美國
證券交易委員會
華盛頓特區 20549
|
| 表單 |
(標記一個)
| | 根據1934年證券交易法第13或15(d)條款提交的季度報告 |
截至季度期
或
| | 根據1934年證券交易法第13條或第15(d)條的過渡報告 |
對於過渡期從 至
委員會檔案編號：
MIND Technology, Inc.
(註冊人名稱如章程中所列)
| | |
| (州或其他管轄區的 公司註冊或組織) | (美國國稅局僱主 識別號) |
2002 Timberloch Place
550號套房
(主要執行辦公室地址，包括郵政編碼)
(
（註冊人 的電話號碼，包括區號）’電話號碼，包括區號)
| 根據法案第12(b)節註冊的證券： | ||
| 每個類別的標題 | 交易標的 | 註冊的每個交易所的名稱 |
| | | 本 |
請通過勾選標記指明註冊人是否（1）在過去12個月內（或註冊人被要求提交此類報告的較短期間內）根據1934年證券交易法第13或15(d)條提交了所有要求提交的報告，以及（2）在過去90天內是否受到此類提交要求的約束。
請用勾選標記指明註冊人是否在過去12個月內（或註冊人被要求提交此類文件的較短期間內）電子提交了根據規定S-T規則405（本章第232.405節）要求提交的每個互動數據文件。
請在以下選項前打勾表示公司屬於大型快速記錄者、快速記錄者、非快速記錄者、小額報告公司還是新興增長公司。可參考《交易所法規》規則120億.2中對「大型快速記錄者」、「快速記錄者」、「小額報告公司」和「新興增長公司」的定義。
| 大型加速報告人 | ☐ | 加速報告人 | ☐ |
| | ☒ | 小型報告公司 | |
| 新興增長公司 | |
如果是新興成長型公司，請打勾表示註冊人選擇不使用按Exchange行爲第13(a)條規定提供的任何新的或修訂的財務會計準則的延遲過渡期。 ☐
請勾選是否註冊公司是外殼公司（根據《交易所法規》規定的120億.2條）。 是
請指出截至最近可行日期的每個發行人普通股類別的流通股份數量：
目錄
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| 項目 4。 |
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| 項目1A. |
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| 項目 3。 |
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| 項目5。 |
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| 項目6。 |
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簡化合並資產負債表
(以千爲單位，除每股數據外)
(未經審計)
| 2024年10月31日 | 2024年1月31日 | |||||||
| 資產 | ||||||||
| 流動資產： | ||||||||
| 現金及現金等價物 | $ | $ | ||||||
| 應收賬款，扣除信用損失準備金$ 截至2024年10月31日和2024年1月31日 | ||||||||
| 存貨，淨額 | ||||||||
| 預付款項及其他流動資產 | ||||||||
| 總流動資產 | ||||||||
| 物業及設備（淨額） | ||||||||
| 經營租賃使用權資產 | ||||||||
| 無形資產，淨值 | ||||||||
| 遞延所得稅資產 | ||||||||
| 總資產 | $ | $ | ||||||
| 負債和股東權益 | ||||||||
| 流動負債： | ||||||||
| 應付賬款 | $ | $ | ||||||
| 遞延收入 | ||||||||
| 客戶存款 | ||||||||
| 應計費用和其他流動負債 | ||||||||
| 應付所得稅 | ||||||||
| 運營租賃負債 - 流動 | ||||||||
| 總流動負債 | ||||||||
| 經營租賃負債 - 非流動 | ||||||||
| 總負債 | ||||||||
| 股東權益： | ||||||||
| 優先股，$ 面值； 授權股份; 截至2024年10月31日已發行和流通的股份 截至2024年1月31日已發行及流通的股份 | ||||||||
| 普通股，$ 面值； 授權股份; 截至2024年10月31日已發行及流通的股份 截至2024年1月31日已發行及流通的股份 | ||||||||
| 額外實收資本 | ||||||||
| 累計虧損 | ( | ) | ( | ) | ||||
| 累計其他綜合收益 | ||||||||
| 股東權益總額 | ||||||||
| 總負債和股東權益 | $ | $ | ||||||
附帶說明是這些合併基本報表不可或缺的一部分。
壓縮合並經營報表
(以千爲單位，除每股數據外)
(未經審計)
| 截至10月31日的三個月 |
截至10月31日的九個月 |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| 營業收入： |
||||||||||||||||
| 海洋科技產品的銷售 |
$ | $ | ||||||||||||||
| 銷售成本： |
||||||||||||||||
| 海洋科技產品的銷售 |
||||||||||||||||
| 毛利潤 |
||||||||||||||||
| 營業費用： |
||||||||||||||||
| 銷售、一般和行政 |
||||||||||||||||
| 研究與開發 |
||||||||||||||||
| 折舊和攤銷 |
||||||||||||||||
| 營業費用總額 |
||||||||||||||||
| 營業收入（損失） |
( |
) | ( |
) | ||||||||||||
| 其他收益（支出）： |
||||||||||||||||
| 利息費用 |
( |
) | ( |
) | ||||||||||||
| 其他，淨額 |
( |
) | ||||||||||||||
| 其他收入(支出)總計 |
( |
) | ( |
) | ( |
) | ||||||||||
| 持續經營業務產生的收入(虧損)在所得稅之前 |
( |
) | ( |
) | ||||||||||||
| 所得稅準備 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 持續經營業務產生的淨收入(虧損) |
( |
) | ( |
) | ||||||||||||
| 來自終止運營的收入，扣除所得稅 |
||||||||||||||||
| 淨利潤（虧損） |
$ | $ | $ | $ | ( |
) | ||||||||||
| 優先股股息 - 已宣佈 |
( |
) | ( |
) | ||||||||||||
| 優先股股息 - 未宣佈 |
( |
) | ( |
) | ( |
) | ||||||||||
| 優先股轉換的影響 |
||||||||||||||||
| 歸屬於普通股東的淨利潤（虧損） |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| 普通股每股淨利潤（虧損） - 基本和稀釋 |
||||||||||||||||
| 持續運營 |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| 中止運營 |
$ | $ | $ | $ | ||||||||||||
| 淨利潤（虧損） |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| 用於計算每普通股淨收益（損失）的股份： |
||||||||||||||||
| 基本和攤薄 |
||||||||||||||||
附帶的註釋是這些簡單合併基本報表的重要組成部分。
綜合收益（損失）濃縮合並報表
(以千爲單位)
（未經審計）
| 截至10月31日的三個月 |
截至10月31日的九個月 |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| 淨利潤（虧損） |
$ | $ | $ | $ | ( |
) | ||||||||||
| 綜合收益（損失） |
$ | $ | ( |
) | ||||||||||||
附帶的註釋是這些簡單合併基本報表的重要組成部分。
壓縮合並現金流量表
(in thousands)
(unaudited)
| For the Nine Months Ended October 31, |
||||||||
| 2024 |
2023 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Stock-based compensation |
||||||||
| Gain on sale of Klein |
( |
) | ||||||
| Provision for inventory obsolescence |
||||||||
| Gross profit from sale of other equipment |
( |
) | ( |
) | ||||
| Changes in: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Unbilled revenue |
||||||||
| Inventories |
( |
) | ( |
) | ||||
| Prepaid expenses and other current and long-term assets |
||||||||
| Income taxes receivable and payable |
( |
) | ( |
) | ||||
| Accounts payable, accrued expenses and other current liabilities |
( |
) | ||||||
| Deferred revenue and customer deposits |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Proceeds from the sale of Klein, net |
||||||||
| Sale of other equipment |
||||||||
| Net cash provided by investing activities |
||||||||
| Cash flows from financing activities: |
||||||||
| Preferred stock conversion transaction costs |
( |
) | ||||||
| Net proceeds from short-term loan |
||||||||
| Payment on short-term loan |
( |
) | ||||||
| Refund of prepaid interest on short-term loan |
||||||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| Effect of changes in foreign exchange rates on cash and cash equivalents |
( |
) | ( |
) | ||||
| Net change in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents, beginning of period |
||||||||
| Cash and cash equivalents, end of period |
$ | $ | ||||||
| Supplemental cash flow information: |
||||||||
| Interest paid |
$ | $ | ||||||
| Income taxes paid |
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Common Stock |
Preferred Stock |
Accumulated |
||||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||||||
| Paid-In |
Treasury |
Accumulated |
Comprehensive |
|||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Capital |
Stock |
Deficit |
Gain |
Total |
||||||||||||||||||||||||||||
| Balances, January 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
| Net income |
— | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, April 30, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
| Net income |
— | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, July 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
| Net income |
— | — | ||||||||||||||||||||||||||||||||||
| Preferred stock conversion |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, October 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Common Stock |
Preferred Stock |
Accumulated |
||||||||||||||||||||||||||||||||||
| As adjusted |
See Note 14 |
Additional |
Other |
|||||||||||||||||||||||||||||||||
| Paid-In |
Treasury |
Accumulated |
Comprehensive |
|||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Capital |
Stock |
Deficit |
Gain |
Total |
||||||||||||||||||||||||||||
| Balances, January 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, April 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, July 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||
| Net income |
— | — | ||||||||||||||||||||||||||||||||||
| Retirement of treasury stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Preferred stock dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, October 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization, Liquidity and Summary of Significant Accounting Policies
Organization—MIND Technology, Inc., a Delaware corporation (the “Company”), was incorporated in 1987. The Company, through its wholly owned subsidiaries, Seamap Pte Ltd, MIND Maritime Acoustics, LLC, Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd, collectively “Seamap”, designs, manufactures and sells a broad range of proprietary products for the seismic, hydrographic and offshore industries with product sales and support facilities based in Singapore, Malaysia, the United Kingdom and the state of Texas. Prior to August 21, 2023, the Company, through its wholly owned subsidiary Klein Marine Systems, Inc. (“Klein”), designed, manufactured and sold a broad range of proprietary products for the seismic, hydrographic and offshore industries from its facility in the state of New Hampshire. Effective August 21, 2023, the Company sold Klein and retrospectively presented its prior period financial results as discontinued operations (see Note 2 – “Sale of a Subsidiary” for additional details).
Liquidity—As of October 31, 2024, the Company had working capital of approximately $
Summary of Significant Accounting Policies—We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024. During the nine months ended October 31, 2024, there were no changes to those accounting policies.
2. Sale of Subsidiary
On August 21, 2023, the Company sold Klein pursuant to a Stock Purchase Agreement (the “SPA”) with General Oceans AS (the "Buyer"). In connection with the SPA, the Company granted the Buyer a license to its Spectral Ai software suite (“Spectral Ai”). The license is exclusive to the Buyer as it relates to side scan sonar. The Company and the Buyer also entered into a collaboration agreement for the further development of Spectral Ai and potentially other software projects. The foregoing transactions contemplated by the SPA are referred to as the “Sale of Klein”. The aggregate consideration to the Company consisted of a cash payment of $
On August 22, 2023, following the closing of the Sale of Klein, all outstanding amounts due and owed, including principal, interest, and other charges, under the Loan (as defined below) were repaid in full and the Loan was terminated, and all liens and security interests granted thereunder were released and terminated (see Note 10 -"Notes Payable" for additional details).
3. Basis of Presentation
The condensed consolidated balance sheet as of January 31, 2024, for the Company has been derived from audited consolidated financial statements. The unaudited interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2024 (“fiscal 2024”). In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position as of October 31, 2024, the results of operations for the three and nine months ended October 31, 2024 and 2023, the cash flows for the nine months ended October 31, 2024 and 2023, and the statement of stockholders’ equity for the three and nine months ended October 31, 2024 and 2023, have been included in these condensed consolidated financial statements. The foregoing interim results are not necessarily indicative of the results of operations to be expected for the full fiscal year ending January 31, 2025 (“fiscal 2025”).
4. Discontinued Operations
On August 21, 2023, the Company sold Klein pursuant to the SPA with the Buyer. As a result, its results of operations are reported as discontinued operations for the three and nine-month period ended October 31, 2023.
The results of operations from discontinued operations for the three and nine months ended October 31, 2024 and 2023 consist of the following:
| For the Three Months Ended October 31, | For the Nine Months Ended October 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues: | (in thousands) | |||||||||||||||
| Revenue from discontinued operations | $ | $ | $ | $ | ||||||||||||
| Cost of sales: | ||||||||||||||||
| Cost of discontinued operations | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Gain on sale of Klein | ||||||||||||||||
| Income before income taxes from discontinued operations | ||||||||||||||||
| Provision for income taxes from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net Income from discontinued operations | ||||||||||||||||
The significant operating and investing noncash items and capital expenditures related to discontinued operations are summarized below:
| For the Nine Months Ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Depreciation and amortization | $ | $ | ||||||
| Gain on sale of Klein | $ | $ | ||||||
5. New Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), to enhance the disclosures public entities provide regarding significant segment expenses so that investors can better understand an entity’s overall performance and assess potential future cash flows. ASU 2023-07 is effective for our annual periods beginning February 1, 2024 and interim periods within fiscal years beginning February 1, 2025. The Company is evaluating the new guidance to determine the impact it will have on the disclosures to its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 seeks to improve transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. The updated guidance is effective for the Company on February 1, 2025. The Company is currently evaluating the new guidance to determine the impact it will have on the disclosures to its consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"), to enhance the disclosures public entities provide regarding specified information about certain costs and expenses at each interim and annual reporting period so that investors can better understand an entity’s overall performance, including its cost structure, and assess potential future cash flows. ASU 2024-03 is effective for our annual periods beginning February 1, 2027 and interim periods within fiscal years beginning February 1, 2028. The Company is evaluating the new guidance to determine the impact it will have on the disclosures to its consolidated financial statements.
6. Revenue from Contracts with Customers
The following table presents revenue from contracts with customers disaggregated by timing of revenue recognition:
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue recognized at a point in time: | (in thousands) | |||||||||||||||
| Total revenue recognized at a point in time | $ | $ | $ | $ | ||||||||||||
| Revenue recognized over time: | ||||||||||||||||
| Total revenue recognized over time | ||||||||||||||||
| Total revenue from contracts with customers | $ | $ | $ | $ | ||||||||||||
The revenue from products manufactured and sold by our Seamap business is generally recognized at a point in time, or when the customer takes possession of the product, based on the terms and conditions stipulated in our contracts with customers. However, from time to time our Seamap business provides repair and maintenance services, or performs upgrades, on customer owned equipment in which case revenue is recognized over time. In addition, our Seamap business provides annual Software Maintenance Agreements (“SMA”) to customers who have an active license for software embedded in Seamap products. The revenue from the SMAs is recognized over time, with the total value of the SMAs recognized in equal monthly amounts over the life of the contract.
The following table presents revenue from contracts with customers disaggregated by geography, based on the shipping location of our customers:
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands) | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| Europe | ||||||||||||||||
| Middle East & Africa | ||||||||||||||||
| Other | ||||||||||||||||
| Total revenue from contracts with customers | $ | $ | $ | $ | ||||||||||||
As of October 31, 2024, and January 31, 2024, contract assets and liabilities consisted of the following:
| October 31, 2024 | January 31, 2024 | |||||||
| Contract Assets: | (in thousands) | |||||||
| Unbilled revenue - current | $ | $ | ||||||
| Total unbilled revenue | $ | $ | ||||||
| Contract Liabilities: | ||||||||
| Deferred revenue & customer deposits - current | $ | $ | ||||||
| Total deferred revenue & customer deposits | $ | $ | ||||||
Considering the products manufactured and sold by our Seamap business and the Company’s standard contract terms and conditions, we expect the Company's contract assets and liabilities to turn over, on average, within a period of to months.
With respect to the disclosures above, sales and transaction-based taxes are excluded from revenue, and we do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Also, we expense costs incurred to obtain contracts because the amortization period would be one year or less. These costs are recorded in selling, general and administrative expenses.
7. Balance Sheet
| October 31, 2024 | January 31, 2024 | |||||||
| (in thousands) | ||||||||
| Inventories: | ||||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Work in progress | ||||||||
| Cost of inventories | ||||||||
| Less allowance for obsolescence | ( | ) | ( | ) | ||||
| Total inventories, net | $ | $ | ||||||
| October 31, 2024 | January 31, 2024 | |||||||
| (in thousands) | ||||||||
| Property and equipment: | ||||||||
| Furniture and fixtures | $ | $ | ||||||
| Autos and trucks | ||||||||
| Land and buildings | ||||||||
| Cost of property and equipment | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
As of January 31, 2024, the Company completed an annual review of property and equipment noting
8. Leases
The Company has certain non-cancelable operating lease agreements for office, production and warehouse space in Texas, Singapore, Malaysia, and the United Kingdom.
Lease expense for the three and nine months ended October 31, 2024, was approximately $
Supplemental balance sheet information related to leases as of October 31, 2024 and January 31, 2024 was as follows:
| Lease | October 31, 2024 | January 31, 2024 | ||||||
| Assets | (in thousands) | |||||||
| Operating lease assets | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liabilities | $ | $ | ||||||
| Classification of lease liabilities | ||||||||
| Current liabilities | $ | $ | ||||||
| Non-current liabilities | ||||||||
| Total Operating lease liabilities | $ | $ | ||||||
Lease-term and discount rate details as of October 31, 2024 and January 31, 2024 were as follows:
| Lease term and discount rate | October 31, 2024 | January 31, 2024 | ||||||
| Weighted average remaining lease term (years) | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
The weighted average discount rate was calculated using the Company's weighted average cost of capital.
Supplemental cash flow information related to leases was as follows:
| For the Nine Months Ended October 31, 2024 | ||||||||
| Lease | 2024 | 2023 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | (in thousands) | |||||||
| Operating cash flows from operating leases | $ | ( | ) | $ | ( | ) | ||
| Changes in lease balances resulting from new and modified leases: | ||||||||
| Operating leases | $ | $ | ||||||
Maturities of lease liabilities at October 31, 2024 were as follows:
| October 31, 2024 | ||||
| (in thousands) | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total payments under lease agreements | $ | |||
| Less: imputed interest | ( | ) | ||
| Total lease liabilities | $ | |||
9. Intangible Assets
| October 31, 2024 | January 31, 2024 | |||||||||||||||||||||||||||
| Weighted | ||||||||||||||||||||||||||||
| Average Life at | Gross Carrying | Accumulated | Net Carrying | Gross Carrying | Accumulated | Net Carrying | ||||||||||||||||||||||
| October 31, 2024 | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||||
| Proprietary rights | ( | ) | ( | ) | ||||||||||||||||||||||||
| Customer relationships | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Patents | ( | ) | ( | ) | ||||||||||||||||||||||||
| Trade name | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other | ( | ) | ( | ) | ||||||||||||||||||||||||
| Intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
On January 31, 2024, the Company completed an annual review of amortizable intangible assets. Based on a review of qualitative factors, it was determined that there were no events or changes in circumstances indicating that the carrying value of amortizable intangible assets was not recoverable. During the nine months ended October 31, 2024, there have been no substantive indicators of impairment.
Aggregate amortization expense was approximately $
| For fiscal years ending January 31, | (in thousands) | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ |
10. Notes Payable
On February 2, 2023, we entered into a $
11. Income Taxes
For the three- and nine-month periods ended October 31, 2024, the income tax expense from continuing operations was approximately and million, respectively, on pre-tax income from continuing operations of approximately $
The Company files U.S. federal and state income tax returns as well as separate returns for its foreign subsidiaries within their local jurisdictions. The Company's U.S. federal tax returns are subject to examination by the Internal Revenue Service for fiscal years ended January 31, 2019 through 2024. The Company’s tax returns may also be subject to examination by state and local tax authorities for fiscal years ending January 31, 2017 through 2024. The Company's Singapore income tax returns are subject to examination by the Singapore tax authorities for the fiscal years ended January 31, 2017, through 2024. The Company’s tax returns in other foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2018 through 2024.
The Company has determined that the undistributed earnings of foreign subsidiaries are not deemed to be indefinitely reinvested outside of the United States as of October 31, 2024. Furthermore, the Company has concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial. Therefore, the Company has recorded a deferred tax liability associated with the undistributed foreign earnings as of October 31, 2024.
For the three- and nine-month periods ended October 31, 2024 and 2023, the Company did recognize any tax expense or benefit related to uncertain tax positions.
12. Earnings per Share
Net income per basic common share is computed using the weighted average number of common shares outstanding during the period, excluding unvested restricted stock. Net income per diluted common share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period using the treasury stock method. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect and from the assumed vesting of unvested shares of restricted stock. For the three and nine months ended October 31, 2024 and October 31, 2023, dilutive potential common shares outstanding were immaterial and had no effect on the calculation of earnings per share because shares were anti-dilutive. The total basic weighted average common shares outstanding for the three and nine months ended October 31, 2024, was approximately
On September 4, 2024, all outstanding shares of our 9.00% Series A Cumulative preferred stock (the “Preferred Stock”) were converted into common stock and retired. The Company issued approximately shares of common stock in connection with the conversion (see Note 14- "Equity and Stock Based Compensation" for additional details).
On October 12, 2023, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Charter (the “Charter Amendment”) to effect a one-for- reverse stock split (the “Reverse Stock Split”). Outstanding shares in prior periods have been restated to reflect the impact of the Reverse Stock Split in calculating earnings per share (see Note 14- "Equity and Stock Based Compensation" for additional details).
13. Related Party Transaction
Ladenburg Thalmann & Co. Inc. (“Ladenburg”) provided advisor and arrangement services for the Loan (See Note 10 - "Notes Payable" for additional details) and received $
14. Equity and Stock-Based Compensation
At the virtual Special Meeting of Preferred Stockholders held on August 29, 2024, our preferred stockholders approved an amendment to our Certificate of Designations, Preferences and Rights of 9.00% Series A Cumulative preferred stock, to provide that each share of 9.00% Series A Cumulative Preferred Stock, $
On September 28, 2023, the Board approved the Reverse Stock Split at a ratio of one-for-ten. On October 12, 2023, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Charter (the "Charter Amendment") to effect the Reverse Stock Split. The Charter Amendment became effective on October 13, 2023.
As a result of the Charter Amendment and Reverse Stock Split, every
Total compensation expense recognized for stock-based awards granted under the Company’s equity incentive plan during the three and nine-month periods ended October 31, 2024 was approximately $
15. Segment Reporting
Prior to August 22, 2023, the Company operated in segments, Seamap and Klein. On August 21, 2023, the Company completed the Sale of Klein. (see Note 2-"Sale of Subsidiary" for additional details). As a result, at October 31, 2024, Seamap is the Company’s reportable segment.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “expect,” “may,” “will,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts of our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
| • |
risks associated with our manufacturing operations including availability and reliability of materials and components as well the reliability of the products that we manufacture and sell; |
|
| • |
loss of significant customers; |
| • |
the impact of disruptions in global supply chains due to various factors, including certain components and materials becoming unavailable, increased lead times for components and materials, as well as increased costs for such items; |
|
| • | demands from suppliers for advance payments could increase our need for working capital; inability to access such working capital could impede our ability to complete orders; |
| • |
increased competition; |
| • |
loss of key suppliers; |
| • |
intellectual property claims by third parties; |
| • |
the effect of uncertainty in financial markets on our customers’ and our ability to obtain financing; |
| • |
our ability to successfully execute strategic initiatives to grow our business; |
| • |
uncertainties regarding our foreign operations, including political, economic, currency, environmental regulation and export compliance risks; |
| • |
seasonal fluctuations that can adversely affect our business; |
| • |
fluctuations due to circumstances beyond our control or that of our customers; |
| • |
defaults by customers on amounts due to us; |
| • |
possible further impairment of our long-lived assets due to technological obsolescence or changes in anticipated cash flow generated from those assets; |
| • |
inability to obtain funding or to obtain funding under acceptable terms; |
| • |
fluctuations in demand for seismic data, which is dependent on the level of spending by oil and gas companies for exploration, production and development activities, and may potentially negatively impact the value of our assets held for sale; |
|
| • | inflation and price volatility in the global economy that could negatively impact our business and results of operations; | |
| • | the consequences of future geopolitical events, which we cannot predict but which may adversely affect the markets in which we operate, our operations, or our results of operations; and | |
| • | negative impacts to our business from security threats, including cybersecurity threats, and other disruptions. |
For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see (1) Part II, “Item 1A. Risk Factors” of this Form 10-Q, (2) Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024, and (3) the Company’s other filings filed with the SEC from time to time.
There may be other factors of which the Company is not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement after the date they are made, whether as the result of new information, future events or otherwise, except as required by law. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
On August 21, 2023, the Company completed the Sale of Klein (see Note 2-"Sale of Subsidiary" in the accompanying financial statements for additional details). Effective with the Sale of Klein, we operate in one segment, Seamap. Our Seamap business designs, produces and sells seismic exploration and survey equipment. Its customers include foreign and domestic commercial marine survey companies and various governmental institutions.
Management believes that the performance of our Seamap business is indicated by revenues from sales of products and by gross profit from those sales. Management monitors EBITDA and Adjusted EBITDA, both as defined and reconciled to the most directly comparable financial measures calculated and presented in accordance with United States generally accepted accounting principles (“GAAP”), in the following table, as key indicators of our overall performance and liquidity.
| For the Three Months Ended October 31, |
For the Nine Months Ended October 31, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Reconciliation of Net income (loss) to EBITDA and Adjusted EBITDA from continuing operations |
(in thousands) |
|||||||||||||||
| Net income (loss) |
$ | 1,291 | $ | 568 | $ | 3,043 | $ | (1,167 | ) | |||||||
| Interest expense, net |
— | 169 | — | 536 | ||||||||||||
| Depreciation and amortization |
221 | 290 | 724 | 1,230 | ||||||||||||
| Provision for income taxes |
396 | 112 | 1,313 | 590 | ||||||||||||
| EBITDA (1) |
1,908 | 1,139 | 5,080 | 1,189 | ||||||||||||
| Stock-based compensation |
47 | 106 | 141 | 264 | ||||||||||||
| Income from discontinued operations net of depreciation and amortization |
— | (2,308 | ) | — | (1,762 | ) | ||||||||||
| Adjusted EBITDA from continuing operations (1) |
$ | 1,955 | $ | (1,063 | ) | $ | 5,221 | $ | (309 | ) | ||||||
| Reconciliation of Net Cash Provided by (Used in) Operating Activities to EBITDA |
||||||||||||||||
| Net cash provided by (used in) operating activities |
$ | 2,288 | $ | (2,147 | ) | $ | (1,407 | ) | $ | (5,624 | ) | |||||
| Gain on Sale of Klein |
— | 2,393 | — | 2,393 | ||||||||||||
| Stock-based compensation |
(47 | ) | (106 | ) | (141 | ) | (264 | ) | ||||||||
| Provision for inventory obsolescence |
(22 | ) | (23 | ) | (67 | ) | (23 | ) | ||||||||
| Changes in accounts receivable (current and long-term) |
(115 | ) | (2,570 | ) | 2,842 | 637 | ||||||||||
| Interest paid, net |
— | 169 | — | 576 | ||||||||||||
| Taxes paid, net of refunds |
473 | 192 | 1,411 | 617 | ||||||||||||
| Gross profit from sale of other equipment |
— | 49 | 457 | 385 | ||||||||||||
| Changes in inventory |
(1,798 | ) | 2,841 | 3,944 | 3,174 | |||||||||||
| Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue |
2,161 | (427 | ) | 191 | (70 | ) | ||||||||||
| Changes in prepaid expenses and other current and long-term assets |
(1,034 | ) | 763 | (2,076 | ) | (566 | ) | |||||||||
| Other |
2 | 5 | (74 | ) | (46 | ) | ||||||||||
| EBITDA (1) |
$ | 1,908 | $ | 1,139 | $ | 5,080 | $ | 1,189 | ||||||||
| (1) |
EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as net income before (a) interest income and interest expense, (b) provision for (or benefit from) income taxes and (c) depreciation and amortization. Adjusted EBITDA excludes non-cash foreign exchange gains and losses, stock-based compensation, impairment of intangible assets and other non-cash tax related items. We consider EBITDA and Adjusted EBITDA to be important indicators for the performance of our business, but not measures of performance or liquidity calculated in accordance with GAAP. We have included these non-GAAP financial measures because management utilizes this information for assessing our performance and liquidity, and as indicators of our ability to make capital expenditures, service debt and finance working capital requirements and we believe that EBITDA and Adjusted EBITDA are measurements that are commonly used by analysts and some investors in evaluating the performance and liquidity of companies such as us. In particular, we believe that it is useful to our analysts and investors to understand this relationship because it excludes transactions not related to our core cash operating activities. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP and should not be considered in isolation or as alternatives to cash flow from operating activities or to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. In evaluating our performance as measured by EBITDA, management recognizes and considers the limitations of this measurement. EBITDA and Adjusted EBITDA do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of the measurements that management utilizes. Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do and EBITDA and Adjusted EBITDA may not be comparable with similarly titled measures reported by other companies. |
We design, manufacture and sell a variety of products used primarily in seismic and marine survey industries. Seamap’s primary products include (i) the GunLink seismic source acquisition and control systems; (ii) the BuoyLink RGPS tracking system used to provide precise positioning of seismic sources and streamers (marine recording channels that are towed behind a vessel) and (iii) SeaLink marine sensors and solid streamer systems (collectively, the “SeaLink” product line or “towed streamer products”). These towed streamer products are primarily designed for three-dimensional, high-resolution marine surveys in marine survey applications.
Our results of operations can experience fluctuations in activity levels due to a number of factors outside of our control. These factors include budgetary or financial concerns, supply chain issues, labor or political issues, inclement weather, and global pandemics. See Part II, Item 1A- “Risk Factors.”
Business Outlook
Our financial performance has improved significantly in recent periods. Although we had a history of generating operating losses prior to fiscal 2024, we generated operating income from continuing operations in fiscal 2024 and the first three quarters of fiscal 2025. We believe this is due to increased demand within our primary markets and efforts to reduce costs and improve product margins.
On August 21, 2023, we completed the Sale of Klein for cash consideration of $11.5 million. In addition, in connection with the Sale of Klein, the Company granted the Buyer a license in its Spectral Ai software suite, exclusive to the Buyer as it relates to side scan sonar. The Company and the Buyer also entered into a collaboration agreement for the further development of Spectral Ai and potentially other software projects. The license and collaboration agreements provide opportunities for recurring licensing revenue and recovery of certain ongoing operating costs. The Sale of Klein served to streamline the Company’s operations and provided needed working capital to address the financial requirements associated with the continuing growth of our Seamap business.
As of October 31, 2024, our backlog of firm orders was approximately $26.2 million, which is essentially flat with July 31, 2024. Our backlog totaled approximately $38.4 million as of January 31, 2024 and $37.4 million as of October 31, 2023. We believe a significant portion of our current backlog will be completed and shipped by the end of fiscal 2025. Additionally, we have a significant pipeline of pending and potential orders that we estimate total more than twice our backlog of firm orders. We believe these orders provide good visibility for the balance of this fiscal year and into the next year. However, the level of backlog at a particular point in time may not necessarily be indicative of results in subsequent periods as the size and delivery period of individual orders can vary significantly.
On September 4, 2024, all outstanding shares of preferred stock were converted into common stock and retired. The Company issued approximately 6.6 million shares of common stock in connection with the conversion. Accordingly, the Company no longer has obligations regarding preferred stock dividends, including undeclared dividends from previous periods (see Note 14- “Equity and Stock-Based Compensation” for additional details).
Our revenues tend to fluctuate from quarter to quarter due to delivery schedules and other factors. We currently expect revenue in fiscal 2025 to exceed that of fiscal 2024. However, no assurances of such results can be made, and there are a number of risks which could cause results to be less than anticipated. Those risks include the following:
| • |
Inability of our customers to accept delivery of orders as scheduled; |
| • |
Cancellation of orders; |
| • |
Production difficulties, including supply chain disruptions, which could delay the completion of orders as scheduled; |
| • |
Anticipated orders not being received as expected; and |
| • |
Other unanticipated delays beyond our control. |
In our Seamap business we address the following primary markets:
| • |
Marine Survey |
| • |
Marine Exploration |
We see a number of opportunities to add to our technology and to apply existing technology and products to new applications.
Revenue from our Spectral Ai software suite has been de-minimus to date. However, feedback from customers has been very positive and we believe there are a number of other potential customers. We are exploring ways in which we can more quickly address an expanded market for this technology.
We also continue to pursue initiatives to further expand our product offerings. These initiatives include new internally developed technology, introduction of new products based on our existing technology, technology obtained through partnering arrangements with others and a combination of all of these. There can be no assurance that any of these initiatives will ultimately have a material impact on our financial position or results of operations. The Company is also pursuing certain business opportunities with governmental organizations. Because the sales cycle for these projects can be quite long and can be impacted by a variety of factors, including the level of competition and budget limitations, the timing of contract awards is often difficult to predict.
We believe there are certain developments within the marine technology industry that can have a significant impact on our business. These developments include the following:
| • |
Increased activity within the marine exploration space, including applications for alternative energy projects such as offshore windfarms and carbon capture projects; and |
| • |
Demand for economical, commercially developed, technology for maritime security applications. |
In response to these, and other, developments we have prioritized certain strategic initiatives to exploit the opportunities that we perceive. These initiatives include the following:
| • |
Adaptation of our SeaLink solid streamer technology to alternative applications, such as hydrographic surveys for windfarm and carbon capture projects; and |
| • |
Application of our Spectral Ai software suite technology to side scan sonar systems and potentially other sensor systems. |
We believe that the above applications expand our addressable markets and provide opportunities for further growth in our revenues.
In fiscal 2024, we eliminated two executive management positions and certain other administrative positions in order to further control general and administrative costs. We have eliminated certain other positions in fiscal 2025. The Sale of Klein has allowed us to further streamline our operations. Should future financial results fall below our expectation, we may take further steps to reduce costs. We believe many of our costs are variable in nature, such as raw materials and labor-related costs. Accordingly, we believe we can reduce such costs commensurate with any declines in our business.
General inflation levels have increased in recent years due in part to supply chain issues, increased energy costs and geopolitical uncertainty. In addition, shortages of certain components, such as electronic components, have caused prices for available components to increase in some cases. These factors have had a negative impact on our costs; however, the magnitude of such impact cannot be accurately determined.
Our revenues and results of operations have not been materially impacted by inflation or changing prices in the past two fiscal years, except as described above.
Results of Operations
Revenues for the three and nine months ended October 31, 2024 were approximately $12.1 million and $31.8 million, respectively, compared to approximately $5.0 million and $23.1 million for the three and nine months ended October 31, 2023, respectively. The revenue increase in the three and nine month periods ended October 31, 2024, compared to the prior year periods was primarily due to increased activity within the marine technology markets, including those activities related to energy exploration and alternative energy initiatives. For the three and nine months ended October 31, 2024, we generated operating income of approximately $1.9 million and $4.0 million, respectively, compared to an operating loss of approximately $1.5 million and $1.8 million for the three and nine months ended October 31, 2023. The increase in operating income in the current year was attributable to increased revenues, decreased selling, general and administrative costs and reduced research and development costs during the nine months ended October 31, 2024. A more detailed explanation of these variations follows.
Revenues and Cost of Sales
Revenues and cost of sales for our Seamap business were as follows:
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| October 31, |
October 31, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| (in thousands) |
(in thousands) |
|||||||||||||||
| Revenues: |
||||||||||||||||
| Seamap |
$ | 12,105 | $ | 4,974 | $ | 31,819 | $ | 23,132 | ||||||||
| Cost of sales: |
||||||||||||||||
| Seamap |
6,684 | 2,721 | 17,402 | 13,402 | ||||||||||||
| Gross profit |
$ | 5,421 | $ | 2,253 | $ | 14,417 | $ | 9,730 | ||||||||
| Gross profit margin |
45 | % | 45 | % | 45 | % | 42 | % | ||||||||
A significant portion of Seamap’s sales consist of large discrete orders, the timing of which is dictated by our customers. This timing generally relates to the availability of a vessel so that our products can be installed. Accordingly, there can be significant variation in sales from one period to another. During the three and nine month periods ended October 31, 2024 approximately 60% of our revenues related to the sale of new systems with the remaining 40% related to “after market” activity such as the sale of spare parts, repairs and training. The gross profit and gross profit margins for Seamap were approximately $5.4 million and 45% and $14.4 million and 45% for the three and nine-month periods ended October 31, 2024, respectively, compared to approximately $2.3 million and 45% and $9.7 million and 42% in the three and nine-month periods ended October 31, 2023, respectively. For the three month periods, the gross profit margins were comparable, despite significantly higher revenue in the fiscal 2025 period, due mainly to revenue mix. The gross profit margins in first nine-months of fiscal 2025 improved from the comparable period in the prior fiscal year, due to price increases implemented in fiscal 2024 and increased production efficiencies. The increased production efficiencies were due primarily to higher overhead absorption from incremental activity levels and production and procurement efficiencies facilitated by increased order backlog.
Operating Expenses
General and administrative expenses for the three and nine-months ended October 31, 2024, respectively, were approximately $2.8 million and $8.3 million, compared to approximately $2.9 million and $9.2 million for the three and nine-months ended October 31, 2023, respectively. The decrease from the prior periods is primarily the result of lower compensation expense due to headcount reductions, and the impact of broader cost control measures.
Research and development costs were approximately $562,000 and $1.4 million, in the three and nine-month periods ended October 31, 2024, respectively, compared to approximately $508,000 and $1.5 million, in the three and nine-month period ended October 31, 2023, respectively. Costs in each of the periods are related primarily to our next generation towed streamer system and ongoing development of our Spectral Ai software suite.
Depreciation and amortization expense, which includes depreciation of equipment, furniture and fixtures and the amortization of intangible assets, decreased primarily attributable to assets becoming fully depreciated and amortized over the year. These costs were approximately $221,000 and $724,000 in the three and nine-month periods ended October 31, 2024, respectively, as compared to approximately $257,000 and $892,000 in the three and nine-month periods ended October 31, 2023, respectively.
Interest Expense
Interest expense of approximately $169,000 and $536,000 in the three and nine-months ended October 31, 2023, respectively, was primarily due to interest on the Loan. The Loan was repaid in fiscal 2024 in connection with the Sale of Klein (see note 2-"Sale of Subsidiary" and note 10-"Notes Payable" for additional details).
Other Expense
Other expense primarily relates to gains on the sale of certain ancillary equipment, scrap sales and other income.
Provision for Income Taxes
For the three and nine-months ended October 31, 2024, we reported tax expense of approximately $396,000 and $1.3 million, respectively, on pre-tax income from continuing operations of approximately $1.7 million and $4.4 million, respectively. For the three and nine-month period ended October 31, 2023, our income tax expense was approximately $112,000 and $590,000, respectively, on pre-tax loss from continuing operations of approximately $1.6 million and $2.0 million, respectively. These amounts differed from the result expected when applying the U.S. statutory rate of 21% to our income or loss from continuing operations before income taxes for the respective periods due primarily to the impact of income taxes accrued in certain foreign jurisdictions, primarily Singapore, which do not have net operating losses available to offset taxable income, and because valuation allowances have been recorded against increases in our deferred tax assets. Valuation allowances have been provided against all deferred tax assets in the United States and certain foreign jurisdictions, including Malaysia and the United Kingdom.
Liquidity and Capital Resources
Until recently, the Company had a history of generating operating losses and negative cash from operating activities and relied on cash from the sale of lease pool equipment and the sale of preferred stock and common stock. However, the Company’s operating results improved significantly in fiscal 2024 as compared to fiscal 2023 and prior years. The Company generated net income from operations and positive Adjusted EBITDA for the fiscal year ended January 31, 2024 and the three and nine month periods ended October 31, 2024. In addition, the Company sold its Klein business on August 21, 2023, generating net proceeds of approximately $7.3 million after settlement of closing costs and all outstanding amounts due and owed, including principal, interest, and other charges, on the Company’s $3.75 million loan. The Sale of Klein increased the Company’s working capital and improved its liquidity situation.
As of October 31, 2024, the Company had working capital of approximately $21.2 million, including cash and cash equivalents of approximately $3.5 million, compared to working capital of approximately $18.1 million, including cash and cash equivalents of approximately $5.3 million, as of January 31, 2024. The Company does not have a credit facility in place and depends on cash on hand and cash flows from operations to satisfy its liquidity needs.
The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, potential financing secured by company owned real property, disciplined working capital commitments, and potentially securing a credit facility or some other form of financing. In the six months ended October 31, 2024, the Company generated positive cash from operating activities in the amount of approximately $3.3 million.
In addition, management believes there are a number of other factors and actions available to the Company to address any liquidity needs, including the following:
| • |
The Company has no obligations or agreements containing “maintenance type” financial covenants. |
| • |
The Company had working capital of approximately $21.2 million as of October 31, 2024, including cash of approximately $3.5 million. |
| • |
Should revenues be less than projected, the Company believes it is able, and has plans, to reduce costs proportionately in order to maintain positive cash flow. |
| • |
The majority of the Company’s costs are variable in nature, such as raw materials and personnel related costs. In fiscal 2024, the Company eliminated two executive level positions and has made additional headcount reductions in fiscal 2025. Furthermore, additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management. |
| • |
The Company had a backlog of orders related to the Seamap segment of approximately $26.2 million as of October 31, 2024, as well as a substantial pipeline of other prospects. Production for certain of these orders was in process and included in inventory as of October 31, 2024, thereby reducing the liquidity needed to complete the orders. |
| • |
On September 4, 2024 all outstanding shares of preferred stock were converted into common stock and retired. The Company issued approximately 6.6 million shares of common stock in connection with the conversion. Accordingly, the Company no longer has obligations regarding preferred stock dividends, including undeclared dividends from previous periods. The conversion of preferred stock into common stock was effected pursuant to an amendment to the Certificate of Designations, Preferences and Rights of the preferred stock. The amendment was approved by preferred stockholders at a virtual special meeting held on August 29, 2024 (see Note 14- “Equity and Stock-Based Compensation” for additional details). |
| • |
In recent years, the Company has raised capital through the sale of common stock and preferred stock pursuant to the at-the-market program (the "ATM Offering Program") and underwritten offerings on Form S-1. Currently, the Company is not eligible to issue securities pursuant to Form S-3 and accordingly cannot sell securities pursuant to the ATM Offering Program. However, with the elimination of the preferred stock dividends in arrears, the Company anticipates becoming eligible to utilize Form S-3 after the Company files its Form 10-K for fiscal 2025. Additionally, the Company may sell securities pursuant to Form S-1 or in private transactions. Management expects to be able to raise further capital through these available means should the need arise. |
|
| • | The Company owns unencumbered real estate near Huntsville, Texas which could be used to generate capital if needed through a mortgage or sale lease transaction. The appraised value of this property is approximately $5.0 million. The Company demonstrated its ability to do this through a secured lending transaction in early fiscal 2024, which was repaid from the proceeds from the Sale of Klein. |
Due to the rising level of sales and production activities there are increasing requirements for purchases of inventory and other production costs. Additionally, due to component shortages and long-lead times for certain items there are requirements in some cases to purchase items well in advance. Furthermore, some suppliers require prepayments in order to secure some items. All of these factors combine to increase the Company’s working capital requirements. Furthermore, Management believes there are opportunities to increase production capacity and efficiencies. However, some of these opportunities may require additional investments such as in production equipment or other fixed assets. If we are unable to meet suppliers' demands, we may not be able to produce products and fulfill orders from our customers.
In order to fund future growth, we may explore sources of additional capital. Such sources include private or public issues of equity or debt securities, or a combination of such securities. Other sources could include secured debt financing, the sale of assets or investment from strategic industry participants.
The following table sets forth selected historical information regarding cash flows from our Consolidated Statements of Cash Flows:
| For the Nine Months Ended |
||||||||
| October 31, |
||||||||
| 2024 |
2023 |
|||||||
| (in thousands) |
||||||||
| Net cash used in operating activities |
$ | (1,407 | ) | $ | (5,624 | ) | ||
| Net cash provided by investing activities |
244 | 11,018 | ||||||
| Net cash used in financing activities |
(619 | ) | (589 | ) | ||||
| Effect of changes in foreign exchange rates on cash and cash equivalents |
(2 | ) | (14 | ) | ||||
| Net decrease in cash and cash equivalents |
$ | (1,784 | ) | $ | 4,791 | |||
As of October 31, 2024, we had working capital of approximately $21.2 million, including cash and cash equivalents of approximately $3.5 million, as compared to working capital of approximately $18.1 million, including cash and cash equivalents of approximately $5.3 million, at January 31, 2024.
Cash Flows from Operating Activities. Net cash used in operating activities was approximately $1.4 million in the first nine months of fiscal 2025 as compared to approximately $5.6 million in the first nine months of fiscal 2024. The decrease in net cash used in operating activities in the first nine months of fiscal 2025 compared to the prior year period was due mainly to an increase in net income.
Cash Flows from Investing Activities. Cash provided by investing activities during the first nine months of fiscal 2025 decreased approximately $10.8 million over the same period in fiscal 2024. The decrease relates primarily to proceeds from the sale of Klein in fiscal 2024, not recurring in fiscal 2025.
Cash Flows from Financing Activities. Net cash used in financing activities during the first nine months of fiscal 2025 consisted of approximately $619,000 of transaction costs associated with the conversion of preferred stock to common stock (see Note 14- "Equity and Stock-Based Compensation " for additional details). Net cash used in financing activities during the first nine months of fiscal 2024 consisted of approximately $589,000 of payments net of proceeds related to short-term loans (see Note 10 - "Notes Payable" for additional details).
We have determined that the undistributed earnings of foreign subsidiaries are not deemed indefinitely reinvested outside of the United States as of October 31, 2024. Furthermore, we have concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial.
As of October 31, 2024, we had deposits in foreign banks equal to approximately $3.3 million, all of which we believe could be distributed to the United States without adverse tax consequences. However, in certain cases, the transfer of these funds may result in withholding taxes payable to foreign taxing authorities. If withholding taxes should become payable, we believe the amount of tax withheld would be immaterial.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Estimates
Information regarding our critical accounting estimates is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 31, 2024. There have been no material changes to our critical accounting estimates during the three- and nine-month periods ended October 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk, which is the potential loss arising from adverse changes in market prices and rates. We have not entered, and do not intend to enter, into derivative financial instruments for hedging or speculative purposes.
Foreign Currency Risk
We operate in several foreign locations, which gives rise to risk from changes in foreign currency exchange rates. To the extent possible, we attempt to denominate our transactions in foreign locations in U.S. dollars. For those cases in which transactions are not denominated in U.S. dollars, we are exposed to risk from changes in exchange rates to the extent that non-U.S. dollar revenues exceed non-U.S. dollar expenses related to those transactions. Our non-U.S. dollar transactions are denominated primarily in British pounds, Singapore dollars and European Union euros. As a result of these transactions, we generally hold cash balances that are denominated in these foreign currencies. At October 31, 2024, our consolidated cash and cash equivalents included foreign currency denominated amounts equivalent to approximately $190,000 in U.S. dollars. A 10% increase in the U.S. dollar as compared to each of these currencies would result in a loss of approximately $19,000 in the U.S. dollar value of these deposits, while a 10% decrease would result in an equal amount of gain. We do not currently hold or issue foreign exchange contracts or other derivative instruments to hedge these exposures.
Interest Rate Risk
As of October 31, 2024, we had no debt.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officers and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our principal executive officer and principal financial officer have concluded that our current disclosure controls and procedures were not effective as of October 31, 2024, due to a material weakness in our internal control over financial reporting relating to the existence of inventory that was disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.
Remediation
As previously described in Part II, Item 9A, "Controls and Procedures" of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024, we are implementing a remediation plan to address the material weakness in our internal controls over the existence of inventory. The remediation plan envisages a year-end inventory count encompassing one hundred percent (100%) of our inventory in Singapore and Malaysia. The weakness will remain unresolved until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
Other than changes in connection with the remediation plan discussed above, there was no change in our system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended October 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we are a party to legal proceedings arising in the ordinary course of business. We are not currently a party to any legal proceedings, individually or collectively, that we believe could have a material adverse effect on our results of operations or financial condition or is otherwise material.
In addition to the other information set forth elsewhere in this Form 10-Q, you should carefully consider the risks discussed in our Annual Report on Form 10-K for the year ended January 31, 2024, which risks could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in our Annual Report on Form 10-K for the year ended January 31, 2024. The risks described in our Annual Report on Form 10-K for the year ended January 31, 2024, are not the only risks the Company faces. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| (a) |
Not applicable. |
| (b) |
Not applicable. |
|
| (c) | Not applicable. |
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
applicable.
Exhibits
The exhibits marked with the cross symbol (†) are filed (or furnished in the case of Exhibit 32.1) with this Form 10-Q.
| Document Description |
Form |
Exhibit |
||||
| Number |
Reference |
|||||
| 2.1 |
Current Report on Form 8-K, filed with the SEC on August 21, 2023. |
10.1 |
||||
| 3.1 |
Amended and Restated Certificate of Incorporation of MIND Technology, Inc. |
Current Report on Form 8-K, filed with the SEC on August 7, 2020. |
3.3 |
|||
| 3.2 | Certificate of Amendment of Certificate of Incorporation of MIND Technology, Inc., effective as of October 12, 2023. | Current Report on Form 8-K, filed with the SEC on October 13, 2023. | 3.1 | |||
| 3.3 |
Current Report on Form 8-K, filed with the SEC on August 7, 2020. |
3.4 |
||||
| 3.4 |
Current Report on Form 8-K, filed with the SEC on August 7, 2020. |
3.5 |
||||
| 3.5 |
Form 8-K filed with the SEC on September 25, 2020. |
3.1 |
||||
| 3.6 |
Registration Statement on Form S-1 filed with the SEC on October 25, 2021. |
3.5 |
||||
| 3.7 |
Form 8-K filed with the SEC on November 4, 2021. |
3.3 |
||||
| 3.8 | Fourth Certificate of Amendment of Certificate of Designations, Preferences and Rights of MIND Technology, Inc. 9.00% Series A Cumulative Preferred Stock | Form 8-K filed with the SEC on October 13, 2023. | 3.2 | |||
| 3.9 | Fifth Certificate of Amendment of Certificate of Designations, Preferences and Rights of MIND Technology, Inc. 9.00% Series A Cumulative Preferred Stock | Form 8-K filed with the SEC on September 5, 2024. | 3.1 | |||
| 3.10 |
Current Report on Form 8-K, filed with the SEC on August 7, 2020. |
3.1 |
||||
| 3.11 |
Delaware Certificate of Merger, effective as of August 3, 2020 |
Current Report on Form 8-K, filed with the SEC on August 7, 2020. |
3.2 |
|||
| 31.1† |
||||||
| 31.2† |
||||||
| 32.1† |
||||||
| 101.INS† |
Inline XBRL Instance Document |
|||||
| 101.SCH† |
Inline XBRL Taxonomy Extension Schema Document |
|||||
| 101.CAL† |
Inline XBRL Taxonomy Extension Calculation of Linkbase Document |
|||||
| 101.DEF† |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|||||
| 101.LAB† |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|||||
| 101.PRE† |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|||||
| 104† |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
Pursuant to the requirements 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.
| MIND TECHNOLOGY, INC. |
|
| Date: December 12, 2024 |
/s/ Robert P. Capps |
| Robert P. Capps |
|
| President and Chief Executive Officer |
|
| (Duly Authorized Officer) |