MIND 10-K & 10-Q changes, risk factors and insider trading

If our customers experience financial difficulties or their own customers delay payment to them, they may not be able to pay, or may delay payment of, accounts receivable owed to us. Disruptions in the financial markets or other macro-economic issues, such as wars, volatility in price of oil or other hydrocarbons or a worldwide pandemic, such as the global pandemic, could exacerbate financial difficulties for our customers. Any inability of customers to pay us for products and services could adversely affect our financial condition and results of operations.

As of January 31, 2025,2026, we had approximately $12.1$12.9 million of gross customer accounts receivable, of which approximately $4,000$52,000 was over 180 days past due. Contractual payment terms vary by customer and by contract and, under certain circumstances, we may grant extended payment terms to our customers. As of January 31, 2025,2026, we had an allowance for credit losses of approximately $332,000 related to accounts receivable from continuing operations.receivable. For fiscal 20252026 and fiscal 2024,2025, we had no charges to our provision for credit losses. Significant payment defaults by our customers in excess of our allowance for credit losses would have a material adverse effect on our financial position and results of operations.

We are subject to taxation in manyseveral foreign jurisdictions and the final determination of our tax liabilities involves the interpretation of the statutes and requirements of taxing authorities worldwide.in those foreign jurisdictions. Our tax returns are subject to routine examination by taxing authorities, and these examinations may result in assessments of additional taxes, penalties and/or interest.

If there is a shortage of a key component and the component cannot be easily sourced from a different supplier, the shortage could disrupt our production activities. Additionally, lead times for other components have increased in some cases. A shortage of key components may cause a significant disruption to our production activities, which could have a substantial adverse effect on itsour financial condition or results of operations.

We have not been directly impacted by the Israel-Hamas conflict. However, the historic volatility in the Middle East, including as a result of recent events in Israel and Gaza, may result in political instability and societal disruption that could reduce overall demand for oil and natural gas, potentially putting downward pressure on demand for our services and causing a reduction in our revenue.

We purchase a portion of our supplies from suppliers in China and other foreign countries. The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the supplies that we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, as well as those between the United States and Canada, Mexico and other countries have escalated recently. Trade tensions have led to a series of tariffs imposed by the United States on imports from China, as well as retaliatory tariffs imposed by China on imports from the United States. Additionally, the current Trump presidential administration has announced plans to imposeimposed broad-based tariffs on imports from Canadanumerous countries. The scope, legal authority and Mexicodurability of these tariffs remain uncertain and countriessubject into the European Union.change. If supplies we purchase from China and other international suppliers become subject to tariffs, our operation costs could increase. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs, making the products we sell uncompetitive to similar products not subjected to such import tariffs. Further changes in United States trade policies, tariffs, taxes, export restrictions or other trade barriers or restrictions, may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase supplies, which could have a material adverse effect on our business, results of operations or financial conditions. The majority of our imports are made in Singapore and Malaysia and, therefore, are not directly impacted by the current and proposed tariffs or trade restriction involving the United States.

We are exposed to inventory risks that may adversely affect our operating results as a result of changes in product cycles and pricing, defective products, changes in customer demand and spending patterns, and other factors. In fiscal 20252026 we recorded inventory obsolescence charges of approximately $68,000$227,000 compared to approximately $341,000$68,000 in fiscal 2024.2025. We endeavor to accurately predict these trends and avoid over-stocking or under-stocking components in order to avoid shortages, excesses or obsolete inventory. Demand for components, however, can change significantly between the time inventory or components are ordered/assembled and the dates of customer orders. In addition, when we begin marketing a new product, it may be difficult to determine appropriate component selection and accurately forecast demand. The acquisition of certain types of inventory or components may require significant lead-timelead-time, and they may not be returnable. We carry a broad selection and significant inventory levels of certain components, and we may be unable to sell them in sufficient quantities. Any one of the inventory risk factors set forth above may adversely affect our operating results.

From time to time, we may require access to working capital to meet overhead costs and operational expenditures, to finance inventory purchases, or to provide letters of credit or bankers’ guarantees to certain customers. For the past several years we have not had a credit facility in place. There is no assurance that we will be able to negotiate a credit facility or continue to meet working capital needs with cash generated from our operations, or the sale of debt or equity securities. The majority of our revenues are generated by Seamap Pte.Pte Ltd., our Singapore-based subsidiary, and therefore the majority of our accounts receivable and inventory are located in Singapore. This limits the ability for U.S.-based financial institutions to provide asset backed financing to us. Additionally, many financial institutions in Singapore require partial local ownership in order to provide financing. These factors limit our access to certain conventional sources of working capital financing. If our cash flows and capital resources are insufficient to fund our operations, we may be forced to reduce or delay capital expenditures, sell assets, or seek additional capital, which may not be available on terms acceptable to us, or at all. Our inability to generate or access working capital could have a material adverse effect on our operations and financial condition.

Finally,In addition, increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, hurricanes, floods, drought and other climatic events. If any such climatic events were to occur, they could have an adverse effect on our financial condition and results of operations and the financial condition and operations of our customers. Notwithstanding potential risks related to climate change, the International Energy Agency estimates that oil and gas will continue to represent a substantial major share of global energy use through 2030, and other private sector studies project continued growth in demand for the next two decades.

We rely heavily on information systems to conduct and protect our business. As a result, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable, threats to the security of our facilities, and threats from terrorist acts. The Company is aware of one such security breach that has occurred in the past; howeverhowever, after consultation with counsel and cybersecurity consultants, Management does not believe any sensitive information was breached.

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

Revenue from the Seamap Marine Products business relates to sales of Seamap products, which operates from locations near Bristol, United Kingdom; Huntsville, Texas; Johor, Malaysia and in Singapore. The majority of our revenues are contracted through our Singapore subsidiary, Seamap Pte Ltd. The majority of manufacturing activity is performed, and therefore the majority of our material purchases are made, by Seamap Pte Ltd or our Malaysian subsidiary, Seamap (Malaysia) Sdn Bhd.

Management believes that the performance of our continued operations is indicated by revenues from sales of products and by gross profit from those sales and the operating profit for those operations. 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.

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

We have continued to experience significant inquiries and bid activity for our Seamap Marine products. As of January 31, 2025,2026, our backlog of firm orders for Seamap Marine Products was approximately $16.9$13.9 million, which is a decrease of approximately 56%18% from the $38.4$16.9 million reported at January 31, 2024.2025. In addition, weWe continue to pursue a number of other significant opportunities and expect to secure additional orders, primarily for delivery in fiscal 20262027 and beyond. Subsequent to January 31, 2025 we received orders totaling approximately $15.9 million, which amounts are not included in our backlog as of January 31, 2025. 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. We believe our backlog as of January 31, 2024 provided visibility that allowed for improved production efficiency which in turn contributed to our improved results. Nonetheless, we believe there are other production efficiencies which can be obtained and could contribute to improved operating margins in fiscal 2026.

DespiteOur improvingoperation results,can our operations continue toalso be impacted by the following factors:

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

Despite the near-term uncertainty discussed above, we are optimistic for the future of the Company. We see a number of opportunities to add to our technology and to apply existing technology and products to new applications.

As we grow our business, we are also looking to control our costs. DuringOver the past several fiscal 2024,years, we eliminated several executive and management level positions to control general and administrative costs. Should future financial results fall below our expectation, we may take further steps to reduce costs. We believe manyMany of our costscosts, are variable in nature, such asincluding raw materials and labor-related costs.costs, are variable in nature. Accordingly, we believe we can reduce such costs commensurate with any declines in our business.

Results of Continuing Operations

For fiscal 20252026 and 2024,2025, we recorded operating income of approximately $6.8$2.9 million and $518,000,$6.8 million respectively. The improvementdecline in fiscal 2026 operating results was driven primarily by significantdecreases in revenue and increases in revenueprofessional forfees, thestock-based Seamap product lines in addition to cost-saving efforts implemented in the currentcompensation, and priorfranchise fiscaltax year.expense.

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

A significant portion of Seamap’s sales consist of large discrete orders, the timing of which is dictated by our customers. This timing generally relates to the availability of a vessel in port so that our products can be installed. Accordingly, there can be significant variation in sales from one period to another, which does not necessarily indicate a fundamental change in demand for these products. The decline in fiscal 2026 revenue resulted from the timing of order deliveries and the impact of the reduced order activity discussed above. A significant portion of our revenues result from “after marketafter-market” activity such as spare parts, training, repairs and field service. In Fiscalfiscal 20252026 and Fiscalfiscal 20242025, approximately 37%60% and 45%,37%, respectivelyrespectively, of our revenue related to these activities. Our gross profit margin increasedremained essentially flat in fiscal 20252026 as compared to fiscal 2024 due to higher overhead absorption from higher revenues and improved production efficiencies. This improvement was despite an increase in warranty costs in Fiscal 2025 to approximately $900,000 versus approximately $400,000 in Fiscal 2024.2025.

Selling, general and administrative expenses for fiscal 20252026 amounted to approximately $11.3$13.3 million, compared to approximately $12.1$11.3 million in 2024.2025. The year-over-year decreaseincrease of approximately 7%17% is primarily the result of reductionsincreased inprofessional headcount,fees, stock-based compensation expense and otherfranchise administrative costs due to cost reduction initiatives implemented throughout fiscal 2024 and fiscal 2025.tax.

We did not record a provision for credit losses in fiscal 20252026 or fiscal 2024.2025. On January 31, 2025,2026, and 2024,2025, we had trade accounts and note receivables over 180 days past due of approximately $4,000$52,000 and $51,000,$4,000, respectively. Contractual payment terms vary by customer and by contract and, under certain circumstances, we may grant extended payment terms to our customers. In our industry, and in our experience, it is not unusual for accounts to become delinquent from time to timetime-to-time, and this is not necessarily indicative of an account becoming uncollectable. As of January 31, 2025, 20242026, and 2023,2025 our allowance for credit losses receivable for continuing operations amounted to approximately $332,000.

Depreciation and amortization expense relates primarily to the depreciation of furniture and fixtures, office and manufacturing equipment and the amortization of intangible assets. Depreciation and amortization expense was approximately $944,000$873,000 and $1.2 million$944,000 for fiscal 20252026 and 2024,2025, respectively. The decrease in depreciation and amortization expense in fiscal 20252026 is due primarily to tangible and intangible assets becoming fully depreciated during the current fiscal year.

Our provision for income taxes for continuing operations for fiscal 20252026 was approximately $2.0$2.2 million compared to approximately $1.3$2.0 million for fiscal 2024.2025. These amounts differed from the result expected when applying the U.S. statutory rate of 21% to our income or loss from continuing operations before income taxes for the respective periods due primarily to the impact of income taxes accrued in certain foreign jurisdictions, primarily in Singapore, which do not have net operating losses available to offset taxable income, and because valuation allowances have been recorded against increases in our deferred tax assets. Valuation allowances have been provided against all deferred tax assets in the United States and several foreign jurisdictions.

As of January 31, 2025,2026, the Company had working capital of approximately $37.4 million, including cash and cash equivalents of approximately $19.1 million, compared to working capital of approximately $23.5 million, including cash and cash equivalents of approximately $5.3 million, compared to working capital of approximately $18.1 million, including cash and cash equivalents of approximately $5.3 million, as of January 31, 2024.2025, Thethe Company doesdid not have a credit facility in place and depends on cash on hand and cash flows from operations to satisfy its liquidity needs.

As of April 23,16, 2025,2026, under our Amended and Restated Certificate of Incorporation, we have 40,000,000 shares of Common Stock are authorized, of which 7,969,4219,089,055 are currently outstanding and approximately 30,00052,000 are reserved for issuance pursuant to our Amended and Restated Stock Awards Plan, leaving approximately 32,000,00030,860,000 available for future issuance.

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

Cash Provided by (Used In) Operating Activities. Cash provided by operating activities amounted to approximately $651,000 in fiscal 2025, compared to cash used in operations of approximately $5.0$2.6 million in fiscal 2024.2026, compared to approximately $651,000 in fiscal 2025. In fiscal 2025,2026, the primary source of cash provided by operating activities was the increase in net incomeconsumption of approximately $5.1 million.inventories.

Cash Flows From(Used in) Provided by Investing Activities. Cash providedused byin investing activities during fiscal 20252026 decreasedincreased approximately $11 million$683,000 from fiscal 2024,2025, due primarily to proceedsthe frombuild-out of the saleHuntsville of Klein totaling approximately $11.5 millionfacility in fiscal 2024.2026.

We value our inventory based on our cost. We adjust the value of our inventory to the extent we determine that our cost cannot be recovered due to obsolescence or other factors. In order to make these determinations, we may use estimates of future demand for our products to determine appropriate inventory reserves and to make corresponding reductions in inventory values to reflect the lower of cost or market value. Our estimates related to inventory obsolescence are subject to uncertainty because we estimate future demand for our products based on historical activity which may not be an accurate indicator due to factors beyond our control and subject to change and variation. For fiscal 2025,2026, we increased our inventory obsolescence reserve for continuing operations by approximately $6,000.$58,000. In fiscal 20242025 we increased our inventory obsolescence reserve for continuing operations by approximately $316,000.$6,000.

Recently, we have experienced decreased visibility for future business activity, as partially indicated by decreased firm backlog as discussed below. We believe this is due in large part to uncertainties in the marine exploration and survey markets. Global economic, political and security concerns have, in our opinion, contributed to this uncertainty. AsThe anon-going example,war certainwith Iran has created additional uncertainty and disruptions. Certain of our customers have experienced disruptions in operations due to the current conflict in Iran. Such disruptions have caused pauses in on-going operations, delays in payments and delays in the Middleaward East.and However,commencement of anticipated projects. Despite these near-term challenges, we believe thesethe disruptions are temporary and that the longer-term outlook in the marine exploration and survey market is quite positive. Certain of our customers have recently reported increasing backlogs for projects outside of the Middle East and many industry commentators predict a strong resurgence in marine exploration and survey activity.

As of AprilJuly 30,31, 2026, our backlog of firm orders was approximately $7.6$4.8 million, compared to approximately $13.9 million as of January 31, 2026. We believe a significant portion of our current backlog will be completed and shipped by the end of fiscal 2027. In addition to our backlog of firm orders, we have a significant pipeline of pending and potential orders, and we have recently identified new opportunities for later this fiscal year and subsequent periods. WeHowever, the timing of many of these opportunities is uncertain and we believe ourthe backlogrecent reduced level of firmactivity orders,will pendingcontinue andat potentialleast orders, and identified new opportunities provide a solid revenue outlook forthrough the balancethird quarter of fiscal 2027. The level of backlog at a particular point in time may not necessarily be indicative of results in subsequent periods as the size and delivery period of individual orders can vary significantly.

Based on this visibility and expected delivery schedules, we expect a decline in revenue in fiscal 2027 from the level of revenue recognized in fiscal 2026. While our long-term outlook for our existing product lines is optimistic, the outlook for fiscal 2027 is less clear. We believe this expected decline in fiscal 2027 revenue is due to recent delays in certain projects and temporary changes in capital allocations by ultimate end-users. We are currently pursuing a number of initiatives, including the development of new products and significant project opportunities, some of which we believe could have a positive impact on our future financial results.results, although there can be no assurance as to the magnitude or timing of any such contributions.

During fiscal 2026, our facility in Huntsville, Texas underwent an expansion to handle an expected increase in activity. As a result, repair and production activities were suspended for several months until the expansion activities were completed and repair and production operations resumed in the third quarter of fiscal 2026. We expect incremental activity and increased revenue from this facility in fiscal 2027.2027 and beyond.

We also believe there are other initiatives that can expand our business and enhance stockholder value. These include development of new technology and products, the acquisition of technology, products or businesses or the combination with other companies. We continue to actively identify and evaluate these opportunities. We believe the Company is well positioned to take advantage of any such opportunities should they arise.

General inflation levels have increased in recently due in part to supply chain issues, increased energy costs and geopolitical uncertainty. In addition, shortages of certain components, such as electronic components, have caused prices for available components to increase in some cases. Although these factors have had a negative impact on our costs, our revenues and results of operations have not been materially impacted by inflation or changing prices in the past several years.

Revenues for the three and six months ended AprilJuly 30,31, 2026 were approximately $9.7$5.6 million and $15.3 million, respectively, compared to approximately $7.9$13.6 million and $21.5 million for the three and six months ended AprilJuly 30,31, 2025,.2025, respectively. For the three and six months ended AprilJuly 30,31, 2026, we generated operating income of approximately $14,000, compared to an operating loss of approximately $658,000$1.8 million and $1.8 million, respectively, compared to operating income of approximately $2.7 million and $2.0 million for the three and six months ended AprilJuly 30,31, 2025.2025, respectively. A more detailed explanation of these variations follows.

A significant portion of Seamap’s sales consist of large discrete orders, the timing of which is dictated by our customers. This timing generally relates to the availability of the vessel in port so that our products can be delivered and installed. Accordingly, sales can significantly vary from one period to another. The remaining sales relate to “after-market” activity such as the sale of spare parts, repairs and services. The gross profit margin in the three-monthsix-month period ended AprilJuly 30,31, 2026 remaineddecreased consistentto with40% from 47% in the priorsix-month yearperiod comparableended period.July 31, 2025 primarily attributable to the impact of unabsorbed overhead. The decline in gross margin was despite a higher percentage of after-market activity in the fiscal 2027 periods. After-market orders generally generate a higher gross margin than system sales.

General and administrative expenses for the three and six months ended AprilJuly 30,31, 2026, were approximately $3.5$3.3 million and $6.8 million, respectively, compared to approximately $3.4$3.6 million and $7.0 million for the three months ended April 30, 2025 and $3.3 million for the threesix months ended JanuaryJuly 31, 2026.2025, respectively. The increase compareddecrease to the threecomparable monthsprior endedyear April 30, 2025,periods primarily relates to higherlower stock-basedprofessional compensationfee expense anddue to one-time, non-recurring project costs incurred in the increaseprior comparedyear to the three months ended January 31, 2026 primarily relates to the timing of incentive compensation awards.periods.

Research and development costs were approximately $310,000$407,000 and $717,000 for the three-three monthand periodsix-month periods ended AprilJuly 30,31, 2026, respectively, compared to approximately $380,000$311,000 and $691,000 for the three-monththree periodand six-month periods ended AprilJuly 30,31, 2025.2025, respectively. Costs in each of the periods are related primarily to development of our next generation towed streamer system and other new products.

Depreciation and amortization expense, which includes depreciation of equipment, furniture and fixtures and the amortization of intangible assets, decreasedwas primarilyapproximately attributable to assets becoming fully depreciated$224,000 and amortized over the year. These costs were approximately $228,000 and $225,000$452,000 in the three-monththree and six-month periods ended AprilJuly 30,31, 2026, respectively, and Aprilapproximately 30,$217,000 and $442,000 for the three and six-month periods ended July 31, 2025, respectively.

Other income recognized for the three and six months ended AprilJuly 30,31, 2026, related primarily to interest income on cash balances. Other losses recognized for the three and six months ended AprilJuly 30,31, 2025 related primarily to foreign exchange losses.

For the three and six months ended AprilJuly 30,31, 2026, our income tax expense was approximately $476,000$18,000 and $494,000, respectively, on pre-tax incomelosses of approximately $65,000.$1.7 million and $1.7 million, respectively. For the three and six months ended AprilJuly 30,31, 2025, our income tax expense was approximately $294,000$670,000 and $964,000, respectively on a pre-tax lossincome of approximately $676,000.$2.6 million and $1.9 million, respectively. These amounts differed from the result expected when applying the U.S. statutory rate of 21% to our income before income taxes for the respective periods due primarily to the impact of income taxes accrued in certain foreign jurisdictions, primarily Singapore, which do not have net operating losses available to offset taxable income, and because we do not benefit from tax losses in the U.S. and certain foreign jurisdictions where we have valuation allowances recorded against our deferred tax assets. Valuation allowances have been provided against all deferred tax assets in the United States and certain foreign jurisdictions, including the United Kingdom.

The Company has generated income from operations and positive Adjusted EBITDA for each of the past three fiscal years. The Company also generated net income from operations and cash provided by operating activities for each of fiscal 2025 and fiscal 2026.

As of AprilJuly 30,31, 2026, the Company had working capital of approximately $37.8$36.7 million, including cash and cash equivalents of approximately $17.7$15.8 million, compared to working capital of approximately $37.4 million, including cash and cash equivalents of approximately $19.1 million, as of January 31, 2026. On March 17, 2026, the Company entered into a trade finance facility with The Hong Kong and Shanghai Bank Corporation Limited, Singapore Branch (“HSBC Singapore”) for the issuance, from time to time, of letters of credit or bank guarantees. The Company has entered into this facility to provide flexibility for the pursuit of potential future projects and to allow the Company to respond efficiently and economically as these potential projects may arise. As of JuneSeptember 10,9, 2026, there has been no activity associated with this trade facility.

As of AprilJuly 30,31, 2026, we had working capital of approximately $37.8$36.7 million, including cash and cash equivalents of approximately $17.7$15.8 million, as compared to working capital of approximately $37.4 million, including cash and cash equivalents of approximately $19.1 million, at January 31, 2026.

Cash Flows from Operating Activities. Net cash used in operating activities was approximately $1.3$3.1 million in the first threesix months of fiscal 2027 as compared to cash provided by operating activities of approximately $4.1$2.9 million in the first threesix months of fiscal 2026. The decrease in net cash provided by operating activities was due mainly to the net loss for the six-month period ended July 31, 2026 and increases in accounts receivable.receivable during that same period.

Cash Flows from Investing Activities. Net cash used in investing activities during the first threesix months of fiscal 20262027 relates primarily to the purchase of assetsassets. These purchases primarily reflect capital expenditures to support our manufacturing and investmentproduct relateddevelopment activities. We expect to thefund expansionfuture ofcapital expenditures from cash on hand and cash generated from operations and do not have any capital expenditure requirements that would materially affect our facilityliquidity inor Huntsville,capital Texas.resources.

Cash Flows from Financing Activities. For the threesix months ended AprilJuly 30,31, 2026 and AprilJuly 30,31, 2025, there was no cash flow related to financing activities.

We have determined that the undistributed earnings of foreign subsidiaries are not deemed indefinitely reinvested outside of the United States as of AprilJuly 30,31, 2026. Furthermore, we have concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial.

As of AprilJuly 30,31, 2026, we had deposits in foreign banks equal to approximately $6.1$4.4 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. If withholding taxes should become payable, we believe the amount of tax withheld would be immaterial.

Information regarding our critical accounting estimates is included in Part II, 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, 2026. There have been no material changes to our critical accounting estimates during the three-monththree- periodand six-month periods ended AprilJuly 30,31, 2026.