Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  MIND Technology, Inc.    MIND

MIND TECHNOLOGY, INC.

(MIND)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryAll NewsPress ReleasesOfficial PublicationsSector news

MIND TECHNOLOGY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

share with twitter share with LinkedIn share with facebook
09/15/2020 | 04:53pm EDT

Overview

MIND Technology, Inc., a Delaware corporation, formerly Mitcham Industries,
Inc., a Texas corporation, was incorporated in 1987. Effective August 3, 2020 we
effectuated a reincorporation to the state of Delaware, name change to MIND
Technology, Inc. and increase in the number of shares of common stock and
preferred stock authorized for issuance. See Note 16 - "Subsequent Event" of our
consolidated financial statements for additional details.

Historically, we have operated in two segments, Marine Technology Products and
Equipment Leasing. During the second quarter of fiscal 2021 our Board determined
to exit the Leasing Business and instructed management to develop and implement
a plan to dispose of those operations. Accordingly, the assets, excluding cash,
and liabilities of the Equipment Leasing segment are considered held for sale
and the segment's operations are presented as discontinued operations. See Note
3 to our condensed consolidated financial statements for more details.

Revenue from the Marine Technology Products segment includes sales of Seamap
equipment, sales of Klein equipment and through the first quarter of fiscal
2020, sales of oceanographic and hydrographic equipment by SAP. This segment
operates from locations near Bristol, United Kingdom, Salem, New Hampshire,
Huntsville, Texas, Johor, Malaysia and in Singapore. During February 2019, the
Company completed the sale of its Australian operations in Brisbane, Australia.
See Note 14 - "Sale of Subsidiaries" of our condensed consolidated financial
statements for additional details.
The discontinued operations of the Equipment Leasing segment includes all
leasing activity, sales of lease pool equipment and certain other equipment
sales and services related to those operations. This business had 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 Marine Technology Products
segment is indicated by revenues from equipment sales 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.
                                                            For the Three Months Ended July                          For the Six Months
                                                                          31,                                          Ended July 31,
                                                                2020               2019              2020                2019

Reconciliation of Net loss from Continuing Operations to EBITDA and Adjusted EBITDA Net loss from Continuing Operations

                         $   (1,896)

$ (1,493)$ (8,323)$ (3,689)


Depreciation and amortization                                      714               639             1,479                 1,275
Benefit for income taxes                                          (530)              (46)             (188)                  (44)
EBITDA from continuing operations (1)                           (1,712)             (900)           (7,032)               (2,458)
Non-cash foreign exchange losses                                    33                37                44                    68

Stock-based compensation                                           219               169               449                   341
Impairment of intangible assets                                      -                 -             2,531                     -

Adjusted EBITDA from continuing operations (1)              $   (1,460)$   (694)$ (4,008)$     (2,049)
Reconciliation of Net Cash Provided by Operating
Activities to EBITDA
Net cash used in operating activities                       $   (3,495)

$ (1,652)$ (2,566)$ (3,503) Stock-based compensation

                                          (219)             (169)             (449)                 (341)

Provision for inventory obsolescence                               (23)                -               (45)                    -
Changes in accounts receivable (current and
long-term)                                                         (46)             (168)           (3,181)               (1,480)
Interest paid                                                       12                13                23                    27
Taxes paid, net of refunds                                          97                85               246                   182

Changes in inventory                                               143             1,883               699                 2,668
Changes in accounts payable, accrued expenses and
other current liabilities and deferred revenue                   1,100            (1,129)              756                  (884)
Impairment of intangible assets                                      -                 -            (2,531)                    -
Changes in prepaid expenses and other current and
long-term assets                                                  (310)             (504)             (469)                   95
Foreign exchange (gains) losses, net                                 -                (5)                -                    11
Reserve against non-current prepaid income taxes                     -              (137)                -                  (137)
Other                                                            1,029               883               485                   904
EBITDA from continuing operations (1)                       $   (1,712)$   (900)$ (7,032)$     (2,458)




(1)EBITDA is defined as net income before (a) interest income and interest
expense, (b) provision for (or benefit from) income taxes and (c) depreciation
and amortization. Adjusted EBITDA excludes non-cash foreign exchange gains and
losses, non-cash costs of lease pool equipment sales, impairment of
                                       16
--------------------------------------------------------------------------------
  Table of Contents
intangible assets, stock-based compensation and other non-cash tax related
items. We consider EBITDA and Adjusted EBITDA to be important indicators for the
performance of our business, but not measures of performance or liquidity
calculated in accordance with GAAP. These non-GAAP financial measures are not
intended to replace the presentation of financial results in accordance with
GAAP. Rather, we have included these non-GAAP financial measures because
management utilizes this information for assessing our performance and
liquidity, and as indicators of our ability to make capital expenditures and
finance working capital requirements. We believe that EBITDA and Adjusted EBITDA
are measurements that are commonly used by analysts and some investors in
evaluating the performance and liquidity of companies such as us. In particular,
we believe that it is useful to our analysts and investors to understand this
relationship because it excludes transactions not related to our core cash
operating activities. We believe that excluding these transactions allows
investors to meaningfully trend and analyze the performance of our core cash
operations. EBITDA and Adjusted EBITDA are not measures of financial performance
or liquidity under GAAP and should not be considered in isolation or as
alternatives to cash flow from operating activities or as alternatives to net
income as indicators of operating performance or any other measures of
performance derived in accordance with GAAP. In evaluating our performance as
measured by EBITDA, management recognizes and considers the limitations of this
measurement. EBITDA and Adjusted EBITDA do not reflect our obligations for the
payment of income taxes, interest expense or other obligations such as capital
expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of the
measurements that management utilizes. Other companies in our industry may
calculate EBITDA or Adjusted EBITDA differently than we do and EBITDA and
Adjusted EBITDA may not be comparable with similarly titled measures reported by
other companies.
Within our Marine Technology Products segment, 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, which provide marine
operators more precise control of exploration tools; (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 consist primarily of leasing seismic data
acquisition equipment primarily to seismic data acquisition companies conducting
land surveys worldwide. 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 sell lease pool equipment. These sales are transacted when we
have equipment for which we do not have near term needs in our leasing business
or which is otherwise considered excess. Additionally, when equipment that has
been leased to a customer is lost or destroyed, the customer is 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

The COVID-19 pandemic has created significant uncertainty in the global economy,
which could have an adverse effect on the Company's business, financial
position, results of operations and liquidity. The time frame for which
disruptions related to the pandemic will continue is uncertain, as is the
magnitude of any adverse impacts. We were required to temporarily shut-down our
facilities in Malaysia and Singapore on March 17 and April 7, respectively. The
Malaysia facility was reopened on April 21, 2020 with approximately 50% of its
normal staff and resumed operations with 100% of its employees on May 4, 2020.
In Singapore, we were able to continue limited shipping and receiving operations
during the shutdown and were able to resume manufacturing operations on June 1,
2020.

Our other facilities have been allowed to operate, although at reduced
efficiencies as certain employees have worked remotely. We expect these
disruptions will have a negative effect on our business; however, the magnitude
of such effect is uncertain. Management believes that the negative impact will
be temporary, but there can be no assurance of that.

Additionally, oil prices declined sharply during the first quarter of fiscal
2021 in response to the economic effects of the COVID-19 pandemic and the
announcement of Saudi Arabia's abandonment of output restraints. Oil prices have
partially recovered recently, but the decline could have an adverse effect on
our customers in the energy industry, which could in turn cause them to cancel
or delay projects and orders with us and could impair their ability to make
payments to us. However, to date we have had no significant orders cancelled and
continue to respond to inquiries from customers in all market segments,
including energy related. Many of our marine customers have recently indicated
increases in backlog, which we believe is a positive indication of a recovery
later in fiscal 2021 and beyond.

In recent months, we have continued to experience significant inquiries and bid
activity and have conducted a number of demonstrations for various customers,
including the U.S. Navy. However, we believe many customers have delayed
purchase commitments due to the uncertainty in the global economy. Accordingly,
we have not experienced the level of firm orders that we would have normally
expected. It is not clear how long this reduced order activity will persist;
however, we expect it to continue at least through the third quarter of fiscal
2021. As of July 31, 2020, our backlog of firm orders for our Marine Technology
Products segment was approximately $7.6 million, as compared to approximately
$10.2 million as of April 30, 2020 and $8.9 million as of January 31, 2020. We
expect all of these orders to be completed within fiscal 2021. 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.
                                       17

--------------------------------------------------------------------------------

Table of Contents



Going forward we intend to address three primary markets in our Marine
Technology Products segment -
•Marine Survey
•Marine Exploration
•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
•Bathymetry systems
•Acoustic arrays, such as SeaLink
•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.

In connection with these proposed changes and in recognition of our focus on our
marine technology products business, as well as recent changes in the global
energy markets, we believe that it is now appropriate to exit the Leasing
Business.

In fiscal 2020, we introduced new sonar technology that we refer to as "MA-X".
We believe this to be revolutionary sonar technology that will significantly
expand the opportunities available to us. We have received and delivered orders
related to this new technology and continue to respond to orders and inquiries
related to this technology, including some for military related applications.
While the MA-X technology has not had a material impact on our results of
operations to date, we believe this technology will result in significant new
opportunities for us. Also, in fiscal 2020, we received an order from a
manufacturer of unmanned underwater vehicles ("UUV's") for a MA-X related
product to be installed on one of their UUV's. This request relates to a
potentially significant program for the U.S. Navy. While this specific order may
not have a material impact on our results of operations, we believe this, and
similar opportunities could have a material impact on our operations. During the
current fiscal year we also introduced technology based on MA-X specifically
focused on the rapidly grown autonomous vehicle market and entered into an
agreement with a major European defense contractor for the joint offering of
synthetic aperture sonar ("SAS"). We believe that each of these initiatives can
significantly expand our serviceable market.
We also are 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 military or
other governmental organizations. The sales cycle for these projects can be
quite long and can be impacted by a number 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 a number of years. In addition, we are pursuing a number of
opportunities related to activity within the marine seismic industry. Certain
projects, for which we anticipate providing equipment, including source
controllers, have not progressed as rapidly as we had anticipated and had been
indicated by our customers. Based on information from our customers, we believe
these projects remain viable and will proceed. However, the timing of orders and
delivery of products remain uncertain.

In response to the effects of the COVID-19 pandemic and the, current economic
environment we have taken steps to reduce expenses including the layoff or
furloughing of certain employees and contractors and the deferral of other
expenditures. Should the effects of the pandemic and low commodity prices
continue, we may take further steps to reduce costs. We believe the majority 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.

During fiscal 2021, the Company received a Singapore government grant pursuant
to its Job Support Scheme, which primary objective is to assist companies in
retaining local employees during the COVID-19 pandemic. Similar to the Singapore
government grant our operations in the United Kingdom were also recipients of
the government backed Job Retention Scheme. Proceeds from the Job Support Scheme
and the Job Retention Scheme were approximately $293,000 and approximately
$119,000, respectively. Continued use of these government job schemes will be
dependent on availability and our ability to qualify for the assistance.

Our revenues and results of operations have not been materially impacted by
inflation or changing prices in the past three fiscal years, except as described
above.
Results of Continuing Operations

Revenues for the three months ended July 31, 2020 were approximately $5.1
million compared to approximately $6.8 million for the three months ended July
31, 2019. For the six months ended July 31, 2020, revenues were approximately
$8.3 million, compared to
                                       18
--------------------------------------------------------------------------------
  Table of Contents
approximately $12.9 million for the six months ended July 31, 2019. We believe
the decrease in fiscal 2021 periods is due in large part to restrictions on
commerce as a result of the global pandemic. For the three months ended July 31,
2020, we generated an operating loss of approximately $2.4 million, compared to
an operating loss of approximately $1.7 million for the three months ended July
31, 2019. For the six months ended July 31, 2020, we generated an operating loss
of approximately $8.6 million, compared to an operating loss of approximately
$3.9 million for the six months ended July 31, 2019.The increase in operating
loss during the three and six month periods ended July 31, 2020 is primarily
attributable to a goodwill impairment expense in our Seamap reporting unit,
lower revenue contribution and an increase in research and development costs. A
more detailed explanation of these variations follows.


Revenues and Cost of Sales
Revenues and cost of sales for our Marine Technology Products segment were as
follows:

                                      Three Months Ended                          Six Months Ended
                                           July 31,                                   July 31,
                                      2020           2019          2020              2019
                                        (in thousands)                             (in thousands)
         Revenues:
         Seamap                   $   4,080$ 4,999$ 6,293$        9,397
         Klein                        1,003         1,841         2,244                3,402
         SAP                              -             -             -                  101
         Intra-segment sales              -             -          (242)                  (4)
                                      5,083         6,840         8,295               12,896
         Cost of sales:
         Seamap                       2,281         2,431         4,175                4,856
         Klein                          785         1,602         1,861                2,703
         SAP                              -             -             -                   95
         Intra-segment sales              -             -          (242)                  (4)
                                      3,066         4,033         5,794                7,650
         Gross profit             $   2,017$ 2,807$ 2,501$        5,246
         Gross profit margin             40  %         41  %         30  %                41   %


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. In the second quarter of fiscal 2020 we delivered a SeaLink
system for installation on a vessel built for the Japanese Coast Guard. The
value of this order was approximately $1.8 million. We believe the decline in
Seamap revenues is due in large part to temporary delays caused by the COVID-19
pandemic, including the temporary shutdown of our production facilities. As
discussed in previous periods, a particular order of approximately $1.8 million
has been delayed from the first quarter of fiscal 2021 and was expected to be
completed and recognized in the second quarter of fiscal 2021. As of July 31,
2020 the order was completed and ready for shipment. However, due to travel
restrictions, the customer has been unable to arrange shipment and take delivery
of the equipment. Accordingly, we have not recognized the associated revenue as
of July 31, 2020. We expect the shipment to be completed in the third quarter of
fiscal 2021. The gross profit and gross profit margins generated by sales of
Seamap products were approximately $1.8 million and 44% in the second quarter of
fiscal 2021 and approximately $2.6 million and 51% in the second quarter of
fiscal 2020. The decrease in gross profit margins between the periods is due
primarily to lower manufacturing activity which resulted in lower overhead
absorption during the period.
Revenue from the sale of Klein products was approximately $1.0 million for the
second quarter of fiscal 2021 versus approximately $1.8 million in the prior
year period. We believe the decline in revenue is partially due to the effects
of the COVID-19 pandemic. Gross profit was approximately $218,000 and $239,000
for the second quarter of fiscal 2021 and 2020, respectively. The decline in
gross profit margin in the second quarter of fiscal 2021 was due mainly to the
mix of products sold between the comparative periods.

Operating Expenses
General and administrative expenses for the three months ended July 31, 2020
decreased to approximately $3.0 million from approximately $3.4 million for the
three months ended July 31, 2019. General and administrative expenses for the
six months ended July 31, 2020 decreased approximately $1.2 million to $5.9
million compared to $7.1 million for the six months ended July 31, 2019. The
decrease in general and administrative expenses is primarily due to reduced
travel and entertainment expense as a result of restrictions due to the global
                                       19
--------------------------------------------------------------------------------
  Table of Contents
pandemic, reductions in salary and rent costs due to the offset of government
subsidies received in several international locations and the impact of various
strategic restructuring activities implemented in fiscal 2020.
In recognition of the need to control costs in the current environment,
effective May 1, 2020, Robert P. Capps, Co-Chief Executive Officer, Executive
Vice President of Finance and Chief Financial Officer, and Guy Malden, Co-Chief
Executive Officer and Executive Vice President of Marine Systems, both agreed to
a temporary 20% reduction in base salary. In addition, our Board has agreed to a
temporary 25% reduction in cash compensation.
Depreciation and amortization expenses include depreciation of equipment,
furniture and fixtures and the amortization of intangible assets. These costs
were approximately $700,000 and $1.4 million in the three and six month periods
ended July 31, 2020, respectively, as compared to approximately $605,000 and
$1.2 million in the three and six month periods ended July 31, 2019,
respectively. The higher depreciation and amortization expense in the three and
six month periods of fiscal 2021 is due primarily to asset additions associated
with the start-up of our Malaysian manufacturing facility and the amortization
of intangible assets related to a recent software upgrade.
Due to deterioration in macroeconomic factors and a decline in the market value
of our equity securities subsequent to January 31, 2020, we concluded that
goodwill was impaired and recorded an impairment charge of approximately $2.5
million in the quarter ended April 30, 2020. The goodwill impairment indicated
that there was potential impairment of our other intangible and long-lived
assets. Accordingly, we performed an analysis of the undiscounted future cash
flow from those assets and concluded that there was no impairment. During the
three months ended July 31, 2020 there have been no substantive indicators of
additional impairment.
Provision for Income Taxes
Our tax benefit for the six months ended July 31, 2020 was approximately
$188,000. For the six months ended July 31, 2019, we reported tax benefit of
approximately $44,000. Our recorded tax benefit in the six-month periods ended
July 31, 2020 and 2019, are less than the benefit that would be derived by
applying the applicable statutory rate to income before tax from continuing
operations in each of these periods, due mainly to the effect of permanent
differences between book and taxable income, including impairment expense, and
recording valuation allowances against increases in our deferred tax assets.
Results of Discontinued Operations
Revenues and cost of sales from our Equipment Leasing segment were comprised of
the following:
                                                                        For the Three Months Ended July 31,                                     For the Six Months Ended July 31,
                                                                         2020                           2019               2020                2019
Revenues:
Equipment leasing                                                         622                         1,281                3,197              4,555
Lease pool equipment sales                                                573                           455                2,010                874
Other equipment sales                                                      35                           341                  211                462
                                                                        1,230                         2,077                5,418              5,891
Cost of sales:
Direct costs-equipment leasing                                            762                           697                1,607              1,654
Lease pool depreciation                                                   772                         1,059                1,698              2,411
Cost of lease pool equipment sales                                         98                            38                  684                 94
Cost of other equipment sales                                              10                           208                  137                355
                                                                        1,642                         2,002                4,126              4,514
Gross profit (loss)                                                      (412)                           75                1,292              1,377
Operating expenses:
Selling, general and administrative                                     1,476                         1,415                3,176              2,890
Provision for doubtful accounts                                           470                             -                  470                  -
Depreciation and amortization                                              41                            46                   85                 95
Total operating expenses                                                1,987                         1,461                3,731              2,985
Operating loss                                                         (2,399)                       (1,386)              (2,439)            (1,608)
Other income (expenses)                                                    72                          (163)                  75               (106)
Loss on disposal (including $2,745 of cumulative translation
loss)                                                                  (1,859)                            -               (1,859)                 -
Loss before income taxes                                               (4,186)                       (1,549)              (4,223)            (1,714)
Provision for income taxes                                               (522)                          (94)                (700)              (147)
Net loss                                                               (4,708)                       (1,643)              (4,923)            (1,861)



                                       20
--------------------------------------------------------------------------------
  Table of Contents
Revenue from discontinued operations during the second quarter of fiscal 2021
decreased approximately 41% to $1.2 million compared to $2.0 million for the
second quarter of fiscal 2020 and decreased approximately $500,000, or 8% in the
first six months of fiscal 2021 as compared to the first six months of fiscal
2020. The reduction in revenue is due to lower equipment leasing activity in the
three and six month comparable periods, primarily as a result of the global
pandemic, while revenue from lease pool equipment sales is higher in the three
and six month comparable periods.
Direct costs related to equipment leasing were relatively flat in the three and
six month periods ending July 31, 2020 as compared to the prior year periods,
despite lower equipment leasing revenue in fiscal 2021 due mainly to the impact
of sub-lease payments to certain OEMs under revenue sharing arrangements. For
the six months of fiscal 2021, lease pool depreciation decreased approximately
$700,000 from the same period in the prior fiscal year, reflecting recent sales
of lease pool equipment and the effect of certain equipment becoming fully
depreciated.
Selling, general and administrative costs increased approximately $300,000
during the six months ended July 31, 2020 as compared to the prior year period.
The increase was due primarily to accrued severance and other costs related to
the Board's decision to exit the Leasing Business
The loss on disposal of approximately $1.9 million reflects the amount by which
the unadjusted carrying value of the net assets of the Leasing Business exceed
the estimated proceeds of the planned sale of the business. The unadjusted
carrying value of the Leasing Business includes approximately $2.7 million of
cumulative translation adjustment which has historically been recorded in
Accumulated Other Comprehensive Loss, a component of equity.
Our provision for income taxes for the three and six months ended July 31, 2020
are approximately $522,000 and $700,000, respectively, on loss before income tax
of approximately $4.2 million for the three and six month periods. Our provision
varies from the expected provision based on the U.S. statutory rate due
primarily to the effect of foreign withholding taxes, and because we have
recorded valuation allowances against the increase in our deferred tax assets in
the respective periods.
Liquidity and Capital Resources
As discussed above, the COVID-19 pandemic and the decline in oil prices has
created significant uncertainty in the global economy, which could have an
adverse effect on our business, financial position, results of operations and
liquidity. The period for which disruptions related to the pandemic will
continue is uncertain, as is the magnitude of any adverse impacts. We believe
that any negative impacts will be temporary, but there can be no assurance of
that.
The Company has a history of losses, has had negative cash from operating
activities in each of the last two years and its cash balance as of July 31,
2020 is lower than at January 31, 2020. For the past three years, the Company
has generated significant cash from the sale of preferred stock pursuant to an
"at the market" program. That program has been completed and no further
preferred shares can be sold pursuant to it.
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 that can be taken
to address these uncertainties, including the following:
•The Company has no funded debt or other outstanding obligations, outside of
normal trade obligations.
•The Company has no obligations or agreements containing "maintenance type"
financial covenants.
•The Company has working capital of approximately $22.6 million as of July 31,
2020, including cash of approximately $2.6 million, which is a decrease from
approximately $3.1 million of cash at January 31, 2020.
•Should revenues be less than projected, the Company believes it is able, and
has plans, to reduce costs proportionately in order to maintain positive cash
flow. Certain cost reduction measures have been implemented, the effects of
which are expected to be reflected in future periods.
•The majority of the Company's costs are variable in nature, such as raw
materials and personnel related costs. The Company has terminated or furloughed
certain employees and contractors.
•Despite the temporary suspension of operations in Malaysia and Singapore,
operations have continued uninterrupted at other locations. Certain of these
operations have been deemed "essential businesses" by authorities. However,
there can be no assurance that further suspensions will not occur in the future.
•The Company has a backlog of orders of approximately $7.6 million as of July
31, 2020 that is primarily related to customers not engaged in the energy
industry. Production for certain of these orders was in process and included in
inventory as of January 31, 2020, thereby reducing the liquidity needed to
complete the orders.
•There are various government sponsored grant or loan programs, both in the
United States and in certain foreign locations which are available to the
Company. The Company received approximately $1.6 million in U.S. government
sponsored loans pursuant to the Small Business Association's Paycheck Protection
Program ("PPP") and has received lesser amounts of government grants in several
foreign jurisdictions. The PPP loans are in the form of two-year promissory
notes. Management believes a significant portion of the $1.6 million PPP loan
will be forgiven under the terms of the PPP.
•Management expects to generate cash from the sale of the Leasing Business or
the related underlying assets.
                                       21
--------------------------------------------------------------------------------
  Table of Contents
•The Company has declared and paid the quarterly dividend on its Series A
Preferred Stock for the quarter ending July 31, 2020, but such quarterly
dividends could be suspended in the future.
•In July, The Company received shareholder approval and effective August 2020
increased the authorized number shares of common and preferred shares available
for issuance. Management believes this increase in authorized capital provides
significant additional financing flexibility, including the possibility of
subsequent future "at-the-market" offerings of common and preferred stock.
•Based on publicized transactions and preliminary discussions with potential
funding sources, management believes that other sources of debt and equity
financing are available should the need arise.
Our principal sources of liquidity and capital over the past three fiscal years
have been proceeds from issuances of preferred stock and from the sale of lease
pool equipment.
The Series A Preferred Stock has been issued in the June 2016 offering, as
consideration to MHI and in the ATM program. The Series A Preferred Stock (i)
allows for redemption on 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, 2020, we have issued 994,046 shares of our Series A Preferred Stock.
The 994,046 shares represent 100% of the Series A Preferred Stock available for
sale through our ATM program. Under our Amended and Restated Certificate of
Incorporation, we have 2,000,000 shares of preferred stock and 40,000,000 shares
of common stock authorized which we believe provides capacity for subsequent
issues of common or preferred stock/
The following table sets forth selected historical information regarding cash
flows from our Consolidated Statements of Cash Flows:

                                                                               For the Six Months Ended
                                                                                       July 31,
                                                                              2020                      2019
                                                                                    (in thousands)
Net cash used in operating activities                                $      (2,566)$    (3,503)
Net cash provided by investing activities                                    1,598                         622
Net cash provided by financing activities                                      489                       1,036

Effect of changes in foreign exchange rates on cash and cash equivalents

                                                                   (117)                        (65)
Net decrease in cash and cash equivalents                            $        (596)$    (1,910)



As of July 31, 2020, we had working capital of approximately $22.6 million,
including cash and cash equivalents and restricted cash of approximately
$2.6 million, as compared to working capital of approximately $31.0 million,
including cash and cash equivalents and restricted cash of approximately
$3.2 million, at January 31, 2020. Our working capital decreased during the
first six months of fiscal 2021 as compared to January 31, 2020 due primarily to
a decrease in cash and cash equivalents, reductions in accounts receivable and
an increase in accounts payable. During the first six months of fiscal year
2021, we made payments of approximately $110,000 for lease pool equipment
purchased during fiscal year 2020.
Cash Flows from Operating Activities. Net cash used in operating activities was
approximately $2.6 million in the first six months of fiscal 2021 as compared to
approximately $3.5 million of net cash used in operating activities in the first
six months of fiscal 2020. The decrease between the two periods resulted
primarily from changes in working capital items such as cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities.
Cash Flows from Investing Activities. Cash provided from Cash provided from
investing activities increased during the first six months of fiscal 2021
compared to the same period in the prior year. The increase is primarily due to
a cash from sale of lease pool equipment.

In the first six months of fiscal 2021 proceeds from the sale of lease pool
equipment totaled approximately $2.0 million compared to approximately $1.2
million in the first six months of fiscal 2020. Due to the decision to exit the
Leasing Business we are currently seeking to sell all of the remaining equipment
from our lease pool. However, there is no guarantee additional sales of lease
pool equipment will occur. Accordingly, cash flow from the sale of lease pool
equipment is unpredictable. Proceeds from any additional sales of lease pool
equipment will be deployed in other areas of our business or used for general
corporate purposes..
Cash Flows from Financing Activities. Net cash provided by financing activities
in the first six months of fiscal 2021 consisted of approximately $1.6 million
of proceeds from the PPP Loans offset by approximately $1.1 million of preferred
stock dividend payments, as compared to approximately $2.0 million of proceeds
from sales of preferred stock, offset by approximately $1.0 million of preferred
stock dividend payments in the prior year period. As of July 31, 2020, there
were 994,046 shares of Series A Preferred Stock outstanding, which represents
100% of the Series A Preferred Stock available for sale through our ATM program.
Based on the Preferred Stock outstanding at July 31, 2020, annual dividend
requirements are approximately $2.2 million. Subsequent to July 31, 2020, the
Company effectuated a shareholder approved reincorporation to the state of
Delaware, name change to MIND Technology, Inc. and increase in the number of
shares of common stock and preferred stock authorized for issuance. See Note 16
- "Subsequent Event" of our condensed consolidated financial statements for
                                       22
--------------------------------------------------------------------------------
  Table of Contents
additional details. The Company may issue up to 40,000,000 shares of common
stock and 2,000,000 shares of preferred stock. Management believes this provides
significant additional financing flexibility, including the possibility of
future "at-the-market" offerings of common and preferred stock.
We currently do not have a line of credit or other bank credit facilities. From
time to time, we may engage in discussions with one or more commercial banks
regarding establishing a credit facility or facilities. However, there can be no
assurance that we will be able to establish any such facilities if and when
needed and to the extent required, on acceptable terms or at all. We would
intend to use such facilities for short-term working capital needs and to
support letter of credit requirements. From time to time we are required to
provide performance bonds related to the sale and delivery of new equipment.
These bonds are normally provided by insurance companies, surety companies or
local banks. In some cases, the party issuing the bond requires that we post
collateral to secure our obligations under the bonds.
As of July 31, 2020, we had deposits in foreign banks consisting of both U.S.
dollar and foreign currency deposits equal to approximately $2.2 million. We
believe all $2.2 million of these deposits could be distributed to the United
States without any adverse tax consequences.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
                                       23

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
All news about MIND TECHNOLOGY, INC.
09/25MIND TECHNOLOGY, INC : Entry into a Material Definitive Agreement, Termination o..
AQ
09/15MIND TECHNOLOGY : Management's Discussion and Analysis of Financial Condition an..
AQ
09/14MIND TECHNOLOGY, INC : Results of Operations and Financial Condition, Regulation..
AQ
09/14MIND TECHNOLOGY : Reports Fiscal 2021 Second Quarter Results
PU
09/14MIND TECHNOLOGY, INC. : Reports Fiscal 2021 Second Quarter Results
PR
09/02MIND TECHNOLOGY : Announces Fiscal 2021 Second Quarter Earnings Release And Conf..
PR
08/20MIND TECHNOLOGY : Mitcham Industries Completes Reincorporation and Rebranding to..
PU
07/29MITCHAM INDUSTRIES INC : Submission of Matters to a Vote of Security Holders (fo..
AQ
07/14MITCHAM INDUSTRIES : Partnership to Produce Synthetic Aperture Sonar Systems
PR
06/25MITCHAM INDUSTRIES INC : Change in Directors or Principal Officers, Financial St..
AQ
More news