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, 2021
or
☐ | |||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from
toCommission 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 400
The Woodlands, Texas 77380
(Address of principal executive offices, including Zip Code)
(281) 353-4475
(Registrant’sRegistrant’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: 13,774,10413,786,904 shares of common stock, $0.01 par value, were outstanding as of September 8, 2021.
Table of Contents
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PART I. FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited) July 31, 2022 January 31, 2022 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $484 at each of July 31, 2022 and January 31, 2022 Inventories, net Prepaid expenses and other current assets Assets held for sale Total current assets Property and equipment, net Operating lease right-of-use assets Intangible assets, net Other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable Deferred revenue Accrued expenses and other current liabilities Income taxes payable Operating lease liabilities - current Liabilities held for sale Total current liabilities Operating lease liabilities - non-current Deferred tax liability Total liabilities Stockholders’ equity: Preferred stock, $1.00 par value; 2,000 shares authorized; 1,683 shares issued and outstanding at each of July 31, 2022 and January 31, 2022 Common stock, $0.01 par value; 40,000 shares authorized; 15,720 and 15,705 shares issued at July 31, 2022 and January 31, 2022, respectively Additional paid-in capital Treasury stock, at cost (1,933 and 1,931 shares at July 31, 2022 and January 31, 2022, respectively) Accumulated deficit Accumulated other comprehensive loss Total stockholders’ equity Total liabilities and stockholders’ equity The accompanying notes are an integral part of these condensed consolidated financial statements. 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, 2022 2021 2022 2021 Revenues: Sale of marine technology products Total revenues Cost of sales: Sale of marine technology products Total cost of sales Gross profit Operating expenses: Selling, general and administrative Research and development Depreciation and amortization Total operating expenses Operating loss Other (expense) income: Other, net Total other (expense) income Loss from continuing operations before income taxes Provision for income taxes Net loss from continuing operations (Loss) income from discontinued operations, net of income taxes Net loss Preferred stock dividends - declared Preferred stock dividends - undeclared Net loss attributable to common stockholders Net (loss) income per common share - Basic Continuing operations Discontinued operations Net loss Net (loss) income per common share - Diluted Continuing operations Discontinued operations Net loss Shares used in computing net loss per common share: Basic Diluted The accompanying notes are an integral part of these condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited) For the Three Months Ended July 31, For the Six Months Ended July 31, 2022 2021 2022 2021 Net loss Change in cumulative translation adjustment for liquidation of entities held for sale Other changes in cumulative translation adjustment Comprehensive loss The accompanying notes are an integral part of these condensed consolidated financial statements. $ 833 $ 5,114 6,657 8,126 14,422 14,006 1,785 1,840 178 159 23,875 29,245 4,013 4,272 2,001 1,835 5,469 6,018 213 650 $ 35,571 $ 42,020 $ 2,460 $ 2,046 441 232 3,641 5,762 1,073 837 502 869 202 953 8,319 10,699 1,499 966 92 92 9,910 11,757 37,779 37,779 157 157 129,314 128,926 (16,863 ) (16,862 ) (123,142 ) (117,856 ) (1,584 ) (1,881 ) 25,661 30,263 $ 35,571 $ 42,020 (unaudited)July 31, 2021 January 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 2,056 $ 4,611 5,100 4,747 Inventories, net 11,928 11,453 Prepaid expenses and other current assets 1,190 1,659 Assets held for sale 3,312 4,321 Total current assets 23,586 26,791 Property and equipment, net 4,440 4,751 Operating lease right-of-use assets 1,568 1,471 Intangible assets, net 6,455 6,750 Total assets $ 36,049 $ 39,763 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,148 $ 1,704 Deferred revenue 459 208 Accrued expenses and other current liabilities 2,651 2,912 Income taxes payable 1,002 1,041 Operating lease liabilities - current 567 1,008 Liabilities held for sale 705 963 Total current liabilities 7,532 7,836 Operating lease liabilities - non-current 1,001 463 Notes payable — 850 Deferred tax liability 198 198 Total liabilities 8,731 9,347 Stockholders’ equity: 27,606 23,104 157 157 Additional paid-in capital 128,519 128,241 Treasury stock, at cost (1,931 and 1,929 shares at July 31, 2021 and January 31, 2021, respectively) (16,862) (16,860) Accumulated deficit (107,780) (99,870) Accumulated other comprehensive loss (4,322) (4,356) Total stockholders’ equity 27,318 30,416 Total liabilities and stockholders’ equity $ 36,049 $ 39,763 $ 8,713 $ 6,807 $ 17,800 $ 11,001 8,713 6,807 17,800 11,001 5,175 4,583 10,973 8,234 5,175 4,583 10,973 8,234 3,538 2,224 6,827 2,767 3,789 3,378 8,061 7,195 833 888 1,847 1,741 467 557 946 1,223 5,089 4,823 10,854 10,159 (1,551 ) (2,599 ) (4,027 ) (7,392 ) (76 ) 57 (194 ) 1,004 (76 ) 57 (194 ) 1,004 (1,627 ) (2,542 ) (4,221 ) (6,388 ) (131 ) (197 ) (342 ) (52 ) (1,758 ) (2,739 ) (4,563 ) (6,440 ) (162 ) 79 224 (204 ) $ (1,920 ) $ (2,660 ) $ (4,339 ) $ (6,644 ) — (682 ) (947 ) (1,266 ) (947 ) — (947 ) — $ (2,867 ) $ (3,342 ) $ (6,233 ) $ (7,910 ) $ (0.20 ) $ (0.25 ) $ (0.47 ) $ (0.56 ) $ (0.01 ) $ 0.01 $ 0.02 $ (0.01 ) $ (0.21 ) $ (0.24 ) $ (0.45 ) $ (0.57 ) $ (0.20 ) $ (0.25 ) $ (0.47 ) $ (0.56 ) $ (0.01 ) $ 0.01 $ 0.02 $ (0.01 ) $ (0.21 ) $ (0.24 ) $ (0.45 ) $ (0.57 ) 13,782 13,774 13,779 13,767 13,782 13,774 13,779 13,767 (unaudited) For the Three Months Ended July 31, For the Six Months Ended July 31, 2021 2020 2021 2020 Revenues: $ 6,807 $ 5,086 $ 11,001 $ 8,273 Total revenues 6,807 5,086 11,001 8,273 Cost of sales: 4,583 3,069 8,234 5,772 Total cost of sales 4,583 3,069 8,234 5,772 Gross profit 2,224 2,017 2,767 2,501 Operating expenses: Selling, general and administrative 3,378 2,988 7,195 5,942 Research and development 888 755 1,741 1,165 Impairment of intangible assets — — — 2,531 Depreciation and amortization 557 700 1,223 1,430 Total operating expenses 4,823 4,443 10,159 11,068 Operating loss (2,599) (2,426) (7,392) (8,567) Other income: Other, net 57 — 1,004 56 Total other income 57 — 1,004 56 Loss from continuing operations before income taxes (2,542) (2,426) (6,388) (8,511) (Provision) benefit for income taxes (197) 530 (52) 188 Loss from continuing operations (2,739) (1,896) (6,440) (8,323) Income (loss) from discontinued operations, net of income taxes 79 (4,708) (204) (4,923) Net loss $ (2,660) $ (6,604) $ (6,644) $ (13,246) Preferred stock dividends (682) (559) (1,266) (1,118) Net loss attributable to common stockholders $ (3,342) $ (7,163) $ (7,910) $ (14,364) Net loss per common share - Basic Continuing operations $ (0.25) $ (0.20) $ (0.56) $ (0.78) Discontinued operations $ 0.01 $ (0.39) $ (0.01) $ (0.40) Net loss $ (0.24) $ (0.59) $ (0.57) $ (1.18) Net loss per common share - Diluted Continuing operations $ (0.25) $ (0.20) $ (0.56) $ (0.78) Discontinued operations $ 0.01 $ (0.39) $ (0.01) $ (0.40) Net loss $ (0.24) $ (0.59) $ (0.57) $ (1.18) Shares used in computing net loss per common share: Basic 13,774 12,182 13,767 12,177 Diluted 13,774 12,182 13,767 12,177 $ (1,920 ) $ (2,660 ) $ (4,339 ) $ (6,644 ) 295 — 295 — 5 (23 ) 2 34 $ (1,620 ) $ (2,683 ) (4,042 ) (6,610 ) (unaudited) For the Three Months Ended July 31, For the Six Months Ended July 31, 2021 2020 2021 2020 Net loss attributable to common stockholders $ (3,342) $ (7,163) $ (7,910) $ (14,364) Changes in cumulative translation adjustment (23) 82 34 (49) Comprehensive loss $ (3,365) $ (7,081) $ (7,876) $ (14,413)
MIND TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) For the Six Months Ended July 31, 2022 2021 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash used in operating activities: PPP loan forgiveness Depreciation and amortization Stock-based compensation Recovery of doubtful accounts Provision for inventory obsolescence Gross profit from sale of assets held-for-sale Loss (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 Net cash used in operating activities Cash flows from investing activities: Purchases of property and equipment Sale of assets held for sale Sale of a business, net of cash sold Net cash provided by investing activities Cash flows from financing activities: Purchase of treasury stock Net proceeds from preferred stock offering Net proceeds from common stock offering Preferred stock dividends Net cash (used in) provided by financing activities Effect of changes in foreign exchange rates on cash and cash equivalents Net decrease 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. $ (4,339 ) $ (6,644 ) — (850 ) 946 1,226 388 236 — (453 ) 45 350 (358 ) — 113 (155 ) 1,998 (140 ) 15 21 (461 ) (542 ) 168 (260 ) 19 (63 ) (1,126 ) 375 95 (292 ) (2,497 ) (7,191 ) (250 ) (14 ) 361 484 — 761 111 1,231 (1 ) (2 ) — 4,502 — 43 (1,894 ) (1,160 ) (1,895 ) 3,383 — 22 (4,281 ) (2,555 ) 5,114 4,611 $ 833 $ 2,056 $ 4 $ 18 $ 277 $ 147 (unaudited) For the Six Months Ended July 31, 2021 2020 Cash flows from operating activities: Net loss $ (6,644) $ (13,246) Adjustments to reconcile net loss to net cash used in operating activities: PPP loan forgiveness (850) — Depreciation and amortization 1,226 3,210 Stock-based compensation 236 449 Impairment of intangible assets — 2,531 Loss on disposal of discontinued operations — 1,859 (Recovery) provision for doubtful accounts, net of charge offs (453) 470 Provision for inventory obsolescence 350 234 Gross profit from sale of lease pool equipment — (1,326) Gross profit from sale of other equipment (155) — Deferred tax expense — 263 Changes in: Accounts receivable (140) 4,404 Unbilled revenue 21 (9) Inventories (542) (675) Prepaid expenses and other current and long-term assets (260) 766 Income taxes receivable and payable (63) — Accounts payable, accrued expenses and other current liabilities 375 (1,583) Deferred revenue (292) 87 Net cash used in operating activities (7,191) (2,566) Cash flows from investing activities: Purchases of seismic equipment held for lease — (110) Purchases of property and equipment (14) (302) Sale of used lease pool equipment — 2,010 Sale of assets held for sale 484 — Sale of a business 761 — Net cash provided by investing activities 1,231 1,598 Cash flows from financing activities: Purchase of treasury stock (2) — Net proceeds from preferred stock offering 4,502 — Net proceeds from common stock offering 43 — Preferred stock dividends (1,160) (1,118) Proceeds from PPP loans — 1,607 Net cash provided by financing activities 3,383 489 Effect of changes in foreign exchange rates on cash, cash equivalents and restricted cash 22 (117) Net decrease in cash, cash equivalents and restricted cash (2,555) (596) Cash, cash equivalents and restricted cash, beginning of period 4,611 3,234 Cash, cash equivalents and restricted cash, end of period $ 2,056 $ 2,638 Supplemental cash flow information: Interest paid $ 18 $ 23 Income taxes paid $ 147 $ 246
MIND TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF (in thousands) (unaudited) Common Stock Preferred Stock Accumulated Additional Other Paid-In Treasury Accumulated Comprehensive Shares Amount Shares Amount Capital Stock Deficit Loss Total Balances, January 31, 2022 Net loss Foreign currency translation Restricted stock issued Restricted stock surrendered for tax withholding Preferred stock dividends Stock-based compensation Balances, April 30, 2022 Net loss Foreign currency translation Restricted stock issued Stock-based compensation Balances, July 31, 2022 MIND TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF (in thousands) (unaudited) Common Stock Preferred Stock Accumulated Additional Other Paid-In Treasury Accumulated Comprehensive Shares Amount Shares Amount Capital Stock Deficit Loss Total Balances, January 31, 2021 Net loss Foreign currency translation Restricted stock issued Restricted stock surrendered for tax withholding Preferred stock offering Preferred stock dividends Common stock offering Stock-based compensation Balances, April 30, 2021 Net loss Foreign currency translation Preferred stock offering Common stock offering Preferred stock dividends Stock-based compensation Balances, July 31, 2021 The accompanying notes are an integral part of these condensed consolidated financial statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Organization MIND Technology, Inc., a Delaware corporation (the “Company”), formerly Mitcham Industries, Inc., a Texas corporation, was incorporated in 1987. Effective August 3, 2020 the Company effectuated a reincorporation to the state of Delaware. Concurrent with the reincorporation the name of the Company was changed to MIND Technology, Inc. The Company, through its wholly owned subsidiaries, Seamap Pte Ltd, MIND Maritime Acoustics, LLC (formerly Seamap USA, LLC), Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd (collectively “Seamap”), and its wholly owned subsidiary, Klein Marine Systems, Inc. (“Klein”), 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 states of New Hampshire and Texas. Prior to July 31, 2020, the Company, through its wholly owned Canadian subsidiary, Mitcham Canada, ULC (“MCL”), its wholly owned Hungarian subsidiary, Mitcham Europe Ltd. (“MEL”), and its branch operations in Colombia, provided full-service equipment leasing, sales and service to the seismic industry worldwide (the “Leasing Business”). Effective July 31, 2020, the Leasing Business has been classified as held for sale These condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The Company has a history of generating losses and negative cash from operating activities and may not have access to sources of capital that were available in prior periods. In addition, the lingering impacts of the global pandemic, Management has identified the following mitigating factors regarding adequate liquidity and capital resources to meet its obligations: The Company has no funded debt, or other outstanding obligations, outside of normal trade obligations. The Company has no obligations or agreements containing “maintenance type” financial covenants. The Company has working capital of approximately $15.6 million as of July 31,2022, including cash of approximately $833,000. Should revenues be less than projected, the Company believes it is able, and has plans in place, 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. The Company has recently eliminated two executive level positions, and additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management. The Company has a backlog of orders of approximately $19.3 million as of July 31,2022. Production for certain of these orders was in process and included in inventory as of July 31,2022, thereby reducing the liquidity needed to complete the orders. Despite difficulties in world energy markets, the Company has been able to generate cash from the sale of lease pool equipment and collection of accounts receivable related to its discontinued operations. Management expects to generate additional liquidity from the sale of lease pool equipment in fiscal 2023. In recent years, the Company has raised capital through the sale of Common Stock and Preferred Stock pursuant to the ATM Offering Program (as defined herein) 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, 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. Notwithstanding the mitigating factors identified by management, there remains substantial doubt regarding the Company's ability to meet its obligations as they arise over the next twelve months. 2. Basis of Presentation The condensed consolidated balance sheet as of January 31, The Company has corrected an immaterial error in the statements of comprehensive loss for the three and six months ended July 31,2021, which as previously presented, incorrectly included $682,000 and $1.3 million of preferred dividends as a component of comprehensive loss, respectively. Additionally, during the years ended January 31, 2022 3. Assets Held for Sale and Discontinued Operations On July 27, 2020, the Board determined to exit the Leasing The assets reported as held for sale consist of the following: July 31, 2022 January 31, 2022 Current assets of discontinued operations: Accounts receivable, net Inventories, net Prepaid expenses and other current assets Seismic equipment lease pool and property and equipment, net Loss recognized on classification as held for sale Total assets of discontinued operations The liabilities reported as held for sale consist of the following: July 31, 2022 January 31, 2022 Current liabilities of discontinued operations: Accounts payable Deferred revenue Accrued expenses and other current liabilities Income taxes payable Total liabilities of discontinued operations The results of operations from discontinued operations for the three and six months ended July 31, For the Three Months Ended July 31, For the Six Months Ended July 31, 2022 2021 2022 2021 Revenues: (in thousands) Revenue from discontinued operations Cost of sales: Cost of discontinued operations Operating expenses: Selling, general and administrative Recovery of doubtful accounts Depreciation and amortization Total operating expenses Operating (loss) income Other income (expenses) Income (loss) before income taxes from discontinued operations Provision for income taxes from discontinued operations Net Income (loss) from discontinued operations The significant operating and investing noncash items and capital expenditures related to discontinued operations are summarized below: For the Six Months Ended July 31, 2022 2021 Gross profit from sale of assets held-for-sale Recovery of doubtful accounts Sale of assets held for sale 4. New Accounting Pronouncements New accounting pronouncements that have been issued 5. Revenue from Contracts with Customers The following table presents revenue from contracts with customers disaggregated by product line and timing of revenue recognition: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 Revenue recognized at a point in time: (in thousands) Seamap Klein Total revenue recognized at a point in time Revenue recognized over time: Seamap Klein Total revenue recognized over time Total revenue from contracts with customers The revenue from products manufactured and sold by our Seamap and Klein businesses, 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. The following table presents revenue from contracts with customers disaggregated by geography, based on shipping location of our customers: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 (in thousands) United States Europe Middle East & Africa Asia-Pacific Canada & Latin America Total revenue from contracts with customers As of July 31, July 31, 2022 January 31, 2022 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 and Klein businesses and the Company’s standard contract terms and conditions, we expect our contract assets and liabilities to turn over, on average, within a period of three to nine months. With respect to 6. Balance Sheet - Continuing Operations As of July 31, 2022 As of January 31, 2022 (in thousands) Current Long-term Total Current Long-term Total Accounts receivable Less allowance for doubtful accounts Accounts receivable net of allowance for doubtful accounts July 31, 2022 January 31, 2022 (in thousands) Inventories: Raw materials Finished goods Work in progress Cost of inventories Less allowance for obsolescence Total inventories, net July 31, 2022 January 31, 2022 (in thousands) Property and equipment: Furniture and fixtures Autos and trucks Marine seismic service equipment Land and buildings Cost of property and equipment Accumulated depreciation and amortization Total property and equipment, net As of January 31, 7. Leases The Company has certain non-cancelable operating lease agreements for office, production and warehouse space in Texas, Hungary, Singapore, Malaysia, Lease expense for the three and six months ended July 31, 2022 was approximately $218,000 and $421,000, respectively, and during the three and six months ended July 31,2021 was approximately $291,000 and $600,000, respectively, and Supplemental balance sheet information related to leases as of July 31, Lease July 31, 2022 January 31, 2022 Assets 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 July 31, Lease term and discount rate July 31, 2022 January 31, 2022 Weighted average remaining lease term (years) Operating leases Weighted average discount rate: Operating leases The incremental borrowing rate was calculated using the Company's weighted average cost of capital. Supplemental cash flow information related to leases was as Lease Six Months Ended July 31, 2022 Six Months Ended July 31, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Changes in lease balances resulting from new and modified leases: Operating leases Maturities of lease liabilities at July 31, July 31, 2022 2023 2024 2025 2026 2027 Thereafter Total payments under lease agreements Less: imputed interest Total lease liabilities 8. Goodwill and Other Intangible Assets July 31, 2022 January 31, 2022 Weighted Gross Net Gross Net Average Life at Carrying Accumulated Carrying Carrying Accumulated Carrying 7/31/2022 Amount Amortization Impairment Amount Amount Amortization Impairment Amount Goodwill Proprietary rights Customer relationships Patents Trade name Developed technology Other Amortizable intangible assets On January 31, Aggregate amortization expense was For fiscal years ending January 31, 2023 2024 2025 2026 2027 Thereafter Total 9. Notes Payable On May 5, 2020, the Company, and its wholly owned subsidiary, Klein (collectively, the “Borrowers”), were granted loans (the “Loans”) from Bank of America, N.A. in the aggregate amount of approximately $1.6 million, pursuant to the Small Business Association's Paycheck Protection Program (the “PPP”), a component of the Coronavirus Aid, Relief, and Economic Security Act which was enacted on March 27, 2020. The Loans, in the form of promissory notes (the “Notes”) dated May 1, 2020 issued by the Borrowers, were set to mature on May 1, 2022 and bore interest at a rate of 1% per annum, payable monthly commencing on November 1, 2020. The Notes stipulated various restrictions customary with this type of transaction including representations, warranties, and covenants, in addition to events of default, breaches of representation and warranties or other provisions of the Notes. In the event of default, the Borrowers would have become obligated to repay all amounts outstanding under the Notes. The Borrowers were permitted to prepay the Notes at any time prior to maturity with no prepayment penalties. Under the terms of the PPP, funds from the Loans could only be used for payroll costs, rent, utilities and interest on other debt obligations incurred prior to February 15, 2020. In addition, certain amounts of the Loans could be forgiven if the funds were used to pay qualifying expenses. In January 2021, the Loan granted to the Company in the amount of approximately $757,000 was forgiven resulting in other income of that amount. In February 2021, the Loan granted to Klein in the amount of approximately $850,000 was also forgiven, resulting in other income of that amount. As of July 31, 10. Income Taxes For the six months ended July 31, 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 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 July 31, For the six months ended July 31, 11. 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. The following table presents the calculation of basic and diluted weighted average common shares used in the earnings per share calculation: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 (in thousands) (in thousands) Basic weighted average common shares outstanding Stock options Unvested restricted stock Total weighted average common share equivalents Diluted weighted average common shares outstanding For the three and six months ended July 31, 12. Related Party Transaction In September 2020 we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Agent”). On November 12,2021, the Company issued During the three- and six-month periods ended July 31, 2022, the Company sold no shares of Preferred Stock During the 13. Equity and Stock-Based Compensation As of July 31, Total compensation expense recognized for stock-based awards granted under the Company’s equity incentive plan during the three- and six 14. Segment Reporting With the designation of the Equipment Leasing segment as discontinued operations as of July 31, 2020, the Company operates in 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 the global pandemic and other factors, including certain components and materials becoming unavailable, increased lead times for components and materials, as well as increased costs for such items; • 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; • local and global impacts of the global pandemic, including effects of responses of governmental authorities and companies to reduce the spread of the COVID-19 virus, such as shutdowns, travel restrictions and work-from-home mandates; • 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. 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, 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. Item2. Overview Historically, we have operated in two segments, Marine Technology Products and Equipment Leasing. During the second quarter of fiscal 2021, our Board Revenue from the Marine Technology Products business includes sales of Seamap equipment and sales of Klein equipment. This business operates from locations near Bristol, United The discontinued operations of the Leasing Management believes that the performance of our Marine Technology Products business is indicated by revenues from For the Three Months Ended July 31, For the Six Months Ended July 31, 2022 2021 2022 2021 Reconciliation of Net loss from Continuing Operations to EBITDA and Adjusted EBITDA (in thousands) Net loss from continuing operations Interest expense, net Depreciation and amortization Provision for income taxes EBITDA loss from continuing operations (1) Non-cash foreign exchange losses Stock-based compensation Adjusted EBITDA loss from continuing operations (1) Reconciliation of Net Cash Used in Operating Activities to EBITDA Net cash provided by (used in) operating activities PPP loan forgiveness Stock-based compensation Provision for inventory obsolescence Changes in accounts receivable (current and long-term) Interest paid Taxes paid, net of refunds Gross profit (loss) from sale of other equipment Changes in inventory Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue Changes in prepaid expenses and other current and long-term assets Other EBITDA loss from continuing operations (1) (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, other non-cash tax related items and non-cash costs of lease pool equipment sales. 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 as alternatives 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. Within our Marine Technology Products business, we design, manufacture and sell a variety of products used primarily in oceanographic, hydrographic, defense, seismic and maritime security industries. Seamap’s primary products include (i) the GunLink seismic source acquisition and control Our discontinued operations consisted primarily of leasing seismic data acquisition equipment 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, difficulties in obtaining licenses or permits, security problems, labor or political issues, inclement weather, and Business Outlook Our financial results during the • The ongoing effects of the global pandemic, such as delayed customer activity, inability to interact directly with many customers and restrictions on the activities of our employees. • Disruptions in the global supply chain which have resulted in delays in development and production activities. • Delays and uncertainties in the timing of orders due to governmental budget issues. However, we believe general economic and geopolitical trends are now more favorable for much of our business. Global energy prices have increased significantly in recent months. We believe this is a positive development for our marine seismic customers and In recent months, we have Based on our current backlog of orders and continued marine technology product inquiries, we anticipate results for the last half of the year to be improved over the first half of the year. We currently plan to deliver several systems in the second half of the current fiscal year. Based on current production and delivery schedules, we expect revenues in the third quarter of fiscal 2023 to decline from the second quarter, but expect significant improvement in the fourth quarter. If revenues in the fourth quarter of fiscal 2023 are as expected, we believe the Company will report positive net income from continuing operations for the fourth quarter of fiscal 2023. 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; • Higher than anticipated costs. Going forward we intend to address three primary markets in our Marine Technology Products • Marine Survey • Marine Exploration • Maritime Defense Specific applications within those markets include sea-floor survey, search and recovery, mineral and geophysical exploration, mine counter measures and anti-submarine warfare. We have existing technology and products that meet needs across all these markets such as: • Side-scan sonar, including multi-beam systems for more demanding missions such as mine counter measure operations • Acoustic arrays, such as SeaLink • Marine seismic equipment, such as GunLink and BuoyLink We see a number of opportunities to add to our technology and to apply existing technology and products to new applications. We We believe there are certain developments within the marine technology industry that can have a significant impact on our business. • The increase in the use of unmanned, or uncrewed, marine vessels, both surface vehicles and underwater vehicles, and the need for a variety of sensor packages designed for these applications. • Demand for higher resolution sonar images, such as for mine countermeasure applications. • Demand for economical, commercially developed, technology for anti-submarine warfare and maritime security applications. In response to these, and other, developments we have initiated certain strategic initiatives in order to exploit the opportunities that we perceive.These initiatives include the following: • Development of side-scan sonar and other sensor systems specifically for unmanned vehicles, including integration of our MA-X technology; Application of our Automatic Target Recognition (“ATR”) technology to our sonar systems; • Development of Synthetic Aperture Sonar (“SAS”) systems in cooperation with a major European defense contractor; and • Application of our SeaLink solid streamer technology to passive sonar arrays for use in maritime security applications, such as anti-submarine warfare. Subsequent to January 31, 2022, we eliminated two executive management positions in order to further control general and General inflation levels have increased recently 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 can be expected to have a negative impact on our costs; however, the magnitude of such impact cannot be accurately determined. In response to these cost increases, in the first quarter of fiscal 2023, we increased the pricing for most of our products. The amount of the increase varies by product and ranged from approximately 5% to 20%. 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 Continuing Operations Revenues for the three months ended July 31, Revenues and Cost of Sales Revenues and cost of sales for our Marine Technology Products business were as follows: Three Months Ended Six Months Ended July 31, July 31, 2022 2021 2022 2021 (in thousands) (in thousands) Revenues: Seamap Klein Intra-business sales Cost of sales: Seamap Klein Intra-business sales Gross profit Gross profit margin A significant portion of Seamap’s sales consists of large discrete orders, the timing of which is dictated by our customers. This timing generally relates to the availability of a vessel in port so that our products can be installed. Accordingly, there can be significant variation in sales from one period to another, which does not necessarily indicate a fundamental change in demand for these products. Revenue from the sale of Klein products was approximately Operating Expenses General and administrative expenses for the three months ended July 31, Research and development costs Depreciation and amortization expense include depreciation of equipment, furniture and fixtures and the amortization of intangible assets. These costs were approximately $467,000 and $946,000 in the three- and six-month periods ended July 31, 2022, respectively, as compared to approximately $557,000 and $1.2 million in the three- and six-month periods ended July 31, 2021, Provision for Income Taxes For the six months ended July 31, Results of Discontinued Operations Revenues and cost of sales from our Equipment Leasing business were comprised of the following: For the Three Months Ended July 31, For the Six Months Ended July 31, 2022 2021 2022 2021 Revenues: Equipment leasing Cost of sales: Direct costs-equipment leasing Gross profit (loss) Operating expenses: Selling, general and administrative Recovery of doubtful accounts Depreciation and amortization Total operating expenses Operating (loss) income Other income (expenses) (Loss) income before income taxes Provision for income taxes Net Income (loss) Following the decision to exit the Leasing Business and present those operations as discontinued operations, we no longer recognize depreciation expense related to our lease pool of seismic equipment, but rather reassess, on a quarterly basis, the recoverability of the remaining carrying value of those assets. Similarly, we no longer recognize gain or loss from the sale of We recorded no revenue for the three months ended July 31, 2022, compared to approximately $757,000 for the three months ended July 31, 2021. No revenue was recorded for the six months ended July 31, 2022, compared to approximately $787,000 for the six months ended July 31, 2021. Direct costs related to Equipment Leasing dropped to approximately Selling, general and administrative costs related to the Leasing Business decreased to approximately For the six months ended July 31, Liquidity and Capital Resources As discussed above, the The Company has a history of generating operating losses Due to the • The Company has no funded debt or other outstanding obligations, outside of normal trade obligations. • The Company has no obligations or agreements containing “maintenance type” financial covenants. • The Company has working capital of approximately $15.6 million as of July 31, 2022, including cash of approximately $833,000. • 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. The Company has recently eliminated two executive level positions, and additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management. • The Company has a backlog of orders of approximately $19.3 million as of July 31, 2022, which is an increase of approximately 47% from the $13.1 million reported at January 31, 2022, and an increase of approximately 65% from the amount reported at July 31, 2021. Production for certain of these orders was in process and included in inventory as of July 31, 2022, thereby reducing the liquidity needed to complete the orders. • Despite difficulties in world energy markets, the Company has been able to generate cash from the sale of lease pool equipment and collection of accounts receivable related to its discontinued operations. Management expects to generate additional liquidity from the sale of lease pool equipment in fiscal 2023. • The Company declared and paid the quarterly dividend on its Preferred Stock for the first quarter of fiscal 2023, and each quarter in fiscal 2022, but deferred payment of the quarterly dividend for the second quarter of fiscal 2023. The Company also has the option to defer future quarterly dividend payments if deemed necessary. The dividends are a cumulative dividend that accrue for payment in the future. During a deferral period, the Company is prohibited from paying dividends or distributions on its common stock, or redeeming any of those shares. Further, if the Company does not pay dividends on its Series A Preferred Stock for six or more quarters, the holders of Series A Preferred Stock will have the right to appoint two directors to the Company's board. • In recent years, the Company has raised capital through the sale of Common Stock and Preferred Stock pursuant to the ATM Offering Program (as defined herein) 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, 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. • Based on publicized transactions and preliminary discussions with potential funding sources, management believes that other sources of debt and equity financing are available should the need arise. Our principal sources of liquidity and capital over the past two fiscal years have been proceeds from issuances of Preferred Stock and from the sale of lease pool equipment. As of this date, under our Amended and Restated Certificate of Incorporation, we have 2,000,000 shares of The Preferred Stock has been issued in During the six months ended July 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 The following table sets forth selected historical information regarding cash flows from our Consolidated Statements of Cash Flows: For the Six Months Ended July 31, 2022 2021 (in thousands) Net cash used in operating activities Net cash provided by investing activities Net cash (used in) provided by financing activities Effect of changes in foreign exchange rates on cash and cash equivalents Net decrease in cash and cash equivalents As of July 31, Cash Flows from Operating Activities Cash Flows from Investing Activities Due to the decision to exit the Leasing Business we are currently seeking to sell the remaining equipment from our lease pool, which is currently classified as Assets Held for Sale. However, there is no guarantee additional sales of Assets Held for Sale will occur. Accordingly, cash flow from the sale of Assets Held for Sale is unpredictable. Proceeds from any additional sales of Assets Held for Sale will be deployed in other areas of our business or used for general corporate purposes. Cash Flows from Financing Activities As of July 31, We have determined that the undistributed earnings of foreign subsidiaries are not deemed indefinitely reinvested outside of the United States as of July 31, As of July 31, Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Critical Accounting Policies Information regarding our critical accounting policies and estimates is included in 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, 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 July 31, Interest Rate Risk As of July 31, 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 Remediation As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended January 30, 2022, we are implementing a remediation plan to address the material weakness in our internal controls over financial reporting. 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 July 31, 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 risk factors We received a written notice from NASDAQ Stock Market LLC (“Nasdaq”) that we have failed to comply with certain listing requirements of the Nasdaq, which could result in our Common Stock being delisted from the Nasdaq. On July 27, 2022, we received a notification from Nasdaq related to our failure to maintain a minimum bid price of $1 per share. Based upon the closing bid price for the last 30 consecutive business days, we no longer meet this requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company is provided a compliance period of 180 calendar days from the date of the notice, or until January 23, 2023, to regain compliance with the minimum closing bid price requirement. If the Company does not regain compliance during the compliance period ending January 23, 2023, the Company may be afforded a second 180 calendar day period to regain compliance. To qualify for the second compliance period, the Company must (i) meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq, with the exception of the minimum closing bid price requirement and (ii) notify Nasdaq of its intent to cure the deficiency. The Company can achieve compliance with the minimum closing bid price requirement if, during either compliance period, the minimum closing bid price per share of the Common Stock is at least $1.00 for a minimum of ten consecutive business days. If we do not regain compliance with the minimum bid price requirement by the end of the compliance period (or the second compliance period, if applicable), our Common Stock will become subject to delisting. If we are delisted from Nasdaq, our Common Stock may be eligible for trading on an over-the-counter market. If we are not able to obtain a listing on another stock exchange or quotation service for our common stock, it may be extremely difficult or impossible for stockholders to sell their shares. If we are delisted from Nasdaq, but obtain a substitute listing for our Common Stock, it will likely be on a market with less liquidity, and therefore experience potentially more price volatility than experienced on Nasdaq. Stockholders may not be able to sell their shares of common stock on any such substitute market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our Common Stock is delisted from Nasdaq, the value and liquidity of our Common Stock would likely be significantly adversely affected. A delisting of our Common Stock from Nasdaq could also adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence by investors, employees and/or business partners. The Company has deferred payment of dividends on its Series A Preferred Stock, which restricts our ability to undertake certain actions. The Company deferred payment of the quarterly dividend on its Series A Preferred Stock for the second quarter of fiscal 2023. Prior to the declaration and payment of dividends our board of directors must determine, among other things, that funds are available out of the surplus of the Company and that the payment would not render us insolvent or compromise our ability to pay our obligations as they come due in the ordinary course of business. As a result, although the Series A Preferred Stock will continue to earn a right to receive dividends, the Company’s ability to pay dividends will depend, among other things, upon our ability to generate excess cash. During a deferral period, the Company is prohibited from paying dividends or distributions on its common stock, or redeeming any of those shares. Further, if the Company does not pay dividends on its Series A Preferred Stock for six or more quarters, the holders of Series A Preferred Stock will have the right to appoint two directors to the Company's board. Not applicable. Not applicable. Not 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. Number Document Description Report or Registration Statement SEC File or Registration Number Exhibit Reference 2.1 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 2.1 3.1 Amended and Restated Certificate of Incorporation of MIND Technology, Inc. Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.3 3.2 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.4 3.3 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.5 3.4 Incorporated by reference to MIND Technology, Inc.’s Form 8-K filed with the SEC on September 25, 2020. 001-13490 3.1 333-260486 3.5 3.6 3.7 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.1 3.8 Delaware Certificate of Merger, effective as of August 3, 2020 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.2 4.1 Incorporated by reference to Mitcham Industries, Inc.’s Registration Statement on Form S-3, filed with the SEC on March 18, 2011. 333-172935 4.1 4.2 Form of Subordinated Indenture (including form of Subordinated Note) Incorporated by reference to Mitcham Industries, Inc.’s Registration Statement on Form S-3, filed with the SEC on March 18, 2011. 333-172935 4.2 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 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: September /s/ Robert P. Capps Robert P. Capps President and Chief Executive Officer (Duly Authorized Officer)STOCKHOLDERS’STOCKHOLDERS’ EQUITY 15,705 $ 157 1,683 $ 37,779 $ 128,926 $ (16,862 ) $ (117,856 ) $ (1,881 ) $ 30,263 — — — — — — (2,419 ) — (2,419 ) — — — — — — — (3 ) (3 ) 10 — — — — — — — — — — — — — (1 ) �� — — (1 ) — — — — — — (947 ) — (947 ) — — — — 236 — — — 236 15,715 $ 157 1,683 $ 37,779 $ 129,162 $ (16,863 ) $ (121,222 ) $ (1,884 ) $ 27,129 — — — — — — (1,920 ) — (1,920 ) — — — — — — — 300 300 5 — — — — — — — — — — — — 152 — — — 152 15,720 $ 157 1,683 $ 37,779 $ 129,314 $ (16,863 ) $ (123,142 ) $ (1,584 ) $ 25,661 (unaudited) Common Stock Preferred Stock Accumulated
Other
Comprehensive
Loss Shares Amount Shares Amount Additional
Paid-In
CapitalTreasury
Stock
Accumulated
DeficitTotal Balances, January 31, 2021 15,681 $ 157 1,038 $ 23,104 $ 128,241 $ (16,860) $ (99,870) $ (4,356) $ 30,416 Net loss — — — — — — (3,984) — (3,984) Foreign currency translation — — — — — — — 57 57 Restricted stock issued 5 — — — 11 — — — 11 Restricted stock forfeited for taxes — — — — — (2) — — (2) Preferred stock offering — — 21 503 — — — — 503 Preferred stock dividends — — — — — — (584) — (584) Common stock offerings 18 — — — 42 — — — 42 Stock-based compensation — — — — 109 — — — 109 Balances, April 30, 2021 15,704 $ 157 1,059 $ 23,607 $ 128,403 $ (16,862) $ (104,438) $ (4,299) $ 26,568 Net loss — — — — — — (2,660) — (2,660) Foreign currency translation — — — — — — — (23) (23) Preferred stock offering — — 164 3,999 — — — — 3,999 Common stock offerings — — — — 1 — — — 1 Preferred stock dividends — — — — — — (682) — (682) Stock-based compensation — — — — 115 — — — 115 Balances, July 31, 2021 15,704 $ 157 1,223 $ 27,606 $ 128,519 $ (16,862) $ (107,780) $ (4,322) $ 27,318 STOCKHOLDERS’STOCKHOLDERS’ EQUITY 15,681 $ 157 $ 1,038 $ 23,104 $ 128,241 $ (16,860 ) $ (99,870 ) $ (4,356 ) $ 30,416 — — — — — — (3,984 ) — (3,984 ) — — — — — — — 57 57 5 — — — 11 — — — 11 — — — — — (2 ) — — (2 ) — — 21 503 — — — — 503 — — — — — — (584 ) — (584 ) 18 — — — 42 — — — 42 — — — — 109 — — — 109 15,704 $ 157 $ 1,059 $ 23,607 $ 128,403 $ (16,862 ) $ (104,438 ) $ (4,299 ) $ 26,568 — — — — — — (2,660 ) — (2,660 ) — — — — — — — (23 ) (23 ) — — 164 3,999 — — — — 3,999 — — — — 1 — — — 1 — — — — — — (682 ) — (682 ) — — — — 115 — — — 115 15,704 $ 157 1,223 $ 27,606 $ 128,519 $ (16,862 ) $ (107,780 ) $ (4,322 ) $ 27,318 (unaudited)Common Stock Preferred Stock Accumulated Other Comprehensive Loss Shares Amount Shares Amount Additional
Paid-In
CapitalTreasury
StockAccumulated Deficit Total Balances, January 31, 2020 14,097 $ 141 994 $ 22,104 $ 123,964 $ (16,860) $ (77,310) $ (4,387) $ 47,652 Net loss — — — — — — (6,642) — (6,642) Foreign currency translation — — — — — — — (131) (131) Preferred stock dividends — — — — — — (559) — (559) Stock-based compensation — — — — 230 — — — 230 Balances, April 30, 2020 14,097 $ 141 994 $ 22,104 $ 124,194 $ (16,860) $ (84,511) $ (4,518) $ 40,550 Net loss — — — — — — (6,604) — (6,604) Foreign currency translation — — — — — — — 82 82 Preferred stock dividends — — — — — — (559) — (559) Stock-based compensation — — — — 219 — — — 219 Balances, July 31, 2020 14,097 $ 141 994 $ 22,104 $ 124,413 $ (16,860) $ (91,674) $ (4,436) $ 33,688 (unaudited)and the number of shares of common stock and preferred stock authorized for issuance was increased. See Note 15 - “Corporate Restructuring”, to the condensed consolidated financial statements.onand the financial results reported as discontinued operations (see Note 3 – “Assets Held for Sale and Discontinued Operations” for additional details). All intercompany transactions and balances have been eliminated in consolidation.and emerging supply chain disruptions and recent volatility in oil prices have created significant uncertainty in the global economy which could have a material adverse effect on the Company’s business, financial position, results of operations and liquidity. In addition,Accordingly, substantial doubt has arisen regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company has a history of operating losses and has had negative cash from operating activities. However, as of July 31, 2021, the Company has no funded debt or obligations containing financial covenants, working capital of approximately $16.1 million, including cash of approximately $2.1 million, backlog of firm orders of approximately $11.7 million, the ability, and plans, to reduce costs to maintain positive cash flow, additional equity available to raise further capital, and lease pool equipment being actively marketed for sale. Based on these factors, management expects the Companynot be able to continue as a going concern.• • • • • • • • The Company declared and paid the quarterly dividend on its Preferred Stock for the first quarter of fiscal 2023, and each quarter in fiscal 2022, but deferred payment of the quarterly dividend for the second quarter of fiscal 2023. The Company also has the option to defer future quarterly dividend payments if deemed necessary. The dividends are a cumulative dividend that accrue for payment in the future. During a deferral period, the Company is prohibited from paying dividends or distributions on its common stock, or redeeming any of those shares. Further, if the Company does not pay dividends on its Series A Preferred Stock for six or more quarters, the holders of Series A Preferred Stock will have the right to appoint two directors to the Company's board. • 20212022, 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-K10-K for the year ended January 31, 20212022 (“fiscal 2021”2022”). 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, 2021,2022, the results of operations for the three and six months ended July 31, 2021 2022 and 2020,2021, the cash flows for the six months ended July 31, 2021 2022 and 2020,2021, and the statement of stockholders’ equity for the three and six months ended July 31, 2021 2022 and 2020,2021, 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 31,2023 (“fiscal 2023”).(“fiscal 2022”).We have reclassified certainand 2021, comprehensive loss incorrectly included preferred dividends of $2.9 million and $2.3 million, respectively. Comprehensive loss will be corrected by revising the amounts included in prior-period financialpreviously-issued statements of comprehensive loss the next time they are required to conform to the current period’s presentation. On the consolidated balance sheets, income taxes payable, not related to discontinued operations has been reclassified from “Current liabilities heldbe filed for sale” to “Current income taxes payable.”comparative purposes.Business, which comprises essentially all operations of the Equipment Leasing segment.Business. As a result, the assets, excluding cash, and liabilities of the Leasing Business are considered held for sale and theits results of operations of the business are reported as discontinued operations as of July 31, 20212022 and for all comparative periods presented in these condensed consolidated financial statements. The Company originally anticipated selling the discontinued operations in multiple transactions, which may involvepotentially involving the sale of legal entities, assets, or a combination of both, within the twelve months ending July 31,2021.July 31, 2021 January 31, 2021 Current assets of discontinued operations: Accounts receivable, net 1,151 1,668 Inventories, net 68 352 Prepaid expenses and other current assets 120 150 Seismic equipment lease pool and property and equipment, net 1,973 2,151 Total assets of discontinued operations $ 3,312 $ 4,321 (in thousands) 24 177 1 2 113 167 40 738 — (925 ) $ 178 $ 159 July 31, 2021 January 31, 2021 Current liabilities of discontinued operations: Accounts payable $ 21 $ 59 Deferred revenue 73 73 Accrued expenses and other current liabilities 611 831 Total liabilities of discontinued operations 705 963 (in thousands) $ — $ 132 56 73 122 507 24 241 202 953 2021 2022 and 2020,2021 consist of the following: For the Three Months Ended July 31, For the Six Months Ended July 31, 2021 2020 2021 2020 Revenues: Revenue from discontinued operations $ 757 $ 1,230 $ 787 $ 5,418 Cost of sales: Cost of discontinued operations 332 1,642 705 4,126 Operating expenses: Selling, general and administrative 378 1,476 720 3,176 Provision for doubtful accounts (2) 470 (445) 470 Depreciation and amortization 2 41 3 85 Total operating expenses 378 1,987 278 3,731 Operating income (loss) 47 (2,399) (196) (2,439) Other income (expenses) 35 72 (4) 75 Loss on disposal (including $2,745 of cumulative translation loss) — (1,859) — (1,859) Income (loss) before income taxes 82 (4,186) (200) (4,223) Provision for income taxes (3) (522) (4) (700) Net income (loss) 79 (4,708) (204) (4,923) $ — $ 757 $ — $ 787 23 332 48 705 101 378 214 720 — (2 ) — (445 ) — 2 — 3 101 378 214 278 (124 ) 47 (262 ) (196 ) (38 ) 35 486 (4 ) (162 ) 82 224 (200 ) — (3 ) — (4 ) (162 ) 79 224 (204 ) For the Six Months Ended July 31, 2021 2020 Depreciation and amortization $ — $ 1,771 Gross profit from sale of lease pool equipment $ — $ (1,324) (Recovery) provisions for doubtful accounts $ (445) $ 470 Loss on disposal of discontinued operations $ — $ 1,859 Sale of used lease pool equipment $ — $ 1,988 Sale of assets held for sale $ 1,245 $ — (in thousands) $ (358 ) $ — $ — $ (445 ) $ 361 $ 1,245 In December 2019, the Financial Accounting Standards Board (“FASB”)Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptionsbut not yet effective are currently being evaluated and at this time are not expected to the general principles in Topic 740 and by clarifying and amending existing guidance to improve consistent application. This ASU is effective for the annual period beginning after December 15, 2020, including interim periods within that annual period. The Company adopted this ASU effective February 1, 2021, and the adoption did not have a material impact on the Company’s condensed consolidatedour financial statements.In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurement by removing, modifying and adding certain disclosures. This ASU is effective for the annual period beginning after December 15, 2019, including interim periods within that annual period. The Company adopted this guidance effective February 1, 2020. The adoptionposition or results of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.operations. Three Months Ended July 31, Six Months Ended July 31, 2021 2020 2021 2020 Revenue recognized at a point in time: (in thousands) Seamap $ 5,256 $ 3,881 $ 8,169 $ 5,870 Klein 1,406 1,004 2,556 2,002 Total revenue recognized at a point in time $ 6,662 $ 4,885 $ 10,725 $ 7,872 Revenue recognized over time: Seamap $ 145 $ 201 $ 276 $ 401 Total revenue recognized over time 145 201 276 401 Total revenue from contracts with customers $ 6,807 $ 5,086 $ 11,001 $ 8,273 $ 4,288 $ 5,256 $ 12,281 $ 8,169 3,688 1,406 4,696 2,556 $ 7,976 $ 6,662 $ 16,977 $ 10,725 $ 737 $ 145 $ 823 $ 276 $ — $ — $ — $ — 737 145 823 276 $ 8,713 $ 6,807 $ 17,800 $ 11,001 OurHowever, from time to time our Seamap and Klein businesses provide repair and maintenance services, or perform upgrades, on customer owned equipment in which case revenue is recognized over time. In addition, our Seamap business also provides annual Software Maintenance Agreements (“SMA”) to customers who have an active license for software embedded in Seamap products. The revenue from SMA’sSMA is recognized over time, with the total value of the SMA amortizedrecognized in equal monthly amounts over the life of the contract, which is typically twelve months. Three Months Ended July 31, Six Months Ended July 31, 2021 2020 2021 2020 (in thousands) United States $ 219 $ 686 $ 578 $ 1,786 Europe 3,520 1,604 6,102 2,980 Middle East & Africa 675 221 689 297 Asia-Pacific 2,188 2,222 2,893 2,499 Canada & Latin America 205 353 739 711 Total revenue from contracts with customers $ 6,807 $ 5,086 $ 11,001 $ 8,273 $ 2,333 $ 219 $ 4,586 $ 578 4,082 3,520 8,694 6,102 142 675 180 689 2,042 2,188 4,226 2,893 114 205 114 739 $ 8,713 $ 6,807 $ 17,800 $ 11,001 2021,2022, and January 31, 2021,2022, contract assets and liabilities consisted of the following:July 31, 2021 January 31, 2021 Contract Assets: (in thousands) Unbilled revenue - current $ 106 $ 85 Total unbilled revenue $ 106 $ 85 Contract Liabilities: Deferred revenue & customer deposits - current $ 399 $ 691 Total deferred revenue & customer deposits $ 399 $ 691 $ 43 $ 28 $ 43 $ 28 $ 2,665 $ 2,569 $ 2,665 $ 2,569 Pursuantour accounting policies and procedures related to revenue from contracts with customers,the disclosures above, sales and transaction-based taxes are excluded from revenue. Also,revenue, and we do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally,Also, we expense costs incurred to obtain contracts when incurred because the amortization period would have been be one year or less. These costs are recorded in selling, general and administrative expenses. As of July 31, 2021 As of January 31, 2021 (in thousands) Accounts receivable $ 5,581 $ 5,695 Less allowance for doubtful accounts (481) (948) Accounts receivable net of allowance for doubtful accounts $ 5,100 $ 4,747 July 31, 2021 January 31, 2021 (in thousands) Inventories: Raw materials $ 7,468 $ 6,905 Finished goods 3,455 3,466 Work in progress 2,404 2,445 13,327 12,816 Less allowance for obsolescence (1,399) (1,363) Total inventories, net $ 11,928 $ 11,453 July 31, 2021 January 31, 2021 (in thousands) Property and equipment: Marine seismic service equipment $ 4,157 $ 5,969 Land and buildings 4,422 4,354 Furniture and fixtures 9,899 9,750 Autos and trucks 491 491 18,969 20,564 Accumulated depreciation and amortization (14,529) (15,813) Total property and equipment, net $ 4,440 $ 4,751 $ 7,141 $ 213 $ 6,928 $ 8,610 $ 650 $ 9,260 (484 ) — (484 ) (484 ) — (484 ) $ 6,657 $ 213 $ 6,444 $ 8,126 $ 650 $ 8,776 $ 9,198 $ 8,511 3,797 3,806 3,324 3,567 16,319 15,884 (1,897 ) (1,878 ) $ 14,422 $ 14,006 $ 9,913 $ 9,865 508 495 — 3,880 4,689 4,555 15,110 18,795 (11,097 ) (14,523 ) $ 4,013 $ 4,272 2021,2022, the Company completed an annual review of long-lived assets noting that the undiscounted future cash flows exceeded their carrying value and no impairment was recorded. Since January 31, 2021,2022, there have notbeen no significant changes to the market, economic or legal environment in which the Company operates that would, in the aggregate, indicate additional impairment analysis is necessary as of July 31, 2021.Colombia,and the United Kingdom and Canada.Kingdom. We negotiated the termination of our Colombia lease obligation during the current period.waswere recorded as a component of operating loss. Included in these costs was short-term lease expense of approximately $9,000 and $18,000 for the three and six months ended July 31, 2022, respectively, and during the three and six months ended July 31,2021 was approximately $10,000 and $10,000, respectively, for the three and six months ended July 31, 2021.20212022 and January 31, 20212022 were as follows (in thousands):Lease July 31, 2021 January 31, 2021 Assets Operating lease assets $ 1,568 $ 1,471 Liabilities Operating lease liabilities $ 1,568 $ 1,471 Classification of lease liabilities Current liabilities $ 567 $ 1,008 Non-current liabilities 1,001 463 Total Operating lease liabilities $ 1,568 $ 1,471 (in thousands) $ 2,001 $ 1,835 $ 2,001 $ 1,835 $ 502 $ 869 1,499 966 $ 2,001 $ 1,835 20212022 and January 31, 20212022 were as follows:Lease term and discount rate July 31, 2021 January 31, 2021 Weighted average remaining lease term (years) Operating leases 1.26 1.09 Weighted average discount rate: Operating leases 9.36 % 10 % 2.08 1.82 13 % 13 % follows (in thousands):follows: (in thousands) $ (421 ) $ (600 ) $ 638 $ 762 Lease Six Months Ended July 31, 2021 Six Months Ended July 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ (600) $ (514) Right-of-use assets obtained in exchange for lease liabilities: Operating leases $ 600 $ 514 20212022 were as follows (in thousands):follows: (in thousands) $ 502 794 541 274 188 204 $ 2,503 (502 ) $ 2,001 July 31, 2021 2022 $ 567 2023 667 2024 346 2025 134 2026 24 Thereafter — Total payments under lease agreements $ 1,738 Less: imputed interest (170) Total lease liabilities $ 1,568 11 Weighted Average Life at 7/31/2021 July 31, 2021 January 31, 2021 Gross
Carrying
AmountAccumulated
AmortizationAccumulated Impairment Net
Carrying
AmountGross
Carrying
AmountAccumulated
AmortizationImpairment Net
Carrying
AmountGoodwill $ 7,060 $ — $ (7,060) $ — $ 7,060 $ — $ (7,060) $ — Proprietary rights 6.4 $ 8,220 $ (3,920) $ — $ 4,300 $ 7,781 $ (3,688) $ — $ 4,093 Customer relationships 0.4 5,024 (4,748) — 276 5,024 (4,513) — 511 Patents 3.1 2,440 (1,653) — 787 2,440 (1,528) — 912 Trade name 4.8 894 (80) (760) 54 894 (74) (760) 60 Developed technology 4.4 1,430 (798) — 632 1,430 (727) — 703 Other 2.8 684 (278) — 406 684 (213) — 471 Amortizable intangible assets $ 18,692 $ (11,477) $ (760) $ 6,455 $ 18,253 $ (10,743) $ (760) $ 6,750 As of (in thousands) (in thousands) $ 7,060 $ — $ (7,060 ) $ — $ 7,060 $ — $ (7,060 ) $ — 5.6 8,237 (4,382 ) — 3,855 8,237 (4,150 ) — 4,087 0.3 5,024 (4,845 ) — 179 5,024 (4,797 ) — 227 2.4 2,540 (1,902 ) — 638 2,540 (1,778 ) — 762 3.8 894 (91 ) (760 ) 43 894 (85 ) (760 ) 49 3.4 1,430 (941 ) — 489 1,430 (870 ) — 560 1.8 693 (428 ) — 265 694 (361 ) — 333 $ 18,818 $ (12,589 ) $ (760 ) $ 5,469 $ 18,819 $ (12,041 ) $ (760 ) $ 6,018 2021, the Company has recorded impairment expense equal to 100% of the gross carrying amount of goodwill. As a result, no further review of goodwill is required. On January 31, 2021,2022, the Company completed an annual review of amortizable intangible assets. Based on a review of qualitative factors it was determined it was more likely than notthat there were no events or changes in circumstances indicating that the fair marketcarrying value of amortizable intangible assets was greater than its carrying value.not recoverable. During the six months ended July 31, 2021, 2022, there have been no substantive indicators of impairment.$618,000$427,000 and $794,000$618,000 for the six months ended July 31, 2021 2022 and 2020,2021, respectively. As of July 31, 2021,2022, future estimated amortization expense related to amortizable intangible assets was estimated to be (in thousands):be: (in thousands) $ 592 1,043 818 721 420 1,875 $ 5,469 For fiscal years ending January 31 2022 $ 588 2023 1,167 2024 1,032 2025 837 2026 700 Thereafter 2,131 Total $ 6,455 2021,2022, the Company had no outstanding balance under the Loans.2021,2022, the income tax expense from continuing operations was approximately $52,000$ 342,000 on a pre-tax net loss from continuing operations of $6.4$4.2 million. For the six months ended July 31, 2020,2021, the benefit for income taxestax expense from continuing operations was approximately $188,000$ 52,000 on a pre-tax net loss from continuing operations of $8.5$6.4 million. The variance between our actual provision and the expected provision based on the U.S. statutory rate is due primarily to recording valuation allowances against the increase in our deferred tax assets in the respective periods, permanent differences between book income and taxable income, and the effect of foreign withholding taxes.122018 2019 through 2021.2022. The Company’s tax returns may also be subject to examination by state and local tax authorities for fiscal years ended January 31, 2016 2017 through 2021.2022. In addition, the Company's tax returns filed in foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2016 2017 through 2021.2021.2022. Furthermore, the Company has concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial. Therefore, the Company has not recorded a deferred tax liability associated with the undistributed foreign earnings as of July 31, 2021.2021 2022 and 2020,2021, the Company did not recognize any tax expense or benefit related to uncertain tax positions. Three Months Ended July 31, Six Months Ended July 31, 2021 2020 2021 2020 (in thousands) (in thousands) Basic weighted average common shares outstanding 13,774 12,182 13,767 12,177 Stock options 79 3 58 1 Unvested restricted stock 29 10 18 5 Total weighted average common share equivalents 108 13 76 6 Diluted weighted average common shares outstanding 13,882 12,195 13,843 12,183 13,782 13,774 13,779 13,767 — 79 — 58 5 29 5 18 5 108 5 76 13,787 13,882 13,784 13,843 2021 2022 and 2020,2021, potentially dilutive common shares underlying stock options and unvested restricted stock were anti-dilutive and were therefore not considered in calculating diluted loss per share for those periods.On October 7, 2016, the CompanyOn December 18, 2019,The Co-Chief Executive Officer and Co-President of the Company and Agent entered into an Amended and Restated equity distribution agreement (the “1st Equity Distribution Agreement”).is the Non-Executive Chairman of our Board. Pursuant to the 1st Equity Distribution Agreement, the Company may sell up to 500,000 shares of 9.00% Series A Cumulative Preferred Stock, par value $1.00 per share (the “Preferred Stock”), and 5,000,000 shares of $0.01 par value common stock (“Common Stock”) through an at-the-market offering program (the “1st ATM“ATM Offering Program”) administered by the Agent. The Co-Chief Executive Officer and Co-President of the Agent is the Non-Executive Chairman of our Board. Under the 1st Equity Distribution Agreement, the Agent wasis entitled to compensation of up to 2.0% of the gross proceeds from the sale of Preferred Stock and Common Stock under the 1st ATM Offering Program. As994,046432,000 shares of the Series A Preferred for whichStock, pursuant to an underwriting agreement, dated November 9,2021, by and between the Agent was entitled to compensation, including 100%Company and Ladenburg Thalmann & Co. Inc. The Co-Chief Executive Officer and Co-President of Ladenburg Thalmann & Co. Inc is the Non-Executive Chairman of the Preferred Stock available for sale through the 1st Equity Distribution Agreement.In September 2020 we entered into a new equity distribution agreement (the “2nd Equity Distribution Agreement”) with the Agent with economic terms essentially identicalCompany’s board of directors. Net proceeds to the initial agreement. Pursuant toCompany were approximately $9.5 million and the 2nd Equity Distribution Agreement,underwriter received underwriting discounts and commissions totaling approximately $576,000 in connection with this offering. The Non-Executive Chairman of the Company may sell up to 500,000received no portion of these discounts and commissions.and 5,000,000 shares of $0.01 par value common stock (“Common Stock”) through a new at-the-market offering program (the “2ndunder the ATM Offering Program”).three-three- and six-monthsix-month periods ended July 31,2021, the Company sold 163,780 and 184,740 shares of Series A Preferred Stock under the 2nd ATM Offering Program, respectively.respectfully. Net proceeds from these sales for the three- and six months-month periods ended July 31, 2021, were approximately $4.0 million and $4.5 million, respectively, and the Agent received compensation of approximately $82,000 and 92,000,$92,000, respectively. The Non-Executive Chairman of the Board received no portion of this compensation.three-three- and six-monthsix-month periods ended July 31, 2022, the Company sold no shares of Common Stock under the ATM Offering Program. During the three- and six-month periods ended July 31,2021, the Company sold 362 and 18,415 shares of Common Stock under the 2nd ATM Offering Program, respectively.respectfully. Net proceeds from these sales for the three- and six months-month periods ended July 31, 2021, were approximately $1,000 and $43,000. Compensation to the Agent during this period was approximately $1,000, none of which was received by the Non-Executive Chairman of the Board.13During the three months ended 2021, the Board declared quarterly dividends of $0.5625 per share for our Preferred Stock. As of July 31, 2021,2022, there are 1,223,000approximately 1,683,000 shares of Preferred Stock outstanding with an aggregate liquidation preference of approximately $30.6$42.0 million. Holders of our Preferred Stock are entitled to receive, when and as declared by the Board out of funds of the Company available for the payment of distributions, quarterly cumulative preferential cash dividends of $0.5625 per share of the $25.00 per share stated liquidation preference on our Preferred Stock. Dividends on the Preferred Stock are payable quarterly in arrears, on April 30,July 31,October 31, and January 31, of each year. During the three months ended July 31, 2022, the Board did not declare, and the Company did not pay a quarterly dividend on our Preferred Stock. As a result, the Company has approximately $947,000 of undeclared preferred dividends in arrears. During the six months ended July 31, 2022, the Board declared a quarterly dividend of $0.5625 per share on our Preferred Stock for the quarter ended April 30, 2022. months-month periods ended July 31, 20212022 was approximately $115,000$ 152,000 and $224,000,$ 388,000, respectively, and during the three- and six months-month periods ended July 31, 20202021, was approximately $219,000$ 115,000 and $449,000,$ 224,000, respectively.1one segment, Marine Technology Products. As a result, no segment reporting is required. The Marine Technology Products business is engaged in the design, manufacture and sale of state-of-the-art seismic and offshore telemetry systems. Manufacturing, support and sales facilities are maintained in the United Kingdom, Singapore, Malaysia and the states of New Hampshire and Texas.15. Corporate RestructuringOn August 3, 2020, the Company, formerly Mitcham Industries, Inc., completed the reincorporation from the State of Texas to the State of Delaware, including a name change to MIND Technology, Inc. The change in legal domicile and company name were approved by the affirmative vote of the holders of more than two-thirds of the votes of the Company’s Common Stock and Preferred Stock, voting separately, at the Annual Meeting of Stockholders held on July 27, 2020. As part of the reincorporation merger, the stockholders approved an increase in the number of authorized shares of capital stock from 21,000,000 shares to 42,000,000 shares, consisting of (i) 40,000,000 shares of Common Stock (up from 20,000,000 shares), and (ii) 2,000,000 shares of Preferred Stock (up from 1,000,000 shares).Pursuant to the terms of the reincorporation merger, each outstanding share of Common Stock and each share of Preferred Stock of Mitcham Industries, Inc., the Texas corporation, automatically converted into one share of Common Stock and one share of Series A Preferred Stock, respectively, of MIND Technology, Inc., the Delaware corporation. Stockholders who hold physical stock certificates are not required to, but may, exchange stock certificates as a result of the reincorporation. The Company’s Common Stock and Preferred Stock continued to trade on the NASDAQ Global Select Market under their ticker symbols, “MIND” and “MINDP”, respectively. The Company’s Common Stock was assigned a new CUSIP number of 602566 101 and the Company’s Preferred Stock was assigned a new CUSIP number of 602566 200.No changes were made to the Board, management, business or operations of the Company as a result of the reincorporation. The Company’s corporate headquarters remains in Texas.16. Subsequent EventSubsequent to July 31,2021, we completed an agreement for the sale of lease pool equipment reported as Assets Held for Sale (see Note 3 – “Assets Held for Sale and Discontinued Operations” for additional details) in our condensed consolidated financial statements.Under the terms of the agreement the Company will receive total proceeds of approximately $4.5 million, with approximately $2.5 million paid at closing and the balance of approximately $2.0 million paid before the end of fiscal 2022.•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 the COVID-19 pandemic and other factors, including certain components and materials becoming unavailable, increased lead times for components and materials, as well as increased costs for such items;•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;•local and global impacts of the COVID-19 virus, including effects of responses of governmental authorities and companies to reduce the spread of COVID-19, such as shutdowns, travel restrictions and work-from-home mandates;•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 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; and•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.• changes in government spending, including efforts by the U.S. and other governments to decrease spending for defense contracts, or as a result of U.S. or other administration transition; • efforts by U.S. Congress and other U.S. government bodies to reduce U.S. government spending and address budgetary constraints and the U.S. deficit, as well as associated uncertainty around the timing, extent, nature and effect of such efforts. • inflation and price volatility in the global economy 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. “Item“Item 1A. Risk Factors”Factors” of this Form 10-Q, (2)Part I, “Item“Item 1A. Risk Factors”Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021,2022, and (3) the Company’sCompany’s other filings filed with the SEC from time to time.Management’sManagement’s Discussion and Analysis of Financial Condition and Results of OperationsMIND Technology, Inc., a Delaware corporation, formerly Mitcham Industries, Inc., a Texas corporation, was incorporated in 1987. Effective August 3, 2020 we effectuated a reincorporation to the state of Delaware, name change to MIND Technology, Inc. and increase in the number of shares of Common Stock and Preferred Stock authorized for issuance. See Note 15 - “Corporate Restructuring” to our condensed consolidated financial statements for additional details.determineddecided to exit the Leasing Business and instructed management to develop and implement a plan to dispose of those operations. Accordingly, the assets, excluding cash, and liabilities of the Leasing Business are considered held for sale and the Leasing Business operations are presented as discontinued operations. See Note 3 - “Assets“Assets Held for Sale and Discontinued Operations” to our condensed consolidated financial statements for more details.Kingdom,Kingdom; Salem, New Hampshire,Hampshire; Huntsville, Texas,Texas; Johor, Malaysia and in Singapore.business includesBusiness include all land leasing activity, sales of lease pool equipment and certain other equipment sales and services related to those operations. This business hadhas been conducted from our locations in Huntsville, Texas; Calgary, Canada; Bogota, Colombia; and Budapest, Hungary. This included the operations of our subsidiaries Mitcham Canada, ULC, Mitcham Europe Ltd.MCL, MEL and our branch in Colombia.product 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 July 31, For the Six Months Ended July 31, 2021 2020 2021 2020 Reconciliation of Net loss from Continuing Operations to EBITDA and Adjusted EBITDA Net loss from continuing operations $ (2,739) $ (1,896) $ (6,440) $ (8,323) Interest income, net (9) — — — Depreciation and amortization 557 714 1,223 1,479 (Benefit) provision for income taxes 197 (530) 52 (188) EBITDA from continuing operations (1) (1,994) (1,712) (5,165) (7,032) Non-cash foreign exchange losses 33 33 82 44 Stock-based compensation 115 219 236 449 Impairment of intangible assets — — — 2,531 Adjusted EBITDA from continuing operations (1) $ (1,846) $ (1,460) $ (4,847) $ (4,008) Reconciliation of Net Cash Used in Operating Activities to EBITDA Net cash used in operating activities $ (4,384) $ (3,495) $ (7,191) $ (2,566) PPP loan forgiveness — — 850 — Stock-based compensation (115) (219) (236) (449) Provision for inventory obsolescence (23) (23) (45) (45) Changes in accounts receivable (current and long-term) 1,570 (46) 466 (3,181) Interest paid — 12 — 23 Taxes paid, net of refunds 116 97 147 246 Gross profit from sale of other equipment 75 — 155 — Changes in inventory (218) 143 523 699 Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue 588 1,100 (332) 756 Impairment of intangible assets — — — (2,531) Changes in prepaid expenses and other current and long-term assets 333 (310) 500 (469) Other 64 1,029 (2) 485 EBITDA from continuing operations (1) $ (1,994) $ (1,712) $ (5,165) $ (7,032) $ (1,758 ) $ (2,739 ) $ (4,563 ) $ (6,440 ) 4 (9 ) 4 — 467 557 946 1,223 131 197 342 52 (1,156 ) (1,994 ) (3,271 ) (5,165 ) — 33 — 82 152 115 388 236 $ (1,004 ) $ (1,846 ) $ (2,883 ) $ (4,847 ) $ 1,025 $ (4,384 ) $ (2,497 ) $ (7,191 ) — — — 850 (152 ) (115 ) (388 ) (236 ) (22 ) (23 ) (45 ) (45 ) (2,897 ) 1,570 (1,860 ) 466 — — 4 — — 116 277 147 — 75 (113 ) 155 201 (218 ) 461 523 333 588 730 (332 ) 304 333 129 500 52 64 31 (2 ) $ (1,156 ) $ (1,994 ) $ (3,271 ) $ (5,165 ) (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, other non-cash tax related items and non-cash costs of lease pool equipment sales. We consider EBITDA and Adjusted EBITDA to be important indicators for the performance of our business, but not measures of performance orliquidity 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 as alternatives 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.systems, which provide marine operators more precise control of exploration tools;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 hydrographic industry applications. Klein designs, manufactures and sells side scan sonar and water-side security systems to commercial, governmental and military customers throughout the world.primarilymainly to seismic data acquisition companies conducting land surveys worldwide. WeHistorically, we provided short-term leasing, typically for a term of less than one year, of seismic equipment to meet a customer’s requirements. From time to time, we sold lease pool equipment. ThoseThese sales were transacted when we had equipment for which we did not have near term needs in our leasing business or which was otherwise considered excess. Additionally, when equipment that hashad been leased to a customer was lost or destroyed, the customer was charged for such equipment at amounts specified in the underlying lease agreement.other unforeseen circumstances such as the Pandemic.global pandemics. See Part II, Item 1A-- “Risk Factors.”The Pandemic has created significant uncertainty inglobal economy, which we believe has had an adverse effect onfirst six months of fiscal year 2023 have improved when compared to the Company’s business, financial position,first six months of fiscal 2022, but our fiscal 2022 results of operations and liquidity.were less than anticipated. We believe the resulting uncertainty caused many customersfiscal 2022 results, and to delay purchasing decisions. Furthermore, travel restrictions limiteda lesser extent our abilityyear-to-date fiscal 2023 results, were detrimentally impacted by the following factors: • Uncertainty in the global economic and geopolitical situation, resulting in delayed expenditures or changes in project priorities. to demonstratemany of our products. Similar restrictions,customers in this space have recently reported improving financial metrics and outlooks. Higher energy prices and the global movement towards renewable energy is, we believe, caused delays in certain governmental evaluation programs involving our technology. Recently we have seen indications of improving activity and the relaxation of Pandemic related restrictions in some areas. However, the time framepositive for which disruptions related to the Pandemic will continue is uncertain, as is the magnitude of any adverse impacts. In fiscal 2021, we were required to temporarily shutdown our facilities in Malaysia and Singapore on March 17, 2020, and April 7, 2020, respectively. The Malaysia facility was reopened on April 21, 2020 with approximately 50% of its normal staff and resumed operations with 100% of its employees on May 4, 2020. In Singapore, we were able to continue limited shipping and receiving operations during the shutdown and were able to resume manufacturing operations on June 1, 2020. However, travel between our Singapore and Malaysia facilities is limited, which has made management and coordination more difficult. In addition, Singapore reimposed certain workplace restrictions in May 2021. While we are able to maintain full operation, we are required to rotate personnel and allow some personnel to work remotely.Our other facilities have been allowed to operate, although at reduced efficiencies in some cases as certain employees have worked remotely from time to time. Furthermore, travel restrictions resulting from the Pandemic have impacted our ability to visit customers, conduct product demonstrations and visit our various operating locations. These disruptions have had, and we expect they will continue to have, a negative effect on our business; however, the duration and magnitude of these disruptions are uncertain. Management believes that the negative impact is subsiding, but there can be no assurance of that.Recently, we have begun to experience difficulties in our global supply chain. Lead times for some components and materials have increased as have prices for some items. Additionally, some components and materials are not readily available and shipping times and costs have increased, particularly for ocean freight. We believe these issues will be temporary but there can be no assurance of that and these conditions could have an adverse effect on our operations and financial results.Additionally, oil prices declined sharply during the first quarter of fiscal 2021 in response to the economic effects of the Pandemic and the announcement of Saudi Arabia’s abandonment of output restraints. While oil prices have recovered significantly, continuing uncertainty could have an adverse effect on our customers in the energy industry, which could cause them to cancel or delay projectsmarine survey industry. Additionally, the current geopolitical unrest, especially in Europe and orders with us or impair their ability to make payments to us. Many of our marine customers have recently indicated increases in backlog, which we believeAsia, is a positive indication of a recovery in fiscal 2022 and beyond. The general economic environment concerning the energy industry could also impact our ability to realize value from our discontinued operations.17In the fourth quarter of fiscal 2021 we began to experience an increase in orders and inquiries for marine exploration applications, particularly for our source controller products. Our GunLink seismic source controllers have certain capabilities that we believe are unique and that increasingly certain of these capabilities are required of operators of seismic exploration vessels. Based on this, and on discussions with current and potential customers, we believedriving demand for our GunLink source controllers will continue, although there can be no assurance of this. Furthermore, during the first quarter of fiscal 2022, we entered into an indefinite quantity, indefinite delivery supply agreement with a major international marine seismic contractor. We expect the arrangement to result in additional sales of our source controller products. Based on discussion with a particular customer, we expect to receive an order for a source controllerdefense and other related equipment related to a new build vessel. We continue to pursue a number of other opportunities and believe there is a general uptick in activity in this market.continuedexperienced and continue to experience significantincreased inquiries and bid activity for our other marine technology products and have conducted a number of demonstrations for various customers, including the U.S. Navy. However, we believe many customers have delayed purchase commitments due to the uncertainty in the global economy. Accordingly, we have not experienced the number of firm orders that we would have normally expected from the current level of inquiries and bid activity.products. As of July 31, 2021,2022, our backlog of firm orders for our Marine Technology Products business was approximately $11.7$19.3 million, as compared to approximately $14.1$13.1 million as of January 31, 20212022, and $7.6$11.7 million at July 31, 2020.2021. We expect essentially allthe majority of these orders to be completed within fiscal 20222023 and thereforecurrently expect revenues from continuing operationsoperation in fiscal 20222023 to exceed those backlog of fiscal 2021.2022. In addition, we continue to pursue a number of other significant opportunities. However, we believe the majority of these opportunities, if they result in orders, will be completed in fiscal 2024. 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.• Production difficulties which could delay the completion of orders as scheduled; • Anticipated orders not being received as expected; and business :•Marine Survey•Marine Exploration•Maritime Defense•Side-scan sonar•Bathymetry systems•Acoustic arrays, such as SeaLink•Marine seismic equipment, such as GunLink and BuoyLinkEarlier this year, we introduced a product line of sonar systems, referred to as AUV-MakoTM specifically focused on the rapidly growing autonomous vehicle market. In addition, in fiscal 2021 we entered into an agreement with a major European defense contractor for the joint offering of synthetic aperture sonar (“SAS”). believe that each of these initiatives can significantly expand our serviceable market. Also, during fiscal 2021, we began development of passive sonar arrays based on our SeaLink technology. We believe this technology is well suited for maritime security applications such as anti-submarine warfare, particularly in applications involving unmanned vessels.Recently, we have noted an increase in inquiries and bids for our single-beam and multi-beam sonar systems. As a result, we expect improvement in this portion of our business in the second half of fiscal 2022 and beyond. However, there can be no assurance of any such improvement or the magnitude of such.We are also pursuing a number of 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. Certain of the business opportunities that we are pursuing are with military or other governmental organizations. 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. Therefore, the timing of contract awards is often difficult to predict. However, once awarded, programs of this type can extend for many years. To date, the mostmajority of our revenues have been from commercial customers; however, we believeexpect the proportion of revenue relatedrelated to military or governmental customers will increase in the future.•The increase in the use of unmanned, or uncrewed, marine vessels, both surface vehicles and underwater vehicles, and the need for a variety of sensor packages designed for these applications.•Demand for higher resolution sonar images, such as for mine countermeasure applications.•Demand for economical, commercially developed, technology for anti-submarine warfare and maritime security applications.•Development of side-scan sonar • other sensor systems specifically for unmanned vehicles, including integration of our MA-X technology;•Development of SAS sonar systems in cooperation with a major European defense contractor; and•Application of our SeaLink solid streamer technology to passive sonar arrays for use in maritime security applications, such as anti-submarine warfare.In fiscal 2021 we took steps to reduce expenses including the layoff or furloughing of certain employees and contractors and the deferral of other expenditures, in response to the effects of the Pandemic on the economic environment.administrative costs. Should the effects of the Pandemicglobal pandemic and uncertainty about global economic conditions continue, through the second half of fiscal 2022 or beyond, we may take further steps to reduce costs. We believe the majoritymany 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.20212022 were approximately $6.8$8.7 million compared to approximately $5.1$6.8 million for the three months ended July 31, 2020.2021. For the six months ended July 31, 2021,2022, revenues were approximately $11.0$17.8 million, compared to approximately $8.3$11.0 million for the six months ended July 31, 2020.2021. We believe the increase in the fiscal 20222023 periods is due in large part to lifting of pandemic related restrictions on commerce that were present in the prior periodperiod. Additionally, positive trends within our primary markets, as a result of the Pandemic.discussed above, are contributing to increased activity. For the three months ended July 31, 2021,2022, we generated an operating loss of approximately $2.6$1.6 million, compared to an operating loss of approximately $2.4$2.6 million for the three months ended July 31, 2020.2021. For the six months ended July 31, 2021,2022, we generated an operating loss of approximately $7.4$4.0 million, compared to an operating loss of approximately $8.6$7.4 million for the six months ended July 31, 2020. The operating loss during the three-month periods ended July 31, 2021 and July 31, 2020 were relatively flat.2021. The decrease in operating loss during the three- and six-month periodperiods ended July 31, 20212022, is primarily attributable to a non-recurring goodwill impairment charge related to our Seamap reporting unitan increase in the prior year period. In addition, the current quarter operating loss was impacted by higher research and development and general and administrative costs.revenues. A more detailed explanation of these variations follows.19 $ 5,025 $ 5,402 $ 13,104 $ 8,446 3,689 1,408 4,811 2,564 (1 ) (3 ) (115 ) (9 ) 8,713 6,807 17,800 11,001 3,213 3,293 8,270 5,890 1,963 1,293 2,818 2,353 (1 ) (3 ) (115 ) (9 ) 5,175 4,583 10,973 8,234 $ 3,538 $ 2,224 $ 6,827 $ 2,767 41 % 33 % 38 % 25 % Three Months Ended
July 31,Six Months Ended
July 31, 2021 2020 2021 2020 (in thousands) (in thousands) Revenues: Seamap $ 5,402 $ 4,080 $ 8,446 $ 6,293 Klein 1,408 1,003 2,564 2,244 Intra-business sales (3) — (9) (242) 6,807 5,083 11,001 8,295 Cost of sales: Seamap 3,293 2,281 5,890 4,175 Klein 1,293 785 2,353 1,861 Intra-business sales (3) — (9) (242) 4,583 3,066 8,234 5,794 Gross profit $ 2,224 $ 2,017 $ 2,767 $ 2,501 Gross profit margin 33 % 40 % 25 % 30 % We believe the increase in Seamap revenues is due in large part to lifting of commerce restrictions, previously caused by the Pandemic, including the temporary shutdown of our production facilities in the prior period. Revenues in the second quarter of fiscal 2022 increased when compared to second quarter of fiscal 2021. We believe lingering effects of the Pandemic and the resulting impact on the global supply chain has impacted certain of our customers. In some cases, customers have delayed placing or accepting orders. We believe that delays in these customers receiving related products and materials from other supplier have contributed to these delays. Nonetheless, we did experience an increase in deliveries and associated revenues in this area as we executed certain orders previously received. Based on our remaining backlog and on-going order activity, we expect further improvement in the second half of fiscal 2022. The gross profit and gross profit margins generated by sales of Seamap products were approximately $1.8 million and 36% in the second quarter of fiscal 2023 and approximately $2.1 million and 39% in the second quarter of fiscal 2022 and approximately $1.8 million and 44% in the second quarter of fiscal 2021.2022. The decrease in gross profit margins between the periods is due primarily to the mixlower absorption of products and services soldfixed costs in the respective periods.$1.4$3.7 million for the second quarter of fiscal 20222023 versus approximately $1.0$1.4 million in the prior year period. Gross profit was approximately $115,000$1.7 million and $218,000$115,000 for the second quarter of fiscal 20222023 and 2021,2022, respectively. The decline in gross profitincrease in the second quarterfiscal 2023 period is due primarily to the delivery of fiscal 2022 was due mainly to lower absorption of overhead costs and higher product testing and sustaining engineering activity during the period.2021, increased2022, were approximately $3.8 million compared to approximately $3.3 million from approximately $3.0$4.3 million for the three monthsthree-months ended April 30, 2022 and approximately $3.4 million for the three-months ended July 31, 2020.2021. The decrease from the three-months ended April 30, 2022 period is primarily due to reduction of non-essential business expenses coupled with no accrual of severance expense in the current period. General and administrative expenses for the six months ended July 31, 20212022 increased to $8.1 million from approximately $1.3 million to $7.2 million compared to $5.9 million for the six months ended July 31, 2020.2021. The approximately $866,000 increase in is primarily due to accrued severance expense for the Company’s former Chief Operating Officer, plus higher convention, travel and entertainment expenses incurred as the Company reengages with customers following easing of global pandemic related restrictions on travel and larger group gatherings. In addition, the increase reflects certain recurring general and administrative operating expenses, including but not limited to, property and casualty insurance premiums, facility maintenance expenses, and communications costs, etc., reported inwhich were directly attributable to our discontinued operations and reported as such in the prior year comparative periods,period, but are being reported in continuing operations in the current fiscal yearperiod as we wind-down and dispose of our discontinued operations. Current periodmanagement has concluded that these costs also reflect increases in compensation and benefits costs, travel and entertainment expense and professional fees. In addition, the prior year comparative periods included the benefit of governmental rent and payroll subsidies in several international locations that have been significantly reduced or eliminated in the current fiscal year.remained relatively flat atwere approximately $888,000$833,000 in the three-month period ended July 31, 2021, as2022, compared to approximately $755,000$1.0 million in the three-monththree-months ended April 30, 2022 and approximately $888,000 in the three-months ended July 31, 2021. For the six-month period ended July 31, 2020. Research2022, research and development costs increased to approximately $1.7$1.9 million in the six-month period ended July 31, 2021, as compared tofrom approximately $1.2$1.7 million in the prior year period ended. The marginal increase in theseyear-to-year costs reflects incremental product development activity, in the strategic initiatives noted above, including our SAS, system,ATR, passive sonar arraysarray and sensor packages specificallysystems for unmanned systems.respectively, as compared to approximately $700,000 and $1.4 million in the three- and six-month periods ended July 31, 2020, respectively. The lower depreciation and amortization expense in the three- and six-month periodssecond quarter of fiscal 20222023 is due primarily to assets becoming fully depreciated over time.20During2021, it was determined that there were no substantive indicators of impairment. During the first quarter of fiscal 2021, due to deterioration in macroeconomic factors and a decline in the market value of our equity securities subsequent to January 31, 2020,2022, we concluded that goodwill associated with our Seamap business was impaired and recorded an impairment chargereported tax expense of approximately $2.5 million.Provision$342,000 on pre-tax loss of approximately $4.2 million from continuing operations, and for Income TaxesFor the six months ended July 31, 2021, we reported tax expense of approximately $52,000 on pre-tax net loss of approximately $6.4 million from continuing operations, andoperations. We recorded tax expense for the six monthssix-month period ended July 31, 2020, we reported tax benefit of approximately $188,000 on2022, and 2021, despite generating pre-tax net loss of approximately $8.5 millionlosses from continuing operations. Our recorded tax expense and benefit in the six-month periods ended July 31, 2021, and 2020, respectively, are less than the benefit that would be derived by applying the applicable statutory rate to the net loss before tax from continuing operations, in each of these periods, due mainly to the effect of permanent differences between book and taxable income foreign withholding taxes, and recording valuation allowances against increases in our deferred tax assets. For the Three Months Ended July 31, For the For the Six Months Ended July 31, 2021 2020 2021 2020 Revenues: Equipment leasing 757 622 787 3,197 Lease pool equipment sales — 573 — 2,010 Other equipment sales — 35 — 211 757 1,230 787 5,418 Cost of sales: Direct costs-equipment leasing 332 762 705 1,607 Lease pool depreciation — 772 — 1,698 Cost of lease pool equipment sales — 98 — 684 Cost of other equipment sales — 10 — 137 332 1,642 705 4,126 Gross profit (loss) 425 (412) 82 1,292 Operating expenses: Selling, general and administrative 378 1,476 720 3,176 Provision for doubtful accounts (2) 470 (445) 470 Depreciation and amortization 2 41 3 85 Total operating expenses 378 1,987 278 3,731 Operating loss 47 (2,399) (196) (2,439) Other income (expenses) 35 72 (4) 75 Loss on disposal (including $2,745 of cumulative translation loss) — (1,859) — (1,859) Income (loss) before income taxes 82 (4,186) (200) (4,223) Provision for income taxes (3) (522) (4) (700) Net income (loss) 79 (4,708) (204) (4,923) (in thousands) (in thousands) — 757 — 787 — 757 — 787 23 332 48 705 23 332 48 705 (23 ) 425 (48 ) 82 101 378 214 720 — (2 ) — (445 ) — 2 — 3 101 378 214 278 (124 ) 47 (262 ) (196 ) (38 ) 35 486 (4 ) (162 ) 82 224 (200 ) — (3 ) — (4 ) (162 ) 79 224 (204 ) individual lease pool assets, but treat anyrecord proceeds from such transactions as a reduction in the carrying value of our lease pool assets. During the six-month period ended July 31, 2022, the carrying value of our lease pool.Revenue from discontinued operations during the second quarter of fiscal 2022 decreased to $757,000, compared to $1.2 million for the second quarter of fiscal 2021. The reduction in revenue is due to the curtailment of equipment leasing activity aspool assets have been fully written down. As a result, approximately $358,000 of proceeds from the decision to exit the Leasing Business and the change in treatmentsale of lease pool salesassets was recognized as discussed above.$332,000$23,000 for the second quarter of fiscal yearthree months ended July 31, 2022, from approximately $762,000$332,000 reported in the same period of fiscal 2021. For the three- and six-month periodsthree months ended July 31, 2021, lease pool depreciation decreased2021. Direct costs related to Equipment Leasing dropped to approximately $772,000 and $1.7 million from$48,000 for the three- and six month periodsmonths ended July 31, 2020,2022, from approximately $705,000 reported in the six months ended July 31, 2021.Our revenue and direct costs from discontinued operations decreased compared to the prior year periods because we are no longer recording lease pool depreciation on discontinued operations.$720,000$101,000 in the three months ended July 31, 2023, from approximately $378,000 in the same period one year ago. Selling, general and administrative costs related to the Leasing Business decreased to approximately $214,000 in the six months ended July 31, 2021,2022, from approximately $3.2 million$720,000 in the same period one year ago. The reductiondecrease in selling, general and administrative expensethe fiscal 2023 periods is due primarily to permanentlower compensation and other administrative expenses resulting from lower headcount reductions, closing and downsizing facilities, and lower overall operating costs due to the significant decline in21generalas management has concluded these costs will be retained going forward. See Note 3 - “Assets Held for Sale and administrative costs from discontinued operations excludes certain personnel, facility and overhead costs which are included in continuing operationsDiscontinued Operations” to our consolidated financial statements for more details.2021.Our2022, we recorded no tax expense on approximately $224,000 of pre-tax income from discontinued operations for the three- and six-month periods ended July 31, 2021, was approximately $3,000 and $4,000, respectively, on pre-tax net income of approximately $82,000 for the three-month period and a pre-tax net loss of approximately $200,000 for the six-month period.operations. For the three and six months ended July 31, 2020,2021, we reported tax expense of approximately $522,000 and $700,000, respectively,$4,000 on pre-tax net loss of approximately $200,000 from discontinued operations. For the six-month period ended July 31, 2022, we recorded no tax expense, despite recording pre-tax income from discontinued operations, because we have tax valuation allowances recorded against all of approximately $4.2 million for both periods. We recordedour deferred tax expense inassets. For the six-month periodsperiod ended July 31, 2021, and 2020,we recorded tax expense, despite generating a pre-tax net loss from discontinued operations due mainly to the effect of foreign withholding taxes and recording valuation allowances against increases in our deferred tax assets.Subsequent to July 31,2021, we completed an agreement for the salePandemicglobal pandemic and volatility in oil prices hashave created significant uncertainty in the global economy, which couldhas had, and may continue to have, an adverse effect on our business, financial position, results of operations and liquidity. The period for which disruptions related to the Pandemicglobal pandemic will continue is uncertain as is the magnitude of any adverse impacts. We believe that any negative impacts have begun to subside but there can be no assurance of that.has generatedand negative cash from operating activities in each of the last four quarters and has relied on cash from the sale of lease pool equipment and the sale of Preferred Stock pursuantand Common Stock for the past several years. As of July 31, 2022, the Company has some remaining lease pool equipment available for sale and has approximately 317,000 shares of Preferred Stock and approximately 22.1 million shares of Common Stock available for issuance. Nevertheless, there can be no assurance the remaining lease pool equipment will be sold or that the Preferred Stock or Common Stock can be sold at prices acceptable to the 2nd ATM Offering Program established inCompany.third quarter of fiscal 2021.Notwithstandingabove factors, there is substantial doubt about the negative impacts ofCompany’s ability to meet its obligations as they arise over the Pandemic and history of operating losses noted above,next twelve months. However, management believes there are compensating factors and actions available to the Company to address liquidity concerns, including the following:•The Company has no funded debt or other outstanding obligations, outside of normal trade obligations.•The Company has no obligations or agreements containing “maintenance type” financial covenants.•The Company has working capital of approximately $16.1 million as of July 31, 2021, including cash of approximately $2.1 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. The Company has terminated or furloughed certain employees and contractors in response to market conditions.•Despite the temporary suspension of operations in Malaysia and Singapore early in fiscal 2021, operations continued uninterrupted at other locations. Certain of these operations have been deemed “essential businesses” by authorities. However, there can be no assurance that there will not be further suspensions in the future.•The Company has a backlog of orders of approximately $11.7 million as of July 31, 2021, which is a decrease from the record amount at January 31, 2021, but an increase of approximately 54% from July 31, 2020.•The Company has been successful in selling certain assets held for sale Subsequent to July 31, 2021, the Company completed an asset sale for total proceeds of approximately $4.5 million, all of which we expect to receive in fiscal 2022.•The Company has declared and paid the quarterly dividend on its Preferred Stock for the first and second quarter of fiscal 2022, and each quarter in fiscal 2021, but such quarterly dividends could be suspended in the future.•Despite the challenging economic environment in fiscal 2021, the Company successfully expanded its authorized capital stock (See Note 15 - “Corporate Restructuring”) and raised approximately $4.5 million in new capital through the sale of Common Stock and Preferred Stock pursuant to the 2nd ATM Offering Program. Management expects to be able to raise further capital through the 2nd ATM Offering Program should the need arise.•Based on publicized transactions and preliminary discussions with potential funding sources, management believes that other sources of debt and equity financing are available should the need arise.Based on the factors and actions available to the Company as discussed above, Management expects the Company to continue to meet its obligations as they arise over the next twelve months.UnderPreferred Stock andpreferred stock authorized, of which 1,682,985 are currently outstanding, leaving 317,015 available for future issuance. In addition, 40,000,000 shares of Common Stock are authorized, of which we13,786,904 are currently outstanding and 4,112,001 are reserved for issue under outstanding stock options, leaving 22,101,095 available for future issuance. We believe providesthese factors provide capacity for subsequent issues of common stock or preferred stock.apublic offerings in June 2016 and November 2021, and in two ATM offering programs. The Preferred Stock issued in the June 2016 public offering aswas consideration to Mitsubishi Heavy Industries, Ltd (“MHI”),. Pursuant to the November 2021 underwritten public offering, the Company issued 432,000 shares of Preferred Stock. The Company received net proceeds of approximately $9.5 million after underwriting discounts and in the 1st and 2nd ATM Offering Programs.other costs. The Preferred Stock (i) allows for redemption on at our option (even in the event of a change of222021,2022, we have issued 1,222,9721,682,985 shares of our Preferred Stock.3, 2021, under the 2nd ATM Offering Program,31, 2022, the Company sold (i) 18,415did not sell any shares of Common Stock resulting in net proceeds to the Company of approximately $43,000, after deducting offering costs and (ii) 184,740 shares ofor Series A Preferred Stock resultingunder the ATM Offering Program.net proceedssome cases to purchase items well in advance. Furthermore, 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 investments such as production equipment or other fixed assets. Accordingly, Management believes it might be prudent for the Company to explore sources of additional capital. Such sources could include private or public issues of equity or debt securities, or a combination of such securities. Other sources could include secured debt financing, sale-leaseback transactions on owned real estate or investment from strategic industry participants. There can be no assurance that any of these sources will be available to the Company, available in adequate amounts, or available under acceptable terms. For the Six Months Ended
July 31, 2021 2020 (in thousands) Net cash (used in) provided by operating activities $ (7,191) $ (2,566) Net cash provided by investing activities 1,231 1,598 Net cash provided by financing activities 3,383 489 Effect of changes in foreign exchange rates on cash and cash equivalents 22 (117) Net decrease in cash and cash equivalents $ (2,555) $ (596) $ (2,497 ) $ (7,191 ) 111 1,231 (1,895 ) 3,383 — 22 $ (4,281 ) $ (2,555 ) 2021,2022, we had working capital of approximately $16.1$15.6 million, including cash and cash equivalents and restricted cash of approximately $2.1 million,$833,000, as compared to working capital of approximately $19.0$18.5 million, including cash and cash equivalents and restricted cash of approximately $4.6$5.1 million, at January 31, 2021.2022. Our working capital decreased during the first six months of fiscal 20222023 as compared to January 31, 20212022 due primarily to reductions in cash assets held for saleand accounts receivable, and an increase in accounts payable.2022 as compared to approximately $2.6 million of2022. The decrease in net cash used in operating activities in the first six monthshalf of fiscal 2021. [In2023 compared to the quarterprior year period was due mainly to the lower operating loss incurred in the six months ended July 31, 2021, the2022. The primary sources of cash used in operating activities was our net loss of $6.6approximately $4.3 million, net of non-cash charges, including depreciation, amortization and provision for inventory obsolescence totaling approximately $1.5 million. In addition,plus the net change in working capital items, such as accounts receivableinventories and accounts payable, increasedtotaling approximately $1.6 million, partially offset by net cash usednon-cash charges, including an approximately $2.0 million reduction in operating activities by approximately $4.6 million. decreased during the first six months of fiscal 2022 compared to2023 decreased approximately $1.1 million over the same period in the prior year.fiscal 2022. The decrease isrelates primarily due to lower proceeds from the sale of Assets Held for Sale in fiscal 2022 as compared to proceeds from the sale of lease pool equipmentbusiness of approximately $761,000 in fiscal 2021.We had $1.2 million of proceeds from sale of assets held for sale during the first six months of fiscal 2022 compared to approximately $2.0 million of proceeds from the sale of lease pool equipment in the first six months of fiscal 2021. 2022. provided byused in financing activities induring the first six months of fiscal 20212023 consisted of approximately $43,000 of proceeds from sales of Common Stock, approximately $4.5 million of proceeds from sales of Preferred Stock, offset by approximately $1.2$1.9 million of Preferred Stock dividend payments. Our 1st ATM Offering Program relatedpayments compared to approximately $1.2 million in the Preferred Stock was concluded in fiscal 2020.prior year period. In addition, In the third quarterfirst six months of fiscal 2021, we launched2022 proceeds from the 2nd ATM Offering Program to sell up to 500,000 sharessale of Preferred Stock and 5,000,000 shares of Common Stock.2021,2022, we have no funded debt and no obligations containing restrictive financial covenants.We regularly evaluate opportunities to expand our business through the acquisition of other companies, businesses or product lines. If we were to make any such acquisitions, we believe they could generally be financed with a combination of cash on hand and cash flows from operations. However, should these sources of financing not be adequate, we may seek other sources of capital to fund future acquisitions. These additional sources of capital include bank credit facilities or the issuance of debt or equity securities.2021.2022. Furthermore, we have concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial.2021,2022, we had deposits in foreign banks equal to approximately $669,000$646,000, 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. These factors could limit our ability to pay cash dividends inIf withholding taxes should become payable, we believe the future.232021.2022. There have been no material changes to our critical accounting policies and estimates during the three- and six-month periods ended July 31, 2021.2021,2022, our consolidated cash and cash equivalents included foreign currency denominated amounts equivalent to approximately $185,000$279,000 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$28,000 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.2021,2022, we have no interest-bearing bank debt on our balance sheet.officersofficer and principal financial officer have concluded that our current disclosure controls and procedures were not effective as of July 31, 2021 at2022, due to a material weakness in our internal control over financial reporting that was disclosed on our Annual Report on Form 10-K for the reasonable assurance level.There20212022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Theincludedset forth below and 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 fiscal year ended January 31, 20212022, 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, 2022.other than the updating risk factors below.The risks described in our Annual Report on Form 10-K for the year ended January 31, 2022 and below are not materially changed.the only risks the Company faces. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results.(a)Not applicable.(b)Not applicable. 3.5 Second Certificate of Amendment of Certificate of Designations, Preferences and Rights of MIND Technology, Inc. 9.00% Series A Cumulative Preferred Stock Incorporated by reference to MIND Technology, Inc.’s Registration Statement on Form S-1 filed with the SEC on October 25, 2021. Third Certificate of Amendment of Certificate of Designations, Preferences and Rights of MIND Technology, Inc. 9.00% Series A Cumulative Preferred Stock Incorporated by reference to MIND Technology, Inc.’s Form 8-K filed with the SEC on November 4, 2021. 001-13490 3.3 Exhibit
NumberDocument Description Report or Registration Statement SEC File or
Registration
NumberExhibit
Reference2.1 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 2.1 3.1 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.3 3.2 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.4 3.3 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.5 3.4 Incorporated by reference to MIND Technology, Inc.’s Form 8-K filed with the SEC on September 25, 2020. 001-13490 3.1 104† Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 3.5 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.1 3.6 Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. 001-13490 3.2 4.1 Incorporated by reference to Mitcham Industries, Inc.’s Registration Statement on Form S-3, filed with the SEC on March 18, 2011. 333-172935 4.1 4.2 Incorporated by reference to Mitcham Industries, Inc.’s Registration Statement on Form S-3, filed with the SEC on March 18, 2011. 333-172935 4.2 10.1 Incorporated by reference to MIND Technology, Inc.’s Form S-8 filed with the SEC on September 9, 2021. 333-259414 10.1 31.1† 31.2† 32.1† 101.INS† XBRL Instance Document 101.SCH† XBRL Taxonomy Extension Schema Document 101.CAL† XBRL Taxonomy Extension Calculation of Linkbase Document 101.DEF† XBRL Taxonomy Extension Definition Linkbase Document 101.LAB† XBRL Taxonomy Extension Label Linkbase Document 101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document 9, 2021