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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM | 10-Q

(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2020
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: 001-13490

MIND TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Delaware |  | 76-0210849
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

2002 Timberloch Place
Suite 400
The Woodlands, Texas 77380
(Address of principal executive offices, including Zip Code)
(281) 353-4475
(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
Common Stock - $0.01 par value per share | MIND | The NASDAQ Stock Market LLC
Series A Preferred Stock - $1.00 par value per share | MINDP | The NASDAQ Stock Market LLC

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. Yes ☒ No ☐
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). Yes ☒ No ☐
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 |  | ☐
Non-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 ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 12,875,221 shares of common stock, $0.01 par value, were outstanding as of December 3, 2020.

Table of Contents
MIND TECHNOLOGY, INC.
Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements (Unaudited) |
| Condensed Consolidated Balance Sheets as of October 31, 2020 and January 31, 2020 | 1
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2020 and 2019 | 2
| Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended O cto ber 31, 2020 and 2019 | 3
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2020 and 2019 | 4
| Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended October 31, 2020 and 2019 | 6
| Notes to Condensed Consolidated Financial Statements | 8
| Cautionary Statement about Forward-Looking Statements | 17
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 28
Item 4. | Controls and Procedures | 28
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings | 29
Item 1A. | Risk Factors | 29
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 29
Item 3. | Defaults Upon Senior Securities | 29
Item 4. | Mine Safety Disclosures | 29
Item 5. | Other Information | 29
Item 6. | Exhibits | 29
| Exhibit Index | 29
| Signatures | 32

ii

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)

| October 31, 2020 |  | January 31, 2020
ASSETS
Current assets: |  |  |
Cash and cash equivalents | $ | 2,664 |  |  | $ | 3,090 |
Restricted cash | — |  |  | 144 |
Accounts receivable, net of allowance for doubtful accounts of $1,044 and $2,378 at October 31, 2020 and January 31, 2020, respectively | 5,609 |  |  | 6,623 |
Inventories, net | 11,880 |  |  | 12,656 |
Prepaid expenses and other current assets | 1,278 |  |  | 1,987 |
Assets held for sale | 5,440 |  |  | 14,913 |
Total current assets | 26,871 |  |  | 39,413 |
Property and equipment, net | 4,954 |  |  | 5,419 |
Operating lease right-of-use assets | 1,363 |  |  | 2,300 |
Intangible assets, net | 6,831 |  |  | 8,136 |
Goodwill | — |  |  | 2,531 |
Other assets | 774 |  |  | 429 |
Total assets | $ | 40,793 |  |  | $ | 58,228 |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: |  |  |
Accounts payable | $ | 1,441 |  |  | $ | 1,767 |
Deferred revenue | 205 |  |  | 731 |
Accrued expenses and other current liabilities | 2,468 |  |  | 1,565 |
Income taxes payable | 691 |  |  | 316 |
Operating lease liabilities - current | 280 |  |  | 1,339 |
Liabilities held for sale | 1,133 |  |  | 2,730 |
Total current liabilities | 6,218 |  |  | 8,448 |
Operating lease liabilities - non-current | 1,083 |  |  | 961 |
Notes payable | 1,607 |  |  | — |
Other non-current liabilities | 797 |  |  | 967 |
Deferred tax liability | 134 |  |  | 200 |
Total liabilities | 9,839 |  |  | 10,576 |
Shareholders’ equity: |  |  |
Preferred stock, $1.00 par value; 2,000 shares authorized; 994 shares issued and outstanding at October 31, 2020 and January 31, 2020 | 22,104 |  |  | 22,104 |
Common stock, $0.01 par value; 40,000 shares authorized; 14,773 and 14,097 shares issued at October 31, 2020 and January 31, 2020, respectively | 148 |  |  | 141 |
Additional paid-in capital | 125,810 |  |  | 123,964 |
Treasury stock, at cost (1,929 shares at October 31, 2020 and January 31, 2020) | (16,860) |  |  | (16,860) |
Accumulated deficit | (95,823) |  |  | (77,310) |
Accumulated other comprehensive loss | (4,425) |  |  | (4,387) |
Total shareholders’ equity | 30,954 |  |  | 47,652 |
Total liabilities and shareholders’ equity | $ | 40,793 |  |  | $ | 58,228 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Table of Contents
MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

|  | For the Three Months Ended October 31, |  | For the Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Revenues: |  |  |  |  |  |  |  |
Sale of marine technology products |  | $ | 6,541 |  |  | $ | 8,175 |  |  | $ | 14,814 |  |  | $ | 21,039 |
Total revenues |  | 6,541 |  |  | 8,175 |  |  | 14,814 |  |  | 21,039 |
Cost of sales: |  |  |  |  |  |  |  |
Sale of marine technology products |  | 4,267 |  |  | 4,860 |  |  | 10,039 |  |  | 12,478 |
Total cost of sales |  | 4,267 |  |  | 4,860 |  |  | 10,039 |  |  | 12,478 |
Gross profit |  | 2,274 |  |  | 3,315 |  |  | 4,775 |  |  | 8,561 |
Operating expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 2,973 |  |  | 3,401 |  |  | 8,915 |  |  | 10,538 |
Research and development |  | 912 |  |  | 629 |  |  | 2,077 |  |  | 1,442 |
Impairment of intangible assets |  | — |  |  | — |  |  | 2,531 |  |  | — |
Depreciation and amortization |  | 662 |  |  | 604 |  |  | 2,092 |  |  | 1,810 |
Total operating expenses |  | 4,547 |  |  | 4,634 |  |  | 15,615 |  |  | 13,790 |
Operating loss |  | (2,273) |  |  | (1,319) |  |  | (10,840) |  |  | (5,229) |
Other income (expense): |  |  |  |  |  |  |  |
Other, net |  | 12 |  |  | (31) |  |  | 68 |  |  | 145 |
Total other income (expense) |  | 12 |  |  | (31) |  |  | 68 |  |  | 145 |
Loss from continuing operations before income taxes |  | (2,261) |  |  | (1,350) |  |  | (10,772) |  |  | (5,084) |
(Provision) benefit for income taxes |  | (109) |  |  | 31 |  |  | 79 |  |  | 75 |
Loss from continuing operations |  | (2,370) |  |  | (1,319) |  |  | (10,693) |  |  | (5,009) |
Loss from discontinued operations, net of income taxes |  | (1,220) |  |  | (709) |  |  | (6,143) |  |  | (2,570) |
Net loss |  | $ | (3,590) |  |  | $ | (2,028) |  |  | $ | (16,836) |  |  | $ | (7,579) |
Preferred stock dividends |  | (559) |  |  | (522) |  |  | (1,677) |  |  | (1,492) |
Net loss attributable to common shareholders |  | $ | (4,149) |  |  | $ | (2,550) |  |  | $ | (18,513) |  |  | $ | (9,071) |
Net loss per common share - Basic |  |  |  |  |  |  |  |
Continuing operations |  | $ | (0.24) |  |  | $ | (0.15) |  |  | $ | (1.01) |  |  | $ | (0.54) |
Discontinued operations |  | $ | (0.10) |  |  | $ | (0.06) |  |  | $ | (0.50) |  |  | $ | (0.21) |
Net loss |  | $ | (0.34) |  |  | $ | (0.21) |  |  | $ | (1.51) |  |  | $ | (0.75) |
Net loss per common share - Diluted |  |  |  |  |  |  |  |
Continuing operations |  | $ | (0.24) |  |  | $ | (0.15) |  |  | $ | (1.01) |  |  | $ | (0.54) |
Discontinued operations |  | $ | (0.10) |  |  | $ | (0.06) |  |  | $ | (0.50) |  |  | $ | (0.21) |
Net loss |  | $ | (0.34) |  |  | $ | (0.21) |  |  | $ | (1.51) |  |  | $ | (0.75) |
Shares used in computing net loss per common share: |  |  |  |  |  |
Basic |  | 12,313 |  |  | 12,158 |  |  | 12,223 |  |  | 12,135 |
Diluted |  | 12,313 |  |  | 12,158 |  |  | 12,223 |  |  | 12,135 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents
MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

|  | For the Three Months Ended October 31, |  | For the Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Net loss attributable to common shareholders |  | $ | (4,149) |  |  | $ | (2,550) |  |  | $ | (18,513) |  |  | $ | (9,071) |
Change in cumulative translation adjustment for sale of foreign entity |  | — |  |  | — |  |  | — |  |  | (331) |
Other changes in cumulative translation adjustment |  | 11 |  |  | 115 |  |  | (38) |  |  | (45) |
Comprehensive loss |  | $ | (4,138) |  |  | $ | (2,435) |  |  | $ | (18,551) |  |  | $ | (9,447) |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

|  | For the Nine Months Ended October 31,
|  | 2020 |  | 2019
Cash flows from operating activities: |  |  |  |
Net loss |  | $ | (16,836) |  |  | $ | (7,579) |
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |
Depreciation and amortization |  | 3,920 |  |  | 5,806 |
Stock-based compensation |  | 562 |  |  | 612 |
Impairment of intangible assets |  | 2,531 |  |  | — |
Loss on disposal of discontinued operations |  | 1,859 |  |  | — |
Provision for doubtful accounts, net of charge offs |  | 470 |  |  | 23 |
Provision for inventory obsolescence |  | 256 |  |  | — |
Gross profit from sale of lease pool equipment |  | (1,326) |  |  | (987) |
Gross profit from sale of other equipment |  | (303) |  |  | — |
Deferred tax expense |  | (32) |  |  | 135 |
Non-current prepaid tax |  | — |  |  | (157) |
Changes in: |  |  |  |
Accounts receivable |  | 3,640 |  |  | (1,020) |
Unbilled revenue |  | (6) |  |  | (302) |
Inventories |  | 762 |  |  | (2,835) |
Prepaid expenses and other current and long-term assets |  | 1,065 |  |  | 240 |
Income taxes receivable and payable |  | 390 |  |  | — |
Accounts payable, accrued expenses and other current liabilities |  | (1,827) |  |  | (392) |
Deferred revenue |  | 72 |  |  | 1,979 |
Foreign exchange losses net of gains |  | — |  |  | 230 |
Net cash used in operating activities |  | (4,803) |  |  | (4,247) |
Cash flows from investing activities: |  |  |  |
Purchases of seismic equipment held for lease |  | (110) |  |  | (1,939) |
Purchases of property and equipment |  | (64) |  |  | (893) |
Sale of used lease pool equipment |  | 2,010 |  |  | 1,415 |
Sale of assets held for sale |  | 734 |  |  | — |
Sale of business, net of cash sold |  | — |  |  | 239 |
Net cash provided by (used in) investing activities |  | 2,570 |  |  | (1,178) |
Cash flows from financing activities: |  |  |  |
Proceeds from exercise of stock options |  | — |  |  | 25 |
Net proceeds from preferred stock offering |  | — |  |  | 2,211 |
Net proceeds from common stock offering |  | 1,291 |  |  | — |
Preferred stock dividends |  | (1,118) |  |  | (1,492) |
Proceeds from PPP loans |  | 1,607 |  |  | — |
Net cash provided by financing activities |  | 1,780 |  |  | 744 |
Effect of changes in foreign exchange rates on cash, cash equivalents and restricted cash |  | (117) |  |  | (69) |
Net decrease in cash, cash equivalents and restricted cash |  | (570) |  |  | (4,750) |
Cash, cash equivalents and restricted cash, beginning of period |  | 3,234 |  |  | 9,549 |
Cash, cash equivalents and restricted cash, end of period |  | $ | 2,664 |  |  | $ | 4,799 |
Supplemental cash flow information: |  |  |  |
Interest paid |  | $ | 34 |  |  | $ | 40 |
Income taxes paid |  | $ | 219 |  |  | $ | 325 |
Purchases of seismic equipment held for lease in accounts payable at end of period |  | $ | — |  |  | $ | 753 |
Purchase of seismic equipment held for lease through settlement of accounts receivable |  | $ | — |  |  | $ | 826 |

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The accompanying notes are an integral part of these condensed consolidated financial statements.
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MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)

| Common Stock |  | Preferred Stock |  |  |  |  |  |  |  | Accumulated Other Comprehensive Loss |  |
| Shares |  | Amount |  | Shares |  | Amount |  | Additional Paid-In Capital | Treasury Stock |  | Accumulated Deficit |  | Total
Balances, January 31, 2020 | 14,097 |  |  | $ | 141 |  |  | 994 |  |  | $ | 22,104 |  |  | $ | 123,964 |  |  | $ | (16,860) |  |  | $ | (77,310) |  |  | $ | (4,387) |  |  | $ | 47,652 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,642) |  |  | — |  |  | (6,642) |
Foreign currency translation | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (131) |  |  | (131) |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (559) |  |  | — |  |  | (559) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 230 |  |  | — |  |  | — |  |  | — |  |  | 230 |
Balances, April 30, 2020 | 14,097 |  |  | $ | 141 |  |  | 994 |  |  | $ | 22,104 |  |  | $ | 124,194 |  |  | $ | (16,860) |  |  | $ | (84,511) |  |  | $ | (4,518) |  |  | $ | 40,550 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,604) |  |  | — |  |  | (6,604) |
Foreign currency translation | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 82 |  |  | 82 |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (559) |  |  | — |  |  | (559) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 219 |  |  | — |  |  | — |  |  | — |  |  | 219 |
Balances, July 31, 2020 | 14,097 |  |  | $ | 141 |  |  | 994 |  |  | $ | 22,104 |  |  | $ | 124,413 |  |  | $ | (16,860) |  |  | $ | (91,674) |  |  | $ | (4,436) |  |  | $ | 33,688 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,590) |  |  | — |  |  | (3,590) |
Foreign currency translation | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11 |  |  | 11 |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (559) |  |  | — |  |  | (559) |
Common stock offerings | 676 |  |  | 7 |  |  | — |  |  | — |  |  | 1,284 |  |  | — |  |  | — |  |  | — |  |  | 1,291 |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 113 |  |  | — |  |  | — |  |  | — |  |  | 113 |
Balances, October 31, 2020 | 14,773 |  |  | $ | 148 |  |  | 994 |  |  | $ | 22,104 |  |  | $ | 125,810 |  |  | $ | (16,860) |  |  | $ | (95,823) |  |  | $ | (4,425) |  |  | $ | 30,954 |

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MIND TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)

| Common Stock |  | Preferred Stock |  |  |  |  |  |  |  | Accumulated Other Comprehensive Loss |  |
| Shares |  | Amount |  | Shares |  | Amount |  | Additional Paid-In Capital |  | Treasury Stock |  | Accumulated Deficit |  |  | Total
Balances, January 31, 2019 | 14,049 |  |  | $ | 140 |  |  | 830 |  |  | $ | 18,330 |  |  | $ | 123,085 |  |  | $ | (16,860) |  |  | $ | (63,973) |  |  | $ | (4,044) |  |  | $ | 56,678 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,415) |  |  | — |  |  | (2,415) |
Foreign currency translation | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (450) |  |  | (450) |
Preferred stock offering | — |  |  | — |  |  | 17 |  |  | 409 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 409 |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (471) |  |  | — |  |  | (471) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 172 |  |  | — |  |  | — |  |  | — |  |  | 172 |
Balances, April 30, 2019 | 14,049 |  |  | $ | 140 |  |  | 847 |  |  | $ | 18,739 |  |  | $ | 123,257 |  |  | $ | (16,860) |  |  | $ | (66,859) |  |  | $ | (4,494) |  |  | $ | 53,923 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,137) |  |  | — |  |  | (3,137) |
Foreign currency translation | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (41) |  |  | (41) |
Equity Compensation | 9 |  |  | 1 |  |  | — |  |  | — |  |  | 25 |  |  | — |  |  | — |  |  | — |  |  | 26 |
Preferred stock offering | — |  |  | — |  |  | 70 |  |  | 1,571 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,571 |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (499) |  |  | — |  |  | (499) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 170 |  |  | — |  |  | — |  |  | — |  |  | 170 |
Balances, July 31, 2019 | 14,058 |  |  | $ | 141 |  |  | 917 |  |  | $ | 20,310 |  |  | $ | 123,452 |  |  | $ | (16,860) |  |  | $ | (70,495) |  |  | $ | (4,535) |  |  | $ | 52,013 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,028) |  |  | — |  |  | (2,028) |
Foreign currency translation | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 115 |  |  | 115 |
Restricted stock issued | 39 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Preferred stock offering | — |  |  | — |  |  | 11 |  |  | 230 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 230 |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (522) |  |  | — |  |  | (522) |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 270 |  |  | — |  |  | — |  |  | — |  |  | 270 |
Balances, October 31, 2019 | 14,097 |  |  | $ | 141 |  |  | 928 |  |  | $ | 20,540 |  |  | 123,722 |  |  | $ | (16,860) |  |  | $ | (73,045) |  |  | $ | (4,420) |  |  | $ | 50,078 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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MIND TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization
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. and the number of shares of common stock and preferred stock authorized for issuance was increased. See Note 16 - Corporate Restructuring, to the condensed consolidated financial statements.
The Company, through its wholly owned subsidiary, Seamap Pte, Ltd. (“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 New Hampshire, Singapore, Malaysia, the United Kingdom and Texas. Prior to July 31, 2020, the Company, together with 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. In February 2019 the Company sold its wholly owned Australian subsidiary Seismic Asia Pacific Pty Ltd (“SAP”). See Note 14 - Sale of Subsidiaries to the condensed consolidated financial statements for more information. All intercompany transactions and balances have been eliminated in consolidation.
During the second quarter of the fiscal year ending January 31, 2021 (“fiscal 2021”), management and the board of directors (the “Board”) of the Company determined to exit the land seismic leasing business (the “Leasing Business”), which comprises essentially all operations of the Equipment Leasing segment. Accordingly, the results of operations for this segment are excluded from the Company’s continuing operations for fiscal 2021 and all comparative periods and presented as discontinued operations in the Company’s condensed consolidated financial statements. See Note 3 - Assets Held for Sale and Discontinued Operations to the condensed consolidated financial statements for further details.
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 losses, has had negative cash from operating activities in the last two fiscal years and may not have access to sources of capital that were available in prior periods. In addition, the COVID-19 pandemic and the decline in oil prices during the first nine months of fiscal 2021 have created substantial doubt and 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 condensed 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.
2. Basis of Presentation
The condensed consolidated balance sheet as of January 31, 2020 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, 2020. 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 October 31, 2020, the results of operations for the three and nine months ended October 31, 2020 and 2019, the cash flows for the nine months ended October 31, 2020 and 2019, and the statement of shareholders’ equity for the three and nine months ended October 31, 2020 and 2019, 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, 2021.
3. Assets Held for Sale and Discontinued Operations
On July 27, 2020, the Board determined to exit the Leasing Business, which comprises essentially all operations of the Equipment Leasing segment. As a result, the assets, excluding cash, and liabilities of the Equipment Leasing segment are considered held for sale and the segment’s operations are reported as discontinued operations as of October 31, 2020 and for all comparative periods presented in these condensed consolidated financial statements. The Company anticipates selling the discontinued operations within twelve months from July 27, 2020 in a single transaction, or multiple transactions, which may involve the sale of legal entities or assets.
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The assets reported as held for sale consist of the following:

| October 31, 2020 |  | January 31, 2020
Current assets of discontinued operations: |  |  |
Accounts receivable, net | 1,963 |  |  | 5,699 |
Inventories, net | 359 |  |  | 605 |
Prepaid expenses and other current assets | 141 |  |  | 227 |
Seismic equipment lease pool and property and equipment, net | 2,977 |  |  | 8,382 |
Total assets of discontinued operations | $ | 5,440 |  |  | $ | 14,913 |

The liabilities reported as held for sale consist of the following:

| October 31, 2020 |  | January 31, 2020
Current liabilities of discontinued operations: |  |  |
Accounts payable | $ | 71 |  |  | $ | 884 |
Deferred revenue | 18 |  |  | 34 |
Accrued expenses and other current liabilities | 1,044 |  |  | 1,886 |
Income taxes payable | — |  |  | (74) |
Total liabilities of discontinued operations | 1,133 |  |  | 2,730 |

The results of operations from discontinued operations for the three and nine months ended October 31, 2020 and 2019, consist of the following:

|  | For the Three Months Ended October 31, |  | For the Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Revenues: |  |  |  |  |  |  |  |
Revenue from discontinued operations |  | $ | 313 |  |  | $ | 2,488 |  |  | $ | 5,731 |  |  | $ | 8,379 |
Cost of sales: |  |  |  |  |  |  |  |
Cost of discontinued operations |  | 263 |  |  | 1,752 |  |  | 4,389 |  |  | 6,266 |
Operating expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 1,146 |  |  | 1,305 |  |  | 4,322 |  |  | 4,195 |
Provision for doubtful accounts |  | — |  |  | — |  |  | 470 |  |  | — |
Depreciation and amortization |  | 43 |  |  | 41 |  |  | 128 |  |  | 136 |
Total operating expenses |  | 1,189 |  |  | 1,346 |  |  | 4,920 |  |  | 4,331 |
Operating loss |  | (1,139) |  |  | (610) |  |  | (3,578) |  |  | (2,218) |
Other income (expenses) |  | (75) |  |  | (8) |  |  | — |  |  | (114) |
Loss on disposal (including $2,745 of cumulative translation loss) |  | — |  |  | — |  |  | (1,859) |  |  | — |
Loss before income taxes |  | (1,214) |  |  | (618) |  |  | (5,437) |  |  | (2,332) |
Provision for income taxes |  | (6) |  |  | (91) |  |  | (706) |  |  | (238) |
Net loss |  | (1,220) |  |  | (709) |  |  | (6,143) |  |  | (2,570) |

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

|  |  |  | For the Nine Months Ended October 31,
|  |  |  |  |  | 2020 |  | 2019
Depreciation and amortization |  |  |  |  |  | $ | 1,771 |  |  | $ | 3,651 |
Gross profit from sale of lease pool equipment |  |  |  |  |  | $ | (1,326) |  |  | $ | (987) |
Provisions for doubtful accounts |  |  |  |  |  | $ | 470 |  |  | $ | — |
Loss on disposal of discontinued operations |  |  |  |  |  | $ | 1,859 |  |  | $ | — |
Sale of used lease pool equipment |  |  |  |  |  | $ | 2,010 |  |  | $ | 1,415 |
Sale of assets held for sale |  |  |  |  |  | $ | 734 |  |  | $ | — |
Purchase of seismic equipment held for lease |  |  |  |  |  | $ | (110) |  |  | $ | (1,938) |

4. New Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance to improve consistent application. This ASU is effective for the annual period beginning after December 15, 2020, including interim periods within that annual period. Certain amendments within this ASU are required to be applied on a retrospective basis for all periods presented; others are to be applied using a modified retrospective approach with a cumulative-effect adjustment to retained earnings, if any, as of the beginning of the first reporting period in which the guidance is adopted; and yet others are to be applied using either basis. All other amendments not specified in the ASU should be applied on a prospective basis. Early adoption is permitted. An entity that elects to early adopt in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company is currently evaluating the new guidance to determine the impact it will have on its condensed consolidated financial statements.
In August 2018, the SEC adopted amendments to simplify certain disclosure requirements, as set forth in Securities Act Release No. 33-10532, Disclosure Update and Simplification, which includes a requirement for entities to present the changes in shareholders’ equity in the interim financial statements in quarterly reports on Form 10-Q. This amendment is effective for all filings made on or after November 5, 2018. Considering the timing of effectiveness of the amendment and proximity to the filing date for most filers’ quarterly reports, the SEC has allowed for a filer’s first presentation of the changes in shareholders’ equity to be included in its Form 10-Q for the quarter that begins after the effective date. The Company adopted the SEC’s amendment to interim disclosures in the first quarter of fiscal 2020 and has presented the changes in shareholders’ equity on an interim basis.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) as modified by subsequently issued ASUs 2018-01, 2018-10, 2018-11 and 2018-20. The Company adopted the standard effective February 1, 2019. We have elected to apply the current period transition approach as introduced by ASU 2018-11 for our transition at February 1, 2019 and we have elected to apply several of the practical expedients in conjunction with accounting policy elections. See Note 7 - Leases to our condensed consolidated financial statements for additional details.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurement by removing, modifying and adding certain disclosures. This ASU is effective for the annual period beginning after December 15, 2019, including interim periods within that annual period. The Company adopted this guidance effective February 1, 2020. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (“Topic 718”): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees except for certain circumstances. The Company adopted this guidance in the first quarter of fiscal 2020. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.
5. Revenue from Contracts with Customers
The following table presents revenue from contracts with customers disaggregated by product line and timing of revenue recognition:
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|  | Three Months Ended October 31, |  | Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Revenue recognized at a point in time: |  | (in thousands)
Seamap |  | $ | 5,196 |  |  | $ | 5,694 |  |  | $ | 11,066 |  |  | $ | 14,648 |
Klein |  | 1,150 |  |  | 2,380 |  |  | 3,152 |  |  | 5,778 |
SAP |  | — |  |  | — |  |  | — |  |  | 101 |
Total revenue recognized at a point in time |  | $ | 6,346 |  |  | $ | 8,074 |  |  | $ | 14,218 |  |  | $ | 20,527 |
Revenue recognized over time: |  |  |
Seamap |  | $ | 195 |  |  | $ | 238 |  |  | $ | 596 |  |  | $ | 512 |
Total revenue recognized over time |  | 195 |  |  | 238 |  |  | 596 |  |  | 512 |
Total revenue from contracts with customers |  | $ | 6,541 |  |  | $ | 8,312 |  |  | $ | 14,814 |  |  | $ | 21,039 |

The revenue from products manufactured and sold by our Seamap and Klein businesses, as well as the revenue from products marketed and sold by our SAP business, is generally recognized at a point in time, or when the customer takes possession of the product, based on the terms and conditions stipulated in our contracts with customers. Our Seamap business also provides Software Maintenance Agreements (“SMA”) to customers who have an active license for software embedded in Seamap products. The revenue from SMA’s is recognized over time, with the total value of the SMA amortized in equal monthly amounts over the life of the contract, which is typically twelve months. The Company sold SAP during the first quarter of fiscal 2020. See Note 14 to our condensed consolidated financial statements for more information.
The following table presents revenue from contracts with customers disaggregated by geography, based on shipping location of our customers:

|  | Three Months Ended October 31, |  | Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (in thousands)
United States |  | $ | 282 |  |  | $ | 1,453 |  |  | $ | 2,068 |  |  | $ | 3,293 |
Europe, Russia & CIS |  | 2,001 |  |  | 3,769 |  |  | 4,981 |  |  | 8,936 |
Middle East & Africa |  | 757 |  |  | 810 |  |  | 1,054 |  |  | 1,359 |
Asia-Pacific |  | 3,342 |  |  | 1,308 |  |  | 5,841 |  |  | 4,417 |
Canada & Latin America |  | 159 |  |  | 972 |  |  | 870 |  |  | 3,034 |
Total revenue from contracts with customers |  | $ | 6,541 |  |  | $ | 8,312 |  |  | $ | 14,814 |  |  | $ | 21,039 |

As of October 31, 2020, and January 31, 2020, contract assets and liabilities consisted of the following:

|  | October 31, 2020 |  | January 31, 2020
Contract Assets: |  | (in thousands)
Unbilled revenue - current |  | $ | 7 |  |  | $ | 13 |
Total unbilled revenue |  | $ | 7 |  |  | $ | 13 |
Contract Liabilities: |  |
Deferred revenue & customer deposits - current |  | $ | 304 |  |  | $ | 220 |
Deferred revenue & customer deposits - non-current |  | — |  |  | 12 |
Total deferred revenue & customer deposits |  | $ | 304 |  |  | $ | 232 |

Considering the products manufactured and sold by the businesses in our Marine Technology Products segment 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 three to six months.
Pursuant to practical expedients and exemptions included in ASU 2014-09, Revenue from Contracts with Customers, sales and transaction-based taxes are excluded from revenue. Also, we do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, we expense costs incurred to obtain contracts when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expenses.
6. Balance Sheet
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| As of October 31, 2020 |  | As of January 31, 2020
| Current |  | Long-term |  | Total |  | Current |  | Long-term |  | Total
Accounts receivable | $ | 6,653 |  |  | $ | — |  |  | $ | 6,653 |  |  | $ | 9,001 |  |  | $ | — |  |  | $ | 9,001 |
Less allowance for doubtful accounts | (1,044) |  |  | — |  |  | (1,044) |  |  | (2,378) |  |  | — |  |  | (2,378) |
Accounts receivable net of allowance for doubtful accounts | $ | 5,609 |  |  | $ | — |  |  | $ | 5,609 |  |  | $ | 6,623 |  |  | $ | — |  |  | $ | 6,623 |

|  | October 31, 2020 |  | January 31, 2020
|  | (in thousands)
Inventories: |  |  |  |
Raw materials |  | $ | 7,019 |  |  | $ | 7,388 |
Finished goods |  | 3,436 |  |  | 3,758 |
Work in progress |  | 2,698 |  |  | 2,720 |
|  | 13,153 |  |  | 13,866 |
Less allowance for obsolescence |  | (1,273) |  |  | (1,210) |
Total inventories, net |  | $ | 11,880 |  |  | $ | 12,656 |

|  | October 31, 2020 |  | January 31, 2020
|  | (in thousands)
Property and equipment: |  |  |  |
Marine seismic service equipment |  | $ | 6,970 |  |  | $ | 8,341 |
Land and buildings |  | 4,358 |  |  | 4,274 |
Furniture and fixtures |  | 9,661 |  |  | 9,364 |
Autos and trucks |  | 490 |  |  | 491 |
|  | 21,479 |  |  | 22,470 |
Accumulated depreciation and amortization |  | (16,525) |  |  | (17,051) |
Total property and equipment, net |  | $ | 4,954 |  |  | $ | 5,419 |

As of January 31, 2020, the Company completed an annual review of long-lived assets noting that the undiscounted future cash flows exceeded their carrying value and no impairment has been recorded. Subsequent to January 31, 2020, there was a significant deterioration in macroeconomic factors and a decline in the market value of the Company’s equity securities which indicated possible impairment of long-lived assets. However, an analysis of the estimated recoverable value of these long-lived assets indicated that there was no impairment.
7. Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) which was modified by subsequently issued ASUs 2018-01, 2018-10, 2018-11 and 2018-20 (collectively, the “New Lease Standard”). The New Lease Standard requires organizations that lease assets ( “lessees”) to recognize the assets and liabilities of the rights and obligations created by leases with terms of more than 12 months. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee remains dependent on its classification as a finance or operating lease. The New Lease Standard also requires additional disclosure of the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The New Lease Standard was effective for financial statements issued for annual periods beginning after December 15, 2018, including interim periods within those fiscal years.
In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”). ASU 2018-11 provided additional relief in the comparative reporting requirements for initial adoption of the New Lease Standard. Prior to ASU 2018-11, a modified retrospective transition was required for financing or operating leases existing at or entered after the beginning of the earliest comparative period presented in the financial statements. ASU 2018-11 provided an additional transition method allowing entities to initially apply the New Lease Standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption.
The Company adopted the New Lease Standard effective February 1, 2019. We elected to apply the current period transition approach as introduced by ASU 2018-11 and we elected a package of transition expedients, which must be elected together, that allowed us to forgo reassessing certain conclusions reached under ASC 840. All expedients in this package were applied together for all leases that commenced before the effective date, February 1, 2019, of the adoption of the New Lease Standard. As a result, in transitioning to the New Lease Standard, for existing leases as of February 1, 2019, we continued to use judgments made under ASC 840 related to embedded leases, lease classification and accounting for initial direct costs. In addition, we have chosen, as an accounting policy election by class of underlying asset, not to separate non-lease components from the associated lease for all our leased asset classes, excluding for Real Estate related leases. As a result, for classes
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of Automobiles, Office Equipment and Manufacturing Equipment, we account for each separate lease component and the non-lease components associated with that lease as a single lease component.
The Company has certain non-cancelable operating lease agreements for office, production and warehouse space in Texas, Hungary, Singapore, Malaysia, Colombia, United Kingdom and Canada.
Adoption of the New Lease Standard during first quarter of fiscal 2020 did have a material impact on our consolidated balance sheet as we recorded right-of-use assets and the corresponding lease liabilities related to our operating leases of approximately $3.0 million, each. The Company determined to treat lease costs with an original maturity of less than one year as short-term lease costs and did not record a right-of-use asset or related lease liability for these leases. The new standard did not have a material impact on our consolidated statements of operations or our statements of cash flows.
Lease expense for the three and nine months ended October 31, 2020 was approximately $313,000 and $828,000, respectively, and was recorded as a component of operating loss. Included in these costs was short-term lease expense of approximately $10,000 and $20,000, respectively, for the three and nine months ended October 31, 2020.
Supplemental balance sheet information related to leases as of October 31, 2020 was as follows (in thousands):

Lease |  |  |  |  |  |  |  | October 31, 2020 |  | January 31, 2020 |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Operating lease assets |  |  |  |  |  |  |  | $ | 1,363 |  |  | $ | 2,300 |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Operating lease liabilities |  |  |  |  |  |  |  | $ | 1,363 |  |  | $ | 2,300 |  |  |
Classification of lease liabilities |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  | $ | 280 |  |  | $ | 1,339 |  |  |
Non-current liabilities |  |  |  |  |  |  |  | 1,083 |  |  | 961 |  |  |
Total Operating lease liabilities |  |  |  |  |  |  |  | $ | 1,363 |  |  | $ | 2,300 |  |  |

Lease-term and discount rate details as of October 31, 2020 were as follows:

Lease term and discount rate |  | October 31, 2020 |  | January 31, 2020
Weighted average remaining lease term (years) |  |  |  |
Operating leases |  | 1.27 |  | 1.76
Weighted average discount rate: |  |  |  |
Operating leases |  | 9.27 | % |  | 9.27 | %

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 (in thousands):

Lease |  | Nine Months Ended October 31, 2020 |  | Nine Months Ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases |  | $ | (828) |  |  | $ | (881) |
Right-of-use assets obtained in exchange for lease liabilities: |  |  |  |
Operating leases |  | $ | 828 |  |  | $ | 592 |

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Maturities of lease liabilities at October 31, 2020 were as follows (in thousands):

|  | October 31, 2020 |  |
2021 |  | $ | 280 |  |  |
2022 |  | 831 |  |  |
2023 |  | 220 |  |  |
2024 |  | 97 |  |  |
2025 |  | 51 |  |  |
Thereafter |  | 20 |  |  |
Total payments under lease agreements |  | $ | 1,499 |  |  |
Less: imputed interest |  | (136) |  |  |
Total lease liabilities |  | $ | 1,363 |  |  |

8. Goodwill and Other Intangible Assets

| Weighted Average Life at 10/31/2020 |  | October 31, 2020 |  | January 31, 2020
Gross Carrying Amount |  | Accumulated Amortization |  | Impairment |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Impairment |  | Net Carrying Amount
Goodwill |  |  | $ | 7,060 |  |  | $ | — |  |  | $ | (7,060) |  |  | $ | — |  |  | $ | 7,060 |  |  | $ | — |  |  | $ | (4,529) |  |  | $ | 2,531 |
Proprietary rights | 7.8 |  | $ | 7,430 |  |  | $ | (3,547) |  |  | $ | — |  |  | $ | 3,883 |  |  | $ | 9,247 |  |  | $ | (4,950) |  |  | $ | — |  |  | $ | 4,297 |
Customer relationships | 1.1 |  | 5,024 |  |  | (4,344) |  |  | — |  |  | 680 |  |  | 5,024 |  |  | (3,831) |  |  | — |  |  | 1,193 |
Patents | 3.8 |  | 2,440 |  |  | (1,463) |  |  | — |  |  | 977 |  |  | 2,440 |  |  | (1,277) |  |  | — |  |  | 1,163 |
Trade name | 5.6 |  | 894 |  |  | (72) |  |  | (760) |  |  | 62 |  |  | 894 |  |  | (63) |  |  | (760) |  |  | 71 |
Developed technology | 5.2 |  | 1,430 |  |  | (691) |  |  | — |  |  | 739 |  |  | 1,430 |  |  | (584) |  |  | — |  |  | 846 |
Other | 3.6 |  | 666 |  |  | (176) |  |  | — |  |  | 490 |  |  | 653 |  |  | (87) |  |  | — |  |  | 566 |
Amortizable intangible assets |  | $ | 17,884 |  |  | $ | (10,293) |  |  | $ | (760) |  |  | $ | 6,831 |  |  | $ | 19,688 |  |  | $ | (10,792) |  |  | $ | (760) |  |  | $ | 8,136 |

On January 31, 2020, the Company completed an annual review of goodwill and other intangible assets. Based on a review of qualitative factors at that time, it was determined it was more likely than not that the fair value of our Seamap reporting unit was greater than its carrying value. Based on a review of qualitative and quantitative factors at that time, it was determined it was more likely than not that the fair value of our Klein reporting unit was less than it's carrying value. Accordingly, we recorded an impairment of approximately $760,000 related to indefinite lived intangible assets in the Klein reporting unit as of January 31, 2020.
Due to the economic impact of the COVID-19 pandemic, the decline in oil prices during the three months ended April 30, 2020 and a decline in the market value of the Company’s equity securities, the Company performed a quantitative review of the Seamap reporting unit and concluded that goodwill had been impaired. As a result, the Company recorded an impairment expense of approximately $2.5 million related to goodwill in the Seamap reporting unit during the quarter ended April 30, 2020. The impairment of goodwill indicated a possible impairment of other intangible assets. Accordingly, the Company completed a quantitative analysis of the other intangible assets as of April 30, 2020, noting that the undiscounted future cash flows exceeded their carrying value and no related impairment was recorded.
Subsequent to April 30, 2020 there have been no substantive indicators of additional impairment.
Aggregate amortization expense was $1.3 million and $1.3 million for the nine months ended October 31, 2020 and 2019, respectively. As of October 31, 2020, future estimated amortization expense related to amortizable intangible assets was estimated to be (in thousands):

For fiscal years ending January 31 |
2021 | $ | 423 |
2022 | 1,232 |
2023 | 1,087 |
2024 | 1,003 |
2025 | 730 |
Thereafter | 2,356 |
Total | $ | 6,831 |

9. Notes Payable
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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 $1.6 million, pursuant to the Small Business Association's Paycheck Protection Program (the “PPP”), a component of the Coronavirus Aid, Relief, and Economic Security Act which was enacted on March 27, 2020.
The Loans, in the form of promissory notes (the “Notes”) dated May 1, 2020 issued by the Borrowers, mature on May 1, 2022 and bear interest at a rate of 1% per annum, payable monthly commencing on November 1, 2020. The Notes stipulate 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 may become obligated to repay all amounts outstanding under the Notes. The Borrowers may prepay the Notes at any time prior to maturity with no prepayment penalties.
Under the terms of the PPP, funds from the Loans may 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 Loan may be forgiven if the funds are used to pay qualifying expenses. The Company believes it has used the proceeds from the Loans to pay qualifying expenses and that a significant portion of the Loans will be forgiven pursuant to the terms of the PPP. The Company has submitted applications for the forgiveness of the Loans but cannot ensure that the Loans will be forgiven, in whole or in part.
10. Income Taxes
For the nine months ended October 31, 2020, the benefit for income taxes from continuing operations was approximately $79,000 on a pre-tax net loss from continuing operations of $10.8 million. For the nine months ended October 31, 2019, the benefit for income taxes from continuing operations was approximately $75,000 on a pre-tax net loss of $5.1 million. The variance between our actual provision and the expected provision based on the U.S. statutory rate is due primarily to recording valuation allowances against the increase in our deferred tax assets in the respective periods, plus the effect of foreign withholding taxes.
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 and state income tax returns are subject to examination by the Internal Revenue Service and state tax authorities for fiscal years ended January 31, 2017 through 2020. In addition, the Company's tax returns filed in foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2015 through 2020.
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 October 31, 2020. Furthermore, the Company has concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial. Therefore, the Company has not recorded a deferred tax liability associated with the undistributed foreign earnings as of October 31, 2020.
For the nine months ended October 31, 2020 and 2019, the Company did not 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 October 31, |  | Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (in thousands) |  | (in thousands)
Basic weighted average common shares outstanding |  | 12,313 |  |  | 12,158 |  |  | 12,223 |  |  | 12,135 |
Stock options |  | 70 |  |  | 44 |  |  | 24 |  |  | 80 |
Unvested restricted stock |  | 17 |  |  | 2 |  |  | 10 |  |  | 2 |
Total weighted average common share equivalents |  | 87 |  |  | 46 |  |  | 34 |  |  | 82 |
Diluted weighted average common shares outstanding |  | 12,400 |  |  | 12,204 |  |  | 12,257 |  |  | 12,217 |

For the three and nine months ended October 31, 2020 and 2019, 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
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On October 7, 2016, the Company entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc. (the “Agent”). On December 18, 2019, the Company and Agent entered into an Amended and Restated equity distribution agreement (the “1 st Equity Distribution Agreement”). Pursuant to the 1 st Equity Distribution Agreement, the Company may sell up to 500,000 shares of 9.00% Series A Cumulative Preferred Stock (the “Preferred Stock”), par value $1.00 per share through an at-the-market (the “1 st ATM”) offering program administered by the Agent. The Co-Chief Executive Officer and Co-President of the Agent is the Non-Executive Chairman of the Board. Under the 1 st Equity Distribution Agreement, the Agent was entitled to compensation of up to 2.0% of the gross proceeds from the sale of Preferred Stock under the 1 st ATM offering program. As of January 31, 2020, we had issued 994,046 shares which represent 100% of the Series A Preferred Stock available for sale through the 1 st Equity Distribution Agreement. For the three and nine months ended October 31, 2019, the Company issued 70,282 and 86,938 shares of Preferred Stock under the 1 st ATM offering program, respectively. Gross proceeds from these sales for the three and nine months ended October 31, 2019 were approximately $1.7 million and $2.1 million, respectively, and the Agent received compensation of approximately $34,000 and $42,000, respectively. The Non-Executive Chairman of the Board received no portion of this compensation.
In September 2020 we entered into a new equity distribution agreement (the “2 nd Equity Distribution Agreement”) with the Agent with economic terms essentially identical to the initial agreement. Pursuant to the 2 nd Equity Distribution Agreement, the Company may sell up to 500,000 shares of Preferred Stock and 5,000,000 shares of $0.01 par value common stock (“Common Stock”) through a new at-the-market (the “2 nd ATM”) offering program. During the three months ended October 31, 2020 the Company sold 676,283 shares of Common Stock under the ATM program, resulting in net proceeds to the Company of approximately $1.3 million. Compensation to the Agent during this period was approximately $30,500, none of which was received by the Non-Executive Chairman of the Board.
13. Equity and Stock-Based Compensation
During the three months ended October 31, 2020, the Board declared quarterly dividends of $0.5625 per share for our Preferred Stock. The Board also approved the grant of 70,000 non-qualified stock options during the third quarter of fiscal 2021 at an average option price of $2.27 per share. Total compensation expense recognized for stock-based awards granted under the Company’s equity incentive plan during the three and nine months ended October 31, 2020 was approximately $113,000 and $562,000, respectively, and during the three and nine months ended October 31, 2019 was approximately $270,000 and $612,000, respectively.
14. Sale of Subsidiaries
In February 2019, the Company completed the sale of its wholly owned Australian subsidiary, Seismic Asia Pacific Pty Ltd. for total contractual proceeds of approximately $660,000 U.S. dollars of which the Company received approximately $240,000 in cash at closing and an unsecured, non-interest bearing two year note receivable in the amount of $420,000. The agreement also included a working capital adjustment of approximately $114,000 payable to the Company which was received in August of 2019. The note receivable was recorded as other current assets as of October 31, 2020 and as other non-current assets as of January 31, 2020. During the three months ended October 31, 2020 the Company received a prepayment of $125,000 related to the note.
15. Segment Reporting
With the designation of the Equipment Leasing segment as discontinued operations as of July 31, 2020, the Company operates in one segment, Marine Technology Products. The Marine Technology Products segment is engaged in the design, manufacture and sale of state-of-the-art seismic and offshore telemetry systems. Manufacturing, support and sales facilities are maintained in the United Kingdom, Singapore, Malaysia and the states of New Hampshire and Texas.
16. Corporate Restructuring
On August 3, 2020, the Company, formerly Mitcham Industries, Inc., completed the reincorporation from the State of Texas to the State of Delaware, including a name change to MIND Technology, Inc. The change in legal domicile and company name were approved by the affirmative vote of the holders of more than two-thirds of the votes of the Company’s Common Stock and Preferred Stock, voting separately, at the Annual Meeting of Shareholders held on July 27, 2020. As part of the reincorporation merger, the shareholders approved an increase in the number of authorized shares of capital stock from 21,000,000 shares to 42,000,000 shares, consisting of (i) 40,000,000 shares of Common Stock (up from 20,000,000 shares), and (ii) 2,000,000 shares of Preferred Stock(up from 1,000,000 shares).
Pursuant to the terms of the reincorporation merger, each outstanding share of Common Stock and each share of Preferred Stock of Mitcham Industries, Inc., the Texas corporation, automatically converted into one share of Common Stock and one share of Series A Preferred Stock, respectively, of MIND Technology, Inc., the Delaware corporation. Stockholders who hold physical stock certificates are not required to, but may, exchange stock certificates as a result of the reincorporation. The Company’s Common Stock and Preferred Stock continued to trade on the NASDAQ Global Select Market under their ticker symbols, “MIND” and “MINDP”, respectively. The Company’s Common Stock was assigned a new CUSIP number of 602566 101 and the Company’s Preferred Stock was assigned a new CUSIP number of 602566 200.
No changes have been made to the Board, management, business or operations of the Company as a result of the reincorporation. The Company’s corporate headquarters remains in Texas.
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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “expect,” “may,” “will,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts of our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
•risks associated with our manufacturing operations including availability and reliability of materials and components as well the reliability of the products that we manufacture and sale;
•loss of significant customers;
•increased competition;
•loss of key suppliers;
•intellectual property claims by third parties;
•the effect of uncertainty in financial markets on our customers’ and our ability to obtain financing;
•our ability to successfully execute strategic initiatives to grow our business;
•local and global impacts of the COVID-19 virus, including effects of responses of governmental authorities and companies to reduce the spread of COVID-19, such as shutdowns, travel restrictions and work-from-home mandates;
•uncertainties regarding our foreign operations, including political, economic, currency environmental regulation and export compliance risks;
•seasonal fluctuations that can adversely affect our business;
•fluctuations due to circumstances beyond our control or that of our customers;
•defaults by customers on amounts due us;
•possible further impairment of our long-lived assets due to technological obsolescence or changes in anticipated cash flow generated from those assets;
•inability to obtain funding or to obtain funding under acceptable terms; and
•demand for seismic data is not assured and depends on the level of spending by oil and gas companies for exploration, production and development activities, thereby potentially negatively impacted the value of our assets held for sale.
For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see (1) Part II, “Item 1A. Risk Factors” of this Form 10-Q, (2) Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, (3) Part II,“Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2020 and (4) the Company’s other filings filed with the SEC from time to time.
There may be other factors of which the Company is not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement after the date they are made, whether as the result of new information, future events or otherwise, except as required by law. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
MIND Technology, Inc., a Delaware corporation, formerly Mitcham Industries, Inc., a Texas corporation, was incorporated in 1987. Effective August 3, 2020 we effectuated a reincorporation to the state of Delaware, name change to MIND Technology, Inc. and increase in the number of shares of Common Stock and Preferred Stock authorized for issuance. See Note 16 - “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 of Seamap equipment and sales of Klein equipment. This segment operates from locations near Bristol, United Kingdom, Salem, New Hampshire, Huntsville, Texas, Johor, Malaysia and in Singapore. During February 2019, the Company completed the sale of its Australian operations in Brisbane, Australia. See Note 14 - “Sale of Subsidiaries” to our condensed consolidated financial statements for additional details.
The discontinued operations of the Equipment Leasing segment includes all leasing activity, sales of lease pool equipment and certain other equipment sales and services related to those operations. This business had been conducted from our locations in Huntsville, Texas; Calgary, Canada; Bogota, Colombia; and Budapest, Hungary. This included the operations of our subsidiaries MCL, MEL and our branch in Colombia.
Management believes that the performance of our Marine Technology Products segment is indicated by revenues from equipment sales and by gross profit from those sales. Management monitors EBITDA and Adjusted EBITDA, both as defined and reconciled to the most directly comparable financial measures calculated and presented in accordance with United States generally accepted accounting principles (“GAAP”), in the following table, as key indicators of our overall performance and liquidity.

|  | For the Three Months Ended October 31, |  | For the Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Reconciliation of Net loss from Continuing Operations to EBITDA and Adjusted EBITDA |  |  |  |  |  |  |  |
Net loss from Continuing Operations |  | $ | (2,370) |  |  | $ | (1,319) |  |  | $ | (10,693) |  |  | $ | (5,009) |
Depreciation and amortization |  | 662 |  |  | 639 |  |  | 2,092 |  |  | 1,914 |
Provision (benefit) for income taxes |  | 109 |  |  | (31) |  |  | (79) |  |  | (75) |
EBITDA from continuing operations (1) |  | (1,599) |  |  | (711) |  |  | (8,680) |  |  | (3,170) |
Non-cash foreign exchange losses |  | 35 |  |  | 18 |  |  | 79 |  |  | 86 |
Stock-based compensation |  | 113 |  |  | 270 |  |  | 562 |  |  | 612 |
Impairment of intangible assets |  | — |  |  | — |  |  | 2,531 |  |  | — |
Adjusted EBITDA from continuing operations (1) |  | $ | (1,451) |  |  | $ | (423) |  |  | $ | (5,508) |  |  | $ | (2,472) |
Reconciliation of Net Cash Used in Operating Activities to EBITDA |  |  |  |  |  |  |  |
Net cash used in operating activities |  | $ | (2,237) |  |  | $ | (745) |  |  | $ | (4,803) |  |  | $ | (4,247) |
Stock-based compensation |  | (113) |  |  | (270) |  |  | (562) |  |  | (612) |
Provision for inventory obsolescence |  | (22) |  |  | (23) |  |  | (67) |  |  | (23) |
Changes in accounts receivable (current and long-term) |  | 1,003 |  |  | 2,396 |  |  | (2,178) |  |  | 916 |
Interest paid |  | 11 |  |  | 13 |  |  | 34 |  |  | 40 |
Taxes paid, net of refunds |  | (27) |  |  | 143 |  |  | 219 |  |  | 325 |
Gross profit from sale of other equipment |  | 303 |  |  | — |  |  | 303 |  |  | — |
Changes in inventory |  | (1,462) |  |  | 494 |  |  | (762) |  |  | 3,162 |
Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue |  | 685 |  |  | (1,051) |  |  | 1,441 |  |  | (1,935) |
Impairment of intangible assets |  | — |  |  | — |  |  | (2,531) |  |  | — |
Changes in prepaid expenses and other current and long-term assets |  | (162) |  |  | (240) |  |  | (631) |  |  | (145) |
Foreign exchange (gains) losses, net |  | — |  |  | (241) |  |  | — |  |  | (230) |
Reserve against non-current prepaid income taxes |  | — |  |  | 137 |  |  | — |  |  | — |
Other |  | 422 |  |  | (1,324) |  |  | 857 |  |  | (421) |
EBITDA from continuing operations (1) |  | $ | (1,599) |  |  | $ | (711) |  |  | $ | (8,680) |  |  | $ | (3,170) |

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(1)EBITDA is defined as net income before (a) interest income and interest expense, (b) provision for (or benefit from) income taxes and (c) depreciation and amortization. Adjusted EBITDA excludes non-cash foreign exchange gains and losses, non-cash costs of lease pool equipment sales, impairment of intangible assets, stock-based compensation and other non-cash tax related items. We consider EBITDA and Adjusted EBITDA to be important indicators for the performance of our business, but not measures of performance or liquidity calculated in accordance with GAAP. These non-GAAP financial measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, we have included these non-GAAP financial measures because management utilizes this information for assessing our performance and liquidity, and as indicators of our ability to make capital expenditures and finance working capital requirements. We believe that EBITDA and Adjusted EBITDA are measurements that are commonly used by analysts and some investors in evaluating the performance and liquidity of companies such as us. In particular, we believe that it is useful to our analysts and investors to understand this relationship because it excludes transactions not related to our core cash operating activities. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP and should not be considered in isolation or as alternatives to cash flow from operating activities or as alternatives to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. In evaluating our performance as measured by EBITDA, management recognizes and considers the limitations of this measurement. EBITDA and Adjusted EBITDA do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of the measurements that management utilizes. Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do and EBITDA and Adjusted EBITDA may not be comparable with similarly titled measures reported by other companies.
Within our Marine Technology Products segment, we design, manufacture and sell a variety of products used primarily in oceanographic, hydrographic, defense, seismic and maritime security industries. Seamap’s primary products include (i) the GunLink seismic source acquisition and control systems, which provide marine operators more precise control of exploration tools; (ii) the BuoyLink RGPS tracking system used to provide precise positioning of seismic sources and streamers (marine recording channels that are towed behind a vessel) and (iii) SeaLink marine sensors and solid streamer systems (collectively, the “SeaLink” product line or “towed streamer products”). These towed streamer products are primarily designed for three-dimensional, high-resolution marine surveys in hydrographic industry applications. Klein designs, manufactures and sells side scan sonar and water-side security systems to commercial, governmental and military customers throughout the world.
Our discontinued operations consist primarily of leasing seismic data acquisition equipment primarily to seismic data acquisition companies conducting land surveys worldwide. We provided short-term leasing, typically for a term of less than one year, of seismic equipment to meet a customer’s requirements. From time to time, we sell lease pool equipment. These sales are transacted when we have equipment for which we do not have near term needs in our leasing business or which is otherwise considered excess. Additionally, when equipment that has been leased to a customer is lost or destroyed, the customer is charged for such equipment at amounts specified in the underlying lease agreement.
Our results of operations can experience fluctuations in activity levels due to a number of factors outside of our control. These factors include budgetary or financial concerns, difficulties in obtaining licenses or permits, security problems, labor or political issues, inclement weather, and global pandemics. See Item 1A-- “Risk Factors.”
Business Outlook
The COVID-19 pandemic has created significant uncertainty in the global economy, which could have an adverse effect on the Company’s business, financial position, results of operations and liquidity. The time frame for which disruptions related to the pandemic will continue is uncertain, as is the magnitude of any adverse impacts. We were required to temporarily shut-down our facilities in Malaysia and Singapore on March 17 and April 7, respectively. The Malaysia facility was reopened on April 21, 2020 with approximately 50% of its normal staff and resumed operations with 100% of its employees on May 4, 2020. In Singapore, we were able to continue limited shipping and receiving operations during the shutdown and were able to resume manufacturing operations on June 1, 2020.
Our other facilities have been allowed to operate, although at reduced efficiencies as certain employees have worked remotely. Furthermore, travel restrictions resulting from the COVID-19 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 will be temporary, but there can be no assurance of that.
Additionally, oil prices declined sharply during the first quarter of fiscal 2021 in response to the economic effects of the COVID-19 pandemic and the announcement of Saudi Arabia’s abandonment of output restraints. Oil prices have partially recovered recently, but the decline could have an adverse effect on our customers in the energy industry, which could in turn cause them to cancel or delay projects and orders with us and could impair their ability to make payments to us. However, to date we have had no significant orders cancelled and continue to respond to inquiries from customers in all market segments, including energy related. Many of our marine customers have recently indicated increases in backlog, which we believe is a positive indication of a recovery later in fiscal 2021 and beyond. The general economic environment concerning the energy industry could also impact our ability to realize value from our discontinued land seismic leasing operations.
In recent months, we have continued to experience significant inquiries and bid activity and have conducted a number of demonstrations for various customers, including the U.S. Navy. However, we believe many customers have delayed purchase commitments due to the uncertainty in the global economy. Accordingly, we have not experienced the number of firm orders that we would have normally expected
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from the current level of inquiries and bid activity. Recently we have received orders for new seismic source controllers or upgrades of systems that we previously sold. 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 increase in coming months, although there can be no assurance of this. As of October 31, 2020, our backlog of firm orders for our Marine Technology Products segment was approximately $8.2 million, as compared to approximately $7.6 million as of July 31, 2020 and $8.9 million as of January 31, 2020. We expect a significant number of these orders to be completed within fiscal 2021 and therefore expect revenues from continuing operation in the fourth quarter of fiscal 2021 to exceed those of the third quarter of this year. 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-X”. We believe this to be revolutionary sonar technology that will significantly expand the opportunities available to us. We have received and delivered orders related to this new technology and continue to respond to orders and inquiries related to this technology, including some for military related applications. While the MA-X technology has not had a material impact on our results of operations to date, we believe this technology will result in significant new opportunities for us. Also, in fiscal 2020, we received an order from a manufacturer of unmanned underwater vehicles (“UUV’s”) for a MA-X related product to be installed on one of their UUV’s. This request relates to a potentially significant program for the U.S. Navy. While this specific order may not have a material impact on our results of operations, we believe this, and similar opportunities could have a material impact on our operations. During the current fiscal year we also introduced technology based on MA-X specifically focused on the rapidly 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.
We also are pursuing a number of initiatives to further expand our product offerings. These initiatives include new internally developed technology, introduction of new products based on our existing technology, technology obtained through partnering arrangements with others and a combination of all of these. There can be no assurance that any of these initiatives will ultimately have a material impact on our financial position or results of operations. Certain of the business opportunities that we are pursuing are with military or other governmental organizations. The sales cycle for these projects can be quite long and can be impacted by a number of factors, including the level of competition and budget limitations. Therefore, the timing of contract awards is often difficult to predict. However, once awarded, programs of this type can extend for a number of years. In addition, we are pursuing a number of opportunities related to activity within the marine seismic industry. Certain projects, for which we anticipate providing equipment, including source controllers, have not progressed as rapidly as we had anticipated and had been indicated by our customers. Based on information from our customers, we believe these projects remain viable and will proceed. However, the timing of orders and delivery of products remain uncertain.
We believe there are certain developments within the marine technology industry which 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.
•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 systems specifically for unmanned vehicles, including integration of our MA-X technology.
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•Development of SAS sonar systems in cooperation with a major European defense contractor.
•Application of our SeaLink solid streamer technology to passive sonar arrays for use in maritime security applications, such as anti-submarine warfare.
In response to the effects of the COVID-19 pandemic and the current economic environment we have taken steps to reduce expenses including the layoff or furloughing of certain employees and contractors and the deferral of other expenditures. Should the effects of the pandemic and low commodity prices continue, we may take further steps to reduce costs. We believe the majority of our costs are variable in nature, such as raw materials and labor related costs. Accordingly, we believe we can reduce such costs commensurate with any declines in our business.
During fiscal 2021, the Company received a Singapore government grant pursuant to its Job Support Scheme. The primary objective of the Job Support Scheme is to assist companies in retaining local employees during the COVID-19 pandemic. Similar to the Singapore government grant our operations in the United Kingdom were also recipients of the government backed Job Retention Scheme. Proceeds from the Job Support Scheme and the Job Retention Scheme were approximately $372,000 and approximately $119,000, respectively. Continued use of these government job schemes will be dependent on availability and our ability to qualify for the assistance.
Our revenues and results of operations have not been materially impacted by inflation or changing prices in the past three fiscal years, except as described above.
Results of Continuing Operations
Revenues for the three months ended October 31, 2020 were approximately $6.6 million compared to approximately $8.1 million for the three months ended October 31, 2019. For the nine months ended October 31, 2020, revenues were approximately $14.8 million, compared to approximately $21.0 million for the nine months ended October 31, 2019. We believe the decrease in fiscal 2021 periods is due in large part to restrictions on commerce as a result of the global pandemic. For the three months ended October 31, 2020, we generated an operating loss of approximately $2.3 million, compared to an operating loss of approximately $1.3 million for the three months ended October 31, 2019. For the nine months ended October 31, 2020, we generated an operating loss of approximately $10.8 million, compared to an operating loss of approximately $5.2 million for the nine months ended October 31, 2019. The increase in operating loss during the three and nine month periods ended October 31, 2020 is primarily attributable to lower revenue contribution and an increase in research and development costs and in the nine-month period, goodwill impairment related to our Seamap reporting unit. 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 October 31, |  | Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (in thousands) |  | (in thousands)
Revenues: |  |  |  |  |  |  |  |
Seamap |  | $ | 5,400 |  |  | $ | 5,801 |  |  | $ | 11,693 |  |  | $ | 15,198 |
Klein |  | 1,150 |  |  | 2,381 |  |  | 3,394 |  |  | 5,783 |
SAP |  | — |  |  | — |  |  | — |  |  | 101 |
Intra-segment sales |  | — |  |  | (39) |  |  | (242) |  |  | (43) |
|  | 6,550 |  |  | 8,143 |  |  | 14,845 |  |  | 21,039 |
Cost of sales: |  |  |  |  |  |  |  |
Seamap |  | 3,179 |  |  | 3,291 |  |  | 7,354 |  |  | 8,148 |
Klein |  | 1,097 |  |  | 1,576 |  |  | 2,958 |  |  | 4,278 |
SAP |  | — |  |  | — |  |  | — |  |  | 95 |
Intra-segment sales |  | — |  |  | (39) |  |  | (242) |  |  | (43) |
|  | 4,276 |  |  | 4,828 |  |  | 10,070 |  |  | 12,478 |
Gross profit |  | $ | 2,274 |  |  | $ | 3,315 |  |  | $ | 4,775 |  |  | $ | 8,561 |
Gross profit margin |  | 35 | % |  | 41 | % |  | 32 | % |  | 41 | %

A significant portion of Seamap’s sales consists of large discrete orders, the timing of which is dictated by our customers. This timing generally relates to the availability of a vessel in port so that our products can be installed. Accordingly, there can be significant variation in sales from one period to another, which does not necessarily indicate a fundamental change in demand for these products. We believe the decline in Seamap revenues is due in large part to temporary delays caused by the COVID-19 pandemic, including the temporary shutdown of our production facilities. As discussed in previous periods, a particular order of approximately $1.8 million was delayed from the first quarter of fiscal 2021 as due to travel restrictions, the customer was unable to arrange shipment and take delivery of the equipment. This order was shipped and recognized in the third quarter of fiscal 2021. The gross profit and gross profit margins generated by sales of Seamap products were approximately $2.2 million and 41% in the third quarter of fiscal 2021 and approximately $2.5 million and 43% in the third quarter of fiscal 2020. The decrease in gross profit margins between the periods is due primarily to lower manufacturing activity, which resulted in lower overhead absorption during the period.
Revenue from the sale of Klein products was approximately $1.2 million for the third quarter of fiscal 2021 versus approximately $2.4 million in the prior year period. We believe the decline in revenue is partially due to the effects of the COVID-19 pandemic. Gross profit was approximately $53,000 and $805,000 for the third quarter of fiscal 2021 and 2020, respectively. The decline in gross profit margin in the third quarter of fiscal 2021 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 October 31, 2020 decreased to approximately $3.0 million from approximately $3.4 million for the three months ended October 31, 2019. General and administrative expenses for the nine months ended October 31, 2020 decreased approximately $1.6 million to $8.9 million, compared to $10.5 million for the nine months ended October 31, 2019. The decrease in general and administrative expenses is primarily due to reduced travel and entertainment expense as a result of restrictions due
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to the global pandemic, reductions in salary and rent costs due to the offset of government subsidies received in several international locations and the impact of various strategic restructuring activities implemented in fiscal 2020.
In recognition of the need to control costs in the current environment, effective May 1, 2020, Robert P. Capps, Co-Chief Executive Officer, Executive Vice President of Finance and Chief Financial Officer, and Guy Malden, Co-Chief Executive Officer and Executive Vice President of Marine Systems, both agreed to a temporary 20% reduction in base salary. In addition, our Board has agreed to a temporary 25% reduction in cash compensation.
Research and development costs in the third quarter and first nine months of fiscal 2021 increased to approximately $912,000 and $2.1 million, respectively, compared to approximately $629,000 and $1.4 million in the three and nine months ended October 31, 2019, respectively. The increase in these costs reflects activity in the strategic initiatives noted above, including the deployment of a passive array test system during the third quarter of fiscal 2021.
Depreciation and amortization expenses include depreciation of equipment, furniture and fixtures and the amortization of intangible assets. These costs were approximately $662,000 and $2.1 million in the three and nine month periods ended October 31, 2020, respectively, as compared to approximately $604,000 and $1.8 million in the three and nine month periods ended October 31, 2019, respectively. The higher depreciation and amortization expense in the three and nine month periods of fiscal 2021 is due primarily to asset additions associated with the start-up of our Malaysian manufacturing facility and the amortization of intangible assets related to a recent software upgrade.
Due to deterioration in macroeconomic factors and a decline in the market value of our equity securities subsequent to January 31, 2020, we concluded that goodwill was impaired and recorded an impairment charge of approximately $2.5 million in the first quarter of fiscal 2021. The goodwill impairment indicated that there was potential impairment of our other intangible and long-lived assets. Accordingly, we performed an analysis of the undiscounted future cash flow from those assets and concluded that there was no impairment. Subsequent to April 30, 2020 there have been no substantive indicators of additional impairment.
Provision for Income Taxes
For the three months ended October 31, 2020, we reported tax expense of approximately $109,000, and for the three months ended October 31, 2019 we reported a tax benefit of approximately $31,000. For the nine month periods ended October 31, 2020 and October 31, 2019 we reported a tax benefit of approximately $79,000 and $75,000, respectively. Our recorded tax expense and benefit in the three and nine-month periods ended October 31, 2020 and 2019, are less than the expense or benefit 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, including impairment expense, and recording valuation allowances against increases in our deferred tax assets.
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Results of Discontinued Operations
Revenues and cost of sales from our Equipment Leasing segment were comprised of the following:

|  | For the Three Months Ended October 31, |  | For the Nine Months Ended October 31,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Revenues: |  |  |  |  |  |  |  |
Equipment leasing |  | 313 |  |  | 2,202 |  |  | 3,510 |  |  | 6,757 |
Lease pool equipment sales |  | — |  |  | 220 |  |  | 2,010 |  |  | 1,095 |
Other equipment sales |  | — |  |  | 66 |  |  | 211 |  |  | 527 |
|  | 313 |  |  | 2,488 |  |  | 5,731 |  |  | 8,379 |
Cost of sales: |  |  |  |  |  |  |  |
Direct costs-equipment leasing |  | 263 |  |  | 568 |  |  | 1,870 |  |  | 2,221 |
Lease pool depreciation |  | — |  |  | 1,091 |  |  | 1,698 |  |  | 3,503 |
Cost of lease pool equipment sales |  | — |  |  | 16 |  |  | 684 |  |  | 109 |
Cost of other equipment sales |  | — |  |  | 77 |  |  | 137 |  |  | 433 |
|  | 263 |  |  | 1,752 |  |  | 4,389 |  |  | 6,266 |
Gross profit (loss) |  | 50 |  |  | 736 |  |  | 1,342 |  |  | 2,113 |
Operating expenses: |  |  |  |  |  |  |  |
Selling, general and administrative |  | 1,146 |  |  | 1,305 |  |  | 4,322 |  |  | 4,195 |
Provision for doubtful accounts |  | — |  |  | — |  |  | 470 |  |  | — |
Depreciation and amortization |  | 43 |  |  | 41 |  |  | 128 |  |  | 136 |
Total operating expenses |  | 1,189 |  |  | 1,346 |  |  | 4,920 |  |  | 4,331 |
Operating loss |  | (1,139) |  |  | (610) |  |  | (3,578) |  |  | (2,218) |
Other income (expenses) |  | (75) |  |  | (8) |  |  | — |  |  | (114) |
Loss on disposal (including $2,745 of cumulative translation loss) |  | — |  |  | — |  |  | (1,859) |  |  | — |
Loss before income taxes |  | (1,214) |  |  | (618) |  |  | (5,437) |  |  | (2,332) |
Provision for income taxes |  | (6) |  |  | (91) |  |  | (706) |  |  | (238) |
Net loss |  | (1,220) |  |  | (709) |  |  | (6,143) |  |  | (2,570) |

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 third quarter of fiscal 2021 decreased approximately 87% to $313,000 compared to $2.5 million for the third quarter of fiscal 2020 and decreased approximately $2.6 million, or 32% in the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020. The reduction in revenue is due to lower Equipment Leasing activity, primarily we believe as a result of the global pandemic, the decision to exit the Leasing Business and the change in treatment of lease pool sales as discussed above.
Direct costs related to Equipment Leasing dropped to approximately $263,000 for the third quarter of fiscal year 2021 from approximately $568,000 reported in the same period for 2019. A significant portion of direct costs are generally fixed and therefore do not fluctuate with the level of leasing revenue. However, these costs also include sub-lease payments to certain OEM’s under revenue sharing arrangements which do fluctuate with the level of leasing revenue. For the three month period ended October 31, 2020 lease pool depreciation decreased approximately $1.1 million from the three months ended October 31, 2021 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 in the three months ended October 31, 2020 as compared to the same period one year ago due to cost reduction efforts and a decline in activity. These costs increased during the nine months ended October 31, 2020 as compared to the prior year period. The increase in the nine-month period was due primarily to accrued severance and other costs related to the decision to exit the Leasing Business
The loss on disposal of approximately $1.9 million reflects the amount by which the unadjusted carrying value of the net assets of the Leasing Business exceed the estimated proceeds of the planned sale of the business. The unadjusted carrying value of the Leasing Business includes approximately $2.7 million of cumulative translation adjustment which has historically been recorded in Accumulated Other Comprehensive Loss, a component of equity.
Our provision for income taxes for the three and nine months ended October 31, 2020 are approximately $6,000 and $706,000, respectively, on loss before income tax of approximately $1.2 million and $5.4 million for the three and nine month periods, respectively. Our provision varies from the expected provision based on the U.S. statutory rate due primarily to the effect of foreign withholding taxes, and because we have recorded valuation allowances against the increase in our deferred tax assets in the respective periods.
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Liquidity and Capital Resources
As discussed above, the COVID-19 pandemic and the decline in oil prices has created significant uncertainty in the global economy, which could have an adverse effect on our business, financial position, results of operations and liquidity. The period of time for which pandemic related disruptions will continue remains uncertain, as does the magnitude of any adverse impacts. We believe that any negative impacts will be temporary, but there can be no assurance of that.
The Company has a history of losses, has had negative cash from operating activities in each of the last two fiscal years and its cash balance as of October 31, 2020 is lower than at January 31, 2020. For the past three years, the Company has generated significant cash from the sale of preferred stock pursuant to the 1 st ATM program. The 1 st ATM program has been completed and no further preferred shares can be sold pursuant to it. However, the Company has established a 2 nd ATM program under which we may sell up to 500,000 shares of Preferred Stock and 5,000,000 shares of Common Stock.
Due to the above factors, there is substantial doubt about the Company’s ability to meet its obligations as they arise over the next twelve months. However, management believes there are compensating factors and actions that can be taken to address these uncertainties, including the following:
•The Company has no funded debt or other outstanding obligations, outside of normal trade obligations.
•The Company has no obligations or agreements containing “maintenance type” financial covenants.
•The Company has working capital of approximately $20.7 million as of October 31, 2020, including cash of approximately $2.7 million, which is a decrease from approximately $3.1 million of cash at January 31, 2020.
•Should revenues be less than projected, the Company believes it is able, and has plans, to reduce costs proportionately in order to maintain positive cash flow. Certain cost reduction measures have been implemented, the effects of which are expected to be reflected in future periods.
•The majority of the Company’s costs are variable in nature, such as raw materials and personnel related costs. The Company has terminated or furloughed certain employees and contractors.
•Despite the temporary suspension of operations in Malaysia and Singapore earlier this year, operations have continued uninterrupted at other locations. Certain of these operations have been deemed “essential businesses” by authorities. However, there can be no assurance that further suspensions will not occur in the future.
•The Company has a backlog of orders of approximately $8.2 million as of October 31, 2020.
•The Company received approximately $1.6 million in U.S. government sponsored loans pursuant to the PPP and has received lesser amounts of government grants in several foreign jurisdictions. The PPP loans are in the form of two-year promissory notes. The Company has submitted an application for the forgiveness of the loans and management believes a significant portion of the $1.6 million PPP loan will be forgiven under the terms of the PPP.
•Management expects to generate cash from the sale of the Leasing Business or the related underlying assets and has done so in recent periods.
•The Company has declared and paid the quarterly dividend on its Preferred Stock for the quarter ending October 31, 2020, but such quarterly dividends could be suspended in the future.
•In July 2020, the Company received shareholder approval and effective August 2020 increased the authorized number shares of common and preferred shares available for issuance. During the third quarter of fiscal 2021 we initiated the 2 nd ATM program providing for the sale of up to 500,000 shares of Preferred Stock and 5,000,000 shares of Common Stock. During the third quarter of fiscal 2021, we sold and received net proceeds of approximately $1.3 million from the sale of Common Stock pursuant to the 2 nd ATM program.
•Based on publicized transactions and preliminary discussions with potential funding sources, management believes that other sources of debt and equity financing are available should the need arise.
Our principal sources of liquidity and capital over the past three fiscal years have been proceeds from issuances of preferred stock and from the sale of lease pool equipment.
Our Preferred Stock has been issued in the June 2016 offering, as consideration to MHI and in the 1 st ATM program. The Preferred Stock (i) allows for redemption on at our option (even in the event of a change of control), (ii) does not grant holders with voting control of our Board of Directors, and (iii) provides holders with a conversion option (into common stock) only upon a change of control which, upon conversion, would be subject to a limit on the maximum number of shares of common stock to be issued. Through January 31, 2020, we have issued 994,046 shares of our Preferred Stock. The 994,046 shares represent 100% of the Preferred Stock available for sale under the 1 st ATM program. Under our Amended and Restated Certificate of Incorporation, we have 2,000,000 shares of preferred stock and 40,000,000 shares of common stock authorized which we believe provides capacity for subsequent issues of common or preferred stock. During the three months ended October 31, 2020 the Company sold 676,283 shares of Common Stock under the 2 nd ATM program, resulting in net proceeds to the Company of approximately $1.3 million.
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The following table sets forth selected historical information regarding cash flows from our Consolidated Statements of Cash Flows:

|  | For the Nine Months Ended October 31,
|  | 2020 |  | 2019
|  | (in thousands)
Net cash used in operating activities |  | $ | (4,803) |  |  | $ | (4,247) |
Net cash provided by (used in) investing activities |  | 2,570 |  |  | (1,178) |
Net cash provided by financing activities |  | 1,780 |  |  | 744 |
Effect of changes in foreign exchange rates on cash and cash equivalents |  | (117) |  |  | (69) |
Net decrease in cash and cash equivalents |  | $ | (570) |  |  | $ | (4,750) |

As of October 31, 2020, we had working capital of approximately $20.7 million, including cash and cash equivalents and restricted cash of approximately $2.7 million, as compared to working capital of approximately $31.0 million, including cash and cash equivalents and restricted cash of approximately $3.2 million, at January 31, 2020. Our working capital decreased during the first nine months of fiscal 2021 as compared to January 31, 2020 due primarily to a decrease in cash and cash equivalents, reductions in accounts receivable and an increase in accounts payable.
Cash Flows from Operating Activities. Net cash used in operating activities was approximately $4.8 million in the first nine months of fiscal 2021 as compared to approximately $4.2 million in the first nine months of fiscal 2020. The decrease between the two periods resulted primarily from changes in working capital items such as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities.
Cash Flows from Investing Activities. Cash provided from investing activities increased during the first nine months of fiscal 2021 compared to the same period in the prior year. The increase is primarily due to proceeds from sale the of lease pool equipment and the sale of assets held for sale.
In the first nine months of fiscal 2021 proceeds from the sale of lease pool equipment and assets held for sale totaled approximately $2.7 million compared to approximately $1.4 million in the first nine months of fiscal 2020. Due to the decision to exit the Leasing Business we are currently seeking to sell all of the remaining equipment from our lease pool. However, there is no guarantee additional sales of lease pool equipment will occur. Accordingly, cash flow from the sale of lease pool equipment is unpredictable. Proceeds from any additional sales of lease pool equipment will be deployed in other areas of our business or used for general corporate purposes..
Cash Flows from Financing Activities. Net cash provided by financing activities in the first nine months of fiscal 2021 consisted of approximately $1.6 million of proceeds from the PPP Loans, approximately $1.3 million of proceeds from sales of Common Stock, offset by approximately $1.1 million of preferred stock dividend payments, as compared to approximately $2.2 million of proceeds from sales of Preferred Stock, offset by approximately $1.4 million of preferred stock dividend payments in the prior year period. We believe that a significant portion of the PPP Loans may be forgiven, and we have submitted applications for the forgiveness of the Loans. However, there can be no assurance as to the amount of the Loans that will be forgiven, if any. As of October 31, 2020, there were 994,046 shares of Preferred Stock outstanding, which represents 100% of the Preferred Stock available for sale through our 1st ATM program. Based on the Preferred Stock outstanding at October 31, 2020, annual dividend requirements are approximately $2.2 million. In August 2020 the Company effectuated a shareholder approved reincorporation to the state of Delaware, name change to MIND Technology, Inc. and increase in the number of shares of common stock and preferred stock authorized for issuance. See Note 16 - “Corporate Restructuring” to our condensed consolidated financial statements for additional details. The Company may issue up to 40,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock. Management believes this provides significant additional financing flexibility, including the capacity for subsequent issues of Common Stock or Preferred Stock. In September 2020 we entered the 2nd Equity Distribution Agreement with the Agent with economic terms essentially identical to the initial agreement. Pursuant to the 2nd Equity Distribution Agreement, the Company may sell up to 500,000 shares of Preferred Stock and 5,000,000 shares of Common Stock through the 2nd ATM program. During the three months ended October 31, 2020 the Company sold 676,283 shares of Commons Stock under the 2nd ATM program, resulting in net proceeds to the Company of approximately $1.3 million. Compensation to the Agent during this period was approximately $30,500, none of which was received by the Non-Executive Chairman of the Board.
We currently do not have a line of credit or other bank credit facilities. From time to time, we may engage in discussions with one or more commercial banks regarding establishing a credit facility or facilities. However, there can be no assurance that we will be able to establish any such facilities if and when needed and to the extent required, on acceptable terms or at all. We would intend to use such facilities for short-term working capital needs and to support letter of credit requirements. From time to time we are required to provide performance bonds related to the sale and delivery of new equipment. These bonds are normally provided by insurance companies, surety companies or local banks. In some cases, the party issuing the bond requires that we post collateral to secure our obligations under the bonds.
As of October 31, 2020, we had deposits in foreign banks consisting of both U.S. dollar and foreign currency deposits equal to approximately $1.9 million. We believe all $1.9 million of these deposits could be distributed to the United States without any adverse tax consequences.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk, which is the potential loss arising from adverse changes in market prices and rates. We have not entered, and do not intend to enter, into derivative financial instruments for hedging or speculative purposes.
Foreign Currency Risk
We operate in a number of foreign locations, which gives rise to risk from changes in foreign currency exchange rates. To the extent possible, we attempt to denominate our transactions in foreign locations in U.S. dollars. For those cases in which transactions are not denominated in U.S. dollars, we are exposed to risk from changes in exchange rates to the extent that non-U.S. dollar revenues exceed non-U.S. dollar expenses related to those transactions. Our non-U.S. dollar transactions are denominated primarily in British pounds, Canadian dollars, Singapore dollars and European Union euros. As a result of these transactions, we generally hold cash balances that are denominated in these foreign currencies. At October 31, 2020, our consolidated cash and cash equivalents included foreign currency denominated amounts equivalent to approximately $407,000 in U.S. dollars. A 10% increase in the U.S. dollar as compared to each of these currencies would result in a loss of approximately $41,000 in the U.S. dollar value of these deposits, while a 10% decrease would result in an equal amount of gain. We do not currently hold or issue foreign exchange contracts or other derivative instruments to hedge these exposures.
Interest Rate Risk
As of October 31, 2020, we have no interest-bearing bank debt on our balance sheet.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officers and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our principal executive officers and
principal financial officer have concluded that our current disclosure controls and procedures were not effective as of October 31, 2020, due to a material weakness in our internal control over financial reporting that was disclosed on Form 10-K for the fiscal year ended January 31, 2020.
Remediation
As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, we commenced implementing a remediation plan to address the material weakness in our internal controls over financial reporting. The weakness will remain unresolved, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We anticipate that the remediation of this material weakness will be satisfied prior to the end of fiscal 2021.
Changes in Internal Control over Financial Reporting
There was no change in our system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended October 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 1. Legal Proceedings
From time to time, we are a party to legal proceedings arising in the ordinary course of business. We are not currently a party to any legal proceedings, individually or collectively, that we believe could have a material adverse effect on our results of operations or financial condition or is otherwise material.
Item 1A. Risk Factors
The risk factors included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020 and our Quarterly Report on Form 10-Q for the three months ended July 31, 2020 have not materially changed except as set forth below. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Our failure to properly develop and manage strategic initiatives may adversely affect our financial position and results of operations.
We have initiated, and may in the future initiate, strategic initiatives in order to focus and expand our product offerings. The initiatives we have initiated include (i) the development of side-scan sonar systems specifically for unmanned vehicles, including integration of our MA-X technology; (ii) the development of SAS sonar systems in cooperation with a major European defense contractor; (iii) the application of our SeaLink solid streamer technology to passive sonar arrays for use in maritime security applications, such as anti-submarine warfare; and (iv) disposition of our Leasing Business. There can be no assurance that we will realize the anticipated benefits of such initiatives or that any of the strategic initiatives will ultimately have a material impact on our financial position or results of operations. The pursuit of the strategic initiatives presents a number of risks, including but not limited to, the length of development, increased competition, the diversion of management’s attention from existing operations or other priorities, the unavailability of equipment, budget limitations and the ability to sell our lease pool equipment on favorable terms, if at all, all of which could adversely affect our financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)Not applicable.
(b)Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
Exhibits
The exhibits marked with the cross symbol (†) are filed (or furnished in the case of Exhibit 32.1) with this Form 10-Q. The exhibits marked with the asterisk symbol (*) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

Exhibit Number | Document Description | Report or Registration Statement | SEC File or Registration Number | Exhibit Reference
1.1 | E quity Distribution Agreement, dated as of September 25, 2020, by and between MIND Technology, Inc. and Ladenburg Thalmann & Co. Inc. | Incorporated by reference to MIND Technology, Inc.’s Form 8-K filed with the SEC on September 25, 2020. | 001-13490 | 1.1

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2.1 | Agreement and Plan of Merger dated as of August 3, 2020, by and between Mitcham Industries, Inc. and MIND Technology, Inc. | Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. | 001-13490 | 2.1
3.1 | Amended and Restated Certificate of Incorporation of MIND Technology, Inc. | Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. | 001-13490 | 3.3
3.2 | Amended and Restated Bylaws of MIND Technology, Inc. | Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. | 001-13490 | 3.4
3.3 | Certificate of Designations, Preferences and Rights of MIND Technology, Inc. 9.00% Series A Cumulative Preferred Stock | Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. | 001-13490 | 3.5
3.4 | Certificate of Amendment of Certificate of Designations, Preferences and Rights of MIND Technology, Inc. 9.00% Series A Cumulative Preferred Stock | Incorporated by reference to MIND Technology, Inc.’s Form 8-K filed with the SEC on September 25, 2020. | 001-13490 | 3.1
3.5 | Texas Certificate of Merger, effective as of August 3, 2020 | Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. | 001-13490 | 3.1
3.6 | Delaware Certificate of Merger, effective as of August 3, 2020 | Incorporated by reference to MIND Technology, Inc.’s Current Report on Form 8-K, filed with the SEC on August 7, 2020. | 001-13490 | 3.2
4.1 | Form of Senior Indenture (including Form of Senior Note) | Incorporated by reference to Mitcham Industries, Inc.’s Registration Statement on Form S-3, filed with the SEC on March 18, 2011. | 333-172935 | 4.1
4.2 | Form of Subordinated Indenture (including form of Subordinated Note) | Incorporated by reference to Mitcham Industries, Inc.’s Registration Statement on Form S-3, filed with the SEC on March 18, 2011. | 333-172935 | 4.2
10.1* | Amendment No. 1 to Guy M. Malden's Employment Agreement (dated June 19, 2020) | Incorporated by reference to Mitcham Industries, Inc.’s Form 8-K filed with the SEC on June 25, 2020. | 001-13490 | 10.1
31.1† | Certification of Guy Malden, Co-Chief Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended |  |  |
31.2† | Certification of Robert P. Capps, Co-Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended |  |  |
32.1† | Certification of Guy Malden, Co-Chief Executive Officer, and Robert P. Capps, Co-Chief Executive Officer and Chief Financial Officer, under Section 906 of the Sarbanes Oxley Act of 2002, 18 U.S.C. § 1350 |  |  |
101.INS† | XBRL Instance Document |  |  |
101.SCH† | XBRL Taxonomy Extension Schema Document |  |  |
101.CAL† | XBRL Taxonomy Extension Calculation of Linkbase Document |  |  |

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101.DEF† | XBRL Taxonomy Extension Definition Linkbase Document |  |  |
101.LAB† | XBRL Taxonomy Extension Label Linkbase Document |  |  |
101.PRE† | XBRL Taxonomy Extension Presentation Linkbase Document |  |  |

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  |  |  |  |  | MIND TECHNOLOGY, INC.
Date: December 4, 2020 |  |  |  |  |  | /s/ Robert P. Capps
|  |  |  |  |  | Robert P. Capps
|  |  |  |  |  | Co-Chief Executive Officer,
|  |  |  |  |  | Executive Vice President of Finance and Chief Financial Officer
|  |  |  |  |  | (Duly Authorized Officer)

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