MIND TECHNOLOGY, INC. Overview
MIND Technology, Inc. , aDelaware corporation, formerlyMitcham Industries, Inc. , aTexas corporation, was incorporated in 1987. EffectiveAugust 3, 2020 we effectuated a reincorporation to the state ofDelaware , name change toMIND Technology, Inc. and increase in the number of shares of Common Stock and Preferred Stock authorized for issuance. See Note 15 - "Corporate Restructuring" to our condensed 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 Leasing Business are considered held for sale and the Leasing Business operations are presented as discontinued operations. See Note 3 - "Assets Held for Sale and Discontinued Operations" to our condensed consolidated financial statements for more details. Revenue from the Marine Technology Products segment includes sales ofSeamap equipment and sales of Klein equipment. This segment operates from locations nearBristol, United Kingdom ,Salem, New Hampshire ,Huntsville, Texas ,Johor, Malaysia and inSingapore . The discontinued operations of theEquipment 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 inHuntsville, Texas ;Calgary, Canada ;Bogota, Colombia ; andBudapest, Hungary . This included the operations of our subsidiariesMitcham Canada , ULC,Mitcham Europe Ltd. and our branch inColombia . 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 withUnited States generally accepted accounting principles ("GAAP"), in the following table, as key indicators of our overall performance and liquidity. For the Three Months EndedApril 30, 2021 2020
Reconciliation of Net loss from Continuing Operations to EBITDA and Adjusted EBITDA Net loss from continuing operations
$ (3,701) $ (6,427) Interest expense (income), net 9 - Depreciation and amortization 666 765 (Benefit) provision for income taxes (145) 342 EBITDA from continuing operations (1) (3,171) (5,320) Non-cash foreign exchange losses 49 11 Stock-based compensation 121 230 Impairment of intangible assets - 2,531 Adjusted EBITDA from continuing operations (1)
$ (2,807) $ 929 PPP loan forgiveness 850 - Stock-based compensation (121) (230) Provision for inventory obsolescence (22) (22) Changes in accounts receivable (current and long-term) (1,104) (3,135) Interest paid - 11 Taxes paid, net of refunds 31 149 Gross profit from sale of other equipment 80 - Changes in inventory 741 556
Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue
(920) (344)
Impairment of intangible assets - (2,531)
Changes in prepaid expenses and other current and long-term assets
168 (159)
Other (67) (544)
EBITDA from continuing operations (1) $ (3,171) $ (5,320)
(1)EBITDA and Adjusted EBITDA are non-GAAP financial measures. 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, stock-based
compensation, impairment of intangible assets, other non-cash tax related items
and non-cash costs of lease pool equipment sales. We consider EBITDA and
Adjusted EBITDA to be important indicators for the performance of our business,
but not measures of performance or
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liquidity calculated in accordance with GAAP. 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, service debt and finance working capital requirements and 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 consisted 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 sold lease pool equipment. Those sales were transacted when we
had equipment for which we did not have near term needs in our leasing business
or which was otherwise considered excess. Additionally, when equipment that has
been leased to a customer was lost or destroyed, the customer was charged for
such equipment at amounts specified in the underlying lease agreement.
Our results of operations can experience fluctuations in activity levels due to
a number of factors outside of our control. These factors include budgetary or
financial concerns, difficulties in obtaining licenses or permits, security
problems, labor or political issues, inclement weather, and other unforeseen
circumstances such as the recent COVID-19 pandemic (the "Pandemic"). See Part
II, Item 1A-- "Risk Factors."
Business Outlook
The Pandemic created significant uncertainty in the global economy, which we
believe has had an adverse effect on the Company's business, financial position,
results of operations and liquidity. We believe the resulting uncertainty caused
many customers to delay purchasing decisions. Furthermore, travel restrictions
limited our ability to interact with customers and to demonstrate our products.
Similar restrictions, we believe, caused delays in certain governmental
evaluation programs involving our technology. Recently we have seen indications
of improving activity and the relaxation of pandemic related restrictions in
some areas. However, the time frame for which disruptions related to the
Pandemic will continue is uncertain, as is the magnitude of any adverse impacts.
In fiscal 2021, we were required to temporarily shutdown our facilities in
Malaysia and Singapore on March 17, 2020 , and April 7, 2020 , 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 . However, travel between our Singapore and Malaysia facilities is limited,
which has made management and coordination more difficult. In addition, in May
2021 , Singapore reimposed certain workplace restrictions. While we are able to
maintain full operation, we are required to rotate personnel and allow some
personnel to work remotely.
Our other facilities have been allowed to operate, although at reduced
efficiencies in some cases as certain employees have worked remotely from time
to time. Furthermore, travel restrictions resulting from the Pandemic have
impacted our ability to visit customers, conduct product demonstrations and
visit our various operating locations. These disruptions have had, and we expect
they will continue to have, a negative effect on our business; however, the
duration and magnitude of these disruptions are uncertain. Management believes
that the negative impact is subsiding, but there can be no assurance of that.
Recently, we have begun to experience difficulties in our global supply chain.
Lead times for some components and materials have increased as have prices for
some items. Additionally, shipping times and costs have increased, particularly
for ocean freight. We believe these issues will be temporary but there can be no
assurance of that and these conditions could have an adverse effect on our
operations and financial results.
Additionally, oil prices declined sharply during the first quarter of fiscal
2021 in response to the economic effects of the Pandemic and the announcement of
Saudi Arabia's abandonment of output restraints. While oil prices have recovered
significantly, continuing uncertainty could have an adverse effect on our
customers in the energy industry, which could cause them to cancel or delay
projects and orders with us, or impair their ability to make payments to us.
Many of our marine customers have recently indicated increases in backlog, which
we believe is a positive indication of a recovery in fiscal 2022 and beyond. The
general economic environment concerning the energy industry could also impact
our ability to realize value from our discontinued operations.
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In the fourth quarter of fiscal 2021 we began to experience an increase in
orders and inquiries for marine exploration applications, particularly for our
source controller products. Our GunLink seismic source controllers have certain
capabilities that we believe are unique and that increasingly certain of these
capabilities are required of operators of seismic exploration vessels. Based on
this, and on discussions with current and potential customers, we believe demand
for our GunLink source controllers will continue, although there can be no
assurance of this. Furthermore, during the first quarter of fiscal 2022, we
entered into an indefinite quantity, indefinite delivery supply agreement with a
major international marine seismic contractor. While we have not yet received a
firm order related to this agreement, we do expect the arrangement to result in
additional sales of our source controller products. Based on discussion with a
particular customer, we expect to receive an order for a source controller and
other related equipment related to a new build vessel.
In recent months, we have continued to experience significant inquiries and bid
activity for our other marine technology products 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 number of firm
orders that we would have normally expected from the current level of inquiries
and bid activity. As of April 30, 2021 , our backlog of firm orders for our
Marine Technology Products business was approximately $11.0 million , as compared
to approximately $14.1 million as of January 31, 2021 and $10.2 million at April
30, 2020 . We expect essentially all of these orders to be completed within
fiscal 2022 and therefore expect revenues from continuing operations in fiscal
2022 to exceed those of fiscal 2021. During the first quarter of fiscal 2022, a
customer cancelled an order for approximately $2.1 million due to changes in
their requirements. We expect other orders from this customer in coming months
as those requirements are more clearly defined. Additionally, we received two
specific orders totaling more than $5.0 million during the second quarter of
fiscal 2022. 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.
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 fiscal 2020, we introduced new sonar technology that we refer to as "MA-XTM"
and we received an order from a manufacturer of unmanned underwater vehicles
("UUV's") for a MA-XTM 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 fiscal 2021 we introduced technology based on
MA-XTM specifically focused on the rapidly growing 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. Also during fiscal
2021, we began development of passive sonar arrays based on our SeaLink
technology. We believe this technology is well suited for maritime security
applications such as anti-submarine warfare, particularly in application
involving unmanned vessels.
We are also pursuing a number of initiatives to further expand our product
offerings. These initiatives include new internally developed technology,
introduction of new products based on our existing technology, technology
obtained through partnering arrangements with others and a combination of all of
these. There can be no assurance that any of these initiatives will ultimately
have a material impact on our financial position or results of operations.
Certain of the business opportunities that we are pursuing are with military or
other governmental organizations. The sales cycle for these projects can be
quite long and can be impacted by a variety of factors, including the level of
competition and budget limitations. Therefore, the timing of contract awards is
often difficult to predict. However, once awarded, programs of this type can
extend for many years. To date, the most of our revenues have been from
commercial customers; however, we expect the proportion of revenue related to
military or governmental customers will increase in the future.
We believe there are certain developments within the marine technology industry
that can have a significant impact on our business. These developments include
the following:
•The increase in the use of unmanned, or uncrewed, marine vessels, both surface
vehicles and underwater vehicles, and the need for a variety of sensor packages
designed for these applications.
•Demand for higher resolution sonar images, such as for mine countermeasure
applications.
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•Demand for economical, commercially developed, technology for anti-submarine
warfare and maritime security applications.
In response to these, and other, developments we have initiated certain
strategic initiatives in order to exploit the opportunities that we perceive.
These initiatives include the following:
•Development of side-scan sonar and other sensor systems specifically for
unmanned vehicles, including integration of our MA-XTM technology;
•Development of SAS sonar systems in cooperation with a major European defense
contractor; and
•Application of our SeaLink solid streamer technology to passive sonar arrays
for use in maritime security applications, such as anti-submarine warfare.
In fiscal 2021 we took steps to reduce expenses including the layoff or
furloughing of certain employees and contractors and the deferral of other
expenditures, in response to the effects of the Pandemic on the economic
environment. Should the effects of the Pandemic continue in fiscal 2022, 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.
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
above.
Results of Continuing Operations
Revenues for the three months ended April 30, 2021 were approximately $4.2
million compared to approximately $3.2 million for the three months ended April
30, 2020 . We believe the increase in the first quarter of fiscal 2022 is due in
large part to lifting of restrictions on commerce that were present in the prior
period as a result of the Pandemic. For the three months ended April 30, 2021 ,
we generated an operating loss of approximately $4.8 million , compared to an
operating loss of approximately $6.1 million for the three months ended April
30, 2020 . The decrease in operating loss during the three-month period ended
April 30, 2021 is primarily attributable to a goodwill impairment charge related
to our Seamap reporting unit in the prior year period that did not recur in the
current quarter. In addition, the current quarter operating loss was impacted by
higher research and development and general and administrative costs. A more
detailed explanation of these variations follows.
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Revenues and Cost of Sales
Revenues and cost of sales for our Marine Technology Products segment were as
follows:
Three Months Ended
April 30,
2021 2020
(in thousands)
Revenues:
Seamap $ 3,044 $ 2,212
Klein 1,156 1,241
Intra-segment sales (6) (266)
4,194 3,187
Cost of sales:
Seamap 2,597 1,893
Klein 1,060 1,076
Intra-segment sales (6) (266)
3,651 2,703
Gross profit $ 543 $ 484
Gross profit margin 13 % 15 %
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. We believe the increase in Seamap revenues is due in large part
to lifting of commerce restrictions, previously caused by the Pandemic,
including the temporary shutdown of our production facilities in the prior
period. Revenues in the first quarter of fiscal 2022 were less than in the
fourth quarter of fiscal 2021 and less than we expected. We believe lingering
effects of the Pandemic and the resulting impact on the global supply chain has
impacted certain of our customers. In some cases, customers have delayed placing
or accepting orders. We believe that delays in these customers receiving related
products and materials from other supplier have contributed to these delays. The
gross profit and gross profit margins generated by sales of Seamap products were
approximately $447,000 and 15% in the first quarter of fiscal 2022 and
approximately $319,000 and 14% in the first quarter of fiscal 2021. The increase
in gross profit margins between the periods is due primarily to the mix of
products and services sold in the respective periods.
Revenue from the sale of Klein products remained relatively flat year over year,
at approximately $1.2 million for the first quarter of fiscal 2022 and fiscal
2021. Gross profit was approximately $96,000 and $165,000 for the first quarter
of fiscal 2022 and 2021, respectively. The decline in gross profit margin in the
first quarter of fiscal 2022 was due mainly to lower absorption of overhead
costs and higher product testing and sustaining engineering activity during the
period.
Operating Expenses
General and administrative expenses for the three months ended April 30, 2021
increased to approximately $3.8 million from approximately $3.0 million for the
three months ended April 30, 2020 . The increase in general and administrative
expenses includes higher travel and entertainment expenses, due mainly to
reduced pandemic related travel restrictions in the current period, and higher
compensation costs resulting from the recent addition of several strategic
corporate level positions. In addition, the current period general and
administrative costs from continuing operations includes certain personnel,
facility and overhead costs which were included in discontinued operations in
the prior year period.
Research and development costs were approximately $853,000 in the three-month
period ended April 30, 2021 , as compared to approximately $410,000 in the
three-month period ended April 30, 2020 . The increase in these costs reflects
activity in the strategic initiatives noted above, including our SAS system,
passive sonar arrays and sensor packages specifically for unmanned systems.
Depreciation and amortization expense include depreciation of equipment,
furniture and fixtures and the amortization of intangible assets. These costs
were approximately $666,000 in the three-month period ended April 30, 2021 , as
compared to approximately $730,000 in the three-month period ended April 30,
2020 . The lower depreciation and amortization expense in the three-month period
of fiscal 2022 is due primarily to assets becoming fully depreciated over time.
During the three months ended April 30, 2021 , it was determined that there were
no substantive indicators of impairment. During the quarter ended April 30,
2020 , 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 first quarter of fiscal 2021.
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Provision for Income Taxes
For the three months ended April 30, 2021 , we reported tax benefit of
approximately $145,000 on pre-tax net loss from continuing operations, and for
the three months ended April 30, 2020 , we reported a tax expense of
approximately $342,000 on pre-tax net loss from continuing operations. Our
recorded tax benefit and expense in the three and nine-month periods ended April
30, 2021 and 2020, are less than the benefit or expense that would be derived by
applying the applicable statutory rate to loss before tax from continuing
operations in each of these periods, due mainly to the effect of permanent
differences between book and taxable income, foreign withholding taxes 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 April 30,
2021 2020
Revenues:
Equipment leasing 30 2,575
Lease pool equipment sales - 1,437
Other equipment sales - 176
30 4,188
Cost of sales:
Direct costs-equipment leasing 373 845
Lease pool depreciation -
926
Cost of lease pool equipment sales - 586
Cost of other equipment sales - 127
373 2,484
Gross profit (loss) (343) 1,704
Operating expenses:
Selling, general and administrative 342 1,700
Recovery of doubtful accounts (443)
-
Depreciation and amortization 1 44 Total operating expenses (100) 1,744 Operating loss (243) (40) Other income (expenses) (39) 3 Loss before income taxes (282) (37) Provision for income taxes (1) (178) Net loss (283) (215) Following the decision to exit the Leasing Business and present those operations as discontinued operations, we no longer recognize depreciation expense related to our lease pool of seismic equipment, but rather reassess, on a quarterly basis, the recoverability of the remaining carrying value of those assets. Similarly, we no longer recognize gain or loss from the sale of individual lease pool assets, but treat any proceeds from such transactions as a reduction in the carrying value of the lease pool. Revenue from discontinued operations during the first quarter of fiscal 2022 decreased to$30,000 , compared to$4.2 million for the first quarter of fiscal 2021. The reduction in revenue is due to the curtailment ofEquipment Leasing activity as a result of the decision to exit the Leasing Business and the change in treatment of lease pool sales as discussed above. Direct costs related toEquipment Leasing dropped to approximately$373,000 for the first quarter of fiscal year 2022 from approximately$845,000 reported in the same period for 2020. A significant portion of direct costs are generally fixed and therefore do not fluctuate with the level of leasing revenue. For the three-month period endedApril 30, 2021 , lease pool depreciation decreased approximately$926,000 from the three months endedApril 30, 2020 , due to the fact that we are no longer recording lease pool depreciation on discontinued operations. Selling, general and administrative costs related to the Leasing Business decreased to approximately$342,000 in the three months endedApril 30, 2021 , from approximately$1.7 million in the same period one year ago. The reduction in selling, general and administrative expense is due to permanent headcount reductions, closing and downsizing facilities, and lower overall operating costs due to the significant decline in activity. In addition, the current period general and administrative costs from discontinued operations excludes certain personnel, facility and overhead costs which are included in continuing operations for the three months endedApril 30, 2021 . Our tax expense for the three months endedApril 30, 2021 , was approximately$1,000 on pre-tax net loss from discontinued operations. For the three months endedApril 30, 2020 , we reported tax expense of approximately$178,000 on pre-tax net loss from discontinued operations. We recorded tax provisions in the three-month periods endedApril 30, 2021 , and 2020, despite generating a loss before income taxes from discontinued operations in each of these periods, due mainly to the effect of foreign withholding taxes and recording valuation allowances against increases in our deferred tax assets. 21
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Liquidity and Capital Resources As discussed above, the Pandemic and volatility 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 have begun to subside but there can be no assurance of that. The Company has a history of operating losses, has generated negative cash from operating activities in each of the last four quarters and has relied on cash from the sale of lease pool equipment and preferred stock pursuant to the 2nd ATM Offering Program established in the third quarter of fiscal 2021. Notwithstanding the negative impacts of the Pandemic and history of operating losses noted above, management believes there are factors and actions available to the Company to address liquidity concerns, 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$15.2 million as ofApril 30, 2021 , including cash of approximately$2.0 million . •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. •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 in response to market conditions. •Despite the temporary suspension of operations inMalaysia andSingapore early in fiscal 2021, operations continued uninterrupted at other locations. Certain of these operations have been deemed "essential businesses" by authorities. However, there can be no assurance that there will not be further suspensions in the future. •The Company has a backlog of orders of approximately$11.0 million as ofApril 30, 2021 , which is a decrease from the record amount atJanuary 31, 2021 , but an increase of approximately 9% fromApril 30, 2020 . •The Company has been successful in selling certain assets held for sale and expects to generate further liquidity from such transactions in fiscal 2022. •The Company has declared and paid the quarterly dividend on its Series A Preferred Stock for the first quarter of fiscal 2022, and each quarter in fiscal 2021, but such quarterly dividends could be suspended in the future. •Despite the challenging economic environment in fiscal 2021, the Company successfully expanded its authorized capital stock (See Note 15 - Corporate Restructuring) and raised approximately$4.6 million in new capital through the sale of common and preferred stock pursuant to the 2nd ATM Offering Program. Management expects to be able to raise further capital through the 2nd ATM Offering Program should the need arise. •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. Based on the factors and actions available to the Company as discussed above, Management expects the Company to continue to meet its obligations as they arise over the next twelve months. Our principal sources of liquidity and capital over the past two fiscal years have been proceeds from issuances of preferred stock and from the sale of lease pool equipment. 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 stock or preferred stock. The Series A Preferred Stock has been issued in aJune 2016 public offering, as consideration to Mitsubishi Heavy Industries, Ltd ("MHI"), and in the 1st and 2nd ATM Offering Programs. 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. ThroughApril 30, 2021 , we have issued 1,059,192 shares of our Series A Preferred Stock. During the three months endedApril 30, 2021 , under the 2nd ATM Offering Program, the Company sold (i) 18,053 shares of Common Stock, resulting in net proceeds to the Company of approximately$42,000 , after deducting offering costs and (ii) 20,960 shares of Series A Preferred Stock, resulting in net proceeds to the Company of approximately$503,000 . 22 -------------------------------------------------------------------------------- Table of Contents The following table sets forth selected historical information regarding cash flows from our Consolidated Statements of Cash Flows: For the Three Months Ended April 30, 2021 2020 (in thousands) Net cash (used in) provided by operating activities$ (2,807) $ 929 Net cash provided by investing activities 179 1,239 Net cash used in financing activities (33) (559)
Effect of changes in foreign exchange rates on cash and cash equivalents
51 (138)
Net decrease in cash and cash equivalents $ (2,610) $ 1,471
As of April 30, 2021 , we had working capital of approximately $15.2 million ,
including cash and cash equivalents and restricted cash of approximately
$2.0 million , as compared to working capital of approximately $19.0 million ,
including cash and cash equivalents and restricted cash of approximately
$4.6 million , at January 31, 2021 . Our working capital decreased during the
first three months of fiscal 2022 as compared to the same period in fiscal 2021
due primarily to reductions in accounts receivable and an increase in accounts
payable and accrued liabilities.
Cash Flows from Operating Activities. Net cash used in operating activities was
approximately $2.8 million in the first three months of fiscal 2022 as compared
to approximately $929,000 of cash provided by operating activities in the first
three months of fiscal 2021. In the quarter ended April 30, 2021 , the primary
sources of cash used in operating activities was our net loss of $4.0 million ,
net of non-cash charges, including depreciation and amortization and provision
for inventory obsolescence totaling approximately $1.0 million . In addition, the
net change in working capital items, such as accounts receivable and accounts
payable, decreased net cash used in operating activities by approximately $1.0
million .
Cash Flows from Investing Activities. Cash provided from investing activities
decreased during the first three months of fiscal 2022 compared to the same
period in the prior year. The decrease is primarily due to reduced proceeds from
the sale of lease pool equipment and the sale of assets held for sale.
We had no proceeds from sale of lease pool equipment and assets held for sale
during the first three months of fiscal 2022 compared to approximately $1.4
million in the first three months of fiscal 2021. Due to the decision to exit
the Leasing Business we are currently seeking to sell 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 three months of fiscal 2021 consisted of approximately $42,000 of
proceeds from sales of Common Stock, approximately $503,000 of proceeds from
sales of Preferred Stock, offset by approximately $576,000 of preferred stock
dividend payments, as compared to approximately $559,000 of preferred stock
dividend payments in the prior year period. Our 1st ATM Offering Program related
to the Series A Preferred Stock was concluded in the fourth quarter of fiscal
2020. In September 2020 , we launched the 2nd ATM Offering Program to sell up to
500,000 shares of Preferred Stock and 5,000,000 shares of $0.01 par value Common
Stock of the Company. During the three months ended April 30, 2021 , under the
2nd ATM Offering Program, the Company sold (i) 18,053 shares of Common Stock,
resulting in net proceeds to the Company of approximately $42,000 , after
deducting offering costs and (ii) 20,960 shares of Series A Preferred Stock,
resulting in net proceeds to the Company of approximately $503,000 .
As of April 30, 2021 , we have no funded debt and no obligations containing
restrictive financial covenants.
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 the undistributed earnings of foreign subsidiaries are
not deemed indefinitely reinvested outside of the United States as of April 30,
2021 . Furthermore, we have concluded that any deferred taxes with respect to the
undistributed foreign earnings would be immaterial.
As of April 30, 2021 , we had deposits in foreign banks equal to approximately
$1.4 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.
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Critical Accounting Policies
Information regarding our critical accounting policies and estimates is included
in Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K for the year ended
January 31, 2021 . There have been no material changes to our critical accounting
policies and estimates during the three-month period ended April 30, 2021 .
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