THE WOODLANDS, Texas, April 18, 2024 /PRNewswire/ -- MIND Technology, Inc. (NASDAQ: MIND) announced today that it will release financial results for its fiscal 2024 fourth quarter and full year ended January 31, 2024 after the market closes on Monday, April 29, 2024.  In conjunction with the release, the Company has scheduled a conference call, which will be broadcast live over the Internet, for Tuesday, April 30th at 9:00 a.m. Eastern Time / 8:00 a.m. Central Time. What: MIND Technology Fiscal 2024 Fou ...

Table of Contents 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 October 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-13490 MIND TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) Delaware 76-0210849 (Sta ...

Financial Data and Key Metrics - The company reported a net income of approximately $568,000 for Q3 2024, driven by a gain of $2.4 million from the sale of Klein [9] - Adjusted EBITDA from continuing operations was a loss of $1.1 million, compared to a loss of $2.4 million in the same quarter last year [9] - Working capital stood at approximately $16.5 million, with $5.6 million in cash on hand as of October 31, 2023 [10] - Gross profit for Q3 was $2.3 million, up from $862,000 in the prior-year period, with a gross profit margin of 45% [38] - Operating loss improved by nearly 50% to $1.5 million, compared to a loss of $2.9 million in Q3 2023 [41] Business Line Performance - Marine Technology Products revenue was approximately $5 million in Q3, significantly lower than expected due to component delivery delays [28] - The backlog for Marine Technology Products reached a record $37.4 million, more than double the $17 million backlog at the end of July [26][22] - The company expects a significant revenue increase in Q4 as delayed orders are completed and delivered [30] Market Performance - The company's Marine Technology Products are penetrating various industries, with strong demand in exploration, defense, and survey markets [32] - A new supply agreement with a major international seismic contractor is expected to drive additional orders in Q4 and beyond [27] - The backlog includes over $5 million related to SeaLink ultra-high resolution 3-D seismic streamer systems for offshore wind farms and green energy projects [33] Strategic Direction and Industry Competition - The company has streamlined operations by selling Klein, which has improved liquidity and eliminated high-cost debt [10][25] - The focus is on profitability and leveraging the growing backlog to achieve sustainable revenue growth [12][17] - The company is well-positioned to capitalize on favorable market dynamics, particularly in the maritime technology sector [14][32] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's future, citing a record backlog and favorable market conditions [12][14] - Supply chain issues, while improved, continue to impact results, but delayed orders are expected to be fulfilled in Q4 [29] - The company anticipates meaningful financial improvements in Q4 and fiscal 2025 as the backlog converts to revenue [17] Other Important Information - The company declared and paid a dividend on preferred stock for Q3 but does not expect to declare further dividends in the foreseeable future due to capital needs for business growth [15] - General and administrative expenses decreased slightly to $2.9 million, with further cost reductions expected in Q4 and fiscal 2025 [39] - Research and development expenses were $508,000, focused on next-generation streamer systems and Spectral Ai Software Suite development [40] Q&A Session Summary Question: Backlog and Revenue Realization - The backlog increased to $37.4 million, with $5-6 million deferred from Q3 expected to be realized in Q4 [22][23] - Component delays pushed some shipments to Q4, but the company expects to catch up by the end of the calendar year [23] Question: Working Capital and Dividend Policy - The company is cautious about reinitiating dividends due to increased working capital requirements from growing business [7][15] - Management emphasized the need to prioritize business execution over dividend payments [62] Question: Inventory and Cash Flow - Inventories increased by approximately $3 million over the last six months, with cash flow expected to improve as inventory is sold [83][84] Question: Preferred Stock and Capital Strategy - The company is exploring alternatives to manage the preferred stock dividend burden, including potential capital-raising strategies [72][86] - Management acknowledged the need to balance business growth with shareholder value creation [87]

PART I. FINANCIAL INFORMATION This section presents MIND Technology, Inc.'s unaudited condensed consolidated financial statements and related notes. [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section provides the company's unaudited condensed consolidated financial statements and comprehensive explanatory notes. [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement details the company's financial position, including assets, liabilities, and equity, at specific reporting dates. Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | July 31, 2023 | January 31, 2023 | | :-------------------------- | :------------ | :--------------- | | Total Assets | $34,225 | $32,858 | | Total Liabilities | $12,749 | $9,806 | | Total Stockholders' Equity | $21,476 | $23,052 | - Total assets increased by **$1.367 million**, primarily driven by increases in accounts receivable and inventories. Total liabilities increased significantly due to a new note payable[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement outlines the company's revenues, expenses, and net loss over specified interim periods. Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | Six Months Ended July 31, 2023 | Six Months Ended July 31, 2022 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $8,750 | $8,713 | $21,336 | $17,800 | | Gross Profit | $3,267 | $3,538 | $8,684 | $6,827 | | Operating Loss | $(1,548) | $(1,551) | $(1,259) | $(4,027) | | Net Loss | $(1,494) | $(1,920) | $(1,734) | $(4,339) | | Net Loss Attributable to Common Stockholders | $(2,441) | $(2,867) | $(3,628) | $(6,233) | | Net Loss per Common Share | $(0.18) | $(0.21) | $(0.26) | $(0.45) | - For the six months ended July 31, 2023, total revenues increased by **19.9% year-over-year**, and net loss significantly decreased by **60%** compared to the prior year period[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This statement presents the net loss and other comprehensive income or loss components for the reporting periods. Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | Six Months Ended July 31, 2023 | Six Months Ended July 31, 2022 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(1,494) | $(1,920) | $(1,734) | $(4,339) | | Comprehensive loss | $(1,494) | $(1,620) | $(1,734) | $(4,042) | - The comprehensive loss for the six months ended July 31, 2023, improved to **$1.7 million** from **$4.0 million** in the prior year, primarily reflecting the reduced net loss[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities. Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended July 31, 2023 | Six Months Ended July 31, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,477) | $(2,497) | | Net cash provided by investing activities | $234 | $111 | | Net cash provided by (used in) financing activities | $2,947 | $(1,895) | | Net decrease in cash and cash equivalents | $(284) | $(4,281) | | Cash and cash equivalents, end of period | $494 | $833 | - Net cash used in operating activities increased to **$3.5 million** for the six months ended July 31, 2023, while net cash provided by financing activities significantly improved to **$2.9 million** due to a new short-term loan[18](index=18&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement details changes in the company's equity accounts, including common stock, preferred stock, and accumulated deficit. Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | January 31, 2023 | April 30, 2023 | July 31, 2023 | | :----------------------- | :--------------- | :------------- | :------------ | | Total Stockholders' Equity | $23,052 | $22,862 | $21,476 | | Accumulated Deficit | $(127,635) | $(127,875) | $(129,369) | - Total stockholders' equity decreased from **$23.052 million** at January 31, 2023, to **$21.476 million** at July 31, 2023, primarily due to the net loss incurred during the period[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential details and explanations supporting the condensed consolidated financial statements. [1. Organization and Liquidity](index=10&type=section&id=1.%20Organization%20and%20Liquidity) This note describes the company's business and assesses its ability to continue as a going concern, outlining mitigating factors. - MIND Technology, Inc. designs, manufactures, and sells proprietary products for the seismic, hydrographic, and offshore industries[24](index=24&type=chunk) - Substantial doubt exists regarding the company's ability to continue as a going concern due to historical losses and negative cash from operating activities[25](index=25&type=chunk) - Mitigating factors include **$12.6 million** in working capital (as of July 31, 2023), plans to reduce costs, a **$17.0 million** order backlog, and **$7.3 million** net proceeds from the recent sale of Klein, significantly improving liquidity[26](index=26&type=chunk)[29](index=29&type=chunk) [2. Sale of Subsidiary and Subsequent Events](index=12&type=section&id=2.%20Sale%20of%20Subsidiary%20and%20Subsequent%20Events) This note details the divestiture of the Klein Marine Services, Inc. subsidiary and its financial impact. - On August 21, 2023, the company sold its Klein Marine Services, Inc. subsidiary for **$11.5 million** in cash, resulting in an estimated gain of approximately **$2.0 million**[30](index=30&type=chunk) - Following the sale, all outstanding amounts under the company's loan were repaid in full on August 22, 2023, and the company received net proceeds of approximately **$7.3 million**[29](index=29&type=chunk)[31](index=31&type=chunk) Unaudited Pro Forma Condensed Consolidated Statement of Operations (Six Months Ended July 31, 2023, in thousands, except per share data) | Metric | Historical MIND Technology | Operations of Klein | Pro Forma MIND Technology | | :----------------------------------- | :------------------------- | :------------------ | :------------------------ | | Total Revenues | $21,336 | $(3,178) | $18,158 | | Operating Income (Loss) | $(1,259) | $1,036 | $(223) | | Net Loss Attributable to Common Stockholders | $(3,628) | - | $(2,279) | | Net Loss per Common Share | $(0.26) | - | $(0.17) | [3. Basis of Presentation](index=16&type=section&id=3.%20Basis%20of%20Presentation) This note explains the accounting principles and rules used in preparing the unaudited interim financial statements. - The unaudited interim condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain information condensed or omitted[43](index=43&type=chunk) - Interim results are not necessarily indicative of the results of operations to be expected for the full fiscal year[43](index=43&type=chunk) [4. Assets Held for Sale and Discontinued Operations](index=16&type=section&id=4.%20Assets%20Held%20for%20Sale%20and%20Discontinued%20Operations) This note addresses the classification and financial reporting of assets and operations held for sale or discontinued. - The Leasing Business was classified as held for sale and reported as discontinued operations until January 31, 2023, when its operations were materially completed[44](index=44&type=chunk) Results from Discontinued Operations (in thousands) | Metric | Three Months Ended July 31, 2023 | Six Months Ended July 31, 2023 | | :----------------------------------- | :------------------------------- | :----------------------------- | | Revenue from discontinued operations | $— | $— | | Net (loss) income from discontinued operations | $— | $— | [5. New Accounting Pronouncements](index=16&type=section&id=5.%20New%20Accounting%20Pronouncements) This note discusses the adoption of new accounting standards and their impact on the company's financial statements. - The company adopted ASU No. 2016-13, 'Financial Instruments-Credit Losses (Topic 326),' effective February 1, 2023[46](index=46&type=chunk) - The adoption of this standard did not have a material effect on the company's financial statements[46](index=46&type=chunk) [6. Revenue from Contracts with Customers](index=18&type=section&id=6.%20Revenue%20from%20Contracts%20with%20Customers) This note provides a detailed breakdown of revenue recognition from contracts with customers by period, segment, and geography. Total Revenue from Contracts with Customers (in thousands) | Period | 2023 | 2022 | YoY Change | | :-------------------------- | :----- | :----- | :--------- | | Three Months Ended July 31 | $8,750 | $8,713 | +0.4% | | Six Months Ended July 31 | $21,336 | $17,800 | +19.9% | Revenue by Segment (Six Months Ended July 31, in thousands) | Segment | 2023 | 2022 | YoY Change | | :------ | :----- | :----- | :--------- | | Seamap | $17,508 | $12,281 | +42.6% | | Klein | $2,652 | $4,696 | -43.5% | Revenue by Geography (Six Months Ended July 31, in thousands) | Region | 2023 | 2022 | YoY Change | | :---------- | :----- | :----- | :--------- | | United States | $1,720 | $4,586 | -62.5% | | Europe | $10,000 | $8,694 | +14.9% | | Asia-Pacific | $8,653 | $4,226 | +104.8% | | Other | $963 | $294 | +227.2% | - Contract liabilities (deferred revenue & customer deposits - current) increased to **$1.670 million** at July 31, 2023, from **$0.571 million** at January 31, 2023[49](index=49&type=chunk) [7. Balance Sheet](index=19&type=section&id=7.%20Balance%20Sheet) This note provides detailed breakdowns of specific balance sheet accounts, including inventories and property and equipment. Inventories, net (in thousands) | Metric | July 31, 2023 | January 31, 2023 | | :----------------------- | :------------ | :--------------- | | Raw materials | $8,730 | $8,480 | | Finished goods | $3,936 | $4,156 | | Work in progress | $4,876 | $4,422 | | Total inventories, net | $15,651 | $15,318 | Property and Equipment, net (in thousands) | Metric | July 31, 2023 | January 31, 2023 | | :-------------------------- | :------------ | :--------------- | | Total property and equipment, net | $3,620 | $3,945 | - No impairment was recorded for property and equipment for fiscal 2023 or the six months ended July 31, 2023[51](index=51&type=chunk) [8. Leases](index=19&type=section&id=8.%20Leases) This note details the company's lease arrangements, including lease expenses, assets, liabilities, and key terms. Lease Expense (in thousands) | Period | 2023 | 2022 | | :-------------------------- | :----- | :----- | | Three Months Ended July 31 | $201 | $218 | | Six Months Ended July 31 | $422 | $421 | Operating Lease Assets and Liabilities (in thousands) | Metric | July 31, 2023 | January 31, 2023 | | :-------------------------- | :------------ | :--------------- | | Operating lease assets | $1,626 | $1,749 | | Total Operating lease liabilities | $1,626 | $1,749 | - The weighted average remaining lease term for operating leases was **1.84 years** as of July 31, 2023, with a weighted average discount rate of **13%**[55](index=55&type=chunk) [9. Intangible Assets](index=21&type=section&id=9.%20Intangible%20Assets) This note provides information on the company's intangible assets, including their net value and amortization expense. Net Intangible Assets (in thousands) | Metric | July 31, 2023 | January 31, 2023 | | :----------------------- | :------------ | :--------------- | | Intangible assets, net | $4,418 | $4,931 | - Aggregate amortization expense was **$0.522 million** for the six months ended July 31, 2023, compared to **$0.427 million** for the same period in 2022[59](index=59&type=chunk) Future Estimated Amortization Expense (in thousands) | For fiscal years ending January 31, | Amount | | :---------------------------------- | :----- | | 2024 | $468 | | 2025 | $743 | | 2026 | $617 | | 2027 | $230 | | 2028 | $228 | | Thereafter | $1,054 | | Total | $3,495 | [10. Notes Payable](index=23&type=section&id=10.%20Notes%20Payable) This note describes the company's short-term loan, its terms, and its subsequent repayment. - The company entered into a **$3.75 million** Loan and Security Agreement on February 2, 2023, bearing interest at **12.9%** per annum, due February 1, 2024[61](index=61&type=chunk) - Approximately **$0.814 million** of debt acquisition costs were incurred, including origination fees and prepaid interest[61](index=61&type=chunk) - The loan was fully repaid on August 22, 2023, in connection with the sale of Klein[61](index=61&type=chunk) [11. Income Taxes](index=23&type=section&id=11.%20Income%20Taxes) This note details the company's income tax expense, pre-tax loss, and factors influencing tax provisions. Income Tax Expense and Pre-tax Loss from Continuing Operations (in thousands) | Period | Income Tax Expense | Pre-tax Loss from Continuing Operations | | :-------------------------- | :----------------- | :-------------------------------------- | | Three Months Ended July 31, 2023 | $77 | $(1,417) | | Six Months Ended July 31, 2023 | $495 | $(1,239) | - The variance between actual and expected tax provision is primarily due to recording valuation allowances against increases in deferred tax assets and permanent differences[62](index=62&type=chunk) - The company has not recorded a deferred tax liability associated with undistributed foreign earnings, as they are not deemed indefinitely reinvested[64](index=64&type=chunk) [12. Earnings per Share](index=23&type=section&id=12.%20Earnings%20per%20Share) This note presents the basic and diluted net loss per common share for the reporting periods. - Net loss per common share (basic and diluted) for the six months ended July 31, 2023, was **$(0.26)**, an improvement from **$(0.45)** in the prior year[13](index=13&type=chunk)[66](index=66&type=chunk) - Dilutive potential common shares were immaterial and anti-dilutive for both the three and six months ended July 31, 2023 and 2022[66](index=66&type=chunk) [13. Related Party Transaction](index=23&type=section&id=13.%20Related%20Party%20Transaction) This note discloses a transaction involving a related party acting as a broker for a company loan. - Ladenburg Thalmann & Co. Inc. acted as the broker for the **$3.75 million** loan, receiving approximately **$0.050 million** in fees[67](index=67&type=chunk) - The Co-Chief Executive Officer and Co-President of the Agent is the Non-Executive Chairman of the company's Board, but received no portion of this compensation[67](index=67&type=chunk) [14. Equity and Stock-Based Compensation](index=24&type=section&id=14.%20Equity%20and%20Stock-Based%20Compensation) This note provides details on outstanding preferred stock, cumulative dividends, and stock-based compensation expense. - As of July 31, 2023, there were approximately **1.68 million** shares of Preferred Stock outstanding with an aggregate liquidation preference of approximately **$46.8 million**, including **$4.7 million** in undeclared cumulative dividends[68](index=68&type=chunk) - No quarterly dividend was declared or paid on Preferred Stock for the three months ended July 31, 2023[68](index=68&type=chunk) Stock-Based Compensation Expense (in thousands) | Period | 2023 | 2022 | | :-------------------------- | :----- | :----- | | Three Months Ended July 31 | $108 | $152 | | Six Months Ended July 31 | $158 | $388 | [15. Segment Reporting](index=24&type=section&id=15.%20Segment%20Reporting) This note presents financial information by the company's operating segments, Seamap and Klein. - The company operates in two segments: Seamap and Klein. Segment reporting was restated for prior periods to conform to current presentation under ASC 280[70](index=70&type=chunk)[71](index=71&type=chunk) Total Assets by Segment (as of July 31, 2023, in thousands) | Segment | Total Assets | | :------ | :----------- | | Seamap | $23,139 | | Klein | $10,537 | Revenues and Operating Income (Loss) by Segment (Six Months Ended July 31, in thousands) | Segment | 2023 Revenues | 2022 Revenues | 2023 Operating Income (Loss) | 2022 Operating Income (Loss) | | :------ | :------------ | :------------ | :--------------------------- | :--------------------------- | | Seamap | $18,215 | $13,104 | $3,746 | $1,723 | | Klein | $3,569 | $4,810 | $(911) | $(686) | [Cautionary Statement about Forward-Looking Statements](index=26&type=section&id=Cautionary%20Statement%20about%20Forward-Looking%20Statements) This statement advises readers on the inherent risks and uncertainties associated with forward-looking information. - Statements regarding future results, financial position, business strategy, and plans are forward-looking and subject to significant risks and uncertainties[75](index=75&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to publicly update or revise them[77](index=77&type=chunk) - Important factors that could cause actual results to differ materially are summarized and referenced in the 'Risk Factors' section of this Form 10-Q and the Annual Report on Form 10-K[76](index=76&type=chunk)[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial performance, outlook, and liquidity. [Overview](index=28&type=section&id=Overview) This overview introduces the company's operating segments and key performance indicators. - The company operates in two segments: Seamap (seismic exploration equipment) and Klein (sonar equipment). The sale of Klein was completed on August 21, 2023[80](index=80&type=chunk) - Management monitors EBITDA and Adjusted EBITDA as key indicators of overall performance and liquidity[82](index=82&type=chunk) EBITDA and Adjusted EBITDA from Continuing Operations (Six Months Ended July 31, in thousands) | Metric | 2023 | 2022 | | :----------------------------------- | :----- | :----- | | Net loss from continuing operations | $(1,734) | $(4,563) | | EBITDA (loss) from continuing operations | $68 | $(3,271) | | Adjusted EBITDA (loss) from continuing operations | $226 | $(2,883) | [Business Outlook](index=30&type=section&id=Business%20Outlook) This section outlines the company's future expectations, strategic initiatives, and market conditions. - Financial performance has improved significantly, with positive operating income in Q4 fiscal 2023 and Q1 fiscal 2024, driven by increased market demand, alleviation of pandemic impacts, and cost reduction efforts[86](index=86&type=chunk) - The sale of Klein provides **$7.3 million** in net proceeds, streamlines operations, and includes a license for Spectral Ai software and a collaboration agreement for recurring revenue opportunities[87](index=87&type=chunk)[109](index=109&type=chunk) - The Seamap segment's backlog of firm orders was approximately **$17.0 million** as of July 31, 2023, up from **$14.0 million** in the prior year, providing good visibility for future periods[88](index=88&type=chunk) - The company expects revenue in fiscal 2024 to exceed that of fiscal 2023, focusing on strategic initiatives in unmanned marine vessels, higher resolution sonar, and marine exploration[89](index=89&type=chunk)[93](index=93&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) This section analyzes the company's revenues, cost of sales, operating expenses, and other income/expense. - Revenues for the six months ended July 31, 2023, increased by **19.9%** to **$21.3 million**, compared to **$17.8 million** in the prior year[97](index=97&type=chunk) - Operating losses decreased significantly to **$1.3 million** for the six months ended July 31, 2023, from **$4.0 million** in the prior year, primarily due to incremental revenues and higher profit margins[97](index=97&type=chunk) [Revenues and Cost of Sales](index=34&type=section&id=Revenues%20and%20Cost%20of%20Sales) This subsection details revenue and gross profit margin trends across the company's operating segments. Revenues by Segment (Six Months Ended July 31, in thousands) | Segment | 2023 | 2022 | YoY Change | | :------ | :----- | :----- | :--------- | | Seamap | $18,215 | $13,104 | +39.0% | | Klein | $3,569 | $4,811 | -25.9% | Gross Profit Margins by Segment (Six Months Ended July 31) | Segment | 2023 | 2022 | Change | | :------ | :--- | :--- | :----- | | Seamap | 41% | 37% | +4 pp | | Klein | 34% | 41% | -7 pp | - Seamap's gross profit margin increase is due to a favorable mix of higher-margin products and increased manufacturing activity, while Klein's decrease is due to lower revenues and a less favorable product mix[100](index=100&type=chunk)[101](index=101&type=chunk) [Operating Expenses](index=34&type=section&id=Operating%20Expenses) This subsection analyzes changes in selling, general and administrative, research and development, and depreciation and amortization expenses. Operating Expenses (Six Months Ended July 31, in thousands) | Expense Category | 2023 | 2022 | YoY Change | | :----------------------- | :----- | :----- | :--------- | | Selling, general and administrative | $7,388 | $8,061 | -8.3% | | Research and development | $1,615 | $1,847 | -12.6% | | Depreciation and amortization | $940 | $946 | -0.6% | - The decrease in SG&A expenses is primarily due to lower compensation expense from headcount reductions and broader cost control measures[102](index=102&type=chunk) - R&D costs were primarily related to synthetic aperture sonar, automatic target recognition development programs, and enhancements to towed streamer and passive sonar array systems[103](index=103&type=chunk) [Other Expense](index=34&type=section&id=Other%20Expense) This subsection explains the components contributing to other income or expense, net. Other Income (Expense), net (in thousands) | Period | 2023 | 2022 | | :-------------------------- | :----- | :----- | | Three Months Ended July 31 | $131 | $(76) | | Six Months Ended July 31 | $20 | $(194) | - Other income for the six months ended July 31, 2023, was primarily due to net interest expense of **$0.367 million** offset by gains on the sale of ancillary equipment, scrap sales, and other income of **$0.387 million**[105](index=105&type=chunk)[106](index=106&type=chunk) [Provision for Income Taxes](index=35&type=section&id=Provision%20for%20Income%20Taxes) This subsection discusses the company's income tax provision and its relation to pre-tax loss. Provision for Income Taxes (Six Months Ended July 31, in thousands) | Metric | 2023 | 2022 | | :----------------------- | :----- | :----- | | Provision for income taxes | $495 | $342 | | Loss from continuing operations before income taxes | $(1,239) | $(4,221) | - The income tax expense on a pre-tax loss is primarily due to recording valuation allowances against increases in deferred tax assets[107](index=107&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations and fund operations, including the impact of the Klein sale. - The sale of Klein for **$11.5 million** (net proceeds of **$7.3 million** after debt repayment) significantly improved the company's liquidity and working capital[109](index=109&type=chunk) - As of July 31, 2023, working capital was approximately **$12.6 million**, including **$0.494 million** in cash and cash equivalents[112](index=112&type=chunk)[119](index=119&type=chunk) - The company has a backlog of orders for the Seamap segment of approximately **$17.0 million** as of July 31, 2023, and has approximately **317,000** shares of Preferred Stock and **22.6 million** shares of Common Stock available for issuance[112](index=112&type=chunk)[113](index=113&type=chunk) Cash Flows Summary (Six Months Ended July 31, in thousands) | Metric | 2023 | 2022 | | :----------------------------------- | :----- | :----- | | Net cash used in operating activities | $(3,477) | $(2,497) | | Net cash provided by financing activities | $2,947 | $(1,895) | [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements. - The company does not have any off-balance sheet arrangements[126](index=126&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) This section states that there have been no material changes to the company's critical accounting estimates. - There have been no material changes to the company's critical accounting estimates during the three and six months ended July 31, 2023[127](index=127&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, specifically foreign currency risk and interest rate risk. [Foreign Currency Risk](index=38&type=section&id=Foreign%20Currency%20Risk) This subsection details the company's exposure to foreign currency fluctuations and its hedging strategy. - The company is exposed to foreign currency exchange rate risk from operations denominated primarily in British pounds, Singapore dollars, and European Union euros[129](index=129&type=chunk)[130](index=130&type=chunk) - As of July 31, 2023, foreign currency denominated cash and cash equivalents totaled approximately **$221,000**, with a **10%** fluctuation potentially resulting in a **$22,000** gain or loss[130](index=130&type=chunk) - The company does not currently hold or issue foreign exchange contracts or other derivative instruments to hedge these exposures[130](index=130&type=chunk) [Interest Rate Risk](index=39&type=section&id=Interest%20Rate%20Risk) This subsection confirms the company's limited exposure to interest rate risk due to the absence of variable-rate debt. - As of July 31, 2023, the company had no interest-bearing debt with a variable rate, limiting its exposure to interest rate risk[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures, noting a material weakness in internal control over financial reporting. [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This subsection reports on management's assessment of the effectiveness of the company's disclosure controls and procedures. - As of July 31, 2023, management concluded that the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[133](index=133&type=chunk) [Remediation](index=40&type=section&id=Remediation) This subsection outlines the company's ongoing efforts to address identified material weaknesses in internal controls. - The company is implementing a remediation plan to address the material weakness, which will remain unresolved until the applicable controls operate effectively and are tested[134](index=134&type=chunk) [Changes in Internal Control over Financial Reporting](index=40&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This subsection confirms any material changes in the company's internal control over financial reporting during the period. - Other than changes in connection with the remediation plan, there were no material changes in the company's internal control over financial reporting during the quarter ended July 31, 2023[135](index=135&type=chunk) PART II. OTHER INFORMATION This section contains additional information not covered in the financial statements, including legal matters and risk factors. [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms the company is not involved in any material legal proceedings. - The company is not currently a party to any legal proceedings that are believed to have a material adverse effect on its results of operations or financial condition[137](index=137&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section states that there are no material changes to previously disclosed risk factors and acknowledges potential new risks. - There have been no material changes in the company's risk factors from those described in its Annual Report on Form 10-K for the year ended January 31, 2023[138](index=138&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial may also materially adversely affect the business[138](index=138&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the current reporting period. - Not applicable[139](index=139&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current reporting period. - Not applicable[139](index=139&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the current reporting period. - Not applicable[140](index=140&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the current reporting period. - Not applicable[141](index=141&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists all supplementary documents filed with the Form 10-Q. - The exhibits include certifications (31.1, 31.2, 32.1), Inline XBRL Instance Document (101.INS), Taxonomy Extension Schema Document (101.SCH), Calculation Linkbase Document (101.CAL), Definition Linkbase Document (101.DEF), Label Linkbase Document (101.LAB), Presentation Linkbase Document (101.PRE), and Cover Page Interactive Data File (104)[143](index=143&type=chunk)[144](index=144&type=chunk) [Signatures](index=43&type=section&id=Signatures) This section confirms the official signing of the report by the authorized executive. - The report was signed by Robert P. Capps, President and Chief Executive Officer, on September 14, 2023[149](index=149&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) MIND Technology, Inc.'s unaudited financial statements show improved operating income and reduced net loss, despite ongoing liquidity and going concern doubts [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | April 30, 2023 | January 31, 2023 | | :-------------------- | :------------- | :--------------- | | Total Assets | $33,845 | $32,858 | | Total Liabilities | $10,983 | $9,806 | | Total Stockholders' Equity | $22,862 | $23,052 | | Cash and cash equivalents | $815 | $778 | | Accounts receivable, net | $7,390 | $3,993 | | Inventories, net | $14,339 | $15,318 | | Accounts payable | $1,206 | $4,101 | | Note payable, net | $3,139 | — | - Total assets increased by approximately **$1 million**, primarily driven by a significant rise in accounts receivable, while inventories decreased. Total liabilities increased due to a new note payable, and stockholders' equity slightly decreased[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total Revenues | $12,586 | $9,087 | | Total Cost of Sales | $7,169 | $5,798 | | Gross Profit | $5,417 | $3,289 | | Total Operating Expenses | $5,128 | $5,765 | | Operating Income (Loss) | $289 | $(2,476) | | Net Loss from Continuing Operations | $(240) | $(2,805) | | Net Loss Attributable to Common Stockholders | $(1,187) | $(3,366) | | Net Loss per Common Share (Continuing Operations) | $(0.09) | $(0.27) | | Net Loss per Common Share (Total) | $(0.09) | $(0.24) | - The company significantly improved its operating performance, moving from an operating loss of **$(2.48) million** in Q1 2022 to an operating income of **$0.29 million** in Q1 2023, driven by a **38.5% increase in total revenues** and a higher gross profit margin[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(240) | $(2,419) | | Change in cumulative translation adjustment | — | $(3) | | Comprehensive loss | $(240) | $(2,422) | - The comprehensive loss significantly decreased from **$(2.42) million** in Q1 2022 to **$(0.24) million** in Q1 2023, primarily reflecting the improved net loss[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(2,987) | $(3,522) | | Net cash provided by investing activities | $81 | $176 | | Net cash provided by (used in) financing activities | $2,945 | $(948) | | Net increase (decrease) in cash and cash equivalents | $37 | $(4,297) | | Cash and cash equivalents, end of period | $815 | $817 | - Net cash used in operating activities decreased by **$0.54 million** year-over-year. A significant shift in financing activities, from cash used to cash provided, was primarily due to a new short-term loan of **$2.95 million** in Q1 2023, leading to a net increase in cash and cash equivalents[19](index=19&type=chunk)[98](index=98&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balances, January 31, 2023 | Net Loss | Stock-based compensation | Balances, April 30, 2023 | | :-------------------- | :------------------------- | :------- | :----------------------- | :----------------------- | | Total Stockholders' Equity | $23,052 | $(240) | $50 | $22,862 | - Stockholders' equity slightly decreased from **$23.05 million** at January 31, 2023, to **$22.86 million** at April 30, 2023, primarily due to the net loss, partially offset by stock-based compensation[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Organization and Liquidity](index=10&type=section&id=1.%20Organization%20and%20Liquidity) - MIND Technology, Inc. designs, manufactures, and sells proprietary products for the seismic, hydrographic, and offshore industries through its subsidiaries Seamap and Klein. The company has a history of losses and negative operating cash flow, leading to substantial doubt about its ability to continue as a going concern[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - Management has identified several mitigating factors, including **$13.7 million** in working capital as of April 30, 2023, the ability to reduce variable costs, a **$22.6 million** order backlog, the option to defer preferred stock dividends, and potential access to further capital through equity or debt financing[28](index=28&type=chunk)[93](index=93&type=chunk) [2. Basis of Presentation](index=12&type=section&id=2.%20Basis%20of%20Presentation) - The unaudited interim condensed consolidated financial statements are prepared in accordance with SEC rules, with certain information condensed or omitted. These statements should be read in conjunction with the company's Annual Report on Form 10-K for the year ended January 31, 2023[31](index=31&type=chunk) [3. Assets Held for Sale and Discontinued Operations](index=12&type=section&id=3.%20Assets%20Held%20for%20Sale%20and%20Discontinued%20Operations) - The Leasing Business was classified as held for sale on July 27, 2020, and its results were reported as discontinued operations. As of February 1, 2023, discontinued operations were considered materially completed, resulting in no revenue or costs from discontinued operations for the three months ended April 30, 2023[32](index=32&type=chunk)[33](index=33&type=chunk) [4. New Accounting Pronouncements](index=12&type=section&id=4.%20New%20Accounting%20Pronouncements) - The adoption of ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), effective during the three months ended April 30, 2023, did not have a material effect on the Company's financial statements[34](index=34&type=chunk) [5. Revenue from Contracts with Customers](index=13&type=section&id=5.%20Revenue%20from%20Contracts%20with%20Customers) Revenue by Type (in thousands) | Revenue Type (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Total revenue recognized at a point in time | $11,877 | $9,002 | | Total revenue recognized over time | $709 | $85 | | Total revenue from contracts with customers | $12,586 | $9,087 | Revenue by Geography (in thousands) | Revenue by Geography (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | United States | $1,342 | $2,253 | | Europe | $7,035 | $4,612 | | Asia-Pacific | $3,953 | $2,184 | | Other | $256 | $38 | | Total revenue from contracts with customers | $12,586 | $9,087 | - Revenue recognized at a point in time, primarily from product sales, increased significantly. Geographically, Europe and Asia-Pacific saw substantial revenue growth, while U.S. revenue decreased[35](index=35&type=chunk)[36](index=36&type=chunk) [6. Balance Sheet](index=14&type=section&id=6.%20Balance%20Sheet) Inventories (in thousands) | Inventories (in thousands) | April 30, 2023 | January 31, 2023 | | :------------------------- | :------------- | :--------------- | | Raw materials | $8,341 | $8,480 | | Finished goods | $3,657 | $4,156 | | Work in progress | $4,079 | $4,422 | | Total inventories, net | $14,339 | $15,318 | Property and Equipment (in thousands) | Property and equipment (in thousands) | April 30, 2023 | January 31, 2023 | | :------------------------------------ | :------------- | :--------------- | | Cost of property and equipment | $15,146 | $15,134 | | Accumulated depreciation and amortization | $(11,359) | $(11,189) | | Total property and equipment, net | $3,787 | $3,945 | - Net inventories decreased by approximately **$1 million**, with reductions across raw materials, finished goods, and work in progress. Net property and equipment also saw a slight decrease[38](index=38&type=chunk) [7. Leases](index=14&type=section&id=7.%20Leases) Lease Metrics (in thousands) | Lease Metric (in thousands) | April 30, 2023 | January 31, 2023 | | :-------------------------- | :------------- | :--------------- | | Operating lease assets | $1,762 | $1,749 | | Operating lease liabilities | $1,762 | $1,749 | | Current lease liabilities | $753 | $903 | | Non-current lease liabilities | $1,009 | $846 | - Lease expense for the three months ended April 30, 2023, was approximately **$0.22 million**, an increase from **$0.20 million** in the prior year period. The weighted average remaining lease term for operating leases was **1.94 years** with a **13% discount rate**[40](index=40&type=chunk)[41](index=41&type=chunk) [8. Intangible Assets](index=16&type=section&id=8.%20Intangible%20Assets) Intangible Assets Net Carrying Amount (in thousands) | Intangible Asset (in thousands) | Net Carrying Amount (April 30, 2023) | Net Carrying Amount (January 31, 2023) | | :------------------------------ | :----------------------------------- | :------------------------------------- | | Proprietary rights | $3,516 | $3,632 | | Customer relationships | $105 | $130 | | Patents | $450 | $513 | | Trade name | $35 | $37 | | Developed technology | $381 | $417 | | Other | $177 | $202 | | Total intangible assets | $4,664 | $4,931 | - Total net intangible assets decreased from **$4.93 million** to **$4.66 million**. Approximately **$0.92 million** of the gross carrying amount relates to technology development projects not yet completed and thus not amortized. No impairment indicators were identified during the quarter[44](index=44&type=chunk)[45](index=45&type=chunk) Estimated Amortization Expense (in thousands) | Fiscal Year Ending January 31, | Estimated Amortization Expense (in thousands) | | :----------------------------- | :-------------------------------------------- | | 2024 | $757 | | 2025 | $728 | | 2026 | $628 | | 2027 | $349 | | 2028 | $283 | | Thereafter | $996 | | Total | $3,741 | [9. Notes Payable](index=17&type=section&id=9.%20Notes%20Payable) - On February 2, 2023, the company entered into a **$3.75 million** Loan and Security Agreement, due February 1, 2024, bearing interest at **12.9% per annum**. Debt acquisition costs of approximately **$0.81 million** were incurred and are being amortized to interest expense[47](index=47&type=chunk) [10. Income Taxes](index=17&type=section&id=10.%20Income%20Taxes) Income Tax Metrics (in thousands) | Tax Metric (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Income tax expense from continuing operations | $418 | $211 | | Pre-tax income (loss) from continuing operations | $178 | $(2,600) | - The company reported income tax expense despite pre-tax income in Q1 2023 and pre-tax loss in Q1 2022, primarily due to recording valuation allowances against increases in deferred tax assets and permanent differences between book and taxable income[48](index=48&type=chunk)[88](index=88&type=chunk) [11. Earnings per Share](index=17&type=section&id=11.%20Earnings%20per%20Share) - Net loss per common share from continuing operations improved to **$(0.09)** in Q1 2023 from **$(0.27)** in Q1 2022. Dilutive potential common shares were immaterial and anti-dilutive for both periods[13](index=13&type=chunk)[52](index=52&type=chunk) [12. Related Party Transaction](index=17&type=section&id=12.%20Related%20Party%20Transaction) - The company has an equity distribution agreement with Ladenburg Thalmann & Co. Inc., whose Co-Chief Executive Officer is the Non-Executive Chairman of MIND's Board. No shares of Preferred or Common Stock were sold under the ATM Offering Program in Q1 2023 or Q1 2022. The Agent received approximately **$0.05 million** in fees for acting as broker for the **$3.75 million** loan[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [13. Equity and Stock-Based Compensation](index=19&type=section&id=13.%20Equity%20and%20Stock-Based%20Compensation) - As of April 30, 2023, there are approximately **1.68 million** shares of Preferred Stock outstanding with an aggregate liquidation preference of **$43.9 million**, including **$3.8 million** in undeclared cumulative dividends. No quarterly dividend was declared or paid on Preferred Stock for Q1 fiscal 2024, allowing for deferral of future payments[56](index=56&type=chunk) Stock-Based Compensation Expense (in thousands) | Metric (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Stock-based compensation expense | $50 | $236 | [14. Segment Reporting](index=19&type=section&id=14.%20Segment%20Reporting) - The company operates in two segments: Seamap (seismic exploration equipment) and Klein (sonar equipment). Segment reporting was restated for Q1 2022 to correct a misapplication of ASC 280[58](index=58&type=chunk)[59](index=59&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) Segment Performance (in thousands) | Segment (in thousands) | Revenues (Q1 2023) | Revenues (Q1 2022) | Operating Income (Loss) (Q1 2023) | Operating Income (Loss) (Q1 2022) | | :--------------------- | :----------------- | :----------------- | :-------------------------------- | :-------------------------------- | | Seamap Marine Products | $10,597 | $8,079 | $2,720 | $1,431 | | Klein Marine Products | $2,330 | $1,122 | $(131) | $(1,180) | | Corporate expenses | - | - | $(2,300) | $(2,727) | | Consolidated | $12,586 | $9,087 | $289 | $(2,476) | - Both Seamap and Klein segments showed significant revenue growth and improved operating income/reduced losses year-over-year, contributing to the overall consolidated operating income[60](index=60&type=chunk)[61](index=61&type=chunk) [Cautionary Statement about Forward-Looking Statements](index=21&type=section&id=Cautionary%20Statement%20about%20Forward-Looking%20Statements) - This section warns readers that the report contains forward-looking statements based on current expectations and beliefs, which involve significant risks and uncertainties that could cause actual results to differ materially. Key risk factors include the ability to continue as a going concern, supply chain disruptions, increased competition, and geopolitical events[64](index=64&type=chunk)[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, and outlook, highlighting improved operating income but ongoing liquidity concerns [Overview](index=22&type=section&id=Overview) - MIND Technology operates in two segments: Seamap (seismic exploration equipment) and Klein (sonar equipment), serving oceanographic, hydrographic, defense, seismic, and maritime security industries. Management monitors EBITDA and Adjusted EBITDA as key performance and liquidity indicators[67](index=67&type=chunk)[69](index=69&type=chunk)[72](index=72&type=chunk) Key Performance Indicators (in thousands) | Metric (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss from continuing operations | $(240) | $(2,805) | | EBITDA (loss) from continuing operations | $863 | $(2,115) | | Adjusted EBITDA (loss) from continuing operations | $913 | $(1,879) | - EBITDA from continuing operations significantly improved to **$0.86 million** in Q1 2023 from a loss of **$(2.12) million** in Q1 2022, reflecting the improved operating results[70](index=70&type=chunk) [Business Outlook](index=24&type=section&id=Business%20Outlook) - The company's financial performance has improved significantly, with positive operating income in the last two fiscal quarters, attributed to increased market demand, alleviation of pandemic impacts, and cost reduction efforts[73](index=73&type=chunk) - Order backlog increased to approximately **$22.6 million** as of April 30, 2023, up from **$20.7 million** at January 31, 2023, and **$13.4 million** at April 30, 2022, indicating increased demand[74](index=74&type=chunk) - Strategic initiatives include applying Automatic Target Recognition (ATR) to sonar systems, developing Synthetic Aperture Sonar (SAS), adapting SeaLink technology for alternative applications (windfarms, carbon capture), and passive sonar arrays for maritime security[77](index=77&type=chunk) - The company implemented price increases (**5% to 20%**) for most products in Q1 fiscal 2023 to offset rising costs due to inflation and supply chain issues[79](index=79&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) - Total revenues for the three months ended April 30, 2023, were **$12.59 million**, a **38.5% increase** from **$9.09 million** in the prior year, leading to an operating income of **$0.29 million** compared to an operating loss of **$(2.5) million**[81](index=81&type=chunk) [Revenues and Cost of Sales](index=26&type=section&id=Revenues%20and%20Cost%20of%20Sales) Segment Revenues, Gross Profit, and Margins (in thousands) | Segment (in thousands) | Revenues (Q1 2023) | Revenues (Q1 2022) | Gross Profit (Q1 2023) | Gross Profit (Q1 2022) | Gross Profit Margin (Q1 2023) | Gross Profit Margin (Q1 2022) | | :--------------------- | :----------------- | :----------------- | :--------------------- | :--------------------- | :---------------------------- | :---------------------------- | | Seamap | $10,597 | $8,079 | $4,536 | $3,022 | 43% | 37% | | Klein | $2,330 | $1,122 | $881 | $267 | 38% | 24% | | Consolidated | $12,586 | $9,087 | $5,417 | $3,289 | 43% | 36% | - Both Seamap and Klein segments experienced significant revenue growth and improved gross profit margins, driven by a favorable mix of higher-margin products, increased manufacturing activity, and price increases[82](index=82&type=chunk)[83](index=83&type=chunk) [Operating Expenses](index=26&type=section&id=Operating%20Expenses) Operating Expenses (in thousands) | Expense (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Selling, general and administrative | $3,874 | $4,272 | | Research and development | $773 | $1,014 | | Depreciation and amortization | $481 | $479 | - Selling, general and administrative expenses decreased due to headcount reductions and cost control measures. Research and development costs also decreased, while depreciation and amortization remained consistent[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Other Expense](index=26&type=section&id=Other%20Expense) - Other expense in Q1 2023 was primarily due to **$0.20 million** in interest expense from the new short-term loan, partially offset by **$0.14 million** in gains from equipment sales[87](index=87&type=chunk) [Provision for Income Taxes](index=26&type=section&id=Provision%20for%20Income%20Taxes) - The company reported income tax expense of **$0.42 million** on pre-tax income of **$0.18 million** in Q1 2023, and **$0.21 million** on a pre-tax loss of **$2.6 million** in Q1 2022. This is mainly due to valuation allowances against deferred tax assets and permanent differences[88](index=88&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - The company has a history of operating losses and negative cash flow, relying on asset sales and equity issuance. Substantial doubt exists regarding its ability to meet obligations over the next twelve months[89](index=89&type=chunk)[90](index=90&type=chunk) - Mitigating factors include **$13.7 million** in working capital (as of April 30, 2023), a **$22.6 million** order backlog, the ability to reduce variable costs, and the option to defer preferred stock dividends. The company also has authorized but unissued shares of Preferred and Common Stock for potential capital raising[93](index=93&type=chunk)[90](index=90&type=chunk) - Working capital requirements are increasing due to rising sales, production activities, component shortages, long lead times, and supplier prepayment demands. The company is exploring additional capital sources, including equity or debt financing, asset sales, or strategic investments[92](index=92&type=chunk)[94](index=94&type=chunk) Cash Flow Summary (in thousands) | Cash Flow (in thousands) | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :----------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(2,987) | $(3,522) | | Net cash provided by investing activities | $81 | $176 | | Net cash provided by (used in) financing activities | $2,945 | $(948) | | Net increase (decrease) in cash and cash equivalents | $37 | $(4,297) | - Net cash used in operating activities decreased, while financing activities shifted to a net cash provided position due to a **$2.9 million** short-term loan in Q1 2024[96](index=96&type=chunk)[98](index=98&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company does not have any off-balance sheet arrangements[101](index=101&type=chunk) [Critical Accounting Estimates](index=30&type=section&id=Critical%20Accounting%20Estimates) - There have been no material changes to the company's critical accounting estimates during the three-month period ended April 30, 2023, as detailed in the Annual Report on Form 10-K[102](index=102&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's market risk exposure, primarily foreign currency fluctuations, with no interest rate risk from variable-rate debt or derivative use [Foreign Currency Risk](index=30&type=section&id=Foreign%20Currency%20Risk) - The company is exposed to foreign currency risk from transactions denominated in British pounds, Singapore dollars, and European Union euros. As of April 30, 2023, foreign currency denominated cash and cash equivalents totaled approximately **$0.28 million**. A **10% change** in the U.S. dollar exchange rate would result in a gain or loss of approximately **$0.03 million**[104](index=104&type=chunk) [Interest Rate Risk](index=30&type=section&id=Interest%20Rate%20Risk) - As of April 30, 2023, the company had no interest-bearing debt with a variable rate, thus no exposure to interest rate risk[106](index=106&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management deemed disclosure controls ineffective due to an unresolved material weakness in internal control over financial reporting, with a remediation plan underway [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The principal executive and financial officers concluded that disclosure controls and procedures were not effective as of April 30, 2023, due to a material weakness in internal control over financial reporting previously disclosed in the Annual Report on Form 10-K[107](index=107&type=chunk) [Remediation](index=32&type=section&id=Remediation) - A remediation plan is being implemented to address the material weakness, which will remain unresolved until the controls operate effectively for a sufficient period and are tested[108](index=108&type=chunk) [Changes in Internal Control over Financial Reporting](index=32&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - Other than changes related to the remediation plan, there were no material changes in the system of internal control over financial reporting during the quarter ended April 30, 2023[109](index=109&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to materially adversely affect its operations or financial condition - The company is not currently involved in any legal proceedings that are individually or collectively material or could have a material adverse effect on its results of operations or financial condition[111](index=111&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the company's risk factors from those described in its Annual Report on Form 10-K for the year ended January 31, 2023 - No material changes have occurred in the company's risk factors from those described in its Annual Report on Form 10-K for the year ended January 31, 2023[112](index=112&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the current reporting period - This item is marked as 'Not applicable'[113](index=113&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current reporting period - This item is marked as 'Not applicable'[113](index=113&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the current reporting period - This item is marked as 'Not applicable'[114](index=114&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the current reporting period - This item is marked as 'Not applicable'[115](index=115&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, agreements, certifications, and XBRL data - The exhibits include the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation and Bylaws, Certificates of Designations for Preferred Stock, Loan and Security Agreement, and certifications from the CEO and CFO[117](index=117&type=chunk) [Signatures](index=35&type=section&id=Signatures) The report is duly signed on behalf of MIND Technology, Inc. by its President and Chief Executive Officer - The report is signed by Robert P. Capps, President and Chief Executive Officer, on June 14, 2023[122](index=122&type=chunk)

1 Fiscal Fourth Quarter Highlights 5 • Liquidity demands • In business more than 50 years RE THINKING. LEADING TECI MOTIVATE I INNOVATE I NAVIGATE I DISCOVER 17 • Re-using our commercial streamer technology for military ASW and maritime security markets FUTURE THINKING. LEADING TECHNOLOGIES. • Order and inquiry activity continues to be encouraging Quarterly Revenue Trend d Primary Products and Technology Growth Drivers Passive Sea Serpent – ASW and Maritime Security • Exclusively for Klein side scan sonars ...

[Cautionary Statement about Forward-Looking Statements](index=5&type=section&id=Cautionary%20Statement%20about%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to risks and uncertainties, cautioning readers against undue reliance - The report contains forward-looking statements regarding future results, financial position, business strategy, and objectives, which are subject to significant risks and uncertainties that could cause actual results to differ materially from expectations[12](index=12&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which are based on current expectations and beliefs and are qualified by the risk factors described in Item 1A[12](index=12&type=chunk) PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) MIND Technology, Inc. provides technology to marine exploration, survey, and security industries, restructuring segments and exiting land-based seismic leasing [Business Overview and Segments](index=6&type=section&id=Business%20Overview%20and%20Segments) MIND Technology, Inc. supplies technology globally to marine exploration, survey, and security markets, reorganizing into Seamap and Klein Marine Products while exiting land-based seismic leasing - MIND Technology, Inc. provides technology to the oceanographic, hydrographic, defense, seismic, and maritime security industries, with global operations in the US, Singapore, Malaysia, and the UK[15](index=15&type=chunk) - Effective January 31, 2023, the company split its Marine Technology Products Segment into Seamap Marine Products and Klein Marine Products to better reflect operations, while continuing to exit the land-based seismic equipment leasing business[16](index=16&type=chunk) - The company's strategy focuses on three core markets: Marine Exploration, Marine Survey, and Maritime Security, serving customers including marine survey companies, seismic contractors, governmental organizations, and navies[18](index=18&type=chunk) [Seamap Marine Products Business](index=6&type=section&id=Seamap%20Marine%20Products%20Business) Seamap designs, manufactures, and sells specialized marine seismic equipment for energy exploration, ocean bottom surveys, and defense applications - Seamap designs, manufactures, and sells specialized marine seismic equipment, including GunLink™ seismic source acquisition and control systems, BuoyLink™ RGPS tracking systems, and SeaLink™ marine sensors and solid streamer systems[17](index=17&type=chunk)[20](index=20&type=chunk) - Applications for Seamap products include marine seismic surveys for energy exploration, ocean bottom surveys, research activities, and potential defense and maritime security applications[20](index=20&type=chunk) [Klein Marine Products Business](index=6&type=section&id=Klein%20Marine%20Products%20Business) Klein designs, manufactures, and sells high-performance side scan sonar and water-side security systems for hydrographic surveys, mine countermeasures, and underwater object detection - Klein designs, manufactures, and sells high-performance side scan sonar and water-side security systems globally[17](index=17&type=chunk)[21](index=21&type=chunk) - Klein's sonar products are used in hydrographic surveys, naval mine countermeasure operations, search and recovery, ocean bottom profiling, and underwater object detection[21](index=21&type=chunk) [Discontinued Operations](index=8&type=section&id=Discontinued%20Operations) The company is exiting the land-based seismic equipment leasing business, having sold most assets and planning to reinvest proceeds into continuing operations - The company is exiting the land-based seismic equipment leasing business, which included various electronic components, geophones, and cables, and has sold the majority of this equipment[16](index=16&type=chunk)[26](index=26&type=chunk)[28](index=28&type=chunk) - Proceeds from the sale of remaining lease pool equipment, which are not expected to be material, will be reinvested into continuing operations[28](index=28&type=chunk) [Technology Overview](index=8&type=section&id=Technology%20Overview) This section details the company's seismic and side scan sonar technologies, used in marine, land, and military applications for exploration, surveying, and object detection - Seismic technology, including digital seismic recording systems and acoustic sensors, is used in marine and land applications such as hydrographic surveys, civil engineering, mining, oil and gas exploration, and military/security applications like anti-submarine warfare[29](index=29&type=chunk)[30](index=30&type=chunk) - Side scan sonar systems detect and identify underwater objects by transmitting sound energy and processing echoes into 2D images of the ocean bottom, with advanced models incorporating bathymetry and sub-seafloor profiling[31](index=31&type=chunk) - Side scan sonar technology is utilized by governmental and military organizations, port authorities, emergency services, offshore operators, universities, and marine survey/salvage companies for diverse applications[32](index=32&type=chunk) [Business and Operations Details](index=10&type=section&id=Business%20and%20Operations%20Details) This section outlines key products for Seamap (seismic source systems, streamers) and Klein (side scan sonar, SAS, Spectral Ai software), including related services and technological advancements - Seamap's key products include GunLink seismic source systems, BuoyLink RGPS tracking, Sleeve Gun energy sources, and SeaLink towed seismic streamer systems, along with repair, engineering, and training services[36](index=36&type=chunk) - Klein offers an extensive product line of multi-beam and single-beam side scan sonar systems for applications like portable search and recovery, naval mine warfare, and bathymetry, featuring patented MA-X™ technology to address nadir gaps[40](index=40&type=chunk) - Klein is jointly developing Synthetic Aperture Sonar (SAS) systems with a European defense contractor and has introduced Spectral Ai™, a software suite for side scan sonar data with automatic target recognition[41](index=41&type=chunk)[43](index=43&type=chunk) [Customers, Sales, Backlog and Marketing](index=11&type=section&id=Customers%2C%20Sales%2C%20Backlog%20and%20Marketing) The company faces significant customer concentration, with a **$20.7 million** backlog as of January 31, 2023, and diverse geographic revenue contributions - Customer concentration is significant, with the single largest customer accounting for **17% of consolidated revenues in fiscal 2023** (**23% in fiscal 2022**), and the top five customers accounting for **47% in fiscal 2023**[47](index=47&type=chunk) Consolidated Revenues by Geographic Region (in thousands) | Geographic Region | 2023 | 2022 | | :---------------- | :--- | :--- | | United States | $6,918 | $2,409 | | Europe | $14,814 | $8,821 | | Asia/South Pacific| $12,876 | $11,244 | | Other | $483 | $633 | | **Total** | **$35,091** | **$23,107** | - As of January 31, 2023, the collective backlog for Seamap and Klein businesses was approximately **$20.7 million**, a **58% increase** from **$13.1 million** at January 31, 2022, expected to be fulfilled in fiscal 2024[49](index=49&type=chunk) [Competition](index=13&type=section&id=Competition) The company competes with other marine equipment manufacturers based on technical capability, reliability, price, delivery, and service, some with greater financial resources - The company competes with other manufacturers of marine seismic, hydrographic, and oceanographic equipment based on technical capability, reliability, price, delivery terms, and service, with some competitors having substantially greater financial resources[55](index=55&type=chunk) [Suppliers](index=13&type=section&id=Suppliers) The company sources parts globally, with certain solid streamer materials from a sole source, and is exploring supply diversification - The company sources parts and components globally, with certain materials for solid streamer products obtained from a sole source, and is exploring options to diversify supply[58](index=58&type=chunk) [Employees](index=13&type=section&id=Employees) As of January 31, 2023, the company employed approximately **190** non-unionized full-time individuals, maintaining satisfactory employee relations - As of January 31, 2023, the company employed approximately **190** full-time individuals, none of whom were unionized, and considers employee relations satisfactory[59](index=59&type=chunk) [Intellectual Property](index=13&type=section&id=Intellectual%20Property) The company protects its intellectual property through patents, copyrights, trademarks, trade secrets, and confidentiality agreements, including acquired technologies - The company relies on patents, copyrights, trademarks, trade secrets, and confidentiality agreements to protect its intellectual property, including acquired patents for energy source controllers, hydrophones, and MA-X technology[59](index=59&type=chunk) [Governmental Environmental Regulation](index=14&type=section&id=Governmental%20Environmental%20Regulation) The company is subject to stringent environmental and worker safety regulations, with potential for significant compliance costs and impacts from new climate-related laws - The company is subject to stringent environmental and worker safety regulations in the US and other countries, requiring permits, imposing safety criteria, and potentially leading to significant costs for compliance or remediation[61](index=61&type=chunk) - New environmental laws, especially those related to climate change or hydraulic fracturing, could reduce demand for certain products and materially affect the business[63](index=63&type=chunk) [Available Information](index=15&type=section&id=Available%20Information) The company's SEC filings, including 10-K, 10-Q, and 8-K reports, are accessible on its website and the SEC's website - The company's SEC filings, including 10-K, 10-Q, and 8-K reports, are available free of charge on its website (https://www.mind-technology.com) and the SEC's website (https://www.sec.gov)[65](index=65&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including going concern uncertainty, customer concentration, supply chain, and financial market volatility [Risks Related to Our Financial Condition](index=16&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition) The company's history of operating losses and negative cash flows raises substantial doubt about its ability to continue as a going concern - The company has a history of operating losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern, which could impact capital financing and stock prices[70](index=70&type=chunk) [Risks Related to the Operation of Our Business](index=16&type=section&id=Risks%20Related%20to%20Our%20Business) Operational risks include significant customer concentration, high exposure to foreign markets, reliance on limited suppliers, and sensitivity to volatile oil and gas prices and geopolitical events - A limited number of customers account for a significant portion of revenues (single largest: **17% in FY23**, **23% in FY22**; top five: **47% in FY23**), making the company vulnerable to the loss or decreased demand from these customers[71](index=71&type=chunk) - Approximately **80% of revenues in fiscal 2023** (**90% in fiscal 2022**) were from foreign customers, exposing the company to risks like government instability, expropriation, currency fluctuations, export controls, and international taxation[74](index=74&type=chunk)[75](index=75&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk) - The company relies on a limited number of suppliers for critical components, including sole-source vendors, which poses risks of supply disruptions, increased costs, and inability to meet customer demands, especially with global shortages like semiconductors[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) - Demand for products is significantly impacted by volatile oil and gas prices, as well as broader geopolitical events, inflation, and trade restrictions, which can increase operating costs and reduce customer capital spending[98](index=98&type=chunk)[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[104](index=104&type=chunk) [Risks Related to Human Capital Management](index=32&type=section&id=Risks%20Related%20to%20Human%20Capital%20Management) Anticipated growth places significant demands on personnel and management, requiring continuous improvement in systems and recruitment of qualified staff - The company's anticipated growth places significant demands on personnel and management, requiring continuous improvement in systems and recruitment of qualified staff, with potential difficulties leading to operational mistakes or loss of business opportunities[143](index=143&type=chunk) - Success depends on retaining key management and attracting other qualified personnel, a challenge given competition from larger companies with greater financial resources[144](index=144&type=chunk)[145](index=145&type=chunk) [Risks Related to Our Common and Preferred Stock](index=33&type=section&id=Risks%20Related%20to%20Our%20Common%20and%20Preferred%20Stock) Stock prices are subject to volatility, with a risk of Nasdaq delisting and deferred preferred stock dividends impacting common stock dividends and governance - The company's stock prices are subject to volatility influenced by operating results, competitor performance, strategic announcements, and global market conditions, which could impede fundraising and talent attraction[148](index=148&type=chunk)[149](index=149&type=chunk) - The company faces a risk of delisting from Nasdaq due to not maintaining a minimum bid price, which could adversely affect stock value, liquidity, and ability to obtain financing[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - The company has deferred payment of dividends on its Series A Preferred Stock for multiple quarters, which restricts its ability to pay common stock dividends and could grant preferred stockholders the right to appoint directors[156](index=156&type=chunk) [Risks Related to Our Indebtedness](index=35&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) The company's ability to service debt depends on future performance and cash generation, with refinancing or asset sale difficulties posing adverse effects - The company's ability to service its debt obligations depends on future performance and cash generation, with potential inability to refinance or sell assets on favorable terms posing a material adverse effect[165](index=165&type=chunk) [Internal Control Over Financial Reporting](index=35&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) A material weakness in internal control over financial reporting was identified due to insufficient review of operating segment aggregation, leading to a restatement of fiscal 2022 segment information - As of January 31, 2023, management identified a material weakness in internal control over financial reporting due to insufficient review of operating segment aggregation, leading to a misapplication of ASC 280 and restatement of fiscal 2022 segment information[162](index=162&type=chunk) - Failure to remediate this material weakness or the occurrence of new deficiencies could lead to material misstatements, restatements, and a loss of investor confidence[164](index=164&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - The company has no unresolved staff comments[166](index=166&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) The company occupies principal facilities in the United States, Singapore, UK, and Malaysia, deemed adequately utilized for continuing operations Principal Facilities (as of January 31, 2023) | Location | Type of Facility | Size (in square feet) | Owned or Leased | | :------------------------ | :-------------------- | :-------------------- | :-------------- | | Huntsville, Texas | Office and warehouse | 25,000 (on six acres) | Owned | | The Woodlands, Texas | Office | 5,800 | Leased | | Singapore | Office and warehouse | 20,000 | Leased | | Shepton Mallet, United Kingdom | Office and warehouse | 10,000 | Leased | | Iskandar Puteri, Johor, Malaysia | Office and warehouse | 76,700 | Leased | | Salem, New Hampshire | Office and warehouse | 57,900 (on 23.6 acres)| Owned | - Approximately **8,500 square feet** of the Salem, New Hampshire facility is subleased to unrelated third parties[167](index=167&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings expected to have a material adverse effect on its operations or financial condition - The company is not currently involved in any legal proceedings that are believed to have a material adverse effect on its results of operations or financial condition[168](index=168&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable[169](index=169&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Common Stock trades on NASDAQ, with no cash dividends paid since inception, and deferred dividends on Series A Preferred Stock totaling approximately **$3.8 million** - Common Stock is traded on NASDAQ under the symbol 'MIND', with approximately **3,700 beneficial holders** as of April 28, 2023[172](index=172&type=chunk) - No cash dividends have been paid on Common Stock since inception, and none are anticipated in the foreseeable future, with future earnings intended to support operations and growth[153](index=153&type=chunk)[173](index=173&type=chunk) - The company deferred quarterly dividends on its Series A Preferred Stock for the second, third, and fourth quarters of fiscal 2023 and the first quarter of fiscal 2024, with total undeclared dividends amounting to approximately **$3.8 million**[174](index=174&type=chunk) [Item 6. [Reserved]](index=37&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - Item 6 is reserved[178](index=178&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2023 saw improved financial results with increased revenue and reduced operating loss, but net loss and negative cash flow persist, raising going concern doubts [Overview](index=37&type=section&id=Overview) The company reorganized its Marine Technology Products segment into Seamap and Klein Marine Products, while continuing to exit the land-based seismic equipment leasing business - Effective January 31, 2023, the company reorganized its Marine Technology Products segment into two distinct segments: Seamap Marine Products and Klein Marine Products, while continuing to exit the land-based seismic equipment leasing business[178](index=178&type=chunk) Operating Information of Continuing Operations (in thousands) | Metric | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Revenues: Sale of marine technology products | $35,091 | $23,107 | | Total revenues | $35,091 | $23,107 | | Cost of sales: Sale of marine technology products | $22,116 | $17,085 | | Total cost of sales | $22,116 | $17,085 | | Gross profit | $12,975 | $6,022 | | Operating expenses: Selling, general and administrative | $15,304 | $14,761 | | Operating expenses: Research and development | $3,398 | $3,596 | | Operating expenses: Depreciation and amortization | $1,887 | $2,209 | | Total operating expenses | $20,589 | $20,566 | | Operating loss | $(7,614) | $(14,544) | Reconciliation of Net Loss from Continuing Operations to EBITDA and Adjusted EBITDA (in thousands) | Metric | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Net loss from continuing operations | $(7,431) | $(13,579) | | Interest expense, net | $4 | — | | Depreciation and amortization | $1,887 | $2,209 | | Provision (benefit) for income taxes | $699 | $(39) | | **EBITDA from continuing operations** | **$(4,841)** | **$(11,409)** | | Non-cash foreign exchange losses | — | $163 | | Stock-based compensation | $654 | $643 | | **Adjusted EBITDA from continuing operations** | **$(4,187)** | **$(10,603)** | [Business Outlook](index=41&type=section&id=Business%20Outlook) The company's financial results improved in fiscal 2023, with favorable economic trends driving demand and a **$20.7 million** backlog, expecting revenue growth and potential net income in fiscal 2024 - The company's financial results improved in fiscal 2023 compared to fiscal 2022, with general economic and geopolitical trends now more favorable, driving demand in marine seismic, marine survey (alternative energy projects), and defense/maritime security markets[188](index=188&type=chunk)[189](index=189&type=chunk) - As of January 31, 2023, the backlog of firm orders for Seamap and Klein was approximately **$20.7 million**, a **58% increase** from **$13.1 million** in the prior year, with an additional **$7.0 million** in new orders received subsequent to January 31, 2023[190](index=190&type=chunk) - The company expects revenue in fiscal 2024 to exceed fiscal 2023, potentially leading to net income from continuing operations, but acknowledges risks such as customer activity delays, supply chain disruptions, and geopolitical uncertainties[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Strategic initiatives include developing sonar systems for unmanned vehicles, SAS sonar systems, Sea Serpent passive sonar arrays, and Spectral Ai software, aiming to expand addressable markets and drive growth[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) [Results of Continuing Operations](index=44&type=section&id=Results%20of%20Continuing%20Operations) Operating losses improved from approximately **$14.5 million** in fiscal 2022 to **$7.6 million** in fiscal 2023, primarily due to significant revenue increases and improved gross profit margins - Operating losses improved from approximately **$14.5 million in fiscal 2022** to **$7.6 million in fiscal 2023**, primarily due to significant revenue increases in both Seamap and Klein product lines[203](index=203&type=chunk) Revenues and Cost of Sales from Continuing Operations (in thousands) | Segment | 2023 Revenues | 2022 Revenues | 2023 Cost of Sales | 2022 Cost of Sales | | :-------- | :------------ | :------------ | :----------------- | :----------------- | | Seamap | $25,012 | $17,294 | $15,537 | $11,735 | | Klein | $10,555 | $5,825 | $7,055 | $5,362 | | Intra-segment sales | $(476) | $(12) | $(476) | $(12) | | **Total** | **$35,091** | **$23,107** | **$22,116** | **$17,085** | - Gross profit increased from **$6.0 million** (**26% margin**) in fiscal 2022 to **$13.0 million** (**37% margin**) in fiscal 2023, driven by higher revenue and improved absorption of fixed costs[204](index=204&type=chunk) - Selling, general and administrative expenses increased by **3% to $15.3 million** in fiscal 2023 due to higher convention expenses, while research and development costs decreased by **5% to $3.4 million**[206](index=206&type=chunk)[207](index=207&type=chunk) [Results of Discontinued Operations](index=47&type=section&id=Results%20of%20Discontinued%20Operations) The company recorded no revenue from discontinued operations in fiscal 2023, a decrease from **$878,000** in fiscal 2022, as equipment leasing activity ceased - The company recorded no revenue from discontinued operations in fiscal 2023, a decrease from **$878,000 in fiscal 2022**, as all equipment leasing activity ceased by July 31, 2021[217](index=217&type=chunk) Results of Discontinued Operations (in thousands) | Metric | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Revenues: Equipment leasing | — | $878 | | Cost of sales: Direct costs-equipment leasing | $91 | $993 | | Gross (loss) profit | $(91) | $(115) | | Operating expenses: Selling, general and administrative | $765 | $1,622 | | Operating expenses: Recovery of doubtful accounts | — | $(450) | | Operating expenses: Depreciation and amortization | — | $5 | | Total operating expenses | $765 | $1,177 | | Operating loss | $(856) | $(1,292) | | Other (expense) income | $(545) | $93 | | Loss before income taxes | $(1,401) | $(1,199) | | Provision for income taxes | — | $(307) | | **Net loss** | **$(1,401)** | **$(1,506)** | - Selling, general and administrative costs for the Leasing Business decreased to **$765,000 in fiscal 2023** from **$1.6 million in fiscal 2022**, primarily due to headcount reductions and declining business activity[218](index=218&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) Despite improved operating results, the company reported a net loss and negative cash flow, raising going concern doubts, but has mitigating factors including **$13.3 million** working capital and a **$20.7 million** backlog - The company's operating results improved in fiscal 2023 but still generated a net loss and negative cash flow from operations, leading to substantial doubt about its ability to continue as a going concern[224](index=224&type=chunk) - Mitigating factors include **$13.3 million** in working capital (including **$778,000 cash**) as of January 31, 2023, plans to reduce costs if revenues fall, a **$20.7 million** order backlog, and the option to defer Preferred Stock dividends[225](index=225&type=chunk) Selected Historical Cash Flows (in thousands) | Cash Flow Activity | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Net cash used in operating activities | $(2,905) | $(17,134) | | Net cash provided by investing activities | $470 | $5,364 | | Net cash (used in) provided by financing activities | $(1,895) | $12,187 | | Effect of changes in foreign exchange rates on cash and cash equivalents | $(6) | $86 | | **Net (decrease) increase in cash and cash equivalents** | **$(4,336)** | **$503** | - As of January 31, 2023, the company had no funded debt, but subsequently entered into a **$3.75 million** Loan and Security Agreement on February 2, 2023, due February 1, 2024, bearing **12.9% interest**[234](index=234&type=chunk)[235](index=235&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements as defined by Regulation S-K - The company does not have any off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of Regulation S-K[239](index=239&type=chunk) [Critical Accounting Estimates](index=52&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include allowances for uncollectible accounts and inventory obsolescence, intangible asset impairment, and valuation allowances for deferred tax assets - Critical accounting estimates include allowances for uncollectible accounts receivable and inventory obsolescence, useful lives and impairment assessments of intangible assets, and the need for a valuation allowance related to deferred tax assets and uncertain tax positions[240](index=240&type=chunk)[241](index=241&type=chunk) - For fiscal 2023, the inventory obsolescence reserve for continuing operations increased by approximately **$445,000**, compared to **$921,000 in fiscal 2022**[243](index=243&type=chunk) - No impairment charges were recorded for long-lived or intangible assets in fiscal 2023 or 2022, as management determined no indicators of impairment were present[245](index=245&type=chunk) [Significant Accounting and Disclosure Changes](index=53&type=section&id=Significant%20Accounting%20and%20Disclosure%20Changes) The company has not adopted any new accounting pronouncements, and no new pronouncements are applicable to its operations - The company has not adopted any new accounting pronouncements, and there are no new pronouncements applicable to the company[344](index=344&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not required for smaller reporting companies - Quantitative and Qualitative Disclosures about Market Risk are not required under Item 305 Regulation S-K for smaller reporting companies[250](index=250&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The required financial statements and supplementary data are incorporated by reference and appear starting on page F-1 - The financial statements and supplementary data are presented starting on page F-1 (page 62 of the document)[251](index=251&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=53&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in and disagreements with accountants on accounting and financial disclosure[252](index=252&type=chunk) [Item 9A. Controls and Procedures](index=54&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of January 31, 2023, the company's disclosure controls were ineffective due to a material weakness in operating segment aggregation review, though a prior weakness in revenue recognition was remediated [Evaluation of Disclosure Controls and Procedures](index=54&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) A material weakness in disclosure controls was identified due to insufficient review of operating segment aggregation, despite management's conclusion that financial statements are fairly presented - As of January 31, 2023, management identified a material weakness in disclosure controls and procedures due to insufficient review of operating segment aggregation, leading to a misapplication of ASC 280, Segment Reporting[254](index=254&type=chunk) - Despite the material weakness, management concluded that the financial statements in the 10-K fairly present the company's financial position, results of operations, and cash flows[255](index=255&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=54&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management assessed internal control over financial reporting as ineffective due to a material weakness related to insufficient review of operating segment aggregation - Management assessed the effectiveness of internal control over financial reporting as of January 31, 2023, and identified a material weakness related to insufficient review of operating segment aggregation (ASC 280), resulting in the determination that internal control was not effective[257](index=257&type=chunk) [Remediation Plan for the Material Weakness in Internal Control over Financial Reporting](index=54&type=section&id=Remediation%20Plan%20for%20the%20Material%20Weakness%20in%20Internal%20Control%20over%20Financial%20Reporting) The company plans to reinforce executive-level review of technical accounting matters to address the material weakness in segment aggregation review - To address the material weakness in segment aggregation review, the company plans to reinforce an executive-level review of technical accounting matters[258](index=258&type=chunk) [Remediation of the Material Weakness in Internal Control over Financial Reporting](index=54&type=section&id=Remediation%20of%20the%20Material%20Weakness%20in%20Internal%20Control%20over%20Financial%20Reporting) A previously disclosed material weakness related to revenue recognition for bill-and-hold transactions was successfully remediated during fiscal 2023 - A previously disclosed material weakness related to revenue recognition for bill-and-hold transactions (ASC 606) was remediated during fiscal 2023 through reinforced policies, data accumulation procedures, adequate review of transfer of control criteria, and comparison of prior transactions[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk) [Changes in Internal Control over Financial Reporting](index=55&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended January 31, 2023, except for segment activity presentation and the remediation plan - Except for changes related to segment activity presentation and the remediation plan, there were no other material changes in internal control over financial reporting during the quarter ended January 31, 2023[262](index=262&type=chunk) [Item 9B. Other Information](index=55&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item - There is no other information to report[263](index=263&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection](index=55&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspection) There are no disclosures regarding foreign jurisdictions that prevent inspection - There are no disclosures regarding foreign jurisdictions that prevent inspection[264](index=264&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=56&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 Annual Meeting of Stockholders proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[267](index=267&type=chunk) - The company has adopted a Code of Business Conduct and Ethics, applicable to senior financial officers, available on its website and upon written request[268](index=268&type=chunk) [Item 11. Executive Compensation](index=56&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2023 Annual Meeting of Stockholders proxy statement - Information on executive compensation is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[269](index=269&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=56&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the 2023 Annual Meeting of Stockholders proxy statement - Information on security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[270](index=270&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=56&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Annual Meeting of Stockholders proxy statement - Information on certain relationships and related transactions, and director independence, is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[271](index=271&type=chunk) [Item 14. Principal Accounting Fees and Services](index=56&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the 2023 Annual Meeting of Stockholders proxy statement - Information on principal accounting fees and services is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[272](index=272&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=57&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of this Form 10-K, including agreements and certifications - The financial statements filed as part of this Form 10-K are listed in the 'Index to Consolidated Financial Statements' on page F-1 (page 62 of the document)[273](index=273&type=chunk) - The section includes a detailed list of exhibits, such as merger agreements, certificates of incorporation, stock awards plans, employment agreements, and certifications[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) [Item 16. Form 10K Summary](index=60&type=section&id=Item%2016.%20Form%2010K%20Summary) This item is not applicable - Form 10-K Summary is not applicable[278](index=278&type=chunk) [Signatures](index=61&type=section&id=Signatures) The report is duly signed on behalf of MIND Technology, Inc. by its President, CEO, and Director, Robert P. Capps, and other authorized persons as of May 1, 2023 - The report is signed by Robert P. Capps, President, Chief Executive Officer and Director (Principal Executive Officer), and other key personnel including Mark A. Cox, Chief Financial Officer, and members of the Board of Directors, on May 1, 2023[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) [INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](index=62&type=section&id=INDEX%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This index lists the Report of Independent Registered Public Accounting Firm, Consolidated Financial Statements, and Notes to Consolidated Financial Statements - The index lists the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Comprehensive Loss, Changes in Stockholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements[285](index=285&type=chunk) [Report of Independent Registered Public Accounting Firm](index=63&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Moss Adams LLP issued an unqualified opinion on the consolidated financial statements, highlighting a 'Going Concern Uncertainty' but identifying no critical audit matters - Moss Adams LLP, the independent registered public accounting firm, issued an unqualified opinion on the consolidated financial statements for the years ended January 31, 2023 and 2022, stating they are presented fairly in all material respects[289](index=289&type=chunk) - The auditors highlighted a 'Going Concern Uncertainty' due to the company's history of operating losses and negative cash flows, which raises substantial doubt about its ability to continue as a going concern[290](index=290&type=chunk) - No critical audit matters were identified for the current period audit of the consolidated financial statements[295](index=295&type=chunk) Consolidated Financial Statements [Consolidated Balance Sheets](index=65&type=section&id=Consolidated%20Balance%20Sheets) As of January 31, 2023, total assets decreased to **$32.86 million** from **$42.02 million** in 2022, with total liabilities and stockholders' equity also declining Consolidated Balance Sheet Highlights (in thousands) | Metric | January 31, 2023 | January 31, 2022 | | :-------------------------------- | :--------------- | :--------------- | | Cash and cash equivalents | $778 | $5,114 | | Accounts receivable, net | $3,993 | $8,126 | | Inventories, net | $15,318 | $14,006 | | Total current assets | $22,233 | $29,245 | | Property and equipment, net | $3,945 | $4,272 | | Intangible assets, net | $4,931 | $6,018 | | **Total assets** | **$32,858** | **$42,020** | | Accounts payable | $4,101 | $2,046 | | Accrued expenses and other current liabilities | $2,247 | $5,762 | | Total current liabilities | $8,931 | $10,699 | | **Total liabilities** | **$9,806** | **$11,757** | | Preferred stock | $37,779 | $37,779 | | Common stock | $157 | $157 | | Additional paid-in capital | $129,580 | $128,926 | | Accumulated deficit | $(127,635) | $(117,856) | | Accumulated other comprehensive gain (loss) | $34 | $(1,881) | | **Total stockholders' equity** | **$23,052** | **$30,263** | [Consolidated Statements of Operations](index=66&type=section&id=Consolidated%20Statements%20of%20Operations) For fiscal 2023, total revenues increased to **$35.09 million** from **$23.11 million** in 2022, leading to a reduced net loss of **$8.83 million** from **$15.09 million** Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Total revenues | $35,091 | $23,107 | | Total cost of sales | $22,116 | $17,085 | | Gross profit | $12,975 | $6,022 | | Total operating expenses | $20,589 | $20,566 | | Operating loss | $(7,614) | $(14,544) | | Loss from continuing operations | $(7,431) | $(13,579) | | Loss from discontinued operations, net of income taxes | $(1,401) | $(1,506) | | **Net loss** | **$(8,832)** | **$(15,085)** | | Preferred stock dividends - declared | $(947) | $(2,901) | | Preferred stock dividends - undeclared | $(2,841) | — | | **Net loss attributable to common stockholders** | **$(12,620)** | **$(17,986)** | | Net loss per common share - Basic | $(0.92) | $(1.31) | | Net loss per common share - Diluted | $(0.92) | $(1.31) | [Consolidated Statements of Comprehensive Loss](index=67&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) For fiscal 2023, comprehensive loss improved to **$6.92 million** from **$12.61 million** in 2022, driven by a reduced net loss and positive cumulative translation adjustment Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Net loss | $(8,832) | $(15,085) | | Change in cumulative translation adjustment for liquidation of entities held for sale | $1,915 | $2,451 | | Other changes in cumulative translation adjustment | — | $24 | | **Comprehensive loss** | **$(6,917)** | **$(12,610)** | [Consolidated Statements of Changes in Stockholders' Equity](index=68&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity decreased to **$23.05 million** at January 31, 2023, from **$30.26 million** in 2022, primarily due to net loss and preferred stock dividends Consolidated Statements of Changes in Stockholders' Equity Highlights (in thousands) | Metric | Jan 31, 2022 Balance | Net Loss | Foreign Currency Translation | Preferred Stock Dividends | Stock-Based Compensation | Jan 31, 2023 Balance | | :----------------------- | :------------------- | :------- | :--------------------------- | :------------------------ | :----------------------- | :------------------- | | Common Stock (Shares) | 15,705 | — | — | — | 16 | 15,721 | | Common Stock (Amount) | $157 | — | — | — | — | $157 | | Preferred Stock (Shares) | 1,683 | — | — | — | — | 1,683 | | Preferred Stock (Amount) | $37,779 | — | — | — | — | $37,779 | | Additional Paid-In Capital | $128,926 | — | — | — | $654 | $129,580 | | Treasury Stock | $(16,862) | — | — | $(1) | — | $(16,863) | | Accumulated Deficit | $(117,856) | $(8,832) | — | $(947) | — | $(127,635) | | Accumulated Other Comprehensive Income (Loss) | $(1,881) | — | $1,915 | — | — | $34 | | **Total Stockholders' Equity** | **$30,263** | **$(8,832)** | **$1,915** | **$(947)** | **$654** | **$23,052** | [Consolidated Statements of Cash Flows](index=69&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly improved to **$2.91 million** in fiscal 2023 from **$17.13 million** in 2022, despite a net decrease in cash and cash equivalents Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Net cash used in operating activities | $(2,905) | $(17,134) | | Net cash provided by investing activities | $470 | $5,364 | | Net cash (used in) provided by financing activities | $(1,895) | $12,187 | | Effect of changes in foreign exchange rates on cash and cash equivalents | $(6) | $86 | | **Net (decrease) increase in cash and cash equivalents** | **$(4,336)** | **$503** | | Cash and cash equivalents, beginning of period | $5,114 | $4,611 | | **Cash and cash equivalents, end of period** | **$778** | **$5,114** | Notes to Consolidated Financial Statements [1. Organization and Summary of Significant Accounting Policies](index=70&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note details the company's structure, segments, and accounting policies for revenue, inventory, intangible assets, and income taxes, addressing going concern uncertainty - The company's consolidated financial statements are prepared assuming a going concern, despite a history of operating losses and negative cash flows, which raises substantial doubt about its ability to meet obligations[311](index=311&type=chunk) - Revenue from marine product sales is recognized upon acceptance of terms and completion of performance obligations, typically at delivery or when control is transferred for bill-and-hold arrangements[314](index=314&type=chunk) - Inventories are valued at the lower of cost or realizable value, with an allowance for obsolescence maintained based on estimates of future demand[321](index=321&type=chunk) - Intangible assets, including proprietary rights, customer relationships, and patents, are amortized over their estimated useful lives (8-15 years) and tested for impairment when events indicate carrying value may not be recoverable[324](index=324&type=chunk)[325](index=325&type=chunk) [2. Assets Held for Sale and Discontinued Operations](index=76&type=section&id=2.%20Assets%20Held%20for%20Sale%20and%20Discontinued%20Operations) The Leasing Business was classified as held for sale and its results reported as discontinued operations, with the sale substantially completed by January 31, 2023 - The Leasing Business was classified as held for sale and its results reported as discontinued operations since July 27, 2020, with the sale substantially completed by January 31, 2023[341](index=341&type=chunk) Assets Held for Sale (in thousands) | Asset Category | As of Jan 31, 2023 | As of Jan 31, 2022 | | :-------------------------------- | :----------------- | :----------------- | | Accounts receivable, net | — | $177 | | Inventories, net | — | $2 | | Prepaid expenses and other current assets | — | $167 | | Seismic equipment lease pool and property and equipment, net | — | $738 | | Loss recognized on classification as held for sale | — | $(925) | | **Total assets of discontinued operations** | **—** | **$159** | Results of Discontinued Operations (in thousands) | Metric | Twelve Months Ended Jan 31, 2023 | Twelve Months Ended Jan 31, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Revenue from discontinued operations | — | $878 | | Cost of discontinued operations | $91 | $993 | | Operating loss | $(856) | $(1,292) | | Net loss from discontinued operations | $(1,401) | $(1,506) | [3. New Accounting Pronouncements](index=77&type=section&id=3.%20New%20Accounting%20Pronouncements) The company has not adopted any new accounting pronouncements, and no new pronouncements are applicable to its operations - The company has not adopted any new accounting pronouncements, and no new pronouncements are applicable to the company[344](index=344&type=chunk) [4. Going Concern and Subsequent Event](index=77&type=section&id=4.%20Going%20Concern%20and%20Subsequent%20Event) The company's history of losses and negative cash flows raises going concern doubts, but mitigating factors and a **$3.75 million** loan agreement provide support - The company's history of operating losses and negative cash flows, along with reliance on asset sales and stock issuance, creates substantial doubt about its ability to continue as a going concern[347](index=347&type=chunk) - Mitigating factors include **$13.3 million** in working capital, a **$20.7 million** order backlog, plans to reduce costs, and the option to defer preferred stock dividends[348](index=348&type=chunk) - On February 2, 2023, the company entered into a **$3.75 million** Loan and Security Agreement with Sachem Capital Corp., due February 1, 2024, at **12.9% interest**, secured by real estate[345](index=345&type=chunk)[346](index=346&type=chunk) [5. Revenue from Contracts with Customers](index=78&type=section&id=5.%20Revenue%20from%20Contracts%20with%20Customers) Total revenue from contracts with customers increased to **$35.09 million** in fiscal 2023, primarily from Seamap and Klein product sales, with Europe and Asia-Pacific as key foreign markets Revenue from Contracts with Customers by Product Line and Timing (in thousands) | Revenue Recognition | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | **Revenue recognized at a point in time:** | | | | Seamap | $22,544 | $16,422 | | Klein | $6,379 | $5,428 | | Total point in time revenue | $28,923 | $21,850 | | **Revenue recognized over time:** | | | | Seamap | $2,468 | $871 | | Klein | $3,700 | $386 | | Total over time revenue | $6,168 | $1,257 | | **Total revenue from contracts with customers** | **$35,091** | **$23,107** | Revenue from Contracts with Customers by Geography (in thousands) | Geographic Region | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | United States | $6,918 | $2,409 | | Europe | $14,814 | $8,821 | | Asia-Pacific | $12,876 | $11,244 | | Other | $483 | $633 | | **Total revenue from contracts with customers** | **$35,091** | **$23,107** | [6. Supplemental Statements of Cash Flows Information](index=79&type=section&id=6.%20Supplemental%20Statements%20of%20Cash%20Flows%20Information) Supplemental cash flow disclosures show **$4,000** in interest paid and **$371,000** in net income taxes paid in fiscal 2023 Supplemental Cash Flows Information (in thousands) | Metric | Year Ended Jan 31, 2023 | Year Ended Jan 31, 2022 | | :----------- | :---------------------- | :---------------------- | | Interest paid | $4 | $31 | | Income taxes paid, net | $371 | $355 | [7. Inventories](index=79&type=section&id=7.%20Inventories) Net inventories from continuing operations increased to **$15.32 million** as of January 31, 2023, driven by higher work in progress and finished goods Inventories from Continuing Operations (in thousands) | Category | As of Jan 31, 2023 | As of Jan 31, 2022 | | :-------------------- | :----------------- | :----------------- | | Raw materials | $8,480 | $8,511 | | Finished goods | $4,156 | $3,806 | | Work in progress | $4,422 | $3,567 | | Cost of inventories | $17,058 | $15,884 | | Less allowance for obsolescence | $(1,740) | $(1,878) | | **Net inventories** | **$15,318** | **$14,006** | [8. Accounts Receivables](index=79&type=section&id=8.%20Accounts%20Receivables) Net accounts receivable from continuing operations decreased to **$3.99 million** as of January 31, 2023, with the allowance for doubtful accounts remaining stable Accounts Receivables from Continuing Operations (in thousands) | Category | As of Jan 31, 2023 | As of Jan 31, 2022 | | :-------------------------------- | :----------------- | :----------------- | | Accounts receivable | $4,497 | $9,260 | | Less allowance for doubtful accounts | $(504) | $(484) | | **Accounts receivable net of allowance for doubtful accounts** | **$3,993** | **$8,776** | [9. Property and Equipment](index=80&type=section&id=9.%20Property%20and%20Equipment) Net book value of property and equipment from continuing operations decreased to **$3.95 million** as of January 31, 2023, primarily due to depreciation and reduced marine seismic service equipment Property and Equipment from Continuing Operations (in thousands) | Category | As of Jan 31, 2023 | As of Jan 31, 2022 | | :-------------------------- | :----------------- | :----------------- | | Furniture and fixtures | $9,896 | $9,865 | | Autos and trucks | $358 | $495 | | Marine seismic service equipment | — | $3,880 | | Land and buildings | $4,880 | $4,555 | | Cost of property and equipment | $15,134 | $18,795 | | Less accumulated depreciation | $(11,189) | $(14,523) | | **Net book value of property and equipment** | **$3,945** | **$4,272** | Location of Property and Equipment (in thousands) | Location | As of Jan 31, 2023 | As of Jan 31, 2022 | | :--------- | :----------------- | :----------------- | | United States | $3,166 | $3,068 | | Europe | $44 | $46 | | Singapore | $154 | $332 | | Malaysia | $581 | $826 | | **Net book value of property and equipment** | **$3,945** | **$4,272** | [10. Leases](index=80&type=section&id=10.%20Leases) Lease expense for operating leases decreased to **$858,000** in fiscal 2023, with operating lease right-of-use assets and liabilities at **$1.75 million** as of January 31, 2023 - Lease expense for operating leases decreased to approximately **$858,000 in fiscal 2023** from **$1.2 million in fiscal 2022**[362](index=362&type=chunk) Supplemental Balance Sheet Information Related to Leases (in thousands) | Lease Metric | As of Jan 31, 2023 | As of Jan 31, 2022 | | :-------------------------------- | :----------------- | :----------------- | | Operating lease assets | $1,749 | $1,835 | | Operating lease liabilities | $1,749 | $1,835 | | Current liabilities | $903 | $869 | | Non-current liabilities | $846 | $966 | Lease-Term and Discount Rate Details | Metric | As of Jan 31, 2023 | As of Jan 31, 2022 | | :-------------------------------- | :----------------- | :----------------- | | Weighted average remaining lease term (years) | 1.98 | 1.82 | | Weighted average discount rate | 13% | 13% | [11. Intangible Assets](index=82&type=section&id=11.%20Intangible%20Assets) Net amortizable intangible assets decreased to **$4.93 million** as of January 31, 2023, due to ongoing amortization, with **$923,000** in unamortized uncompleted technology projects Intangible Assets from Continuing Operations (in thousands) | Category | Net Carrying Amount (Jan 31, 2023) | Net Carrying Amount (Jan 31, 2022) | | :-------------------- | :------------------------------- | :------------------------------- | | Proprietary rights | $3,632 | $4,087 | | Customer relationships | $130 | $227 | | Patents | $513 | $762 | | Trade name | $37 | $49 | | Developed technology | $417 | $560 | | Other | $202 | $333 | | **Total Amortizable Intangible Assets** | **$4,931** | **$6,018** | - Aggregate amortization expense was **$1.1 million for fiscal 2023**, down from **$1.3 million in fiscal 2022**[366](index=366&type=chunk) - Approximately **$923,000** of gross intangible assets are related to uncompleted technology development projects and are not currently being amortized[365](index=365&type=chunk) [12. Accrued Expenses and Other Current Liabilities](index=83&type=section&id=12.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities significantly decreased to **$2.25 million** as of January 31, 2023, primarily due to reduced customer deposits and no accrued preferred stock dividends Accrued Expenses and Other Current Liabilities (in thousands) | Category | As of Jan 31, 2023 | As of Jan 31, 2022 | | :-------------------------------- | :----------------- | :----------------- | | Wages and benefits | $906 | $556 | | Customer deposits | $407 | $2,601 | | Accrued inventory | $306 | $900 | | Accrued preferred stock dividend | — | $947 | | Other | $628 | $758 | | **Accrued Expenses and Other Liabilities** | **$2,247** |

Financial Data and Key Metrics Changes - The company reported fourth quarter revenues of $12.4 million, a 230% increase year-over-year from $3.8 million in the same period last year [90] - Full year revenue amounted to $35.1 million, representing a 51% increase over the previous year, marking the highest annual revenue for the marine technology products segment [19] - Adjusted EBITDA from continuing operations was approximately $1.4 million, compared to a loss of $4.5 million in the fourth quarter of 2022 [6] - The gross profit margin for the year was 37%, an 11% increase from 26% in 2022 [91] Business Line Data and Key Metrics Changes - Revenues from the Klein product line were greater this year than any year since its acquisition, contributing to the overall revenue increase [90] - The company executed on its backlog, resulting in significant top-line revenue growth [16] Market Data and Key Metrics Changes - The company noted substantial tailwinds in its three key markets: exploration, defense, and survey, indicating favorable market conditions [3] - The backlog of firm orders stood at $20.7 million as of January 31, compared to $13.1 million at the end of fiscal 2022, suggesting strong future demand [2] Company Strategy and Development Direction - The company aims to capitalize on favorable market conditions and macroeconomic trends in fiscal 2024, with a focus on maintaining and improving revenue momentum [96] - The company is pursuing innovative ways to adapt products to meet evolving customer needs, particularly in new markets such as wind farm installations and carbon capture [45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's position, citing robust customer interest and growth in backlog as indicators of sustainable revenue levels [7] - The company acknowledged potential challenges such as supply chain issues and tighter vendor credit requirements but remains confident in its ability to navigate these obstacles [94] Other Important Information - The company entered into a $3.75 million secured financing arrangement to support the execution of its growing backlog, emphasizing a non-dilutive approach to address liquidity concerns [4][22] - The company deferred its fourth quarter preferred stock dividend to manage liquidity demands [95] Q&A Session Summary Question: What is the outlook for margins given recent revenue increases? - Management indicated that unusual items impacted gross margins in the fourth quarter, and supply chain issues have also affected costs, but improvements are expected moving forward [26] Question: Are there any dividends expected to be paid soon? - Management aims to address preferred dividends before reaching the six-deferment threshold, focusing on overall liquidity to facilitate this [39][40] Question: What is the status of military relationships and revenue generation? - Management noted that while military relationships have not yet generated revenue, they are in discussions and expect to see contributions in the near future [49][50] Question: How is the company positioned in the defense market? - Management highlighted a unique solution in the market that is gaining traction, particularly in the defense sector, and noted ongoing improvements in both commercial and governmental business [42][54] Question: What is the current status of arrears dividends? - The company has approximately $940,000 in arrears dividends per quarter, totaling around $3.8 million [68] Question: Is there increased demand for ocean mapping and unmanned vehicles? - Management confirmed that there is broad interest in unmanned vehicles and ocean mapping, driven by various market factors including defense and alternative energy [54]

MIND Technology, Inc. 1 Fiscal Fourth Quarter (ended January 31, 2023) Conference Call April 20, 2023 FUTURE THINKING. LEADING TECHNOLOGIES. Certain statement and information in this presentation may constitute "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. The words "believe," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could," or other similar expr ...

1 FUTURE THINKING. LEADING TECHNOLOGIES. MIND Technology, Inc. Fiscal Third Quarter (ended October 31, 2022) Conference Call December 14, 2022 MOTIVATE I INNOVATE I NAVIGATE I DISCOVER 2 FUTURE THINKING. LEADING TECHNOLOGIES. Forward Looking Statement Certain statement and information in this presentation may constitute "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. The words "b ...