mind20240731

mind20240731_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13490

MIND TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware

76-0210849

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2002 Timberloch Place

Suite 550

The Woodlands, Texas 77380

(Address of principal executive offices, including Zip Code)

(281) 353-4475

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock - $0.01 par value per share	MIND	The NASDAQ Stock Market LLC
Series A Preferred Stock - $1.00 par value per share	MINDP	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1,405,779 shares of common stock, $0.01 par value, were outstanding as of September 11, 2024.

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MIND TECHNOLOGY, INC.

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PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of July 31, 2024 and January 31, 2024	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2024 and 2023	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended July 31, 2024 and 2023	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2024 and 2023	4
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended July 31, 2024 and 2023	5
	Notes to Condensed Consolidated Financial Statements	7
	Cautionary Statement about Forward-Looking Statements	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	22

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3.	Defaults Upon Senior Securities	22

Item 4.	Mine Safety Disclosures	22

Item 5.	Other Information	22

Item 6.	Exhibits	23

	Exhibit Index	23

	Signatures	24

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	*July 31, 2024*			*January 31, 2024*
*ASSETS*
Current assets:
Cash and cash equivalents	$	1,904		$	5,289
Accounts receivable, net of allowance for credit losses of $332 at each of July 31, 2024 and January 31, 2024		9,586			6,566
Inventories, net		19,069			13,371
Prepaid expenses and other current assets		2,075			3,113
Total current assets		32,634			28,339
Property and equipment, net		782			818
Operating lease right-of-use assets		1,732			1,324
Intangible assets, net		2,566			2,888
Deferred tax asset		122			122
Total assets	$	37,836		$	33,491
*LIABILITIES AND STOCKHOLDERS’ EQUITY*
Current liabilities:
Accounts payable	$	4,387		$	1,623
Deferred revenue		428			203
Customer deposits		2,726			3,446
Accrued expenses and other current liabilities		1,905			2,140
Income taxes payable		2,171			2,114
Operating lease liabilities - current		747			751
Total current liabilities		12,364			10,277
Operating lease liabilities - non-current		985			573
Total liabilities		13,349			10,850
Stockholders’ equity:
Preferred stock, $1.00 par value; 2,000 shares authorized; 1,683 shares issued and outstanding at each of July 31, 2024 and January 31, 2024		37,779			37,779
Common stock, $0.01 par value; 40,000 shares authorized; 1,406 shares issued and outstanding at July 31, 2024 and January 31, 2024		14			14
Additional paid-in capital		113,215			113,121
Accumulated deficit		(126,555	)		(128,307	)
Accumulated other comprehensive gain		34			34
Total stockholders’ equity		24,487			22,641
Total liabilities and stockholders’ equity	$	37,836		$	33,491

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	*For the Three Months Ended July 31,*						*For the Six Months Ended July 31,*
	*2024*			*2023*			*2024*			*2023*
Revenues:
Sales of marine technology products	$	10,036		$	7,561			19,714			18,158
Cost of sales:
Sales of marine technology products		5,258			4,620			10,718			10,681
Gross profit		4,778			2,941			8,996			7,477
Operating expenses:
Selling, general and administrative		2,784			2,913			5,543			6,219
Research and development		328			493			790			971
Depreciation and amortization		236			302			503			635
Total operating expenses		3,348			3,708			6,836			7,825
Operating income (loss)		1,430			(767	)		2,160			(348	)
Other income (expense):
Interest expense		—			(163	)		—			(367	)
Other, net		40			238			509			310
Total other income (expense)		40			75			509			(57	)
Income (loss) from continuing operations before income taxes		1,470			(692	)		2,669			(405	)
Provision for income taxes		(672	)		(66	)		(917	)		(477	)
Net income (loss) from continuing operations		798			(758	)		1,752			(882	)
Loss from discontinued operations, net of income taxes		—			(736	)		—			(852	)
Net income (loss)	$	798		$	(1,494	)	$	1,752		$	(1,734	)
Preferred stock dividends - declared		—			—			—			—
Preferred stock dividends - undeclared		(947	)		(947	)		(1,894	)		(1,894	)
Net loss attributable to common stockholders	$	(149	)	$	(2,441	)	$	(142	)	$	(3,628	)
Net loss per common share - Basic and Diluted
Continuing operations	$	(0.11	)	$	(1.21	)	$	(0.10	)	$	(1.97	)
Discontinued operations	$	—		$	(0.52	)	$	—		$	(0.61	)
Net loss	$	(0.11	)	$	(1.74	)	$	(0.10	)	$	(2.58	)
Shares used in computing net income (loss) per common share:
Basic and diluted		1,406			1,406			1,406			1,406

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	*For the Three Months Ended July 31,*					*For the Six Months Ended July 31,*
	*2024*		*2023*			*2024*		*2023*
Net income (loss)	$	798	$	(1,494	)	$	1,752	$	(1,734	)
Comprehensive income (loss)	$	798	$	(1,494	)		1,752		(1,734	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	*For the Six Months Ended July 31,*
	*2024*			*2023*
Cash flows from operating activities:
Net income (loss)	$	1,752		$	(1,734	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		503			940
Stock-based compensation		95			158
Provision for inventory obsolescence		45			—
Gross profit from sale of other equipment		(457	)		(336	)
Changes in:
Accounts receivable		(3,032	)		(3,238	)
Unbilled revenue		75			31
Inventories		(5,742	)		(333	)
Prepaid expenses and other current and long-term assets		1,042			1,329
Income taxes receivable and payable		54			63
Accounts payable, accrued expenses and other current liabilities		2,465			(1,556	)
Deferred revenue and customer deposits		(495	)		1,199
Net cash used in operating activities		(3,695	)		(3,477	)
Cash flows from investing activities:
Purchases of property and equipment		(146	)		(102	)
Sale of other equipment		457			336
Net cash provided by investing activities		311			234
Cash flows from financing activities:
Payment on short-term loan		—			2,947
Net cash provided by financing activities		—			2,947
Effect of changes in foreign exchange rates on cash and cash equivalents		(1	)		12
Net change in cash and cash equivalents		(3,385	)		(284	)
Cash and cash equivalents, beginning of period		5,289			778
Cash and cash equivalents, end of period	$	1,904		$	494
Supplemental cash flow information:
Interest paid	$	—		$	407
Income taxes paid	$	938		$	425

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MIND TECHNOLOGY, INC.

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		1,406	$	14		1,683	$	37,779	$	113,121	$	—	$	(128,307	)	$	34	$	22,641
Net income		—		—		—		—		—		—		954			—		954
Stock-based compensation		—		—		—		—		48		—		—			—		48
Balances, April 30, 2024		1,406	$	14		1,683	$	37,779	$	113,169	$	—	$	(127,353	)	$	34	$	23,643
Net income		—		—		—		—		—		—		798			—		798
Stock-based compensation		—		—		—		—		46		—		—			—		46
Balances, July 31, 2024		1,406	$	14		1,683	$	37,779	$	113,215	$	—	$	(126,555	)	$	34	$	24,487

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

	*Common Stock*				*Preferred Stock*												*Accumulated*
	*As adjusted*		*See Note 15*						*Additional*								*Other*
									*Paid-In*		*Treasury*			*Accumulated*			*Comprehensive*
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Stock*			*Deficit*			*Gain*		*Total*
Balances, January 31, 2023		1,599	$	16	$	1,683	$	37,779	$	129,721	$	(16,863	)	$	(127,635	)	$	34	$	23,052
Net loss		—		—		—		—		—		—			(240	)		—		(240	)
Stock-based compensation		—		—		—		—		50		—			—			—		50
Balances, April 30, 2023		1,599	$	16	$	1,683	$	37,779	$	129,771	$	(16,863	)	$	(127,875	)	$	34	$	22,862
Net loss		—		—		—		—		—		—			(1,494	)		—		(1,494	)
Stock-based compensation		—		—		—		—		108		—			—			—		108
Balances, July 31, 2023		1,600	$	16		1,683	$	37,779	$	129,879	$	(16,863	)	$	(129,369	)	$	34	$	21,476

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MIND TECHNOLOGY, INC.

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 periods financial results reported as discontinued operations (see Note 2 – “Sale of a Subsidiary” for additional details).

Liquidity—As of July 31, 2024, the Company had working capital of approximately $20.3 million, including cash and cash equivalents of approximately $1.9 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. However, 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, disciplined working capital management, potential financing secured by company-owned real property, and potentially securing a credit facility or some other form of financing.

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 six months ended July 31, 2024, there were no changes to those accounting policies.

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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 $11.5 million, resulting in a gain of approximately $2.3 million. The SPA contained customary representation and warranties.

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 July 31, 2024, the results of operations for the three and six months ended July 31, 2024 and 2023, the cash flows for the six months ended July 31, 2024 and 2023, and the statement of stockholders’ equity for the three and six months ended July 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”).

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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 six-month period ended July 31, 2023.

The results of operations from discontinued operations for the three and six months ended July 31, 2024 and 2023 consist of the following:

	*For the Three Months Ended July 31,*					*For the Six Months Ended July 31,*
	*2024*		*2023*			*2024*		*2023*
Revenues:	(in thousands)
Revenue from discontinued operations	$	—	$	1,189		$	—	$	3,178
Cost of sales:
Cost of discontinued operations		—		863			—		1,971
Operating expenses:
Selling, general and administrative		—		600			—		1,168
Research and development		—		349			—		644
Depreciation and amortization		—		158			—		306
Total operating expenses		—		1,107			—		2,118
Operating loss		—		(781	)		—		(911	)
Other income		—		55			—		76
Loss before income taxes from discontinued operations		—		(726	)		—		(835	)
Provision for income taxes from discontinued operations		—		(10	)		—		(17	)
Net loss from discontinued operations		—		(736	)		—		(852	)

The significant operating and investing noncash items and capital expenditures related to discontinued operations are summarized below:

	*For the Six Months Ended July 31,*
	*2024*		*2023*
	(in thousands)
Depreciation and amortization	$	—	$	306

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 impacts of adoption.

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.

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6. Revenue from Contracts with Customers

The following table presents revenue from contracts with customers disaggregated by timing of revenue recognition:

	*Three Months Ended July 31,*				*Six Months Ended July 31,*
	*2024*		*2023*		*2024*		*2023*
Revenue recognized at a point in time:	(in thousands)
Total revenue recognized at a point in time	$	9,661	$	7,191	$	19,038	$	17,703
Revenue recognized over time:
Total revenue recognized over time		375		370		676		455
Total revenue from contracts with customers	$	10,036	$	7,561	$	19,714	$	18,158

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 SMA is recognized over time, with the total value of the SMA 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 July 31,*				*Six Months Ended July 31,*
	*2024*		*2023*		*2024*		*2023*
	(in thousands)
United States	$	492	$	107	$	837	$	499
Europe		6,298		2,557		9,083		9,057
Asia-Pacific		2,647		4,850		8,490		8,432
Other		599		47		1,304		170
Total revenue from contracts with customers	$	10,036	$	7,561	$	19,714	$	18,158

As of July 31, 2024, and January 31,

SEC Form 10-Q filed by MIND Technology Inc.