GEOSPACE TECHNOLOGIES CORPORATION (NASDAQ:GEOS) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

On November16, 2017, the Audit Committee of the Board of Directors (“the Audit Committee”) of Geospace Technologies Corporation (the “Company”) on the recommendation of management, and after consultation with the Company’s independent registered public accounting firm, BDO USA, LLP, concluded that the Company’s audited consolidated financial statements for the fiscal years ended September30, 2016 and 2015, and the related report of the Company’s independent registered public accounting firm thereon, and the unaudited consolidated financial statements for quarters ended December31, 2016, March31, 2017 and June30, 2017 (“Restated Periods”) should no longer be relied upon because of an accounting error.

The accounting error to be addressed in the restatement relates to an error made in the classification of inventories. The Company classified all of its inventories as a current asset in its consolidated balance sheets as of September30, 2016 and 2015, December31, 2016, March31, 2017 and June30, 2017. The Company has now determined that all of its inventories for each of these dates were not reasonably expected to be sold or consumed during the Company’s next operating cycle, and therefore a portion of these inventories should have been classified as long-term.

The Company intends to present its restated consolidated financial statements in its Annual Report on Form 10-K for the year ended September30, 2017 (the “2017 Form 10-K”), including (i)audited restated consolidated balance sheets as of September30, 2016 and 2015, (ii) unaudited restated condensed consolidated balance sheets as of the quarterly periods ended December31, 2016, March31, 2017 and June30, 2017 and (iii)footnotes reconciling previously final annual and quarterly consolidated balance sheets to the restated balance sheets. The Company currently believes that it will be able to file the 2017 Form 10-K with the restated balance sheets by no later than December1, 2017.

The effect of the restatement on the Company’s consolidated balance sheets as of September30, 2016 and 2015, December31, 2016, March31, 2017 and June30, 2017 consist of a non-cash reclassification with respect to inventories. The restatement does not affect previously reported results of operations, net loss, total assets, total liabilities, stockholders’ equity or cash flows.

The effect of the restatement to Company’s consolidated balance sheet as of the quarter ended June30, 2017 was to (i)reduce the current portion of inventories from $88.0million to $22.4million, which also decreased current assets from $154.8million to $89.2million, and (ii)increase the noncurrent portion of inventories from zero to $65.6million

The effect of the restatement to Company’s consolidated balance sheet as of September30, 2016 was to (i)reduce the current portion of inventories from $104.5million to $30.8million, which also decreased current assets from $174.3million to $100.6million, and (ii)increase the noncurrent portion of inventories from zero to $73.7million.

Management has also evaluated the effects of the facts leading to the restatement on its conclusion regarding the Company’s internal control over financial reporting and disclosure controls and procedures as of September30, 2017 and as of the end of the Restated Periods.

Based on that evaluation, management has concluded that the accounting error noted above resulted from a material weakness in the Company’s internal controls pertaining to the classification of its current assets with respect to inventories. As a result of the material weakness, management has concluded that the Company’s internal control over financial reporting and its disclosure controls and procedures were ineffective as of September30, 2017 and as of the end of each of the Restated Periods.

As a result of the material weakness BDO USA LLP’s report on the Company’s internal control over financial reporting as of September30, 2016 should no longer be relied upon.

Management, with the oversight of the Audit Committee, intends to begin promptly to develop a plan to remediate the material weakness. The description of the material weakness in internal controls identified by management and the Company’s preliminary remediation plans and changes to internal control over financial reporting will be disclosed in item 9A of the 2017 Form 10-K.

The Audit Committee and management have discussed the matters disclosed in this Item 4.02 with BDO USA, LLP, the Company’s independent registered public accounting firm.

About GEOSPACE TECHNOLOGIES CORPORATION (NASDAQ:GEOS)

Geospace Technologies Corporation 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. The Company also designs and manufactures non-seismic products, including industrial products, offshore cables and imaging equipment. The Company operates through two segments: Seismic and Non-Seismic. The Company’s Seismic product segments include traditional exploration products, wireless exploration products and reservoir products. Its seismic product lines consist of land and marine nodal data acquisition systems, permanent land and seabed reservoir monitoring products and services, geophones and geophone strings, hydrophones, leader wire, connectors, telemetry cables, marine streamer retrieval and steering devices and various other products. The Company’s Non-Seismic product segments include imaging and industrial products.