UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|
| FORM |
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
MIND TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2002 Timberloch Place
Suite 550
(Address of principal executive offices, including Zip Code)
(
(Registrant’s telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act: | ||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Table of Contents
| Item 1. |
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| Condensed Consolidated Balance Sheets as of July 31, 2022 and January 31, 2022 |
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| Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2022 and 2021 |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
| July 31, 2022 | January 31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $ at each of July 31, 2022 and January 31, 2022 | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Assets held for sale | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Deferred revenue | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Income taxes payable | ||||||||
| Operating lease liabilities - current | ||||||||
| Liabilities held for sale | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities - non-current | ||||||||
| Deferred tax liability | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding at each of July 31, 2022 and January 31, 2022 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued at July 31, 2022 and January 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost ( and shares at July 31, 2022 and January 31, 2022, respectively) | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| For the Three Months Ended July 31, |
For the Six Months Ended July 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Sale of marine technology products |
$ | $ | $ | $ | ||||||||||||
| Total revenues |
||||||||||||||||
| Cost of sales: |
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| Sale of marine technology products |
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| Total cost of sales |
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| Gross profit |
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| Operating expenses: |
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| Selling, general and administrative |
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| Research and development |
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| Depreciation and amortization |
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| Total operating expenses |
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| Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other (expense) income: |
||||||||||||||||
| Other, net |
( |
) | ( |
) | ||||||||||||
| Total other (expense) income |
( |
) | ( |
) | ||||||||||||
| Loss from continuing operations before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss from continuing operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| (Loss) income from discontinued operations, net of income taxes |
( |
) | ( |
) | ||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Preferred stock dividends - declared |
( |
) | ( |
) | ( |
) | ||||||||||
| Preferred stock dividends - undeclared |
( |
) | ( |
) | ||||||||||||
| Net loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net (loss) income per common share - Basic |
||||||||||||||||
| Continuing operations |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Discontinued operations |
$ | ( |
) | $ | $ | $ | ( |
) | ||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net (loss) income per common share - Diluted |
||||||||||||||||
| Continuing operations |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Discontinued operations |
$ | ( |
) | $ | $ | $ | ( |
) | ||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Shares used in computing net loss per common share: |
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| Basic |
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| Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
| For the Three Months Ended July 31, |
For the Six Months Ended July 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Change in cumulative translation adjustment for liquidation of entities held for sale |
||||||||||||||||
| Other changes in cumulative translation adjustment |
( |
) | ||||||||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | ( |
) | ( |
) | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| For the Six Months Ended July 31, |
||||||||
| 2022 |
2021 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| PPP loan forgiveness |
( |
) | ||||||
| Depreciation and amortization |
||||||||
| Stock-based compensation |
||||||||
| Recovery of doubtful accounts |
( |
) | ||||||
| Provision for inventory obsolescence |
||||||||
| Gross profit from sale of assets held-for-sale |
( |
) | ||||||
| Loss (gross profit) from sale of other equipment |
( |
) | ||||||
| Changes in: |
||||||||
| Accounts receivable |
( |
) | ||||||
| Unbilled revenue |
||||||||
| Inventories |
( |
) | ( |
) | ||||
| Prepaid expenses and other current and long-term assets |
( |
) | ||||||
| Income taxes receivable and payable |
( |
) | ||||||
| Accounts payable, accrued expenses and other current liabilities |
( |
) | ||||||
| Deferred revenue |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: |
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| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Sale of assets held for sale |
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| Sale of a business, net of cash sold |
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| Net cash provided by investing activities |
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| Cash flows from financing activities: |
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| Purchase of treasury stock |
( |
) | ( |
) | ||||
| Net proceeds from preferred stock offering |
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| Net proceeds from common stock offering |
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| Preferred stock dividends |
( |
) | ( |
) | ||||
| Net cash (used in) provided by financing activities |
( |
) | ||||||
| Effect of changes in foreign exchange rates on cash and cash equivalents |
||||||||
| Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
| Cash and cash equivalents, beginning of period |
||||||||
| Cash and cash equivalents, end of period |
$ | $ | ||||||
| Supplemental cash flow information: |
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| Interest paid |
$ | $ | ||||||
| Income taxes paid |
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Common Stock |
Preferred Stock |
Accumulated |
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| Additional |
Other |
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| Paid-In |
Treasury |
Accumulated |
Comprehensive |
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| Shares |
Amount |
Shares |
Amount |
Capital |
Stock |
Deficit |
Loss |
Total |
||||||||||||||||||||||||||||
| Balances, January 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Foreign currency translation |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Restricted stock issued |
||||||||||||||||||||||||||||||||||||
| Restricted stock surrendered for tax withholding |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Preferred stock dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, April 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Foreign currency translation |
— | — | ||||||||||||||||||||||||||||||||||
| Restricted stock issued |
||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, July 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||
MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Common Stock |
Preferred Stock |
Accumulated |
||||||||||||||||||||||||||||||||||
| Additional |
Other |
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| Paid-In |
Treasury |
Accumulated |
Comprehensive |
|||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Capital |
Stock |
Deficit |
Loss |
Total |
||||||||||||||||||||||||||||
| Balances, January 31, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Foreign currency translation |
— | — | ||||||||||||||||||||||||||||||||||
| Restricted stock issued |
||||||||||||||||||||||||||||||||||||
| Restricted stock surrendered for tax withholding |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Preferred stock offering |
||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Common stock offering |
||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, April 30, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Foreign currency translation |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Preferred stock offering |
||||||||||||||||||||||||||||||||||||
| Common stock offering |
— | — | ||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | ||||||||||||||||||||||||||||||||||
| Balances, July 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Liquidity
MIND Technology, Inc., a Delaware corporation (the “Company”), formerly Mitcham Industries, Inc., a Texas corporation, was incorporated in 1987. Effective August 3, 2020 the Company effectuated a reincorporation to the state of Delaware. Concurrent with the reincorporation the name of the Company was changed to MIND Technology, Inc.
The Company, through its wholly owned subsidiaries, Seamap Pte Ltd, MIND Maritime Acoustics, LLC (formerly Seamap USA, LLC), Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd (collectively “Seamap”), and its wholly owned subsidiary, Klein Marine Systems, Inc. (“Klein”), designs, manufactures and sells a broad range of proprietary products for the seismic, hydrographic and offshore industries with product sales and support facilities based in Singapore, Malaysia, the United Kingdom and the states of New Hampshire and Texas. Prior to July 31, 2020, the Company, through its wholly owned Canadian subsidiary, Mitcham Canada, ULC (“MCL”), its wholly owned Hungarian subsidiary, Mitcham Europe Ltd. (“MEL”), and its branch operations in Colombia, provided full-service equipment leasing, sales and service to the seismic industry worldwide (the “Leasing Business”). Effective July 31, 2020, the Leasing Business has been classified as held for sale and the financial results reported as discontinued operations (see Note 3 – “Assets Held for Sale and Discontinued Operations” for additional details). All intercompany transactions and balances have been eliminated in consolidation.
These condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The Company has a history of generating losses and negative cash from operating activities and may not have access to sources of capital that were available in prior periods. In addition, the lingering impacts of the global pandemic, emerging supply chain disruptions and recent volatility in oil prices have created significant uncertainty in the global economy which could have a material adverse effect on the Company’s business, financial position, results of operations and liquidity. Accordingly, substantial doubt has arisen regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company not be able to continue as a going concern.
Management has identified the following mitigating factors regarding adequate liquidity and capital resources to meet its obligations:
| • | The Company has no funded debt, or other outstanding obligations, outside of normal trade obligations. |
| • | The Company has no obligations or agreements containing “maintenance type” financial covenants. |
| • | The Company has working capital of approximately $ |
| • | Should revenues be less than projected, the Company believes it is able, and has plans in place, to reduce costs proportionately in order to maintain positive cash flow. |
| • | The majority of the Company’s costs are variable in nature, such as raw materials and personnel related costs. The Company has recently eliminated two executive level positions, and additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management. |
| • | The Company has a backlog of orders of approximately $ |
| • | Despite difficulties in world energy markets, the Company has been able to generate cash from the sale of lease pool equipment and collection of accounts receivable related to its discontinued operations. Management expects to generate additional liquidity from the sale of lease pool equipment in fiscal 2023. |
| • | The Company declared and paid the quarterly dividend on its Preferred Stock for the first quarter of fiscal 2023, and each quarter in fiscal 2022, but deferred payment of the quarterly dividend for the second quarter of fiscal 2023. The Company also has the option to defer future quarterly dividend payments if deemed necessary. The dividends are a cumulative dividend that accrue for payment in the future. During a deferral period, the Company is prohibited from paying dividends or distributions on its common stock, or redeeming any of those shares. Further, if the Company does not pay dividends on its Series A Preferred Stock for six or more quarters, the holders of Series A Preferred Stock will have the right to appoint two directors to the Company's board. |
| • | In recent years, the Company has raised capital through the sale of Common Stock and Preferred Stock pursuant to the ATM Offering Program (as defined herein) and underwritten offerings on Form S-1. Currently, the Company is not eligible to issue securities pursuant to Form S-3 and accordingly cannot sell securities pursuant to the ATM Offering Program. However, the Company may sell securities pursuant to Form S-1 or in private transactions. Management expects to be able to raise further capital through these available means should the need arise. |
Notwithstanding the mitigating factors identified by management, there remains substantial doubt regarding the Company's ability to meet its obligations as they arise over the next twelve months.
2. Basis of Presentation and Immaterial Correction of Comprehensive Loss
The condensed consolidated balance sheet as of January 31, 2022, for the Company has been derived from audited consolidated financial statements. The unaudited interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2022 (“fiscal 2022”). In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position as of July 31, 2022, the results of operations for the three and six months ended July 31, 2022 and 2021, the cash flows for the six months ended July 31, 2022 and 2021, and the statement of stockholders’ equity for the three and six months ended July 31, 2022 and 2021, have been included in these condensed consolidated financial statements. The foregoing interim results are not necessarily indicative of the results of operations to be expected for the full fiscal year ending January 31, 2023 (“fiscal 2023”).
The Company has corrected an immaterial error in the statements of comprehensive loss for the three and six months ended July 31, 2021, which as previously presented, incorrectly included $
3. Assets Held for Sale and Discontinued Operations
On July 27, 2020, the Board determined to exit the Leasing Business. As a result, the assets, excluding cash, and liabilities of the Leasing Business are considered held for sale and its results of operations are reported as discontinued operations as of July 31, 2022 and for all comparative periods presented in these condensed consolidated financial statements. The Company originally anticipated selling the discontinued operations in multiple transactions, potentially involving the sale of legal entities, assets, or a combination of both, within the twelve months ending July 31, 2021. The Company now believes it will complete the process by January 31, 2023.
The assets reported as held for sale consist of the following:
| July 31, 2022 | January 31, 2022 | |||||||
| Current assets of discontinued operations: | (in thousands) | |||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Seismic equipment lease pool and property and equipment, net | ||||||||
| Loss recognized on classification as held for sale | ( | ) | ||||||
| Total assets of discontinued operations | $ | $ | ||||||
The liabilities reported as held for sale consist of the following:
| July 31, 2022 | January 31, 2022 | |||||||
| Current liabilities of discontinued operations: | (in thousands) | |||||||
| Accounts payable | $ | $ | ||||||
| Deferred revenue | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Income taxes payable | ||||||||
| Total liabilities of discontinued operations | ||||||||
The results of operations from discontinued operations for the three and six months ended July 31, 2022 and 2021 consist of the following:
| For the Three Months Ended July 31, | For the Six Months Ended July 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | (in thousands) | |||||||||||||||
| Revenue from discontinued operations | $ | $ | $ | $ | ||||||||||||
| Cost of sales: | ||||||||||||||||
| Cost of discontinued operations | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Recovery of doubtful accounts | ( | ) | ( | ) | ||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expenses) | ( | ) | ( | ) | ||||||||||||
| Income (loss) before income taxes from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net Income (loss) from discontinued operations | ( | ) | ( | ) | ||||||||||||
The significant operating and investing noncash items and capital expenditures related to discontinued operations are summarized below:
| For the Six Months Ended July 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Gross profit from sale of assets held-for-sale | $ | ( | ) | $ | ||||
| Recovery of doubtful accounts | $ | $ | ( | ) | ||||
| Sale of assets held for sale | $ | $ | ||||||
4. New Accounting Pronouncements
New accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.
5. Revenue from Contracts with Customers
The following table presents revenue from contracts with customers disaggregated by product line and timing of revenue recognition:
| Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue recognized at a point in time: | (in thousands) | |||||||||||||||
| Seamap | $ | $ | $ | $ | ||||||||||||
| Klein | ||||||||||||||||
| Total revenue recognized at a point in time | $ | $ | $ | $ | ||||||||||||
| Revenue recognized over time: | ||||||||||||||||
| Seamap | $ | $ | $ | $ | ||||||||||||
| Klein | $ | $ | $ | $ | ||||||||||||
| Total revenue recognized over time | ||||||||||||||||
| Total revenue from contracts with customers | $ | $ | $ | $ | ||||||||||||
The revenue from products manufactured and sold by our Seamap and Klein businesses, is generally recognized at a point in time, or when the customer takes possession of the product, based on the terms and conditions stipulated in our contracts with customers. However, from time to time our Seamap and Klein businesses provide repair and maintenance services, or perform upgrades, on customer owned equipment in which case revenue is recognized over time. In addition, our Seamap business provides annual Software Maintenance Agreements (“SMA”) to customers who have an active license for software embedded in Seamap products. The revenue from SMA is recognized over time, with the total value of the SMA recognized 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:
| Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (in thousands) | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| Europe | ||||||||||||||||
| Middle East & Africa | ||||||||||||||||
| Asia-Pacific | ||||||||||||||||
| Canada & Latin America | ||||||||||||||||
| Total revenue from contracts with customers | $ | $ | $ | $ | ||||||||||||
As of July 31, 2022, and January 31, 2022, contract assets and liabilities consisted of the following:
| July 31, 2022 | January 31, 2022 | |||||||
| Contract Assets: | (in thousands) | |||||||
| Unbilled revenue - current | $ | $ | ||||||
| Total unbilled revenue | $ | $ | ||||||
| Contract Liabilities: | ||||||||
| Deferred revenue & customer deposits - current | $ | $ | ||||||
| Total deferred revenue & customer deposits | $ | $ | ||||||
Considering the products manufactured and sold by our Seamap and Klein businesses and the Company’s standard contract terms and conditions, we expect our contract assets and liabilities to turn over, on average, within a period of to months.
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.
6. Balance Sheet - Continuing Operations
| As of July 31, 2022 | As of January 31, 2022 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Current | Long-term | Total | Current | Long-term | Total | |||||||||||||||||||
| Accounts receivable | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Less allowance for doubtful accounts | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Accounts receivable net of allowance for doubtful accounts | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| July 31, 2022 | January 31, 2022 | |||||||
| (in thousands) | ||||||||
| Inventories: | ||||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Work in progress | ||||||||
| Cost of inventories | ||||||||
| Less allowance for obsolescence | ( | ) | ( | ) | ||||
| Total inventories, net | $ | $ | ||||||
| July 31, 2022 | January 31, 2022 | |||||||
| (in thousands) | ||||||||
| Property and equipment: | ||||||||
| Furniture and fixtures | $ | $ | ||||||
| Autos and trucks | ||||||||
| Marine seismic service equipment | ||||||||
| Land and buildings | ||||||||
| Cost of property and equipment | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
As of January 31, 2022, the Company completed an annual review of long-lived assets noting that the undiscounted future cash flows exceeded their carrying value and
7. Leases
The Company has certain non-cancelable operating lease agreements for office, production and warehouse space in Texas, Hungary, Singapore, Malaysia, and the United Kingdom. We negotiated the termination of our Colombia lease obligation during fiscal 2022 and our lease obligation in Canada was terminated as of March 31, 2022.
Lease expense for the three and six months ended July 31, 2022 was approximately $
Supplemental balance sheet information related to leases as of July 31, 2022 and January 31, 2022 were as follows:
| Lease | July 31, 2022 | January 31, 2022 | ||||||
| Assets | (in thousands) | |||||||
| Operating lease assets | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liabilities | $ | $ | ||||||
| Classification of lease liabilities | ||||||||
| Current liabilities | $ | $ | ||||||
| Non-current liabilities | ||||||||
| Total Operating lease liabilities | $ | $ | ||||||
Lease-term and discount rate details as of July 31, 2022 and January 31, 2022 were as follows:
| Lease term and discount rate | July 31, 2022 | January 31, 2022 | ||||||
| Weighted average remaining lease term (years) | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
The incremental borrowing rate was calculated using the Company's weighted average cost of capital.
Supplemental cash flow information related to leases was as follows:
| Lease | Six Months Ended July 31, 2022 | Six Months Ended July 31, 2021 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | (in thousands) | |||||||
| Operating cash flows from operating leases | $ | ( | ) | $ | ( | ) | ||
| Changes in lease balances resulting from new and modified leases: | ||||||||
| Operating leases | $ | $ | ||||||
Maturities of lease liabilities at July 31, 2022 were as follows:
| July 31, 2022 | ||||
| (in thousands) | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total payments under lease agreements | $ | |||
| Less: imputed interest | ( | ) | ||
| Total lease liabilities | $ | |||
8. Goodwill and Other Intangible Assets
| July 31, 2022 | January 31, 2022 | |||||||||||||||||||||||||||||||||
| Weighted | Gross | Net | Gross | Net | ||||||||||||||||||||||||||||||
| Average Life at | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||||||||||||||||
| 7/31/2022 | Amount | Amortization | Impairment | Amount | Amount | Amortization | Impairment | Amount | ||||||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||
| Goodwill | $ | $ | — | $ | ( | ) | $ | $ | $ | — | $ | ( | ) | $ | ||||||||||||||||||||
| Proprietary rights | ( | ) | — | ( | ) | — | ||||||||||||||||||||||||||||
| Customer relationships | ( | ) | — | ( | ) | — | ||||||||||||||||||||||||||||
| Patents | ( | ) | — | ( | ) | — | ||||||||||||||||||||||||||||
| Trade name | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Developed technology | ( | ) | — | ( | ) | — | ||||||||||||||||||||||||||||
| Other | ( | ) | — | ( | ) | — | ||||||||||||||||||||||||||||
| Amortizable intangible assets | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
On January 31, 2022, the Company completed an annual review of amortizable intangible assets. Based on a review of qualitative factors it was determined that there were no events or changes in circumstances indicating that the carrying value of amortizable intangible assets was not recoverable. During the six months ended July 31, 2022, there have been substantive indicators of impairment.
Aggregate amortization expense was $
| For fiscal years ending January 31, | (in thousands) | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total | $ |
9. Notes Payable
On May 5, 2020, the Company, and its wholly owned subsidiary, Klein (collectively, the “Borrowers”), were granted loans (the “Loans”) from Bank of America, N.A. in the aggregate amount of approximately $
The Loans, in the form of promissory notes (the “Notes”) dated May 1, 2020 issued by the Borrowers, were set to mature on May 1, 2022 and bore interest at a rate of 1% per annum, payable monthly commencing on November 1, 2020. The Notes stipulated various restrictions customary with this type of transaction including representations, warranties, and covenants, in addition to events of default, breaches of representation and warranties or other provisions of the Notes. In the event of default, the Borrowers would have become obligated to repay all amounts outstanding under the Notes. The Borrowers were permitted to prepay the Notes at any time prior to maturity with no prepayment penalties.
Under the terms of the PPP, funds from the Loans could only be used for payroll costs, rent, utilities and interest on other debt obligations incurred prior to February 15, 2020. In addition, certain amounts of the Loans could be forgiven if the funds were used to pay qualifying expenses.
In January 2021, the Loan granted to the Company in the amount of approximately $
10. Income Taxes
For the six months ended July 31, 2022, the income tax expense from continuing operations was approximately $
The Company files U.S. federal and state income tax returns as well as separate returns for its foreign subsidiaries within their local jurisdictions. The Company's U.S. federal tax returns are subject to examination by the Internal Revenue Service for fiscal years ended January 31, 2019 through 2022. The Company’s tax returns may also be subject to examination by state and local tax authorities for fiscal years ended January 31, 2017 through 2022. In addition, the Company's tax returns filed in foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2017 through 2022.
The Company has determined that the undistributed earnings of foreign subsidiaries are not deemed to be indefinitely reinvested outside of the United States as of July 31, 2022. Furthermore, the Company has concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial. Therefore, the Company has recorded a deferred tax liability associated with the undistributed foreign earnings as of July 31, 2022.
For the six months ended July 31, 2022 and 2021, the Company did recognize any tax expense or benefit related to uncertain tax positions.
11. Earnings per Share
Net income per basic common share is computed using the weighted average number of common shares outstanding during the period, excluding unvested restricted stock. Net income per diluted common share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period using the treasury stock method. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect and from the assumed vesting of unvested shares of restricted stock.
The following table presents the calculation of basic and diluted weighted average common shares used in the earnings per share calculation:
| Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Stock options | ||||||||||||||||
| Unvested restricted stock | ||||||||||||||||
| Total weighted average common share equivalents | ||||||||||||||||
| Diluted weighted average common shares outstanding | ||||||||||||||||
For the three and six months ended July 31, 2022 and 2021, potentially dilutive common shares underlying stock options and unvested restricted stock were anti-dilutive and were therefore not considered in calculating diluted loss per share for those periods.
12. Related Party Transaction
In September 2020 we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Agent”). The Co-Chief Executive Officer and Co-President of the Agent is the Non-Executive Chairman of our Board. Pursuant to the Equity Distribution Agreement, the Company may sell up to