mind20220430

mind20220430_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended April 30, 2022

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

For the transition period from to

Commission File Number: 001-13490

MIND TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware

76-0210849

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2002 Timberloch Place

Suite 550

The Woodlands, Texas 77380

(Address of principal executive offices, including Zip Code)

(281) 353-4475

(Registrant’s telephone number, including area code)

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

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

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

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

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 13,781,904 shares of common stock, $0.01 par value, were outstanding as of June 7, 2022.

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MIND TECHNOLOGY, INC.

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PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of April 30, 2022 and January 31, 2022	1
	Condensed Consolidated Statements of Operations for the Three Months Ended April 30, 2022 and 2021	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended April 30, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2022 and 2021	4
	Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended April 30, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements	7
	Cautionary Statement about Forward-Looking Statements	15

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	26

	Exhibit Index	26

	Signatures	28

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	*April 30, 2022*			*January 31, 2022*
*ASSETS*
Current assets:
Cash and cash equivalents	$	817		$	5,114
Accounts receivable, net of allowance for doubtful accounts of $484 at each of April 30, 2022 and January 31, 2022		9,397			8,126
Inventories, net		14,243			14,006
Prepaid expenses and other current assets		1,558			1,840
Assets held for sale		3			159
Total current assets		26,018			29,245
Property and equipment, net		4,062			4,272
Operating lease right-of-use assets		1,531			1,835
Intangible assets, net		5,743			6,018
Other assets		428			650
Total assets	$	37,782		$	42,020
*LIABILITIES AND STOCKHOLDERS’ EQUITY*
Current liabilities:
Accounts payable	$	2,084		$	2,046
Deferred revenue		559			232
Accrued expenses and other current liabilities		5,112			5,762
Income taxes payable		1,004			837
Operating lease liabilities - current		587			869
Liabilities held for sale		271			953
Total current liabilities		9,617			10,699
Operating lease liabilities - non-current		944			966
Deferred tax liability		92			92
Total liabilities		10,653			11,757
Stockholders’ equity:
Preferred stock, $1.00 par value; 2,000 shares authorized; 1,683 shares issued and outstanding at each of April 30, 2022 and January 31, 2022		37,779			37,779
Common stock, $0.01 par value; 40,000 shares authorized; 15,715 and 15,705 shares issued at April 30, 2022 and January 31, 2022, respectively		157			157
Additional paid-in capital		129,162			128,926
Treasury stock, at cost (1,933 and 1,931 shares at April 30, 2022 and January 31, 2022, respectively)		(16,863	)		(16,862	)
Accumulated deficit		(121,222	)		(117,856	)
Accumulated other comprehensive loss		(1,884	)		(1,881	)
Total stockholders’ equity		27,129			30,263
Total liabilities and stockholders’ equity	$	37,782		$	42,020

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

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	*For the Three Months Ended April 30,*
	*2022*			*2021*
Revenues:
Sale of marine technology products	$	9,087		$	4,194
Total revenues		9,087			4,194
Cost of sales:
Sale of marine technology products		5,798			3,651
Total cost of sales		5,798			3,651
Gross profit		3,289			543
Operating expenses:
Selling, general and administrative		4,272			3,817
Research and development		1,014			853
Depreciation and amortization		479			666
Total operating expenses		5,765			5,336
Operating loss		(2,476	)		(4,793	)
Other (expense) income:
Other, net		(118	)		947
Total other (expense) income		(118	)		947
Loss from continuing operations before income taxes		(2,594	)		(3,846	)
(Provision) benefit for income taxes		(211	)		145
Net loss from continuing operations		(2,805	)		(3,701	)
Income (loss) from discontinued operations, net of income taxes		386			(283	)
Net loss	$	(2,419	)	$	(3,984	)
Preferred stock dividends		(947	)		(584	)
Net loss attributable to common stockholders	$	(3,366	)	$	(4,568	)
Net loss per common share - Basic
Continuing operations	$	(0.27	)	$	(0.31	)
Discontinued operations	$	0.03		$	(0.02	)
Net loss	$	(0.24	)	$	(0.33	)
Net loss per common share - Diluted
Continuing operations	$	(0.27	)	$	(0.31	)
Discontinued operations	$	0.03		$	(0.02	)
Net loss	$	(0.24	)	$	(0.33	)
Shares used in computing net loss per common share:
Basic		13,775			13,759
Diluted		13,775			13,759

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

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	*For the Three Months Ended April 30,*
	*2022*			*2021*
Net loss	$	(2,419	)	$	(3,984	)
Changes in cumulative translation adjustment		(3	)		57
Comprehensive loss	$	(2,422	)	$	(3,927	)

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

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	*For the Three Months Ended April 30,*
	*2022*			*2021*
Cash flows from operating activities:
Net loss	$	(2,419	)	$	(3,984	)
Adjustments to reconcile net loss to net cash used in operating activities:
PPP loan forgiveness		—			(850	)
Depreciation and amortization		479			668
Stock-based compensation		236			121
Recovery of doubtful accounts		—			(453	)
Provision for inventory obsolescence		23			327
Gross profit from sale of assets held-for-sale		(280	)		—
Loss (gross profit) from sale of other equipment		113			(80	)
Changes in:
Accounts receivable		(871	)		1,602
Unbilled revenue		(26	)		51
Inventories		(260	)		(739	)
Prepaid expenses and other current and long-term assets		286			(239	)
Income taxes receivable and payable		(66	)		(168	)
Accounts payable, accrued expenses and other current liabilities		(622	)		947
Deferred revenue		(115	)		(10	)
Net cash used in operating activities		(3,522	)		(2,807	)
Cash flows from investing activities:
Purchases of property and equipment		(107	)		(8	)
Sale of assets held for sale		283			—
Sale of a business, net of cash sold		—			187
Net cash provided by investing activities		176			179
Cash flows from financing activities:
Purchase of treasury stock		(1	)		(2	)
Net proceeds from preferred stock offering		—			503
Net proceeds from common stock offering		—			42
Preferred stock dividends		(947	)		(576	)
Net cash used in financing activities		(948	)		(33	)
Effect of changes in foreign exchange rates on cash and cash equivalents		(3	)		51
Net decrease in cash and cash equivalents		(4,297	)		(2,610	)
Cash and cash equivalents, beginning of period		5,114			4,611
Cash and cash equivalents, end of period	$	817		$	2,001
Supplemental cash flow information:
Interest paid	$	4		$	9
Income taxes paid	$	277		$	31

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

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

	*Common Stock*				*Preferred Stock*												*Accumulated*
									*Additional*								*Other*
									*Paid-In*		*Treasury*			*Accumulated*			*Comprehensive*
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Stock*			*Deficit*			*Loss*			*Total*
Balances, January 31, 2022		15,705	$	157		1,683	$	37,779	$	128,926	$	(16,862	)	$	(117,856	)	$	(1,881	)	$	30,263
Net loss		—		—		—		—		—		—			(2,419	)		—			(2,419	)
Foreign currency translation		—		—		—		—		—		—			—			(3	)		(3	)
Restricted stock issued		10		—		—		—		—		—			—			—			—
Restricted stock forfeited for taxes		—		—		—		—		—		(1	)		—			—			(1	)
Preferred stock dividends		—		—		—		—		—		—			(947	)		—			(947	)
Stock-based compensation		—		—		—		—		236		—			—			—			236
Balances, April 30, 2022		15,715	$	157		1,683	$	37,779	$	129,162	$	(16,863	)	$	(121,222	)	$	(1,884	)	$	27,129

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MIND TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

	*Common Stock*				*Preferred Stock*												*Accumulated*
									*Additional*								*Other*
									*Paid-In*		*Treasury*			*Accumulated*			*Comprehensive*
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Stock*			*Deficit*			*Loss*			*Total*
Balances, January 31, 2021		15,681	$	157	$	1,038	$	23,104	$	128,241	$	(16,860	)	$	(99,870	)	$	(4,356	)	$	30,416
Net loss		—		—		—		—		—		—			(3,984	)		—			(3,984	)
Foreign currency translation		—		—		—		—		—		—			—			57			57
Restricted stock issued		5		—		—		—		11		—			—			—			11
Restricted stock forfeited for taxes		—		—		—		—		—		(2	)		—			—			(2	)
Preferred stock offering		—		—		21		503		—		—			—			—			503
Preferred stock dividends		—		—		—		—		—		—			(584	)		—			(584	)
Common stock offerings		18		—		—		—		42		—			—			—			42
Stock-based compensation		—		—		—		—		109		—			—			—			109
Balances, April 30, 2021		15,704	$	157	$	1,059	$	23,607	$	128,403	$	(16,862	)	$	(104,438	)	$	(4,299	)	$	26,568

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

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MIND TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Liquidity

MIND Technology, Inc., a Delaware corporation (the “Company”), formerly Mitcham Industries, Inc., a Texas corporation, was incorporated in 1987. Effective August 3, 2020 the Company effectuated a reincorporation to the state of Delaware. Concurrent with the reincorporation the name of the Company was changed to MIND Technology, Inc. and the number of shares of common stock and preferred stock authorized for issuance was increased.

The Company, through its wholly owned subsidiaries, Seamap Pte Ltd, MIND Maritime Acoustics, LLC (formerly Seamap USA, LLC), Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd (collectively “Seamap”), and its wholly owned subsidiary, Klein Marine Systems, Inc. (“Klein”), designs, manufactures and sells a broad range of proprietary products for the seismic, hydrographic and offshore industries with product sales and support facilities based in Singapore, Malaysia, the United Kingdom and the states of New Hampshire and Texas. Prior to July 31, 2020, the Company, through its wholly owned Canadian subsidiary, Mitcham Canada, ULC (“MCL”), its wholly owned Hungarian subsidiary, Mitcham Europe Ltd. (“MEL”), and its branch operations in Colombia, provided full-service equipment leasing, sales and service to the seismic industry worldwide (the “Leasing Business”). Effective July 31, 2020, the Leasing Business has been classified as held for sale and the financial results reported as discontinued operations (see Note 3 – “Assets Held for Sale and Discontinued Operations” for additional details). All intercompany transactions and balances have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The Company has a history of generating losses and negative cash from operating activities and may not have access to sources of capital that were available in prior periods. In addition, the lingering impacts of the global pandemic, emerging supply chain disruptions and recent volatility in oil prices have created significant uncertainty in the global economy which could have a material adverse effect on the Company’s business, financial position, results of operations and liquidity. Accordingly, substantial doubt has arisen regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company not be able to continue as a going concern.

Management has identified the following mitigating factors regarding adequate liquidity and capital resources to meet its obligations:

•

The Company has no funded debt, or other outstanding obligations, outside of normal trade obligations.

•

The Company has no obligations or agreements containing “maintenance type” financial covenants.

•

The Company has working capital of approximately $16.4 million as of April 30, 2022, including cash of approximately $0.8 million.

•

Should revenues be less than projected, the Company believes it is able, and has plans in place, to reduce costs proportionately in order to maintain positive cash flow.

•

The majority of the Company’s costs are variable in nature, such as raw materials and personnel related costs. The Company has recently eliminated two executive level positions, and additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management.

•

The Company has a backlog of orders of approximately $13.4 million as of April 30, 2022. Production for certain of these orders was in process and included in inventory as of April 30, 2022, thereby reducing the liquidity needed to complete the orders. Subsequent to April 30, 2022 we received firm orders of approximately $2.2 million and responded to requests for proposals (“RFQ”s) of approximately $7.3 million. Accordingly, the combination of our backlog, subsequent orders and RFQ’s, which management believes will be confirmed and completed in fiscal 2023, currently total is approximately $22.9 million.

•

Despite difficulties in world energy markets, the Company has been able to generate cash from the sale of lease pool equipment and collection of accounts receivable related to its discontinued operations. Management expects to generate additional liquidity from the sale of lease pool equipment in fiscal 2023.

•

The Company has declared the quarterly dividend on its Series A Preferred Stock for the quarter ended April 30, 2022, but such quarterly dividends could be suspended in the future.

•

Despite challenging economic conditions in the fiscal 2022, the Company successfully raised approximately $5.2 million in new capital through the sale of Common Stock and Preferred Stock pursuant to the ATM Offering Program. Management expects to be able to raise further capital through the ATM Offering Program should the need arise.

Notwithstanding the mitigating factors identified by management, there remains substantial doubt regarding the Company's ability to meet its obligations as they arise over the next twelve months.

2. Basis of Presentation and Immaterial Correction of Comprehensive Loss

The condensed consolidated balance sheet as of January 31, 2022, for the Company has been derived from audited consolidated financial statements. The unaudited interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2022 (“fiscal 2022”). In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position as of April 30, 2022, the results of operations for the three months ended April 30, 2022 and 2021, the cash flows for the three months ended April 30, 2022 and 2021, and the statement of stockholders’ equity for the three months ended April 30, 2022 and 2021, have been included in these condensed consolidated financial statements. The foregoing interim results are not necessarily indicative of the results of operations to be expected for the full fiscal year ending January 31, 2023 (“fiscal 2023”).

The Company has corrected an immaterial error in the statements of comprehensive loss for the three months ended April 30, 2021, which as previously presented, incorrectly included $584,000 of preferred dividends as a component of comprehensive loss. Additionally, during the years ended January 31, 2022 and 2021, comprehensive loss incorrectly included preferred dividends of $2.9 million and $2.3 million, respectively. Comprehensive loss will be corrected by revising the amounts included in previously-issued statements of comprehensive loss the next time they are required to be filed for comparative purposes.

3. Assets Held for Sale and Discontinued Operations

On July 27, 2020, the Board determined to exit the Leasing Business. As a result, the assets, excluding cash, and liabilities of the Leasing Business are considered held for sale and its results of operations are reported as discontinued operations as of April 30, 2022 and for all comparative periods presented in these condensed consolidated financial statements. The Company originally anticipated selling the discontinued operations in multiple transactions, potentially involving the sale of legal entities, assets, or a combination of both, within the twelve months ending July 31, 2021. The Company now believes it will complete the process by October 31, 2022.

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The assets reported as held for sale consist of the following:

	*April 30, 2022*			*January 31, 2022*
Current assets of discontinued operations:		(in thousands)
Accounts receivable, net		37			177
Inventories, net		2			2
Prepaid expenses and other current assets		156			167
Seismic equipment lease pool and property and equipment, net		40			738
Loss recognized on classification as held for sale		(232	)		(925	)
Total assets of discontinued operations	$	3		$	159

The liabilities reported as held for sale consist of the following:

	*April 30, 2022*		*January 31, 2022*
Current liabilities of discontinued operations:		(in thousands)
Accounts payable	$	4	$	132
Deferred revenue		56		73
Accrued expenses and other current liabilities		203		507
Income taxes payable		8		241
Total liabilities of discontinued operations		271		953

The results of operations from discontinued operations for the three months ended April 30, 2022 and 2021 consist of the following:

	*For the Three Months Ended April 30,*
	*2022*			*2021*
Revenues:		(in thousands)
Revenue from discontinued operations	$	—		$	30
Cost of sales:
Cost of discontinued operations		25			373
Operating expenses:
Selling, general and administrative		113			342
Recovery of doubtful accounts		—			(443	)
Depreciation and amortization		—			1
Total operating expenses (income)		113			(100	)
Operating loss		(138	)		(243	)
Other income (expenses)		524			(39	)
Income (loss) before income taxes from discontinued operations		386

SEC Form 10-Q filed by MIND Technology Inc.