MIND Technology(MIND) - 2023 Q4 - Annual Report

Cautionary Statement about Forward-Looking Statements 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] - 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] PART I Item 1. Business MIND Technology, Inc. provides technology to marine exploration, survey, and security industries, restructuring segments and exiting land-based seismic leasing Business Overview and Segments 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] - 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] - 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] Seamap Marine Products Business 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][20] - Applications for Seamap products include marine seismic surveys for energy exploration, ocean bottom surveys, research activities, and potential defense and maritime security applications[20] Klein Marine Products Business 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][21] - Klein's sonar products are used in hydrographic surveys, naval mine countermeasure operations, search and recovery, ocean bottom profiling, and underwater object detection[21] Discontinued Operations 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][26][28] - Proceeds from the sale of remaining lease pool equipment, which are not expected to be material, will be reinvested into continuing operations[28] Technology Overview 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][30] - 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] - 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] Business and Operations Details 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] - 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] - 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][43] Customers, Sales, Backlog and Marketing 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] 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] 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] 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] 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] Intellectual Property 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] Governmental Environmental Regulation 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] - New environmental laws, especially those related to climate change or hydraulic fracturing, could reduce demand for certain products and materially affect the business[63] Available Information 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 The company faces substantial risks including going concern uncertainty, customer concentration, supply chain, and financial market volatility Risks Related to Our Financial Condition 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] Risks Related to the Operation of Our Business 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] - 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][75][78][79][81] - 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][93][94][95][97] - 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][99][101][102][104] Risks Related to Human Capital Management 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] - Success depends on retaining key management and attracting other qualified personnel, a challenge given competition from larger companies with greater financial resources[144][145] Risks Related to Our Common and Preferred Stock 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][149] - 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][151][152] - 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] Risks Related to Our Indebtedness 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] Internal Control Over Financial Reporting 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] - 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] Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the SEC - The company has no unresolved staff comments[166] Item 2. Properties 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] Item 3. Legal Proceedings 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] Item 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable[169] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - 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][173] - 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] Item 6. [Reserved] This item is reserved and contains no information - Item 6 is reserved[178] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] 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 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][189] - 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] - 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][192][193][194] - 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][198][199] Results of Continuing Operations 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] 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] - 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][207] Results of Discontinued Operations 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] 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] Liquidity and Capital Resources 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] - 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] 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][235] Off-Balance Sheet Arrangements 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] Critical Accounting Estimates 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][241] - For fiscal 2023, the inventory obsolescence reserve for continuing operations increased by approximately $445,000, compared to $921,000 in fiscal 2022[243] - 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] Significant Accounting and Disclosure Changes 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] Item 7A. Quantitative and Qualitative Disclosures about Market Risk 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] Item 8. Financial Statements and Supplementary Data 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] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 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] Item 9A. Controls and Procedures 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 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] - 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] Management's Report on Internal Control Over Financial Reporting 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] Remediation Plan for the Material Weakness in Internal Control over Financial Reporting 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] Remediation of the Material Weakness in Internal Control over Financial Reporting 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][260][261] Changes in Internal Control over Financial Reporting 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] Item 9B. Other Information There is no other information to report under this item - There is no other information to report[263] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection There are no disclosures regarding foreign jurisdictions that prevent inspection - There are no disclosures regarding foreign jurisdictions that prevent inspection[264] PART III Item 10. Directors, Executive Officers and Corporate Governance 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] - 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] Item 11. Executive Compensation 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] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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] Item 13. Certain Relationships and Related Transactions, and Director Independence 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] Item 14. Principal Accounting Fees and Services 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] PART IV Item 15. Exhibits, Financial Statement Schedules 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] - The section includes a detailed list of exhibits, such as merger agreements, certificates of incorporation, stock awards plans, employment agreements, and certifications[274][275][276][277] Item 16. Form 10K Summary This item is not applicable - Form 10-K Summary is not applicable[278] 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][282][283] INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 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] Report of Independent Registered Public Accounting Firm 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] - 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] - No critical audit matters were identified for the current period audit of the consolidated financial statements[295] Consolidated Financial Statements Consolidated Balance Sheets 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 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 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 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 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 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] - 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] - Inventories are valued at the lower of cost or realizable value, with an allowance for obsolescence maintained based on estimates of future demand[321] - 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][325] 2. Assets Held for Sale and Discontinued Operations 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] 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 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] 4. Going Concern and Subsequent Event 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] - 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] - 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][346] 5. Revenue from Contracts with Customers 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 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 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 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 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 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] 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 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] - Approximately $923,000 of gross intangible assets are related to uncompleted technology development projects and are not currently being amortized[365] 12. Accrued Expenses and Other Current Liabilities 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 |