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Item7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Historically, we operated in two segments, Marine Technology Products and Equipment Leasing. Effective January 31, 2023, we split our Marine Technology Products Segment into two segments, Seamap Marine Products and Klein Marine Products, to more accurately reflect our operations. During the second quarter of the fiscal fiscal 2021, our Board decided to exit the Leasing Business and instructed management to develop and implement a plan to dispose of those operations. See Note 2 - “Assets Held for Sale and Discontinued Operations” to our consolidated financial statements for more details.

Our worldwide Seamap Marine Products business includes Seamap Pte Ltd, MIND Maritime Acoustics, LLC (formerly Seamap USA, LLC), Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd (collectively “Seamap”), which designs, manufactures and sells specialized marine seismic equipment. Our worldwide Klein Marine Products business includes Klein Marine Systems, Inc. (“Klein”), which designs, manufactures and sells high performance side scan sonar and water-side security systems. We have in the past, and may in the future, lease certain marine equipment to our customers. Such amounts have not been material in recent periods nor are anticipated to be material in the future.

Revenue from the Seamap Marine Products business relates to sales of Seamap products, which operates from locations near Bristol, United Kingdom; Huntsville, Texas; Johor, Malaysia and in Singapore.

Revenue from the Klein Marine Products business relates to sales of Klein products, which operates from Salem, New Hampshire.

The discontinued operations of the Leasing Business includes all land leasing activity, sales of lease pool equipment and certain other equipment sales and services related to those operations. This business has been conducted from our locations in Huntsville, Texas; Calgary, Canada; Bogota, Colombia; and Budapest, Hungary. This included the operations of our subsidiaries MCL, MEL and our branch in Colombia.

Management believes that the performance of our continued operations is indicated by revenues from sales of products and by gross profit from those sales. Management monitors EBITDA and Adjusted EBITDA, both as defined and reconciled to the most directly comparable financial measures calculated and presented in accordance with United States generally accepted accounting principles (“GAAP”), in the following table, as key indicators of our overall performance and liquidity.

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The following table presents certain operating information of our continuing operations:

Year Ended January 31,

(in thousands)

Revenues:

Sale of marine technology products $ 35,091 $ 23,107

Cost of sales:

Sale of marine technology products $ 22,116 $ 17,085

Operating expenses:

Selling, general and administrative $ 15,304 $ 14,761

Depreciation and amortization $ 1,887 $ 2,209

Year Ended January 31,

(in thousands)

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 (1) (4,841 ) (11,409 )

Non-cash foreign exchange losses — 163

Stock-based compensation 654 643

Adjusted EBITDA from continuing operations (1) $ (4,187 ) $ (10,603 )

Reconciliation of Net Cash Used In Operating Activities to EBITDA

Net cash used in operating activities $ (2,905 ) $ (17,134 )

PPP loan forgiveness — 850

Stock-based compensation (654 ) (643 )

Provision for inventory obsolescence (445 ) (616 )

Changes in accounts receivable (current and long-term) (4,798 ) 4,316

Interest paid 4 —

Taxes paid, net of refunds 371 355

(Gain) loss on sale of other equipment (113 ) 155

Changes in prepaid expenses and other current and long-term assets 536 606

EBITDA from continuing operations (1) $ (4,841 ) $ (11,409 )

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Within our Seamap business, we design, manufacture and sell a variety of products used primarily in oceanographic, hydrographic, defense, seismic and maritime security industries. Seamap’s primary products include (i) the GunLink seismic source acquisition and control systems; (ii) the BuoyLink RGPS tracking system used to provide precise positioning of seismic sources and streamers (marine recording channels that are towed behind a vessel) and (iii) SeaLink marine sensors and solid streamer systems (collectively, the “SeaLink” product line or “towed streamer products”). These towed streamer products are primarily designed for three-dimensional, high-resolution marine surveys in hydrographic industry applications. Klein designs, manufactures and sells side scan sonar and water-side security systems to commercial, governmental and military customers throughout the world.

Our discontinued operations consisted primarily of leasing seismic data acquisition equipment mainly to seismic data acquisition companies conducting land surveys worldwide. Historically, we provided short-term leasing, typically for a term of less than one year, of seismic equipment to meet a customer’s requirements. From time to time, we sold lease pool equipment. These sales were transacted when we had equipment for which we did not have near term needs in our leasing business or which was otherwise considered excess. Additionally, when equipment that had been leased to a customer was lost or destroyed, the customer was charged for such equipment at amounts specified in the underlying lease agreement.

Our results of operations can experience fluctuations in activity levels due to a number of factors outside of our control. These factors include budgetary or financial concerns, difficulties in obtaining licenses or permits, security problems, labor or political issues, inclement weather, and global pandemics. See Item 1A- “Risk Factors.”

Business Outlook

Our financial results during fiscal year 2023 have improved when compared to fiscal 2022. We believe the fiscal 2022 and prior years results were impacted by the following factors:

However, we believe general economic and geopolitical trends are now more favorable for much of our business. Global energy prices increased sharply during the first half of fiscal 2023 and, despite declining in the second half of the year, remain significantly higher than the past several years. We believe this is a positive development for our marine seismic customers and many of our customers in this space have recently reported improving financial metrics and outlooks. Higher energy prices and the global movement towards renewable energy is, we believe, positive for our customers in the marine survey industry. We have seen increasing demand for our products regarding alternative energy projects, such as marine wind farm installations, and carbon capture projects. Additionally, the current geopolitical unrest, especially in Europe and Asia, is driving demand for defense and maritime security solutions.

In recent months, we have continued to experience significant inquiries and bid activity for our other continuing operation products. As of January 31, 2023, our collective backlog of firm orders for Seamap Marine Products and Klein Marine Products businesses was approximately $20.7 million, which is an increase of approximately 58% from the $13.1 million reported at January 31, 2022. In addition, we continue to pursue a number of other significant opportunities and expect to secure additional orders, primarily for delivery in fiscal 2024 and beyond. Subsequent to January 31, 2023, we have received approximately $7.0 million in new orders. The level of backlog at a particular point in time may not necessarily be indicative of results in subsequent periods as the size and delivery period of individual orders can vary significantly.

Based on our current backlog of orders, continued product inquiries, and current production and delivery schedules, we expect revenue in fiscal 2024 to exceed that of fiscal 2023. If revenues in fiscal 2024 are as expected, we believe the Company will report net income from continuing operations for fiscal 2024. However, no assurances of such results can be made, and there are a number of risks which could cause results to be less than anticipated. Those risks include the following:

• Inability of our customers to accept delivery of orders as scheduled;

• Cancellation of orders;

• Higher than anticipated costs.

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We continue to address three primary markets through our continued operations businesses -

• Marine Survey;

• Marine Exploration; and

• Maritime Defense.

Specific applications within those markets include sea-floor survey, search and recovery, mineral and geophysical exploration, mine counter measures and anti-submarine warfare. We have existing technology and products that meet needs across all these markets such as -

• Side-scan sonar;

• Acoustic arrays, such as SeaLink; and

• Marine seismic equipment, such as GunLink and BuoyLink.

We see a number of opportunities to add to our technology and to apply existing technology and products to new applications.

We are also pursuing a number of initiatives to further expand our product offerings. These initiatives include new internally developed technology, introduction of new products based on our existing technology, technology obtained through partnering arrangements with others and a combination of all of these. There can be no assurance that any of these initiatives will ultimately have a material impact on our financial position or results of operations. Certain of the business opportunities that we are pursuing are with the military or other governmental organizations. The sales cycle for these projects can be quite long and can be impacted by a variety of factors, including the level of competition and budget limitations. Therefore, the timing of contract awards is often difficult to predict. However, once awarded, programs of this type can extend for many years. To date, the majority of our revenues have been from commercial customers; however, we expect the proportion of revenue related to military or governmental customers will increase in the future.

We believe there are certain developments within the marine technology industry which can have a significant impact on our business. These developments include the following:

In response to these, and other, developments we have initiated certain strategic initiatives in order to exploit the opportunities that we perceive. These initiatives include the following:

• Development of our Spectral Ai sonar software app;

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We believe that the above applications expand our addressable markets and provide opportunities for further growth in our revenues.

As we grow our business, we are also looking to control our costs. Subsequent to January 31, 2023, we eliminated two executive management positions and during fiscal 2023, we eliminated two other executive management positions in order to control general and administrative costs. Should future financial results fall below our expectation, we may take further steps to reduce costs. We believe many of our costs are variable in nature, such as raw materials and labor-related costs. Accordingly, we believe we can reduce such costs commensurate with any declines in our business.

General inflation levels have increased recently due in part to supply chain issues, increased energy costs and geopolitical uncertainty. In addition, shortages of certain components, such as electronic components, have caused prices for available components to increase in some cases. These factors can be expected to have a negative impact on our costs; however, the magnitude of such an impact cannot be accurately determined. In response to these cost increases, in the first quarter of fiscal 2023, we increased the pricing for most of our products. The amount of the increase varies by product and ranged from approximately 5% to 20%.

Our revenues and results of operations have not been materially impacted by inflation or changing prices in the past two fiscal years, except as described below.

Results of Continuing Operations

For fiscal 2023 and 2022, we recorded operating losses of approximately $7.6 million and $14.5 million, respectively. The improvement in operating results was driven primarily by significant increases in revenue for both Seamap and Klein product lines.

Revenues and cost of sales from continued operations were as follows:

Year Ended January 31,

(in thousands)

Revenues:

Intra-segment sales (476 ) (12 )

Cost of sales:

Intra-segment sales (476 ) (12 )

Gross profit margin 37 % 26 %

A significant portion of Seamap’s sales consists of large discrete orders, the timing of which is dictated by our customers. This timing generally relates to the availability of a vessel in port so that our products can be installed. Accordingly, there can be significant variation in sales from one period to another, which does not necessarily indicate a fundamental change in demand for these products. Although a marginal increase in revenues exists, we believe our full potential was hindered, in large part, due to temporary delays and disruptions caused by the lingering effects of the global pandemic, including shipping delays, limited availability and longer lead times for certain products, and disruptions to our product delivery schedules. The gross profit and gross profit margins generated by sales of Seamap products were approximately $9.5 million and 38% during fiscal 2023 and approximately $5.6 million and 32% in fiscal 2022. The increase in gross profit margins between the periods is primarily due to incremental revenue and production activity resulting in higher absorption of fixed costs.

Revenue from the sale of Klein products was approximately $10.6 million during fiscal 2023 versus approximately $5.8 million in the prior year period. We believe the increase in revenue is primarily due to the increased interest and demand for our high-speed multi-beam sonar systems. However, we also experienced increased demand for our single beam sonar products. Gross profit was approximately $3.5 million and $463,000, with gross profit margins of 33% and 8%, during fiscal 2023 and 2022, respectively. The increase in year over year gross profit margin is due to favorable revenue mix in fiscal 2023 and higher product testing and sustaining engineering activity during fiscal 2022, not recurring in fiscal 2023.

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Operating Expenses

Selling, general and administrative expenses for fiscal 2023 amounted to approximately $15.3 million, compared to approximately $14.8 million in 2022, respectively. In fiscal 2023 compared to fiscal 2022, the increase of approximately 3% is primarily due to higher convention expenses as pandemic related restrictions eased and we reengaged with customers.

Research and development costs decreased approximately 5% in fiscal 2023 as compared to fiscal 2022 due to minimal reductions in product development activity. The primary research and development activities during the year involved our synthetic aperture sonar, Sea Serpent and Spectral Ai projects.

We did not record a provision for doubtful accounts in fiscal 2023 or fiscal 2022. On January 31, 2023, and 2022, we had trade accounts and note receivables over 180 days past due of approximately $521,000 and $36,000, respectively. Contractual payment terms vary by customer and by contract and, under certain circumstances, we may grant extended payment terms to our customers. In our industry, and in our experience, it is not unusual for accounts to become delinquent from time to time and this is not necessarily indicative of an account becoming uncollectable. As of January 31, 2023, and 2022, our allowance for doubtful accounts receivable amounted to approximately $504,000 and $484,000, respectively.

Depreciation and amortization expense relates primarily to the depreciation of furniture and fixtures, office and manufacturing equipment and the amortization of intangible assets. The decrease in depreciation and amortization expense in fiscal 2023 is due primarily to intangible assets becoming fully depreciated during the current fiscal year.

We periodically evaluate the recoverability of our long-lived assets. As of January 31, 2023, we performed a qualitative analysis of our long-lived assets and determined that there were no indicators of impairment for fiscal 2023.

Other Income and Expense

During fiscal 2023 we recorded a non-recurring transaction related to an Employee Retention Credit of approximately $1.0 million in other income. Included in other income in fiscal 2022 is approximately $850,000 related to forgiveness of the loan granted to Klein pursuant to the Paycheck Protection Program administered by the Small Business Administration in response to the global pandemic.

Provision for Income Taxes

Our provision for income taxes for continuing operations for fiscal 2023 was approximately $699,000, compared to a benefit of approximately $39,000 for fiscal 2022. These amounts differed from the result expected when applying the U.S. statutory rate of 21% to our loss before income taxes for the respective periods due primarily to the impact of valuation allowances against the increase in our deferred tax assets, permanent differences between book income and taxable income, and the impact of foreign withholding taxes.

Internal Controls

As of January 31, 2023, the Company’s executive officers determined that the Company’s internal control over financial reporting was not effective due to an identified material weakness. The material weakness involved the Company’s insufficient level of review performed in connection with the analysis pertaining to the aggregation of operating segments resulting in misapplication of ASC 280, Segment Reporting. For the year ended January 31, 2023, we correctly reported segment activity pursuant to the provisions of ASC 280, and we have restated segment information for the year ended January 31, 2022 to correct our error and conform to our current presentation. We are evaluating our controls related to financial statement disclosures and have identified changes we intend to implement in an effort to strengthen our control environment. We can give no assurance that these actions will remediate this deficiency in internal control or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.

As of January 31, 2022, the Company’s executive officers determined that the Company’s internal control over financial reporting was not effective due to an identified material weakness. The material weakness involved the Company’s review controls to ensure proper application of generally accepted accounting principles (ASC 606, Revenue from Contracts with Customers) related to assessment of whether control has transferred to a customer in a point in time revenue transaction, more specifically in a bill-and-hold transaction. The Company failed to properly determine whether control had transferred to a customer in a bill-and-hold transaction and recognized revenue in error as identified by the Company’s auditors during the audit of our financial statements for the fiscal year ended January 31, 2022. We evaluated our controls related to accounting estimates and identified changes to our existing controls and additional controls which were implemented during fiscal 2023 to strengthen our control environment. These actions have remediated this deficiency in internal control, but we can give no assurance that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.

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Results of Discontinued Operations

Revenues and cost of sales from discontinued operations were comprised of the following:

Year Ended January 31,

(in thousands)

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

Recovery of doubtful accounts — (450 )

Depreciation and amortization — 5

Other (expense) income (545 ) 93

Loss before income taxes (1,401 ) (1,199 )

Provision for income taxes — (307 )

Following the decision to exit the Leasing Business and present those operations as discontinued operations, we no longer recognize depreciation expense related to our lease pool of seismic equipment, but rather reassess, on a quarterly basis, the recoverability of the remaining carrying value of those assets. Similarly, we no longer recognize gain or loss from the sale of individual lease pool assets but present any net gain or loss from such transactions as a reduction in the carrying value of the lease pool.

We recorded no revenue from discontinued operations during fiscal 2023, compared to approximately $878,000 for fiscal 2022. We completed our last equipment leasing contract and ceased all equipment leasing activity as of July 31, 2021.

Direct costs related to the Leasing Business dropped to approximately $91,000 for fiscal year 2023 from approximately $1.0 million reported in fiscal 2022. The reduction in direct costs is commensurate with the decline in revenue.

Selling, general and administrative costs related to the Leasing Business amounted to approximately $765,000 compared to $1.6 million during fiscal 2022. The decrease was due primarily to lower compensation and other administrative expenses resulting from headcount reductions and the decline in business activity.

In fiscal 2023, no provision for doubtful accounts was recorded compared to a recovery for doubtful accounts of approximately $450,000 in fiscal 2022. The recovery recorded in fiscal 2022 was due to collection from two customers of our Leasing Business.

In fiscal 2023 and fiscal 2022 we recognized approximately $1.9 million and $2.5 million, respectively, of cumulative translation adjustment. The cumulative translation adjustment had historically been recorded in Accumulated Other Comprehensive Loss, a component of equity.

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Subsequent to July 31, 2020, sales of lease pool equipment totaling approximately $8.0 million have been reflected as a reduction in the carrying value of assets held for sale, with no gain or loss recognized from these transactions.

No provision for income taxes related to our discontinued operations was recorded for fiscal 2023 compared to a provision of approximately $307,000 on a loss before income taxes of approximately $1.2 million for fiscal 2022. Our provision varies from the expected provision based on the U.S. statutory rate due primarily to the impact of recording valuation allowances against the increase in our deferred tax assets, permanent differences between book and taxable income, local taxes in a foreign jurisdiction, and the effect of foreign withholding taxes.

Liquidity and Capital Resources

The Company’s operating results improved significantly in fiscal 2023 as compared to fiscal 2022 and prior years; however, still generated a net loss and negative cash flow from operating activities. The Company has a history of generating operating losses and negative cash from operating activities and has relied on cash from the sale of lease pool equipment and the sale of Preferred Stock and Common Stock for the past several years. As of January 31, 2023, the Company had some remaining lease pool equipment available for sale and had approximately 317,000 shares of Preferred Stock and approximately 22.1 million shares of Common Stock available for issuance. However, there can be no assurance the remaining lease pool equipment will be sold or that the Preferred Stock or Common Stock can be sold at prices acceptable to the Company.

Due to the above factors, there is substantial doubt about the Company’s ability to meet its obligations as they arise over the next twelve months. However, management believes there are compensating factors and actions available to the Company to address liquidity concerns, including the following:

As of this date, under our Amended and Restated Certificate of Incorporation, we have 2,000,000 shares of Preferred Stock authorized, of which 1,682,985 are currently outstanding, leaving 317,015 available for future issuance. In addition, 40,000,000 shares of Common Stock are authorized, of which 13,788,738 are currently outstanding and 3,837,667 are reserved for issuance pursuant to our Amended and Restated Stock Awards Plan, leaving 22,373,595 available for future issuance. We believe these factors provide capacity for subsequent issues of Common Stock or Preferred Stock.

The Preferred Stock has been issued in public offerings in June 2016 and November 2021, and in two ATM offering programs. The Preferred Stock issued in the June 2016 public offering was issued as consideration to Mitsubishi Heavy Industries, Ltd. Pursuant to the November 2021 underwritten public offering, the Company issued 432,000 shares of Preferred Stock. The Company received net proceeds of approximately $9.5 million after underwriting discounts and other costs. The Preferred Stock (i) allows for redemption at our option (even in the event of a change of control), (ii) does not grant holders with voting control of our Board of Directors, and (iii) provides holders with a conversion option (into common stock) only upon a change of control which, upon conversion, would be subject to a limit on the maximum number of shares of common stock to be issued. Through January 31, 2023, we have issued 1,682,985 shares of our Preferred Stock.

During the twelve months ended January 31, 2023, the Company did not sell any shares of Common Stock or Series A Preferred Stock under the ATM Offering Program.

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Due to the rising level of sales and production activities, there are increasing requirements for purchases of inventory and other production costs. Additionally, due to component shortages and long-lead times for certain, items there are requirements in some cases to purchase items well in advance. Furthermore, some suppliers require prepayments in order to secure some items. All of these factors combine to increase the Company’s working capital requirements. Furthermore, Management believes there are opportunities to increase production capacity and efficiencies. However, some of these opportunities may require investments such as production equipment or other fixed assets. If we are unable to meet suppliers demands, we may not be able to produce products and fulfill orders from our customers.

The following table sets forth selected historical information regarding cash flows from our Consolidated Statements of Cash Flows:

Year Ended January 31,

(in thousands)

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, we had working capital of approximately $13.3 million, including cash and cash equivalents of approximately $778,000, as compared to working capital of approximately $18.5 million, including cash and cash equivalents of approximately $5.1 million at January 31, 2022. Our working capital decreased during fiscal 2023 compared to fiscal 2022, due primarily to a decrease in accounts receivable and cash and an increase in accounts payable.

Cash Used In Operating Activities. Cash used in operating activities amounted to approximately $2.9 million in fiscal 2023 compared to approximately $17.1 million in fiscal 2022. In fiscal 2023, the primary sources of cash used in operating activities was our net loss of approximately $8.8 million, partially offset by non-cash expenses, including depreciation and amortization, etc., and the net change in working capital items, such as accounts receivable, inventories and deferred revenue, totaling approximately $1.9 million.

Cash Flows From Investing Activities. Cash provided from investing activities during fiscal 2023 decreased approximately $4.9 million over fiscal 2022. The decrease is primarily due to proceeds from the sale of Assets Held for Sale totaling approximately $1.1 million in fiscal 2023 as compared to $5.4 million in fiscal 2022.

Cash Flows From Financing Activities. Net cash used in financing activities during fiscal 2023 consisted of approximately $1.9 million of Preferred Stock dividend payments. Net cash provided by financing activities during fiscal 2022 consisted of approximately $43,000 of proceeds from sales of Common Stock and approximately $14.7 million of proceeds from sales of Preferred Stock, partially offset by approximately $2.5 million of Preferred Stock dividend payments.

As of January 31, 2023, we have no funded debt and no obligations containing restrictive financial covenants. On February 2, 2023, we entered into a $3.75 million Loan and Security Agreement (“the Loan”). The Loan is due February 1, 2024, and bears interest at 12.9% per annum, payable monthly. However, we have prepaid interest through maturity. In addition, we have paid the Lender an origination fee equal to $240,000. The Loan may be prepaid at any time without penalty.

The Loan is secured by mortgages on certain real estate owned by the Company. The Loan contains terms customary with this type of transaction including representations, warranties, covenants, and reporting requirements (see Note 4 – “Going Concern and Subsequent Event” for additional details).

We regularly evaluate opportunities to expand our business through the acquisition of other companies, businesses or product lines. If we were to make any such acquisitions, we believe they could generally be financed with a combination of cash on hand and cash flows from operations. However, should these sources of financing not be adequate, we may seek other sources of capital to fund future acquisitions. These additional sources of capital include bank credit facilities or the issuance of debt or equity securities.

We have determined that, due to the potential requirement for additional investment and working capital to achieve our objectives, the undistributed earnings of foreign subsidiaries is not deemed indefinitely reinvested outside of the United States as of January 31, 2023. Furthermore, we have concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial.

As of January 31, 2023, we had deposits in foreign banks equal to approximately $370,000 all of which we believe could be distributed to the United States without adverse tax consequences. However, in certain cases the transfer of these funds may result in withholding taxes payable to foreign taxing authorities. These factors could limit our ability to pay cash dividends in the future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of Regulation S-K.

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Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in determining the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant estimates made by us in the accompanying consolidated financial statements relate to the allowances for uncollectible accounts receivable and inventory obsolescence, the useful lives, and the impairment assessments of our various intangible assets and the assessment of the need for a valuation allowance related to deferred tax assets and the assessment of uncertain tax positions.

Critical accounting estimates are those that are most important to the portrayal of a company’s financial position and results of operations and require management’s subjective judgment. Below is a brief discussion of our critical accounting estimates.

Allowance for Doubtful Accounts

We make provisions to the allowance for doubtful accounts based on a detailed review of outstanding receivable balances. Factors considered include the age of the receivable, the payment history of the customer, the general financial condition of the customer, any financial or operational leverage we may have in a particular situation and general industry conditions. We typically do not charge fees on past due accounts, although we reserve the right to do so in most of our contractual arrangements with our customers and have done so from time to time. No allowance for doubtful accounts related to continuing operations was recorded during fiscal 2023 or fiscal 2022. No provision for doubtful accounts related to discontinued operations was recorded during fiscal 2023 compared to a recovery of $450,000 in fiscal 2022. At January 31, 2023, we had an allowance for doubtful accounts of approximately $504,000 and $484,000 at January 31, 2022, related to continuing operations receivables.

Inventory Obsolescence

We value our inventory based on our cost. We adjust the value of our inventory to the extent we determine that our cost cannot be recovered due to obsolescence or other factors. In order to make these determinations, we may use estimates of future demand for our products to determine appropriate inventory reserves and to make corresponding reductions in inventory values to reflect the lower of cost or market value. For fiscal 2023 and fiscal 2022 we increased our inventory obsolescence reserve for continuing operations by approximately $445,000 and $921,000, respectively.

Intangible Assets

Intangible assets consist primarily of proprietary rights, customer relationships, patents, trade names, developed software and other developed technology.

Intangible assets with finite lives are amortized over their estimated useful life on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization period. We test these assets for potential impairment whenever our management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. The original estimate of an asset’s useful life and the impact of an event or circumstance on either an asset’s useful life or carrying value involve significant judgment regarding estimates of the future cash flows associated with each asset

For fiscal 2023 and fiscal 2022, management did not identify any events or changes in circumstances that indicated that the carrying amount may not be recoverable. As a result, no charge for impairment was recorded for fiscal 2023 or fiscal 2022.

Income Taxes

We account for income taxes under the liability method, whereby deferred tax asset or liability account balances are determined based on the difference between the financial statement and the tax bases of assets and liabilities using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets when we expect the amount of tax benefit to be realized is less than the carrying value of the deferred tax asset.

We make an evaluation at the end of each reporting period as to whether or not some or all of the undistributed earnings of our foreign subsidiaries are permanently reinvested. While we may have concluded in the past that some of such undistributed earnings are permanently reinvested, facts and circumstances may change in the future. Changes in facts and circumstances may include a change in the estimated capital needs of our foreign subsidiaries, or a change in our corporate liquidity requirements. Such changes could result in our management determining that some or all of such undistributed earnings are no longer permanently reinvested. In that event, we would be required to recognize income tax liabilities on the assumption that our foreign undistributed earnings will be distributed to the U.S

Accounting for income taxes involves uncertainty and judgment on how to interpret and apply tax laws and regulations within our annual tax filings. Such uncertainties from time to time may result in a tax position that may be challenged and overturned by a tax authority in the future which could result in additional tax liability, interest charges and possibly penalties. We classify interest and penalties as a component of tax expense.

Significant Accounting and Disclosure Changes

See Note 3 - “New Accounting Pronouncements” in the Notes to the Condensed Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Item7A.Quantitative and Qualitative Disclosures about Market Risk

Not required under Item 305 Regulation S-K for smaller reporting companies.

Item8.Financial Statements and Supplementary Data

The information required by this Item appears beginning on page F-1 and is incorporated herein by reference.

Item9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item9A.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officers and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Management has identified a material weakness involving the Company’s review controls over the review of significant technical accounting matters. The Company failed to perform a sufficient level of review related to the aggregation of operating segments, which resulted in a misapplication of ASC 280, Segment Reporting identified by the Company’s auditors during the audit of our financial statements for the fiscal year ended January 31, 2023.

As described below, the Company will implement changes to internal control procedures intended to provide sufficient level of review related to technical accounting matters as such matters arise. Notwithstanding the material weakness described above, the Company’s management, including our principal executive officers and principal financial officer, have concluded that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company's financial position, results of operations, and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Rule 13a-15(c) under the Exchange Act, our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of January 31, 2023. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework in 2013. Based on this assessment, our management, including our principal executive officers and principal financial officer, identified a material weakness which resulted from an insufficient level of review performed in connection with the analysis of the aggregation of operating segments, which resulted in a misapplication of ASC 280, Segment Reporting. For the year ended January 31, 2023, we correctly reported segment activity pursuant to the provisions of ASC 280, and we have restated segment information for the year ended January 31, 2022 to correct our error and conform to our current presentation. Solely as a result of such material weakness, the Company’s executive officers determined that the Company’s internal control over financial reporting was not effective at the reasonable assurance level as of January 31, 2023.

Remediation Plan for the Material Weakness in Internal Control over FinancialReporting

To address the material weakness regarding the insufficient level of review performed in connection with the analysis of the aggregation of operating segments, the Company will reinforce the following:

Remediation of the Material Weakness in Internal Control over FinancialReporting

As disclosed in Part II Item 9A Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, the Company failed to properly determine whether control had transferred to a customer in a bill-and-hold transaction and recognized revenue in error as identified by the Company’s auditors during the audit of our financial statements for the fiscal year ended January 31, 2022.

During fiscal 2023, management implemented our previously disclosed remediation plan that included:

In connection with its assessment of the effectiveness of our internal control over financial reporting as of January 31, 2023, our management, including our principal executive officers and principal financial officer, concluded that the material weakness involving the Company’s review controls to ensure the proper application of generally accepted accounting principles (ASC 606, Revenue from Contracts with Customers) has been remediated as of January 31, 2023.

Changes in Internal Control over Financial Reporting

Except for the changes in connection with our presentation of segment activity and our implementation of the remediation plan discussed above, there was no change in our system of internal control over financial reporting during the quarter ended January 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item9B.Other Information

None.

Item9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

None.

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PART III

Item10.Directors, Executive Officers and Corporate Governance

Pursuant to General Instruction G to Form 10-K, we incorporate by reference into this Item the information to be disclosed in our definitive proxy statement for our 2023 Annual Meeting of Stockholders, which will be filed with the SEC within 120 business days of January 31, 2023.

We have adopted a Code of Business Conduct and Ethics, which covers a wide range of business practices and procedures. The Code of Business Conduct and Ethics represents the code of ethics applicable to our principal executive officer, principal financial officer, and principal accounting officer or controller and persons performing similar functions (“senior financial officers”). A copy of the Code of Business Conduct and Ethics is available on our website, https://www.mind-technology.com, and a copy will be mailed without charge, upon written request, to MIND Technology, Inc., 2002 Timberloch Place, Suite 550, The Woodlands, Texas, 77380, Attention: Robert P. Capps. We intend to disclose any amendments to or waivers of the Code of Business Conduct and Ethics on behalf of our senior financial officers on our website, at https://www.mind-technology.com promptly following the date of the amendment or waiver.

Item11.Executive Compensation

Item12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item13.Certain Relationships and Related Transactions and Director Independence

Item14.Principal Accounting Fees and Services

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PART IV

Item15.Exhibits, Financial Statement Schedules

(a) List of Documents Filed

(i) Financial Statements

(ii) Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts

(iii) Exhibits

(b) Exhibits

The exhibits marked with the cross symbol (†) are filed (or furnished in the case of Exhibits 32.1 and 32.2) with this Form 10-K. The exhibits marked with the asterisk symbol (*) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

Exhibit Number Document Description Form Exhibit Reference

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Exhibit Number Document Description Form Exhibit Reference

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Exhibit Number Document Description Form Exhibit Reference

21.1† Subsidiaries of MIND Technology, Inc.

23.1† Consent of Moss Adams LLP

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Exhibit Number Document Description Form Exhibit Reference

101.INS† Inline XBRL Instance Document

101.SCH† Inline XBRL Taxonomy Extension Schema Document

101.CAL† Inline XBRL Taxonomy Extension Calculation of Linkbase Document

101.DEF† Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB† Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE† Inline XBRL Taxonomy Extension Presentation Linkbase Document

Item 16. Form 10-K Summary

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 1st day of May 2023.

MIND TECHNOLOGY, INC.

By: /s/ ROBERT P. CAPPS

Robert P. Capps

President, Chief Executive Officer and Director

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature Title/Capacity Date

/s/ ROBERT P. CAPPS President, Chief Executive Officer and Director May 1, 2023

Robert P. Capps (Principal Executive Officer)

Mark A. Cox (Principal Financial Officer and Principal Accounting Officer)

/s/ PETER H. BLUM Non-Executive Chairman of the Board of Directors May 1, 2023

Peter H. Blum

/s/ THOMAS S. GLANVILLE Director May 1, 2023

Thomas S. Glanville

/s/ WILLIAM H. HILARIDES Director May 1, 2023

William H. Hilarides

/s/ NANCY J. HARNED Director May 1, 2023

Nancy J. Harned

/s/ ALAN P. BADEN Director May 1, 2023

Alan P. Baden

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Balance Sheets as of January 31, 2023 and 2022 4

Notes to Consolidated Financial Statements 9

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

MIND Technology, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MIND Technology, Inc. and subsidiaries (the “Company”) as of January 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of January 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the consolidated financial statements, the Company has a history of generating operating losses and negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 4. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits providea reasonable basis for our opinion.

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Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Moss Adams LLP

Houston, Texas

May 1, 2023

We have served as the Company’s auditor since 2017.

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MIND TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

January 31,

ASSETS

Current assets:

Cash and cash equivalents $ 778 $ 5,114

Prepaid expenses and other current assets 2,144 1,840

Assets held for sale — 159

Operating lease right-of-use assets 1,749 1,835

Other assets — 650

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued expenses and other current liabilities 2,247 5,762

Operating lease liabilities - current 903 869

Liabilities held for sale — 953

Operating lease liabilities - non-current 846 966

Deferred tax liability 29 92

Stockholders’ equity:

Accumulated other comprehensive gain (loss) 34 (1,881 )

Total liabilities and stockholders’ equity $ 32,858 $ 42,020

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

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MIND TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Year Ended January 31,

Revenues:

Sale of marine technology products $ 35,091 $ 23,107

Cost of sales:

Operating expenses:

Depreciation and amortization 1,887 2,209

Other income:

Loss from continuing operations before income taxes (6,732 ) (13,618 )

(Provision) benefit for income taxes (699 ) 39

Loss from continuing operations (7,431 ) (13,579 )

Loss from discontinued operations, net of income taxes (1,401 ) (1,506 )

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

Continuing operations $ (0.82 ) $ (1.20 )

Discontinued operations $ (0.10 ) $ (0.11 )

Net loss per common share - Diluted

Continuing operations $ (0.82 ) $ (1.20 )

Discontinued operations $ (0.10 ) $ (0.11 )

Shares used in computing loss per common share:

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

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MIND TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

Year Ended January 31,

Other changes in cumulative translation adjustment — 24

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

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MIND TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

Common Stock Preferred Stock

Retained Accumulated

Additional Earnings Other

Paid-In Treasury (Accumulated Comprehensive

Shares Amount Shares Amount Capital Stock Deficit) Income (Loss) Total

Foreign currency translation — — — — — — — 2,475 2,475

Restricted stock issued 5 — — — 11 — — — 11

Restricted stock forfeited for taxes — — — — — (2 ) — — (2 )

Preferred stock dividends — — — — — — (2,901 ) — (2,901 )

Common stock offerings — — — — 42 — — — 42

Stock-based compensation — — — — 632 — — — 632

Foreign currency translation — — — — — — — 1,915 1,915

Restricted stock forfeited for taxes — — — — — (1 ) — — (1 )

Restricted stock issued 16 — — — — — — — —

Preferred stock dividends — — — — — — (947 ) — (947 )

Stock-based compensation — — — — 654 — — — 654

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

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MIND TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended January 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

PPP loan forgiveness — (850 )

Depreciation and amortization 1,887 2,214

Stock-based compensation 654 643

Non-cash cumulative translation adjustment for discontinued operations 1,626 —

(Recovery) provision for doubtful accounts, net of charge offs — (453 )

Provision for inventory obsolescence 445 921

Gross profit from sale of lease pool equipment (1,052 ) —

Gross profit from sale of other equipment 113 (155 )

Deferred tax benefit (62 ) (106 )

Changes in:

Unbilled revenue (26 ) (57 )

Income taxes receivable and payable 441 37

Accounts payable, accrued expenses and other current liabilities 775 713

Prepaid expenses and other current and long-term assets (10 ) (565 )

Net cash used in operating activities (2,905 ) (17,134 )

Cash flows from investing activities:

Cost incurred to develop technology (12 ) —

Purchases of property and equipment (570 ) (834 )

Sale of business, net of cash sold — 761

Net cash provided by investing activities 470 5,364

Cash flows from financing activities:

Net proceeds from preferred stock offering — 14,676

Net proceeds from common stock offering — 43

Repurchase of common stock (1 ) (2 )

Preferred stock dividends (1,894 ) (2,530 )

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

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

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MIND Technology, Inc.

Notes to Consolidated Financial Statements

1. Organization and Summary of Significant Accounting Policies

Going Concern—These 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. As discussed in Note 4, 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.

Organization—MIND Technology, Inc., a Delaware corporation (the “Company”), was incorporated in 1987. The Company, through its wholly owned subsidiaries, Seamap Pte Ltd, MIND Maritime Acoustics, LLC (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. Effective July 31, 2020, the Leasing Business has been classified as held for sale and the financial results reported as discontinued operations (see Note 2 – “Assets Held for Sale and Discontinued Operations” for additional details). All intercompany transactions and balances have been eliminated in consolidation.

Correction of Comprehensive Loss —The Company has corrected an immaterial error in the statement of comprehensive loss during the year ended January 31, 2022, which as previously presented, incorrectly included $2.9 million of preferred dividends as a component of comprehensive loss.

Revenue Recognition of Marine Product Sales—Revenues and cost of sales from the sale of marine products are recognized upon acceptance of terms and completion of our performance obligations, which is typically when delivery has occurred, or in the case of bill-and-hold arrangements, when control has been transferred.

Revenue Recognition of Long-term Projects—From time to time the Company enters into contracts whereby certain marine equipment is assembled or manufactured and sold, primarily to governmental entities. Performance under these contracts generally occurs over a period of three to twelve months. Revenue and costs related to these contracts are recognized “over time”, as each separately identified performance obligation is satisfied.

Revenue Recognition of Repair Services and Equipment Upgrades—Revenue and cost of sales from the provision of repair services and equipment upgrades are recognized “over time” pursuant to the practical expedient under which revenue is recognized when invoiced.

Revenue Recognition of Service Agreements—In some cases the Company provides on-going support services pursuant to contracts that generally have a term of 12 months. The Company recognizes revenue from these contracts ratably over the term of the contract. The Company may also provide support services on a time and material basis. Revenue from these arrangements is recognized as the services are provided. For certain new systems, the Company provides support services for up to 12 months at no additional charge. Any amounts attributable to these support obligations are immaterial. Revenues from service contracts for fiscal 2023 and 2022 were not material and as a result are not presented separately in the financial statements.

Revenue Recognition of Leasing Arrangements—The Company has historically leased various types of seismic equipment to seismic data acquisition companies. There were no active leases as of January 31, 2023, or January 31, 2022. Lease revenue is recognized ratably over the term of the lease. The Company does not enter into leases with embedded maintenance obligations. The standard lease provides that the lessee is responsible for maintenance and repairs to the equipment, excluding normal wear and tear. The Company occasionally provides technical advice to its customers without additional compensation as part of its customer service practices. Repairs or maintenance performed by the Company is charged to the lessee, generally on a time and materials basis. Repair and maintenance revenues are recognized as incurred. Effective July 31, 2020, the Leasing Business has been classified as held for sale on the financial results reported as discontinued operations (see Note 2 – “Assets Held for Sale and Discontinued Operations” for additional details).

Allowance for Doubtful Accounts—Trade receivables are uncollateralized customer obligations due under normal trade terms. The carrying amount of trade receivables and contracts receivable is reduced by a valuation allowance that reflects management’s estimate of the amounts that will not be collected, based on the age of the receivable, payment history of the customer, general industry conditions, general financial condition of the customer and any financial or operational leverage the Company may have in a particular situation. Amounts are written-off when collection is deemed unlikely. Past due amounts are determined based on contractual terms. The Company generally does not charge interest on past due accounts.

Cash and Cash Equivalents—The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.

Short-term Investments—The Company considers all highly liquid investments with an original maturity greater than three months, but less than twelve months, to be short-term investments.

Inventories—Inventories are stated at the lower of cost or realizable value. The Company determines cost on the basis of Average or Standard Cost. An allowance for obsolescence is maintained to reduce the carrying value of any inventory items that may become obsolete. Inventories are periodically monitored to ensure that the allowance for obsolescence covers any obsolete items.

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Property and Equipment—Property and equipment is carried at cost, net of accumulated depreciation. Depreciation is computed on the straight-line method over the related estimated useful lives. The estimated useful lives of equipment range from three to seven years. Buildings are depreciated over 30 years and property improvements are amortized over 10 years or the shorter of their useful life. Leasehold improvements are amortized over the shorter of the estimated useful life or the life of the respective leases. No salvage value is assigned to property and equipment. Significant improvements are capitalized while maintenance and repairs are charged to expense as incurred.

Intangible Assets—Intangible assets are carried at cost, net of accumulated amortization. Amortization is computed on the straight-line method (for customer relationships, the straight-line method is not materially different from other methods that estimate run off of the underlying customer base) over the estimated life of the asset. Proprietary rights, developed technology and amortizable tradenames are amortized over a 10 to 15-year period. Customer relationships are amortized over an eight-year period. Patents are amortized over an eight to ten-year period.

Impairment—The Company reviews its long-lived assets, including its amortizable intangible and non-amortizing assets, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The determination of future cash flows as well as the estimated fair value of long-lived assets involves significant estimates on the part of management. The Company performs an impairment test on indefinite lived assets on an annual basis. The Company performs a qualitative review to determine if it is more likely than not that the fair value of our indefinite lived assets is greater than their carrying value. If the Company is unable to conclude qualitatively that it is more likely than not that an indefinite lived asset’s fair value exceeds its carrying value, then the Company performs a quantitative assessment of fair value of the indefinite lived asset. The quantitative reviews involve significant estimates on the part of management.

Product Warranties—Seamap provide its customers warranties against defects in materials and workmanship generally for a period of three months after delivery of the product. Klein also provides its customers with similar warranties against defects in material and workmanship for an approximate twelve month period subsequent to delivery of the product. The Company maintains an accrual for potential warranty costs based on historical warranty claims. For fiscal 2023 and 2022, warranty expense was not material.

Income Taxes—The Company accounts for income taxes under the liability method, whereby the Company recognizes deferred tax assets and liabilities which represent differences between the financial and income tax reporting basis of its assets and liabilities. Deferred tax assets and liabilities are determined based on temporary differences between income and expenses reported for financial reporting and tax reporting. The Company has assessed, using all available positive and negative evidence, the likelihood that the deferred tax assets will be recovered from future taxable income.

The weight given to the potential effect of positive and negative evidence is commensurate with the extent to which it can be objectively verified. The preponderance of negative or positive evidence supports a conclusion regarding the need for a valuation allowance for some portion, or all, of the deferred tax asset. The more significant types of evidence considered include the following:

• projected taxable income in future years;

• our history of taxable income within a particular jurisdiction;

• any history of deferred tax assets expiring prior to realization;

• other limitations on the utilization of tax benefits;

• tax planning strategies that will create additional taxable income.

Employee retention credit (ERC)—The ERC allows for a refundable tax credit against certain employment taxes equal to 70% of the firstten thousand dollars in qualified wages paid between January 1, 2021, and June 30, 2021. To be eligible, pursuant to the Taxpayer Certainty and Disaster Relief Act of 2020, the Company must have had gross receipts decline by more than 20% in a calendar quarter when compared to the same quarter in 2019. Because the Company had fewer than 500 full-time employees in 2019, wages paid to employees providing services and not providing services are qualified wages. During the fourth quarter of fiscal 2023 the Company filed ERC refund claims of approximately $1.0 million, which was recognized as Other Income on the Company’s consolidated statements of operations and within accounts receivable, net on the Company's consolidated balance sheets.

Use of Estimates—The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, the allowance for doubtful accounts, inventory obsolescence, lease liabilities, valuation allowance on deferred tax assets, the evaluation of uncertain tax positions, estimated depreciable lives of fixed assets and intangible assets, impairment of fixed assets and intangible assets, valuation of assets acquired and liabilities assumed in business combinations and the valuation of stock options. Future events and their effects cannot be perceived with certainty. Accordingly, these accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Actual results could differ from these estimates.

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Substantial judgment is necessary in the determination of the appropriate levels for the Company’s allowance for doubtful accounts because of the extended payment terms the Company offers to its customers on occasion and the limited financial wherewithal of certain of these customers. As a result, the Company’s allowance for doubtful accounts could change in the future, and such change could be material to the financial statements taken as a whole. The Company must also make substantial judgments regarding the valuation allowance on deferred tax assets and with respect to quantitative analysis prepared in conjunction with impairment analysis related to intangible assets.

Fair Value of Financial Instruments—The Company’s financial instruments consist of accounts and contracts receivable and accounts payable.

The Financial Accounting Standards Board (“FASB”) has issued guidance on the definition of fair value, the framework for using fair value to measure assets hierarchy, which prioritizes the inputs used to measure fair value. These tiers include:

The Company measures the fair values of intangibles and other long-lived assets on a non-recurring basis if required by impairment tests applicable to these assets. Based on the results of our qualitative reviews, no quantitative tests were applicable during fiscal years 2023 and 2022.

Foreign Currency Translation—All balance sheet accounts of the Canadian resident subsidiary for fiscal 2023 and 2022 have been translated at the current exchange rate as of the end of the accounting period. Statements of operations items have been translated at average currency exchange rates. The resulting translation adjustment is recorded as a separate component of comprehensive income within stockholders’ equity.

Leases—The Company determines if an arrangement is a lease at inception. Operating leases are recorded as right-of-use assets and operating lease liabilities. The Company has not entered into any financing leases.

Operating lease right-of-use assets represent a right to use an underlying asset for the lease term and operating lease right-of-use liabilities represent an obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term and use an implicit rate when readily available. Since most of the Company’s leases do not provide an implicit rate the Company utilizes the incremental borrowing rate to determine the present value of lease payments. The rate will take into consideration the underlying asset’s economic environment, including the length of the lease term and currency that the lease is payable in. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Stock-Based Compensation—Stock-based compensation expense is recorded based on the grant date fair value of share-based awards. Restricted stock awards are valued at the closing price on the date of grant. Determining the grant date fair value for options requires management to make estimates regarding the variables used in the calculation of the grant date fair value. Those variables are the future volatility of our Common Stock price, the length of time an optionee will hold their options until exercising them (the “expected term”), and the number of options that will be forfeited before they are exercised (the “forfeiture rate”). We utilize various mathematical models in calculating the variables. Share-based compensation expense could be different if we used different models to calculate the variables. The fair value of stock-based compensation awards is amortized over the requisite service period of the award, which is the vesting period of the related awards.

Earnings Per Share—Net income (loss) per basic common share is computed using the weighted average number of common shares outstanding during the period. Net income (loss) per diluted common share is computed using the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding Common Stock options having a dilutive effect using the treasury stock method, from unvested shares of restricted stock using the treasury stock method and from outstanding Common Stock warrants. For fiscal 2023 and 2022, the following table sets forth the number of potentially dilutive shares that may be issued pursuant to options, restricted stock and warrants outstanding used in the per share calculations.

Year Ended

January 31,

(in thousands)

Stock options — 37

Restricted stock — 13

Total dilutive shares — 50

For fiscal 2023 and 2022, respectively, potentially dilutive common shares, underlying stock options and unvested restricted stock were anti-dilutive and were therefore not considered in calculating diluted loss per share for those periods.

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2. 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 January 31, 2023 and 2022 and for the years then ended. 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. As of January 31, 2023, we have substantially completed the sale of our discontinued operations.

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

As of January 31,

Current assets of discontinued operations: (in thousands)

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

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

As of January 31,

Current liabilities of discontinued operations: (in thousands)

Accounts payable $ — $ 132

Deferred revenue — 73

Accrued expenses and other current liabilities — 507

Income taxes payable — 241

Total liabilities of discontinued operations $ — $ 953

The results of operations from discontinued operations for the twelve months ended January 31, 2023 and 2022, consist of the following:

Twelve Months Ended January 31,

Revenues: (in thousands)

Revenue from discontinued operations $ — $ 878

Cost of sales:

Cost of discontinued operations 91 993

Operating expenses:

Selling, general and administrative 765 1,622

(Recovery) provision for doubtful accounts — (450 )

Depreciation and amortization — 5

Other (expense) income (545 ) 93

Loss before income taxes from discontinued operations (1,401 ) (1,199 )

Provision for income taxes from discontinued operations — (307 )

Net loss from discontinued operations (1,401 ) (1,506 )

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

As of January 31,

(in thousands)

Depreciation and amortization $ — $ 5

(Recovery) provisions for doubtful accounts $ — $ (450 )

Sale of assets held for sale $ 1,052 $ 6,198

3. New Accounting Pronouncements

The Company has not adopted any new accounting pronouncements and there are no new accounting pronouncements that have been issued that are applicable to the Company.

4. Going Concern and Subsequent Event

On February 2,2023, the Company and Klein (collectively, the “Borrowers”), entered into a $3.75 million Loan and Security Agreement (the “Loan”) with Sachem Capital Corp., (the “Lender”). The Loan is due February 1, 2024, and bears interest at 12.9% per annum, payable monthly. However, the Borrowers have prepaid interest through maturity. In addition, the Borrowers have paid the Lender an origination fee equal to $240,000. The Loan may be prepaid at any time without penalty.

The Loan is secured by mortgages on certain real estate owned by the Borrowers. The Loan contains terms customary with this type of transaction including representations, warranties, covenants, and reporting requirements.

The Company has a history of generating operating losses and negative cash from operating activities and has relied on cash from the sale of lease pool equipment and the sale of Preferred Stock and Common Stock for the past several years. As of January 31,2023, the Company has some remaining lease pool equipment available for sale and has approximately 317,000 shares of Preferred Stock and approximately 22.1 million shares of Common Stock available for issuance. However, there can be no assurance the remaining lease pool equipment will be sold or that the Preferred Stock or Common Stock can be sold at prices acceptable to the Company.

The above factors create substantial doubt regarding the Company’s future financial results and liquidity. As such, there is substantial doubt as to the Company’s ability to continue as a going concern.

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

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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.

5. Revenue from Contracts with Customers

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

Twelve Months Ended January 31,

Revenue recognized at a point in time: (in thousands)

Total revenue recognized at a point in time $ 28,923 $ 21,850

Revenue recognized over time:

Total revenue recognized over time 6,168 1,257

Total revenue from contracts with customers $ 35,091 $ 23,107

The revenue from products manufactured and sold by our Seamap and Klein businesses, is generally recognized at a point in time, or when the customer takes possession of the product, based on the terms and conditions stipulated in our contracts with customers. However, from time to time our Seamap and Klein businesses provide repair and maintenance services, or perform upgrades, on customer owned equipment in which case revenue is recognized over time. In addition, our Seamap business provides annual Software Maintenance Agreements (“SMA”) to customers who have an active license for software embedded in Seamap products. The revenue from SMA is recognized over time, with the total value of the SMA amortized in equal monthly amounts over the life of the contract.

The following table presents revenue from contracts with customers disaggregated by geography, based on shipping location of our customers:

Twelve Months Ended January 31,

Revenue from contracts with customers: (in thousands)

Total revenue from contracts with customers $ 35,091 $ 23,107

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As of January 31, 2023 and 2022 contract assets and liabilities consisted of the following:

Contract Assets: (in thousands)

Unbilled revenue-current $ 2 $ 28

Total unbilled revenue $ 2 $ 28

Contract Liabilities:

Deferred revenue & customer deposits - current $ 571 $ 2,569

Total deferred revenue & customer deposits $ 571 $ 2,569

Considering the products manufactured and sold by our Seamap and Klein businesses and the Company’s standard contract terms and conditions, we expect our contract assets and liabilities to turn over, on average, within a three to six-month period.

With respect to the disclosures above, sales and transaction-based taxes are excluded from revenue, and we do not disclose the value of unsatisfied performance obligations for contacts with an original expected duration of one year or less. Also, we expense costs incurred to obtain contracts because the amortization period would be one year or less. These costs are recorded in selling, general and administrative expenses.

6. Supplemental Statements of Cash Flows Information

Supplemental disclosures of cash flows information for fiscal 2023 and 2022 were as follows (in thousands):

Year Ended January 31,

Interest paid $ 4 $ 31

7. Inventories

Inventories from continuing operations consisted of the following (in thousands):

As of January 31,

Less allowance for obsolescence (1,740 ) (1,878 )

8. Accounts Receivables

Accounts receivables from continuing operations consisted of the following (in thousands):

Current Long-term Total Current Long-term Total

Less allowance for doubtful accounts (504 ) — (504 ) (484 ) — (484 )

* the long-term balance of accounts receivable is recorded in Other Assets.

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9. Property and Equipment

Property and equipment from continuing operations consisted of the following (in thousands)

As of January 31,

Marine seismic service equipment — 3,880

Net book value of property and equipment $ 3,945 $ 4,272

Depreciation expense on property, plant and equipment was approximately $806,000 for fiscal 2023, and approximately $934,000 for fiscal 2022.

Location of property and equipment (in thousands):

As of January 31,

Net book value of property and equipment $ 3,945 $ 4,272

10. Leases

The Company has certain non-cancelable operating lease agreements for office, production and warehouse space in Texas, Hungary, Singapore, Malaysia and United Kingdom. We negotiated the termination of our Colombia lease obligation during the prior fiscal year and our lease obligation in Canada was terminated as of March 31, 2022.

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Lease expense for the twelve months ended January 31, 2023 and 2022 was approximately $858,000 and $1.2 million, respectively, and was recorded as a component of operating loss. Included in these costs was short-term lease expense of approximately $6,000 and $36,000 for the twelve months ended January 31, 2023 and 2022, respectively.

Supplemental balance sheet information related to leases as of January 31, 2023 and 2022 was as follows (in thousands):

As of January 31,

Assets

Liabilities

Operating lease liabilities $ 1,749 $ 1,835

Classification of lease liabilities

Current liabilities $ 903 $ 869

Non-current liabilities 846 966

Total Operating lease liabilities $ 1,749 $ 1,835

Lease-term and discount rate details as of January 31, 2023 and 2022 were as follows:

As of January 31,

Weighted average remaining lease term (years)

Weighted average discount rate:

Operating leases 13 % 13 %

Supplemental cash flow information related to leases on January 31, 2023 and 2022 was as follows (in thousands):

Mind Technology, Inc MIND US Equity

MIND · 10-K · period ended 2023-01-31

Item7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item7A.Quantitative and Qualitative Disclosures about Market Risk

Item8.Financial Statements and Supplementary Data

Item9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item9A.Controls and Procedures

Item9B.Other Information

Item9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

Item10.Directors, Executive Officers and Corporate Governance

Item11.Executive Compensation

Item12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item13.Certain Relationships and Related Transactions and Director Independence

Item14.Principal Accounting Fees and Services

Item15.Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

Mind Technology, Inc MIND US Equity☆

MIND · 10-K · period ended 2023-01-31

Item7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item7A.Quantitative and Qualitative Disclosures about Market Risk

Item8.Financial Statements and Supplementary Data

Item9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item9A.Controls and Procedures

Item9B.Other Information

Item9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

Item10.Directors, Executive Officers and Corporate Governance

Item11.Executive Compensation

Item12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item13.Certain Relationships and Related Transactions and Director Independence

Item14.Principal Accounting Fees and Services

Item15.Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

Mind Technology, Inc MIND US Equity