UNAUDITED PRO FORMA FINANCIAL INFORMATION
Exhibit 99.2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On August 21, 2023, MIND Technology., Inc., a Delaware corporation (the “Company” or “MIND”), entered into a Stock Purchase Agreement (the “SPA”) with General Oceans AS (“General Oceans”), providing for the sale of the Company’s wholly owned subsidiary, Xxxxx Marine Systems, Inc. (“Xxxxx”). In addition, pursuant to the transaction, MIND has licensed its Spectral Ai software suite (“Spectral Ai”) to General Oceans for certain applications, particularly side-scan sonar. The Company and General Oceans have 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 Xxxxx”. The aggregate consideration to the Company consisted of a cash payment of $11.5 million upon closing of the transaction on August 21, 2023 (the “Closing Date”).
The SPA contains certain customary representations, warranties, and covenants. The SPA also contains customary indemnification provisions pursuant to which the parties agree to indemnify each other for certain matters, including, among other things, breaches of certain representations, warranties and covenants in connection with the Sale of Xxxxx, subject to specified caps and limitations. The Company has also agreed to a covenant that would prohibit the Company from engaging in specified activities that would compete with the Xxxxx business, for a period of five years, subject to certain limitations and exceptions. Completion of the Sale of Xxxxx was subject to the satisfaction or waiver of customary closing conditions, including a requirement to terminate any liens, including those imposed under the Company’s Loan and Security Agreement (the “Loan”), dated as of February 2, 2023, with Sachem Capital Corp. Upon closing, the Company utilized a portion of the transaction proceeds to pay off its outstanding balance of the Loan.
The following unaudited pro forma condensed consolidated financial statements are intended to show how the Sale of Xxxxx might have affected the historical financial statements of the Company if the Sale of Xxxxx had been completed at an earlier time as indicated therein, and such unaudited pro forma consolidated financial statements are derived from, and should be read in conjunction with, the Company’s historical condensed consolidated financial statements and notes thereto, as presented in the Company’s Quarterly Report on Form 10-Q for the three months ended April 30, 2023 filed with the Securities and Exchange Commission (“SEC”) on June 14, 2023 (the “Form 10-Q”) and the Company’s historical financial statements and notes thereto, as presented in the Company’s Annual Reports on Form 10-K for the fiscal years ended January 31, 2023 and January 31, 2022, filed with the SEC on May 1, 2023 and on April 29, 2022, respectively (collectively , the "Form 10-K's").
The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed consolidated balance sheet as of April 30, 2023 assumes the transaction had occurred on April 30, 2023. The unaudited pro forma condensed consolidated statements of operations for the three months ended April 30, 2023 and the years ended January 31, 2023 and January 31, 2022, give effect to the transaction as if it had occurred as of February 1, 2021.
In addition, Regulation S-X permits registrants to reflect adjustments that depict synergies and dis-synergies of the acquisitions and dispositions for which pro forma effect is being given in the Company’s disclosures as management adjustments. The Company has determined not to disclose such adjustments because it does not believe that presentation of such adjustments would enhance an understanding of the pro forma effects of the Sale of Xxxxx.
The transaction accounting adjustments to reflect the Sale of Xxxxx in the unaudited pro forma consolidated financial statements include:
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• |
the sale of the stock of Xxxxx Marine Systems, Inc. pursuant to the SPA; |
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• |
the cash repayment of the Term Loan Facility; and |
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• |
receipt of the cash proceeds that were payable on the Closing Date in connection with the Sale of Xxxxx. |
The transaction accounting adjustments do not include future potential royalty income related to the licensed Spectral Ai software because it is not estimable and is contingent on future operations of the Purchaser.
The unaudited pro forma consolidated financial statement information is presented for informational purposes only and is based upon estimates by the Company’s management, which are based upon available information and certain assumptions that the Company’s management believes are reasonable as of the date of this filing. The unaudited pro forma consolidated financial statements are not intended to be indicative of the actual financial position or results of operations that would have been achieved had the Sale of Xxxxx been consummated as of the periods indicated, nor does it purport to indicate results which may be attained in the future. Actual amounts could differ materially from these estimates.
The unaudited pro forma consolidated balance sheet as of April 30, 2023 and the unaudited pro forma consolidated statements of operations for three months ended April 30, 2023 and the fiscal years ended January 31, 2023 and January 31, 2022, should be read in conjunction with the notes thereto.
Unaudited Pro Forma Condensed Consolidated Balance Sheet As of April 30, 2023
(in thousands)
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Transaction Accounting Adjustments |
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Historical MIND Technology (a) |
Operations of Xxxxx (b) |
Pro Forma Adjustments |
Pro-forma MIND Technology |
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| ASSETS | ||||||||||||||||||
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Current assets: |
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Cash and cash equivalents |
815 | - | 7,304 | (e) | 8,119 | |||||||||||||
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Accounts receivable, net of allowance for doubtful accounts of $ 504 at April 30, 2023 |
7,390 | (1,506 | ) | (c) | - | 5,884 | ||||||||||||
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Inventories, net |
14,339 | (4,377 | ) | (c) | - | 9,962 | ||||||||||||
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Prepaid expenses and other current assets |
1,088 | (343 | ) | (c) | - | 745 | ||||||||||||
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Total current assets |
23,632 | (6,226 | ) | 7,304 | 24,710 | |||||||||||||
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Property and equipment, net |
3,787 | (2,900 | ) | (c) | - | 887 | ||||||||||||
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Operating lease right-of-use assets |
1,762 | - | - | 1,762 | ||||||||||||||
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Intangible assets, net |
4,664 | (1,246 | ) | (c) | - | 3,418 | ||||||||||||
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Total assets |
33,845 | (10,372 | ) | 7,304 | 30,777 | |||||||||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
1,206 | (517 | ) | (c) | - | 689 | ||||||||||||
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Deferred revenue |
486 | (20 | ) | (c) | - | 466 | ||||||||||||
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Accrued expenses and other current liabilities |
2,638 | (1,014 | ) | (c) | - | 1,624 | ||||||||||||
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Income taxes payable |
1,723 | - | - | 1,723 | ||||||||||||||
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Operating lease liabilities - current |
753 | - | - | 753 | ||||||||||||||
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Note payable, net |
3,139 | - | (3,139 | ) | (f) | - | ||||||||||||
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Total current liabilities |
9,945 | (1,551 | ) | (3,139 | ) | 5,255 | ||||||||||||
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Operating lease liabilities - non-current |
1,009 | - | - | 1,009 | ||||||||||||||
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Deferred tax liability |
29 | - | - | 29 | ||||||||||||||
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Total liabilities |
10,983 | (1,551 | ) | (3,139 | ) | 6,293 | ||||||||||||
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Stockholders’ equity: |
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Preferred stock, $ 1.00 par value; 2,000 shares authorized; 1,683 shares issued and outstanding at April 30, 2023 |
37,779 | - | - | 37,779 | ||||||||||||||
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Common stock, $ 0.01 par value; 40,000 shares authorized; 15,721 shares issued at April 30, 2023 |
157 | - | - | 157 | ||||||||||||||
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Additional paid-in capital |
129,630 | - | - | 129,630 | ||||||||||||||
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Treasury stock, at cost (1,933 shares at April 30, 2023) |
(16,863 | ) | - | - | (16,863 | ) | ||||||||||||
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Accumulated deficit |
(127,875 | ) | (8,821 | ) | (g) | 10,443 | (g) | (126,253 | ) | |||||||||
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Accumulated other comprehensive gain |
34 | - | - | 34 | ||||||||||||||
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Total stockholders’ equity |
22,862 | (8,821 | ) | 10,443 | 24,484 | |||||||||||||
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Total liabilities and stockholders’ equity |
33,845 | (10,372 | ) | 7,304 | 30,777 | |||||||||||||
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Three Months Ended April 30, 2023
(in thousands, except per share data)
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Transaction Accounting Adjustments |
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Historical MIND Technology (a) |
Operations of Xxxxx (b) |
Pro Forma Adjustments |
Pro-forma MIND Technology |
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Revenues: |
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Sale of marine technology products |
12,586 | (1,989 | ) |
(d) |
- | 10,597 | ||||||||||||
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Total revenues |
12,586 | (1,989 | ) | - | 10,597 | |||||||||||||
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Cost of sales: |
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Sale of marine technology products |
7,169 | (1,108 | ) |
(d) |
- | 6,061 | ||||||||||||
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Total cost of sales |
7,169 | (1,108 | ) | 6,061 | ||||||||||||||
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Gross profit |
5,417 | (881 | ) | - | 4,536 | |||||||||||||
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Operating expenses: |
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Selling, general and administrative |
3,874 | (583 | ) |
(d) |
- | 3,291 | ||||||||||||
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Research and development |
773 | (341 | ) |
(d) |
- | 432 | ||||||||||||
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Depreciation and amortization |
481 | (149 | ) |
(d) |
- | 332 | ||||||||||||
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Total operating expenses |
5,128 | (1,073 | ) | - | 4,055 | |||||||||||||
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Operating income |
289 | 192 | 481 | |||||||||||||||
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Other expense: |
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Other, net |
(111 | ) | 21 |
(d) |
204 |
(h) |
114 | |||||||||||
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Total other (expense) income |
(111 | ) | 21 | 204 | 114 | |||||||||||||
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Income from continuing operations before income taxes |
178 | 213 | 204 | 595 | ||||||||||||||
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Provision for income taxes |
(418 | ) | 7 |
(d) |
- | (411 | ) | |||||||||||
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Net (loss) income |
(240 | ) | 220 | 204 | 184 | |||||||||||||
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Preferred stock dividends - declared |
- | - | ||||||||||||||||
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Preferred stock dividends - undeclared |
(947 | ) | - | - | (947 | ) | ||||||||||||
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Net loss attributable to common stockholders |
(1,187 | ) | 220 | 204 | (763 | ) | ||||||||||||
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Net loss per common share - Basic and Diluted |
$ | (0.09 | ) | $ | (0.06 | ) | ||||||||||||
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Shares used in computing net loss per common share: |
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Basic |
13,789 | 13,789 | ||||||||||||||||
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Diluted |
13,789 | 13,789 | ||||||||||||||||
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Fiscal Year Ended January 31, 2023
(in thousands, except per share data)
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Transaction Accounting Adjustments |
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|
Historical MIND Technology (a) |
Operations of Xxxxx (b) |
Pro Forma Adjustments |
Pro-forma MIND Technology |
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Revenues: |
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Sale of marine technology products |
35,091 | (10,079 | ) |
(d) |
- | 25,012 | |||||||||||
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Total revenues |
35,091 | (10,079 | ) | - | 25,012 | ||||||||||||
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Cost of sales: |
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Sale of marine technology products |
22,116 | (6,579 | ) |
(d) |
- | 15,537 | |||||||||||
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Total cost of sales |
22,116 | (6,579 | ) | - | 15,537 | ||||||||||||
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Gross profit |
12,975 | (3,500 | ) | - | 9,475 | ||||||||||||
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Operating expenses: |
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Selling, general and administrative |
15,304 | (2,482 | ) |
(d) |
- | 12,822 | |||||||||||
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Research and development |
3,398 | (2,206 | ) |
(d) |
- | 1,192 | |||||||||||
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Depreciation and amortization |
1,887 | (543 | ) |
(d) |
- | 1,344 | |||||||||||
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Total operating expenses |
20,589 | (5,231 | ) | - | 15,358 | ||||||||||||
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Operating (loss) income |
(7,614 | ) | 1,731 | - | (5,883 | ) | |||||||||||
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Other expense: |
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Other, net |
882 | (627 | ) |
(d) |
- | 255 | |||||||||||
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Total other expense |
882 | (627 | ) | - | 255 | ||||||||||||
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Loss from continuing operations before income taxes |
(6,732 | ) | 1,104 | - | (5,628 | ) | |||||||||||
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Provision for income taxes |
(699 | ) | 26 |
(d) |
- | (673 | ) | ||||||||||
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Net loss |
(7,431 | ) | 1,130 | - | (6,301 | ) | |||||||||||
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Preferred stock dividends - declared |
(947 | ) | - | - | (947 | ) | |||||||||||
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Preferred stock dividends - undeclared |
(2,841 | ) | - | - | (2,841 | ) | |||||||||||
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Net loss attributable to common stockholders |
(12,620 | ) | 1,130 | - | (11,490 | ) | |||||||||||
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Net loss per common share - Basic and Diluted |
(0.81 | ) | (0.73 | ) | |||||||||||||
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Shares used in computing net loss per common share: |
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Basic |
13,784 | 13,784 | |||||||||||||||
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Diluted |
13,784 | 13,784 | |||||||||||||||
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Fiscal Year Ended January 31, 2022
(in thousands, except per share data)
|
Transaction Accounting Adjustments |
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|
Historical MIND Technology (a) |
Operations of Xxxxx (b) |
Pro Forma Adjustments |
Pro-forma MIND Technology |
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Revenues: |
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Sale of marine technology products |
23,107 | (5,814 | ) |
(d) |
- | 17,293 | |||||||||||
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Total revenues |
23,107 | (5,814 | ) | - | 17,293 | ||||||||||||
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Cost of sales: |
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Sale of marine technology products |
17,085 | (5,362 | ) |
(d) |
- | 11,723 | |||||||||||
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Total cost of sales |
17,085 | (5,362 | ) | - | 11,723 | ||||||||||||
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Gross profit |
6,022 | (452 | ) | - | 5,570 | ||||||||||||
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Operating expenses: |
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|
Selling, general and administrative |
14,761 | (1,860 | ) |
(d) |
- | 12,901 | |||||||||||
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Research and development |
3,596 | (2,632 | ) |
(d) |
- | 964 | |||||||||||
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Depreciation and amortization |
2,209 | (541 | ) |
(d) |
1,668 | ||||||||||||
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Total operating expenses |
20,566 | (5,033 | ) | - | 15,533 | ||||||||||||
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Operating loss |
(14,544 | ) | 4,581 | - | (9,963 | ) | |||||||||||
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Other expense: |
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Other, net |
926 | (976 | ) |
(d) |
- | (50 | ) | ||||||||||
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Total other income (expense) |
926 | (976 | ) | - | (50 | ) | |||||||||||
|
Loss from continuing operations before income taxes |
(13,618 | ) | 3,605 | - | (10,013 | ) | |||||||||||
|
Provision for income taxes |
39 | 26 |
(d) |
- | 65 | ||||||||||||
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Net loss |
(13,579 | ) | 3,631 | - | (9,948 | ) | |||||||||||
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Preferred stock dividends - declared |
(2,901 | ) | - | - | (2,901 | ) | |||||||||||
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Preferred stock dividends - undeclared |
- | - | - | - | |||||||||||||
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Net loss attributable to common stockholders |
(16,480 | ) | 3,631 | - | (12,849 | ) | |||||||||||
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Net loss per common share - Basic and Diluted |
(1.20 | ) | (0.93 | ) | |||||||||||||
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Shares used in computing net loss per common share: |
|||||||||||||||||
|
Basic |
13,771 | 13,771 | |||||||||||||||
|
Diluted |
13,771 | 13,771 | |||||||||||||||
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
The unaudited pro forma condensed consolidated financial statements reflect the following notes and adjustments:
(a) Reflects the condensed consolidated balance sheet as of April 30, 2023 and condensed consolidated statement of operations for the three months ended April 30, 2023 in the Form 10-Q and the consolidated statement of operations for the years ended January 31, 2023 and 2022 in the Form 10-K.
(b) Reflects the consummation of the Sale of Xxxxx in accordance with the terms of the SPA.
(c) Adjustments represent the disposation of assets and liabilities of the Xxxxx operations.
(d) Adjustments represent the elimination of income and expenses of the Xxxxx operations.
(e) To record the net cash proceeds from the Sale of Xxxxx 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 Xxxxx.
(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 Xxxxx. 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 Xxxxx 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 Xxxxx had been completed February 1, 2021.
