GEOSPACE TECHNOLOGIES CORP Fair Value Disclosure

6. Fair Value of Financial Instruments

 

The 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 approximate fair value on the respective balance sheet dates.

 

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

 

The following tables present the fair value of the Company’s continent consideration, short-term investments and note receivable on sale of subsidiary by valuation hierarchy and input (in thousands):

 

		AS OF SEPTEMBER 30, 2025
		(Level 1)				(Level 2)				(Level 3)				Totals
Recurring:
Contingent consideration		$	—				—			$	(2,540	)		$	(2,540	)

 

		AS OF SEPTEMBER 30, 2024
		(Level 1)				(Level 2)				(Level 3)				Totals
Recurring:
Short-term investments							.
Corporate bonds		$	—			$	21,849			$	—			$	21,849
U.S. treasury securities and securities of U.S. government-sponsored agency			—				8,378				—				8,378
Total recurring		$	—			$	30,227			$	—			$	30,227
Nonrecurring:
Note receivable on sale of subsidiary		$	—			$	—			$	2,600			$	2,600

 

Assets and Liabilities Measured on a Nonrecurring Basis

 

The Company performed a fair value analysis of the $3.5 million promissory note obtained in connection with its subsidiary sale as of the August 2024 transaction date. The measurements utilized to determine the implied fair value of the note receivable obtained represented significant unobservable inputs (Level 3).  The derivation of discount rate utilized in the analysis was based on comparable market yields.  Based on the analysis, the Company recorded a $0.9 million discount to fair value on this note receivable.  Also see Note 4 to these consolidated financial statements. 

 

At September 30, 2024, the Company performed a recoverability assessment on its long-lived assets of its Intelligent Industrial asset group (formerly Emerging Markets) in which its carrying value was compared to the estimated undiscounted cash flows over the remaining useful life of the asset group's primary asset, which is its developed technology.  Accordingly, a fair value analysis was performed.  Based on the assessment, the Company determined the fair value of the asset was less than its carrying value and recorded an impairment charge of $2.8 million on this asset group, which impaired its intangible assets in their entirety. The Company determined the fair value of this asset group to be approximately zero. The measurements utilized to determine the implied fair value represented significant unobservable inputs (Level 3).  See Note 12 for more information.

 

In 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 forcast, 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 for the fiscal year  September 30, 2025:

 

Balance at October 1, 2024		$	—
Contingent consideration pursuant to acquisition			2,540
Fair value adjustments			—
Payment of contingent consideration			—
Balance at September 30, 2025		$	2,540