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Note 2 - Sale of Subsidiaries and Subsequent Events | 6 Months Ended
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Jul. 31, 2023
Notes to Financial Statements |
Sale of Subsidiaries and Subsequent Events [Text Block] | 2. Sale of Subsidiary and Subsequent Events On August 21, 2023, the Company sold its Klein Marine Services, Inc. subsidiary (“Klein”) pursuant to a Stock Purchase Agreement (the “SPA”) with General Oceans AS (“the Buyer"). In connection with the SPA, the Company granted the Buyer a license in its Spectral Ai software suite (“Spectral Ai”). The license is exclusive to the Buyer as it relates to side scan sonar. The Company and the Buyer also entered into a collaboration agreement for the further development of Spectral Ai and potentially other software projects. The foregoing transactions contemplated by the SPA are referred to as the “Sale of Klein”. The aggregate consideration to the Company consisted of a cash payment of $11.5 million, resulting in a gain of approximately $2.0 million that will be recorded in the quarter ended October 31, 2023. The SPA contains customary representation and warranties. On August 22, 2023, following the closing of the Sale of Klein, all outstanding amounts due and owed, including principal, interest, and other charges, under the Loan were repaid in full and the Loan was terminated, and all liens and security interests granted thereunder were released and terminated (see Note 10 - "Notes Payable" for additional details). The following unaudited pro forma condensed consolidated financial statements are intended to show how the Sale of Klein might have affected the historical financial statements of the Company if the Sale of Klein had been completed at an earlier time as indicated therein. The unaudited pro forma condensed consolidated balance sheet as of July 31, 2023, assumes that the transaction had occurred on July 31, 2023. The unaudited pro forma condensed consolidated statements of operations for the three and six months ended July 31, 2023, give effect to the transaction as if it had occurred as of February 1, 2023.The unaudited pro forma condensed consolidated financial information of the Company as of and for the three and six months ended July 31, 2023, and the notes related thereto, in each case giving effect to the Sale of Klein are as follows:
MIND Technology, Inc
Unaudited Pro Forma Condensed Consolidated Balance Sheet As of July 31, 2023
(in thousands, except per share data)
ASSETS |  | Historical MIND Technology (a) |  |  |  | Operations of Klein (b) |  |  |  | Pro Forma Adjustments |  |  |  | Pro-forma MIND Technology |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 494 |  |  |  |  | - |  |  |  |  | 7,304 |  | (e) |  |  | 7,798 |
Accounts receivable, net of allowance for doubtful accounts of $ 504 as of July 31, 2023 |  |  | 7,143 |  |  |  |  | (944 | ) | (c) |  |  | - |  |  |  |  | 6,199 |
Inventories, net |  |  | 15,651 |  |  |  |  | (5,031 | ) | (c) |  |  | - |  |  |  |  | 10,620 |
Prepaid expenses and other current assets |  |  | 1,273 |  |  |  |  | (312 | ) | (c) |  |  |  |  |  |  |  | 961 |
Total current assets |  |  | 24,561 |  |  |  |  | (6,287 | ) |  |  |  | 7,304 |  |  |  |  | 25,578 |
Property and equipment, net |  |  | 3,620 |  |  |  |  | (2,784 | ) | (c) |  |  | - |  |  |  |  | 836 |
Operating lease right-of-use assets |  |  | 1,626 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 1,626 |
Intangible assets, net |  |  | 4,418 |  |  |  |  | (1,193 | ) | (c) |  |  | - |  |  |  |  | 3,225 |
Total assets |  |  | 34,225 |  |  |  |  | (10,264 | ) |  |  |  | 7,304 |  |  |  |  | 31,265 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 2,459 |  |  |  |  | (866 | ) | (c) |  |  | - |  |  |  |  | 1,593 |
Deferred revenue |  |  | 309 |  |  |  |  | (10 | ) | (c) |  |  | - |  |  |  |  | 299 |
Accrued expenses and other current liabilities |  |  | 3,386 |  |  |  |  | (690 | ) | (c) |  |  | - |  |  |  |  | 2,696 |
Income taxes payable |  |  | 1,585 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 1,585 |
Operating lease liabilities - current |  |  | 903 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 903 |
Note payable, net |  |  | 3,343 |  |  |  |  | - |  |  |  |  | (3,343 | ) | (f) |  |  | - |
Total current liabilities |  |  | 11,985 |  |  |  |  | (1,566 | ) |  |  |  | (3,343 | ) |  |  |  | 7,076 |
Operating lease liabilities - non-current |  |  | 723 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 723 |
Deferred tax liability |  |  | 41 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 41 |
Total liabilities |  |  | 12,749 |  |  |  |  | (1,566 | ) |  |  |  | (3,343 | ) |  |  |  | 7,840 |
Stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $ 1.00 par value; 2,000 shares authorized; 1,683 shares issued and outstanding as of July 31, 2023 |  |  | 37,779 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 37,779 |
Common stock, $ 0.01 par value; 40,000 shares authorized; 15,721 shares issued as of July 31, 2023 |  |  | 157 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 157 |
Additional paid-in capital |  |  | 129,738 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 129,738 |
Treasury stock, at cost ( 1,933 shares as of July 31, 2023) |  |  | (16,863 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (16,863 | )
Accumulated deficit |  |  | (129,369 | ) |  |  |  | (8,698 | ) | (g) |  |  | 10,647 |  | (g) |  |  | (127,420 | )
Accumulated other comprehensive gain |  |  | 34 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 34 |
Total stockholders’ equity |  |  | 21,476 |  |  |  |  | (8,698 | ) |  |  |  | 10,647 |  |  |  |  | 23,425 |
Total liabilities and stockholders’ equity |  |  | 34,225 |  |  |  |  | (10,264 | ) |  |  |  | 7,304 |  |  |  |  | 31,265 |
MIND Technology, Inc
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Six Months Ended July 31, 2023
(in thousands, except per share data)
|  | Historical MIND Technology (a) |  |  | Operations of Klein (b) |  |  |  | Pro Forma Adjustments |  |  |  | Pro-forma MIND Technology |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sale of marine technology products |  |  | 21,336 |  |  |  | (3,178 | ) | (d) |  |  |  |  |  |  |  | 18,158 |
Total revenues |  |  | 21,336 |  |  |  | (3,178 | ) |  |  |  | - |  |  |  |  | 18,158 |
Cost of sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sale of marine technology products |  |  | 12,652 |  |  |  | (1,972 | ) | (d) |  |  | - |  |  |  |  | 10,680 |
Total cost of sales |  |  | 12,652 |  |  |  | (1,972 | ) |  |  |  |  |  |  |  |  | 10,680 |
Gross profit |  |  | 8,684 |  |  |  | (1,206 | ) |  |  |  | - |  |  |  |  | 7,478 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling, general and administrative |  |  | 7,388 |  |  |  | (1,199 | ) | (d) |  |  | - |  |  |  |  | 6,189 |
Research and development |  |  | 1,615 |  |  |  | (737 | ) | (d) |  |  | - |  |  |  |  | 878 |
Depreciation and amortization |  |  | 940 |  |  |  | (306 | ) | (d) |  |  |  |  |  |  |  | 634 |
Total operating expenses |  |  | 9,943 |  |  |  | (2,242 | ) |  |  |  | - |  |  |  |  | 7,701 |
Operating income (loss) |  |  | (1,259 | ) |  |  | 1,036 |  |  |  |  | - |  |  |  |  | (223 | )
Other expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other, net |  |  | 20 |  |  |  | (77 | ) | (d) |  |  | 407 |  | (h) |  |  | 350 |
Total other income (expense) |  |  | 20 |  |  |  | (77 | ) |  |  |  | 407 |  |  |  |  | 350 |
Income (loss) from continuing operations before income taxes |  |  | (1,239 | ) |  |  | 959 |  |  |  |  | 407 |  |  |  |  | 127 |
Provision for income taxes |  |  | (495 | ) |  |  | (17 | ) | (d) |  |  |  |  |  |  |  | (512 | )
Net (loss) income from continuing operations |  |  | (1,734 | ) |  |  | 942 |  |  |  |  | 407 |  |  |  |  | (385 | )
Preferred stock dividends - declared |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  | - |
Preferred stock dividends - undeclared |  |  | (1,894 | ) |  |  | - |  |  |  |  | - |  |  |  |  | (1,894 | )
Net loss attributable to common stockholders |  |  | (3,628 | ) |  |  | - |  |  |  |  | - |  |  |  |  | (2,279 | )
Net loss per common share - Basic and Diluted |  |  | (0.26 | ) |  |  |  |  |  |  |  |  |  |  |  |  | (0.17 | )
Shares used in computing net loss per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 13,791 |  |  |  |  |  |  |  |  |  |  |  |  |  | 13,791 |
Diluted |  |  | 13,791 |  |  |  |  |  |  |  |  |  |  |  |  |  | 13,791 |
MIND Technology, Inc
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Three Months Ended July 31, 2023
(in thousands, except per share data)
|  | Historical MIND Technology (a) |  |  | Operations of Klein (b) |  |  |  | Pro Forma Adjustments |  |  |  | Pro-forma MIND Technology |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sale of marine technology products |  |  | 8,750 |  |  |  | (1,190 | ) | (d) |  |  | - |  |  |  |  | 7,560 |
Total revenues |  |  | 8,750 |  |  |  | (1,190 | ) |  |  |  | - |  |  |  |  | 7,560 |
Cost of sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sale of marine technology products |  |  | 5,483 |  |  |  | (864 | ) | (d) |  |  | - |  |  |  |  | 4,619 |
Total cost of sales |  |  | 5,483 |  |  |  | (864 | ) |  |  |  |  |  |  |  |  | 4,619 |
Gross profit |  |  | 3,267 |  |  |  | (326 | ) |  |  |  | - |  |  |  |  | 2,941 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling, general and administrative |  |  | 3,514 |  |  |  | (616 | ) | (d) |  |  | - |  |  |  |  | 2,898 |
Research and development |  |  | 842 |  |  |  | (395 | ) | (d) |  |  | - |  |  |  |  | 447 |
Depreciation and amortization |  |  | 459 |  |  |  | (157 | ) | (d) |  |  | - |  |  |  |  | 302 |
Total operating expenses |  |  | 4,815 |  |  |  | (1,168 | ) |  |  |  | - |  |  |  |  | 3,647 |
Operating income (loss) |  |  | (1,548 | ) |  |  | 842 |  |  |  |  | - |  |  |  |  | (706 | )
Other expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other, net |  |  | 131 |  |  |  | (98 | ) | (d) |  |  | 204 |  | (h) |  |  | 237 |
Total other income (expense) |  |  | 131 |  |  |  | (98 | ) |  |  |  | 204 |  |  |  |  | 237 |
Income (loss) from continuing operations before income taxes |  |  | (1,417 | ) |  |  | 744 |  |  |  |  | 204 |  |  |  |  | (469 | )
Provision for income taxes |  |  | (77 | ) |  |  | (24 | ) | (d) |  |  | - |  |  |  |  | (101 | )
Net loss from continuing operations |  |  | (1,494 | ) |  |  | 720 |  |  |  |  | 204 |  |  |  |  | (570 | )
Preferred stock dividends - declared |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  | - |
Preferred stock dividends - undeclared |  |  | (947 | ) |  |  | - |  |  |  |  | - |  |  |  |  | (947 | )
Net loss attributable to common stockholders |  |  | (2,441 | ) |  |  | - |  |  |  |  | - |  |  |  |  | (1,517 | )
Net loss per common share - Basic and Diluted |  |  | (0.18 | ) |  |  |  |  |  |  |  |  |  |  |  |  | (0.11 | )
Shares used in computing net loss per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 13,792 |  |  |  |  |  |  |  |  |  |  |  |  |  | 13,792 |
Diluted |  |  | 13,792 |  |  |  |  |  |  |  |  |  |  |  |  |  | 13,792 |
The unaudited pro forma condensed consolidated financial statements reflect the following notes and adjustments:
(a) Reflects the condensed consolidated balance sheet as of July 31, 2023 and condensed consolidated statement of operations for the three and six months ended July 31, 2023 in the Form 10-Q.
(b) Reflects the consummation of the Sale of Klein in accordance with the terms of the SPA.
(c) Adjustments represent the disposition of assets and liabilities of the Klein operations.
(d) Adjustments represent the elimination of income and expenses of the Klein operations.
(e) To record the net cash proceeds from the Sale of Klein paid on the Closing Date of $11.5 million, less estimated closing costs, estimated pay-off of the Note Payable, and estimated transaction costs, primarily legal expenses and investment broker fees, associated with the sale, all of which were incurred as part of the consummation of the Sale of Klein.
(f) To record the pay-off of the Note Payable, net of prepaid interest and debt acquisition costs, due to Sachem Capital.
(g) Adjustments to accumulated deficit reflect the estimated gain on Sale of Klein. The estimated gain has not been reflected in the accompanying statements of operations as it is not related to continuing operations. The actual gain or loss on Sale of Klein will be recorded in the Company's financial statements for the quarter ending October 31, 2023, and will differ from this estimate.
(h) Reflects removal of interest expense that would not have been incurred if the Sale of Klein had been completed February 1, 2023.

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