{"url_path":"/sec/geos/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Financial Statements**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-08","source_url":"https://www.sec.gov/Archives/edgar/data/1001115/0001437749-26-015836-index.html","accession_number":"0001437749-26-015836","cik":"0001001115","ticker":"GEOS","issuer_name":"GEOSPACE TECHNOLOGIES CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1001115/0001437749-26-015836-index.html","primary_entity_key":"0001001115","primary_entity_name":"GEOSPACE TECHNOLOGIES CORP"},"word_count":7770,"has_tables":true,"body_markdown":"**Item 1. Financial Statements**\n\n \n\n**GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES**\n\n**CONSOLIDATED BALANCE SHEETS**\n\n(in thousands except share amounts)\n\n(unaudited)\n\n \n\n  \n**March 31, 2026**\n  \n**September 30, 2025**\n \n\n**ASSETS**\n   ** **   ** **\n\nCurrent assets:\n        \n\nCash and cash equivalents\n $13,358  $26,338 \n\nTrade accounts and financing receivables, net\n  19,344   28,009 \n\nInventories, net\n  36,961   30,901 \n\nPrepaid expenses and other current assets\n  6,076   3,252 \n\nTotal current assets\n  75,739   88,500 \n\n         \n\nNon-current inventories, net\n  11,758   17,113 \n\nRental equipment, net\n  5,856   8,120 \n\nProperty, plant and equipment, net\n  23,706   23,244 \n\nNon-current financing receivables\n  12,329   8,190 \n\nOperating right-of-use assets\n  716   915 \n\nGoodwill\n  1,258   1,258 \n\nOther intangible assets, net\n  4,872   5,155 \n\nOther non-current assets\n  482   542 \n\nTotal assets\n $136,716  $153,037 \n\n         \n\n**LIABILITIES AND STOCKHOLDERS’ EQUITY**\n   ** **   ** **\n\nCurrent liabilities:\n        \n\nAccounts payable trade\n $5,141  $10,369 \n\nOperating lease liabilities\n  443   420 \n\nContingent consideration\n  1,727   — \n\nDeferred contract liabilities\n  12,999   — \n\nOther current liabilities\n  9,986   13,641 \n\nTotal current liabilities\n  30,296   24,430 \n\n         \n\nNon-current contingent consideration\n  961   2,540 \n\nNon-current operating lease liabilities\n  326   554 \n\nDeferred tax liabilities, net\n  —   4 \n\nTotal liabilities\n  31,583   27,528 \n\n         \n\nCommitments and contingencies (Note 11)\n          \n\n         \n\nStockholders’ equity:\n        \n\nPreferred stock, 1,000,000 shares authorized, no shares issued and outstanding\n  —   — \n\nCommon Stock, $.01 par value, 20,000,000 shares authorized; 14,489,378 and 14,378,962 shares issued, respectively; and 12,931,118 and 12,820,702 shares outstanding, respectively\n  145   144 \n\nAdditional paid-in capital\n  99,283   98,845 \n\nRetained earnings\n  24,745   45,558 \n\nAccumulated other comprehensive loss\n  (4,540)  (4,538)\n\nTreasury stock, at cost, 1,558,260 shares\n  (14,500)  (14,500)\n\nTotal stockholders’ equity\n  105,133   125,509 \n\nTotal liabilities and stockholders’ equity\n $136,716  $153,037 \n\n \n\nThe accompanying notes are an integral part of the consolidated financial statements.\n\n \n\n3\n\n[Table of Contents](#toc)\n\n \n\n \n\n**GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES**\n\n**CONSOLIDATED STATEMENTS OF OPERATIONS**\n\n(in thousands, except share and per share amounts)\n\n(unaudited)\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nRevenue:\n                \n\nProducts\n $18,964  $18,708  $43,353  $51,353 \n\nRental\n  778   (685)  1,975   3,893 \n\nTotal revenue\n  19,742   18,023   45,328   55,246 \n\nCost of revenue:\n                \n\nProducts\n  17,072   13,747   37,903   28,016 \n\nRental\n  1,976   2,528   4,035   5,333 \n\nTotal cost of revenue\n  19,048   16,275   41,938   33,349 \n\n                 \n\nGross profit\n  694   1,748   3,390   21,897 \n\n                 \n\nOperating expenses:\n                \n\nSelling, general and administrative\n  7,358   6,775   15,637   14,195 \n\nResearch and development\n  4,774   5,235   9,263   10,129 \n\nChange in fair value of contingent consideration\n  (48)  —   148   — \n\nProvision for credit losses\n  29   19   8   19 \n\nTotal operating expenses\n  12,113   12,029   25,056   24,343 \n\n                 \n\nLoss from operations\n  (11,419)  (10,281)  (21,666)  (2,446)\n\n                 \n\nOther income (expense):\n                \n\nInterest expense\n  (35)  (43)  (72)  (87)\n\nInterest income\n  616   693   1,250   1,438 \n\nForeign currency transaction losses, net\n  (197)  (255)  (194)  (269)\n\nOther, net\n  (25)  (38)  (62)  (71)\n\nTotal other income, net\n  359   357   922   1,011 \n\n                 \n\nLoss before income taxes\n  (11,060)  (9,924)  (20,744)  (1,435)\n\nIncome tax expense (benefit)\n  (12)  (126)  69   (13)\n\nNet loss\n $(11,048) $(9,798) $(20,813) $(1,422)\n\n                 \n\nLoss per common share:\n                \n\nBasic\n $(0.86) $(0.77) $(1.62) $(0.11)\n\nDiluted\n $(0.86) $(0.77) $(1.62) $(0.11)\n\n                 \n\nWeighted average common shares outstanding:\n                \n\nBasic\n  12,914,318   12,792,803   12,881,604   12,772,981 \n\nDiluted\n  12,914,318   12,792,803   12,881,604   12,772,981 \n\n \n\nThe accompanying notes are an integral part of the consolidated financial statements.\n\n \n\n4\n\n[Table of Contents](#toc)\n\n \n\n \n\n**GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES**\n\n**CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS**\n\n(in thousands)\n\n(unaudited)\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nNet loss\n $(11,048) $(9,798) $(20,813) $(1,422)\n\nOther comprehensive income (loss):\n                \n\nChange in unrealized losses on available-for-sale securities, net of tax\n  —   (14)  —   (57)\n\nForeign currency translation adjustments\n  (22)  65   (2)  (334)\n\nTotal other comprehensive income (loss)\n  (22)  51   (2)  (391)\n\nTotal comprehensive loss\n $(11,070) $(9,747) $(20,815) $(1,813)\n\n \n\nThe accompanying notes are an integral part of the consolidated financial statements.\n\n \n\n5\n\n[Table of Contents](#toc)\n\n \n\n \n\n**GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES**\n\n**CONSOLIDATED STATEMENTS OF STOCKHOLDERS**’**EQUITY**\n\n**FOR THE six months ended March 31, 2026 and 2025**\n\n(in thousands, except share amounts)\n\n(unaudited)\n\n \n\n \n \n\n**Common Stock**\n\n \n \n \n* *\n** **\n \n \n* *\n** **\n \n\n**Accumulated**\n\n \n \n \n* *\n** **\n \n \n* *\n** **\n\n \n \n \n* *\n** **\n \n \n* *\n** **\n \n\n**Additional**\n\n \n \n \n* *\n** **\n \n\n**Other**\n\n \n \n \n* *\n** **\n \n \n* *\n** **\n\n \n \n\n**Shares**\n\n \n \n \n* *\n** **\n \n\n**Paid-In**\n\n \n \n\n**Retained**\n\n \n \n\n**Comprehensive**\n\n \n \n\n**Treasury**\n\n \n \n \n* *\n** **\n\n \n \n\n**Outstanding**\n\n \n \n\n**Amount**\n\n \n \n\n**Capital**\n\n \n \n\n**Earnings**\n\n \n \n\n**Loss**\n\n \n \n\n**Stock**\n\n \n \n\n**Total**\n\n \n\nBalance at October 1, 2025\n\n \n \n12,820,702\n \n \n$\n144\n \n \n$\n98,845\n \n \n$\n45,558\n \n \n$\n(4,538\n)\n \n$\n(14,500\n)\n \n$\n125,509\n \n\nNet loss\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n(9,765\n)\n \n \n—\n \n \n \n—\n \n \n \n(9,765\n)\n\nOther comprehensive income\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n20\n \n \n \n—\n \n \n \n20\n \n\nIssuance of common stock pursuant to the vesting of restricted stock units\n\n \n \n86,217\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\nCommon stock exchanged for withholding taxes on stock-based compensation\n\n \n \n(19,001\n)\n \n \n—\n \n \n \n(305\n)\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(305\n)\n\nStock-based compensation\n\n \n \n*—*\n \n \n \n—\n \n \n \n419\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n419\n \n\nBalance at December 31, 2025\n\n \n \n12,887,918\n \n \n \n144\n \n \n \n98,959\n \n \n \n35,793\n \n \n \n(4,518\n)\n \n \n(14,500\n)\n \n \n115,878\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nNet loss\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n(11,048\n)\n \n \n—\n \n \n \n—\n \n \n \n(11,048\n)\n\nOther comprehensive loss\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(22\n)\n \n \n—\n \n \n \n(22\n)\n\nIssuance of common stock pursuant to the vesting of restricted stock units\n\n \n \n43,200\n \n \n \n1\n \n \n \n(1\n)\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\nStock-based compensation\n\n \n \n*—*\n \n \n \n—\n \n \n \n325\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n325\n \n\nBalance at March 31, 2026\n\n \n \n12,931,118\n \n \n$\n145\n \n \n$\n99,283\n \n \n$\n24,745\n \n \n$\n(4,540\n)\n \n$\n(14,500\n)\n \n$\n105,133\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nBalance at October 1, 2024\n\n \n \n12,709,381\n \n \n$\n142\n \n \n$\n97,342\n \n \n$\n55,282\n \n \n$\n(4,257\n)\n \n$\n(13,885\n)\n \n$\n134,624\n \n\nNet income\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n8,376\n \n \n \n—\n \n \n \n—\n \n \n \n8,376\n \n\nOther comprehensive loss\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(442\n)\n \n \n—\n \n \n \n(442\n)\n\nIssuance of common stock pursuant to the vesting of restricted stock units\n\n \n \n109,180\n \n \n \n1\n \n \n \n(1\n)\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\nPurchase of treasury stock\n\n \n \n(19,664\n)\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(197\n)\n \n \n(197\n)\n\nStock-based compensation\n\n \n \n*—*\n \n \n \n—\n \n \n \n349\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n349\n \n\nBalance at December 31, 2024\n\n \n \n12,798,897\n \n \n \n143\n \n \n \n97,690\n \n \n \n63,658\n \n \n \n(4,699\n)\n \n \n(14,082\n)\n \n \n142,710\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nNet loss\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n(9,798\n)\n \n \n—\n \n \n \n—\n \n \n \n(9,798\n)\n\nOther comprehensive income\n\n \n \n*—*\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n51\n \n \n \n—\n \n \n \n51\n \n\nIssuance of common stock pursuant to the vesting of restricted stock units\n\n \n \n44,950\n \n \n \n1\n \n \n \n(1\n)\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\nPurchase of treasury stock\n\n \n \n(41,895\n)\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n(418\n)\n \n \n(418\n)\n\nStock-based compensation\n\n \n \n*—*\n \n \n \n—\n \n \n \n547\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n547\n \n\nBalance at March 31, 2025\n\n \n \n12,801,952\n \n \n$\n144\n \n \n$\n98,236\n \n \n$\n53,860\n \n \n$\n(4,648\n)\n \n$\n(14,500\n)\n \n$\n133,092\n \n\n \n\nThe accompanying notes are an integral part of the consolidated financial statements.\n\n \n\n6\n\n[Table of Contents](#toc)\n\n \n\n \n\n**GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES**\n\n**CONSOLIDATED STATEMENTS OF CASH FLOWS**\n\n(in thousands)\n\n(unaudited)\n\n \n\n \n \n\n**Six Months Ended**\n\n \n\n \n \n\n**March 31, 2026**\n\n \n \n\n**March 31, 2025**\n\n \n\nCash flows from operating activities:\n\n \n \n \n \n \n \n \n \n\nNet loss\n\n \n$\n(20,813\n)\n \n$\n(1,422\n)\n\nAdjustments to reconcile net loss to net cash used in operating activities:\n\n \n \n \n \n \n \n \n \n\nDeferred income tax benefit\n\n \n \n(12\n)\n \n \n(11\n)\n\nRental equipment depreciation\n\n \n \n2,510\n \n \n \n3,415\n \n\nProperty, plant and equipment depreciation\n\n \n \n2,477\n \n \n \n1,770\n \n\nAmortization of intangible assets\n\n \n \n283\n \n \n \n74\n \n\nAmortization of discount on note receivable\n\n \n \n(37\n)\n \n \n(36\n)\n\nAccretion of discounts on short-term investments\n\n \n \n—\n \n \n \n(156\n)\n\nStock-based compensation expense\n\n \n \n744\n \n \n \n896\n \n\nProvision for credit losses\n\n \n \n8\n \n \n \n19\n \n\nInventory obsolescence expense\n\n \n \n1,774\n \n \n \n905\n \n\nGross loss (profit) from sale of rental equipment\n\n \n \n84\n \n \n \n(15,820\n)\n\n(Gain) loss on disposal of property, plant and equipment\n\n \n \n101\n \n \n \n(93\n)\n\nRealized gain on investments\n\n \n \n—\n \n \n \n(10\n)\n\nEffects of changes in operating assets and liabilities:\n\n \n \n \n \n \n \n \n \n\nTrade accounts and notes receivable\n\n \n \n(2,432\n)\n \n \n1,829\n \n\nInventories\n\n \n \n(2,810\n)\n \n \n(3,518\n)\n\nOther assets\n\n \n \n(2,554\n)\n \n \n688\n \n\nAccounts payable trade\n\n \n \n(5,228\n)\n \n \n(2,633\n)\n\nOther liabilities\n\n \n \n9,097\n \n \n \n702\n \n\nFair value of contingent consideration\n\n \n \n148\n \n \n \n—\n \n\nNet cash used in operating activities\n\n \n \n(16,660\n)\n \n \n(13,401\n)\n\n \n \n \n \n \n \n \n \n \n\nCash flows from investing activities:\n\n \n \n \n \n \n \n \n \n\nPurchase of property, plant and equipment\n\n \n \n(3,015\n)\n \n \n(4,419\n)\n\nProceeds from the sale of property, plant and equipment\n\n \n \n—\n \n \n \n131\n \n\nInvestment in rental equipment\n\n \n \n(67\n)\n \n \n(900\n)\n\nProceeds from the sale of rental equipment\n\n \n \n6,914\n \n \n \n1,704\n \n\nProceeds from the sale of short-term investments\n\n \n \n—\n \n \n \n18,862\n \n\nPayments received on note receivable related to sale of subsidiary\n\n \n \n143\n \n \n \n76\n \n\nNet cash provided by investing activities\n\n \n \n3,975\n \n \n \n15,454\n \n\n \n \n \n \n \n \n \n \n \n\nCash flows from financing activities:\n\n \n \n \n \n \n \n \n \n\nTaxes payments on stock-based compensation for exchange of common stock\n\n \n \n(305\n)\n \n \n—\n \n\nPurchase of treasury stock\n\n \n \n—\n \n \n \n(615\n)\n\nNet cash used in financing activities\n\n \n \n(305\n)\n \n \n(615\n)\n\n \n \n \n \n \n \n \n \n \n\nEffect of exchange rate changes on cash\n\n \n \n10\n \n \n \n(39\n)\n\n(Decrease) increase in cash and cash equivalents\n\n \n \n(12,980\n)\n \n \n1,399\n \n\nCash and cash equivalents, beginning of period\n\n \n \n26,338\n \n \n \n6,895\n \n\nCash and cash equivalents, end of period\n\n \n$\n13,358\n \n \n$\n8,294\n \n\n \n \n \n \n \n \n \n \n \n\n**SUPPLEMENTAL CASH FLOW INFORMATION:**\n\n \n \n \n** **\n \n \n \n** **\n\nCash paid for income taxes\n\n \n$\n107\n \n \n$\n113\n \n\nFinancing receivables related to sale of rental equipment\n\n \n \n6,847\n \n \n \n14,701\n \n\nInventory transferred to rental equipment\n\n \n \n334\n \n \n \n2,395\n \n\n \n\nThe accompanying notes are an integral part of the consolidated financial statements.\n\n \n\n7\n\n[Table of Contents](#toc)\n\n \n\n**GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES**\n\n**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**\n\n \n\n**1. Significant Accounting Policies**\n\n \n\n**\n\n*Basis of Presentation*\n\n \n\nThe consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at *September 30, 2025*, was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at *March 31, 2026* and the consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the *three* and *six* months ended *March 31, 2026*and *2025* were prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made. All significant intercompany balances and transactions have been eliminated. The results of operations for the *three* and *six* months ended *March 31, 2026*, are *not* necessarily indicative of the operating results for a full year or of future operations.\n\n \n\nCertain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America (\"U.S. GAAP\") were omitted pursuant to the rules of the Securities and Exchange Commission. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form *10*-K for the Company’s fiscal year ended *September 30, 2025*.\n\n \n\n**\n\n*Use of Estimates*\n\n \n\nThe preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually evaluates its estimates, including those related to revenue recognition, credit loss, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets, impairment of goodwill and other intangible assets, contingent consideration and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. While management believes current estimates are reasonable and appropriate, actual results *may*differ from these estimates under different conditions or assumptions.\n\n \n\n**\n\n*Reclassifications*\n\n \n\nCertain amounts previously reported in the consolidated financial statements have been reclassified to conform to the current year presentation.  Such reclassifications had *no* effect on our previously reported net loss, stockholders' equity or cash flows.\n\n \n\n**\n\n*Cash and Cash Equivalents*\n\n \n\nThe 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 *March 31, 2026* and *September 30, 2025*, cash and cash equivalents included $0.6 million and $0.8 million, respectively, held by the Company’s foreign subsidiaries and branch offices.\n\n \n\n**\n\n*Concentration of Credit Risk*\n \n\nThe 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 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 immediately for expected credit losses.  The Company determines the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, and current aging of customer accounts and financial conditions of its customers.  Receivables are charged off against the allowance whenever it is probable that the balance will *not* be recoverable.\n\n \n\nThe Company had trade accounts and notes receivable from two customers of $15.5 million and $5.9 million, respectively at *March 31, 2026*. The Company recognized revenue from these two customers of $3.6 million and $27,000, respectively, for the *three* months ended *March 31, 2026,*and revenue of $14.2 million and $49,000, respectively, for the *six* months ended *March 31, 2026*.  The Company recognized revenue from these two customers of zero and $44,000, respectively, for the *three* months ended *March 31, 2025,*and revenue of zero and $0.1 million, respectively, for the *six* months ended *March 31, 2025*.  These receivables and revenue are related to the Company's Energy Solutions segment.\n\n \n\n**\n\n*Impairment of Long-lived Assets*\n\n \n\nThe Company's long-lived assets are reviewed for impairment whenever an event or circumstance indicates that the carrying amount of an asset or group of assets *may**not* be recoverable. The impairment review, if necessary, includes a comparison of the expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value.  During the quarter ended *March 31, 2026*, *no* events or changes in circumstances were identified indicating the carrying value of any of the Company's asset groups *may**not* be recoverable.\n\n \n\n**\n\n*Goodwill*\n\n \n\nThe 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 Company *first* assesses qualitative factors to determine if the fair value of a reporting unit exceeds its carrying amount. If, based on the qualitative assessment of events or circumstances, the Company determines it is more likely than *not* that the fair value of a reporting unit is more than its carrying amount then it does *not* perform a quantitative assessment. However, if the Company concludes otherwise, then it performs a quantitative assessment.  If, based on the quantitative assessment, the Company determines that the fair value of a reporting unit is less that its carrying amount, a goodwill impairment is recognized equal to the difference between the carrying amount of the reporting unit and its fair value, *not* to exceed the carrying amount of the goodwill.\n\n \n\n**\n\n*Business Acquisitions*\n\n \n\nThe Company accounts for its business acquisitions under the acquisition method of accounting. The total value of the consideration paid for acquisitions is allocated to the underlying net assets acquired, based on their respective estimated fair values.  The Company uses multiple valuation methods to determine the fair value of assets and liabilities acquired, including discounted cash flows, external market values, valuations on recent transactions or a combination thereof, and believes that it uses the most appropriate measure or a combination of measures to value each asset or liability. The Company utilized the excess earnings method to value its *fourth* quarter fiscal year *2025* acquisition of Geovox Securities, Inc. (\"Geovox\").  The Company recognizes measurement-period adjustments in the reporting period in which the adjustment amounts are determined.\n\n \n\n**\n\n*Contingent Consideration*\n\n \n\nThe Company established an earn-out liability in connection with its acquisition of Geovox in the *fourth* quarter of fiscal year *2025.*  The Company engaged the services of a valuation firm to measure the fair value of the liability.  The valuation technique used to measure the fair value of the liability was a Monte Carlo simulation.  The primary inputs included revenue forecast, risk free rate, revenue volatility, revenue discount rate and payment discount rate.  The Company reviews and assesses the value of the liability on a quarterly basis.  Adjustments, if any, will be included as a component of earnings in the consolidated statements of operations.\n\n \n\n**\n\n*Research and Development*\n\n \n\nWe incur significant future research and development expenditures.  These efforts are primarily aimed at the development of additional products for each of our business segments.  The majority of our product research and development costs relates to the Company's engineers.  The Company's engineering staff have been key to our past success. Research and development expense includes personnel costs of the Company's engineers, project expenditures, on-going product maintenance and improvements to our existing products, as well as general and administrative expenses associated with the engineering department. Research and development expense for the *three* and *six* months ended *March 31, 2026*  was $4.8 million and $9.3 million, respectively.  Research and development expense for the *three* and *six* months ended *March 31, 2025*  was $5.2 million and $10.1 million, respectively.\n\n \n\n**\n\n*Recently Issued Accounting Pronouncements*\n\n \n\nIn *November 2024,*the Financial Accounting Standards Board (\"FASB\"), as further amended in *January 2025,*issued guidance requiring enhanced disclosures in financial statements by requiring detailed disclosures of specific expenses like inventory purchases, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after *December 15, 2026,*and interim periods within fiscal years beginning after *December 15, 2027. *Early adoption is permitted. The Company is currently evaluating the provisions of this guidance and the impact on its consolidated financial statements.\n\n \n\nIn *December 2023,*the FASB issued guidance improvements on income tax disclosure which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt this guidance in its *fourth* quarter of fiscal year *2026.*  The guidance allows for adoption using either a prospective or retrospective transition method. The adoption of this guidance is *not* expected to have any material impact on its consolidated financial statements.\n\n \n\nAll other new accounting pronouncements that have been issued, but are *not* yet effective, are currently being evaluated and at this time are *not* expected to have a material impact on the Company's financial position or results of operations.\n\n \n\n*8*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**2. Revenue Recognition**\n\n \n\nIn accordance with ASC Topic *606,* *Revenue from Contracts with Customers* (“ASC *606”*), the Company recognizes revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.\n\n \n\nThe Company primarily derives product revenue from the sale of its manufactured products. Revenue from these product sales, including the sale of used rental equipment, is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is probable. The Company records deferred revenue when customer funds are received prior to shipment, or delivery or performance has *not* yet occurred. The Company assesses collectability during the contract assessment phase. In situations where collectability of the sales price is *not* probable, the Company recognizes revenue when it determines that collectability is probable or when non-refundable cash is received from its customers and there is *not* a significant right of return. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. 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.\n\n \n\nThe Company occasionally recognizes revenue from contracts throughout the manufacturing or service process, even prior to delivery of the completed product or service to the customer.  This overtime recognition of revenue requires that either (i) the customer simultaneously receives and consumes the economic benefits the Company provides, (ii) the Company creates or enhances an asset controlled by the customer or (iii) the Company’s performance does *not* create an asset for which the it has an alternative use and has an enforceable right to payment for performance completed to date.\n\n \n\nRevenue 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.\n\n \n\nAs permissible under ASC *606,* 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. Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would have been *one* year or less. These costs are recorded in selling, general and administrative expenses. \n\n \n\nThe Company has elected to treat shipping and handling activities in a sales transaction after the customer obtains control of the goods as a fulfillment cost and *not* as a promised service. Accordingly, fulfillment costs related to the shipping and handling of goods are accrued at the time of shipment. Amounts billed to a customer in a sales transaction related to reimbursable shipping and handling costs are included in revenue and the associated costs incurred by the Company for reimbursable shipping and handling expenses are reported in cost of revenue.\n\n \n\nThe Company also generates revenue from short-term rentals under operating leases of its manufactured products.  Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to *one* year.  Rental revenue is recognized within the scope of ASC *842,* *Leases* (\"ASC *842\"*).   The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions.  In accordance with ASC *842,* rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured.  When collectability of amounts are *no* longer probable the Company records a direct write-off of the rent receivable to rental revenue and limits future rental revenue recognition to cash received.  During the *second* quarter of fiscal year *2025,* the Company determined the collectability of receivables from a rental customer was less than probable.  As a result of this determination, the rent receivable balance due from this customer of $2.2 million was reversed against rental revenue.  Any future cash received from this customer will be recognized as rental revenue.    \n\n \n\nAt *March 31, 2026* and *September 30, 2025*, the Company had deferred contract liabilities of $13.0 million and zero, respectively.  At *March 31, 2026* and *September 30, 2025*, the Company had no deferred contract assets.  During the *three* and *six* months ended *March 31, 2026*and *2025,* *no* revenue or cost of revenue was recognized from deferred contract costs or deferred contract asset.  At *March 31, 2026 *and *October 1, 2025,*the Company had accounts receivable from contracts with customers of $5.3 million and $11.4 million, respectively.  At *March 31, 2025 *and *October 1, 2024,*the Company had accounts receivable from contracts with customers of $13.2 million and $12.6 million, respectively.  Accounts receivable from contracts with customers exclude accounts receivable from rental contracts.\n\n \n\nFor the *three* and *six* months ended *March 31, 2026* revenue of $3.6 million and $4.0 million, respectively, was recognized from contracts with customers satisfied over-time, which was from the Company's Energy Solutions segment. For the *three* and *six* months ended *March 31, 2025* no revenue was recognized from contracts with customers satisfied over-time. \n\n \n\nAt *March 31, 2026*, the aggregate amount of transaction price allocation to unsatisfied performance obligations on contracts with a duration in excess of *one* year was approximately $89 million.  The majority of these unsatisfied performance obligations are expected to be fulfilled by the *third* quarter of fiscal year *2027.*  Revenue from these contracts are expected to be recognized over-time utilizing the cost-to-cost method.  All other revenue from contracts with customers are being recognized at a point-in time and have a duration of *one* year or less.  For each of the Company’s operating segments, the following table presents revenue (in thousands) only from the sale of products and the performance of services under contracts with customers.  Therefore, the table excludes all revenue earned from rental contracts.\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nSmart Water\n $3,728  $9,472  $9,484  $16,760 \n\nEnergy Solutions\n  8,977   3,399   22,550   23,225 \n\nIntelligent Industrial\n  6,259   5,837   11,319   11,368 \n\nTotal\n $18,964  $18,708  $43,353  $51,353 \n\n \n\nSee Note *12* for more information on the Company’s operating business segments.\n\n \n\n*9*\n\n[Table of Contents](#toc)\n\n   \n\nFor 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:\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nAsia (including Russian Federation)\n $1,552  $1,811  $2,514  $19,868 \n\nCanada\n  259   626   1,906   995 \n\nEurope\n  1,196   1,190   1,703   2,588 \n\nMexico\n  59   811   108   2,092 \n\nUnited States\n  11,858   14,002   32,823   25,425 \n\nSouth America\n  3,697   183   3,819   205 \n\nOther\n  343   85   480   180 \n\n**Total**\n $18,964  $18,708  $43,353  $51,353 \n\n \n\nRevenue is attributable to countries based on the ultimate destination of the product sold, if known. If the ultimate destination is *not* known, revenue is attributable to countries based on the geographic location of the initial shipment.\n\n \n\n \n\n**3. Fair Value of Financial Instruments**\n\n \n\nThe Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts and financing receivables and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts receivable and accounts payable, the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates.  The Company measures its contingent consideration at fair value on a recurring basis.\n\n \n\nThe following tables present the fair value of the Company’s recurring contingent consideration (in thousands):\n\n \n\n  \n**As of March 31, 2026**\n \n\n  \n**(Level 1)**\n  \n**(Level 2)**\n  \n**(Level 3)**\n  \n**Totals**\n \n\nContingent consideration liabilities:\n                \n\nCurrent portion\n $—  $—  $(1,727) $(1,727)\n\nNon-current portion\n  —   —   (961)  (961)\n\n  $—  $—  $(2,688) $(2,688)\n\n  \n\n  \n**As of September 30, 2025**\n \n\n  \n**(Level 1)**\n  \n**(Level 2)**\n  \n**(Level 3)**\n  \n**Totals**\n \n\nRecurring:\n                \n\nNon-current contingent consideration\n $—  $—  $(2,540) $(2,540)\n\n     \n\n \n\nIn connection with the Company's acquisition of Geovox in *August 2025, *it recorded an initial contingent earn-out liability of $2.5 million.  The Company engaged the services of a valuation firm to measure the fair value of the liability.  The primary inputs included revenue forecast, risk free rate, revenue volatility, revenue discount rate and payment discount rate (Level *3*). Contingent payments, if any, will be based on eligible revenue generated during a *four*-year earn-out period.  The maximum amount of contingent payments is $3.3 million. The following table summarizes the changes in the fair value of the contingent consideration during the *six* months ended *March 31, 2026*:\n\n \n\nBalance at October 1, 2025\n $2,540 \n\nFair value adjustments\n  148 \n\nBalance at March 31, 2026\n  2,688 \n\nLess current portion\n  (1,727)\n\nNon-current balance at March 31, 2026\n $961 \n\n \n\nThe Company had no contingent consideration during the *six* months ended *March 31, 2025*.\n\n*10*\n\n[Table of Contents](#toc)\n\n  \n\n \n\n**4. Trade Accounts and Financing Receivables**\n\n \n\nTrade accounts receivable, net, reflected in the following table (in thousands):\n\n  \n**March 31, 2026**\n  \n**September 30, 2025**\n \n\nTrade accounts receivable\n $6,162  $12,725 \n\nAllowance for credit losses\n  (27)  (63)\n\nTotal trade accounts receivable\n $6,135  $12,662 \n\n \n\nThe Company determines the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its customers. Trade accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will *not* be recoverable.\n\n \n\nAllowance for credit losses related to trade accounts receivable are reflected in the following table (in thousands):\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nAllowance for credit losses:\n                \n\n**Beginning of period**\n $42  $4  $63  $4 \n\nProvision for credit losses\n  42   19   47   19 \n\nRecoveries\n  (13)  —   (39)  — \n\nCharge-offs\n  (44)  (2)  (44)  (2)\n\n**End of period**\n $27  $21  $27  $21 \n\n \n\nFinancing receivables, net, are reflected in the following table (in thousands):\n\n \n\n  \n**March 31, 2026**\n  \n**September 30, 2025**\n \n\nPromissory notes\n $25,367  $19,149 \n\nSales-type lease\n  975   5,302 \n\nTotal financing receivables\n  26,342   24,451 \n\nDiscount to fair value and unearned income\n  (804)  (914)\n\nTotal financing receivables, net\n  25,538   23,537 \n\nLess current portion\n  (13,209)  (15,347)\n\nNon-current financing receivables\n $12,329  $8,190 \n\n \n\n \n\nIn *January 2026,*the Company entered into a $0.3 million promissory note with a customer related to a product sale.  The note bears interest at 10.00% per annum and matures in *January **2027.* Principal and interest installments of $28,000 are due monthly until maturity.  The note is collateralized by the product sold.\n\n \n\nIn *January 2026,*the Company entered into a $2.7 million promissory note with a customer related to a product sale.  The note bears interest at 8.75% per annum and matures in *January 2029. *Principal and interest installments of $0.1 million are due monthly until maturity.  The note is collateralized by the product sold.\n\n \n\nDuring the *first* quarter of fiscal year *2026,* the Company entered into *three* promissory notes totaling $7.9 million with a customer related to product sales.  The notes bear interest at 8.75% per annum and mature during the *first* quarter of fiscal year *2029.* Principal and interest installments totaling $0.3 million are due monthly until maturity.  The notes are collateralized by the products sold.\n\n \n\nDuring the *fourth* quarter of fiscal year *2025,* The Company entered into *two* promissory notes totaling $7.5 million with a customer related to product sales.  The notes bear interest at 8.75% per annum and mature during the *fourth* quarter of fiscal year *2028.*  Principal and interest installments totaling $0.2 million are due monthly until maturity.  The notes are collateralized by the products sold. \n\n \n\nIn *November 2024,*the Company entered into a sales-type lease with a customer on ocean bottom equipment from its rental fleet.  The lease, which matured in *October 2025,*had a remaining unpaid principal balance of $1.0 million at *March 31, 2026. *Ownership of the equipment will transfer to the customer when the unpaid principal has been paid.  Interest income recognized on the lease for the fiscal year ended *September 30, 2025*and for the *six* months ended *March 31, 2026*was $0.6 million and $6,000, respectively.\n\n \n\nIn *August 2024,*the Company entered into a $9.4 million promissory note with a customer related to a product sale.  The note bears interest at 9.5% per annum and matures in *November **2026.*  Principal and interest installments of $0.9 million are due monthly beginning in *January 2025.*The note is collateralized by the product sold.\n\n \n\nIn *August 2024,*the Company entered into a $3.5 million promissory note with the buyer of its Russian subsidiary.  The note bears interest at 5% per annum and is for a 10-year term. Principal and interest installments of $37,000 are due monthly beginning in *November 2024. *Based on a fair value analysis performed at the date of sale, a discount to fair value of $0.9 million was placed on the note. Interest income on the amortization of the discount is being recognized under the effective interest method.\n\n \n\nCredit quality indicators used for the financing receivables consisted of historical collection experience, internal credit risk grades and collateral.  The Company determined the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its customers.\n\n \n\n \n\n**5. Inventories**\n\n            \n\nInventories consist of the following (in thousands):  \n\n \n\n  \n**March 31, 2026**\n  \n**September 30, 2025**\n \n\nFinished goods\n $25,004  $24,180 \n\nWork in process\n  4,153   6,408 \n\nRaw materials\n  27,143   27,245 \n\nObsolescence reserve (net realizable value adjustment)\n  (7,581)  (9,819)\n\nTotal\n  48,719   48,014 \n\nLess current portion\n  36,961   30,901 \n\nNon-current portion\n $11,758  $17,113 \n\n \n\nInventory obsolescence expense for the *three* and *six* months ended *March 31, 2026* was $1.3 million and $1.8 million, respectively. Inventory obsolescence expense for the *three* and *six* months ended *March 31, 2025* was $0.4 million and $0.9 million, respectively.  Raw materials include semi-finished goods and component parts that totaled approximately $10.1 million and $9.1 million at *March 31, 2026* and *September 30, 2025*, respectively. \n\n \n\n*11*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**6. Property, Plant and Equipment**\n\n \n\nProperty, plant and equipment consist of the following (in thousands):\n\n \n\n  \n**March 31, 2026**\n  \n**September 30, 2025**\n \n\nLand and land improvements\n $2,979  $2,960 \n\nBuilding and building improvements\n  24,771   24,089 \n\nMachinery and equipment\n  50,652   48,647 \n\nFurniture and fixtures\n  1,614   1,032 \n\nTools and molds\n  5,290   3,928 \n\nConstruction in progress\n  1,131   2,856 \n\nTransportation equipment\n  53   41 \n\n   86,490   83,553 \n\nAccumulated depreciation and impairment\n  (62,784)  (60,309)\n\n  $23,706  $23,244 \n\n \n\nProperty, plant and equipment depreciation expense for the *three* and *six* months ended *March 31, 2026* was $1.3 million and $2.5 million, respectively.  Property, plant and equipment depreciation expense for the *three* and *six* months ended *March 31, 2025* was $0.9 million and $1.8 million, respectively.\n\n \n\n \n\n**7. Rental Equipment**\n\n \n\nThe Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to one year. All of the Company’s current leasing arrangements for which the Company acts as lessor, are classified as operating leases, except for *one* sales-type lease. The majority of the Company’s rental revenue is generated from its ocean bottom nodes.\n\n \n\nThe Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. The Company suspends revenue recognition when the collectability of amounts due are *no* longer probable and concurrently records a direct write-off of the lease receivable to rental revenue and limits future rental revenue recognition to cash received. \n\n \n\nAt *March 31, 2026*  and *September 30, 2025,*the Company’s trade accounts receivable included lease receivables of $0.9 million and $1.0 million, respectively.  At *March 31, 2026*, the Company had no future minimum lease obligations due from leasing customers on operating leases.\n\n \n\nRental equipment consisted of the following (in thousands):\n\n \n\n  \n**March 31, 2026**\n  \n**September 30, 2025**\n \n\nRental equipment, primarily wireless recording equipment\n $44,105  $45,289 \n\nAccumulated depreciation\n  (38,249)  (37,169)\n\n  $5,856  $8,120 \n\n \n\nRental equipment depreciation expense for the *three* and *six* months ended *March 31, 2026* was $1.3 million and $2.5 million, respectively. Rental equipment depreciation expense for the *three* and *six* months ended *March 31, 2025* was $1.5 million and $3.4 million, respectively.\n\n \n\n**8. Long-Term Debt**\n\n \n\nThe Company had no long-term debt outstanding at *March 31, 2026* or *September **30,* *2025.*\n\n \n\nOn *August 29, 2025,*the Company amended and restated its credit agreement (“the Agreement”) with Woodforest National Bank.  The Agreement extended the Company’s revolving loan agreement, dated as of *July 26, 2023,*with Woodforest.  The Agreement is for a *three*-year term and provides a revolving credit facility with a maximum availability of $25 million.  Interest shall accrue on outstanding borrowings at *30* Day Term SOFR plus a margin equal to 2.75% per annum. The Company is required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of the Company's assets, except for certain excluded property. The Agreement requires the Company to maintain (i) a minimum consolidated tangible net worth of $85 million, (ii) minimum liquidity of $10 million, and (iii) a minimum asset coverage ratio of 2.00 to *1.00.* The Agreement also requires the Company to maintain a springing minimum interest coverage ratio of at least 1.50 to *1.00,* tested quarterly whenever (a) there is an outstanding balance on the revolving credit facility, or (b) has letter of credit exposure greater than $1 million.  Effective *December 31, 2025,*the Company entered into a limited waiver agreement with Woodforest which waived its springing minimum interest coverage ratio through *February 16, 2027. *At *March 31, 2026*, the Company was in compliance with all covenants under the Agreement. \n\n \n\n On *May 5, 2026,*the Company entered into an amendment to its Agreement which removed the springing minimum interest coverage requirement. This amendment requires the Company to maintain a $2 million cash reserve pledged to Woodforest and is primarily secured by the Company's Pinemont facility.\n\n \n\n**9. Stock-Based Compensation**\n\n \n\nDuring the *six* months ended *March 31, 2026*, the Company issued 147,250 restricted stock units (“RSUs”) under its *2014* Long Term Incentive Plan, as amended. The RSUs issued include both time-based and performance-based vesting provisions. The weighted average grant date fair value of each RSU granted was $11.19 per unit. Compensation expense for the RSUs was determined based on the closing market price of the Company’s stock on the date of grant to the total number of units that are anticipated to fully vest. Each RSU represents a contingent right to receive *one* share of the Company’s common stock upon vesting.  As of *March 31, 2026*, there were 300,512 RSUs outstanding.\n\n \n\nFor the *three* and *six* months ended *March 31, 2026*, stock-based compensation expense was $0.3 million and $0.7 million, respectively.  For the *three* and *six* months ended *March 31, 2025* stock-based compensation expense was $0.5 million and $0.9 million, respectively. The Company accounts for forfeitures as they occur and records compensation costs under the assumption that the holder will complete the requisite service period.  As of *March 31, 2026*, the Company had unrecognized compensation expense of $2.7 million relating to RSUs that is expected to be recognized over the next four years.\n\n \n\n*12*\n\n[Table of Contents](#toc)\n\n  \n\n \n\n**10. Loss Per Common Share**\n\n \n\nThe following table summarizes the calculation of net loss and weighted average common shares and common equivalent shares outstanding for purposes of the computation of loss per share (in thousands, except share and per share data):\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nNet loss\n $(11,048) $(9,798) $(20,813) $(1,422)\n\nWeighted average number of common share equivalents:\n                \n\nCommon shares used in basic loss per share\n  12,914,318   12,792,803   12,881,604   12,772,981 \n\nCommon share equivalents outstanding related to RSUs\n  —   —   —   — \n\nTotal weighted average common shares and common share equivalents used in diluted loss per share\n  12,914,318   12,792,803   12,881,604   12,772,981 \n\nLoss per share:\n                \n\nBasic\n $(0.86) $(0.77) $(1.62) $(0.11)\n\nDiluted\n $(0.86) $(0.77) $(1.62) $(0.11)\n\n \n\n           For the calculation of diluted loss per share for each of the *three* and *six* months ended *March 31, 2026*, there were 300,512 non-vested RSU's excluded from the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive. For the calculation of diluted loss per share for each of the *three* and *six* months ended *March 31, 2025*, there were 354,965 non-vested RSU's excluded from the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive. \n\n \n\n \n\n**11. Commitments and Contingencies**\n\n \n\n*Contingent Compensation Costs*\n\n \n\nIn *August 2025,*the Company acquired Geovox.  In connection with the acquisition, the Company recorded an initial contingent earn-out liability of $2.5 million.  Contingent payments, if any, will be based on eligible revenue generated during a *four*-year earn-out period.  The maximum amount of contingent payments is $3.3 million.  \n\n \n\nIn *July 2021,*the Company acquired Aquana, LLC (“Aquana”).  Pursuant to the merger agreement with Aquana, as amended (\"the Merger Agreement\"), the Company is subject to additional contingent cash payments to the former members of Aquana over a seven-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is *no* maximum limit to the contingent cash payments that could be made. The Merger Agreement requires the continued employment of a certain key employee and former member of Aquana for the *first* five years of the seven-year earn-out period in order for any of Aquana’s former members to be eligible for any earn-out payments. Due to the continued employment requirement, *no* liability has been recorded for the estimated fair value of earn-out payments for this transaction. Earn-outs achieved are recorded as compensation expense when incurred. \n\n \n\n*Legal Proceedings*\n\n \n\nThe 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.\n\n \n\n*13*\n\n[Table of Contents](#toc)\n\n \n\n \n\n**12. Segment Information**\n\n \n\nThe Company's business segments are comprised of: Smart Water, Energy Solutions and Intelligent Industrial. The Smart Water segment emphasizes the Company’s targeted approach in the water management industry. This business segment contains the Hydroconn® smart water connectivity offerings and the Company's Aquana products. The Energy Solutions segment encompasses the Company’s traditional business in oil and gas land and ocean bottom exploration products, reservoir monitoring solutions, and will additionally incorporate emerging energy solutions and microseismic monitoring. This segment will include energy-related business from Quantum’s SADAR® products and associated analytics.  The Intelligent Industrial segment includes seismic sensor products used for vibration monitoring geotechnical applications such as mine safety applications and earthquake detection, designs seismic products targeted at the border and perimeter security markets, imaging products, as well as providing contract manufacturing services. \n\n \n\nThe Company defines its segments as those operations our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources. The Company’s CODM is the Chief Executive Officer. The CODM regularly reviews revenue, gross profit, operating expenses and operating income (loss) by segment as the primary measures of segment performance. The CODM reviews revenue as a primary indicator of operational performance, assessing how much revenue is brought in from core business activities, which reflects demand and execution of each segment’s strategy. Gross profit, is reviewed by the CODM as a diagnostic metric and is particularly useful in evaluating margin trends. Operating income is the key profitability metric used to assess performance across segments and make decisions related to resource allocation, including capital expenditures, headcount, and other investment initiatives. Each of these metrics are considered in budgeting, forecasting, and operational planning decisions.\n\n \n\nFor financial reporting purposes, we are organized into these reportable segments and “Corporate”, which includes the remainder of our businesses.  The following table summarizes the Company’s segment information (in thousands).  \n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nRevenue:\n                \n\nSmart Water\n $3,728  $9,472  $9,484  $16,760 \n\nEnergy Solutions\n  9,629   2,588   24,265   26,870 \n\nIntelligent Industrial\n  6,299   5,883   11,410   11,460 \n\nCorporate\n  86   80   169   156 \n\n   19,742   18,023   45,328   55,246 \n\n                 \n\nCost of revenue:\n                \n\nSmart Water\n  2,770   5,561   6,631   10,724 \n\nEnergy Solutions\n  11,254   5,703   26,023   13,124 \n\nIntelligent Industrial\n  4,994   4,984   9,225   9,438 \n\nCorporate\n  30   27   59   63 \n\n   19,048   16,275   41,938   33,349 \n\n                 \n\nGross profit (loss):\n                \n\nSmart Water\n  958   3,911   2,853   6,036 \n\nEnergy Solutions\n  (1,625)  (3,115)  (1,758)  13,746 \n\nIntelligent Industrial\n  1,305   899   2,185   2,022 \n\nCorporate\n  56   53   110   93 \n\n   694   1,748   3,390   21,897 \n\n                 \n\nOperating expenses:\n                \n\nSmart Water\n  2,580   2,491   5,276   4,246 \n\nEnergy Solutions\n  3,157   3,553   6,458   7,132 \n\nIntelligent Industrial\n  1,892   2,186   3,585   4,249 \n\nCorporate\n  4,484   3,799   9,737   8,716 \n\n   12,113   12,029   25,056   24,343 \n\n                 \n\nIncome (loss) from operations:\n                \n\nSmart Water\n  (1,622)  1,420   (2,423)  1,790 \n\nEnergy Solutions\n  (4,782)  (6,668)  (8,216)  6,614 \n\nIntelligent Industrial\n  (587)  (1,287)  (1,400)  (2,227)\n\nCorporate\n  (4,428)  (3,746)  (9,627)  (8,623)\n\n   (11,419)  (10,281)  (21,666)  (2,446)\n\n                 \n\nOther segment disclosures:\n                \n\n                 \n\nInterest income:\n                \n\nSmart Water\n  —   —   —   — \n\nEnergy Solutions\n  558   465   1,134   799 \n\nIntelligent Industrial\n  —   —   —   — \n\nCorporate\n  58   228   116   639 \n\n   616   693   1,250   1,438 \n\nInterest expense:\n                \n\nSmart Water\n  —   —   —   — \n\nEnergy Solutions\n  35   —   72   — \n\nIntelligent Industrial\n  —   —   —   — \n\nCorporate\n  —   43   —   87 \n\n   35   43   72   87 \n\n                 \n\nDepreciation and amortization expenses:\n                \n\nSmart Water\n  184   220   497   233 \n\nEnergy Solutions\n  1,889   959   3,580   3,410 \n\nIntelligent Industrial\n  218   21   463   254 \n\nCorporate\n  424   1,271   730   1,362 \n\n   2,715   2,471   5,270   5,259 \n\n                 \n\n                 \n\nInventory obsolescence and stock-based compensation expenses:\n                \n\nSmart Water\n  177   17   361   23 \n\nEnergy Solutions\n  807   419   1,058   1,075 \n\nIntelligent Industrial\n  285   61   625   67 \n\nCorporate\n  203   449   474   636 \n\n   1,472   946   2,518   1,801 \n\n                 \n\n \n\nThe Company's manufacturing operations for its operating 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.\n\n \n\n\"Corporate\" expense from operations primarily consists of the Company's Houston headquarters general and administrative expenses.\n\n \n\nThe Company generates revenue from product sales, product rentals and services from its subsidiaries located in the United States, Canada and the United Kingdom.  Revenue generated by the Company's subsidiaries is as follows (in thousands):\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nUnited States\n $18,347  $16,837  $43,065  $53,049 \n\nCanada\n  674   535   884   899 \n\nUnited Kingdom\n  721   651   1,379   1,298 \n\n  $*19,742*  $*18,023*  $*45,328*  $*55,246* \n\n \n\nA summary of revenue by Geographic area is as follows (in thousands):\n\n \n\n  \n**Three Months Ended**\n  \n**Six Months Ended**\n \n\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n  \n**March 31, 2026**\n  \n**March 31, 2025**\n \n\nAsia (including Russian Federation)\n $1,552  $1,826  $2,604  $21,627 \n\nCanada\n  308   655   2,051   893 \n\nEurope\n  1,231   1,227   1,765   2,514 \n\nMexico\n  59   811   108   2,092 \n\nUnited States\n  12,004   13,068   33,397   27,528 \n\nSouth America\n  3,697   331   4,303   352 \n\nOther\n  891   105   1,100   240 \n\n  $19,742  $18,023  $45,328  $55,246 \n\n \n\nRevenue is attributable 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.\n\n \n\nLong-lived asset balances are as follows (in thousands):\n\n \n\n  \n**March 31, 2026**\n  \n**September 30, 2025**\n \n\nUnited States\n $59,782  $63,332 \n\nCanada\n  347   366 \n\nColombia\n  404   392 \n\nUnited Kingdom\n  444   447 \n\n  $60,977  $64,537 \n\n  \n\n \n\n**13. Income Taxes**\n\n \n\nConsolidated income tax expense (benefit) for the *three* and *six* months ended *March 31, 2026* was $(12,000) and $69,000, respectively.  Consolidated income tax benefit for the *three* and *six* months ended *March 31, 2025* was $(126,000) and $(13,000), respectively. The primary difference between the Company's effective tax rate and the statutory rate is adjustments to the valuation allowance against deferred tax assets.  \n\n \n\n \n\n**14. Exit and Disposal Costs**\n\n \n\n   At the end of the *second* quarter of fiscal year *2026,* the Company implemented an organizational change plan, which included a voluntary early retirement plan available to eligible qualifying employees as well as a reduction in force. This plan will result in an approximate 20% reduction in Company's global workforce, and together with cost-containment measures are expected to produce approximately $10 million of annualized cash savings.  In connection with the workforce reduction, the Company incurred $0.7 million of termination costs in its *second* quarter of fiscal year *2026* and expects to incur $0.7 million of termination costs in its *third* quarter of fiscal year *2026.*  These charges primarily relate to employee transition, severance payments, and employee benefits.  At *March 31, 2026,*the Company had liabilities related to the termination costs of $0.7 million."}