MIND · Read the filing

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

Overview

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. On August 21, 2023, we sold the Klein Marine Products segment and now operate in one segment.

Our worldwide Seamap Marine Products business includes Seamap Pte Ltd, MIND Maritime Acoustics, LLC, Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd (collectively “Seamap”), which designs, manufactures and sells specialized marine seismic equipment.

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.

The discontinued operations of the Klein Marine Products business related to sales of Klein products, which operated from Salem, New Hampshire.

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 $ 36,510 $ 25,012

Cost of sales:

Sale of marine technology products $ 20,539 $ 15,062

Operating expenses:

Selling, general and administrative $ 12,142 $ 12,883

Depreciation and amortization $ 1,178 $ 1,344

Operating income (loss) $ 518 $ (5,650 )

Year Ended January 31,

(in thousands)

Interest expense, net 634 4

Depreciation and amortization 1,516 1,887

Provision for income taxes 1,355 699

Stock-based compensation 261 654

Adjusted EBITDA from continuing operations (1) $ 2,311 $ (3,392 )

Reconciliation of Net Cash Used In Operating Activities to EBITDA

Net cash used in operating activities $ (4,967 ) $ (2,905 )

Stock-based compensation (261 ) (654 )

Provision for inventory obsolescence (341 ) (445 )

Changes in accounts receivable (current and long-term) 3,318 (4,864 )

Interest paid 634 —

Taxes paid, net of refunds 847 371

Gain on sale of other equipment 476 939

Gain on sale of Klein 2,343 —

Changes in prepaid expenses and other current and long-term assets 847 10

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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 RGNSS positioning system used to provide precise positioning of seismic sources and streamers 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 survey and exploration applications.

The discontinued operations of our Klein business designed, manufactured, and sold side scan sonar and water-side security systems to commercial, governmental, and military customers throughout the world.

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 2024 improved significantly when compared to fiscal 2023. Despite improving results, our operations continue to be impacted by the following factors:

• Extended lead times for key components.

• Requirements for advanced payments from some vendors for key components.

However, we believe general economic and geopolitical trends are now favorable for much of our business. Global energy prices traded within a fairly tight range during fiscal 2024 but remain significantly higher than the past several years and are generally expected to rise in fiscal 2025. 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. Expected increases in 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.

In recent months, we have continued to experience significant inquiries and bid activity for our Seamap Marine products. As of January 31, 2024, our backlog of firm orders for Seamap Marine Products was approximately $38.4 million, which is an increase of approximately 145% from the $15.7 million reported at January 31, 2023. In addition, we continue to pursue a number of other significant opportunities and expect to secure additional orders, primarily for delivery in fiscal 2025 and beyond. 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 2025 to exceed that of fiscal 2024. If revenues in fiscal 2025 increase as expected, we believe the Company will report net income from continuing operations and positive EBITDA for fiscal 2025. 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, mineral and geophysical exploration and maritime security. We have existing technology and products that meet needs across all these markets such as -

• Marine seismic equipment, such as GunLink and BuoyLink; and

• Acoustic arrays, such as SeaLink

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

In response, 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 system; and

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We believe that the above applications expand our addressable markets and provide opportunities for further growth in our revenues; however, neither initiative has produced material revenue to date.

As we grow our business, we are also looking to control our costs. During fiscal 2024, we eliminated several executive and management level positions 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 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 2024, we increased the pricing for most of our products. The amount of the increase varies by product and ranged from approximately 5% to 10%.

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 2024, we recorded operating income of approximately $518,000 and for fiscal 2023, we recorded an operating loss of approximately $5.7 million. The improvement in operating results was driven primarily by significant increases in revenue for the Seamap product lines in addition to cost-saving efforts implemented in the current fiscal year.

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

Year Ended January 31,

(in thousands)

Sale of marine technology products $ 36,510 $ 25,012

Gross profit margin 44 % 40 %

A significant portion of Seamap’s sales consist 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. The gross profit and gross profit margins generated by sales of Seamap products were approximately $16.0 million and 44% during fiscal 2024 and approximately $10.0 million and 40% in fiscal 2023. 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.

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Operating Expenses

Selling, general and administrative expenses for fiscal 2024 amounted to approximately $12.1 million, compared to approximately $12.9 million in 2023, respectively. In fiscal 2024 compared to fiscal 2023, the decrease of approximately 6% is primarily the result of reductions in headcount, compensation expense and other administrative costs due to cost reduction initiatives implemented in fiscal 2024.

Research and development costs were approximately $2.1 million in fiscal 2024 as compared to approximately $1.4 million in fiscal 2023. The increase in research and development spending was due primarily to development of the next generation of the Sealink product line.

We did not record a provision for credit losses in fiscal 2024 or fiscal 2023. On January 31, 2024, and 2023, we had trade accounts and note receivables over 180 days past due of approximately $51,000 and $349,000, 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, 2024, and 2023, our allowance for credit losses receivable for continuing operations amounted to approximately $332,000.

Depreciation and amortization expense relates primarily to the depreciation of furniture and fixtures, office and manufacturing equipment and the amortization of intangible assets. Depreciation and amortization expense was approximately $1.2 million and $1.3 million for fiscal 2024 and 2023, respectively. The decrease in depreciation and amortization expense in fiscal 2024 is due primarily to tangible and intangible assets becoming fully depreciated during the current fiscal year.

We periodically evaluate the recoverability of our long-lived assets. As of January 31, 2024, we performed a qualitative analysis of our long-lived assets and determined that there were no indicators of impairment for fiscal 2024.

Other Income and Expense

In fiscal 2024, we recorded other expense of approximately $280,000, consisting of interest expense of approximately $675,000 related to the $3.75 million loan that was repaid, in full, in conjunction with the sale of Klein, partially offset by gains from sale of assets. In fiscal 2023, we recorded other income of approximately $256,000, consisting primarily of gains from sale of assets.

Provision for Income Taxes

Our provision for income taxes for continuing operations for fiscal 2024 was approximately $1.3 million compared to approximately $699,000 for fiscal 2023. These amounts differed from the result expected when applying the U.S. statutory rate of 21% to our income or loss from continuing operations before income taxes for the respective periods due primarily to the impact of income taxes accrued in certain foreign jurisdictions, primarily in Singapore, which do not have net operating losses available to offset taxable income, and because valuation allowances have been recorded against increases in our deferred tax assets. Valuation allowances have been provided against all deferred tax assets in the United States and several foreign jurisdictions.

Internal Controls

As of January 31, 2024, the Company’s executive officers determined that the Company’s internal control over financial reporting was not effective due to an identified material weakness. See Item 9A. Controls and Procedures for further details.

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. See Item 9A. Controls and Procedures for further details.

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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:

Cost of sales:

Operating expenses:

Selling, general and administrative 2,022 5,185

Depreciation and amortization 338 543

Other income, including $2.3 million gain on sale of Klein 2,415 81

Income (loss) before income taxes 1,391 (2,713 )

Provision for income taxes (17 ) (26 )

In the third quarter of fiscal 2024, we sold the Klein business and therefore present those operations as discontinued operations.

We recorded revenue of $3.3 million from discontinued operations during fiscal 2024, compared to approximately $10.1 million for fiscal 2023. The revenue recorded in fiscal 2024 and 2023 is from the discontinued operations of Klein. The drop in revenue is due to only seven months of activity in fiscal 2024 and several large multi-beam system sales in fiscal 2023, not recurring in fiscal 2024.

Costs of sales related to the discontinued operations of Klein dropped to approximately $2.0 million in fiscal 2024 from approximately $7.1 million reported in fiscal 2023. The reduction in direct costs is commensurate with the decline in revenue.

Selling, general and administrative costs related to the discontinued operations, primarily related to Klein, totaled approximately $2.0 million in fiscal 2024 compared to approximately $5.2 million during fiscal 2023. The decrease was due primarily to only seven months of activity in fiscal 2024 due to the sale of Klein on August 21, 2023.

Depreciation and amortization expense was approximately $338,000 in fiscal 2024 and approximately $543,000 for fiscal 2023. The decrease in depreciation and amortization expense in fiscal 2024 is due primarily to the sale of Klein on August 21, 2023.

In fiscal 2024 we recognized approximately $2.3 million of gain on the sale of Klein.

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We recorded provision for income taxes of approximately $17,000 and $26,000 related to the discontinued operations of Klein in fiscal 2024 and fiscal 2023, respectively. The tax provision for the discontinued operations of Klein relates to state income tax varies from the expected provision based on the U.S. statutory rate due to the proration of profit and loss allocated to the state taxing jurisdiction.

Liquidity and Capital Resources

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. However, the Company’s operating results improved significantly in fiscal 2024 as compared to fiscal 2023 and prior years, generating net income from operations and positive Adjusted EBITDA for the fiscal year ended January 31, 2024. In addition, the Company sold its Klein business on August 21, 2023, generating net proceeds of approximately $7.3 million after settlement of closing cost and all outstanding amounts due and owed, including principal, interest, and other charges, on the Company’s $3.75 million loan. The sale of Klein increased the Company’s working capital and improved its liquidity situation.

The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, potential financing secured by company owned real property, disciplined working capital commitments, and potentially securing a credit facility or some other form of financing.

In addition, management believes there are additional 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 1,405,779 are currently outstanding and 38,377 are reserved for issuance pursuant to our Amended and Restated Stock Awards Plan, leaving 38,555,844 available for future issuance. We believe these factors provide capacity for subsequent issues of Common Stock or Preferred Stock.

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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 $ (4,967 ) $ (2,905 )

Net cash provided by investing activities 11,018 470

Net cash used in financing activities (1,535 ) (1,895 )

Net (decrease) increase in cash and cash equivalents $ 4,511 $ (4,336 )

As of January 31, 2024, we had working capital of approximately $18.1 million, including cash and cash equivalents of approximately $5.3 million, as compared to working capital of approximately $13.3 million, including cash and cash equivalents of approximately $778,000 at January 31, 2023. Our working capital increased during fiscal 2024 compared to fiscal 2023, due primarily to increases in cash, accounts receivable and inventory and a decrease in accounts payable.

Cash Used In Operating Activities. Cash used in operating activities amounted to approximately $5.0 million in fiscal 2024, compared to approximately $2.9 million in fiscal 2023. In fiscal 2024, the primary sources of cash used in operating activities was the net change in working capital items, such as accounts receivable, inventories, prepaid assets, and accounts payable, totaling approximately $4.4 million.

Cash Flows From Investing Activities. Cash provided by investing activities during fiscal 2024 increased approximately $10.5 million over fiscal 2023, due primarily to proceeds from the sale of Klein totaling approximately $11.5 million.

Cash Flows From Financing Activities. Net cash used in financing activities during fiscal 2024 consisted of approximately $0.9 million of Preferred Stock dividend payments and approximately $600,000 of net outflows related to the borrowing and repayment of a short-term loan. Net cash used in financing activities during fiscal 2023 consisted of approximately $1.9 million of Preferred Stock dividend payments.

As of January 31, 2024, 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 was due February 1, 2024, and bore interest at 12.9% per annum, payable monthly. However, the interest due through maturity and an origination fee equal to $240,000 were withheld from the proceeds issued by the Lender. The Loan was secured by mortgages on certain real estate owned by the Company and contained terms customary with this type of transaction, including representations, warranties, covenants, and reporting requirements. The terms of the Loan also allowed for prepayment at any time without penalty. On August 22, 2023, following the sale of Klein, all outstanding amounts due and owed, including principal, interest, and other charges, with respect to the Loan were repaid, in full.

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 are not deemed indefinitely reinvested outside of the United States as of January 31, 2024. Furthermore, we have concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial.

As of January 31, 2024, we had deposits in foreign banks equal to approximately $4.9 million, 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. Critical accounting estimates made by us in the accompanying consolidated financial statements relate to the allowances for uncollectible accounts receivable and inventory obsolescence, and the impairment assessments of our various intangible assets.

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 Credit Losses

We make provisions to the allowance for credit losses 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 and reasonable and supportable forecasts. Our estimates are subject to uncertainty because financial information about our customers may not be public information or readily available, and the information that is available may not be current or verifiable. However, we have longstanding relationships with most of our Marine Technology business customers and can rely on internal collection history data which we believe is more predictable than most of the other sources of data we use for this purpose. 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 additional allowance for credit losses related to continuing operations was recorded during fiscal 2024 or fiscal 2023. At January 31, 2024 and 2023, we had an allowance for credit losses of approximately $332,000 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. Our estimates related to inventory obsolescence are subject to uncertainty because many aspects of estimating future demand for our products are beyond our control and subject to change and variation. We are currently experiencing record levels of confirmed backlog of orders which makes the estimate of future demand more sure and less sensitive to changes beyond our control. For fiscal 2024, we increased our inventory obsolescence reserve for continuing operations by approximately $316,000. In fiscal 2023 we decreased our inventory obsolescence reserve for continuing operations by approximately $315,000 primarily due to write-offs of obsolete inventory.

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. Our estimates of an asset’s useful life are subject to uncertainty because our intangible assets are unique and may differ from one to another by type, technology, or use, all of which may impact its estimated useful life. Likewise, if we perform quantitative analysis to determine the recoverability of the carrying value of an asset, our estimate is subject to uncertainty because cashflow projections involve numerous assumptions, many of which are beyond our control. However, due to the Company’s improving financial results our facts and circumstances do not mandate quantitative analysis.

For fiscal 2024 and fiscal 2023, 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 2024 or fiscal 2023.

Significant Accounting and Disclosure Changes

See Note 3 - “New Accounting Pronouncements” in the Notes to the 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 controls over the existence of inventory at its subsidiary location in Singapore. The Company performed less-than-complete physical inventory at year-end because it placed reliance on other compensating controls during the year, including cycle counts and controls involving receipt and disbursement of inventory. However, due to the material value of inventory items not counted at yearend, management determined that reliance on other compensating controls was insufficient to ensure there is not a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected in a timely basis.

As described below, the Company will implement changes to internal control procedures over the existence of inventory. Notwithstanding the material weakness described above, the Company’s management, including our principal executive officer 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, 2024. 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 involving the Company’s control over the existence of inventory at its subsidiary location in Singapore. The annual physical count of the subsidiary’s inventory was limited to items with an extended value greater than $5,000, so all the inventory at the subsidiary location was not counted. The Company performed less-than-complete physical inventory at year-end because it placed reliance on other compensating controls during the year, including cycle counts and controls involving receipt and disbursement of inventory. However, due to the material value of inventory items not counted at yearend, management determined that reliance on other compensating controls was insufficient to ensure there is not a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected in a timely basis.. 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, 2024.

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, 2023, we had a material weakness in our controls over financial reporting because of the Company's failure to perform a sufficient level of review related to the aggregation of operating segments, which resulted in a misapplication of ASC 280, Segment Reporting, as identified by the Company’s auditors during the audit of our financial statements for the fiscal year ended January 31, 2023.

Remediation Plan for the Material Weakness in Internal Control over Financial Reporting

To address the material weakness regarding controls over the existence of inventory, the Company will implement and reinforce the following:

● Ensure adequate review and oversight of cycle count procedures and results.

The Company anticipates the actions described above and resulting improvements in controls will strengthen the Company's processes, procedures and controls related to the existence of inventory and will address the related material weakness described above. However, the material weakness cannot be considered fully remediated until the remediation processes have been in operation for a period of time and successfully tested.

Remediation of the Material Weakness in Internal Control over FinancialReporting

During fiscal 2024, management implemented our previously disclosed remediation plan that included reinforcing an executive level of review of the Company's technical accounting matters:

In connection with its assessment of the effectiveness of our internal control over financial reporting as of January 31, 2024, our management, including our principal executive officer 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 280, Segment Reporting) has been remediated as of January 31, 2024.

Changes in Internal Control over Financial Reporting

Except for the changes in connection with our implementation of the remediation plan discussed above, there was no change in our system of internal control over financial reporting during the fiscal year ended January 31, 2024, 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

Not Applicable.

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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 2024 Annual Meeting of Stockholders, which will be filed with the SEC within 120 business days of January 31, 2024.

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 Accountant Fees and Services

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PART IV

Item15.Exhibit and 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

4.1† Description of Securities

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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 30th day of April 2024.

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

Robert P. Capps (Principal Executive Officer)

/s/ MARK A. COX Vice President and Chief Financial Officer April 30, 2024

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

Peter H. Blum

/s/ THOMAS S. GLANVILLE Director April 30, 2024

Thomas S. Glanville

/s/ WILLIAM H. HILARIDES Director April 30, 2024

William H. Hilarides

/s/ ALAN P. BADEN Director April 30, 2024

Alan P. Baden

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Balance Sheets as of January 31, 2024 and 2023 4

Notes to Consolidated Financial Statements 9

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Report of Independent Registered Public Accounting Firm

The Stockholders and the Board of Directors

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, 2024 and 2023, the related consolidated statements of operations, comprehensive income (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, 2024 and 2023, 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.

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 audits 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

April 30, 2024

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 $ 5,289 $ 778

Prepaid expenses and other current assets 3,113 1,400

Current assets of discontinued operations — 5,783

Property and equipment, net 818 953

Operating lease right-of-use assets 1,324 1,749

Deferred tax asset 122 —

Long-term assets of discontinued operations — 4,289

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued expenses and other current liabilities 5,586 1,477

Operating lease liabilities - current 751 903

Current liabilities of discontinued operations — 2,420

Operating lease liabilities - non-current 573 846

Deferred tax liability — 29

Stockholders’ equity:

Accumulated other comprehensive gain 34 34

Total liabilities and stockholders’ equity $ 33,491 $ 32,858

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 $ 36,510 $ 25,012

Cost of sales:

Operating expenses:

Depreciation and amortization 1,178 1,344

Operating income (loss) 518 (5,650 )

Other (expense) income (280 ) 256

Income (loss) from continuing operations before income taxes 238 (5,394 )

Provision for income taxes (1,338 ) (699 )

Loss from continuing operations (1,100 ) (6,093 )

Income (loss) from discontinued operations, net of income taxes 1,374 (2,739 )

Preferred stock dividends - declared (946 ) (947 )

Preferred stock dividends - undeclared (2,842 ) (2,841 )

Net loss attributable to common stockholders $ (3,514 ) $ (12,620 )

Net (loss) income per common share - Basic and diluted

Continuing operations $ (3.48 ) $ (7.03 )

Discontinued operations $ 0.98 $ (1.95 )

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

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MIND TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Year Ended January 31,

Comprehensive income (loss) $ 274 $ (6,917 )

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 — — — — — — — 1,915 1,915

Restricted stock issued 2 — — — — — — — —

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

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

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

Net income — — — — — — 274 — 274

Preferred stock dividends — — — — — — (946 ) — (946 )

Stock-based compensation — — — — 261 — — — 261

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:

Depreciation and amortization 1,516 1,887

Stock-based compensation 261 654

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

Gain on sale of Klein (2,343 ) —

Provision for inventory obsolescence 341 445

Gross profit from sale of other equipment (476 ) (939 )

Deferred tax benefit (153 ) (62 )

Changes in:

Unbilled revenue 25 (26 )

Income taxes receivable and payable 635 441

Accounts payable, accrued expenses and other current liabilities (334 ) 775

Prepaid expenses and other current and long-term assets (847 ) (10 )

Net cash used in operating activities (4,967 ) (2,905 )

Cash flows from investing activities:

Cost incurred to develop technology (49 ) (12 )

Purchases of property and equipment (241 ) (570 )

Proceeds from the sale of Klein, net 10,832 —

Net cash provided by investing activities 11,018 470

Cash flows from financing activities:

Net proceeds from short-term loan 2,947 —

Payment on short-term loan (3,750 ) —

Refund of prepaid interest on short-term loan 214

Repurchase of common stock — (1 )

Preferred stock dividends (946 ) (1,894 )

Net cash used in financing activities (1,535 ) (1,895 )

Net increase (decrease) in cash and cash equivalents 4,511 (4,336 )

Cash and cash equivalents, beginning of period 778 5,114

Cash and cash equivalents, end of period $ 5,289 $ 778

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, Liquidity and Summary of Significant Accounting Policies

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, Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd, collectively “Seamap”, 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 state of Texas. Prior to August 21, 2023, the Company, through its wholly owned subsidiary Klein Marine Systems, Inc. (“Klein”), designed, manufactured and sold a broad range of proprietary products for the seismic, hydrographic and offshore industries from its facility in the state of New Hampshire. Effective August 21, 2023, the Company sold Klein and retrospectively presented its prior periods balance sheet activity as assets and liabilities of discontinued operations and the financial results reported as discontinued operations (see Note 2 – “Sale of a Subsidiary and Discontinued Operations” for additional details).

As of January 31, 2024, the Company had working capital of approximately $18.1 million, including cash and cash equivalents of approximately $5.3 million, compared to working capital of approximately $13.3 million, including cash and cash equivalents of approximately $778,000, as of January 31, 2023. The Company does not have a credit facility in place and depends on cash on hand and cash flows from operations to satisfy its liquidity needs. However, the Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, disciplined working capital management, potential financing secured by company owned real property, and potentially securing a credit facility or some other form of financing.

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 2024 and 2023 were not material and as a result are not presented separately in the financial statements.

Allowance for Credit Losses—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.

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 provides its customers warranties against defects in materials and workmanship generally for a period of three months after delivery of the product. For fiscal 2024 and 2023, 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.

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 credit losses, 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 credit losses 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 credit losses could change in the future, and such change could be material to the financial statements taken as a whole. The Company must also make judgments 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 2024 and 2023.

Foreign Currency Translation—All balance sheet accounts of the Canadian subsidiary for fiscal 2024 and 2023 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 2024 and 2023, 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 — —

Restricted stock — —

Total dilutive shares — —

For fiscal 2024 and 2023, respectively, potentially dilutive common shares, were immaterial and did not change the calculation of diluted loss per share for those periods.

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2. Sale of a Subsidiary 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 for the year 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 discontinued operations related to the Leasing Business.

On August 21, 2023, the Company sold Klein pursuant to a Stock Purchase Agreement (the “SPA”) with General Oceans AS (“the Buyer"). In connection with the SPA, the Company granted the Buyer a license to its Spectral Ai software suite (“Spectral Ai”). The license is exclusive to the Buyer as it relates to side scan sonar. The Company and the Buyer also entered into a collaboration agreement for the further development of Spectral Ai and potentially other software projects. The foregoing transactions contemplated by the SPA are referred to as the “Sale of Klein”. The aggregate consideration to the Company consisted of a cash payment of $10.8 million, resulting in a gain of approximately $2.4 million. The SPA contained customary representation and warranties. On August 22, 2023, following the closing of the Sale of Klein, all outstanding amounts due and owed, including principal, interest, and other charges, under the Loan were repaid in full and the Loan was terminated, and all liens and security interests granted thereunder were released and terminated (see Note 11 - "Notes Payable" for additional details). As a result of the sale, the assets, and liabilities of Klein, are considered assets and liabilities of discontinued operations in prior periods and its results of operations are reported as discontinued operations for the years ended January 31, 2024 and 2023.

The assets reported as discontinued operations consist of the following:

As of January 31,

Assets of discontinued operations: (in thousands)

Accounts receivable, net $ — $ 746

Inventories, net — 4,292

Prepaid expenses and other current assets — 745

Total current assets of discontinued operations — 5,783

Property, plant and equipment, net — 2,992

Intangible and other assets, net — 1,297

Total assets of discontinued operations $ — $ 10,072

The liabilities of discontinued operations consist of the following:

As of January 31,

Current liabilities of discontinued operations: (in thousands)

Accounts payable $ — $ 1,607

Deferred revenue — 20

Accrued expenses and other current liabilities — 769

Income taxes payable — 24

Total current liabilities of discontinued operations $ — $ 2,420

The results of operations from discontinued operations for the twelve months ended January 31, 2024 and 2023, consist of the following:

Twelve Months Ended January 31,

Revenues: (in thousands)

Revenue from discontinued operations $ 3,315 $ 10,079

Cost of sales:

Cost of discontinued operations 1,979 7,145

Operating expenses:

Selling, general and administrative 2,022 5,185

Depreciation and amortization 338 543

Other income, including $2.3 million gain on sale of Klein 2,415 81

Income (loss) before income taxes from discontinued operations 1,391 (2,713 )

Provision for income taxes from discontinued operations (17 ) (26 )

Net income (loss) from discontinued operations 1,374 (2,739 )

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

Twelve Months Ended January 31,

(in thousands)

Depreciation and amortization $ 338 $ 543

Gross profit from sale of other equipment $ — $ 939

Gain on sale of Klein $ 2,343 $ —

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

In fiscal 2023, our discontinued operations recognized a loss of approximately $1.6 million related to cumulative currency translation adjustments related to our subsidiary, Mitcham Canada, which was declared a discontinued entity. In addition, our discontinued operations recognized gains of approximately $939,000 related to the sales of lease pool equipment in fiscal 2023.

3. New Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326), which changes the existing incurred loss impairment model for financial assets held at amortized cost. The new model uses a forward-looking expected loss method to calculate credit loss estimates. ASU 2016-13 and its amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, though early adoption was permitted. The Company adopted the requirements of ASU 2016-13 as of February 1, 2023, on a modified retrospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU No.2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to enhance the disclosures public entities provide regarding significant segment expenses so that investors can better understand an entity’s overall performance and assess potential future cash flows. ASU 2023-07 will become effective February 1, 2024. The Company is currently evaluating the new guidance to determine the impact it will have on the disclosures to its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 seeks to improve transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. The updated guidance is effective for the Company on February 1, 2025. The Company is currently evaluating the new guidance to determine the impact it will have on the disclosures to its consolidated financial statements.

4. Revenue from Contracts with Customers

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

Twelve Months Ended January 31,

(in thousands)

Total revenue recognized at a point in time $ 35,556 $ 22,544

Total revenue recognized over time 954 2,468

Total revenue from contracts with customers $ 36,510 $ 25,012

The revenue from products manufactured and sold by our Seamap business, 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 business provides repair and maintenance services, or performs 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 $ 36,510 $ 25,012

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As of January 31, 2024 and 2023 contract assets and liabilities consisted of the following:

Contract Assets: (in thousands)

Unbilled revenue-current $ 26 $ 2

Total unbilled revenue $ 26 $ 2

Contract Liabilities:

Deferred revenue & customer deposits - current $ 3,649 $ 571

Total deferred revenue & customer deposits $ 3,649 $ 571

Considering the products manufactured and sold by our Seamap business 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 contracts 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.

5. Supplemental Statements of Cash Flows Information

Supplemental disclosures of cash flows information for fiscal 2024 and 2023 were as follows (in thousands):

Year Ended January 31,

Interest paid $ 634 $ 4

6. Inventories

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

As of January 31,

Less allowance for obsolescence (1,531 ) (1,215 )

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7. Property and Equipment

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

As of January 31,

Less accumulated depreciation (9,334 ) (9,124 )

Net book value of property and equipment $ 818 $ 953

Depreciation expense on property, plant and equipment was approximately $383,000 for fiscal 2024, and approximately $471,000 for fiscal 2023.

Location of property and equipment (in thousands):

As of January 31,

Net book value of property and equipment $ 818 $ 953

8. Leases

The Company has certain non-cancelable operating lease agreements for office, production and warehouse space in Texas, Singapore, Malaysia and United Kingdom. Our lease obligation in Canada was terminated as of March 31, 2022 and our lease obligation in Hungary was terminated as of October 31, 2022.

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Lease expense for the twelve months ended January 31, 2024 and 2023 was approximately $831,000 and $858,000, respectively, and was recorded as a component of operating income (loss). Included in these costs was short-term lease expense of approximately $8,000 and $6,000 for the twelve months ended January 31, 2024 and 2023, respectively.

Supplemental balance sheet information related to leases as of January 31, 2024 and 2023 was as follows (in thousands):

As of January 31,

Assets

Operating lease right-of-use assets $ 1,324 $ 1,749

Liabilities

Operating lease liabilities $ 1,324 $ 1,749

Classification of lease liabilities

Current liabilities $ 751 $ 903

Non-current liabilities 573 846

Total Operating lease liabilities $ 1,324 $ 1,749

Lease-term and discount rate details as of January 31, 2024 and 2023 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, 2024 and 2023 was as follows (in thousands):

As of January 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ (831 ) $ (858 )

Right-of-use assets obtained in exchange for lease liabilities:

Maturities of lease liabilities on January 31, 2024 and 2023 were as follows (in thousands):

As of January 31,

Thereafter — 16

Total payments under lease agreements $ 1,597 $ 2,143

Less: imputed interest (273 ) (394 )

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9. Intangible Assets

Intangible assets from continuing operations consisted of the following:

Weighted

Average Gross Net Gross Net

Life at Carrying Accumulated Carrying Carrying Accumulated Carrying

1/31/2024 Amount Amortization Amount Amount Amortization Amount

(in thousands) (in thousands)

The Company did not record impairment of intangible assets during fiscal years 2024 and 2023.

Aggregate amortization expense was approximately $795,000 and $873,000 for fiscal 2024 and fiscal 2023, respectively. As of January 31, 2024, future estimated amortization expense related to amortizable intangible assets is estimated to be (in thousands):

For fiscal year ending January 31:

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10. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities from continuing operations consisted of the following (in thousands):

As of January 31,

Accrued Expenses and Other Liabilities $ 5,586 $ 1,477

11. Notes Payable

On February 2, 2023, we entered into a $3.75 million Loan and Security Agreement (“the Loan”). The Company had incurred approximately $814,000 of debt acquisition costs associated with the loan including approximately $254,000 in origination and other transaction fees and approximately $484,000 of prepaid interest, which was the total interest due through maturity. These costs were recorded as a reduction to the carrying value of our debt and are amortized to interest expense straight-line over the term of the Loan. Approximately $601,000 of amortization of debt acquisition costs were recorded as interest expense for the twelve months ended January 31,2024. On August 22, 2023, in connection with the Sale of Klein, the Loan was repaid in full (see Note 2- "Sale of a Subsidiary and Discontinued Operations" for additional details).

12. Stockholders’ Equity

The Company has 2,000,000 shares of Preferred Stock authorized. The Preferred Stock may be issued in multiple series with various terms, as authorized by the Company’s Board of Directors. As of January 31, 2024 and 2023, there were 1,682,985 shares of the Series A Preferred Stock outstanding. Dividends on the Series A Preferred Stock are cumulative from the date of original issue and payable quarterly on or about the last day of January, April, July and October of each year when, as and if, declared by the Company’s board of directors. Dividends are payable out of amounts legally available therefore at a rate equal to 9.00% per annum per $25.00 of stated liquidation preference per share, or $2.25 per share of Series A Preferred Stock per year. The Company may redeem, at the Company’s option, the Series A Preferred Stock, in whole or in part, at a cash redemption price of $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date. If at any time a change of control occurs, the Company will have the option to redeem the Series A Preferred Stock, in whole or in part, within 120 days after the date on which the change of control occurred by paying $25.00 per share, plus any accrued and unpaid dividends to, but not including, the date of redemption. As of January 31, 2024, the aggregate liquidation preference on preferred shares was approximately $47.7 million, including $5.7 million of cumulative undeclared dividends. The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or other mandatory redemption and will remain outstanding indefinitely unless repurchased or redeemed by the Company or converted into our Common Stock in connection with a change of control. Holders of the Series A Preferred Stock generally have no voting rights except for limited voting rights if dividends payable on the outstanding Series A Preferred Stock are in arrears for six or more consecutive or non-consecutive quarterly dividend periods, or if the Company fails to maintain the listing of the Series A Preferred Stock on a national securities exchange for a period continuing for more than 180 days. As of January 31, 2024, preferred stock dividends have not been declared for a cumulative of six quarters.

On September 28, 2023, the Board approved a reverse stock split (the "Reverse Stock Split") of the Company's shares of common stock at a ratio of one-for-ten. On October 12, 2023, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Charter Amendment to effect the Reverse Stock Split. The Charter Amendment became effective on October 13, 2023.

As a result of the Charter Amendment and Reverse Stock Split, every ten shares of issued and outstanding Common Stock were combined into one issued and outstanding share of Common Stock, without any change in par value per share. Proportionate adjustments were also made to any outstanding securities or rights convertible into, or exchangeable or exercisable for, shares of Common Stock. Fractional shares were not issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to receive a fractional share were entitled to receive one full share of post-Reverse Stock Split Common Stock, in lieu of receiving such fractional shares. The Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder’s relative interest in the Company’s equity securities. The Reverse Stock Split reduced the number of shares of issued and outstanding Common Stock from approximately 13,788,738 shares to approximately 1,405,779 shares. Common stock and treasury stock shares have been retroactively adjusted to reflect the Reverse Stock Split in all periods presented. In connection with the Reverse Stock Split, the Company retired all treasury stock.

The Company has 40,000,000 shares of Common Stock authorized, of which 1,405,779 and 1,599,053 were issued as of January 31, 2024 and 2023. Treasury shares as of January 31, 2023 were 193,274.

During fiscal 2023, approximately 220 shares were surrendered in exchange for payment of taxes due upon the vesting of restricted shares. The shares had an average fair value of $12.50.

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Table of Contents

13. Related Party Transaction

Ladenburg Thalmann & Co. Inc. (“Ladenburg”) provided advisor and arrangement services for the Loan (See Note 11 - "Notes Payable" for additional details) and received $75,000 in fees for such services. Additionally, Ladenburg provided advisory services related to the Sale of Klein and received fees of $405,000 for such services. The Co-Chief Executive Officer and Co-President of Ladenburg is the Non-Executive Chairman of our Board. Our Non-Executive Chairman of the Board received no portion of the above-mentioned compensation.

Mind Technology, Inc MIND US Equity

MIND · 10-K · period ended 2024-01-31

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 Accountant Fees and Services

Item15.Exhibit and Financial Statement Schedules

Item 16. Form 10-K Summary

Mind Technology, Inc MIND US Equity☆

MIND · 10-K · period ended 2024-01-31

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 Accountant Fees and Services

Item15.Exhibit and Financial Statement Schedules

Item 16. Form 10-K Summary

Mind Technology, Inc MIND US Equity