GEOSPACE TECHNOLOGIES CORP Income Taxes Disclosure

17. Income Taxes:

 

Components of loss before income taxes were as follows (in thousands):

 

		YEAR ENDED SEPTEMBER 30,
		2025				2024
United States		$	(8,941	)		$	(6,930	)
Foreign			(395	)			466
		$	(9,336	)		$	(6,464	)

 

The provision for income taxes consisted of the following (in thousands):

 

		YEAR ENDED SEPTEMBER 30,
		2025				2024
Current
Federal		$	—			$	—
Foreign			361				55
State			58				41
			419				96
Deferred:
Federal			—				—
Foreign			(31	)			18
			(31	)			18
		$	388			$	114

 

The difference between the effective tax rate reflected in the provision for income taxes and the U.S. federal statutory rate were as follows (in thousands):

 

		YEAR ENDED SEPTEMBER 30, 2025								YEAR ENDED SEPTEMBER 30, 2024
		Amount				Percent				Amount				Percent
Benefit for U.S. federal income tax at statutory rate		$	(1,961	)			21.0	%		$	(1,357	)			21.0	%
Research and experimentation tax credit			(585	)			6.3	%			(572	)			8.8	%
State income taxes, net of federal income tax benefit			46				(0.5	)%			32				(0.5	)%
Change in valuation allowance			2,930				(31.4	)%			1,934				(29.9	)%
Foreign earnings tax			169				(1.8	)%			125				(1.9	)%
Stock compensation			(111	)			1.2	%			(210	)			3.2	%
Impact due to foreign currency translation			171				(1.8	)%			(44	)			0.7	%
Other items			(271	)			2.9	%			206				(3.2	)%
Total tax expense and effective tax rate		$	388				(4.1	)%		$	114				(1.8	)%

 

The income tax expense for fiscal years 2025 and 2024 primarily reflects tax accrual for U.S. state, U.K. income tax and foreign withholding tax on U.S.  companies.  Texas contributed to the majority of the state tax expense for fiscal years 2025 and 2024.  The Company is currently unable to record any tax benefits for its tax loss in 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 assets (liabilities) were as follows (in thousands):

 

		YEAR ENDED SEPTEMBER 30,
		2025				2024
Deferred income tax assets:
Inventories		$	4,684			$	5,447
Loss and tax credit carryforwards			34,129				31,850
Accrued compensation			652				733
R&D expenditure capitalization			4,366				3,064
Intangible assets			245				290
Property and equipment			321				331
Other reserves			590				456
Subtotal deferred income tax assets			44,987				42,171
Valuation allowance			(43,781	)			(40,851	)
Net deferred income tax assets			1,206				1,320
Deferred income tax liabilities:
Property and equipment			(1,210	)			(1,249	)
Other			—				(105	)
Total deferred income tax liabilities			(1,210	)			(1,354	)
Net deferred income tax liabilities		$	(4	)		$	(34	)

 

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, 2025, the Company had $0.8 million of cash and cash equivalents held by its foreign subsidiaries. At September 30, 2025 and 2024, the temporary difference related to undistributed earnings for which no deferred taxes have been provided was approximately $0.8 million and $1.2 million, respectively.

 

The Company is subject to taxation in the United States as well as various states and foreign jurisdictions. Tax years that remain subject to examination by significant tax jurisdictions are the United States for tax years ending after 2016, the United Kingdom for tax years ending after 2023, and Canada for tax years ending after 2021.

 

At   September 30, 2025, the Company had net operating loss ("NOL") carry-forwards of approximately $92.4 million in the United States and $19.2 million in Canada which are available to offset future taxable income in those jurisdictions. The NOL carry-forward for Canada will begin to expire in 2033. The NOL carry-forward for the United States which originated prior to the 2017 Tax Act of $32.4 million begins to expire in 2029 and those originating after the 2017 Tax Act of $60.0 million do not expire.

 

Management of the Company has concluded that it was not more-likely-than-not that its U.S. and Canadian net deferred tax assets will be realized in accordance with U.S. GAAP. On  September 30, 2025 and September 30, 2024, the Company had a valuation allowance against its U.S. net deferred tax assets of $39.0 million and $36.1 million, respectively. At September 30, 2025 and September 30, 2024, the Company had a valuation allowance against its Canadian net deferred tax assets of $4.7 million and $4.8 million, respectively.