ANNUALREPORT2019
FORWARD-LOOKING STATEMENTS:
This Annual Report on Form 10-K contains “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 pro-
jections 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 results and success of our transactions with Quantum and the OptoSeis® technology, the adoption and sale of our products in various geographic
regions, potential tenders for permanent reservoir monitoring systems, future demand for OBX systems, the completion of new orders for our channels of our GCL system, the fulfillment of customer
payment plans, 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 the Quantum or OptoSeis® technology transactions to yield positive operating results, decreases in commodity price levels, which could reduce demand for our products,
the failure of our products to achieve market acceptance, despite 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, lack of further orders for our OBX systems, failure of our Quantum products
to be adopted by the border and perimeter security markets, 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.
Rick Wheeler
Dear Fellow Shareholder,
Geospace Leveraging Technology
Ask someone familiar with Geospace, and the first things that will likely come to mind are
well defined, high quality technology, and client-oriented attention focused on customers’
success. Since the company’s inception, these principles have defined us, driven our growth,
and guided us through both good and bad market conditions. Fiscal year 2019 was filled with
activities strengthening our technology and positioning our company and its shareholders
for a next phase of prosperity and opportunity. With the invention of our GCL recorder, we’ve
established a new pinnacle for land seismic instruments. With our acquisition of OptoSeis®
fiber-optic sensing technology, we can now provide oil and gas companies the broadest
spectrum of available products for permanent reservoir monitoring (PRM). And by combining
our digital seismic systems with the groundbreaking algorithms and analytic software of
Quantum Technology Sciences, we’ve created a new breed of border and perimeter security
solutions featuring unparalleled capability.
Defying a fifth straight year of record low spending for global oil and gas exploration, we grew
revenue by 26% in fiscal year 2019 over last year. In fact, our fourth fiscal quarter which ended
September 30, 2019 recorded the highest quarterly revenue and gross profit in over five
years. This improved performance was driven by strong rental demand for our OBX ocean-
bottom nodal seismic recording systems. In today’s world, many offshore focused oil and gas
companies are realizing significant savings through finding and producing new hydrocarbon
resources nearby existing infrastructure. Our proven OBX technology helps this goal become
a reality with superior subsurface imaging quality. It’s no wonder why the list of world-wide
projects and customers utilizing our OBX systems continues to grow.
Financial Results
Total revenue in fiscal year 2019 climbed to almost $96 million, producing a gross profit
of over $31 million. If we set aside beneficial amounts related to a gain on the sale of non-
essential real estate and a favorable net reduction in contingent earn-out liabilities, our net
loss for the year shrank to $0.70 per share – less than half that of the year before. And with
these beneficial amounts included in our financial results, our net loss for fiscal year 2019
drops to just $0.01 per share. Over the course of the year, our capital expenditures amounted
to $36 million and were mostly targeted at the expansion of our OBX rental fleet. We
accomplished all of this while maintaining a strong balance sheet that at year’s end remained
debt free with a total liquidity of almost $46 million, including nearly $19 million in cash
and equivalents. Looking into the future, we anticipate capital spending in fiscal year 2020
to be about one-third of last year’s figure, with approximately half being allocated toward
additional OBX rental equipment. The remainder of these investments are targeted toward
expanded factory automation, maintenance, and other improvements.
Oil and Gas Markets Segment
Last year, our hopes for fiscal year 2019 were to see a diminished stranglehold on energy
exploration spending. These hopes were somewhat realized as reflected by the increase in
revenue from our oil and gas market segment of almost 45% over last year. Faced with lower
revenue from our traditional and reservoir seismic products, the improvement was entirely
driven by our wireless products, where demand for our marine OBX equipment pushed rental
revenue to record levels. Although new oil and gas discoveries in recent years are woefully
GEOSPACE TECHNOLOGIES ANNUAL REPORT 2019
1
short of replacing produced reserves, the overwhelming majority of these limited finds have been
offshore. Our success with the OBX highlights our ability to place innovative technologies wherever
demand is highest in an otherwise difficult market. Likewise, our latest GCL land seismic recorder
offers best-in-class technology for land seismic operations. While this portion of the market remains
challenged, recent sales of our GCL demonstrate our preparedness to fulfill any demand that may
similarly arise in the onshore market.
Adjacent Markets Segment
Products in our adjacent markets segment generated revenue of just over $30 million in fiscal year
2019. Although this represents an increase of less than 1% over last year, we continue to believe that
this segment has significant opportunity for expansion and growth. For the full year, this segment
contributed almost one-third of the company’s total revenue, directly emphasizing its strategic
importance in partially diffusing volatility from our oil and gas market segment. In fiscal year 2020, we
intend to continue identifying new ways and means to expand this segment’s revenue contribution.
Emerging Markets Segment
Our emerging markets segment focuses on border and perimeter security products that provide deep
awareness and real-time intelligence of any activity occurring in proximity to an area or asset of interest.
These products process seismic-acoustic information using sophisticated algorithms and analytics
developed by our Quantum group. Even though very little revenue was generated from these products
in fiscal year 2019, the year heralded major advances in our integration of Quantum software and our
hardened digital systems. Based on the accolades our demonstrations of this technology have received
from targeted customers, we fully expect meaningful and sustainable revenue from this segment in the
foreseeable future.
Conclusion
For Geospace Technologies, fiscal year 2019 can be summed up as a year of multi-faceted
achievement. While this certainly includes financial metrics such as our growth in revenue, higher
gross profit, and preservation of a rock-solid balance sheet, it also describes many behind the scenes
accomplishments in engineering innovation and product diversification. Improvements in our
OBX marine recorder and the invention of our GCL land seismic recorder have each maximized our
opportunity for commerce in an improved seismic exploration market. And by incorporating OptoSeis
fiber-optic sensing technology into our largescale system designs and manufacturing capabilities,
we’ve significantly increased our chances of landing any future contracts for PRM systems. On top of
this, the full integration of Quantum’s intelligent analytics software with our field proven systems has
created a remarkable new potential for future revenue. Our goal in fiscal year 2020 is to exploit all of the
rich opportunities we have created, thus giving our employees, our customers, and our shareholders
the highest possible value t
the highest possible value that can be attained.
Rick Wheeler
President & Chief Executive Officer
2
GEOSPACE TECHNOLOGIES ANNUAL REPORT 2019
10-K
2019
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year
Ended September 30, 2019
OR
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 001-13601
GEOSPACE TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Texas
(State or Other Jurisdiction of
Incorporation or Organization)
76-0447780
(I.R.S. Employer
Identification No.)
7007 Pinemont Drive
Houston, Texas 77040-6601
(Address of Principal Executive Offices)
(713) 986-4444
(Registrant’s telephone number, including area code)
Title of Each Class
Common Stock
Securities Registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
GEOS
Securities Registered pursuant to Section 12(g) of the Act: NONE
Name of Each Exchange on Which Registered
The NASDAQ Global Select Market
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐
Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 13,630,666 shares of the Registrant’s Common Stock outstanding as of the close of business on October 31, 2019. As of March 29,
2019, the aggregate market value of the Registrant’s Common Stock held by non-affiliates was approximately $170 million (based upon the closing
price of $12.94 on March 29, 2019, as reported by The NASDAQ Global Select Market).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Registrant’s 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this
report.
Item 1. Business
Business Overview
PART I
Geospace Technologies Corporation reincorporated as a Texas corporation on April 16, 2015. We originally incorporated as
a Delaware corporation on September 27, 1994. Unless otherwise specified, the discussion in this Annual Report on Form 10-K refers
to Geospace Technologies Corporation and its subsidiaries. We principally design and manufacture seismic instruments and
equipment. These seismic products are marketed to the oil and gas industry and used to locate, characterize and monitor hydrocarbon
producing reservoirs. We also market our seismic products to other industries for vibration monitoring, border and perimeter security
and various geotechnical applications. We design and manufacture other products of a non-seismic nature, including water meter
products, imaging equipment and offshore cables. We report and categorize our customers and products into three different segments:
Oil and Gas Markets, Adjacent Markets and Emerging Markets.
Demand for our seismic products targeted at customers in our Oil and Gas Markets segment has been, and will likely
continue to be, vulnerable to downturns in the economy and the oil and gas industry in general. For more information, please refer to
the risks discussed under the heading “Risk Factors.”
Business Acquisitions
OptoSeis® fiber optic sensing technology
On November 13, 2018, we acquired all of the intellectual property and related assets of the OptoSeis® fiber optic sensing
technology business. The operations of the OptoSeis® business are included in our Oil and Gas Markets business segment. The
acquisition purchase price consisted of cash payments at closing of approximately $1.8 million and contingent earn-out payments of
up to $23.2 million during the five-and-a-half year period. The contingent earn-out payments will be derived from eligible revenue
generated during the earn-out period from products and services utilizing the OptoSeis® fiber optic technology. There were no earn-
out obligation payments made during the fiscal year ended September 30, 2019.
Quantum Technology Sciences, Inc.
On July 27, 2018, we acquired Quantum Technology Sciences, Inc., a Florida-based tactical security and surveillance
systems solutions provider (“Quantum”) through a merger of the Company’s subsidiary with and into Quantum, with Quantum as the
surviving corporation. The acquisition purchase price consisted of a cash down payment at closing of approximately $4.4 million and
contingent earn-out payments of up to $23.5 million over a four-year period. The contingent earn-out payments, if any, which may be
paid in the form of cash or Company stock, will be derived from certain eligible revenue that may be generated during the four-year
earn-out period. There were no earn-out obligation payments made during the fiscal year ended September 30, 2019.
The Quantum acquisition represents the Company’s strategy to expand its product revenues, as well as its engineering and
manufacturing competencies, to markets outside the oil and gas industry. The operations of Quantum are included in our Emerging
Markets business segment.
Segment and Geographical Information
Effective September 30, 2018, we began reporting and evaluating financial information for three business segments: Oil and
Gas Markets, Adjacent Markets and Emerging Markets. The Oil and Gas Markets segment was previously referred to as our Seismic
segment. Our Adjacent Markets segment was previously referred to as our Non-Seismic segment. The Emerging Markets segment
was added in conjunction with the acquisition of Quantum in July 2018, which designs and markets seismic products targeted at the
border and perimeter security markets. Because we have simply renamed our two original segments and added a new segment, we
have not restated any previous financial statements. For a discussion of the products sold and markets served by each of our segments,
see “Products and Product Development” below. For a discussion of financial information by segment and geographic area, see Note
21 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. Geoscientists use
seismic data primarily in connection with the exploration, development and production of oil and gas reserves to map potential and
known hydrocarbon bearing formations and the geologic structures that surround them. This segment’s products include wireless
seismic data acquisition systems, reservoir characterization products and services, and traditional seismic exploration products such as
geophones, hydrophones, leader wire, connectors, cables, marine streamer retrieval and steering devices and various other seismic
1
products. We believe that our Oil and Gas Markets products are among the most technologically advanced instruments and equipment
available for seismic data acquisition.
Traditional Products
An energy source and a data recording system are combined to acquire seismic data. We provide many of the components of
seismic data recording systems, including geophones, hydrophones, multi-component sensors, leader wire, geophone strings,
connectors, seismic telemetry cables and other seismic related products. On land, our customers use geophones, leader wire, cables
and connectors to receive and measure seismic reflections resulting from an energy source into data recording units, which store the
seismic information for subsequent processing and analysis. In the marine environment, large ocean-going vessels tow long seismic
cables known as “streamers” containing hydrophones that are used to detect pressure changes. Hydrophones transmit electrical
impulses back to the vessel’s data recording unit where the seismic data is stored for subsequent processing and analysis. Our marine
seismic products also help steer streamers while being towed and help recover streamers if they become disconnected from the vessel.
Our seismic sensor, cable and connector products are compatible with most major competitive seismic data acquisition
systems currently in use. Revenue from these products results primarily from seismic contractors purchasing our products as
components of new seismic data acquisition systems or to repair and replace components of seismic data acquisition systems already
in use.
Wireless Products
We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition system. Rather than
utilizing interconnecting cables as required by most traditional land data acquisition systems, each of our wireless stations operate as
an independent data collection system, allowing for virtually unlimited channel configurations. As a result, our wireless systems
require less maintenance, which we believe allows our customers to operate more effectively and efficiently because of its reduced
environmental impact, lower weight and ease of operation. Each wireless station is available in a single-channel or three-channel
configuration. Since its introduction in 2008 and through September 30, 2019, we have sold 441,000 wireless channels and we
currently have 84,000 wireless channels in our rental fleet.
We have also developed a marine-based wireless seismic data acquisition system called the OBX. Similar to our land-based
wireless systems, the marine OBX system may be deployed in virtually unlimited channel configurations and does not require
interconnecting cables between each station. Our deepwater versions of the OBX system can be deployed in depths of up to 3,450
meters. At September 30, 2019, we had 31,000 OBX stations in our rental fleet, and additional OBX stations under construction in
order to meet contracted rental demand. We expect fiscal year 2020 capital investments into our wireless product rental fleet to be $6
million based on the current level of demand.
Reservoir Products
Seismic surveys repeated over selected time intervals show dynamic changes within a producing oil and gas reservoir, and
operators can use these surveys to monitor the effects of oil and gas development and production. This type of reservoir monitoring
requires special purpose or custom designed systems in which portability becomes less critical and functional reliability assumes
greater importance. This reliability factor helps assure successful operations in inaccessible locations over a considerable period of
time. Additionally, reservoirs located in deep water or harsh environments require special instrumentation and new techniques to
maximize recovery. Reservoir monitoring also requires high-bandwidth, high-resolution seismic data for engineering project planning
and reservoir management. Utilizing these reservoir monitoring tools, producers can enhance the recovery of oil and gas deposits over
the life of a reservoir.
We have developed permanently installed high-definition reservoir monitoring systems for land and ocean-bottom
applications in producing oil and gas fields. Our electrical reservoir monitoring systems are currently installed on numerous offshore
reservoirs in the North Sea and elsewhere. Through our recent 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.
The scalable architecture of these systems enable custom designed configuration for applications ranging from low-channel
engineering and environmental-scale surveys requiring a minimum number of recording channels to high-channel surveys required to
efficiently conduct permanent reservoir monitoring (“PRM”). The modular architecture of these products allows virtually unlimited
channel expansion for these systems.
In addition, we produce seismic borehole acquisition systems that employ a fiber optic augmented wireline capable of very
high data transmission rates. These systems are used for several reservoir monitoring applications, including an application pioneered
by us allowing operators and service companies to monitor and measure the results of hydraulic fracturing operations.
2
We believe our reservoir characterization products make seismic acquisition a cost-effective and reliable process for reservoir
monitoring. Our multi-component seismic product developments also include an omni-directional geophone for use in reservoir
monitoring, a compact marine three-component or four-component gimbaled sensor and special-purpose connectors, connector arrays
and cases.
We have not received any orders for large-scale seabed PRM systems since November 2012 and we currently do not have
any indication that such an order will be received in fiscal year 2020, although we do believe opportunities for PRM orders exist in
today’s market.
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.
Industrial Products
Our industrial products include water meter products, contract manufacturing products, offshore cables, and seismic sensors
used for vibration monitoring and geotechnical applications such as mine safety applications and earthquake detection.
Imaging Products
Our imaging products include electronic pre-press products that employ direct thermal imaging and digital inkjet printing
technologies targeted at the commercial graphics, industrial graphics, textile and flexographic printing industries.
Emerging Markets
Our Emerging Markets business segment consists of our recent acquisition of Quantum. Quantum’s product line includes a
proprietary detection system called SADAR®, which detects, locates and tracks items of interest in real-time. Using the SADAR
technology, Quantum designs and sells products used for border and perimeter security surveillance, cross-border tunneling detection
and other products targeted at movement monitoring, intrusion detection and situational awareness. Quantum’s customers include
various agencies of the U.S. government including the Department of Defense, Department of Energy, Department of Homeland
Security and other agencies.
Business Strategy
We have experienced several years of very low demand for most of the products we sell and rent into our Oil and Gas
Markets. We are now seeing some signs of increased oil and gas exploration activities brought about by improving market prices for
crude oil. Specifically, we are seeing significant rental demand for some of our oil and gas products used to gather seismic data on the
ocean-bottom and we are allocating capital resources to the production of these products. Conversely, depressed demand continues
for our marine PRM systems and many of our land-focused seismic products. As a result, we have adopted what we think is a
conservative and prudent business strategy which places a focus on sound financial management practices. We have not changed our
primary focus on continued investment in product research and development, selective acquisitions and joint ventures.
•
•
Continue Investment in Product Research and Development – Past periods of revenue growth were primarily driven
through our internal development of new products for the oil and gas industry. In past years, our oil and gas product
innovations included the introduction of borehole seismology tools, land and seabed PRM systems and wireless data
acquisition systems for both land and marine applications. These innovative technologies are the result of our unceasing
investment in research and development initiatives. A majority of our product research and development cost relates to
our product engineers. Our engineering staff has been key to our past success, and we intend to continue our tradition of
retaining and attracting quality engineering staff by providing appropriate compensation and benefits. Going forward,
we intend to continue significant investments in product research and development of new oil and gas technologies as
well as products for our other business segments in order to diversify and grow our revenue base.
Selectively Pursue Acquisitions of Businesses with Technological and Engineering Overlap – The oil and gas industry
periodically experiences volatile business cycles requiring us to rapidly increase and decrease our business activities to
meet the industry’s demand for our products. This industry generally offers equipment manufacturers like us limited
visibility into new orders creating challenges for us to manage our manufacturing capacity, workforce, inventories and
other working capital challenges. While our primary growth initiative is to expand our oil and gas seismic product
offerings, as seen recently with our acquisition of the OptoSeis® fiber optic sensing technology, we may also seek out
other business opportunities in adjacent markets and emerging markets which complement our existing oil and gas
3
seismic products, engineering and manufacturing capabilities, and company-wide culture. In order to diversify our
revenue base and expose us to different markets with different business cycles, we may direct these efforts toward
businesses outside the oil and gas industry, as seen with our acquisition of Quantum in fiscal year 2018.
•
Financial Management – Industry conditions since fiscal year 2014 have required us to place increased emphasis on cash
management and preservation. Due to the cyclicality of the oil and gas industry, we have historically managed our
financial risk by limiting or eliminating debt leverage in our balance sheet. While we are not opposed to moderate
amounts of short-term debt during favorable business cycles, we choose to minimize our exposure to long-term debt
obligations which, in our view, restrict our ability to operate during periodic difficult business cycles in the oil and gas
industry similar to the recent business environment. We believe this strategy has allowed us to continue operations
through difficult business cycles without disruption for debt and equity restructuring as has been seen among our peers,
many of whom have significant long-term debt burdens. In addition, we have limited our investments in capital assets
and have liquidated, and made appropriate reserves for, significant amounts of our inventories and rental fleet assets.
We also believe that the value of our common shares outstanding will be best served in the long-term by retaining our
cash and short-term investments to fund future cash outflows as they become necessary. In this regard, we do not
anticipate paying any cash dividends in the foreseeable future, nor do we expect to initiate any buy-back program to
repurchase our common stock.
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 (a joint venture formed
in 2009 between ION Geophysical and Bureau of Geophysical Prospecting, a subsidiary of China National Petroleum Company).
Furthermore, entities in China affiliated with Sercel, as well as other Chinese manufacturers produce low-cost oil and gas seismic
products.
The primary competitors for our land wireless data acquisition systems are Sercel, INOVA and numerous smaller entities
who have introduced similar versions of wireless data acquisition systems. We believe the primary competitors for our marine nodal
data acquisition systems are Magseis Fairfield ASA and Seabed Geosolutions (a joint venture formed between Fugro and CGG), 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. While price is an important factor in a customer’s decision to purchase a land or marine wireless data
acquisition system, we believe customers also place a high value on a product’s historical performance and the ongoing engineering
and field support provided by the product’s manufacturer.
The principal keys for success in the seismic instruments and equipment market are technological superiority, product
durability under harsh field conditions, reliability and customer support. Product deliverability is always an important consideration
for our customers.
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.
Our primary competitors for the rental of our traditional and wireless seismic equipment are Mitcham Industries, Inc. and
Seismic Equipment Solutions.
Our primary competitor for our seabed PRM systems is Alcatel-Lucent. Our primary competitors for high-definition
borehole seismic data acquisition systems are Avalon Sciences Ltd and Sercel.
Adjacent Markets Products
Our industrial and imaging products face competition from numerous domestic and international specialty product
manufacturers.
Emerging Markets Products
The border and perimeter security marketplace is dominated by large integrated system providers such as Boeing, General
Dynamics, Lockheed Martin, Raytheon, Elbit Systems and others. Systems provided by these competitors are generally multifaceted
and may include numerous integrated surveillance technologies, including the geophysical sensor and software systems that we have
developed. Our sensing technology does not rely on line-of-sight motion detection, which is required by cameras and other optical
4
technologies enabling motion-sensing a camera would miss. Competitive geophysical technologies utilizing fiber optic sensing
techniques are provided by OptaSense, Fibersensys, Future Fiber Technologies and other specialty sensor manufacturing firms.
Suppliers
We purchase raw materials from a variety of suppliers located in various countries. We typically have multiple suppliers for
our critical materials. In our oil and gas seismic business segment, certain models of our marine wireless products use a timing device
manufactured by a single supplier. We currently do not possess the ability to manufacture this component and have no other reliable
source for this device. In our Adjacent Markets business segment, we purchase all of our imaging thermal film from a single supplier.
Beyond this film supplier, we know of no other source for thermal film that performs as well in our imaging equipment. 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.”
We do not currently experience any significant difficulties in obtaining raw materials from our suppliers for the production of
our products.
Product Manufacturing and Assembly
Our manufacturing and product assembly operations consist of machining, molding or cabling the necessary component
parts, configuring these parts along with components received from various vendors and assembling a final product. We manufacture
many of our oil and gas seismic products to the specifications required by our customers. For example, we can armor cables for use in
multiple deep water applications. We assemble geophone strings based on a number of customer choices such as length, gauge,
tolerance and color of molded parts. Upon completion of our manufacturing and assembly operations, we test our final products to the
functional and environmental extremes of product specifications and inspect the products for quality assurance. Consistent with
industry practice, we normally manufacture our products based on firm customer orders, anticipated customer orders and historical
product demand. As a result of the steep decline in product demand that began in fiscal year 2014, aggravated by the decline in crude
oil prices, we currently hold significant levels of inventories.
Markets and Customers
Our principal customers for our traditional and wireless seismic products are seismic contractors and, to a lesser extent, major
independent and government-owned oil and gas companies that either operate their own seismic crews or specify seismic instrument
and equipment preferences to contractors. For our deep water PRM products, our customers are generally large international oil and
gas companies that operate long-term offshore oil and gas producing properties. Our industrial product customers consist of specialty
manufacturers, research institutions and industrial product distributors. Our imaging customers primarily consist of direct users of
our equipment as well as specialized resellers that focus on the screen-printing and flexographic printing industries. Our border and
perimeter security customers are primarily government agencies.
Three customers comprised 19.7%, 5.2% and 20.0% of our revenue during fiscal year 2019. The latter two customers are
affiliated with a common parent company. One customer comprised 10.4% of our revenue during fiscal year 2018. One customer
comprised 17.8% of our revenue during fiscal year 2017. The following table describes our revenue by customer segment type (in
thousands):
5
YEAR ENDED SEPTEMBER 30,
2018
2017
2019
Traditional seismic exploration product revenue...................... $
Wireless seismic exploration product revenue..........................
Seismic reservoir product revenue ............................................
Industrial product revenue ........................................................
Imaging product revenue ..........................................................
Border & perimeter security product revenue...........................
Corporate revenue .....................................................................
Total revenue............................................................................. $
9,504 $
52,770
2,692
18,324
11,832
159
528
95,809 $
12,855 $
27,254
4,842
18,352
11,580
286
579
75,748 $
14,756
29,690
2,663
14,420
11,607
—
585
73,721
Intellectual Property
We seek to protect our intellectual property by means of patents, trademarks, trade secrets and other measures. We hold
patents on geophones, micro-geophones, piezo-electric sensors, seismic data acquisition, in-line retrieval devices and water meter
connectors, and we have pending applications on related technology. We do not consider any single patent essential to our success.
Our patents are scheduled to expire at various dates through 2037. We are not able to predict the effect of any patent expiration. We
protect our proprietary rights to our technology through a variety of methods, including confidentiality agreements and proprietary
information agreements with suppliers, employees, consultants and others who may have access to proprietary information.
Research and Development
We expect to incur significant future research and development expenditures aimed at the development of additional products
for each of our business segments. We have incurred company-sponsored research and development expenses of $15.5 million, $10.8
million and $13.8 million during the fiscal years ended September 30, 2019, 2018 and 2017, respectively.
Employees
As of September 30, 2019, we employed 786 people predominantly on a full-time basis, of which 513 were employed in the
United States, 242 in the Russian Federation and the remainder in the United Kingdom, Canada, China and Colombia. A majority of
our employees in the Russian Federation belong to a regional union for machine manufacturers. Our remaining employees are not
unionized. We have never experienced a work stoppage and consider our relationship with our employees to be satisfactory.
Financial Information by Segment and Geographic Area
For a discussion of financial information by segment and geographic area, see Note 21 to the consolidated financial
statements contained in this Annual Report on Form 10-K. 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”). Our SEC filings are available to the public over the internet at the SEC’s website at www.sec.gov. Our SEC
filings are also available to the public on our website at www.geospace.com. Please note that information contained on our website,
whether currently posted or posted in the future, is not a part of this Annual Report on Form 10-K or the documents incorporated by
reference in this Annual Report on Form 10-K.
6
Item 1A. Risk Factors
Risk Factors
Commodity Price Levels May Affect Demand for Our Oil and Gas Products, Which Has and Could Continue to 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. 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 products. Conversely, in periods when these energy commodity prices deteriorate, capital spending budgets
of oil and natural gas operators tend to contract and the demand for our products generally weakens. Historically, the markets for oil
and gas have been volatile and are subject to wide fluctuation 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, supplies of oil and natural gas, regional and international economic conditions, weather conditions, domestic and foreign
governmental regulations (including those related to climate change), price and availability of alternative fuels, political conditions,
instability and hostilities in the Middle East and other significant oil-producing regions, increases and decreases in the supply of oil
and gas, the effect of worldwide energy conservation measures and the ability of OPEC to set and maintain production levels and
prices of foreign imports.
In addition to the negative effects of slowdowns in the United States economy, slowing economic growth in growing
economies like those in China and India could lead to a decline in demand for crude oil and natural gas. Slowdowns in economic
activity would likely reduce worldwide demand for energy and result in an extended period of lower crude oil and natural gas prices.
Any material changes in oil and gas prices or other market trends that adversely impact seismic exploration activity would likely affect
the demand for our products and could materially and adversely affect our 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.
Our New Products Require a Substantial Investment by Us in Research and Development Expense and May Not Achieve Market
Acceptance
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 oil and gas 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 new adjacent
and emerging markets. 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.
The Short Term Nature of Our Order Backlog for Sales of Our Oil and Gas Products and Delayed or Canceled Customer Orders
May Cause Us to Experience Fluctuations in Quarterly Results of Operations
Historically, the rate of new orders for the sale of our oil and gas products has varied substantially from quarter to quarter.
Moreover, we typically operate, and expect to continue operating, on the basis of orders in-hand for our products before we commence
substantial manufacturing “runs.” The short-term nature of our order backlog for most of our oil and gas products generally does not
allow us to predict with any accuracy demand for our products more than approximately three months in advance. Thus, our ability to
replenish orders and the completion of orders, particularly large orders for deep water PRM projects, can significantly impact our
operating results and cash flow for any quarter, and results of operations for any one quarter may not be indicative of results of
operations for future quarters.
Additionally, customers can delay or even cancel orders and rental contracts before product delivery occurs. For larger
orders which generally require us to make a substantial capital investment in our inventories or rental fleet, we attempt to negotiate for
a non-refundable deposit or cancellation penalties depending on our relationship with the customer. However, such deposits or
penalties, even when obtained, may not fully compensate us for our inventory investment and forgone profits if the order is ultimately
cancelled.
These periodic fluctuations in our operating results and the impact of any order delays/cancellations could adversely affect
our stock price.
7
Our Credit Risk Could Increase and We May Incur Bad Debt 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. Many of our oil and gas customers are not well capitalized and as a result cannot always pay our invoices when
due. We have in the past incurred write-offs in our accounts and notes receivable due to customer credit problems. We have found it
necessary from time to time to extend trade credit, including promissory notes, to long-term customers and others where some risks of
non-payment exist. While we are now seeing increasing crude oil prices, many of our oil and gas customers continue to experience
significant liquidity difficulties, which increase those credit risks. These risks include the potential inability to collect the entire $8.5
million owed to us by an international seismic marine customer, including the failure of such customer to perform under their payment
plan. 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. If these
customers experience financial difficulties, it could be difficult or impossible to retrieve our rental equipment from foreign countries.
The Industries in Which We Operate are Characterized by Rapid Technological Development and Product Obsolescence, Which
May Affect Our Ability to Provide Product Enhancements or New Products on a Timely and Cost Effective Basis
Our instruments and equipment are constantly undergoing rapid technological improvement. Our future success depends on
our ability to continue to:
improve our existing product lines,
address the increasingly sophisticated needs of our customers,
•
•
• maintain a reputation for technological leadership,
• maintain market acceptance of our products,
•
•
•
anticipate changes in technology and industry standards,
respond to technological developments on a timely basis and
develop new markets for our products and capabilities.
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, could become
obsolete. In such case, we would be required to impair the value of such inventories on our balance sheet.
We Operate in Highly Competitive Markets and Our Competitors May Be Able to Provide Newer or Better Products Than We Are
Able to Provide
The markets for most of our products are highly competitive. Many of our existing and potential competitors have
substantially greater marketing, financial and technical resources than we do. Some competitors currently offer a broader range of
instruments and equipment for sale than we do and may offer financing arrangements to customers on terms that we may not be able
to match. In addition, new competitors may enter the market and competition could intensify.
We cannot assure you that revenue from our products will continue at current volumes or prices if current competitors or new
market entrants introduce new products with better features, performance, price or other characteristics than our products.
Competitive pressures or other factors may also result in significant price competition that could have a material adverse effect on our
results of operations.
The Limited Market for Our Oil and Gas Markets and Emerging Markets Products Can Affect Our Revenue
In our Oil and Gas Markets segment, we generally market many of our 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. Since
this product’s introduction in 2002, we have received system orders from three offshore oil and gas operators: BP, Shell and Statoil,
8
which have accounted for a significant portion of our revenue in fiscal year 2014 and prior fiscal years. We did not deliver nor have
we received orders for any PRM systems since 2014. Our emerging markets segment currently sells its products to a small number of
agencies within the United States 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.
We Cannot Be Certain of the Effectiveness of Patent Protection on Our Products
We hold and from time to time apply for certain patents relating to some of our products. We cannot assure you that our
patents will prove enforceable or free of challenge, that any patents will be issued for which we have applied or that competitors will
not develop functionally similar technology outside the protection of any patents we have or may obtain.
Our Foreign Subsidiaries and Foreign Marketing Efforts Are Subject to Additional Political, Economic, Legal and Other
Uncertainties Not Generally Associated with Domestic Operations
Based on customer billing data, revenue to customers outside the United States accounted for approximately 66% of our
revenue during fiscal year 2019; 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. We again expect revenue
outside of the United States to represent a substantial portion of our revenue for fiscal year 2020 and subsequent years.
Foreign revenue is subject to special risks inherent in doing business outside of the United 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, 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.
A portion of our oil and gas product manufacturing is conducted through our subsidiary Geospace Technologies Eurasia
LLC, which is based in the Russian Federation. Our oil and gas business could be directly affected by political and economic
conditions in the Russian Federation, including the current geopolitical instability involving the Russian Federation, Ukraine and
Syria. United States sanctions against Russia have been expanded to preclude the export of oil and gas equipment anywhere in the
world that involve persons designated under the sanctions and to include projects in which persons subject to the sanctions have a 33%
ownership interest or a majority of voting interests. Together, these changes make it more difficult for us to support projects that have
the potential to produce oil involving Russian energy companies. Furthermore, if an exporter is unable to determine whether its
equipment will be used in such projects, the export is prohibited. In fiscal year 2019, we imported $1.8 million of products from
Geospace Technologies Eurasia LLC, our wholly-owned subsidiary in the Russian Federation for resale elsewhere in the world. If
imports of these products from the Russian Federation are restricted by government regulation, we may be forced to find other sources
for the manufacture of these products at potentially higher costs. Boycotts, protests, unfavorable regulations, additional governmental
sanctions and other actions in the region could also adversely affect our ability to operate profitably. Delays in obtaining
governmental approvals can affect our ability to timely deliver our products pursuant to contractual obligations, which could result in
us being liable to our customers for damages. The risk of doing business in the Russian Federation and other economically or
politically volatile areas could adversely affect our operations and earnings.
Foreign revenue is also generally subject to the risk of compliance with additional laws, including tariff regulations and
import and export restrictions. 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.
We may experience difficulties in connection with future foreign revenue. 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.
Increases in Tariffs, Trade Restrictions or Taxes on our Products Could Have an Adverse Impact on our Operations.
In fiscal year 2019, customers outside the United States accounted for 66% of our revenues. 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, Mexico and
other countries have been escalating in recent years. 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. Most recently, on August 23, 2019, the U.S.
government announced a plan to implement two additional tariff increases in retaliation for China’s imposing additional tariffs of 5%
to 10% on $75 billion of U.S. imports to China earlier that day. We believe that certain raw materials we purchase from China could
become subject to these tariffs which could increase our manufacturing costs. Products we sell into certain foreign markets could also
9
become subject to similar retaliatory 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.
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 Countries
We have offices in Brazil, Colombia, Canada, China, the Russian Federation and the United Kingdom, in addition to our
offices in the United States. In addition to the risks noted above 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 example through the negligent or the unauthorized intentional
behavior of individual employees, 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, our business and our operating
results.
Our Strategy of Renting Our Oil and Gas Seismic Products Exposes Us to Additional Risks Relating to Equipment Recovery,
Rental Renewals, Technological Obsolescence and Impairment of Assets
Our rental fleet of oil and gas equipment represents a significant portion of our assets and accounts for a growing portion of
our revenue. Equipment we rent to our customers is frequently located in foreign countries where retrieval of the equipment after the
termination of the rental agreement is difficult or impossible if the customer does not return the equipment. The costs associated with
retrieving this equipment or the loss of equipment that is not retrieved could be significant and could adversely affect our operations
and earnings.
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-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 technology improvements by our competitors could have an adverse effect on
our results of operations and earnings.
Our equipment rental business has high fixed costs, which primarily consist of depreciation expenses. In periods of declining
rental revenue, these fixed costs generally do not decline. As a result, any significant decline in rental revenue caused by reduced
demand could adversely affect our results of operations.
10
Our Expansion Into the Border and Perimeter Security Market May Not Be Successful
We have not previously operated in the border and perimeter security marketplace prior to our 2018 acquisition of Quantum.
Quantum is also a relatively recent entrant into this marketplace, and Quantum was not cash-flow positive when we acquired it. While
we will devote management time and resources, financial and otherwise, to develop our business in this marketplace, our lack of
experience and success up to this point in this market makes it difficult to estimate our financial returns, if any, from this business. In
addition, some of the customers for this business will be governmental entities and contracting with those entities can be difficult,
costly, and unpredictable. We do not have extensive experience in government contracting, and so we may not win, retain, or perform
under such contracts in a manner that is profitable. 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.
Cybersecurity Breaches and Other Disruptions of Our Information Technology Network and Systems Could Adversely Affect Our
Business
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. 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. 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. 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.
Because We Have No Plans to Pay Any Dividends for the Foreseeable Future, Investors Must Look Solely to Stock Appreciation
for a Return on Their Investment in Us
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. We currently intend to retain any future earnings to support our operations and growth. 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.
Unfavorable Currency Exchange Rate Fluctuations Could Adversely Affect Our Results of Operations
Substantially all of our third-party revenue from the United States is invoiced in U.S. dollars, though from time to time we
may invoice revenue transactions in foreign currencies including intercompany sales. 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, Chinese and Colombian
branch offices are denominated in currencies other than U.S. dollars. To prepare our consolidated financial statements, we must
translate those assets, liabilities, revenue and expenses into U.S. dollars at then-applicable exchange rates. Consequently, increases
and decreases in the value of the U.S. dollar versus these other currencies will affect the amount of these items in our consolidated
financial statements, even if their value has not changed in their original currency. These translations could result in significant
changes to our results of operations from period to period. For the fiscal year ended September 30, 2019, approximately 11% of our
consolidated revenue related to the operations of our foreign subsidiaries and branches.
We Have a Relatively Small Public Float, and Our Stock Price May be Volatile
At September 30, 2019, we have approximately 13.1 million shares outstanding held by non-affiliates. 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, 2019 averaged approximately 66,000 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.
We Rely on Key Suppliers for Certain Components Used in Our Products
Certain models of our oil and gas marine wireless products require a timing device we purchase from a United States
manufacturer. We currently do not possess the ability to manufacture this component and have no other reliable source for this
device. If this manufacturer were to discontinue its production of this timing device, were to become unwilling to contract with us on
11
competitive terms or were unable to supply the component in sufficient quantities to meet our requirements, our ability to compete in
the marine wireless marketplace could be impaired, which could adversely affect our financial performance.
For our imaging products, we purchase all of our thermal film from a European 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 European
manufacturer were to discontinue producing thermal film, were to become unwilling to contract with us on competitive terms 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.
Our Success Depends Upon a Limited Number of Key Personnel
Our success depends on attracting and retaining highly skilled professionals. A number of our employees are highly skilled
engineers and other professionals. In addition, our success depends to a significant extent upon the abilities and efforts of the
members of our senior management team. If we fail to continue to attract and retain such professionals, our ability to compete in the
industry could be adversely affected.
A Continued General Downturn in the Economy in Future Periods May Adversely Affect Our Business
Slowing growth in China and India and any other economic slowdown in future periods, 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. 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 flows and adversely impact our liquidity and
profitability. See “The Limited Market for Our Oil and Gas Products Can Affect Our Revenue,” above.
We Have a Minimal Disaster Recovery Program at Our Houston Facilities
Due to its proximity to the Texas Gulf Coast, our facilities in Houston, Texas are annually subject to the threat of 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.
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 with a bank. Amounts
available for borrowing under the credit agreement are determined by a borrowing base, which is determined based upon the book
value of certain assets. The credit agreement limits the incurrence of additional indebtedness, restricts our and our U.S. subsidiaries’
ability to pay cash dividends if payment would result in pro forma non-compliance with the negative covenants in the credit
agreement, requires us to maintain a certain amount of unencumbered liquid assets, contains a covenant that requires us to maintain a
certain amount of tangible net worth and 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 amounts borrowed from it to be due and payable, together with accrued and unpaid interest,
and the 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 that 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.
12
Reliance on Third Party Subcontractors Could Adversely Affect Our Results of Operations and Reputation
We may rely on subcontractors to complete certain projects. The quality and timing of production and services by our
subcontractors is not totally under our control. Reliance on subcontractors gives us less control over a project and exposes us to
significant risks, including late delivery, substandard quality and high costs. The failure of our subcontractors to deliver quality
products or services in a timely manner could adversely affect our profitability and reputation.
The High Fixed Costs of Our Operations Could Adversely Affect Our Results of Operations
We have a high fixed cost structure primarily consisting of (i) depreciation expenses associated with our rental equipment
and (ii) fixed manufacturing costs including salaries and benefits, taxes, insurance, maintenance, depreciation and other fixed
manufacturing costs. In regards to our rental equipment, large declines in the demand for rental equipment could result in substantial
operating losses due to the on-going fixed nature of rental equipment depreciation expense. Concerning our product manufacturing
costs, in periods of low product demand our fixed costs generally do not decline or may decline only in modest increments. Therefore
lower demand for our rental equipment and manufactured products could adversely affect our results of operations.
Our Long-Lived Assets May be Subject to Impairment
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 Oil and Gas Markets 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 goodwill and other
intangible assets if our acquisition of Quantum or the OptoSeis® fiber optic sensing technology does not generate sufficient cash flows
to recover the carrying value of such assets. 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.
Increased or Inaccurate Estimation of Contingent Earn-Out Liabilities Could Result in Increased Charge-Offs or Losses and
Defaults Under Our Credit Agreement
As further discussed below, we have contingent earn-out liability associated with our acquisitions of Quantum and
OptoSeis. We have utilized the services of an independent valuation consultant to assist us with the estimation of the contingent earn-
out liability in each case. We expect to continue to utilize similar consulting services to help us estimate the contingent earn-out
liability in future periods. If we, or our independent valuation consultant, have incorrectly estimated such potential earn-out liability
or if such estimates prove to be inaccurate due to the inherent unpredictability of the size, scope, and occurrence of the contracts that
might be subject to such earn-outs, and we are required to pay an amount of consideration in excess of our estimate, we may incur
increased losses and charge-offs associated with that increased liability. If we receive substantial revenue from Quantum or OptoSeis
and if such revenue is subject to the applicable earn-out, the attendant increase in contingent liability could also be
substantial. Further, in certain instances, if the increases in contingent earn-out liability are of a large enough magnitude, they may
cause us to default on certain financial covenants in our credit agreement. These increased losses, potential defaults, and other
negative repercussions from such increased liability could adversely affect our financial performance and results of operations.
Should We Fail to Maintain an Effective System of Internal Control Over Financial Reporting, We May Not Be Able to Accurately
Report Our Financial Results and Prevent Material Fraud, Which Could Adversely Affect the Value of Our Common Stock
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 occurring and 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.
Item 1B. Unresolved Staff Comments
None.
13
Item 2. Properties
As of September 30, 2019, our operations included the following locations:
Approximate
Square
Location
Houston, Texas .............................
Houston, Texas .............................
Houston, Texas .............................
Austin, Texas ................................
Cocoa Beach, Florida....................
Ufa, Bashkortostan, Russia...........
Calgary, Alberta, Canada..............
Luton, Bedfordshire, England.......
Beijing, China ...............................
Bogotá, Colombia .........................
Owned/Leased
Owned
Owned
Owned
Leased
Leased
Owned
Owned
Owned
Leased
Owned
Footage/Acreage
Use
Segment (see notes below)
387,000 See Note 1 below
6 and 7
30,000 See Note 2 below
6
17.3 acres See Note 3 below
6
17,000 See Note 4 below
6
10,000 See Note 5 below
8
120,000 Manufacturing, sales and service 6
45,000 Manufacturing, sales and service 6 and 7
8,000 Sales and service
1,000 Sales and service
19,000 Sales and service
7
6
6
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
This property is located at 7007 Pinemont Drive in Houston, Texas (the “Pinemont Facility”). The Pinemont Facility
contains substantially all manufacturing activities and all engineering, selling, marketing and administrative activities for us
in the United States. The Pinemont Facility also serves as our international corporate headquarters.
This property is located at 6410 Langfield Road in Houston, Texas. This facility provides additional warehousing and
maintenance and repair capacity for our marine rental equipment operations.
This property is located adjacent to the Pinemont Facility. It 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 property is located at 11801 Stonehollow Drive in Austin, Texas. This facility contains substantially all of our fiber
optic sensing operations.
This property is located at 1980 N. Atlantic Avenue, Suite 201, in Cocoa Beach, Florida. This facility contains all the
operations of Quantum.
Oil and Gas Markets.
Adjacent Markets
Emerging Markets
Item 3. Legal Proceedings
We are involved in various pending legal actions in the ordinary course of our business. Management is unable to predict the
ultimate outcome of these actions, because of the inherent uncertainty of litigation. However, management believes that the most
probable, ultimate resolution of currently pending matters will not have a material adverse effect on our consolidated financial
position, results of operations or cash flows.
Item 4. Mine Safety Disclosures
None.
14
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Holders of Record
Our common stock is traded on The NASDAQ Global Select Market under the symbol “GEOS”. On October 31, 2019, there
were approximately 134 holders of record of our common stock, and the closing price per share on such date was $14.59 as quoted by
The NASDAQ Global Select Market.
Market Information for Common Stock
The following table shows the high and low per share sales prices for our common stock reported on The NASDAQ Global
Market.
Year Ended September 30, 2019:
Low
High
Fourth Quarter ....................................................................... $
Third Quarter.........................................................................
Second Quarter......................................................................
First Quarter ..........................................................................
Year Ended September 30, 2018:
Fourth Quarter ....................................................................... $
Third Quarter.........................................................................
Second Quarter......................................................................
First Quarter ..........................................................................
11.61 $
11.85
10.01
9.93
12.68 $
9.46
9.18
12.09
16.61
15.89
16.92
15.93
15.12
14.81
15.66
18.71
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. We presently intend to retain our earnings for use in our business, with any future decision to
pay cash dividends dependent upon our growth, profitability, financial condition and other factors our Board of Directors may deem
relevant. Our existing credit agreement may restrict our ability to pay dividends if payment would result in pro forma non-compliance
with the negative covenants in the credit agreement. For a discussion of our credit agreement, see the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” contained in this
Annual Report on Form 10-K.
Securities Authorized for Issuance under Equity Compensation Plans
The following equity plan information is provided as of September 30, 2019:
Equity Compensation Plan Information
Plan Category
Equity Compensation Plans Approved
by Security Holders (1) ......................................
Equity Compensation Plans Not Approved
by Security Holders ............................................
Total ......................................................................
Number of Securities
to be Issued upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(a)
(In shares)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a)) (c)
(In shares)
Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
(In dollars per share)
302,890
19.15 (2)
477,015
—
302,890
—
19.15 (2)
—
477,015
(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 (the “2014 Plan”), which was approved by the Board and shareholders in February
15
2014. The 2014 Plan allows for the issuance of restricted stock awards, performance stock awards, performance stock unit
awards, restricted stock unit awards (the foregoing, “Full Value Awards”), stock options and stock appreciation rights. For
purposes of calculating the number of securities remaining under the 2014 Plan in column (c), Full Value Awards are counted
as 1.5 shares for each share awarded. The number of securities shown in column (a) of the table above represents 120,600
stock options and 137,290 restricted stock unit awards outstanding under the 2014 Plan and 45,000 stock options outstanding
under the 1997 Key Employee Stock Option Plan.
(2) The calculation of the weighted-average exercise price of outstanding options, warrants and rights excludes restricted stock unit
awards.
Recent Sales of Unregistered Securities and Use of Proceeds
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. Selected Financial Data
Not Required.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is management’s discussion and analysis of the major elements of our consolidated financial statements. You
should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and
other detailed information appearing elsewhere in this 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, 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.
Cautionary Note Regarding Forward-Looking Statements and Assumptions
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 results and
success of our transactions with Quantum and the OptoSeis® technology, the adoption and sale of our products in various geographic
regions, potential tenders for PRM systems, future demand for OBX systems, 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 the Quantum or OptoSeis® technology
transactions to yield positive operating results, decreases in commodity price levels, which could reduce demand for our products, the
failure of our products to achieve market acceptance, despite 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, lack of further orders for our OBX systems, failure of our Quantum products to be
adopted by the border and perimeter security market, 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.
16
Background
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, including water meter products, imaging equipment and offshore cables. See the information
under the heading “Business” in this Annual Report on Form 10-K.
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.
Our revenue and results of operations have not been materially impacted by inflation or changing prices in the past two fiscal
years.
We report and evaluate financial information for three segments: Oil and Gas Markets, Adjacent Markets and Emerging
Markets. Summary financial data by business segment follows (in thousands):
Oil and Gas Markets
Traditional exploration product revenue ........................................... $
Wireless exploration product revenue ...............................................
Reservoir product revenue.................................................................
Total revenue .....................................................................................
Operating income (loss).....................................................................
Adjacent Markets
Industrial product revenue .................................................................
Imaging product revenue ...................................................................
Total revenue .....................................................................................
Operating income ..............................................................................
Emerging Markets
Revenue .............................................................................................
Operating loss ....................................................................................
Corporate
Revenue .............................................................................................
Operating loss ....................................................................................
Consolidated Totals
Revenue .............................................................................................
Operating loss ....................................................................................
YEAR ENDED SEPTEMBER 30,
2019
2018
9,504 $
52,770
2,692
64,966
3,095
18,324
11,832
30,156
6,234
159
(2,306)
528
(5,990)
95,809
1,033
12,855
27,254
4,842
44,951
(14,070)
18,352
11,580
29,932
5,345
286
(718)
579
(11,300)
75,748
(20,743)
Overview
Early in calendar year 2014, our Oil and Gas Markets segment experienced a softening in the demand for its traditional
exploration products, particularly in North America, as capital budgets for oil and gas producers were trending away from exploration-
focused activities toward production and exploitation activities. During this period oil production in North America’s unconventional
shale reservoirs increased, as did oil production from other non-OPEC countries, resulting in an oversupply of crude oil in the world
market. Market prices for a barrel of West Texas Intermediate crude oil declined from over $100 in July 2014 to approximately $26 in
February 2016, and have recovered to approximately $55 today. With this decline in oil prices, oil and gas exploration and production
companies experienced a significant reduction in cash flows, which resulted in sharp reductions in their capital spending budgets for
oil and gas exploration-focused activities, including seismic data acquisition activities. Our Oil and Gas Markets segment is now
seeing significant demand for the rental of our marine wireless nodal products; however, the demand for new land-based seismic
equipment in recent fiscal years has remained restrained due to capital limitations affecting many of our customers, along with their
excess levels of underutilized equipment. As a result, revenue from the sale and rental of our land-based traditional and wireless
products has remained low due to reduced investment in exploration-focused seismic activities. We expect these challenging industry
conditions will improve somewhat in fiscal year 2020, however, we expect revenue from our traditional and land-based wireless
products to remain below historical norms.
17
In light of current market conditions, the inventory balances in our Oil and Gas Markets business segment at September 30,
2019 continued to exceed levels we consider appropriate for the current level of product demand. While we are aggressively working
to reduce these legacy inventory balances, we are also adding new inventories for new wireless product developments and for other
product demand in our Adjacent Markets segment. During periods of excessive inventory levels, our policy has been, and will
continue to be, to record obsolescence expense as we experience reduced product demand and as our inventories continue to age. If
difficult market conditions continue for the products in our Oil and Gas Markets segment, we expect to record additional inventory
obsolescence expense in fiscal year 2020 and beyond until product demand and/or resulting inventory turnover return to acceptable
levels.
In December 2017, we initiated a program to reduce operating costs in light of expected and continuing low levels of oil and
gas product demand. The program produced approximately $6 million of annualized cash savings. The majority of these future cost
reductions were realized through the reduction of over 60 employees from our Houston area workforce. In connection with the
workforce reductions, we incurred $0.7 million of termination costs in our first quarter of fiscal year 2018. The termination costs were
recorded to both cost of revenue and operating expenses in the consolidated statement of operations. There are no outstanding
liabilities related to this program as of September 30, 2019.
Fiscal Year 2019 Compared to Fiscal Year 2018
Consolidated revenue for fiscal year 2019 increased $20.1 million, or 26.5%, from fiscal year 2018. The increase in revenue
primarily resulted from increased rental revenue in our Oil and Gas Markets segment from our OBX marine nodal products.
Consolidated gross profit for fiscal year 2019 was $31.4 million, compared to $11.0 million for fiscal year 2018. The
increase in gross profit primarily resulted from a significant increase in wireless product rental revenue caused by the high utilization
of our expanding OBX rental fleet and a decline in unutilized factory costs due to higher manufacturing productivity from production
of OBX nodes. While factory utilization has recently increased due to demand for the rental of our OBX marine nodal products, we
expect our consolidated gross margins from the sale of our Oil and Gas Markets products to remain below historic norms until demand
increases significantly for our land-based traditional and wireless seismic products.
Consolidated operating expenses for fiscal year 2019 were $37.4 million, an increase of $5.7 million, or 18.1%, from fiscal
year 2018. The increase in operating expenses was primarily due to incremental operating costs associated with our recent
acquisitions of the Quantum and OptoSeis® businesses. For fiscal year 2019, operating expenses increased $7.1 million due to
acquisition-related operating costs, inclusive of intangible asset amortization expenses of $1.5 million. These acquisition-related
increases in operating expenses were partially offset by a $2.1 million net non-cash reduction in the estimated fair value of contingent
earn-out consideration related to our Quantum and OptoSeis® acquisitions. The balance of the increased operating expenses relates to
personnel wage increases and other general expense increases related to our business operations.
In August 2019, we sold our real property located at 7334-7340 N. Gessner Road in Houston, Texas for a cash sales price of
$8.3 million. We recognized a gain of $7.0 million from the sale of this property in the fourth quarter of fiscal year 2019. The buyer
had previously occupied the property as a tenant under a long-term lease.
Consolidated other income for fiscal year 2019 increased $0.3 million from fiscal year 2018, or 30.2% from fiscal year 2018.
This increase was primarily due to (i) an increase in interest charged to a customer for the late payment of our invoices and (ii) a
decrease in foreign currency hedge financing fees. These increases in other income were partially offset by a decrease in foreign
exchange gains.
Consolidated income tax expense for fiscal year 2019 was $2.4 million compared to a tax benefit of $0.6 million for fiscal
year 2018. The income tax expense in fiscal year 2019 primarily reflects foreign withholding tax assessed on our rental income. The
income tax benefit for fiscal year 2018 primarily reflects a $0.7 million refund resulting from the filing of an amended U.S. tax return.
We are currently unable to record any tax benefits from the tax losses we incur in the U.S. and Canada due to the uncertainty
surrounding our ability to utilize such losses in the future to offset taxable income.
18
Segment Results of Operations
Oil and Gas Markets
Fiscal Year 2019 Compared to Fiscal Year 2018
Revenue
Revenue from our Oil and Gas Markets products for fiscal year 2019 increased $20.0 million, or 44.5%, from the prior fiscal
year. The components of this increase include the following:
•
Traditional Exploration Product Revenue – Revenue from our traditional products decreased $3.4 million, or 26.1%
from the prior fiscal year. The decrease primarily reflects lower demand for our specialty sensor products and customer
product repairs. The decrease was partially offset by higher demand for our marine products.
• Wireless Exploration Product Revenue – Revenue from our wireless exploration products increased $25.5 million, or
93.6%, from the prior fiscal year. The increase resulted from higher rental demand for our OBX systems. The increase
was partially offset by a decline in demand for sales and rental of our GSX wireless products.
•
Reservoir Product Revenue – Revenue from our reservoir products decreased $2.2 million, or 44.4%, from the prior
fiscal year. The decrease was primarily due to a decrease in sales of our borehole products and lower service revenue.
Operating Income (Loss)
Operating income associated with our Oil and Gas Markets products for fiscal year 2019 was $3.1 million, compared to an
operating loss of $(14.1) million from the prior fiscal year. The improvement in our operating income primarily resulted from (i) an
increase in wireless rental revenue and gross profits from our OBX systems and (ii) a decline in unutilized factory costs due to higher
productivity. Partially offsetting these operating income improvements is an $0.8 million adjustment to increase our operating
expenses due to an increase in the estimated fair value of contingent earn-out consideration related to our recent OptoSeis®
acquisition.
Adjacent Markets
Fiscal Year 2019 Compared to Fiscal Year 2018
Revenue
Revenue from our Adjacent Markets products for fiscal year 2019 increased $0.2 million, or 0.7%, from the prior fiscal year.
The components of this increase included the following:
•
•
Industrial Product Revenue and Services – Revenue from our industrial products decreased $28,000, or 0.2% from the
prior fiscal year. The decrease in revenue primarily attributable to lower demand for our water meter products. These
decreases were partially offset by increased demand for our industrial sensor products.
Imaging Product Revenue – Revenue from our imaging products increased $0.3 million, or 2.2%, from the prior fiscal
year. The increase was primarily due to higher demand for our equipment and film products. We consider this small
change in revenue to be normal and not indicative of any particular trend in product demand.
Operating Income
The operating income from our Adjacent Markets products for fiscal year 2019 increased $0.9 million or 16.6%, from the
prior fiscal year. The increase in operating income resulted from efficiencies gained in our manufacturing efforts and lower operating
personnel costs.
Emerging Markets
Fiscal Year 2019 Compared to Fiscal Year 2018
Revenue
On July 27, 2018, we entered the border and perimeter security market through our acquisition of Quantum. In connection
with the Quantum acquisition, we established the Emerging Markets business segment, which currently includes only Quantum.
Revenue from our Emerging Markets products for fiscal year 2019 decreased $0.1 million, or 44.4%, from the prior fiscal year. The
19
decrease in revenue primarily resulted from the completion of contracts that existed when Quantum was acquired. Quantum did not
receive any significant border and perimeter security contracts during fiscal year 2019.
Operating Loss
Our operating loss from our Emerging Markets products for fiscal year 2019 increased $1.6 million, or 221.2% from the prior
fiscal year. Since its acquisition in July 2018, Quantum has primarily focused on product development activities, and the marketing of
its technologies to government agencies and other end users. Fiscal year 2018 includes approximately two months of Quantum’s
operating activities while fiscal year 2019 includes a full year of operating activities. Included in Quantum’s operating expenses for
fiscal years 2019 and 2018 are intangible asset amortization expenses of $1.2 million and $0.2 million, respectively. Also included in
Quantum’s operating expenses for fiscal year 2019 is a $2.9 million adjustment to decrease Quantum’s operating expenses caused by a
decrease in the estimated fair value of contingent earn-out consideration related to our acquisition of Quantum. We expect Quantum
to incur operating losses into the future until it obtains revenue-generating contracts that are sufficiently able to support its current cost
structure.
Liquidity and Capital Resources
Fiscal Year 2019
At September 30, 2019, we had approximately $18.9 million in cash and cash equivalents and short-term investments. For
fiscal year 2019, we generated $5.6 million of cash from operating activities. Our net loss of $0.1 million included net non-cash
charges of $24.6 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-
based compensation, bad debt expense and changes in the estimated fair value of contingent consideration. These net non-cash
charges were partially offset by (i) a $9.2 million increase in trade accounts and financing receivables resulting from the increase in
revenue and delays in collecting funds owed from a rental customer, (ii) a $1.9 million increase in inventories for the production of
recently introduced land-based wireless seismic products, (iii) the removal of a $7.1 million gain from the sale of real property and
equipment since such gains are reflected in the proceeds from the sale of property and equipment under investing activities and (iv) a
$1.0 decrease in deferred revenue due to the revenue recognition of customer deposits on rental contracts.
For fiscal year 2019, we generated cash of $1.6 million from investing activities. Sources of cash included (i) $25.6 million
of proceeds from the sale of short-term investments, (ii) $8.3 million of proceeds from the sale of a real property (iii) $4.9 million of
proceeds from the sale of rental equipment and (iv) $0.5 million of proceeds, net of payments, from a property-related insurance
claim. These sources of cash were partially offset by (i) $34.1 million investment in our rental equipment primarily to expand our
OBX rental fleet, (ii) $1.9 million for additions to our property, plant and equipment and (iii) $1.8 million for the acquisition of the
intellectual property and related assets of the OptoSeis® fiber optic sensing technology business. Depending on demand for our
marine OBX rental equipment, we expect fiscal year 2020 cash investments into our rental fleet to be approximately $6 million. We
estimate total fiscal year 2020 cash investments in property, plant and equipment could be up to $5 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, from
borrowings under our credit agreement.
For fiscal year 2019, we generated cash proceeds of $0.2 million from financing activities from the exercise of stock options
by our employees. We had no long-term debt outstanding throughout the fiscal year ended September 30, 2019.
The significant crude oil price volatility that began in 2014 continues today, stifling budgets targeted at the oil and gas
exploration industry, including the seismic industry. OPEC and other crude oil producing/exporting nations appear united in their
efforts to maintain equilibrium between current worldwide crude oil supply and demand. If worldwide crude oil supplies and
associated prices stabilize, these factors and developing trends bode well for the oil and gas industry and we expect to participate in
any resurgence in demand for new seismic equipment that may be forthcoming. While we are seeing some signs of increased seismic
activity in certain areas around the world, the need for new seismic equipment remains restrained due to capital limitations affecting
many of our customers along with excessive on-hand quantities of under-utilized seismic equipment. We expect product sales of our
Oil and Gas Markets products, and in particular our legacy land-based traditional and wireless products, to remain low until
exploration-focused seismic activities increase, which we believe will eventually result from the ongoing depletion of existing
reservoirs prompting the need to find new sources of oil and gas. We expect these challenging industry conditions facing our land-
based traditional and legacy wireless products will continue in fiscal year 2020.
Our trade accounts receivable at September 30, 2019 include $8.5 million due from an international seismic marine customer
that, as of September 30, 2019 rented a significant amount of our marine nodal equipment. We experienced cash collection
difficulties with this customer throughout fiscal year 2019 due to the customer’s inability to generate enough cash flow to pay its
obligations to us in a timely manner. In November 2019, we accepted from the customer a plan to bring our current and future unpaid
invoices to a satisfactory status. This plan contemplates completion during our second fiscal quarter ending March 31, 2020, and is
premised upon the customer’s (i) projections of free cash flows from an existing contract with a third-party and (ii) potential access to
capital transactions and/or future borrowing availability from its bank. While we have significant concerns about the ultimate
collection of this customer’s accounts receivable, we have not, and do not currently intend to, provide any significant bad debt
20
reserves toward this customer’s outstanding accounts receivable balance unless and until it becomes probable (in our judgement) that
the customer cannot (i) generate free cash flows from its existing contract and (ii) complete capital transactions and/or borrow from its
bank.
Our available cash and cash equivalents totaled $18.9 million at September 30, 2019, which included $7.0 million of cash
and cash equivalents held by our foreign subsidiaries and branch offices. The Tax Cuts and Jobs Act signed into law on December 22,
2017, creates new taxes on certain foreign earnings and also requires companies to pay a one-time transition tax on undistributed
earnings of their foreign subsidiaries which were previously tax deferred. We have determined that we are not required to pay
any transition tax on the undistributed earnings of our foreign subsidiaries since we had no accumulated earnings on a consolidated
basis.
Our credit agreement allows for borrowings of up to $30.0 million with such amounts available for borrowing determined by
a borrowing base. In November 2018, we extended the maturity of the credit agreement from April 2019 to April 2020. In March
2019, we entered into an amendment to the credit agreement that altered the unencumbered liquid assets covenant to (i) reduce the
minimum threshold from $10 million to $5 million and (ii) include unencumbered liquid assets held outside the United States. The
amendment also added another financial covenant that requires us to maintain a tangible net worth of not less than $140 million.
Additionally, pursuant to the amendment, our principal place of business and the related real estate, located at 7007 Pinemont Drive,
Houston, Texas was added as collateral securing our obligations under the credit agreement. In November 2019, we further amended
the credit agreement to (i) extend the maturity date from April 2020 to April 2022, (ii) increase the unencumbered liquid assets
covenant threshold from $5 million to $10 million effective in the first quarter of fiscal year 2021, (iii) to increase the tangible net
worth requirement from $140 million to $145 million in the first quarter of fiscal year 2021 and (iv) remove the requirement that we
obtain the consent of Frost Bank prior to paying dividends or repurchasing stock so long as we are in compliance with the covenants
of the credit agreement.
At September 30, 2019, we had no outstanding borrowings under the credit agreement and our borrowing availability under
the credit facility was $27.0 million. At September 30, 2019, we were in compliance with all covenants under the credit agreement.
We currently do not anticipate the need to borrow under the credit agreement; however, we can make no assurance that we will not do
so.
In August 2019, we sold our real property located at 7334 N. Gessner in Houston, Texas for $8.3 million. We recognized a
$7.0 million gain on the disposal of the property in the fourth quarter of fiscal year 2019. The buyer occupied the property as a tenant
under a long-term lease. The property was not strategic to our ongoing operations.
In fiscal years 2016, 2017 and 2018, we received income tax refunds of $18.3 million, $12.8 million and $0.7 million,
respectively, from the U.S. Department of Treasury. These refunds were a result of the significant tax losses we experienced in fiscal
years 2016 and 2015, which we elected to carryback and recoup taxes previously paid. For U.S. income tax purposes, we are now in a
loss carryforward position in regards to our tax losses occurring in fiscal year 2017 and beyond. As a result, our current tax losses will
not result in any additional U.S. federal income tax refunds. The tax refunds we received in fiscal years 2016 and 2017 were
significant contributors to our overall liquidity. In the absence of future profitable results of operations, we may need to rely on other
sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under our credit agreement
through its expiration in April 2020, leveraging or sale of real estate assets, sales of rental assets and other liquidity sources which may
be available to us. However, currently we believe that our cash, cash equivalents and borrowings under our credit facility will be
sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.
Fiscal Year 2018
At September 30, 2018, we had approximately $11.9 million in cash and cash equivalents and $25.5 million in short-term
investments. For the fiscal year ended September 30, 2018, we used $10.4 million of cash in operating activities. In addition to our
net loss of $19.2 million, we incurred other uses of cash in our operations including (i) a $5.1 million increase in trade accounts
receivable resulting from the timing of collections from customers, (ii) a $4.3 million increase in inventories for the production of
OBX products and recently introduced land-based wireless seismic products and (iii) the removal of a $6.8 million gross profit from
the sale of used rental equipment since such gross profit is reflected in the proceeds from the sale of used rental equipment under
investing activities. These uses of cash were offset by (i) net non-cash charges of $22.7 million from deferred income taxes,
depreciation, amortization, impairment, accretion, inventory obsolescence, stock-based compensation and bad debt expense, (ii) a $1.3
million increase in accounts payable associated with inventory purchases and the timing of payments to suppliers, (iii) a $3.1 million
increase in deferred revenue due to the receipt from customers of deposits for rental contracts and (iv) an increase of $1.0 million in
accrued and other expenses.
For the fiscal year ended September 30, 2018, we generated cash of $7.8 million from investing activities. Sources of cash
included (i) $10.5 million of net proceeds from the sale of short-term investments, (ii) $9.9 million of proceeds from the sale of rental
equipment and (iii) $2.1 million in insurance proceeds and claims receivable related to a property insurance claim. These sources of
cash were partially offset by (i) a down payment of $4.4 million for the Quantum acquisition, (ii) $6.5 million to expand our rental
21
fleet, (iii) $1.7 million for additions to our property, plant and equipment and (iv) $2.4 million in payments for damages related to the
insurance claim.
For the fiscal year ended September 30, 2018, we generated cash proceeds of $63,000 from financing activities from the
exercise of stock options by our employees. We had no long-term debt outstanding throughout the fiscal year ended September 30,
2018.
Off-Balance Sheet Arrangements
We do not have any obligations which meet the definition of an off-balance sheet arrangement and which have or are
reasonably likely to have a current or future effect on our financial statements or the items contained therein that are material to
investors.
Contractual Obligations
Contingent Consideration
We recorded an initial contingent earn-out liability of $7.7 million in connection with our July 2018 acquisition of Quantum.
Contingent payments, if any, may be paid in the form of cash or Company stock and will be derived from eligible revenue generated
during a four-year earn-out period subsequent to the closing of the acquisition. The maximum amount of contingent payments is
$23.5 million over the earn-out period. For the fiscal year ended September 30, 2019, we recorded a $2.9 million adjustment to
decrease the initial earn-out liability to its estimated fair value.
We recorded an initial contingent earn-out liability of $4.3 million in connection with our November 2018 acquisition of all
the intellectual property and related assets of the OptoSeis® fiber optic sensing technology. Contingent cash payments, if any, will be
derived from eligible revenue generated during a five-and-a-half year earn-out period subsequent to the closing of the acquisition from
products and services utilizing the OptoSeis® fiber optic technology. The maximum amount of contingent payments is $23.2 million
over the earn-out period. For the fiscal year ended September 30, 2019, we recorded an $0.8 million adjustment to increase the initial
earn-out liability to its estimated fair value.
We will reassess the earn-out calculations related to this contingent consideration in future periods.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
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 revenue recognition, bad debt reserves, inventory obsolescence reserves, self-insurance reserves for medical
expenses, product warranty reserves, contingent consideration, stock-based compensation and deferred income tax assets. 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.
Our normal credit terms for trade receivables are 30 days. In certain situations, credit terms for trade receivables may be
extended to 60 days or longer and such receivables generally do not require collateral. Additionally, we provide long-term financing
in the form of promissory notes and sales-type leases when competitive conditions require such financing and, in such cases, we may
require collateral. We perform ongoing credit evaluations of our accounts and financing receivables, and allowances are recognized
for potential credit losses.
Our long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying
amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of
expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying
value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is
recognized to the extent that the carrying value of the asset group exceeds its fair value.
Management makes judgments regarding the interpretation of tax laws that might be challenged upon an audit and cause
changes to previous estimates of tax liability. In addition, we operate within multiple taxing jurisdictions and are subject to audit in
these jurisdictions as well as by the Internal Revenue Service. In management’s opinion, adequate provisions for income taxes have
been made for all open tax years. The potential outcomes of examinations are regularly assessed in determining the adequacy of the
provision for income taxes and income tax liabilities. Management believes that adequate provisions have been made for reasonable
and foreseeable outcomes related to uncertain tax matters.
22
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 subsidiaries in the Russian Federation and the
United Kingdom use an average cost method to value their inventories.
We periodically review the composition of our inventories to determine if market demand, product modifications, technology
changes, excessive quantities on-hand and other factors hinder our ability to recover our investment in such inventories.
Management’s assessment is based upon historical product demand, estimated future product demand and various other judgments
and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of our
inventory investment will not be realized in our operating activities.
The value of our inventories not expected to be realized in cash, sold or consumed during our next operating cycle are
classified as non-current assets in our consolidated balance sheets.
We recognize revenue from product sales and services in accordance with ASC Topic 606, Revenue from Contracts with
Customers. This standard applies to contracts for the sale of products and services and does not apply to contracts for the rental or
lease of products. Under this standard, we recognize revenue when performance of contractual obligations are satisfied, generally
when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect
to be entitled in exchange for those goods or services. Revenue from product sales is recognized when obligations under the terms of
a contract are satisfied, control is transferred and collectability of the sales price is reasonably assured. Transfer of control generally
occurs with shipment or delivery, depending on the terms of the underlying contract. Our products are generally sold without any
customer acceptance provisions, and our standard terms of sale do not allow customers to return products for credit. Most of our
products do not require installation assistance or sophisticated instruction. We offer a standard product warranty, which obligates us
to repair or replace our products having manufacturing defects. We maintain a reserve for future warranty costs based on historical
experience or, in the absence of historical experience, management estimates. Revenue from engineering services is recognized as
services are rendered over the duration of a project or as billed on a per hour basis. Field service revenue is recognized when services
are rendered and is generally priced on a per day rate. We recognize rental revenue as earned over the rental period. Rentals of our
equipment generally range from daily rentals to rental periods of up to six months or longer.
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.
Management’s Current Outlook and Assumptions
Regarding our Oil and Gas Markets business segment, prices for a barrel of WTI crude oil declined from over $100 in July
2014 to approximately $26 in February 2016, and have recovered to approximately $55 today. With this substantial net decline in
crude oil prices, oil and gas exploration and production companies experienced a significant reduction in cash flows, which resulted in
sharp reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic data acquisition
activities. While we are now seeing some signs of increased oil and gas exploration activity around the world, 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.
Many of our traditional seismic products are damaged, destroyed or otherwise consumed during field operations. We expect
fiscal year 2020 demand for our land-based traditional seismic products to increase slightly over fiscal year 2019 levels.
We have recently introduced the “GCL” which is a new version of our land-based wireless data recorder. This version
contains several unique features not found in competitive models and we have received positive customer feedback regarding these
features and its overall functionality. We recently sold 5,000 GCL stations to a European customer and we recently received an order
to deliver 30,000 stations to another customer. While we believe the GCL will be a market leader similar to our GSX wireless unit,
beyond the recently received order for 30,000 stations it is uncertain what revenue impact this product will have during fiscal year
2020 in light of the tepid market demand for oil and gas seismic services and equipment. However, we expect our fiscal year 2020
land-based wireless product revenue to exceed the levels we achieved in fiscal year 2019.
The vast majority of our oil and gas rental revenue in fiscal year 2019 was derived from short-term rentals of our OBX
ocean-bottom recorder. We believe our OBX rental revenue will increase further in fiscal year 2020 as a result of rental contracts we
executed in fiscal year 2019 and from additional demand we continue to see for this product.
We believe that fiscal year 2020 revenue from our oil and gas reservoir products, and principally our borehole tools and
services, will be similar to the revenues we achieved in fiscal year 2019. We have not received any orders for large-scale seabed PRM
systems since November 2012 and we currently do not have any indication that such an order will be received in fiscal year 2020,
23
although we do believe opportunities for PRM orders do exist in today’s market. If a large-scale order were received in fiscal year
2020, it could significantly impact our fiscal year 2020 revenue and profits.
We expect fiscal year 2020 revenue from our Adjacent Markets products to increase over fiscal year 2019 levels. We expect
our industrial products to contribute the majority of this increase as a result of expanded market acceptance of these products.
We expect fiscal year 2020 revenue from our Emerging Markets products to increase over fiscal year 2019 as a result of
anticipated market acceptance of our border and perimeter security surveillance products.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not required.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements, including the reports thereon, the notes thereto and supplementary data begin at page
F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified under SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).
Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures
of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in our
reports.
In connection with the preparation of this Annual Report on Form 10-K, we carried out an evaluation under the supervision and
with the participation of our management, including the CEO and CFO, as of September 30, 2019 of the effectiveness of the Company’s
disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that
evaluation, the CEO and CFO concluded that our disclosure controls and procedures are effective as of September 30, 2019.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or
procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2019. In
making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control Integrated Framework (2013). Based on this assessment, our management concluded that, as of
September 30, 2019, our internal control over financial reporting is effective based on those criteria.
Our internal control over financial reporting as of September 30, 2019 has been audited by RSM US LLP, an independent
registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)
of the Exchange Act) during the fiscal quarter ended September 30, 2019 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
24
Item 9B. Other Information
None.
25
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of
September 30, 2019 in connection with our 2020 Annual Meeting of Stockholders under the captions “Election of Directors,”
“Executive Officers and Compensation,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” and is
incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of
September 30, 2019 in connection with our 2020 Annual Meeting of Stockholders under the caption “Executive Officers and
Compensation” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of
September 30, 2019 in connection with our 2020 Annual Meeting of Stockholders under the caption “Security Ownership of Certain
Beneficial Owners and Management” and is incorporated herein by reference, and in Item 5, “Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” contained in Part II hereof.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of
September 30, 2019 in connection with our 2020 Annual Meeting of Stockholders under the caption “Certain Relationships and
Related Transactions” and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of
September 30, 2019 in connection with our 2020 Annual Meeting of Stockholders under the caption “Independent Public
Accountants” and is incorporated herein by reference.
26
Item 15. Exhibits and Financial Statement Schedules
Financial Statements and Financial Statement Schedules
PART IV
The financial statements and financial statement schedules listed on the accompanying Index to Financial Statements (see
page F-1) are filed as part of this Annual Report on Form 10-K.
Exhibits
Exhibit
Number
3.1
Description of Documents
Amended and Restated Certificate of Formation of Geospace Technologies Corporation (incorporated by reference to
Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 8, 2015).
3.2
Amended and Restated Bylaws of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.2 to the
Registrant’s Current Report on Form 8-K filed August 8, 2019).
10.1
10.2
10.3
10.4
Employment Agreement dated as of August 1, 1997, between the Company and Michael J. Sheen (incorporated by
reference to the Registrant’s Registration Statement on Form S-1 filed September 30, 1997 (Registration No. 333-
36727)).*
Employment Agreement effective as of January 1, 2012, by and between OYO Geospace Corporation and Walter R. Wheeler
(incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed December 9, 2011).*
Employment Agreement effective as of January 1, 2012, by and between OYO Geospace Corporation and Robbin B. Adams
(incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed December 9, 2011).*
Employment Agreement effective as of January 1, 2012, by and between OYO Geospace Corporation and Thomas T.
McEntire (incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed December 9,
2011).*
10.5
OYO Geospace Corporation 1997 Key Employee Stock Option Plan (incorporated by reference to Amendment No. 1 to
the Registrant’s Registration Statement on Form S-1 filed November 5, 1997 (Registration No. 333-36727)).*
10.6
Amendment No. 1 to OYO Geospace Corporation 1997 Key Employee Stock Option Plan, dated February 2, 1998
(incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended September 30, 1998).*
10.7
Amendment No. 2 to OYO Geospace Corporation 1997 Key Employee Stock Option Plan, dated November 16, 1998
(incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended September 30, 1998).*
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Amendment No. 3 to OYO Geospace Corporation 1997 Key Employee Stock Option Plan, dated November 10, 2000
(incorporated by reference to the Registrant’s Registration Statement on Form S-8 filed February 15, 2005 (Registration
No. 333-122835)).*
Amendment No. 4 to OYO Geospace Corporation 1997 Key Employee Stock Option Plan, dated February 8, 2005
(incorporated by reference to the Registrant’s Registration Statement on Form S-8 filed February 15, 2005 (Registration
No. 333-122835)).*
Amendment No. 5 to OYO Geospace Corporation 1997 Key Employee Stock Option Plan, dated January 1, 2009
(incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended September 30, 2013).*
Amendment No. 6 to OYO Geospace Corporation 1997 Key Employee Stock Option Plan, approved by stockholders
August 20, 2013 (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended September
30, 2013).*
Geospace Technologies Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Appendix A to the
Company’s Proxy Statement on Schedule 14A filed on December 11, 2013).*
Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s
Form S-8 filed May 21, 2014).*
Form of Employee Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed November 26, 2018).*
27
Exhibit
Number
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
Description of Documents
Form of Employee Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to the
Registrant’s Form S-8 filed May 21, 2014).*
Form of Employee Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to the
Registrant’s Form S-8 filed May 21, 2014).*
Form of Performance Option Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed November 20, 2015).*
Form of Consultant Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s
Form S-8 filed May 21, 2014).*
Form of Consultant Stock Option Award Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Form
S-8 filed May 21, 2014).*
Form of Director Stock Option Award Agreement (incorporated by reference to Exhibit 10.6 to the Registrant’s Form S-
8 filed May 21, 2014).*
Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s Form
S-8 filed May 21, 2014).*
Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form
10-Q filed May 3, 2019).*
10.23
Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed November 26, 2018).*
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
Form of Amended and Restated Indemnity Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed May 26, 2015).*
Geospace Technologies Corporation Annual Bonus Program (incorporated by reference to Exhibit 10.23 to the
Registrant’s Annual Report on Form 10-K for the year ended September 30, 2017 filed December 1, 2017).*
First Amendment effective October 1, 2008 to Employment Agreement dated as of August 1, 1997, between the
Company and Michael J. Sheen (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2009, filed February 5, 2010).*
Loan Agreement dated September 27, 2013 among Geospace Technologies Corporation, as borrower, certain
subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender (incorporated by reference
to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed October 1, 2013).
First Amendment to Loan Agreement effective September 27, 2013 among Geospace Technologies Corporation, as
borrower, certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender
(incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed December 18, 2013).
Second Amendment to the Loan Agreement effective May 4, 2015 by and between Geospace Technologies Corporation
as borrower, certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2015, filed May 8, 2015).
Third Amendment to the Loan Agreement effective May 9, 2017 by and between Geospace Technologies Corporation as
borrower, certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender
(incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended
September 30, 2018 filed December 1, 2017).
Fourth Amendment to Loan Agreement dated October 25, 2017 among Geospace Technologies Corporation, as
borrower, certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed October 27, 2017).
Fifth Amendment to Loan Agreement dated November 9, 2018 among Geospace Technologies Corporation, as borrower,
certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed November 13, 2018).
28
Exhibit
Number
10.33
10.34
10.35
10.36
10.37
14.1
21.1
23.1
31.1
31.2
32.1
32.2
101
Description of Documents
Sixth Amendment to Loan Agreement dated March 29, 2019 among Geospace Technologies Corporation, as borrower,
certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed March 29, 2019).
Seventh Amendment to Loan Agreement dated November 15, 2019 among Geospace Technologies Corporation, as
borrower, certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender
(incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed November 18, 2019).
Revolving Promissory Note effective May 4, 2015 by and between Geospace Technologies Corporation as borrower,
certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender (incorporated by
reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed
May 8, 2015).
Waiver and Consent Letter to Loan Agreement effective April 6, 2015 among Geospace Technologies Corporation as
borrower, certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed April 7, 2015).
Commercial Contract – Improved Property, dated June 3, 2019 by and between GTC, Inc. and Harmony Public Schools
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 3, 2019).
General Code of Business Conduct and Supplemental Code of Ethics for CEO and Senior Financial Officers
(incorporated by reference to Exhibit 14.1 to the Registrant’s Current Report on Form 8-K filed February 6, 2019).
Subsidiaries of the Registrant.**
Consent of RSM US LLP.**
Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Certification of the Company’s Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
Certification of the Company’s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
Interactive data file.**
*
**
This exhibit is a management contract or a compensatory plan or arrangement.
Filed herewith.
Item 16. Form 10-K Summary
None.
29
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
GEOSPACE TECHNOLOGIES CORPORATION
By:
/s/ WALTER R. WHEELER
Walter R. Wheeler, Director, President and
Chief Executive Officer
November 22, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ WALTER R. WHEELER
Walter R. Wheeler
Director, President and Chief Executive Officer
(Principal Executive Officer)
/s/ THOMAS T. MCENTIRE
Thomas T. McEntire
Vice President, Chief Financial Officer and Secretary
(Principal Financial Officer and Principal Accounting
Officer)
/s/ GARY D. OWENS
Gary D. Owens
/s/ THOMAS L. DAVIS
Thomas L. Davis
Chairman of the Board
Director
/s/ EDGAR R. GIESINGER, JR.
Director
Edgar R. Giesinger, Jr.
/s/ TINA M. LANGTRY
Director
Tina M. Langtry
/s/ RICHARD F. MILES
Director
Richard F. Miles
/s/ WILLIAM H. MOODY
William H. Moody
/s/ MICHAEL J. SHEEN
Michael J. Sheen
/s/ CHARLES H. STILL
Charles H. Still
Director
Director
Director
Date
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
30
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Reports of Independent Registered Public Accounting Firm............................................................................................................
Consolidated Balance Sheets as of September 30, 2019 and 2018 ...................................................................................................
Consolidated Statements of Operations for the Years Ended September 30, 2019 and 2018 ..........................................................
Consolidated Statements of Comprehensive Loss for the Years Ended September 30, 2019 and 2018 ..........................................
Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2019 and 2018 ..........................................
Consolidated Statements of Cash Flows for the Years Ended September 30, 2019 and 2018 .........................................................
F-2
F-5
F-6
F-7
F-8
F-9
Notes to Consolidated Financial Statements ..................................................................................................................................... F-10
Schedule II—Valuation and Qualifying Accounts............................................................................................................................ F-32
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Geospace Technologies Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Geospace Technologies Corporation and its subsidiaries
(the Company) as of September 30, 2019 and 2018, and the related consolidated statements of operations, comprehensive loss,
stockholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements
(collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of September 30, 2019 and 2018, and the results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of September 30, 2019, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and
our report dated November 22, 2019 expressed an unqualified opinion on the effectiveness of the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ RSM US LLP
We have served as the Company's auditor since 2018.
Houston, Texas
November 22, 2019
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Geospace Technologies Corporation
Opinion on the Internal Control Over Financial Reporting
We have audited Geospace Technologies Corporation and its subsidiaries' (the Company) internal control over financial
reporting as of September 30, 2019, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of September 30, 2019, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets as of September 30, 2019 and 2018, the related consolidated statements of operations,
comprehensive loss, stockholders' equity and cash flows for the years then ended of the Company and our report dated November 22,
2019 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
Houston, Texas
November 22, 2019
F-3
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Geospace Technologies Corporation
Our audits of the consolidated financial statements and internal control over financial reporting referred to in our separate reports
dated November 22, 2019, (included elsewhere in this Annual Report on Form 10-K) also included the financial statement schedule of
Geospace Technologies Corporation and its subsidiaries, listed in Item 15(a) of this Form 10-K. This schedule is the responsibility of
Geospace Technologies Corporation's management. Our responsibility is to express an opinion based on our audits of the consolidated
financial statements.
In our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth therein.
/s/ RSM US LLP
Houston, Texas
November 22, 2019
F-4
Geospace Technologies Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
AS OF SEPTEMBER 30,
2019
2018
Current assets:
ASSETS
Cash and cash equivalents.............................................................................................. $
Short-term investments ..................................................................................................
Trade accounts receivable, net of allowance of $951 and $1,453 .................................
Financing receivables.....................................................................................................
Inventories......................................................................................................................
Prepaid expenses and other current assets .....................................................................
Total current assets ...................................................................................................
Non-current financing receivables, net of allowance of $0 and $1,849 ..............................
Non-current inventories.......................................................................................................
Rental equipment, net..........................................................................................................
Property, plant and equipment, net......................................................................................
Goodwill ..............................................................................................................................
Other intangible assets, net..................................................................................................
Deferred income tax assets, net ...........................................................................................
Prepaid income taxes...........................................................................................................
Other assets..........................................................................................................................
Total assets ............................................................................................................... $
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade .................................................................................................. $
Accrued expenses and other current liabilities ..............................................................
Deferred revenue............................................................................................................
Income tax payable ........................................................................................................
Total current liabilities..............................................................................................
Contingent consideration.....................................................................................................
Deferred income tax liabilities ............................................................................................
Total liabilities..........................................................................................................
Commitments and contingencies (Note 19)
Stockholders’ equity:
Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding ..........
Common stock, $.01 par value, 20,000,000 shares authorized, 13,630,666 and
13,600,541 shares issued and outstanding ..................................................................
Additional paid-in capital...............................................................................................
Retained earnings...........................................................................................................
Accumulated other comprehensive loss.........................................................................
Total stockholders’ equity ........................................................................................
Total liabilities and stockholders’ equity.................................................................. $
18,925 $
—
24,193
3,233
23,855
1,001
71,207
184
21,524
62,062
31,474
5,008
10,063
236
64
179
202,001 $
4,051 $
6,370
2,724
18
13,163
9,940
51
23,154
—
136
88,660
105,808
(15,757)
178,847
202,001 $
The accompanying notes are an integral part of the consolidated financial statements.
11,934
25,471
14,323
4,258
18,812
1,856
76,654
4,740
31,655
39,545
33,624
4,343
8,006
246
54
213
199,080
4,106
6,826
3,752
51
14,735
7,713
45
22,493
—
136
86,116
105,954
(15,619)
176,587
199,080
F-5
Geospace Technologies Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
YEAR ENDED SEPTEMBER 30,
2019
2018
Revenue:
Products ............................................................................................................................ $
Rental equipment ..............................................................................................................
Total revenue...............................................................................................................
45,847 $
49,962
95,809
Cost of revenue:
Products ............................................................................................................................
Rental equipment ..............................................................................................................
Total cost of revenue ...................................................................................................
Gross profit.............................................................................................................................
Operating expenses:
Selling, general and administrative...................................................................................
Research and development ...............................................................................................
Change in estimated fair value of contingent consideration.............................................
Bad debt expense ..............................................................................................................
Total operating expenses .............................................................................................
Gain on disposal of property ..................................................................................................
Income (loss) from operations................................................................................................
Other income (expense):
Interest expense.................................................................................................................
Interest income..................................................................................................................
Foreign exchange gains ....................................................................................................
Other, net ..........................................................................................................................
Total other income, net................................................................................................
46,059
18,322
64,381
31,428
23,626
15,495
(2,115)
436
37,442
7,047
1,033
(99)
1,308
241
(212)
1,238
Income (loss) before income taxes.........................................................................................
Income tax expense (benefit) .................................................................................................
Net loss ................................................................................................................................... $
2,271
2,417
(146) $
53,306
22,442
75,748
51,913
12,863
64,776
10,972
19,874
10,832
—
1,009
31,715
—
(20,743)
(336)
1,083
324
(120)
951
(19,792)
(580)
(19,212)
Loss per common share:
Basic.................................................................................................................................. $
Diluted .............................................................................................................................. $
(0.01) $
(0.01) $
(1.45)
(1.45)
Weighted average common shares outstanding:
Basic..................................................................................................................................
Diluted ..............................................................................................................................
13,388,626
13,388,626
13,250,867
13,250,867
The accompanying notes are an integral part of the consolidated financial statements.
F-6
Geospace Technologies Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
(In thousands)
Net loss ................................................................................................................................... $
Other comprehensive income (loss):
Change in unrealized losses on available-for-sale securities, net of tax...........................
Foreign currency translation adjustments ........................................................................
Other comprehensive loss ......................................................................................................
Total comprehensive loss ....................................................................................................... $
YEAR ENDED SEPTEMBER 30,
2019
2018
(146) $
(19,212)
82
(220)
(138)
(284) $
(24)
(1,365)
(1,389)
(20,601)
The accompanying notes are an integral part of the consolidated financial statements.
F-7
Geospace Technologies Corporation and Subsidiaries
Consolidated Statement of Stockholders’ Equity
For the years ended September 30, 2019 and 2018
(In thousands, except share amounts)
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
(14,230) $ 194,803
Total
Balance at October 1, 2017 .......................................... 13,438,316 $
134 $ 83,733 $ 125,166 $
Net loss .........................................................................
Other comprehensive loss ............................................
Issuance of restricted stock ..........................................
Forfeiture of restricted stock ........................................
Issuance of common stock pursuant to exercise of
7,700
options .......................................................................
Stock-based compensation ...........................................
—
Balance at September 30, 2018 .................................... 13,600,541
—
—
176,450
(21,925)
—
—
2
—
—
—
(2)
—
(19,212)
—
—
—
—
(1,389)
—
—
(19,212)
(1,389)
—
—
—
—
136
67
2,318
—
—
86,116 105,954
—
—
67
2,318
(15,619) 176,587
Net loss .........................................................................
Other comprehensive loss ............................................
Issuance of restricted stock ..........................................
Forfeiture of restricted stock ........................................
Issuance of common stock pursuant to the vesting of
restricted stock units..................................................
Issuance of common stock pursuant to exercise of
24,500
options .......................................................................
Stock-based compensation ...........................................
—
Balance at September 30, 2019 .................................... 13,630,666 $
—
—
8,000
(2,875)
500
—
—
—
—
—
—
—
—
(146)
—
—
—
—
(138)
—
—
(146)
(138)
—
—
—
—
—
—
215
—
2,329
136 $ 88,660 $ 105,808 $
—
—
215
2,329
(15,757) $ 178,847
The accompanying notes are an integral part of the consolidated financial statements.
F-8
Geospace Technologies Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net loss ............................................................................................................................................. $
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Deferred income tax expense (benefit).......................................................................................
Rental equipment depreciation ...................................................................................................
Property, plant and equipment depreciation ...............................................................................
Amortization of intangible assets ...............................................................................................
Impairment of long-lived assets .................................................................................................
Accretion of discounts (amortization of premiums) on short-term investments ........................
Stock-based compensation expense............................................................................................
Bad debt expense ........................................................................................................................
Inventory obsolescence expense.................................................................................................
Change in estimated fair value of contingent consideration.......................................................
Gross profit from sale of used rental equipment ........................................................................
Gain on disposal of property ......................................................................................................
Gain on disposal of equipment ...................................................................................................
Realized loss on short-term investments ....................................................................................
Effects of changes in operating assets and liabilities:
Trade accounts and other receivables...................................................................................
Income tax receivable...........................................................................................................
Inventories ............................................................................................................................
Prepaid expenses and other current assets............................................................................
Prepaid income taxes ............................................................................................................
Accounts payable trade.........................................................................................................
Accrued expenses and other .................................................................................................
Deferred revenue ..................................................................................................................
Income taxes payable ...........................................................................................................
Net cash provided by (used in) operating activities .......................................................
Cash flows from investing activities:
Purchase of property, plant and equipment ......................................................................................
Investment in rental equipment ........................................................................................................
Proceeds from the sale of property ...................................................................................................
Proceeds from the sale of equipment................................................................................................
Proceeds from the sale of used rental equipment .............................................................................
Purchases of short-term investments ................................................................................................
Proceeds from the sale of short-term investments............................................................................
Business acquisition, net of acquired cash .......................................................................................
Payments for damages related to insurance claim............................................................................
Proceeds from insurance claim.........................................................................................................
Increase in insurance claim receivable .............................................................................................
Net cash provided by investing activities.......................................................................
Cash flows from financing activities:
Proceeds from exercise of stock options and other ..........................................................................
Net cash provided by financing activities ......................................................................
Effect of exchange rate changes on cash ................................................................................................
Increase (decrease) in cash and cash equivalents ...................................................................................
Cash and cash equivalents, beginning of fiscal year ..............................................................................
Cash and cash equivalents, end of fiscal year......................................................................................... $
YEAR ENDED SEPTEMBER 30,
2019
2018
(146) $
(19,212)
16
13,713
3,965
1,661
—
(9)
2,329
436
4,614
(2,115)
(652)
(7,047)
(100)
66
(9,159)
—
(1,865)
325
18
(44)
660
(1,016)
(21)
5,629
(1,936)
(34,070)
8,265
142
4,856
—
25,606
(1,819)
(650)
1,166
—
1,560
215
215
(413)
6,991
11,934
18,925 $
(18)
10,178
4,040
194
573
27
2,318
1,009
4,353
—
(6,809)
—
(27)
11
(5,090)
270
(7,824)
93
55
1,333
1,011
3,063
51
(10,401)
(1,721)
(6,513)
—
202
9,918
(17,922)
28,463
(4,352)
(2,353)
1,749
306
7,777
63
63
(597)
(3,158)
15,092
11,934
The accompanying notes are an integral part of the consolidated financial statements.
F-9
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies:
The Company
Geospace Technologies Corporation (“Geospace”) designs and manufactures instruments and equipment used by the oil and
gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. Geospace also
designs and manufactures Adjacent Markets products, including industrial products and imaging equipment, and Emerging Market
products consisting of border and perimeter security products. Geospace and its subsidiaries are referred to collectively as the
“Company”.
Basis of Presentation
The accompanying financial statements present the consolidated financial position, results of operations and cash flows of the
Company in accordance with accounting principles generally accepted in the United States of America. All intercompany balances
and transactions have been eliminated.
Reclassifications
The Company reclassified certain components of revenue and cost of revenue on its consolidated statement of operations for
the fiscal year ended September 30, 2018 to conform to the current year presentation. The reclassifications had no effect on
previously reported total revenue, total cost of revenue, net loss, stockholders’ equity or cash flows.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in
developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually
evaluates its estimates, including those related to bad debt reserves, inventory obsolescence reserves, self-insurance reserves, product
warranty reserves, useful lives of long-lived assets, impairment of long-lived assets and intangible assets, contingent consideration and
deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions.
Cash and Cash Equivalents
The Company considers all highly-liquid investments purchased with an original or remaining maturity at the time of
purchase of three months or less to be cash equivalents. At September 30, 2019 cash and cash equivalents included $7.0 million held
by the Company’s foreign subsidiaries and branch offices. If the Company were to repatriate the cash held by its foreign subsidiaries,
it would be required to accrue and pay taxes on any amount repatriated under rates enacted by The Tax Cuts and Jobs Act (“2017 Tax
Act’).
Short-term Investments
The Company classifies its short-term investments consisting of corporate bonds, government bonds and other such similar
investments as available-for-sale securities. Available-for-sale securities are carried at fair market value with net unrealized holding
gains and losses reported each period as a component of accumulated other comprehensive loss in stockholders’ equity. See Note 4 to
these consolidated financial statements for additional information.
Concentrations of Credit and Supplier Risk
The Company maintains its cash in bank deposit accounts that, at times, exceed federally insured limits. Management of the
Company believes that the financial strength of the financial institutions holding such deposits minimizes the credit risk of such
deposits.
The Company sells products to customers throughout the United States and various foreign countries. The Company’s
normal credit terms for trade receivables are 30 days. In certain situations, credit terms may be extended to 60 days or longer. The
F-10
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
Company performs ongoing credit evaluations of its customers and generally does not require collateral for its trade receivables.
Additionally, the Company provides long-term financing in the form of promissory notes and sales-type leases when competitive
conditions require such financing. In such cases, the Company may require collateral. Allowances are recognized for potential credit
losses. Three customers comprised 19.7%, 5.2% and 20.0% of the Company’s revenue during fiscal year 2019. At September 30,
2019, the Company had trade account receivables due from these three customers of $6.7 million, $3.6 million and $8.5 million,
respectively. With respect to the Company’s revenue and trade account receivables, the latter two customers are affiliated with a
common parent company. One customer comprised 10.4% of the Company’s revenue during fiscal year 2018. At September 30,
2018, the Company had a combined trade account and financing receivable due from this customer of $9.0 million.
Certain models of the Company’s oil and gas marine wireless products require a timing device it purchases from a United
States manufacturer. The Company currently does not possess the ability to manufacture this component and has no other reliable
source for this device. If this manufacturer were to discontinue its production of this timing device, were to become unwilling to
contract with the Company on competitive terms or were unable to supply the component in sufficient quantities to meet its
requirements, the Company’s ability to compete in the marine wireless marketplace could be impaired, which could adversely affect
its financial performance.
The Company purchases all of its thermal film from a European manufacturer for its imaging products. Except for the film
sold to the Company by this manufacturer, the Company knows of no other source for thermal film that performs as well in its
imaging equipment. If the European manufacturer were to discontinue producing thermal film, were to become unwilling to contract
with the Company on competitive terms or were unable to supply thermal film in sufficient quantities to meet its requirements, the
Company’s ability to compete in the direct thermal imaging marketplace could be impaired, which could adversely affect its financial
performance.
Inventories
The Company records a write-down of its inventories when the cost basis of any manufactured product, including any
estimated future costs to complete the manufacturing process, exceeds its net realizable value. Inventories are stated at the lower of
cost or net realizable value. Cost is determined on the first-in, first-out method, except that certain of the Company’s foreign
subsidiaries use an average cost method to value their inventories.
The Company periodically reviews the composition of its inventories to determine if market demand, product modifications,
technology changes, excessive quantities on-hand and other factors hinder our ability to recover its investment in such
inventories. The Company’s assessment is based upon historical product demand, estimated future product demand and various other
judgments and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of
the Company’s inventory investment will not be realized in its operating activities.
The Company reviews it inventories for classification purposes. The value of inventories not expected to be realized in cash,
sold or consumed during its next operating cycle are classified as noncurrent assets.
Property, Plant and Equipment and Rental Equipment
Property, plant and equipment and rental equipment are stated at cost. Depreciation expense is calculated using the straight-
line method over the following estimated useful lives:
Rental equipment ...........................................................................
Property, plant and equipment:
Machinery and equipment ........................................................
Buildings and building improvements .....................................
Other .........................................................................................
Years
2-5
3-15
10-50
5-10
Expenditures for renewals and betterments are capitalized. Repairs and maintenance expenditures are charged to expense as
incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any gain
or loss thereon is reflected in the statements of operations.
F-11
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
Impairment of Long-lived Assets
The Company’s long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the
carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of
expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying
value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is
recognized to the extent that the carrying value of the asset group exceeds its fair value. Impairment charges are included as a
component of cost of revenue in the Company’s consolidated statements of operations.
Goodwill
The Company conducts its evaluation of goodwill at the reporting unit level on an annual basis as of September 30 and more
frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. The guidance on the
testing of goodwill for impairment provides the option to first assess qualitative factors to determine if the annual two-step test of
goodwill for impairment must be performed. If, based on the qualitative assessment of events or circumstances, an entity determines it
is more likely than not that the goodwill fair value of a reporting unit is more than its carrying amount then it is not necessary to
perform the two-step impairment test. However, if an entity concludes otherwise, then the two-step impairment test must be performed
to identify potential impairment and to measure the amount of goodwill impairment, if any.
At September 30, 2019, the Company performed the two-step analysis on its Oil & Gas and Emerging Markets reporting
units and determined there was no impairment since the value of the goodwill was more than its carrying amount.
Other Intangible Assets
Intangible assets are carried at cost, net of accumulated amortization. The estimated useful life of the Company’s other
intangible assets are evaluated each reporting period to determine whether events or circumstances warrant a revision to the remaining
amortization period. If the estimate of an intangible asset’s remaining useful life is changed, the amortization period should be
changed prospectively. Amortization expense is calculated using the straight-line method over the following estimated useful lives:
Developed technology..............................................
Trade names .............................................................
Customer relationships .............................................
Non-compete agreements .........................................
Years
18
5
4
4
Revenue Recognition
See Note 2 to these consolidated financial statements.
Deferred Revenue
The Company records deferred revenue when customer funds are billed or received prior to the recognition of the associated
revenue.
Contingent Consideration
The Company established earn-out liabilities in connection with its business acquisitions in the fourth quarter of fiscal year
2018 and the first quarter of fiscal year 2019. The Company engaged the services of a valuation firm to measure the initial fair value
of the earn-out liabilities as of the acquisition date for each business. The valuation technique used to measure the fair value of the
liability was derived from models utilizing market observable inputs. The Company records the fair value of its contingent earn-out
liabilities on a quarterly basis. Adjustments to the liabilities, if any, are included as a component of earnings in the consolidated
statements of operations. See Note 19 to these consolidated financial statements for additional information.
Research and Development Costs
The Company expenses research and development costs as incurred. Research and development costs include salaries,
employee benefit costs, department supplies, direct project costs and other related costs.
F-12
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
Product Warranties
Most of the Company’s products do not require installation assistance or sophisticated instructions. The Company offers a
standard product warranty obligating it to repair or replace equipment with manufacturing defects. The Company maintains a reserve
for future warranty costs based on historical experience or, in the absence of historical product experience, management’s estimates.
Reserves for future warranty costs are included within accrued expenses and other current liabilities on the consolidated balance
sheets.
Changes in the product warranty reserve are reflected in the following table (in thousands):
Balance at October 1, 2017 ........................................................... $
Accruals for warranties issued during the year .............................
Settlements made (in cash or in kind) during the year..................
Balance at September 30, 2018.....................................................
Accruals for warranties issued during the year .............................
Settlements made (in cash or in kind) during the year..................
Balance at September 30, 2019..................................................... $
508
1,074
(894)
688
386
(845)
229
Stock-Based Compensation
The Company accounts for stock-based compensation, including grants of restricted awards and unqualified stock options in
accordance with Accounting Standards Codification Topic 718, which requires that all share-based payments (to the extent that they
are compensatory) be recognized as an expense in the Company’s consolidated statements of operations based on their fair values on
the award date and the estimated number of shares it ultimately expects to vest.
The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the
award. The Company’s stock-based compensation plan and awards are more fully described in Note 16 to these consolidated financial
statements.
Foreign Currency Gains and Losses
The assets and liabilities of the Company’s foreign subsidiaries that have a foreign currency as their functional currency have
been translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations have been
translated using the average exchange rates during the year. Resulting translation adjustments have been recorded as a component of
accumulated other comprehensive loss in stockholders’ equity. Foreign currency transaction gains and losses are included in the
statements of operations as they occur. Transaction gains and losses on intra-entity foreign currency transactions and balances
including advances and demand notes payable, on which settlement is not planned or anticipated in the foreseeable future, are
recorded in “accumulated other comprehensive loss” on our consolidated balance sheets.
Shipping and Handling Costs
Amounts billed to a customer in a sales transaction related to reimbursable shipping and handling costs are included in
revenue and the associated costs incurred by the Company for reimbursable shipping and handling expenses are reported in cost of
sales. The Company had shipping and handling expenses of $0.5 million and $0.5 million, respectively, for the fiscal years ended
September 30, 2019 and 2018, respectively.
Fair Value
Fair value is the price that would be received to sell an asset or the amount paid to transfer a liability in an orderly transaction
between market participants (an exit price) at the measurement date. U.S. generally accepted accounting principles (“GAAP”) has
established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels.
These levels are determined based on the lowest level input that is significant to the fair value measurement. Level 1 represents
unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 represents quoted prices for similar assets and
liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly. Level 3
represents valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
F-13
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
Income Taxes
Income taxes are presented in accordance with the Accounting Standards Codification Topic 740 (“Topic 740”) guidance for
accounting for income taxes. The estimated future tax effects of temporary differences between the tax basis of assets and liabilities
and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carrybacks and
carryforwards are recorded. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax
basis of assets and liabilities (temporary differences) and are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. The Company periodically reviews the recoverability of tax assets recorded on the balance
sheet and provides valuation allowances if it is more likely than not that such assets will not be realized.
The Company follows the guidance of Topic 740 to analyze all tax positions that are less than certain. Topic 740 prescribes a
recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. In accordance with Topic 740, the Company recognizes in its financial statements the impact of a
tax position if that position is “more likely than not” to be sustained on audit, based on the technical merits of the position. The
Company’s estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts,
and circumstances existing at that time.
The Company classifies interest and penalties associated with the payment of income taxes, if any, in the Other Income
(Expense) section of its consolidated statements of operations. The Company incurred no interest or penalties for the fiscal years
ended September 30, 2019 and 2018.
Recently Adopted Accounting Pronouncements
In November 2016, the Financial Accounting Standards Board (“FASB”) issued guidance which requires that a statement of
cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted
cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be
included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. This guidance was adopted by the Company in its first quarter of fiscal year 2019. The adoption of this
guidance had no effect on the Company’s consolidated financial statements since it currently holds no restricted cash balances.
In May 2014, the FASB issued guidance requiring entities to recognize revenue from contracts with customers by applying a
five-step model in accordance with the core principle to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this
guidance specifies the accounting for some costs to obtain or fulfill a contract with a customer and expands disclosure requirements
for revenue recognition. This new standard supersedes existing revenue recognition guidance and requires changes to the revenue
recognition process, financial statement presentation and footnote disclosures. The Company adopted this standard on October 1,
2018 using the modified retrospective method. The adoption of this standard did not result in a cumulative adjustment as of October
1, 2018 nor did it have any impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
In June 2018, the FASB issued guidance expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to
include share-based payment transactions for acquiring goods and services from nonemployees. The guidance is effective for fiscal
years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. The Company
will adopt this guidance in its first quarter of its fiscal year ending September 30, 2020 and does not expect the adoption of this
guidance to have any material impact on its consolidated financial statements.
In August 2018, the FASB issued guidance requiring certain existing disclosure requirements in ASC Topic 820, Fair Value
Measurements and Disclosures, to be modified or removed, and certain new disclosure requirements to be added to this standard. In
addition, the guidance allows entities to exercise more discretion when considering fair value measurement disclosures. The guidance
is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. The Company is in the process of
evaluating the impact of this guidance on its consolidated financial statements.
In January 2017, the FASB issued guidance simplifying the current two-step goodwill impairment test by eliminating Step 2
of the test. The guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its
carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair
value, if any. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal
years, and should be applied on a prospective basis. Early adoption is permitted for the interim or annual goodwill impairment tests
F-14
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material
impact on its consolidated financial statements and disclosures.
In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss
impairment methodology in generally accepted accounting principles (“GAAP”). The new impairment model requires immediate
recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments. For
available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the
amortized cost of the securities. The standard is effective for fiscal years reporting periods beginning after December 15, 2019 and
interim periods within those fiscal years. Early adoption for a fiscal year beginning after December 15, 2018 is permitted. Entities
will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective
reporting period. The Company expects to adopt this standard during the first quarter of its fiscal year ending September 30, 2021 and
is currently evaluating the impact of this new guidance on its consolidated financial statements.
In February 2016, the FASB issued guidance requiring a lessee to recognize assets and liabilities for leases with lease terms
of more than 12 months. Consistent with current GAAP, the recognition, measurement and presentation of expense and cash flows
arising from a lease by a lessee primarily will depend on its classification of the lease as a finance or operating lease. However, unlike
current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will also require operating
leases of the lessee to be recognized on the balance sheet if the operating lease term is more than 12 months. The guidance also
requires disclosures to help investors and other financial statement users to better understand the amount, timing and uncertainty of
cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information
about the amounts recorded in the financial statements. The guidance is effective for fiscal years, and interim reporting periods
therein, beginning after December 15, 2018 and is to be applied using the modified retrospective approach. The Company will adopt
this guidance in its first quarter of its fiscal year ending September 30, 2020. Effective May 1, 2019, the Company became a lessee
under an office lease agreement with a term longer than one year and will follow the guidance of the new standard regarding this lease
contract. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.
2. Revenue Recognition
On October 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers. This new standard
applies to contracts for the sale of products and services, and does not apply to contracts for the rental or lease of products. The
Company adopted the new standard using the modified retrospective method applied to those contracts that were not completed as of
September 30, 2018. Results for reporting periods beginning after September 30, 2018 are presented under the new standard, while
prior period amounts are not restated.
Under the new standard, the Company recognizes revenue from product sales and services when performance of contractual
obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that
reflects the consideration it expects to be entitled to in exchange for those goods or services.
The Company primarily derives product revenue from the sale of its manufactured products. Revenue from these product
sales is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales
price is reasonably assured. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying
contract. Most of the Company’s products do not require installation assistance or sophisticated instruction. The Company’s products
are generally sold without any customer acceptance provisions, and the Company’s standard terms of sale do not allow customers to
return products for credit. We offer a standard product warranty, which obligates us, in certain circumstance, to repair or replace our
products having manufacturing defects. We maintain a reserve for future warranty costs based on historical experience or, in the
absence of historical experience, management estimates.
Revenue from engineering services is recognized as services are rendered over the duration of a project, or as billed on a per
hour basis. Field service revenue is recognized when services are rendered and is generally priced on a per day rate.
The Company also generates revenue from short-term rentals under operating leases of its manufactured products. Rental
revenue is recognized as earned over the rental period. Rentals of the Company’s equipment generally range from daily rentals to
minimum rental periods of up to six months or longer. The Company has determined that the new standard does not apply to rental
contracts, which are within the scope of other revenue recognition accounting standards.
The cumulative effect of the changes made to the Company’s consolidated balance sheet as of October 1, 2018 resulting from
the adoption of the new standard was not material and did not impact beginning retained earnings. The impact on the timing of sales
and services for the fiscal year ended September 30, 2019 resulting from the application of the new standard was not material.
As permissible under the new standard, sales taxes and transaction-based taxes are excluded from revenue. The Company
does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.
F-15
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would be one
year or less. These costs are recorded in selling, general and administrative expenses.
At September 30, 2019 and September 30, 2018 the Company had deferred contract liabilities of zero and $0.2 million,
respectively, included as a component of deferred revenue. The Company had deferred contract costs of zero and $27,000 at
September 30, 2019 and September 30, 2018, respectively, included as a component of prepaid expenses and other current assets.
During the fiscal year ended September 30, 2019, the Company recognized revenue of $0.2 million from deferred contract liabilities
and cost of revenue of $27,000 from deferred contract costs.
For each of the Company’s operating segments, the following table presents revenue only from the sale of products and the
performance of services under contracts with customers. The table excludes all revenue earned from rental contracts (in thousands):
Oil and Gas Markets Product and Services Revenue:
Traditional exploration .............................................................
Wireless exploration.................................................................
Reservoir ..................................................................................
Total revenue ............................................................................
$
Adjacent Markets Product and Services Revenue:
Industrial...................................................................................
Imaging.....................................................................................
Total revenue ............................................................................
YEAR ENDED SEPTEMBER 30,
2019
2018
8,712 $
4,362
2,554
15,628
18,324
11,736
30,060
11,795
6,851
4,533
23,179
18,352
11,489
29,841
Emerging Markets Product and Services Revenue:
Revenue ....................................................................................
159
286
Total ..............................................................................................
$
45,847 $
53,306
See Note 21 for more information on the Company’s operating segments.
For each of the geographic areas where the Company operates, the following table presents revenue (in thousands) from the
sale of products and services under contracts with customers. The table excludes all revenue earned from rental contracts:
YEAR ENDED SEPTEMBER 30,
2019
2018
Asia ...................................................................................
Canada...............................................................................
Europe ...............................................................................
United States .....................................................................
Other..................................................................................
$
$
6,025 $
2,558
6,569
28,763
1,932
45,847 $
2,143
13,044
4,652
31,296
2,171
53,306
F-16
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
3. Business Acquisitions
OptoSeis® fiber optic sensing technology
On November 13, 2018, the Company acquired all of the intellectual property and related assets of the OptoSeis® fiber optic
sensing technology business from PGS Americas, Inc. The assets of the OptoSeis® business are included in the Company’s Oil and
Gas Markets business segment. The acquisition represented the Company’s strategy for the addition of breadth to its PRM and other
products. The acquisition purchase price consisted of cash at closing of approximately $1.8 million and contingent earn-out payments
of up to $23.2 million over a five-and-a half year period beginning on the date of acquisition. The contingent cash payments will be
derived from certain eligible product and service revenue generated during the earn-out period.
In connection with the OptoSeis® acquisition, the Company recorded goodwill of $0.7 million (deductible for tax purposes),
other intangible assets of $3.7 million, fixed assets of $1.7 million and has established an initial contingent earn-out liability of $4.3
million.
Legal costs of $0.2 million related to the OptoSeis® acquisition are included in selling, general and administrative expenses.
For the fiscal year ended September 30, 2019, the estimated fair value of the acquired OptoSeis® assets was revised,
including a $1.8 million addition to machinery and equipment, which was offset by a $1.0 million decrease in goodwill and a $0.8
million decrease in other intangible assets.
Quantum Technology Sciences, Inc.
On July 27, 2018, the Company acquired Quantum Technology Sciences, Inc., a Florida-based tactical security and
surveillance systems solutions provider (“Quantum”) through a merger of the Company’s subsidiary with and into Quantum, with
Quantum as the surviving corporation. The acquisition represented the Company’s strategy to expand its product revenues, as well as
its engineering and manufacturing competencies, to markets outside the oil and gas industry.
The acquisition purchase price for Quantum consisted of a cash down payment at closing of approximately $4.4 million and
contingent earn-out payments of up to $23.5 million over a four-year period.
In connection with the acquisition the Company recorded goodwill of $4.3 million (not deductible for tax purposes) and other
intangible assets of $8.2 million and established an initial contingent earn-out liability of $7.7 million. Current assets and current
liabilities of $0.2 million and $0.6 million were acquired in the transaction. The contingent earn-out payments, if any, which may be
paid in the form of cash or Company stock, will be derived from certain eligible revenue that may be generated during the four-year
earn-out period.
Acquisition related costs of $0.3 million incurred in connection with the transaction are included in selling, general and
administrative expenses in the Company’s consolidated financial statements.
4. Short-term Investments
During the fiscal years ended September 30, 2019 and 2018 the Company realized losses of $66,000 and $11,000,
respectively, from the sale of short-term investments. These realized losses are recorded in Other Income on the consolidated
statements of operations. The Company had no short-term investments at September 30, 2019. At September 30, 2018, the
Company’s short-term investments were composed of the following (in thousands):
Short-term investments:
Corporate bonds ................................................................. $
Government bonds .............................................................
Total ................................................................................... $
17,851 $
7,702
25,553 $
— $
—
— $
(60) $
(22)
(82) $
17,791
7,680
25,471
Amortized
Cost
AS OF SEPTEMBER 30, 2018
Unrealized
Unrealized
Losses
Gains
Estimated
Fair Value
5. Derivative Financial Instruments
At September 30, 2019 and 2018, the Company’s Canadian subsidiary had CAN$9.3 million and CAN$20.4 million,
respectively, of Canadian dollar denominated intercompany accounts payable owed to one of the Company’s U.S subsidiaries. In
order to mitigate its exposure to movements in foreign currency rates between the U.S. dollar and Canadian dollar, the Company
routinely enters into foreign currency forward contracts to hedge a portion of its exposure to changes in the value of the Canadian
dollar. At September 30, 2019 and 2018, the Company had short-term hedge contracts of CAN$7.0 million and CAN$30.0 with a
F-17
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
United States bank to reduce the impact on cash flows from movements in the Canadian dollar/U.S. dollar currency exchange rate, but
have not been designated as a hedge for accounting purposes.
The following table summarizes the gross fair value of all derivative instruments, which are not designated as hedging
instruments and their location in the consolidated balance sheets (in thousands):
Derivative Instrument
Location
AS OF SEPTEMBER 30,
2019
2018
Foreign Currency Forward Contracts ..... Accrued Expenses and Other Current Liabilities $
4 $
270
The following table summarizes the impact of the Company’s derivatives on the consolidated statements of operations (in
thousands):
Derivative Instrument
Location
Foreign Currency Forward Contracts ....... Other Income (Expense)
YEAR ENDED SEPTEMBER 30,
2019
2018
552
$
779
$
Amounts in the above table include realized and unrealized derivative gains and losses.
6. Fair Value of Financial Instruments
The Company’s financial instruments generally included cash and cash equivalents, short-term investments, a foreign
currency forward contract, trade, notes and financing lease receivables and accounts payable. Due to the short-term maturities of cash
and cash equivalents, trade and other receivables and accounts payable, the carrying amounts approximate fair value on the respective
balance sheet dates. The valuation technique used to measure the fair value of the contingent consideration was derived from models
utilizing market observable inputs.
The Company measures short-term investments and derivatives at fair value on a recurring basis.
The following tables present the fair value of the Company’s short-term investments, contingent consideration and foreign
currency forward contracts by valuation hierarchy and input (in thousands):
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
AS OF SEPTEMBER 30, 2019
Significant Other
Observable
(Level 2)
Significant
Unobservable
(Level 3)
Contingent consideration ........................................................ $
Foreign currency forward contract..........................................
Total................................................................................... $
— $
—
- $
— $
(4)
(4) $
(9,940) $
—
(9,940) $
Totals
(9,940)
(4)
(9,944)
AS OF SEPTEMBER 30, 2018
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant Other
Observable
(Level 2)
Significant
Unobservable
(Level 3)
Totals
Short-term investments
Corporate bonds................................................................. $
Government bonds.............................................................
Contingent consideration ........................................................
Foreign currency forward contract..........................................
Total................................................................................... $
17,791 $
7,680
—
—
25,471 $
— $
—
—
(270)
(270) $
— $
—
(7,713)
—
(7,713) $
17,791
7,680
(7,713)
(270)
17,488
Assets and liabilities measured on a nonrecurring basis
The measurements utilized to determine the implied fair value of the Company’s long-lived assets and contingent
consideration as of September 30, 2019 represented significant unobservable inputs (Level 3).
F-18
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the fiscal year
ended September 30, 2019:
Balance at October 1, 2018 .............................................................................................. $
Contingent consideration pursuant to acquisitions...........................................................
Fair value adjustments......................................................................................................
Balance at September 30, 2019 ........................................................................................ $
7,713
4,342
(2,115)
9,940
Adjustments to the fair value of the contingent consideration are based on Monte Carlo simulations utilizing inputs which
include market comparable information and management assessments regarding potential future scenarios. The Company believes its
estimates and assumptions are reasonable, however, there is significant judgement involved.
7. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consisted of the following (in thousands):
Balance at October 1, 2017 ...................................................... $
Other comprehensive loss...................................................
Balance at September 30, 2018 ................................................
Other comprehensive income (loss) ...................................
Balance at September 30, 2019 ................................................ $
8. Accounts and Financing Receivables
Trade accounts receivable consisted of the following (in thousands):
Unrealized Gains
(Losses) on
Available-for-
Sale
Securities
Foreign
Currency
Translation
Adjustments
(14,172) $
(1,365)
(15,537)
(220)
(15,757) $
(58) $
(24)
(82)
82
- $
Total
(14,230)
(1,389)
(15,619)
(138)
(15,757)
Trade accounts receivable........................................................... $
Allowance for doubtful accounts................................................
$
25,144 $
(951)
24,193 $
15,776
(1,453)
14,323
AS OF SEPTEMBER 30,
2018
2019
The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses. The Company
determines the allowance based upon historical experience and a current review of its accounts receivable balances. Accounts
receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.
Trade accounts receivable at September 30, 2019 includes $8.5 million due from an international seismic marine customer
that, as of September 30, 2019 rented a significant amount of marine nodal equipment from the Company. The Company has
experienced cash collection difficulties with this customer throughout fiscal year 2019 due to the customer’s inability to generate
enough cash flow to pay its obligations in a timely manner. In November 2019, the Company accepted from the customer a plan to
bring the Company’s current and future unpaid invoices to a satisfactory status. This plan contemplates completion during the
Company’s second fiscal quarter ending March 31, 2020, and is premised upon the customer’s (i) projections of free cash flows from
an existing contract with a third-party and (ii) potential access to capital transactions and/or future borrowing availability from its
bank. While the Company has significant concerns about the ultimate collection of its accounts receivable from this customer, it has
not, and does not currently intend to, provide any significant bad debt reserves toward its outstanding accounts receivable balance
from this customer unless and until it becomes probable (in the Company’s judgement) that the customer cannot (i) generate free cash
flows from its existing contract and (ii) complete capital transactions and/or borrow from its bank.
F-19
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
See Note 1 to these consolidated financial statements for information on concentrations of credit risk.
Financing receivables are reflected in the following table (in thousands):
Promissory notes......................................................................... $
Sales-type lease...........................................................................
Total financing receivables ...................................................
Unearned income:
Promissory notes ...................................................................
Sales-type lease .....................................................................
Total unearned income ....................................................
Total financing receivables, net of unearned income .................
Allowance for doubtful promissory notes ..................................
Less current portion ....................................................................
Non-current financing receivables.............................................. $
AS OF SEPTEMBER 30,
2018
2019
780 $
2,692
3,472
—
(55)
(55)
3,417
—
(3,233)
184 $
5,646
5,533
11,179
(95)
(237)
(332)
10,847
(1,849)
(4,258)
4,740
Promissory notes receivable are generally collateralized by the products sold, and bear interest at rates ranging up to 5% per
year. The promissory notes receivable mature at various times through May 2021. The Company has, on occasion, extended or
renewed notes receivable as they mature, but there is no obligation to do so.
The Company entered into a sales-type lease in September 2017 resulting from the sale of rental equipment. The sales-type
lease has a term of three years. Future minimum lease payments required under the lease at September 30, 2019 were $2.9 million,
including $0.1 million of unearned income. The future minimum lease payments are due in fiscal year 2020. The ownership of the
equipment will transfer to the lessee at the end of the lease term.
9. Inventories
Inventories consisted of the following (in thousands):
Finished goods ............................................................................ $
Work in process ..........................................................................
Raw materials .............................................................................
Obsolescence reserve..................................................................
Less current portion ....................................................................
Non-current portion .................................................................... $
AS OF SEPTEMBER 30,
2018
2019
17,967 $
3,681
55,781
(32,050)
45,379
23,855
21,524 $
18,802
7,926
54,290
(30,551)
50,467
18,812
31,655
Inventory obsolescence expense totaled approximately $4.6 million and $4.4 million during fiscal years 2019 and 2018,
respectively. Raw materials include semi-finished goods and component parts that totaled approximately $25.2 million and $29.0
million at September 30, 2019 and 2018, respectively.
10. Rental Equipment
Rental equipment consisted of the following (in thousands):
Rental equipment, primarily wireless recording equipment....... $
Accumulated depreciation and impairment ................................
$
AS OF SEPTEMBER 30,
2019
2018
107,645 $
(45,583)
62,062 $
76,245
(36,700)
39,545
Rental equipment depreciation expense was $13.7 million and $10.2 million in fiscal years 2019 and 2018, respectively.
F-20
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
11. Property, Plant and Equipment
On August 1, 2019, the Company sold its real property located at 7334-7340 Gessner Road, Houston, Texas for a cash price
of $8.3 million and realized a gain on disposal of property of $7.0 million. The property was unencumbered.
Property, plant and equipment consisted of the following (in thousands):
Land and land improvements...................................................... $
Building and building improvements .........................................
Machinery and equipment ..........................................................
Furniture and fixtures .................................................................
Tools and molds..........................................................................
Construction in progress .............................................................
Leasehold improvements ............................................................
Transportation equipment...........................................................
Accumulated depreciation and impairment ................................
$
AS OF SEPTEMBER 30,
2019
2018
7,933 $
24,582
54,760
1,376
2,710
512
85
75
92,033
(60,559)
31,474 $
8,552
31,070
52,523
1,362
2,256
503
—
31
96,297
(62,673)
33,624
Property, plant and equipment depreciation expense was $4.0 million and $4.0 million in fiscal years 2019 and 2018,
respectively.
12. Goodwill and Other Intangible Assets
In connection with the November 2018 acquisition of all the intellectual property and related assets of the OptoSeis® fiber
optic sensing technology business from PGS Americas, Inc., the Company recorded goodwill of $0.7 million and other intangible
assets of $3.7 million.
In connection with the acquisition of Quantum in July 2018, the Company recorded goodwill of $4.3 million and other
intangible assets of $8.2 million.
Goodwill represents the excess cost of the businesses acquired over the fair market value of identifiable net assets at the dates
of acquisition.
At September 30, 2019, the Company evaluated its goodwill and other intangible assets for impairment and determined there
was no impairment. The determination of the fair value requires estimates and projections of future revenue. These estimates and
projections can be unpredictable, particularly for Quantum as an emerging business. Also see Note 1 to these consolidated financial
statements.
As a result of these acquisitions, the Company’s consolidated goodwill and other intangible assets consisted of the following
(in thousands):
Weighted-
Average
Remaining
Useful Lives
(in years)
Goodwill .........................................................................
Other intangible assets:
Developed technology...............................................
Customer relationships..............................................
Trade names ..............................................................
Non-compete agreements ..........................................
Total other intangible assets ...........................................
Accumulated amortization..............................................
16.9
2.9
3.9
3.0
10.0
AS OF SEPTEMBER 30,
2018
2019
$
5,008 $
4,343
5,918
3,900
1,930
170
11,918
(1,855)
10,063 $
4,200
2,500
1,400
100
8,200
(194)
8,006
$
F-21
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
Other intangible assets amortization expense was $1.7 million and $0.2 million in fiscal years 2019 and 2018,
respectively.
As of September 30, 2019, future estimated amortization expense of other intangible assets is as follows (in thousands):
For fiscal years ending September 30,
2020..................................................................................................................
2021..................................................................................................................
2022..................................................................................................................
2023..................................................................................................................
2024..................................................................................................................
Thereafter .........................................................................................................
$
$
1,732
1,732
1,624
714
342
3,919
10,063
13. Long-Term Debt
The Company had no long-term debt outstanding at September 30, 2019 and 2018.
On March 2, 2011, the Company entered into a credit agreement with Frost Bank (the “Original Credit Agreement”). The
Original Credit Agreement has been amended periodically since 2011 (as so amended, the “Credit Agreement”). In November 2018,
the Company extended the maturity of the Credit Agreement from April 2019 to April 2020. In March 2019, the Company entered
into an amendment to the Credit Agreement that altered the unencumbered liquid assets covenant to (i) reduce the minimum threshold
from $10 million to $5 million and (ii) include unencumbered assets held outside the United States. The amendment also added
another financial covenant that requires the Company to maintain a tangible net worth of not less than $140 million. Additionally,
pursuant to the amendment, the Company’s principal place of business and the related real estate, located at 7007 Pinemont Drive,
Houston, Texas was added as collateral securing its obligations under the credit agreement. In November 2019, we further amended
the credit agreement to (i) extend the maturity date from April 2020 to April 2022, (ii) increase the unencumbered liquid assets
covenant threshold from $5 million to $10 million effective in the first quarter of fiscal year 2021, (iii) to increase the tangible net
worth requirement from $140 million to $145 million in the first quarter of fiscal year 2021 and (iv) remove the requirement that we
obtain the consent of Frost Bank prior to paying dividends or repurchasing stock so long as we are in compliance with the covenants
of the credit agreement. Under the Credit Agreement, the Company can borrow up to $30.0 million with amounts available for
borrowing determined by a borrowing base. The borrowing base is determined based upon certain of the Company’s assets which
include (i) 80% of certain accounts receivable plus (ii) 50% of certain notes receivable (such result not to exceed $10 million) plus (iii)
25% of certain inventories (such result not to exceed $20 million). Subject to the borrowing base calculation, as of September 30,
2019, the amount available for borrowing was $27.0 million. Several of the Company’s domestic subsidiaries have guaranteed the
obligations of the Company under the Credit Agreement and such subsidiaries have secured their obligations under such guarantees by
the pledge of substantially all of the assets of such subsidiaries. The Company is required to make monthly interest payments on
borrowed funds. The Credit Agreement limits the incurrence of additional indebtedness and contains other covenants customary in
agreements of this type. The interest rate for borrowings under the Credit Agreement is based on the Wall Street Journal prime rate,
which was 5.0% at September 30, 2019. At September 30, 2019, the Company was in compliance with all covenants under the Credit
Agreement.
F-22
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
14. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
AS OF SEPTEMBER 30,
2018
2019
Product warranty ....................................................................................... $
Compensated absences ..............................................................................
Legal and professional fees .......................................................................
Payroll........................................................................................................
Property and sales taxes.............................................................................
Medical claims...........................................................................................
Other ..........................................................................................................
$
229 $
1,603
356
1,031
1,972
496
683
6,370 $
688
1,329
434
960
1,977
450
988
6,826
The Company is self-insured for certain losses related to employee medical claims. The Company has purchased stop-loss
coverage for individual claims in excess of $175,000 per claimant per year in order to limit its exposure to any significant levels of
employee medical claims. Self-insured losses are accrued based on the Company’s historical experience and on estimates of
aggregate liability for uninsured claims incurred using certain actuarial assumptions followed in the insurance industry.
15. Employee Benefits
The Company’s U.S. employees are participants in the Geospace Technologies Corporation’s Employee’s 401(k) Retirement
Plan (the “Plan”), which covers substantially all eligible employees in the United States. The Plan is a qualified salary reduction plan
in which all eligible participants may elect to have a percentage of their compensation contributed to the Plan, subject to certain
guidelines issued by the Internal Revenue Service. The Company’s share of discretionary matching contributions was approximately
$0.9 million and $0.8 million in fiscal years 2019 and 2018, respectively.
The Company’s stock incentive plans in which key employees may participate are discussed in Note 16 to these consolidated
financial statements.
16. Stockholders’ Equity
In September 1997, the board of directors and stockholders approved the 1997 Key Employee Stock Option Plan (as
amended the “1997 Plan”) and, following amendments thereto, there has been reserved an aggregate of 2,250,000 shares of common
stock for issuance thereunder. The 1997 Plan expired in November 2017.
In February 2014, the board of directors and stockholders approved the 2014 Long Term Incentive Plan (the “2014 Plan”),
which replaced the 1997 Plan. Under the 2014 Plan, an aggregate of 1,500,000 shares of common stock may be issued. The
Company is authorized to issue nonqualified and incentive stock options to purchase common stock, restricted stock awards (“RSAs”)
and restricted stock units (“RSUs”) to key employees, directors and consultants under the 2014 Plan. Options have a term not to
exceed ten years, with the exception of incentive stock options granted to employees owning ten percent or more of the outstanding
shares of common stock, which have a term not to exceed five years. The exercise price of any option may not be less than the fair
market value of the common stock on the date of grant. In the case of incentive stock options granted to an employee owning ten
percent or more of the outstanding shares of common stock, the exercise price of such option may not be less than 110% of the fair
market value of the common stock on the date of grant. An RSU represents a contingent right to receive one share of the common
stock upon vesting. Under the 2014 Plan, the Company may issue RSAs and RSUs to employees for no payment by the employee or
for a payment below the fair market value on the date of grant. The RSAs and RSUs are subject to certain restrictions described in the
2014 Plan.
At September 30, 2019, an aggregate of 477,015 shares of common stock were available for issuance under the 2014 Plan.
No further awards of stock options may be made under the 1997 Plan.
F-23
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
The following table summarizes the combined activity under the equity incentive plans for the indicated periods:
Number of
Nonqualified
Options
Outstanding
Weighted
Average
Exercise
Price per
Share
Outstanding at October 1, 2017 ..........
Granted ........................................
Exercised .....................................
Forfeited ......................................
Vested..........................................
Outstanding at September 30, 2018....
Granted ........................................
Exercised .....................................
Forfeited ......................................
Vested..........................................
Outstanding at September 30, 2019....
201,800
—
(7,700 )
(4,000 )
—
190,100
—
(24,500 )
—
—
165,600
$
$
17.47
—
8.78
17.63
—
17.81
—
8.78
—
—
19.15
Number
of
RSAs
288,800 $
176,450
—
(21,925 )
(116,100 )
327,225
8,000
—
(2,875 )
(111,938 )
220,412 $
Weighted
Average
Grant-date
Fair Value
per Share
28.92
15.13
—
18.75
45.19
16.42
14.59
—
14.60
16.18
16.50
Number of
RSUs
—
—
—
—
—
—
161,800
(500 )
(24,010 )
—
137,290
$
$
Weighted
Average
Grant-date
Fair Value
per Unit
—
—
—
—
—
—
15.17
15.17
15.17
—
15.17
During fiscal years 2019 and 2018, the Company issued 8,000 and 176,450 RSAs, respectively, to certain of its employees
under the 2014 Plan, as amended. The weighted average grant date fair value of each RSA issued for fiscal year 2019 and 2018 was
$14.59 and $15.13 per share, respectively. The total grant date fair value of all RSAs issued for fiscal years 2019 and 2018 was
$0.1 million and $2.7 million, respectively, which will be charged to expense over the next four years as the restrictions lapse.
Compensation expense for the RSAs was determined based on the closing market price of the Company’s stock on the date of grant
applied to the total number of shares that are anticipated to fully vest. Recipients of RSAs are entitled to vote such shares and are
entitled to dividends, if paid.
During fiscal year 2019, the Company issued 161,800 RSUs to certain of its employees, executive officers and directors
under the 2014 Plan, as amended. The RSUs issued include both time-based and performance-based vesting provisions. The
weighted average grant date fair value of each RSU was $15.11 per unit. The total grant date fair value of all RSUs issued was $2.4
million, which will be charged to expense over the next four years as the restrictions lapse. Compensation expense for RSUs was
determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of units that are
anticipated to fully vest.
All RSAs and RSUs outstanding at September 30, 2019 and 2018 were issued from the 2014 Plan. 45,000 stock options
outstanding at September 30, 2019 were issued under the 1997 Plan. All remaining stock options outstanding were issued under the
2014 Plan. All stock options outstanding are nonqualified options.
The total intrinsic value of the Company’s nonqualified stock options exercised during fiscal year 2019 and 2018 was $0.1
million and $41,000, respectively.
The following table summarizes information about stock options outstanding and exercisable at September 30, 2019:
Options Outstanding
Weighted
Average
Remaining
Term
(in years)
Weighted
Average
Exercise
Price
Options Exercisable
Weighted
Average
Remaining
Term
(in years)
Weighted
Average
Exercise
Price
Range of Exercise Prices
$14.87............................................................. 69,300
$21.42 to $21.95............................................. 84,300
$26.48 to $26.48............................................. 12,000
165,600
Shares
Intrinsic
Value
Shares
—
6.1 $ 14.87 $ 34,650
— 33,000
4.5 21.63
0.9 26.48
— 12,000
4.9 $ 19.15 $ 34,650 45,000
Intrinsic
Value
— $ — $ —
0.4 21.95 —
0.9 26.48 —
0.5 $ 23.16 $ —
The Company recognized $2.3 million and $2.3 million of stock-based compensation expense for the fiscal years ended
September 30, 2019 and 2018, respectively. As of September 30, 2019, the Company had unrecognized compensation expense of
$2.2 million relating to RSAs which is expected to be recognized over a weighted average period of 2.0 years. As of September 30,
2019, the Company had unrecognized compensation expense of $1.7 million relating to RSUs which is expected to be recognized over
a weighted average period of 3.2 years. In addition, the Company had $8,000 of unrecognized compensation expense related to
nonqualified stock option awards which is expected to be recognized over a weighted average period of 0.1 years.
F-24
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
17. Income Taxes:
Components of income (loss) before income taxes were as follows (in thousands):
United States.............................................................................................. $
Foreign.......................................................................................................
$
4,105 $
(1,834)
2,271 $
(19,231)
(561)
(19,792)
YEAR ENDED SEPTEMBER 30,
2019
2018
The provision (benefit) for income taxes consisted of the following (in thousands):
YEAR ENDED SEPTEMBER 30,
2019
2018
Current
Federal.................................................................................................. $
Foreign .................................................................................................
State......................................................................................................
Deferred:
Federal..................................................................................................
Foreign .................................................................................................
$
(16) $
2,401
16
2,401
—
16
16
2,417 $
(613)
51
—
(562)
—
(18)
(18)
(580)
Actual income tax expense (benefit) differs from income tax expense computed by applying the U.S. statutory federal tax rate
of 21% and 24% (blended) for the fiscal years ended September 30, 2019 and 2018 as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
2019
2018
Expense (benefit) for U.S federal income tax at statutory rate................. $
Effect of foreign income taxes..................................................................
Research and experimentation tax credit..................................................
State income taxes, net of federal income tax benefit ..............................
Nondeductible expenses ...........................................................................
Resolution of prior years’ tax matters ......................................................
Change in valuation allowance.................................................................
Impact on deferred taxes due to change in tax rate ..................................
Difference in U.S. tax rate from assumed rate..........................................
Change in fair value of contingent consideration .....................................
Foreign income tax withholding...............................................................
Disallowance of stock compensation adjustments in excess
of book ...................................................................................................
Other items................................................................................................
$
Effective tax rate.......................................................................................
477
$
(101)
(812)
(161)
105
14
964
—
—
(444)
2,358
31
(14)
2,417
$
106.4%
(4,849)
(47)
(320)
(23)
33
(657)
(4,237)
8,116
511
—
11
895
(13)
(580)
2.9%
F-25
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
The income tax expense for fiscal year 2019 primarily reflects foreign withholding tax on rental income earned in Nigeria
and Brunei. The income tax benefit for fiscal year 2018 primarily reflects a $0.7 million tax refund resulting from the filing of an
amended U.S. tax return. The Company is currently unable to record any tax benefits for its tax losses in the U.S. and Canada due to
the uncertainty surrounding its ability to utilize such losses in the future to offset taxable income.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s
net deferred income tax asset were as follows (in thousands):
Deferred income tax assets:
Allowance for doubtful accounts ................... $
Inventories......................................................
Loss and tax credit carry-forwards.................
Stock-based compensation.............................
Accrued product warranty..............................
Accrued compensated absences .....................
Property and equipment .................................
Prepaid income taxes .....................................
Other reserves ................................................
Deferred income tax liabilities:
AS OF SEPTEMBER 30, 2019
AS OF SEPTEMBER 30, 2018
U.S.
Non U.S.
Total
U.S.
Non U.S.
Total
189 $
7,652
18,156
691
43
313
—
753
13
27,810
3 $
79
4,221
—
4
—
462
—
8
4,777
192 $
7,731
22,377
691
47
313
462
753
21
32,587
545 $
6,870
17,056
614
136
259
—
714
56
26,250
8 $
68
4,151
—
8
—
457
—
6
4,698
553
6,938
21,207
614
144
259
457
714
62
30,948
Allowance for doubtful accounts ...................
Intangible assets .............................................
Property, plant and equipment and other .......
Subtotal deferred income tax assets ....................
Valuation allowance ............................................
Net deferred income tax assets ............................ $
—
(1,386)
(4,919)
21,505
(21,502)
3 $
—
(5)
(59)
4,713
(4,531)
182 $
—
(1,391)
(4,978)
26,218
(26,033)
185 $
—
(1,681)
(3,622)
20,947
(20,931)
16 $
(6)
—
(59)
4,633
(4,448)
185 $
(6)
(1,681)
(3,681)
25,580
(25,379)
201
Deferred income tax assets and liabilities are reported as follows in the accompanying consolidated balance sheets (in
thousands):
Deferred income tax assets, net .................................................. $
Deferred income tax liabilities, net.............................................
$
236 $
(51)
185 $
246
(45)
201
AS OF SEPTEMBER 30,
2018
2019
The 2017 Tax Act was enacted in December 2017. The 2017 Tax Act, among other things, reduces the U.S. federal corporate
tax rate from 35% to 21%, effective January 1, 2018, creates new taxes on certain foreign earnings and may require companies to pay
a one-time transition tax on undistributed earnings of certain foreign subsidiaries that were previously tax deferred. The Company is
not required to pay a one-time transition tax on earnings of our foreign subsidiaries since there were no accumulated earnings on a
consolidated basis. As a result of the 2017 Tax Act, during the fiscal year ended September 30, 2018, the Company revalued its U.S.
deferred tax assets based on a U.S. federal tax rate of 21%, which resulted in a reduction to our deferred tax assets of approximately
$8.1 million. The reduction in deferred tax assets was completely offset by a like reduction to the valuation allowance.
The financial reporting basis of investments in foreign subsidiaries exceed their tax basis. A deferred tax liability is not
recorded for this temporary difference because the investment is deemed to be permanent. A reversal of the Company’s plans to
permanently invest in these foreign operations would cause the excess to become taxable. At September 30, 2019, the Company had
$7.0 million of cash and cash equivalents held by its foreign subsidiaries. At September 30, 2019 and 2018, the temporary difference
related to undistributed earnings for which no deferred taxes have been provided was approximately $12.9 million and $12.9 million,
respectively.
F-26
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
Tax return filings which are subject to review by local tax authorities by major jurisdiction are as follows:
• United States—fiscal years ended September 30, 2016 through 2019
•
State of Texas—fiscal years ended September 30, 2016 through 2019
•
•
•
•
•
State of New York—fiscal years ended September 30, 2017
State of California – fiscal years ended September 30, 2016 through 2019
State of Pennsylvania – fiscal years ended September 30, 2017
Russian Federation—calendar years 2017 through 2019
Canada—fiscal years ended September 30, 2016 through 2019
• United Kingdom—fiscal years ended September 30, 2018 through 2019
•
Colombia—calendar years 2017 through 2019
The Company had no unrecognized tax liabilities as of September 30, 2019 and 2018.
As of September 30, 2019, the Company had net operating loss (“NOL”) carry-forwards of approximately $61.7 million in
the United States, $15.2 million in Canada and $0.5 million in Russia which are available to offset future taxable income in those
jurisdictions. The NOL carry-forwards for Canada and Russia begin to expire in 2033 and 2026, respectively. The NOL carry-
forward for the United States which originated prior to the 2017 Tax Act of $41.4 million begins to expire in 2028. The Company’s
NOLs originating after the 2017 Tax Act of $17.5 million do not expire.
Management of the Company has concluded that it was more-likely-than-not that its U.S. and Canadian net deferred tax
assets will not be realized in accordance with U.S. GAAP. At September 30, 2019 and September 30, 2018, the Company had a
valuation allowance against its U.S. net deferred tax assets of $21.5 million and $20.9 million, respectively, and a valuation allowance
against its Canadian net deferred tax assets of $4.5 million and $4.4 million, respectively.
18. Loss Per Common Share
Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of
common shares used in basic loss per share during the period. Diluted loss per share is determined on the assumption that outstanding
RSUs have been exchanged for common stock and outstanding dilutive stock options have been exercised and the aggregate proceeds
as defined were used to reacquire common stock using the average price of such common stock for the period.
The following table summarizes the calculation of net loss and weighted average common shares and common equivalent
shares outstanding for purposes of the computation of loss per share (in thousands, except share and per share amounts):
YEAR ENDED SEPTEMBER 30,
2019
2018
Net loss ...................................................................................................... $
Less: Loss allocable to unvested restricted stock ......................................
Loss attributable to common shareholders
for diluted earnings per share ................................................................. $
Weighted average number of common share equivalents:
Common shares used in basic loss per share .......................................
Common share equivalents outstanding related to
stock options and RSUs ....................................................................
Total weighted average common shares and common share
equivalents used in diluted loss per share...............................................
Loss per shares:
(146) $
—
(19,212)
—
(146) $
(19,212)
13,388,626
13,250,867
—
—
13,388,626
13,250,867
Basic..................................................................................................... $
Diluted.................................................................................................. $
(0.01) $
(0.01) $
(1.45)
(1.45)
For the calculation of diluted loss per share for fiscal years 2019 and 2018, stock options of 165,600 and
190,600, respectively, and RSUs of 137,290 and zero, respectively, were excluded in the calculation of weighted average shares
outstanding as a result of their impact being antidilutive.
F-27
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
19. Commitments and Contingencies
Contingent Consideration
In connection with its acquisitions of Quantum and OptoSeis, the Company recorded contingent purchase price payments, or
contingent consideration, that may be owed in the future. For both acquisitions, the contingent payments are based on future receipt of
contracts awards and the resulting revenue derived from such contracts. The Company has utilized the services of an independent
valuation consultant to assist it with the estimation of the fair value of this contingent consideration. The determination of fair value is
inherently unpredictable since it requires estimates and projections of future revenue, including the size, length, timing and, in the case
of Quantum, the extent of gross profits earned under its future contracts. As a result, the Company anticipates future fair value
adjustments to these liabilities over the respective earn-out periods, and these adjustments will result in either charges or credits to the
Company’s operating expenses when the fair value of the contingent consideration increases or decreases, respectively.
The Company recorded an initial contingent earn-out liability of $7.7 million in connection with its July 2018 acquisition of
Quantum. Contingent payments, if any, may be paid in the form of cash or Company stock and will be derived from eligible revenue
generated during a four-year earn-out period subsequent to the closing of the acquisition. The maximum amount of contingent
payments is $23.5 million over the earn-out period. For the fiscal year ended September 30, 2019, the Company recorded a $2.9
million adjustment to decrease the initial earn-out liability to its estimated fair value.
The Company recorded an initial continent earn-out liability of $4.3 million in connection with its November 2018
acquisition of all the intellectual property and related assets of the OptoSeis® fiber optic sensing technology. Contingent cash
payments, if any, will be derived from eligible revenue generated during a five-and-a-half year earn-out period subsequent to the
closing of the acquisition from products and services utilizing the OptoSeis® fiber optic technology. The maximum amount of
contingent payments is $23.2 million over the earn-out period. For the fiscal year ended September 30, 2019, the Company recorded a
$0.8 million adjustment to increase the initial earn-out liability to fair value.
The Company will reassess the earn-out calculations related to this contingent consideration in future periods.
Operating Leases
The Company leases office space and certain equipment for terms of two years or less. Rent expense was approximately $0.6
million and $0.1 million during fiscal years 2019 and 2018, respectively. Future minimum lease obligations for the fiscal years ending
September 30, 2020 and 2021 are $0.4 million and $36,000, respectively.
Legal Proceedings
The Company is involved in various pending legal actions in the ordinary course of its business. Management is unable to
predict the ultimate outcome of these actions, because of the inherent uncertainty of such actions. However, management believes that
the most probable, ultimate resolution of current pending matters will not have a material adverse effect on the Company’s
consolidated financial position, results of operations or cash flows.
20. Supplemental Cash Flow Information
Supplemental cash flow information is as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
2019
2018
Cash paid for interest............................................................................ $
Cash paid (refunded) for income taxes.................................................
Non-cash investing and financing activities:
Inventory transferred to rental equipment ............................................
Inventory transferred to property, plant and equipment.......................
Financing receivables in connection with sale of used rental
equipment ..........................................................................................
Property, plant and equipment acquired in connection with business
acquisition .........................................................................................
Extinguishment of financing receivable in connection with
repossession of equipment added to rental fleet................................
99 $
2,402
1,861
126
336
(649)
29,248
109
—
3,984
1,721
750
—
—
F-28
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
21. Segment and Geographic Information
Effective September 30, 2018, the Company began reporting and evaluating financial information for three operating
business segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets. The Oil and Gas Markets segment was previously
referred to as our Seismic segment. This segment’s products include wireless seismic data acquisition systems, reservoir
characterization products and services, and traditional seismic exploration products such as geophones, hydrophones, leader wire,
connectors, cables, marine streamer retrieval and steering devices and various other seismic products. Our Adjacent Markets segment
was previously referred to as our Non-Seismic segment. This segment’s products include imaging equipment, water meter products,
offshore cables, as well as seismic sensors used for vibration monitoring and geotechnical applications such as mine safety
applications and earthquake detection. The Emerging Markets segment was added in conjunction with the acquisition of Quantum,
which designs and markets seismic products targeted at the border and perimeter security markets.
The following tables summarize the Company’s segment information:
YEAR ENDED SEPTEMBER 30,
2019
2018
Revenue:
Oil and Gas Markets ............................................................................ $
Adjacent Markets .................................................................................
Emerging Markets................................................................................
Corporate..............................................................................................
Total .....................................................................................................
Income (loss) from operations:
Oil and Gas Markets ............................................................................
Adjacent Markets .................................................................................
Emerging Markets................................................................................
Corporate..............................................................................................
Total .....................................................................................................
Depreciation and amortization expenses:
Oil and Gas Markets ............................................................................
Adjacent Markets .................................................................................
Emerging Markets................................................................................
Corporate..............................................................................................
Total .....................................................................................................
Impairment, inventory obsolescence and stock-based compensation
expenses:
Oil and Gas Markets ............................................................................
Adjacent Markets .................................................................................
Emerging Markets................................................................................
Corporate..............................................................................................
Total .....................................................................................................
Interest income:
Oil and Gas Markets ............................................................................
Adjacent Markets .................................................................................
Emerging Markets................................................................................
Corporate..............................................................................................
Total .....................................................................................................
Interest expense:
Oil and Gas Markets ............................................................................
Adjacent Markets .................................................................................
Emerging Markets................................................................................
Corporate..............................................................................................
Total .....................................................................................................
F-29
64,966 $
30,156
159
528
95,809
3,095
6,234
(2,306)
(5,990)
1,033
16,865
466
1,164
844
19,339
6,046
92
68
737
6,943
1,033
1
—
274
1,308
—
—
—
99
99
44,951
29,932
286
579
75,748
(14,070)
5,345
(718)
(11,300)
(20,743)
13,348
490
194
380
14,412
6,243
164
14
823
7,244
614
—
—
469
1,083
2
—
1
333
336
Geospace Technologies Corporation and Subsidiaries
Notes to Consolidated Financial Statements—(Continued)
The Company’s manufacturing operations for its business segments are combined. Therefore, the Company does not
segregate and report separate balance sheet accounts for each of its segments and, therefore, no such segment balance sheet
information is presented in the table above.
“Corporate” revenue consists of rental revenue earned from an operating lease of a surplus building located in Houston,
Texas. “Corporate” loss from operations primarily consists of the Company’s Houston headquarters general and administrative
expenses.
The Company generates revenue from product sales, rentals and services from its subsidiaries located in the United States,
Canada, Colombia, the Russian Federation and the United Kingdom. Revenue information for the Company is as follows (in thousands):
United States..............................................................................................
Canada .......................................................................................................
Colombia ...................................................................................................
Russian Federation ....................................................................................
United Kingdom ........................................................................................
Eliminations...............................................................................................
A summary of revenue by geographic area is as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
2019
2018
$
$
91,222 $
5,266
408
4,286
2,905
(8,278)
95,809 $
79,019
8,311
300
3,539
3,095
(18,516)
75,748
YEAR ENDED SEPTEMBER 30,
2019
2018
Africa......................................................................................................... $
Asia............................................................................................................
Canada .......................................................................................................
Europe........................................................................................................
United States..............................................................................................
Other ..........................................................................................................
$
20,192 $
10,171
5,232
25,860
32,397
1,957
95,809 $
5
2,143
15,945
4,743
50,522
2,390
75,748
Revenue is attributed to countries based on the ultimate destination of the product sold, if known. If the ultimate destination
is not known, revenue is attributed to countries based on the geographic location of the initial shipment.
Long-lived assets, excluding deferred tax assets, were as follows (in thousands):
United States............................................................................... $
Canada ........................................................................................
Colombia.....................................................................................
Russian Federation......................................................................
United Kingdom .........................................................................
China...........................................................................................
$
AS OF SEPTEMBER 30,
2018
2019
106,079
118,064 $
13,515
10,419
1,002
671
1,143
961
428
430
13
13
122,180
130,558 $
F-30
Schedule II
Geospace Technologies Corporation and Subsidiaries
Valuation and Qualifying Accounts
(In thousands)
Balance at
Beginning
of Period
Charged to
Costs and
Expenses, net
of Recoveries
Charged
to Other
Assets
(Deductions)
and
Additions
Balance at
End of
Period
Year ended September 30, 2019
Allowance for doubtful accounts on accounts and financing
receivables................................................................................. $
Year ended September 30, 2018
Allowance for doubtful accounts on accounts and financing
receivables................................................................................. $
3,302 $
436 $
— $
(2,787) $
951
2,415 $
1,009 $
— $
(122) $
3,302
Year ended September 30, 2019
Inventory obsolescence reserve ................................................... $
Year ended September 30, 2018
Inventory obsolescence reserve ................................................... $
30,551 $
4,614 $
— $
(3,115) $
32,050
29,614 $
4,353 $
— $
(3,416) $
30,551
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged
to Other
Assets
(Deductions)
and
Additions
Balance at
End of
Period
F-31
A N N U A L R E P O R T 2 0 1 9
O F F I C E R S
2 0 1 9 B O A R D O F D I R E C T O R S
Walter R. Wheeler
President &
Chief Executive Officer
Robbin B. Adams
Executive Vice President &
Chief Project Engineer
Thomas T. McEntire
Vice President &
Chief Financial Officer
Michael J. Sheen
Senior Vice President &
Chief Technical Officer
Gary D. Owens
Chairman of the Board
Thomas L. Davis, Ph.D.
Professor of Geophysics
Colorado School of Mines
Edgar R. Giesinger, Jr.
Retired Managing Partner
KPMG LLP
Tina M. Langtry
Retired Senior Manager
ConocoPhillips
Richard F. Miles
Private Investor
William H. Moody
Retired Partner
KPMG LLP
Michael J. Sheen
Senior Vice President &
Chief Technical Officer
Charles H. Still
Retired Partner
Fulbright & Jaworski LLP
Walter R. Wheeler
President & CEO
Geospace Technologies
2019 Board of Directors
Left to right: Thomas Davis, Richard Miles, William Moody, Charles Still,
Gary Owens, Rick Wheeler, Michael Sheen, Tina Langtry and Edgar
Giesinger, Jr.
ANNUALREPORT2019
C O R P O R A T E H E A D Q U A R T E R S A N D O P E R A T I N G F A C I L I T Y
Geospace Technologies Corporation
7007 Pinemont Drive
Houston, Texas 77040
(713) 986-4444
GTC, Inc.
(713) 986-4444
Geospace Offshore
(713) 986-4444
Geospace Engineering Resources
International, Inc.
(713) 986-4444
Geospace Technologies Eurasia LLC
Kirovogradskaya, 36,
Ufa, Bashkortostan, Russia
450001
(7) 3472 25 3973
geospace-ufa.ru
Geospace Technologies,
Sucursal Sudamericana
Av. Cra. 9 No. 115-06/30 Piso 17,
Edificio Tierra Firme
Bogotá D.C. - Colombia
57 (1) 639-8313
geospacetech.co
Geospace Technologies Canada, Inc.
2735-37 Avenue, N.E.
Calgary, Alberta, Canada T1Y 5R8
(403) 250-9600
geospacetech.ca
Geospace Brasil Equipamentos
Sismicos EIRELI
Av. Rio Branco 251 Sala 1307
Bairro Centro
Rio de Janeiro, RJ CEP Brasil 20040-009
Geospace Technologies, China
Room 700, 7th Floor, Lido Office Tower
Lido Place
Jichang Road
Beijing 100004, P. R. China
86-10-64378768
geospace.com
EXILE Technologies Limited
7007 Pinemont Drive
Houston, Texas 77040
(713) 986-4444
exiletech.com
EXILE Technologies Limited
F3 Bramingham Business Park
Enterprise Way, Luton,
Bedfordshire LU3 4BU, England
44 (0) 1582 573 980
exiletech.co.uk
TM
Quantum Technology Sciences
1980 N. Atlantic Ave. Suite 201
Cocoa Beach, FL 32931
(321) 868-0288
QTSI.com
www.GEOSPACE.com