Q2 2024 MIND Technology Inc Earnings Call
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Speaker 1: Greetings and welcome to the MIND Technology second quarter fiscal 2024 conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Ken Denard. Thank you. You may begin.
Greetings and welcome to the main technologies second quarter fiscal 2024 conference call.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Now my pleasure to introduce your host Ken Dennard. Thank you may begin.
Speaker 2: Thank you, operator. Good morning and welcome to the mine technology fiscal 2024 second quarter earnings conference call.
Thank you operator, good morning, and welcome to the main technology fiscal 'twenty 'twenty four second quarter earnings Conference call.
Speaker 2: We appreciate you joining us today. With me are Rob Capps, President and Chief Executive Officer, and Mark Cox, Vice President and Chief Financial Officer.
We appreciate you joining us today with me are Rob Katz, President and Chief Executive Officer, and Mark <unk>, Vice President and Chief Financial Officer.
Speaker 2: Before I turn the call over to Rob, I have a few items to cover. If you'd like to listen to a replay of today's call, it will be available for 90 days via webcast by going to the investor relations section of the company's website at mind-technology.com or via telephonic recorded instant replay until September 21st.
Before I turn the call over to Rob I have a few items to cover.
Like to listen to a replay of today's call it'll be available for 90 days via webcast by going to the Investor Relations section of the company's website at my Dash technology Dot com or the a telephonic recorded instant replay until September 21.
Speaker 2: Information on how to access these replay features was provided in yesterday's earnings.
Information on how to access. These replay features was provided in yesterday's earnings release.
Speaker 2: Information on this call speaks only as of today, Thursday, September 14, 2023, and therefore you are advised that time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading.
Information on this call speaks only as of today Thursday September 14th 2023, and therefore, you are advised the time sensitive information.
No longer be accurate at the time of any replay listening or transcript reading.
Speaker 2: Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Before we begin let me remind you that certain statements made by management. During this call may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Speaker 2: These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties, and other factors, many of which the company is unable to predict or control, that may cause the company's actual future results or performance to materially differ from any future results or performance expressed or implied by these statements.
These forward looking statements are based on management's current expectations and include known and unknown risks.
Uncertainties and other factors many of which the company is unable to predict or control that may cause the company's actual future results or performance to materially differ from any future results or performance expressed or implied by these statements.
Speaker 2: These risks and uncertainties include the risk factors disclosed by the company from time to time in its SEC filings, including its annual report on Form 10-K for the year ended January 31, 2023. Furthermore, as we start this call, please also refer to the statement regarding forward-looking statements incorporated in our news release issued yesterday, and please note that the contents of our conference call this morning are covered by these statements.
These risks and uncertainties include the risk factors disclosed by the company from time to time in its SEC filings.
Clothing in its annual report on Form 10-K.
Year ended January 31, 2023 Furthermore, as we start this call. Please also refer to the statement regarding forward looking statements incorporated in our news release issued yesterday and please note that the contents of our conference call. This morning are covered by these statements and now with that behind me I'd like to turn the call.
Speaker 2: And now, with that behind me, I'd like to turn the call over to Rob Capps. Rob.
Over to Rob Capps, Rob.
Okay. Thanks, Ken.
Speaker 3: Now, as I believe you all know, in August , we took a significant step with the sale of our client.
No as I believe you all know in August we took a significant step with the sale of our climate.
Speaker 3: Today, I'd like to begin by discussing that transaction and our rationale for it, before discussing our second quarter 2024 results, as well as our current view of market conditions. Mark will then provide a more detailed update on our financials.
Today I'd like to begin by discussing that transaction at a rationale for it before discussing our second quarter 2024 results as well as our current view of market conditions.
Mark will then provide a more detailed update on our financials.
Then wrap things up with some remarks about our outlook.
Speaker 3: With a strengthening outlook for our CMEB unit that we'll discuss further in a moment, we thought it was important to streamline mines operations and address the financial requirements associated with that growing business.
With our strengthening outlook for seeing that Chinas.
Further in a moment, we thought it was important to streamline minds operations and address the financial requirements associated with that growing business.
Speaker 3: When the opportunity to sell client arose, we saw an opportunity to achieve both those objectives.
The opportunity to sell client our Roes, we saw an opportunity to achieve both of those objectives.
Speaker 3: Our client business unit was responsible for approximately $3.1 million in revenue during the first six months of this fiscal year, but contributed an operating loss of about $911,000.
I find this unit business unit was responsible for approximately $3 1 million in revenue during the first six months of this fiscal year, but contributed an operating loss of about 911000.
Speaker 3: On a proforma basis, had the sale taken place at the beginning of the year, mine would have reported a positive pre-tax income as opposed to the 1.2 million loss we reported.
On a pro forma basis had the sale taking place at the beginning of the year mine would have reported healthy pre.
Pre tax income as opposed to the $1 2 million loss, we reported this.
Speaker 3: This further demonstrates the basis for our decision to part ways with client business unit and focus our attention.
This further demonstrates the basis for our decision to part ways with client this achievement and focus our attention on other operations.
Speaker 3: As we've previously disclosed, consideration from the sale was $11.5 million in cash.
As we've previously previously disclosed consideration from the sale was <unk> 5 million in cash.
Speaker 3: We used a portion of these proceeds to repay the 3.75 million term loan from earlier this year.
We used a portion of these proceeds to repay the $3 $75 million term loan from earlier this year.
Speaker 3: After transaction cost and the loan repayment, the net proceeds available to us amounted to about $7.3 million.
After transaction costs and the loan repayment.
Proceeds available to us amounted to about $7 3 million.
Speaker 3: An added benefit from the sale is the licensing arrangement and collaboration agreement with the buyer, General Ocean.
An added benefit from the sale is the licensing arrangement and collaboration agreement with a buyer general oceans.
Speaker 3: This provides an important opportunity to realize value from our spectral AI software suite, which mine retains.
This provides an important opportunity to realize value from our spectral AI software suite, which mind retirement.
Speaker 3: Through this arrangement, we hope to realize recurring licensing revenue while continuing to enhance Spectral AI and port it to applications beyond SideScan Seminar. Our second quarter.
Through this arrangement, we hope to realize recurring license revenue.
<unk> to enhance spectral AI imported two applications beyond side scan sonar.
Yeah.
Our second quarter results came in roughly in line with your expectations.
Speaker 3: Revenues drop off a bit sequentially due to the scheduling of deliveries, but that was largely anticipated.
Revenues dropped off a bit sequentially due to the due to the scheduling of deliveries that was largely anticipated.
Speaker 3: This activity is not unusual, and I'll remind you that revenues often fluctuate in our business from time to time for a variety of reasons that are often out of our control.
This activity is not unusual and I'll remind you that revenues often fluctuate in our business from time to time for a variety of reasons that are often out of our control.
Speaker 3: continue to believe that mine is exceptionally well positioned to capitalize on the favorable market dynamics to achieve a sustainable top line improvement long term.
We continue to believe that mine is exceptionally well positioned to capitalize on the favorable market dynamics, achieving sustainable topline improvement long term.
Speaker 3: As of July 31st, our backlog of firm orders for CMAP stood at $17 million.
As of July 31st our backlog of firm orders, you've seen that stood at $17 million subsequent to quarter end, we received additional orders totaling approximately $5 4 million.
Speaker 3: Subsequent to quarter end, we receive additional orders totaling approximately 5.4 million.
Speaker 3: And we also have confidence that in coming weeks, we'll be in a position to announce additional sizable orders that we feel are important.
We also have confidence that in the coming weeks will be the decision to announce additional sizable orders we feel are imminent.
Speaker 3: These booked and pending orders involve a variety of products, including GunLink source controllers, Loyalink positioning systems, and C-Link string receivers.
These booked and indeed orders involving a variety of products.
Kind of like source controllers, like positioning assistance and ceiling streamer systems.
Speaker 3: We believe this continued positive backlog trend is indicative of the favorable market conditions and the differentiation of our CMAP product line.
We believe this continued positive backlog trend is indicative of the favorable market conditions and the differentiation of our seeing that product lines.
Speaker 3: We remain confident that this momentum will carry throughout the remainder of our fiscal 2024 and beyond. We believe the current
We remain confident that this momentum will carry throughout the remainder of our fiscal 2024 and beyond.
We believe the current market environment, it's advantageous for them I.
Speaker 3: Each of our three key markets, exploration, defense, and survey are loaded with opportunity.
Each of our three key markets exploration Defensin survey are loaded to the opportunity.
Speaker 3: With our operations now streamlined and focused, we are better positioned than ever before to deploy our product lines into a variety of end markets. And our team continues to develop new innovative ways to adapt and implement our technologies to meet the needs of our customers.
With our operations now streamlined and focused we are better positioned than ever before to support our product lines due to a variety of end markets and our team continues to develop new innovative ways to adapt our technology to meet the needs of our customers.
Speaker 3: In addition to traditional energy-related opportunities, we're seeing new alternative applications for our CNET technologies, including offshore wind farms and other green energy projects.
In addition to traditional energy related opportunities, we're seeing new alternative applications, probably seeing that technologies, including offshore wind farms and other green energy projects.
Speaker 3: There's also a growing opportunity for mine to provide sizing schema repair service.
There's also a growing opportunity for mind to provide seismic shame of repair services.
Speaker 3: not only for ceiling streamers, but also for products manufactured by others.
Only preceding streamers also products manufactured by others.
Speaker 3: within the maritime defense and security market. We continue to believe that our Sea Serpent passive array system, which is derived from our commercially developed ceiling system, is a significant and economical solution for a variety of demanding applications within the space.
Within the Maritime defense and security market, we continue to believe that our C circuit passive array system, which is derived from our commercial ceiling system.
Significant an economical solution for a variety of demanding applications within the space.
Speaker 3: We intend to continue leveraging the favorable macroeconomic trends.
We intend to continue leveraging the favorable macroeconomic trends.
Speaker 3: the differentiation and versatility of our product lines and the sustained customer demand and interest that we're seeing to drive robust order activity and growth in our book of business in the near term.
The differentiation and versatility of our product lines and the sustained customer demand and interest that we're seeing to drive robust order activity and growth in our book of business in the near term.
Speaker 3: Now, I know many of you are interested in our plans regarding dividends on our preferred stock.
Now I know many of you are interested in our plans regarding dividends on our preferred stock.
Speaker 3: While our liquidity position is much improved, we are continuing to evaluate the working capital requirements associated with our growing backlog of business.
Our liquidity position is much improved we are continuing to evaluate your working capital requirements associated with our growing backlog of business.
Speaker 3: Accordingly, at this point, we have not made a decision regarding accrued or ongoing dividends. We will, of course, update you once
Accordingly at this point, we have not made a decision regarding accrued our ongoing dividends.
We will of course add next year.
Any decisions are made.
Speaker 3: As many of you are aware, we held our annual shareholder meeting on August 30.
As many of you are aware, we held our annual shareholder meeting on August 30th.
Speaker 3: Included on the agenda was a proposal for the approval of a reverse stock split that would enable us to regain compliance with the NASDAQ listing standards. Our shareholder
Included on the agenda the proposal for the approval of a reverse stock split.
Last to regain compliance with the NASDAQ listing standards our shareholders approve this proposal.
Speaker 3: This was an important and necessary first step, and NASDAQ has granted us until November 15 to regain compliance with the minimum mid-price requirement.
This was an important and necessary first step.
NASDAQ has granted us until November 15 to regain compliance with the minimum bid price requirement.
Speaker 3: We're now going through the internal mechanics of implementing the reverse split, and we'll provide an update on the specific framework as things evolve.
Right now we went through the internal mechanics, and then implementing reverse split.
I will provide an update on the specific framework as things evolve.
Speaker 3: Now, let me let Mark walk you through our second quarter financial results in a bit more detail before I come back.
Yeah.
Now, let me I'll, let Mark walk you through our second quarter financial results had a bit more detail before I come back.
Thanks, Rob and good morning, everyone.
Speaker 4: As Rob mentioned earlier, revenues from continuing operations totaled approximately $8.8 million in the quarter, which was roughly in line with the revenues of $8.7 million in the same period a year ago.
As Rob mentioned earlier revenues from continuing operations totaled approximately $8 8 million in the quarter.
Which was roughly in line with the revenues of $8 7 million in the same period a year ago.
Speaker 4: Our CMAP segment delivered revenue of approximately $7.6 million during the quarter, which we believe is largely indicative of the continued strength that we're seeing in the exploration and alternative energy markets.
Our cement segment delivered revenue of approximately $7 6 million during the quarter, which we believe is largely indicative of the continued strength that were seeing in the exploration and alternative energy markets.
Speaker 4: Gross profit during the second quarter was approximately 3.3 million, which was marginally down when compared to gross profit of 3.5 million in the prior year period.
Gross profit during the second quarter was approximately $3 3 million.
Which was marginally down when compared to gross profit of $3 5 million in the prior year period.
Speaker 4: This represents a gross profit margin of 37% for the quarter, a 330 basis point decrease when compared to the same period a year ago.
This represents a gross profit margin of 37% for the quarter.
330 basis point decrease when compared to the same period a year ago.
Speaker 4: Gross profit margins for the CMAP segment were up approximately 300 basis points year-over-year, while current period gross profit margins in the CLIMB segment declined significantly from the prior year period.
Gross profit margins for the cement segment were up approximately 300 basis points year over year, while current period gross profit margins in the client segment declined significantly from the prior year period.
Speaker 4: Decline in gross profit margins for the Klein segment was due to sales of higher margin multi-beam sonar systems in the prior year period, not recurring in the second quarter of physical 2024.
The decline in gross profit margins for the Cline segment was due to sales of higher margin multi beam sonar systems in the prior year period, not recurring in the second quarter of physical 2024.
Speaker 4: Our general and administrative expenses were approximately $3.5 million for the second quarter, which were down slightly when compared to the $3.9 million from the first quarter and $3.8 million for the same period a year ago.
Our general and administrative expenses were approximately $3 5 million for the second quarter, which were down slightly when compared to the $3 9 million from the first quarter and $3 8 million for the same period a year ago.
Speaker 4: The improvement over the prior year period is mainly due to reductions in executive-level headcount as well as other cost management initiatives that we've implemented.
The improvement over the prior year period is mainly due to reductions in executive level head count as well as other cost management initiatives that we've implemented.
Speaker 4: Our research and development expense for the second quarter was $842,000.
Our research and development expense for the second quarter was 842000.
Speaker 4: which was up slightly both sequentially and when compared to the year ago period.
Which was up slightly both sequentially and when compared to the year ago period.
Speaker 4: Consistent with prior periods, these costs are largely directed toward our strategic initiatives, including synthetic aperture sonar and passive sonar array.
Consistent with prior periods. These costs are largely directed towards our strategic initiatives, including synthetic aperture sonar passive sonar rate.
Speaker 4: Operating loss for the second quarter was approximately $1.5 million, which was essentially in line with a loss of approximately $1.6 million in the second quarter of 2023.
Operating loss for the second quarter was approximately $1 5 million.
Which was essentially in line with a loss of approximately 1.6 million in the second quarter of 2023.
Speaker 4: Our second quarter adjusted EBITDA was a loss of $687,000 compared to a loss of approximately $1 million in the second quarter last year.
Our second quarter adjusted EBITDA was a loss of 687000 compared to a loss of approximately $1 million in the second quarter last year.
Speaker 4: As of July 31st, 2023, we had working capital of approximately $13 million and cash of $494,000.
As of July 31, 2023, we had working capital of approximately 13 billion and cash of 494000.
Speaker 4: After factoring in net proceeds from the Klein sale in August , our liquidity position is significant.
After factoring in net proceeds from the client sale in August are.
Our liquidity position has significantly improved.
Speaker 4: As Rob noted in his opening comments, upon the closing of the client sale, we also repaid and eliminated our high-cost debt that we incurred earlier this year, and MIND is once again debt-free. I'll now pass it back over to Rob for some concluding comments.
As Rob noted in his opening comments upon the closing of the client sale.
We also repaid and eliminated our high cost debt that we incurred earlier this year in mind as once again debt free.
I'll now pass it back over to Rob for some concluding comments.
Thanks Mark.
We're more excited than ever for the future of mind technology.
Speaker 3: We've taken the necessary steps to streamline our operations, and as we see it here today, we are a more focused and efficient company. We thank the opportunities for our seniors.
We've taken the necessary steps to streamline our operations and as we sit here today, we are a more focused and efficient company.
We think the opportunities for seeing that per unit are significant.
Speaker 3: The coupling of favorable market conditions and our differentiated and purchasable product offerings is a recipe for long-term success.
Coupling that favorable market conditions, and our differentiated virtual product offerings, it's a recipe for long term success.
Speaker 3: We're seeing greater customer interest and engagement and historical highs in order flow, which contributes to our high expectations for meaningful and sustained growth. We're confident the mind is.
We're seeing greater customer interest and engagement and historical highs in order flow, which contributes to our high expectations for meaningful and sustained growth.
We're confident the combined is headed in the right direction.
Speaker 3: We look forward to building on the solid foundation that we've constructed today.
We look forward to building on the solid foundation that we've constructed the date.
Speaker 3: Our segment technologies continue to gain traction with customers globally for a variety of end uses. Our team has done a great job adapting our technologies to meet the evolving needs of our customers.
Our cement technologies continue to gain traction with customers globally from a variety of end uses and our team has done a great job adapting our technology to meet the evolving needs of our customers.
Speaker 3: As we look forward to the back half of the year and into fiscal 2025, we intend to capitalize on this positive momentum to drive improvements in our financial.
As we look forward to the back half of the year and into fiscal 2025.
We intend to capitalize on this positive momentum to drive improvements in our financials.
Speaker 3: who experienced this quarter and have traditionally seen, there will likely be revenue variation between quarters due to a variety of challenges and unforeseen circumstances, as well as simple customer delivery requirements.
So we experienced this quarter and if traditionally saying.
It will likely be revenue variation between quarters due to a variety of challenges the unforeseen circumstances as well as simple customer delivery requirements.
Speaker 3: With that said, we do believe that the general trend will be one of increased revenue.
But that said, we do believe that the general trend will be wanted to increased revenue.
Speaker 3: The favorable market trends, robust customer interest, and growth of our backlog continues to give us confidence that sustainable, higher-level revenue is achievable.
The favorable market trends robust customer interest and growth of our backlog continues to give us confidence that sustainable higher level of revenue it is achievable.
Speaker 3: We've worked hard and taken the necessary steps to position MINE as a leading producer in differentiated marine technology products. We're excited about what the future holds.
We've worked hard and taken the necessary steps to position. The mine is a leading producer of differentiated ring topology products. We're excited about what the future holds.
Speaker 3: As of today, we're debt-free. We have a much-improved balance sheet and liquidity position. We intend to continue to capitalize.
As of today, we're debt free.
We have a much improved balance sheet and liquidity position.
We intend to continue capitalizing on the favorable market conditions strong customer interest and engagement and robust order flow to achieve improved results, which we believe will generate meaningful shareholder value going forward.
Speaker 3: strong customer interest and engagement, and robust order flow to achieve improved results, which we believe will generate meaningful shareholder value going forward. And with that operator, we
And with that operator, we can now open the call for questions.
Speaker 1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the starches.
Speaker 1: Our first question comes from the line of Tyson Bauer with KC Capital. Please proceed with your question.
Our first question comes from the line of Tyson Bauer with Keybanc capital. Please proceed with your question good morning.
And gentlemen.
Speaker 5: Do you happen to have just a bookkeeping question right off the bat, kind of the cash balance of where you were as of this morning or last night?
I see.
Do you happen to have just a bookkeeping question right off the bat to kind of a cash balance of where you were as of.
This morning or last night.
Speaker 6: I'm not sure I want to talk about that specifically, but again, if you look at where we worked into the quarter, you know, half a million dollars or so, we've added, you know, seven million or so from the sale, so that's going to give you a sense of magnitude. Okay. And then, have you had cash conversion? Obviously, you had some significant accounts receivable with the lower revenue, so I'm guessing just that timetable of converting those receivables to cash.
I mean, yeah, yeah, I'm not sure about it.
Can you talk about that specifically, but again, if you look at where we worked into the quarter.
Half of million dollars or so we've added $7 million or so from the AR from the site also that's going to give you a sense of magnitude. Okay. And then have you had the cash conversion. Obviously you had some significant comps receivable with a lower revenue. So I'm guessing just that timetable of converting those receivables to cash.
Operator: Greetings and welcome to the Mind Technology 2nd quarter of fiscal 2024 conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker 6: Yeah, I mean that will certainly continue to do that, but also remember we have a large backlog that we are starting to build. So there's ongoing needs there as well. So it's a combination of things. Okay.
Yeah, I mean that all will certainly continue to do that.
Ken Dennard: It's now my pleasure to introduce your host Ken Dennard. Thank you. You may begin. Thank you operator.
But also remember we have a large backlog that we are starting to build them. So there's ongoing needs are as well. So it's a combination of things.
Ken Dennard: Good morning and welcome to the Mind Technology 5th school 2024 2nd quarter earnings conference call. We appreciate you joining us today. With me are Rob Capps, President and Chief Executive Officer and Mark Cox, Vice President and Chief Financial Officer.
On.
Speaker 5: If we look at the first six months in CMAP, approximately $18 million, you're talking about some kind of revenue growth as we go forward. I'm guessing you're basing that off that $18 million for CMAP. That would imply at least a $36 million for the year, if you have any kind of growth, between $36 million and $40 million.
Well, if we look at the first six months and see him at approximately $18 million Youre talking about some kind of revenue growth as we go forward I'm guessing you're basing that off of that.
Ken Dennard: Before I turn the call over to Rob, I have a few items to cover. If you'd like to listen to a replay of today's call, it'll be available for 90 days via webcast by going to the investor relations section of the company's website at mind-technology.com or via telephonic recorded instant replay until September 21st. Information on how to access these replay features was provided in yesterday's earnings release. Information on this call is only as of today Thursday September 14th, 2023 and therefore you are advised the time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading.
18 million for Siem App.
That would imply at least a 36 for the year. If you have any kind of growth between 36 40 million.
Speaker 5: Depending on shipment timings and some other things that can throw a monkey wrench into that But as of right now is that kind of a the view that you have is between 36 40 million in revenue
Depending on shipment timings and some other things that can.
Throw a monkey wrench into that but as of right. Now is that kind of a view that you have is between 36 $40 million of revenue.
Speaker 6: Yeah, excuse me. Again, not wanting to get too specific, but I think, again, as far as a sense of magnitude, you're headed in the right direction. I think the interesting thing is...
Yeah, excuse me again, not wanting to get too specific but I think again as far as the sense of magnitude you're headed in the right direction.
I think the interesting thing is as you know we have that.
Speaker 6: you know, history for the first six months, but I think more importantly, if you look at our backlog activity, it gives us visibility for the balance of the year and into next year as well, which is very important for lots.
The history for the first six months.
More importantly, if you look at our backlog activity it gives us visibility.
For the balance of the year and into next year as well, which is very important.
Ken Dennard: Before we begin, let me remind you that certain statements made by management during this may constitute forward-looking statements within the meaning of the private security litigation reform act of 1995. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the company is unable to predict or control that may cause to come these actual future results or performance to materially differ from any future results or performance expressed or implied by these statements.
For for lots of reasons.
Speaker 6: But, you mentioned that the thing that we have to keep in mind is, you know, lots of things can happen that cause a particular shipment or two to slide from, you know, one way or another. And so, these, some of these are sizable orders.
But you mentioned that the thing that we have to keep in mind is you know lots of things can happen because a particular shipment for two slides from now one way or another.
So these are some of these are sizable orders.
Speaker 6: you know, a few million dollars, so it only takes one or two of those to have an impact. So just everyone keep that in mind, but the general trend is not different from what you described.
A few million dollars. So it only takes one or two of those to have an impact. So just everyone needs to keep that in mind, but the general trend is not.
Different from what you described.
Speaker 5: And the margins typically on CMAP, at least historically, have been closer to, on the growth side, what, 50 plus percent or 50 percent, depending on what kind of capacity utilization and what kind of, how many you're actually being able to produce and deliver.
Okay.
And the margins typically on T map Elisa.
Historically had been closer to on the growth side, what 50 plus percent or 50%, depending on what kind of capacity utilization or what kind of how many you're actually being able to produce and deliver.
Ken Dennard: These risks and uncertainties include the risk factors disclosed by the company from time to time in its SEC violence, including at the end of report on 14K for the year-end of January 31st, 2023. Furthermore, as we start this call, please also refer to this statement regarding forward-looking statements incorporated in our news release issued yesterday and please note that the contents of our conference call this morning are covered by these statements.
Speaker 6: Yeah, maybe not quite that much. I'd say in the high 40s is kind of where we've seen things historically, you know, we have a reasonable
Yes, maybe not quite that much I'd say in the high Forty's is kind of where we're just seeing things historically you know when we have that.
A reasonable.
Speaker 6: inflow or throughput to the operation.
And flower ER throughput due to the operation.
Speaker 6: But since we do have visibility going forward, that gives us some opportunities, we think, to be a bit more aggressive in some of our procurement activities as well as some of our production operations. So we're hopeful to be able to improve that somewhat. But it's really been in the high 40s.
Since we do have some visibility going forward you know that gives us some opportunities we think to be a bit more aggressive.
Ken Dennard: And now with that behind me, I'd like to turn the call over to Rob Caps. Rob? Okay, thanks, Ken.
Some of our procurement activities as well as some of our production operation. So we're hopeful to be able to improve that somewhat but it's really been in the high Forty's. That's one thing.
Robert Capps: Now, as I believe you all know, in August, we took a significant step with the sale of our client unit. Today, I'd like to begin by discussing that transaction at a rationale for it before discussing our second quarter 2024 results as well as our current view of market conditions.
Robert Capps: Mark will then provide a more detailed update on our financials.
Speaker 5: And you have been already previously talking about a million reduction in your corporate expenses and your G&A expenses even before you did the CLINE. Would anticipate some additional savings out of that as we go forward and whatever was allocated to CLINE on those corporate.
And you have been already previously you're talking about a million.
A reduction in your corporate expenses in your G&A expenses, even before he did decline.
Robert Capps: I'll then wrap things up with some remarks about our outlook, with a strengthening outlook for a senior unit that was expressed further in a moment. We thought it was important to streamline mine operations and address the financial requirements associated with that growing business. When the opportunity to sell client arose, we saw an opportunity to achieve both those objectives. Our climate business unit was responsible for approximately 3.1 million in revenue during the first six months of this fiscal year, but contributed an operating loss of about 911,000.
I would anticipate some additional savings out of that as we go forward and whatever it was allocated to decline on those corporate.
Speaker 5: What are you anticipating now to go forward on those G&A expenses? And in a follow-up, your R&D, was that primarily related to Klein?
What are you anticipating now kind of as a go forward on the SG&A expenses.
Robert Capps: On a pro-former basis, had the sale taken place at the beginning of the year, mine would have recorded a possibly pre-tax income as opposed to the 1.2 million loss we reported. This further demonstrates the basis for our decision to part ways with the client business unit and focus our attention on other operations as we previously disclosed consideration from the sale was 11.5 million in cash. We used a portion of these proceeds to repair the 3.75 million term loan from earlier this year.
And then a follow up.
R&D was that primarily related decline.
Or what portion of that.
Speaker 6: Yeah, not, not entirely. I tell you, I'm going to, I'm going to defer a little bit here in the, when we file our 10-Q later.
Yeah, no not entirely I tell you I'm going to I'm going to.
Differ a little bit here in the when we file our 10-Q.
Later today.
Speaker 6: We're including some pro forma financials in that T&Q, which I think will give you some good visibility as to what the impact would have been. We alluded to it in our comments today, but I think that will give you some sense. Essentially, the client R&D goes away, which is a significant portion of our R&D. The direct client G&A goes away.
We're including some pro forma financials in that 10-Q, which I think will give you some good visibility as to what the impact would have been that we alluded to it in our comments today, but I think that'll give you some sense, but essentially the decline R&D goes away.
Which you know it was a significant portion of our R&D.
The the reclined G&A goes away.
Speaker 6: And we also think there's some ongoing things we can do to continue to streamline the operation. I haven't quite quantified those yet. That's something we're looking to do to just make things a bit more efficient. But, again, look at the pro formas and the P&Q, and I think that will give you some good information. And your interest expense goes up.
And we also think there's an ongoing things we can do to continue to streamline the operation.
Quite quantified those yet that's something we're looking to do that just to make things a bit more efficient, but again looking at the pro forma is in the 10-Q and I think that'll give you. Some some good information and your interest expense goes away also.
Robert Capps: After transaction cost and the loan repayment, the net proceeds available to us amounted to about 7.3 million. And that had been a benefit from the sale is the licensing arrangement and collaboration agreement with the buyer, General Oceans. This provides an important opportunity to realize value from our spectral AI software suite, which mine retains. Through this arrangement, we hope to realize recurring licensing revenues will continue to enhance spectral AI in order to applications beyond side scan seminar.
Speaker 3: Yes, absolutely. Absolutely. Yep. And I guess what I'm leading you to is, and just doing the back of the napkin type of numbers is.
Yeah, absolutely absolutely yes.
And I guess, what I'm, leading you to is in just doing the back of the napkin type number says.
Speaker 5: should your directors choose to pay forward.
Should your directors choose to pay.
Pay for word pro.
Speaker 5: preferred dividends. The financial wherewithal is there. It may be tight initially, but obviously you'll have the cash balance. You will have the financial wherewithal on ongoing financial operations. To pay that
Preferred dividends the financial Wherewithal is there.
Robert Capps: Our second quarter results came in roughly in line with our expectations. Revenue struck off a bit sequentially due to this due to scheduling of deliveries. That was largely anticipated. This activity is not unusual and will remind you that revenues often fluctuate in our business from time to time. For a variety of reasons that are often out of our control.
It may be tight initially but.
Obviously, you'll have the cash balance you will have the financial wherewithal on ongoing financial operations.
To pay that if you decide to do so.
Speaker 6: Yeah, again, we're just analyzing the overall situation and trying to understand how we can stabilize the ongoing.
Yeah again, we were just analyzing the overall situation and trying to understand you know.
Robert Capps: We continue to believe that mine is exceptionally well positioned to capitalize on the favorable market dynamics, achieving sustainable top line improvement long term. As of July 31st, our backlog of firm orders of CMAP stood at $17 million. So it's going to quarter end. We receive additional orders totally in approximately $5.4 million. And we also have confidence that in coming weeks, we'll be in a position to announce additional sizable orders that we feel are imminent.
How we can stabilize the.
Ongoing.
No.
Speaker 6: overhead costs, but also what are the working capital requirements going to be to make sure we don't find ourselves in a position like we were a year ago and for a few months and having to really get by on a shoestring. That's not what we want to do, that hurts the operation.
Overhead cost.
But also what are the working capital requirement is going to be to make sure. We don't find ourselves in a position like we were a year ago.
Robert Capps: These both continued orders involve a variety of products, including gun link source controllers, literally position systems and ceiling streamer systems. We believe this continued positive backlog trend is indicative of the favorable market conditions and the differentiation of our CMAP product lines.
For a few months and having to you know really get by on a on a shoestring and desktop, but we want to do that that hurts the operation So yeah.
Speaker 6: certain things are much improved. Again, you're going to see from the proformas what the numbers look like, so you can draw your own conclusions, but we're just going to take all that into consideration when we make our decisions. Okay, and that decision likely we'll know is early October , which is the time that you have to decide whether to defer or to at least make that October payment on the preferred term.
Certain things are much improved again youre going to see from the pro forma is you know what those numbers look like so you can draw your own conclusions, but we're just going to take all that into consideration when we make our decisions, okay and that decision likely we'll know in early October which is the time that you have to decide whether to differ or to at least make that October payment on the preferred.
Robert Capps: We remain confident that this momentum will carry throughout the remainder of fiscal 2024 and beyond. We believe the current market environment is advantageous for mine. Each of our three key markets, exploration, defense and survey are loaded with opportunity.
Speaker 3: Yeah, that's correct. That's right. Okay. And really off the table right now is the accrued amount.
Third.
Yeah, that's correct that's right okay.
And really off the table right now is the accrued amount because we're not in that position to address that at the time being so the decision is really whether or not we want to pay.
Speaker 5: because we're not in that position to address that at the time being. So the decision is really whether or not we want to pay what is going forward and being current on the forward and then at some point in the future make a decision on what the accrued whether or not you can back pay.
What is going forward and being current on the forward and then at some point in the future and make a decision on what the crude whether or not you can back pay.
Robert Capps: The operation is now streamlined and focused. We are better positioned than ever before to deploy our product lines into a variety of markets. And our team continues to develop new and innovative ways to adapt and implement our technologies to meet the needs of our customers. In addition to traditional energy-related opportunities, we're seeing new alternative applications far seeing that technologies, including offshore wind farms and other green energy projects. There's also growing opportunities for mine to provide sizing, shimmer repair services, not only for seeding streamers, but also for products manufactured by others.
Speaker 6: Yeah, again, I don't want to comment on that, Tyson. It's all on the table right now. We're just going to look at the overalls.
Yeah, again, I don't Wanna comment that ties to work, it's all on the table right now and we're just gonna look real world situation. Okay.
Speaker 5: Okay, in your 10-K on regarding the reverse split, it appears that even though it is till November 15, you will make a decision or a split if it were to occur would occur on the end of October .
Okay.
In your 10-K on regarding the reverse split it appears that even though it is still out on November 15, you will make a decision or a split if it were to occur.
Would occur on the end of October.
Speaker 5: which the implication is if you have to have 10 days above a dollar, that would have to occur within the next four weeks.
What's the implication is if you have to have 10 days above a dollar that would have to occur within the next four weeks.
Robert Capps: Within the maritime defense and security market, we continue to believe that our C serpent passive array system, which is derived from our commercially developed seeding system, is a significant and economical solution for a variety of demanding applications within the space.
Speaker 5: Uh, so you're right about that scenario is that we have a reverse split one for 10, just throwing that out there because that was in the proxy, um, will occur would likely occur at the end of October . That is not an unreasonable assumption.
So you're right about that scenario is that we have a reverse split one for 10, just throwing that out there because that was in the proxy.
<unk> will occur would likely occur at the end of October.
Robert Capps: We intend to continue leveraging the favorable macroeconomic trends and differentiation and versatility of our product lines and the sustained customer demand and interest that we're saying to drive robust over activity and growth in our book of business in the near term.
That is not an unreasonable assumption.
Okay.
Oil.
Speaker 5: $90 heating oil is up 40% since July . A lot of tailwinds are building that would be favorable for CMAP. And just to give the listeners a little sense, when your major competitor left the market a year ago.
$90, a heating oil dropped 40% since July a lot of tailwind or building that would be favorable for <unk> and just to give the listeners a little sense. When your major competitor left the market a year ago.
Robert Capps: Now, I know many of you are interested in our plans regarding dividends on our preferred stock. While our liquidity position is much improved, we are continuing to evaluate the working capital requirements associated with our growing backlog of business. Accordingly, at this point, we have not made a decision regarding a crude or ongoing dividends. We will, of course, add that you want any decisions are made.
Speaker 5: A lot of these decisions on whether or not you get a contract or not is whether the ultimate customer just wants to go ahead and place that order is not really a competitive situation where you're going against somebody else as we've seen in years past.
A lot of these decisions on whether or not you get a contract or not is whether the ultimate customer just wants to go ahead and and place that order, it's not really a competitive situation where.
Robert Capps: As many of you are aware, we held our annual shareholder meeting on August 30. Included on the agenda was a proposal for the approval of the reverse stock spit that would enable us to retain compliance with the Nasdaq listed standards. Her shareholder approved this proposal. This was an important and necessary first step, and Nasdaq has granted us until November 15 to regain compliance with a minimum bid price requirement. We're now going through the internal mechanics of implementing the reverse split, and we'll provide an update on the civic framework as things evolve.
You're going against somebody else as we've seen in years past.
Speaker 6: Yeah, as it relates to source controllers, that is definitely the case. We are pretty much the only game in town. We do have some competition for the positioning systems, BuoyLink, and we do have some competition for the streamer systems, but we are focused more on the high-resolution systems.
Yeah as it relates to source controllers.
That is definitely the case Oh, we were pretty much the only game in town are.
We do have some competition.
For the positioning systems buoy link and we do have some competition.
For the streamer systems.
But you know we are focused more on the high.
High resolution three dimensional applications used for survey purposes more than deepwater exploration. So we don't go head to head with the the deepwater streamer systems. So we do have some competition there, but it's pretty thin.
Speaker 6: three-dimensional applications used for survey purposes more than deepwater exploration. We don't go head-to-head with the deepwater streamer systems. We do have some competition there, but it's pretty thin, it's fair to say. Okay. Annie, yourself and Mark are not on the board, correct?
Mark Cox: Now, let me mark what you threw a second quarter financial results in a bit more detail before I come back. Thanks, Rob, and good morning, everyone. As Rob mentioned earlier, revenues from continuing operations told approximately 8.8 million in the quarter, which was roughly in line with the revenues of 8.7 million in the same period of year ago. Our CMAT segment delivered revenue of approximately 7.6 million during the quarter, which we believe is largely indicative of the continued strength that we're seeing in the exploration and alternative energy markets.
Hard to say okay.
Yourself and Mark are not on the board correct.
Speaker 3: I'm on the board. Mark is not. Okay. You're on the board. The board is going to ask for your recommendation being the CEO and the CFO's recommendation on Outlook and financials. Are you willing to share what you would recommend, even though that is only one cog in the decision that the board will make ultimately in regards to the preferred and going forward.
I'm on the board Mark is not hey, you're on the board. The board is going to ask for your recommendation being the CEO and the CFO. His recommendation on outlook and financials are you willing to share what that record with what you would recommend.
Even though that there's only one cog in the decision that the board will make ultimately in regards to the preferred and going forward.
Speaker 3: Yeah, I know. I don't think we want to comment on that or the board as a whole will make that decision So it wouldn't be appropriate for me to comment on that Okay
Yeah, I know I don't think we're going to comment on that where the board as a whole like that that decision. So it wouldn't be appropriate for me to comment on that okay. Thank you gentlemen.
Mark Cox: Gross profit during the second quarter was approximately 3.3 million, which was marginally down when compared to gross profit of 3.5 million in the prior year period. This represents a gross profit margin of 37% for the quarter, a 330 basis point decrease when compared to the same period of year ago. Gross profit margins for the CMAT segment were up approximately 300 basis points year over year, while current period gross profit margins in the client segment declined significantly from the prior year period.
You bet.
Yeah.
Speaker 1: Thank you. Our next question comes from the line of Ross Taylor with ARS Investment Partners. Please proceed with your question.
Thank you. Our next question comes from the line of Ross Taylor with Arris investment partners. Please proceed with your question.
Speaker 7: always hard to follow Tyson since he asks all the good fundamental questions. So, Rob, I'm just going to voice some thoughts here. First, the preferred is actually pretty damn good paper. In fact, it's really good paper for you guys.
Always hard to follow Tyson since he asks all the good fundamental questions. So.
I'm just gonna, even a voice some thoughts here first sure.
Sure the preferred is actually pretty damn good paper in fact, it's really good paper for you guys.
Mark Cox: The decline in gross profit margins for the client segment was due to sales of higher margin multi beam sonar systems in the prior year period, not recurring in the second quarter of physical 2024. Our general administrative expenses were approximately 3.5 million for the second quarter, which were down slightly when compared to the 3.9 million from the first quarter and 3.8 million for the same period of year ago. The improvement over the prior year period is mainly due to reductions in executive level headcount as well as other cost management initiatives that we've implemented.
Speaker 7: And there's no way you can go into the marketplace. You paid off a term loan that was, what, 12-9, I think it was.
And there's no way you can go into the marketplace you paid off a term loan that was like 12 712 nine I think it was just preferred is almost 400 bps.
Speaker 7: This preferred is almost 400 bits under that. The fact that you guys and the board might choose not to pay that off, every time you do that, I mean, as an equity holder, I've sat here forever waiting for you guys to get it right, and you're close to getting it right, and I have this feeling you're about to snatch defeat from victory, because what if I'm a preferred holder, and I get two directors, the first thing I'm telling my directors to do, hire a banker, and there's no way, even with your plans and your confidence.
Under that.
In fact that you you guys and the board might choose not to pay that off every time, you do that I mean, as an equity holder I've sat here for ever waiting for you guys to get it right and you're close to getting it right and I had this feeling you're about to snatch defeat from victory because what if I'm a preferred holder and I get two directors. The first thing I'm, telling my directors.
Do hire a banker and Theres no way, even with your plans and your confidence there is that hesitancy and you're hearing you in your call.
Speaker 7: There's that hesitancy, and you hear it in your comments, that makes it impossible for this board to say no to any deal that that banker found that would make the preferred holders.
Mark Cox: Our research and development expense for the second quarter was $842,000, which was up slightly both sequentially and when compared to the year ago periods. Consistent with prior periods, these costs are largely directed toward our strategic initiatives, including synthetic aperture sonar and passive sonar array. Operating loss for the second quarter was approximately 1.5 million, which was essentially in line with the loss of approximately 1.6 million in the second quarter of 2023. Our second quarter adjusted EBITDA was the loss of 687,000 compared to a loss of approximately 1 million in the second quarter last year.
That makes it impossible for this board to say no to any deal that that bank and found that would make the preferred holders whole and the equity holders walked away with next to nothing and so it's important that it gets that paper off the bat off the.
Speaker 7: whole and the equity holders walk away with next to nothing.
Speaker 7: And so it's important to get that paper off the back of the common holders. It's just it's straightforward. It's you know, you can't borrow a nine percent.
Back of the common holders. It's just it's straightforward it's you can't borrow at 9%.
Speaker 7: And in fact, you should get it going. And that paper is better than going to the bank. I mean, eventually, you'll be able to go to the bank and probably borrow in the high single digits.
And in fact, you should get it and get it going and that paper is better than going to the bank I mean, eventually you'll be able to go to the bank and probably borrowing down high single digits.
Speaker 7: But at this point in this environment, and it frustrates me and I just I sense that the common holders just going to be asked to hold the bag and you're going to do a reverse split, get the stock above a buck. But in reality, that eight, $9 million in value that's attached to the common right now is basically there on the hope that you guys
And at this point in this environment and it Frustrates me and I, just I sense that the common holders just gonna be asked to hold the bag and you're going to do a reverse split to get the stock above a bar, but in reality that eight $9 million and values that's attached to the common right now it's basically they're on the hope that you guys.
Mark Cox: As of July 31, 2023, we had working capital of approximately 13 million and cash of 494,000. After factoring in net proceeds from the client sale in August, our liquidity position is significantly improved. As Rob noted in his opening comments upon the closing of the client sale, we also repaid and eliminated our high cost debt that we incurred earlier this year, and mine is once again debt-free.
Speaker 7: get this thing worked out with the preferred holders. So, you know, you are on the board and I've known you for a long time and I know you're a good person and a smart person. And I can't believe that you and this board are gonna let this situation go where you defer the payment again. Because as I said, I'm confident, you know, Tyson's a smart guy and I'm sure some of those preferred holders talk to Tyson and I'm sure they're pretty confident that this company is worth.
Get this thing worked out with the preferred holders. So you know you are on the board and I've known you for a long time and I know, you're a good person and smart person and I can't believe that you're in this board are we going to let the situation go where you're just sort of the payment again, because as I said I'm confident tightened to a smart guy and I'm sure. Some of those people are holding stocks.
Robert Capps: I'll now pass it back over to Rob for some concluding comments. Thanks Mark. We're more excited than ever for the future of mine technology. We've taken the necessary steps to streamline our operations, and as we see it today, we are more focused and efficient companies. We thank the opportunities for our CMAP units are significant. The coupling of favorable market conditions that are differentiated and versatile, product offerings is a recipe for long-term success.
Tyson I'm sure, they're pretty confident that this company is worth.
Speaker 7: you know somewhere between 26 and 50 million dollars or more and if it's if they sell it at 50 the preferred holders walk away with everything and you can't
Somewhere between 26 and $50 million or more and if it's if they sell at 50, the preferred holders lock away with everything.
And you can't let that happen.
Speaker 3: Ross, I hear your comments and I take those into consideration.
Can you Okay all right.
Ross I hear your comments and.
And take those into consideration.
I hear you.
Speaker 7: Yeah, don't, I mean, I'll be honest, I don't want to come back to a call having supported you guys for this long and have you guys basically have, you know, for want of a million dollars paid to the preferred holders.
Yes don't I mean, I'd be honest I don't want to come back to a call having supported you guys for this long and have you guys basically.
Robert Capps: We've seen greater customer interest and engagement in historical highs and order flow, which contributes to our high expectations for many full and sustained growth. We're confident that the mine is headed in the right direction, and we look forward to building on the solid foundation that we've constructed today. Our CMAP technology has continued to gain traction in customers globally for a variety of induces. Our team has done a great job adapting our technologies to meet the evolving needs of our customers.
Yeah, So I wanted to $1 million paid to the preferred holders.
Speaker 7: Basically, Nate told the equity holders that they don't have an asset. I've waited too long. This has not been a successful investment for me. But we can still snatch victory from the jaws of ignominiety. So let's do it. Okay. I appreciate it, Rob. Thanks. I really do appreciate your comments.
Basically they told the equity holders that they don't have an asset.
I waited too long and this has not been as successful investment for me.
We can still snatched victory from the jaws in ignominy.
Let's do it.
Robert Capps: If we look forward to the back half of the year and into fiscal 2025, we intend to capitalize on this positive momentum to drive improvements in our financials. As we experience this quarter, and if traditionally saying, there will likely be revenue variation between quarters due to a variety of challenges then for seeing significant samples, as well as simple customer delivery requirements. With that said, we do believe that the general trend will be wanted to increase revenue.
Okay I appreciate it thanks I really appreciate your comments.
Yes, you.
You bet.
Yeah.
Speaker 1: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Capps for any final
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Katz for any final comments.
Speaker 6: Okay. Thank you, Lissa. Thanks everyone for joining us today. I look forward to talking to you at the end of our next quarter. So everyone have a good day.
Okay. Thank you Melissa.
Thanks, everyone for joining us today and look forward to talking to you at the end of our next quarter. So everyone have a good day. Thank you.
Yeah.
Yeah.
Robert Capps: The favorable market trends, robust customer interest, and growth of our backlog continues to give us confidence that sustainable, higher-level revenue is achievable. We've worked hard taking the necessary steps to position mine as a leading producer and differentiated rain technology products, and we're excited about what the future holds. As of today, we're debt-free. We have a much-reproved balance sheet and liquidity position. We intend to continue to capitalize on the favorable market conditions, strong customer interest and engagement, and robust order flow to achieve improved results, which we believe will generate meaningful shareholder value going forward.
Speaker 1: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
Robert Capps: Thank you.
Operator: We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Tyson Bauer: Our first question comes from the line. I'm Tyson Bauer with Casey Capital. Please proceed with your question.
Tyson Bauer: Good morning, gentlemen. Hey, Tyson. Do you happen to have just a bookkeeping question right out the bat that kind of the cash balance where you were as of this morning or last night? I mean, yeah, I'm not sure why I can't talk about that specifically. But again, if you look at where we worked into the quarter, you know, half a million dollars. So we've added, you know, seven million or so from the site also.
Tyson Bauer: That's going to give you a sense of magnitude. Okay, and then how have you had cash conversion? Obviously, you had some significant cons receivable with the lower revenue. So I'm guessing just that timetable of converting those receivables to cash. Yeah, I mean, that will certainly continue to do that. But also, remember, we have a large backlog that we are starting to build. So there's ongoing needs there as well. So this is combination.
Tyson Bauer: Thanks. Okay. If we look at the first six months and see map approximately 18 million dollars, you're talking about some kind of revenue growth as we go forward. I'm guessing you're basing that off that 18 million for CMAP. That would imply at least a 36 for the year. If you have any kind of growth between 3640 million, depending on shipment timings and some other things that can throw a monkey wrench into that.
Tyson Bauer: But as of right now, is that kind of the view that you have is between 3640 million of revenue? Yeah, excuse me. Yeah, not wanting to get too specific, but I figured you're headed in the right direction. I think the interesting thing is we have that history for the first six months. I think more importantly, if you look at our backlog activity, it gives us visibility for the balance of the year and end of next year as well, which is very important for lots of reasons.
Tyson Bauer: But you mentioned the thing that we have to keep in mind is lots of things can happen because of a particular shipment or two to slide from one way or another. So some of these are sizeable orders, a few million dollars. So it only takes one or two of those to have an impact. So just everyone needs to keep that in mind that the general trend is not different from what you described.
Tyson Bauer: And the margins typically on CMAP at least and historically have been closer to on the gross side, what 50 plus percent or 50 percent depending on what kind of capacity utilization and what kind of how many you're actually being able to produce and deliver. Yeah, maybe not quite that much outside in the high 40s. It's kind of really distinct things historically. You know, we have a reasonable to the operation. Since we do have visibility going forward, you know, that gives us some opportunities we think to be a bit more aggressive in some of our procurement activities as well as some of our production operations.
Tyson Bauer: So we're hopeful to be able to improve that somewhat, but it's really been in the high 40s that way. And you have been already previously talking about a million reduction in your corporate expenses and your GNA expenses even before you did the client would anticipate some additional savings out of that as we go forward and whatever was allocated to client on those corporate. What are you anticipating now kind of as we go forward on those GNA expenses?
Tyson Bauer: And then they follow up your R&D with that primarily related to client? Or what portion of that? Yeah, not entirely. I'm going to defer a little bit here. And when we follow TNQ later today, we're including some pro-former financials in that TNQ, which I think will give you some good visibility as to what the impact would have been. We alluded to it in our comments today, but I think that will give you some sense.
Tyson Bauer: It's essentially that the client R&D goes away, which is a significant portion of our R&D, the direct client's GNA goes away. And we also think there's some ongoing things we can do to continue to streamline the operation. I haven't quite quantified those yet. That's something we're looking to do to just make things a bit more efficient. But again, look at the pro-formers in the TNQ and I'm going to give you some good information.
Tyson Bauer: And your interest expense goes away also. Yes, absolutely, absolutely. Yep. And I guess what I'm leading you to is, and just during the back of the napkin type numbers, is should your directors choose to pay forward preferred dividends? The financial wherewithal is there. It may be tight initially, but obviously you'll have the cash balance. You will have the financial wherewithal on ongoing financial operations to pay that if you decide to do so.
Tyson Bauer: Yeah, again, we're just analyzing the overall situation and trying to understand how we can stabilize the ongoing overhead cost. But also, what are the working capital requirements going to be to make sure we don't find ourselves in a position like to where a year ago and for a few months and having to really get by on a shoe string. And that's what we want to do. That hurts the operation. So certain things are much improved.
Tyson Bauer: Again, you're going to see from the performers what the numbers look like. So you can jar your conclusions that we're just going to take all that into consideration when we make our decisions. Okay. And that decision likely will know as early October, which is the time that you have to decide whether to defer or to at least make that October payment on the preferred. Yeah, that's correct. That's right. Okay. And really off the table right now is the accrued amount because we're not in that position to address that at the time being.
Tyson Bauer: So, the decision is really whether or not we want to pay what is going forward and being current on the forward and then at some point in the future make a decision on what the accrued whether or not you can back pay. Yeah, again, I don't want to comment on that. It's all on the table right now. We're just looking to look at the overall situation. Okay. In your 10k on regarding the reverse split, it appears that even though it is till November 15, you will make a decision or a split if it were to occur, would occur on the end of October, which the implication is if you have to have 10 days above a dollar, now it would have to occur within the next four weeks.
Tyson Bauer: So, you're right about that. The scenario is that we have a reverse split, one for 10, just throwing that out there because that was in the proxy will occur, would likely occur at the end of October. Yeah, there's not an unreasonable assumption. Okay. Oil, $90, heating oil, about 40 percent since July, a lot of tailwinds are building that would be favorable for CMAP and just to give the listeners a little sense when your major competitor left the market a year ago.
Tyson Bauer: A lot of these decisions on whether or not you get a contract or not is whether the ultimate customer just wants to go ahead and place that order. It's not really a competitive situation where you're going against somebody else as we've seen in years past. Yeah, as it relates to source controllers, that is definitely because we were pretty much the only game in town. We do have some competition for the position systems, Booleanq, and we do have some competition for the streamer systems, but we are focused more on the high resolution, high resolution, three-dimensional applications used for survey purposes more than deep water exploration.
Tyson Bauer: So, we don't go ahead ahead with the deep water streamer systems. So, we do have some competition there, but it's pretty thin. It's fair to say. Okay. And yourself and Mark are not on the board, correct? I'm on the board. Mark is not. Okay. You're on the board. The board is going to ask for your recommendation being the CEO and the CFL's recommendation on outlook and financials. Are you willing to share what you would recommend even though that is only one cog in the decision that the board will make ultimately in regards to the preferred and going forward? Yeah, I know. I don't think we're going to comment on that. The board as a whole will like that decision. So, it would be appropriate for me to comment on that. Okay.
Tyson Bauer: Thank you, gentlemen. Thank you.
Ross Taylor: Our next question comes from line of Ross Taylor with ARS Investment Partners. Please proceed with your question. Always hard to follow. Tyson, since he asks all the good fundamental questions.
Ross Taylor: So, Rob, I'm just going to, I'm going to voice some thoughts here first. Sure. The preferred is actually pretty damn good paper. In fact, it's really good paper for you guys. And there's no way you can go into the marketplace. You paid off a term loan that was 12-9, I think it was. This preferred is almost 400 bits under that. The fact that you guys in the board might choose not to pay that off every time you do that. I mean, as an equity holder, I've sat here forever waiting for you guys to get it right and you're close to getting it right.
Ross Taylor: And I have this feeling you're about to snatch defeat from victory because what if I'm a preferred holder and I get two directors, the first thing I am telling my directors to do, hire a banker and there's no way, even with your plans and your confidence, there's that hesitancy and you hear it in your comments that makes it impossible for this board to say no to any deal that that banker found that would make the preferred holders whole and the equity holders walk away with next to nothing. And so it's important, let's get that paper off the back of the common holders.
Ross Taylor: It's just straightforward. You can't borrow a nine percent. And in fact, you should get it going and that paper is better than going to the bank. I mean, eventually you'll be able to go to the bank and probably borrow in the high single digits by the this point in this environment.
Ross Taylor: And it frustrates me and I just I sense that the commonholders just going to be asked to hold the bag and you're going to do a reverse, let's get the stock above a buck. But in reality, that eight, nine million dollars in value that's attached to the common right now is basically there on the hope that you guys get this thing worked out with the good foreholders.
Ross Taylor: So, you know, you are on the board and I've known you for a long time and I know you're a good person and a smart person and I can't believe that you and this board are going to let this situation go where you defer the payment again. Because as I said, I'm confident, you know, Tyson's a smart guy and I'm sure some of those prefer holders stop the Tyson and I'm sure they're pretty confident that this company is worth, you know, somewhere between 26 and 50 million dollars or more. And if it's if they sell it at 50, the preferred holders walk away with everything.
Robert Capps: And you can't let that happen, can you? Yeah. I taught Ross. I hear comments and I take those into consideration. So I hear you. Yeah.
Ross Taylor: Don't I mean, I don't want to come back to a call having supported you guys for this long and have you guys basically have, you know, for a one to the million dollars paid to the preferred holders, you know, basically make told the equity holders that they don't have an asset. I've been I waited too long. This is not been a successful investment for me. But we can still snatch victory from the jobs of ignominity.
Ross Taylor: So let's do it. Okay. I'll forget Ross. Thanks. I would appreciate your comments. Thank you, sir. You bet. Thank you.
Operator: Ladies and gentlemen, that concludes our question and answer session.
Robert Capps: I'll turn the floor back to Mr. Caps for any final comments. Okay. Thank you. Listen. Thanks everyone for joining us today. I'm looking forward to talking to you at the end of our next quarter. So we're going to have a good day. Thank you.
Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.