Q2 2025 MIND Technology Inc Earnings Call

September 12, 2024

Greetings welcome to mine Technology's fiscal 2020 five second quarter earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star.

Operator: Welcome to Mind Technology's Disco 2025 second quarter earnings conference call. At this time, all participants are in a listen-only mode.

Operator: A 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.

Speaker Change: Zero on your telephone keypad.

Operator: Please note this conference is being recorded.

Speaker Change: Please note this conference is being recorded.

Zach Vaughan: I will now turn the conference over to Zach Vaughan.

Zack fun: Now I'll turn the conference over to Zack fun. Thank you you may begin.

Zach Vaughan: Thank you, you may begin. Thank you, operator.

Speaker Change: Thank you operator, good morning, and welcome to the main technology fiscal 2025 second quarter earnings Conference call.

Speaker Change: We appreciate all of you joining us today.

With me are Rob Capps, President and Chief Executive Officer, and Mark <unk>, Vice President and Chief Financial Officer.

Speaker Change: Before I turn the call over to Rob.

Zach Vaughan: Before I turn the call over to Rob, I have a few items to cover. If you would 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 a recorded incident replay until September 19th. Information on how to access the replay was provided in yesterday's earnings release.

Speaker Change: A few items to cover if.

Speaker Change: 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 Dash technology Dot com.

Speaker Change: Or via a recorded instant replay until September 19th.

Information on how to access the replay was provided in yesterday's earnings release.

Speaker Change: Information reported on this call speaks only as of today Thursday September 12, 2024, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.

Zach Vaughan: Information report on this call speaks only as of today, Thursday, September 12, 2024, and therefore you revise the time-sensitive information; may no longer be accurate as of the time of any replay listening or transcript reading.

Zach Vaughan: 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. 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. It may cause the company's actual future results or performance to materially differ from many future results or performance expressed or implied by those statements. These risks and uncertainties include the risk factors disclosed by the company from time to time and its filings with the SEC, including an annual report on Form 10-K for the year ending January 31st, 2024.

Speaker Change: 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 Change: 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 those statements.

Speaker Change: These risks and uncertainties include the risk factors disclosed by the company from time to time in its filings with the SEC, including in its annual report on Form 10-K for the year ended January 31 2024.

Zach Vaughan: Furthermore, as we start this call, please also refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday, and please note that the contents of our conference call this morning are covered by these statements.

Speaker Change: Furthermore, as we start this call. Please also refer to the statement regarding forward looking statements incorporated in our press release issued yesterday and please note that the contents of our conference call. This morning are covered by these statements now I would like to turn the call over to Rob Capps.

Rob Capps: Okay. Thanks Zack.

Rob Capps: Thanks for all you joining us today.

Rob Capps: First of all I want to welcome all of our new common stock holders.

Rob Capps: With the conversion of our preferred stock and common stock last week.

Rob Capps: <unk> now has a substantial new group of common stockholders' meeting.

Rob Capps: Many if not most of your mind as a new company.

Rob Capps: This new capital structure and our encouraging business environment provides mind with important opportunities. Today, I'll discuss some highlights from the quarter. Mark will then provide a more detailed update on our financials.

Rob Capps: This new capital structure that are encouraging business environment provide mind with important opportunities.

Rob Capps: Now I'll discuss some highlights from the quarter.

Rob Capps: Mark will then provide a more detailed update on our financials and.

Rob Capps: Now, we turn to ref things up with some remarks about our outlook. Mine delivered positive results in the second quarter that were aligned with our expectations and further demonstrated the progress we've made on several fronts. We continue to operate efficiently, efficiently, and actively manage cost. We generate a positive cash flow from operations in the quarter, which helps improve further recruitment of liquidity. Our ability to build on the momentum we've generated in recent periods and execute has enabled mine to deliver another quarter of positive adjusted EBITDAF and profitability. We remain well-positioned to achieve profitability and favorable results in future periods, but we maintain our belief that the mind is strategically positioned for both near and long-term growth.

Mark: I'll return to wrap things up with some remarks about our outlook.

Mark: Mine delivered positive results in the second quarter that were in line with our expectations and further demonstrated the progress we've made on several fronts.

Mark: We continued to operate efficiently efficiently and accurately manage cost.

Speaker Change: We generated positive cash flow from operations for the quarter.

Speaker Change: Further improve liquidity.

Speaker Change: Our ability to build on the momentum we've generated in recent periods and execute.

Enabled by to deliver another quarter of positive adjusted EBITDA and profitability.

Speaker Change: We remain well positioned to achieve profitability and favorable results in future periods. We maintain our belief of mine is strategically positioned for both near and long term growth.

Speaker Change: So while it did not directly impact second quarter results.

Speaker Change: All of our preferred stock proposal and the resulting conversion of all preferred stock into common stock. It was a very important development.

Speaker Change: On the conversion.

Speaker Change: Issued approximately $6 6 million shares of common stock now have about 8 million shares outstanding.

Speaker Change: All outstanding preferred stock with an associated accrued, but then declare dividend has had been retired.

Speaker Change: Mark will touch on the accounting for this conversion, which will receive which you'll see in the third quarter.

Rob Capps: Mark will touch on the candidate for this conversion, which will see in the third quarter. We entered the third quarter with a strong backlog of approximately 26 million dollars. I know that some of you have been concerned that there have not been more announcements of new orders recently. Although the overflow is often sporadic, the staff are common to see positives in order attended throughout the year, especially during the summer. The backlog at the end of the quarter was down sequentially; however, it was more than 50% higher than at the same time last year, which is quite high by its local standards.

We entered the third quarter with a strong backlog of approximately $26 million.

I know that some of you have been concerned that there's not been more announcements of new orders recently.

Speaker Change: Although it could older floaters often sporadic.

That comment to see pauses in order activity throughout the year, especially during the summer.

Speaker Change: The backlog at the end of the quarter was down sequentially. However, it was more than 50% higher than at the time.

Tom: Tom last year, which was quite high by historical standards.

Rob Capps: We don't announce each and every order we receive. Currently, there are more than 6 million dollars in orders that have been received, such that you like to refer, or that we believe are imminent. And those are not included in the reported backlog. Beyond that, we have an active pipeline of pending orders and prospects that is well in excess of our backlog received orders. We believe this robust backlog, and in many of our opportunities we are pursuing, those well for favorable future financial results. As always, the case, timing of certain orders is subject to variability due to any number of challenges, and for seeing circumstances or customer delivered requirements.

Speaker Change: We don't announce each and every quarter we receive.

Speaker Change: Currently there are more than $6 million from owners have been restaged subcontractor July could be first or that we believe are imminent.

Speaker Change: And those are not included in our reported backlog.

Speaker Change: Beyond that.

Speaker Change: Active pipeline of pending orders and prospects and its well in excess of our backlog and received orders.

Speaker Change: We believe this robust backlog and many other opportunities we are pursuing bode well for favorable future financial results.

Speaker Change: As is always the case.

Speaker Change: The timing of certain orders is subject can carry building variability due to any number of challenges unforeseen circumstances or customer delivery requirements.

Speaker Change: Organic source controllers will be like positioning systems and ceiling streamer systems are all contributing to our strong backlog. We currently have a number of pending orders across these product lines.

Rob Capps: Organic source controllers, movie length positioning systems, and ceiling streamer systems are all contributing to our strong backlog, which currently have a number of pending orders across these product lines. I'm confident that the type of macro-environment, our narrowed focus, strong customer relationships, every increase in capabilities and value of partnerships will continue to see that at nine, as the partner choice for companies looking to acquire high quality and versatile marine technology products. From marine technology products, revenues from the second quarter of fiscal 2025 were $10 million. Our ability to grow revenue, both sequentially and year-to-year, demonstrates the strength in customer engagement and overflow, favorable macro-failment, and the emphasis we put on execution and efficiency.

Speaker Change: I'm confident that the type of macro environment.

Speaker Change: Merode focus strong customer relationships ever increase your capabilities and value partnerships will continue to see that in mind as the partner of choice for companies.

Speaker Change: Looking to acquire high quality commercial marine technology products.

Speaker Change: Our marine technology products revenues for the second quarter of fiscal 2000 $25 million to $10 million.

Speaker Change: Our ability to grow revenue, both sequentially and year over year demonstrates the strengthening customer engagement and order flow.

Speaker Change: Favorable macro tailwind and the emphasis we put on execution and efficiency.

Rob Capps: We also continue to take steps to improve our cost structure, which has enhanced our profitability in the recent quarters. That's always important to mention that while supply chain issues are mentioned, there are still with us to varying degrees and could impact results in future periods. These challenges are simply a component of the new business, and we will almost certainly encounter them again in the future. To combat some of these challenges, we've built inventory in recent months to accommodate pending and upcoming orders. Additionally, if we've done it, the magnitude of our backlog and expected orders does give us better visibility and therefore better ability to manage our procurement processes. We continue to believe that the current market environment is an advantageous remind.

Speaker Change: We also continue to take steps to improve our cost structure.

Speaker Change: Which has enhanced our profitability in recent quarters.

Speaker Change: That's always important to mention that while supply chain issues are metric crude.

Speaker Change: With us to varying degrees and could impact results in future periods.

Speaker Change: These challenges are simply component of doing business, we will almost certainly encounter them again in the future.

Speaker Change: Chicken at some of these challenges we built inventory in recent months to accommodate pending and upcoming orders.

Speaker Change: Additionally.

Speaker Change: We've noted.

Speaker Change: The magnitude of her backlog unexpected orders, that's gave us better visibility and therefore, a better ability to manage our procurement processes and a great bargains.

Speaker Change: We continue to believe that the current market environment is not advantageous your mind.

Rob Capps: Our key markets remain loaded with opportunity. We're seeing an uptick in customer inquiries and RFQs, as would come out of the summer months. In addition to now operating a more streamlined and focused suite of products, our team continues to develop new and innovative ways to adapt and implement our technologies to meet the evolving needs of our customers. Recent sales and inquiries regarding our ultra-high-resolution feeling streamer systems are a good example of this. I'm confident that our differentiated approach and best-of-class suite products will continue to give us the competitive advantage to address the growing demand we're seeing within and bring to the technology industry.

Key markets remain loaded with opportunity.

Speaker Change: Seeing an uptick in customer inquiries are huge as we come out of the summer months.

Speaker Change: In addition to now operating a more streamlined and focused suite of products.

Speaker Change: Can't continues to develop new and innovative ways to adapt mathematic technologies to meet the evolving needs of our customers.

Speaker Change: Recent sales inquiries regarding your ultra high resolution feeling extremely systems are good example of this.

Speaker Change: I'm confident that our differentiated approach and best in class suite products will continue to give us the competitive advantage to address their growing demand, we're seeing within the bring technology industry.

Rob Capps: For repair activities, both for our own products, and for a third-party product, continue to develop and look promising for the future. We continue to see traction for our spectral AI sopiously through our collaboration and agreement with General Oceans. We believe there are a number of promising prospects. The recent customer feedback for this software has been positive. We hope to find further applications for this technology in the future.

Speaker Change: Our repair activities, both for our own products as well as third party products continue to develop look promising for the future.

Speaker Change: We continue to see traction for spectral software suite to our collaboration agreement with general oceans.

Speaker Change: We believe there are a number of promising prospects.

Speaker Change: Recent customer feedback and the software has been positive and we hope to find the killer applications for this technology in the future.

Now I'll, let Mark walk you through the second quarter financial results, a little bit more detail.

Mark Cox: Now, I'll add more equities to the second court of financial results in a bit more detail.

Mark Cox: Thanks, Rob.

Mark: Thanks, Rob and good morning, everyone.

Mark Cox: Good morning, everyone. Consistent with the past several calls, I would like to remind everyone that with the sale of client, those operations have been treated as discontinued operations, and prior period results have been restated to reflect that. Accordingly, the results from continuing operations that we reported yesterday and are discussing here today, including prior period comparative data, do not include amounts related to client. They include only our ongoing business. As Rob mentioned earlier, revenues from marine technology product sales totaled 10 million in the quarter, which was up about 32 percent from approximately 7.6 million in the same period a year ago.

Mark: Fifth with the past several calls I would like to remind everyone that with the sale of Klein those operations have been treated as discontinued operations and prior period results have been restated to reflect that.

Speaker Change: Accordingly, the results from continuing operations that we reported yesterday and are discussing here today, including prior period comparative data.

Speaker Change: Not include amounts related decline.

Speaker Change: They include only our ongoing business.

Speaker Change: As Rob mentioned earlier revenues for Marine technology product sales totaled $10 million in the quarter, which was up about 32% from approximately $7 6 million in the same period a year ago.

Mark Cox: We continue to believe the underlying strengths we're seeing in all our key markets and the significant customer demand driving our robust backlog positions as well for sustained high-level revenue in the coming quarters. Second quarter, gross profit was approximately 4.8 million, which was up approximately 62 percent when compared to the second quarter last year. Gross profit margin, which was approximately 48 percent for the quarter, also increased approximately 22 percent when compared to the same quarter a year ago. This margin improvement stemmed from increased manufacturing activity that resulted in greater overhead absorption. Margin's also benefited from the price increases that were implemented in 2024 as well as greater production efficiencies throughout the business.

Speaker Change: We continue to believe the underlying strength, we're seeing in all our key markets and the significant customer demand driving a robust backlog positions us well for sustained high level revenue in the coming quarters.

Speaker Change: Second quarter gross profit was approximately $4 8 million.

Speaker Change: Which was up approximately six 2% when compared to the second quarter of last year.

Gross profit margin, which was approximately 48% for the quarter also increased approximately 22% when compared to the same quarter a year ago.

Speaker Change: This margin improvement stemmed from increased manufacturing activity that resulted in greater overhead absorption.

Speaker Change: Margins also benefited from the price increases that were implemented in 2024 as well as greater production efficiencies throughout the business.

Mark Cox: General and administrative expenses were 2.8 million for the second quarter of fiscal 2025, which was flat sequentially and down slightly from 2.9 million in the second quarter last year. We also expect additional reductions in general administrative expenses in the third quarter as we continue to streamline overhead costs following the sale of clients. As we've mentioned on previous calls, the sale of client has allowed us to streamline our operations and thereby reduce some costs, most notably related to corporate expenses attributable to the supportive client. I should note that our general and administrative costs do not include incremental third-party costs related to the preferred stock proposal and resulting conversion of preferred stock into common stock.

Speaker Change: Our general and administrative expenses were $2 8 million for the second quarter of fiscal 2025.

Speaker Change: Which was flat sequentially and down slightly from $2 9 million in the second quarter of last year.

Speaker Change: We also expect additional reductions in general and administrative expenses in the third quarter as we continued to streamline overhead costs following the sale of Klein.

Speaker Change: As we've mentioned on previous calls the sell of Klein has allowed us to streamline our operations and thereby reduce some costs, most notably related to corporate expenses attributable to the support of corn.

Speaker Change: I should note that our general and administrative costs do not include incremental third party costs related to the preferred stock proposal and resulting conversion preferred stock into common stock.

Mark Cox: I'll touch on the accounting for that in a moment. A research and development expense for the second quarter was 328,000. This was down both sequentially and compared to the prior year period. These costs are largely directed toward the development of our next generation streamer system and continued development of our spectral AI software suite. Operating income for the second quarter was approximately 1.4 million compared to an operating loss of 767,000 in the second quarter of fiscal 2024. Our second quarter adjusted EBITDA was approximately 1.8 million, compared to an adjusted EBITDA loss of 120,000 in the second quarter a year ago.

Speaker Change: I'll touch on the accounting for that in a moment.

Our research and development expense for the second quarter was 328000.

Speaker Change: This was down both sequentially and compared to the prior year period.

Speaker Change: These costs are largely directed toward the development of our next generation Streamer system and continued development of our spectral AI software suite.

Speaker Change: Operating income for the second quarter was approximately $1 4 million compared to an operating loss of 767000 in the second quarter of fiscal 2024.

Speaker Change: Our second quarter adjusted EBITDA was approximately $1 8 million compared to an adjusted EBITDA loss of 120000 from the second quarter a year ago.

Mark Cox: Net income for the second quarter was 798,000, which was an improvement of approximately 1.6 million from the net loss of 758,000 in the second quarter of fiscal 2024. As Rob mentioned, we're pleased to have achieved another quarter of profitability, and we hope to continue building on this momentum in the future period. As of July 31, 2024, we had working capital of approximately 20.3 million and 1.9 million of cash on hand. As expected, during the quarter, liquidity continued to be impacted by mine's operational requirements related to acquiring inventory and executing on a backlog of orders. However, we did generate approximately 1 million of cash flow from operations in the second quarter.

Speaker Change: Net income for the second quarter was 798000, which was an improvement of approximately $1 6 million from the net loss of 758000 in the second quarter of fiscal 'twenty 'twenty four.

Rob Capps: As Rob mentioned.

Rob Capps: We're pleased to have achieved another quarter of profitability and we hope to continue building on this momentum in the future period.

Rob Capps: As of July 31st 2024, we had working capital of approximately $20 3 million and $1 9 million of cash on hand.

Speaker Change: As expected during the quarter liquidity continues to be impacted by mine's operational requirements related to acquiring inventory and executing on our backlog of orders.

Speaker Change: However, we did generate approximately $1 million of cash flow from operations in the second quarter.

Speaker Change: The balance sheet remains strong as of the day mine remains debt free.

Mark Cox: The balance sheet remains strong, and as of today, mine remains debt-free. Additionally, after the preferred stock conversion earlier this month, mine now maintains a clean capital structure and has good flexibility from which to enhance stockholder value. As Rob mentioned, the conversion of the preferred stock is not reflected in our second quarter results. In the third quarter financials, we will reflect this transaction. We expect to record the issuance of approximately 6.6 million new shares of common stock at the then current market value of the common stock, less associated transaction costs such as legal fees and solicitation costs.

Speaker Change: Additionally, after the preferred stock conversion earlier this month mine now maintains a clean capital structure.

That is good flexibility from which to enhance stockholder value.

Speaker Change: As Rob mentioned the conversion of the preferred stock is not reflected in our second quarter results.

Rob Capps: In the third quarter financials, we will reflect this transaction.

Rob Capps: We expect to record the issuance of approximately $6 6 million new shares of common stock at the then current market value of the common stock left.

Less associated transaction costs, such as legal fees and solicitation cost.

Rob Capps: The carrying value of the preferred stock will be eliminated.

Mark Cox: The carrying value of the preferred stock will be eliminated. The excess of the carrying value of the preferred stock over the reported value of the new common stock, which we currently estimate to be approximately $15 million, will be credited directly to retained earnings. This treatment was described in the proxy statement provided to preferred stockholders associated with the approval of the proposed.

Rob Capps: The excess of the carrying value of the preferred stock over the recorded value of the new common stock.

Rob Capps: We currently estimate to be approximately $15 million.

We'll be credited directly to retained earnings.

Rob Capps: This treatment was described in the proxy statement provided to preferred stockholders associated with the approval of the proposal.

Rob Capps: Council. I'll now pass it back over to Rob for some concluding comments.

Rob Capps: I'll now pass it back over to Rob for some concluding comments.

Rob Capps: Okay. Thanks Mark.

Rob Capps: Okay, thanks, Mark. My continues to benefit from the positive momentum we've generated in recent periods, and there's sustained higher-level revenue reflects that. We're seeing strong customer interest in the man that cross-report FIDNAC protocols. Our focus approach and streamlined operations continue to positively impact the results. We maintain a lean operating structure to continue to manage cost to improve margins and enhance our bottom line. We fully expect to achieve positive adjusted EBITDAW and profitability throughout fiscal 2025. We remain encouraged by the notable tailwinds and significant opportunities for a C-Map unit and our other initiatives in this market.

Rob Capps: My continues to benefit from the positive momentum we've generated in recent periods and a sustained higher level revenue reflects that.

Rob Capps: We're seeing strong customer interest and demand across all parts of that product lines.

Speaker Change: Just approach streamlining operations to continue to positively impact our results.

Speaker Change: We maintain a lean operating structure to continue to manage cost to improve margins and enhance your bottom line.

Speaker Change: We expect to achieve positive adjusted EBITDA and profitability throughout fiscal 2025.

We remain encouraged by the notable tailwind and significant opportunities for steam after unit and our other initiatives in this market.

Rob Capps: We develop valuable partnerships and customer relationships that have enabled us to build a strong backlog that continues to drive the orders. Our marine technology products continue to penetrate a variety of industries and markets. I believe this is a direct correlation to the work that our team has done to develop and continually adapt our technology to make the evolving needs of our customers.

Speaker Change: You can tell us valuable partnerships and customer relationships have enabled us to build a strong backlog and continue to drive new orders.

Our marine technology products continue to penetrate a variety of industries and markets. I believe this is a direct correlation to the work that our team has done to develop and continually adapt our technology to meet the evolving needs of our customers.

Rob Capps: We believe our pipeline will receive the hand-pending orders and other prospects or reflect the significant demand and please, with the results from the second quarter, we believe mine is poised to catalyze on additional opportunities delivered approved results in the coming course.

Speaker Change: We believe our pipeline that we received or have pending orders and other prospects.

Speaker Change: Is it significant demand and market adoption of our product lines.

Speaker Change: While we're pleased with our results for the second quarter. We believe mind is poised to capitalize on additional opportunities and deliver improved results in the coming quarters.

Rob Capps: As usual, a lot to remind everyone that fluctuations in a revenue from quarter to quarter are bound to occur at some point in the future, as they have at times in the past. In this relative variation, could result from any number of different challenges, naps, and circumstances, or simple customer delivery requirements. We continue to maintain our belief that the general trend will be one that's a state-of-the-art, higher level revenue for us remaining at physical 2025 and beyond. The conversion of the third shock to Comestalk is another important development that, in my opinion, provides a great deal of flexibility in pursuing these opportunities.

Speaker Change: As usual.

Speaker Change: To remind everyone that fluctuations in our revenue from quarter to quarter or bad to occur at some point in the future as they have at times in the past.

Speaker Change: In this regard.

Speaker Change: And the variation could result from any number of different challenges naphthacene struck the chances or simple customer delivery requirements.

Speaker Change: We continue to maintain our belief that the general trend will be one that is sustainably higher level revenue throughout the remainder of fiscal 2025 and beyond.

Speaker Change: The conversion of preferred stock to common stock is another important element of that in my opinion provides a great deal of flexibility in pursuing these opportunities.

Rob Capps: Looking forward and barring any unexpected challenges or naps and circumstances, we expect the results from the second half of physical 2025 to be somewhat approved compared to the first half of the year. Our current visibility, healthy customer engagement, strong backlog, and favorable macro tailwinds continue to give us confidence. We will see a higher revenue and continued positive adjusted a bit off in the coming course, which we anticipate, culminating in another profitable year from mine. We have a differentiated and market-leading switch of products, a favorable market environment, and now a very clean, debt-free capital structure.

Looking forward and barring any unexpected challenges or unforeseen circumstances, we expect our results in second half of fiscal 'twenty 'twenty five to be somewhat improved compared to the first half of the year.

Speaker Change: Our current visibility.

Speaker Change: The customer engagement.

Speaker Change: Strong backlog and favorable macro tailwind should continue to give us confidence that we'll see higher revenue and continued positive adjusted EBITDA in the kind of approach.

We anticipate.

Speaker Change: And another profitable year for Mike.

Mike: We have a differentiated and market, leading switching products, a favorable market environment and now I'm very clean debt free capital structure.

Rob Capps: We look forward to capitalizing on these positive factors to increase talkable value as we move forward.

Mike: We look forward to capitalize on these positive factors to increase stockholder value as we move forward.

Operator: Will the event operator reach out to open the call for questions? Thank you. 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 may press star two if you would like to remove your question from the queue, and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.

Speaker Change: With that operator, we can now open the call for questions.

Speaker Change: Thank you if he 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 May press star two if he would like.

Speaker Change: A question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: He is.

Tyson Bauer: Our first question is from Tyson Bauer with Casey Capitol. Please proceed.

Speaker Change: Our first question is presentation better with Casey capital. Please proceed.

Rob Capps: Congratulations, gentlemen. Thank you, Tyson. A lot less stressful for all involved now that the cap structure. Obviously, backlog will be somewhat of a focus, but I think your comments on the outlook kind of soft in that. We go from 38 to 31, 26, add another six, so you're about 32. So you're maintaining your backlog. You mentioned sustained revenue as we go forth in the next couple of quarters with an improvement in the second half results. Do you look at that as kind of now we've hit that benchmark level where, other than maybe some unique timing issues, we should be at that 10 plus million going forward.

Speaker Change: Congratulations gentlemen.

Casey: Hey, Thanks, guys.

A lot less stressful for all involved and all that.

Speaker Change: Cap structure.

Speaker Change: Obviously backlog there'll be somewhat of a focus but I think your comments on the outlook kind of soften that we go from 38 to 31 26 add another six so you're about 32.

Speaker Change: You're maintaining your backlog.

You mentioned sustained revenue as we go forth in the next couple of quarters with an improvement in the second half results.

Operator: Welcome to Mind Technology's Disco 2025 second quarter earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Do you look at that as kind of know where you've hit that benchmark level, where other than maybe some unique timing issues, we should be at that 10 plus million going forward.

Operator: A 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. Please note this conference is being recorded.

Rob Capps: Oh, of course, I'm always hesitant to be specific about that, but I think nominally you're correct. Just understanding that when a particular order falls, you know, from one week to the next, could have an impact on getting quarters. So if we wake up when they had an eight million dollar quarter, you know, I would not be panicking. This is no, you know, don't be shocked if there's a 12 million dollar quarter. Right.

Speaker Change: Oh of course, I'm always hesitant excuse me to be specific about that but I I think nominally youre correct, just understanding that when a particular order falls.

Zach Vaughan: I will now turn the conference over to Zach Vaughan. Thank you, you may begin.

Zach Vaughan: Thank you, operator.

Speaker Change: But one way to next could have an impact on the getting quarter. So with wake up one day and have that $8 million a quarter I would not be panicking.

Zach Vaughan: Good morning and welcome to the Mind Technology fiscal 2025 second quarter earnings conference call. We appreciate all of you joining us today. With me are Rob Capps, President and Chief Executive Officer, and Mark Cox, Vice President and Chief Financial Officer. Before I turn the call over to Rob, I have a few items to cover. If you would 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 a recorded incident replay until September 19th.

Speaker Change: So there'll be shocked if there's 12 billion dollar quarter.

Speaker Change: Right.

Rob Capps: I think one of the more impressive financial metrics that you posted in the quarter was your gross margin, 47.6. I think I had you at about 45 and a half. That's 200 basis points. I had a schedule, which I'll take that over the little lighter on the revenue any day. Is that mainly from that operating leverage, or is that just that pricing that's coming through, or kind of a combination? Yeah, it's a combination. I mean, certainly the operating leverage helps a lot, and they're able to buy more rationally. You know, product mix has an impact.

I think one of the more impressive financial metrics that you posted in the quarter was <unk>.

Speaker Change: Gross margin of.

Speaker Change: 47, six I think I had you had about 45 and a half it's 200 basis points ahead of schedule.

Speaker Change: Which I will take that over the little lighter on the revenue any day.

Speaker Change: Is that mainly from that operating leverage or is that just that pricing, that's coming through or kind of a combination.

Zach Vaughan: Information on how to access the replay was provided in yesterday's earnings release.

Speaker Change: It's a combination when you know certainly the operating leverage helps a lot and they were able to buy more rationally.

Speaker Change: Product mix has an impact.

Rob Capps: So there are all sorts of things to go into that calculus, but you know, we are very pleased about that. That's something we've only been trying to focus on. And you know, hopefully we can continue that going forward. So you see that being sustainable also, or widening as we continue. I would say more sustainable. Again, if we solve a quarter, you know, a couple of points, a couple of points, that wouldn't be a cost concern at all. Again, just give them products here in a quarter, you know, what discount structures happen, you know, that's sort of think an impact at quarter to quarter.

Speaker Change: So there are all sorts of things that go into that calculus, but yes.

Speaker Change: We are very pleased about that and that's something we've only been trying to focus on.

Speaker Change: Well I hope, we can continue that going forward.

Speaker Change: So you see that being sustainable also or widening as we continue.

Well I would say more sustainable now again, if we solve a quarter a couple of points.

Speaker Change: No that wouldn't be it.

Speaker Change: Yeah.

Speaker Change: Cause for concern at all.

And then just given what products during the quarter.

Speaker Change: You know what discount structures happen.

Speaker Change: Sort of thing can impact a quarter to quarter, but I think again.

Rob Capps: But I think again, we've done a good job at improving margins at the gross level.

Speaker Change: We've done a good job of improving margins.

Speaker Change: Yeah.

Rob Capps: I think another impressive financial metric here is catchable operations being up a million in the quarter. Given you had a three million increase in your inventory, it's been a while that we've had positive numbers on that line item. Are we expected then to work down a little bit of that inventory, or is that going to be kind of sustained? And what is your networking capital outlook the second half? Yeah, I would hope and expect it would be able to work that down a bit, and therefore, we're starting to see, you know, the cash flow turn a bit, collector receivables from things we've shipped.

Speaker Change: Take another impressive.

Speaker Change: Financial metric here is cash flow from operations being up a million in the quarter.

Given you had a $3 million increase in your inventory.

Speaker Change: It's been a while that we've had a positive numbers on that line item or.

Rob Capps: Now, I would like to turn the call over to Rob Taps. Okay, thanks, Zach, and thanks for all of you joining us today. First of all, I want to welcome all of our new common stockholders. With the conversion of our preferred stock and the common stock last week, mine now has a substantial new group of common stockholders. For me, it's not most of you. Mine is a new company. This new capital structure and our encouraging business environment provides mind with important opportunities. Today, I'll discuss some highlights from the quarter. Mark will then provide a more detailed update on our financials.

Are we expected them to work down a little bit of that inventory or is that going to be kind of a sustained and what is your networking capital outlook the second half.

Speaker Change: Yeah, I would hope and expect that would be able to work that down a bit and therefore, we're starting to see the cash flow turned a bit collecting receivables from things we shipped.

Rob Capps: Again, we pre-bought inventory in some cases, trying to work some of that down and maybe don't have to be quite as aggressive in the future with that. Having said that, you know, you get a big order next week that we need to, you know, buy the day to deliver in six months; you know, that can have an impact. But in general, I would expect this to work in. You go ahead and get those big orders.

Speaker Change: Again, we we.

Speaker Change: Pre bought inventory in some cases.

Speaker Change: I'm trying to work some of that data, maybe you don't have to be quite as aggressive.

Speaker Change: Future with that.

Speaker Change: Having said that you know.

Speaker Change: You get a big order next week that we need to.

Speaker Change: You know by today to deliver in six months, you know that can have an impact but in general I would expect us to work that down with it.

Speaker Change: You go ahead and get those big orders.

Speaker Change: Exactly.

Tyson Bauer: Deluted Chaircon, now that we all should be reporting pods of EPS as far as gap purposes with the conversion, which is roughly 8 million shares, would have gave you a quarter around 10 cents. I want to thank you have very much options or anything else in the money. So is that 8 million a fairly good deluded number to work with? Yes, it is. Yeah, there's nothing in the money at this point. Okay, that should be a good number. And I was trying to go on the back of my notes. What are you looking at your book value post conversion?

Speaker Change: Diluted share count now that we should be reporting positive EPS as far as the GAAP purposes, with the conversion, which was roughly 8 million shares.

Speaker Change: What I gave you a quarter around 10 cents.

I want to thank you all very much options or anything else in the money. So is that 8 million are fairly good diluted number to work with yes. It is yeah. There's no there's nothing in the money at this point.

Speaker Change: Okay. So it would be a good number.

And I was trying to do it.

Speaker Change: On the back of my notes.

Speaker Change: What are you looking at your book value post conversion I know you talked about $15 million retained earnings and preferred getting rid of that now what is your book value looks like per share.

Rob Capps: While it did not directly impact second quarter results, the approval of our preferred stock proposal and the resulting inversion of all preferred stock and common stock was a very important development. Upon the conversion, we issued approximately 6.6 million shares of common stock. Mark now has about 8 million shares outstanding. All that's any preferred stock, along with associated accrued but unclear dividends, has been retired. Mark will touch on the candidate for this conversion, which will see in the third quarter. We entered the third quarter with a strong backlog of approximately 26 million dollars. I know that some of you have been concerned that there have not been more announcements of new orders recently.

Tyson Bauer: I know you talk about 15 million retained earnings and the preferred getting rid of net. Now, what does your book value look like for share? I was just, Tyson, I don't have the number in front of me. So I hate to do something about the cost. Let's think you will be out this evening. I think if I can do your own math off of that, we'll get pretty close. I don't have a front of me, so I don't want to miss this state on that.

Speaker Change: Oh Gosh Tyson I don't have the number in front of me so I hate to just do something off the cuff.

Speaker Change: Less than 10-Q will be out this evening.

Speaker Change: If I can do their own math off of that and get pretty damn close to I. Just I don't have them in front of me So I don't want it.

Ms State: Ms State on that.

Tyson Bauer: I know I'm talking about a lot of things outside of your actual business products and services. One of the key things, you're getting a market value of 29 million dollars, and you just got rid of a liquidation value preference of 48. Right. Which included getting rid of all those accumulated dividends, which go away and will not continue to accumulate in addition to what the preferred value was in the marketplace before you did the conversion. Are you a little surprised that we haven't seen an adjustment to your market valuation just based on those numbers alone? You know, frankly, not really in that you kind of think about the natural arbitrage that's been in place.

Speaker Change: No I'm talking about a lot of things outside of your actual business products and services are one of the key things.

Speaker Change: You're getting a market value of $29 million and you just got rid of a liquidation value preference 48.

Rob Capps: Although the overflow is often sporadic, the staff are common to see positives in order attended throughout the year, especially during the summer. The backlog at the end of the quarter was down sequentially; however, it was more than 50% higher than at the same time last year, which is quite high by its local standards. We don't announce each and every order we receive. Currently, there are more than 6 million dollars in orders that have been received, such that you like to refer, or that we believe are imminent. And those are not included in the reported backlog.

Speaker Change: Right. What's included getting rid of all of those accumulated dividends, which go away and will not continue to accumulate in addition to what the preferred value was in the marketplace. Before you did the conversions are you a little surprised that we haven't seen an adjustment to your market valuation just.

Speaker Change: Based on those numbers alone.

Speaker Change: You know frankly, not really in that you'd kind of think about the natural arbitrage that's been in place.

Rob Capps: Beyond that, we have an active pipeline of pending orders and prospects that is well in excess of our backlog received orders. We believe this robust backlog, and in many of our opportunities we are pursuing, those well for favorable future financial results. As always, the case, timing of certain orders is subject to variability due to any number of challenges, and for seeing circumstances or customer delivered requirements. Organic source controllers, movie length positioning systems, and ceiling streamer systems are all contributing to our strong backlog, which currently have a number of pending orders across these product lines. I'm confident that the type of macro-environment, our narrowed focus, strong customer relationships, every increase in capabilities and value of partnerships will continue to see that at nine, as the partner choice for companies looking to acquire high quality and versatile marine technology products.

Speaker Change: Yeah.

Rob Capps: There's not been demand to buy the common recently. People will be buying the preferred instead. Obviously, there are some people who bought the preferred and intended to unload immediately. So, I think we're seeing some of that selling pressure right now. So, I would expect that to work itself off in the coming days and maybe weeks. And as we continue to work for more of mine, I think it'll start from the texture of itself. So, I'm not concerned about that. Back at. Yeah, as we work through those non-votes on the preferred and no-votes, they're converted shares.

Speaker Change: There's not been demand can buy the common recently people will be buying the preferred instead.

Honestly there are some people who bought the preferred you intended to unload immediately so I think we're seeing some of that selling pressure right. Now so I would expect that to work itself off kind of in that.

Speaker Change: So it may be weeks.

Speaker Change: And as we continue to perform I think the stock price will take care of itself. So I'm not concerned about that.

Speaker Change: As we've worked through those non votes on the preferred of no votes.

Speaker Change: There are converted shares.

Tyson Bauer: I would assume, given what you're given as an outlook and what you've posted on a performance basis, we should see some positive traction. All other things being equal. I would love to expect that. I hope so. All right.

Speaker Change: I would assume given what you are giving us an outlook on what you've posted on a pro forma basis, we should see some positive traction.

Speaker Change: All other things being equal.

Speaker Change: I would I would expect so I would hope so.

Speaker Change: Alright.

Tyson Bauer: I'm sure somebody else will have some business questions for you, but thanks a lot, and great job, guys. Thank you.

Speaker Change: I'm sure somebody else will have some business questions for you, but thanks, a lot and great job guys. Okay. Thanks talking.

Russ Taylor: As a reminder, just star one on your telephone keypad if you would like to ask a question. Our next question is from Russ Taylor with ARS Investment Partners.

Speaker Change: As a reminder, just star one on your telephone keypad, if he would like to ask a question.

Rob Capps: From marine technology products, revenues from the second quarter of fiscal 2025 were $10 million. Our ability to grow revenue, both sequentially and year-to-year, demonstrates the strength in customer engagement and overflow, favorable macro-failment, and the emphasis we put on execution and efficiency. We also continue to take steps to improve our cost structure, which has enhanced our profitability in the recent quarters. That's always important to mention that while supply chain issues are mentioned, there are still with us to varying degrees, and could impact results in future periods. These challenges are simply a component of the new business, and we will almost certainly encounter them again in the future.

Speaker Change: Our next question is from Ross Taylor with R. S investment partners. Please proceed.

Russ Taylor: Please proceed. Thank you. And I'll echo Tyson's congratulations. And also thank you for your perseverance. It was not an easy thing to get done. I had some people telling me it wouldn't get done. And it got done. So, I think this is sitting the stage for a lot of value creation going forward.

Ross Taylor: Thank you and I'll Echo Tyson Congratulations and also thank you for your perseverance. It was not an easy thing to get done I had some people telling me it wouldn't get done and they got that so I think this is setting the stage for a lot of value creation going forward and I'm confident that as a preferred holder all be better off the year.

Russ Taylor: And I'm confident as a preferred holder, I'll be better off the year from now than I would have been under the old structure. Thanks, Russ.

Ross Taylor: Now than I was a little than under the old structure.

Ross Taylor: Antitrust.

Rob Capps: a couple of questions. What were inventory levels at quarter end? About 20 million. 20?

Speaker Change: Couple of questions for where inventory levels at quarter end.

Speaker Change: $20 million.

Speaker Change: 20.

Rob Capps: To combat some of these challenges, we've built inventory in recent months to accommodate pending and upcoming orders. Additionally, if we've done it, the magnitude of our backlog and expected orders does give us better visibility and therefore better ability to manage our procurement processes. We continue to believe that the current market environment is an advantageous remind. Our key markets remain loaded with opportunity. We're seeing an uptick in customer inquiries and RFQs as would come out of the summer months. In addition to now operating a more streamlined and focused suite of products, our team continues to develop new and innovative ways to adapt and implement our technologies to meet the evolving needs of our customers.

Speaker Change: Yeah.

Rob Capps: Second, is you talked about pulling down the GNA as you're right-sizing the business.

Speaker Change: Second is.

Speaker Change: You talked about pulling down.

The G&A as you right sizing the business, what kind of run rate G&A should we expect to see going forward either annually or on a quarter.

Mark Cox: What kind of run rate GNA should we expect to see going forward either annually or on a quarter basis? So we're down a little bit, you know, 100,000 or so, you know, not drastically, but at the point we were starting to tweak things of it, you know, just to head counts and some places. So it's kind of like that level, you know, annualize the two-way and maybe a half million off that, maybe make some sense. Those are rough numbers, obviously. Okay, and that's a number that you should, that, you know, two-way to annualized down looks out to something around 10 million annually, and you're confident that as you grow your revenues, that number should be able to hold towards that 10 million dollar rate?

Speaker Change: Basis so.

Speaker Change: So we're at a two eight this quarter I would.

Speaker Change: Nice to see that down a little bit you know.

Yeah.

Speaker Change: 100000 or so.

Drastically.

Speaker Change: There's a point, where we're starting to tweak things a bit you know just head counts in some places.

Speaker Change: So you kind of look at that level.

Speaker Change: Oh yeah.

Elisa to I can take maybe a half million off that maybe makes some sense, but that's those are rough numbers obviously.

Speaker Change: Okay, and that's a number that you should that.

Rob Capps: Recent sales and inquiries regarding our ultra-high-resolution feeling streamer systems are a good example of this. I'm confident that our differentiated approach and best-of-class suite products will continue to give us the competitive advantage to address the growing demand we're seeing within and bring to the technology industry. For repair activities, both for our own products, and for a third-party product, continue to develop and look promising for the future. We continue to see traction for our spectral AI sopiously through our collaboration and agreement with General Oceans. We believe there are a number of promising prospects. The recent customer feedback for this software has been positive.

Speaker Change: Two eight annualized down without too.

Speaker Change: Around $10 million annually and you are confident that if as you grow your revenues that number should be able to hold towards that $10 million range. Yeah, I think so yeah.

Mark Cox: Yeah, I think so, yeah. For a while, at least, obviously, about two point where we have to expand a bit. Yeah, for the time being. Yeah, within reason. Yeah, obviously.

Speaker Change: For a while at least obviously you don't get to a point, where we have to expand it but yeah for the time being yeah.

Speaker Change: Yeah within reason yeah on this.

Mark Cox: What are your public company costs? Obviously, it's pretty expensive to be a small public company. Yeah, not uncommon to cost over a million dollars.

Speaker Change: One of your public company costs, obviously, it's pretty expensive to be a small public company.

Speaker Change: Not uncommon cost over a million dollars what kind of cost you guys incurred just yeah. That's a great question.

Mark Cox: What kind of costs do you guys encourage? Yeah, that's a great question. So I think it's well in the excess of the million dollars. You're the art of cost or more; you've got public reporting costs, you've got, you know, shareholder costs. So I think well in the excess of a million, probably approaching two million is not hard to get to. Wow, so it could be something as high as like 15, 16 cents a share in earnings impact. Yeah, it's really, really pretty. Yeah, under the eight million shares. Okay, that's actually pretty, pretty meaningful.

Speaker Change: I think it's well in excess of a million dollars.

Rob Capps: We hope to find further applications for this technology in the future.

Speaker Change: Your yard at cost you more you got you.

Mark Cox: Now, I'll add more equities to the second court of financial results in a bit more detail.

Speaker Change: Public reporting cost.

Speaker Change: Got you no shareholder cost.

Speaker Change: So I think well in excess of a million they'd probably approaching $2 million.

Mark Cox: Thanks, Rob.

Speaker Change: It's not hard to get to.

Speaker Change: Wow, so it could be something as high as like 15, 16 cents a share in earnings impact that's really that's real money procure.

Speaker Change: Yeah.

Speaker Change: Under the 8 million shares, okay, that's actually pretty pretty meaningful.

Russ Taylor: In the past, you had to subtract the preferred dividends like the number, and Tyson touched on this. I had, you know, it always drives me crazy because I think Tyson reports his numbers on adjusted and the street picked it up as gap. And so they reported it as an earnings miss when, in fact, I actually think you were probably in line with Tyson's number. He can come back on and confirm that, confirm that if I'm right or wrong. If I'm wrong, he can call me up in the last time. But when we're looking at that, that's what, about almost 12 cents a quarter, roughly 47, 48 cents a year.

Speaker Change: In the past you had to subtract the preferred dividends like the number and Tyson touched on this.

Speaker Change: Yeah. It always drives me crazy cause I think Tyson reports its numbers on an adjusted and.

Speaker Change: The street picked it up as GAAP and so they reported as an earnings Miss one in fact, I actually think you were probably in line with license number he can come back on and confirm that confirm that if I'm right or wrong. If I'm wrong. He can call me up and laugh at me.

Speaker Change: Uh huh.

Speaker Change: But when we're looking at that that's what about almost 12 cents a quarter roughly 47 48 cents a year.

Mark Cox: When we go going forward, when you get this, are you going to restate past earnings or is this all going to come out in that that you kind of make all adjustment? Yeah, so I don't hold it to this since we're still researching as to the proper way to do this because there's not clear guidance on some of this. I suspect EPS will be restated, and there will be a, I think, a really strange looking adjustment in EPS in first quarter. This $15 million charge to return earnings or process of $15 million. Actually, we have reflected in EPS in that quarter, which is kind of meaningless, but we think that's what gaps us.

Speaker Change: When we go going forward when you get this are you going to restate past earnings or is this all going to come out in that.

Speaker Change: You kind of a make.

Speaker Change: Make whole adjustment.

Speaker Change: Yeah. So.

Speaker Change: Don't hold me to this it suddenly we're still researching as to the proper way to do it because there's not a clear guidance on some of this.

Speaker Change: EPS will be restated.

Speaker Change: And there will be a I think a really strange looking adjusted and EPS in the first quarter.

Speaker Change: This $15 million charged to retained earnings.

Speaker Change: Approximately 15 million actually will get reflected in EPS in that quarter, which is kind of thing, but that's we think that's what gaps do.

Russ Taylor: Yeah, and all I would say is, you know, break out whatever that number is so that even Bloomberg can pick it up and be right with it.

Speaker Change: Yeah, and all I would say is breakout whatever that number is so that yeah yeah.

Speaker Change: Even bloomberg can pick it up and be right with it.

Speaker Change: Right.

Russ Taylor: You've talked about, in the comments you made, you talked about the fact that you saw the second half being slightly better than the first half. Can you tell us what number you're working on for the first half? When I'm looking at reported gap numbers, I have you earning about 58 cents. I, when I adjust for the preferred dividends, I add that back. I get 24 cents added to that. So I'm talking about something that's in the 81 cent range. What do you see as the second half? I mean, what should I be benchmarking slightly better against?

Speaker Change: You've talked about in the comments you made you talked about the fact that you saw the second half being slightly better than the first half can you tell us what number you're working on for the first half and I'm looking at reported GAAP numbers I have your learning about 58.

Speaker Change: I when I adjust for the preferred dividends I add that back I get 24 cents added to that so I'm talking about something that's in the 81 cent range.

What do you see as the second half I mean, what should I be benchmarking slightly better against is it 57 cents is it a different number.

Russ Taylor: Is it 57 cents? Is it a different number? When I'm going to compare apples to apples, what should I be using as my first apple? So Ross, to be quite frank, my was alluding to a revenue level. And so, you know, roughly 20 million revenue, maybe just below that in the first half. So that's what I was comparing to you. And then kind of do the math off of that. That's what the EPS looks like. So I wasn't kind of do it.

Mike: And I'm going to compare apples to apples, what should I be using as my first Apple so raws to be quite quite frankly, what Mike Mike.

Mike: It was alluding to a revenue level.

Speaker Change: And so you know roughly $20 million of revenue that would be just below that in the first half.

Speaker Change: So that's what I was comparing to and then you kind of do the math off of that as to what the EPS looks like so I wasn't trying to do it from an EPS standpoint.

Russ Taylor: Is there anything in the first half of the year that was uniquely one time that we should be backing out to get that base level before we add back the preferred dividend? I don't think there's nothing really legal. I mean, again, there's some seasonality and some of our costs of DNA cost that we've talked about in the past, so nothing out of the ordinary.

Speaker Change: Is there anything in the first half of the year that was uniquely one time that we should be backing out to get that base level before we add back the preferred dividend.

Speaker Change: Well I don't think so.

Speaker Change: No nothing really unusual although again, there's some seasonality in some of our costs, our G&A costs that we've talked about that in the past so nothing.

Speaker Change: Out of the ordinary.

Russ Taylor: Okay. Cool. So that's a really nice setup for the second half of this year.

Speaker Change: Okay cool so that's a really nice setup for the second half of this year also you press released the last line and it was interesting to me.

Russ Taylor: Also, your press release, the last line in it was interesting to me. You made a comment is a little sentence. This is an important step for mind. It simplifies our capital structure. It's actually the last two sentences. I went to public school for a given. And in my opinion, they created meaningful stockholder value. Were you going to some more color on how you see that value being realized? Is this setting up a situation where obviously we're going to have much better earnings that clean balance. That creates one level of value, but does this also create a situation where strategically you think that it will be easier for people to look at mind and value it appropriately and come up with a number that will be found acceptable to all shareholders in the past.

Speaker Change: You made a comment is it'll sentence is this is an important step for mind it simplifies our capital structure its actually the last two sentences.

Speaker Change: I went to public schools.

Speaker Change #100: And in my opinion and set the stage for creating meaningful stockholder value. When you go into some more color on how you see that value being realized is this.

Speaker Change #101: Setting up a situation, where obviously, we're going to have much better earnings a clean balance sheet that creates one level of value, but does this also create a situation where strategically you think that it'll be easier for people to look at mind and value it appropriately and come up with a number.

Speaker Change #102: That will be found acceptable to all shareholders in the past and finally, how does the first roughly $50 million was going to the preferred holders, which left a little for the common holders, but now we're all in the same boat so I'd love to get more insight into.

Rob Capps: So I'd love to get more insight into what you're thinking is behind those two sentences. Sure. There's a couple of aspects to that. Ross, you know, certainly there's just the math of it or the corporate finance aspects of it that you delivered to. And that, you know, I think this is my opinion. I think that people didn't really understand how to value or how to, you know, what calculus to use and determine what's the impact of the third on the comment. So I think taking that uncertainty away, clarify. I also think it gives us a great more flexibility to go into the company.

Speaker Change #102: What youre thinking is behind those two sentences.

Speaker Change #102: Sure. There's a couple of aspects to that Ross certainly there's just the.

Speaker Change #104: The math of it or the corporate finance aspects of it that you alluded to.

Speaker Change #105: I think this is my opinion I think that you know people didn't really understand how to value how to.

Speaker Change #105: What calculus to used in determining whats the impact of the preferred on the common so I think taking that uncertainty Hawaii clarifies things I also think it gives us some great more no more flexibility in growing the company.

Speaker Change #105: We're a small very small companies.

Rob Capps: We're a small, very small company. We need to be bigger, and there's different ways to get bigger. I think, you know, having this uncertainty out of the way in this confusion, perhaps out of the way, makes it easier for us to do other things, raise another capital to grow, or maybe look for other partners to do things with. So it just gives us one more flexibility to do lots of different things.

Speaker Change #105: We need to be bigger.

Speaker Change #105: And there's different ways to get bigger and I think having this uncertainty out of the way and this confusion perhaps out of the way it makes it easier for us to do other things to be a raise other capital to grow or maybe look for other partners to do things with it. So it just gives us a lot.

Rob Capps: Council. I'll now pass it back over to Rob for some concluding comments.

Speaker Change #105: A lot more flexibility to do lots of different things.

Speaker Change #105: Well thank.

Russ Taylor: Well, thank you. And I would agree with you. If you just look at, if you put a 10 multiple on the preferred dividend, you have a stock that should be closer to five, not four or three and a half. So that alone. Great.

Speaker Change #106: Thank you and I would agree I mean, if you just look at if you put a 10 multiple on the preferred dividend you have a stock that should be closer to five not four or three and a half so that alone.

Speaker Change #107: Great and then we talked about the public company costs I mean, there's a huge amount of value here. This company is clearly worth a lot more than three and a half for $4 a share and I want to leave you with I want to thank you I know that as I said you worked very hard on getting this done there was you know.

Russ Taylor: And then we talked about the public company costs. I mean, there's a huge amount of value here. This company is clearly worth a lot more than three and a half or four dollars to share. And I want to leave you if I want to thank you. I know, as I said, you worked very hard on getting this done. There was, you know, you and I, you know, I didn't always support or agree with how you were handling this. But in the end, I think you created something that should unlock a tremendous amount of value.

Speaker Change #108: You and I didn't always support or agree with how you are handling this but in the end I think you've created something that should unlock a tremendous amount of value and U.

Russ Taylor: And, you and your board, your leadership team are to be commended for, quite honestly, sticking to something that most people would have walked away from. Well, thanks for also. Appreciate that.

Speaker Change #109: You and your board leadership team are to be commended for quite honestly sticking to something that most people would have walked away from.

Speaker Change #110: Okay. Thanks, Ron So I appreciate that.

Speaker Change #110: Yeah.

Sam Schwartz: Our next question is from Sam Schwartz with Caliber Management. Please proceed. Hi, good morning. Excellent report. So good to read. And congratulations on the turnaround and looking forward. I have one particular question. You don't seem to focus on.

Speaker Change #110: Our next question is from Sam Schwartz with caliber management. Please proceed.

Sam Schwartz: Hi, Good morning, excellent report show good to read.

Speaker Change #112: And congratulations on the turnaround and looking forward.

Sam Schwartz: I have one.

Speaker Change #113: Particular question.

Speaker Change #114: You don't seem to.

Speaker Change #114: Focus on and that is.

Rob Capps: And that is Mind Technologies' involvement in artificial intelligence and your spectral software. I wonder if you can give us a little color on what's going on there. Sure. You know, that's something we developed in connection with our client operation initially. Of course, we've sold that; we retained that IP in the transaction, but then it's a license that back to. Client and general oceans, the buyer, as it relates to certain applications, specifically size can't so far. So right now, we are promoting that in connection with our agreement or collaboration agreement with General Oceans. It's early days.

Mine technologies.

Speaker Change #116: Involvement in artificial intelligence.

Speaker Change #116: Your spectral software.

Speaker Change #116: Wonder if you could give us a little color on what's going on there.

Speaker Change #116: Sure you know.

Speaker Change #117: That's something we developed them.

Speaker Change #118: In connection with our client operation initially and of course, we've sold that we retain that IP.

Speaker Change #118: In the transaction, but then had some licensing that back to.

Speaker Change #118: Client in general oceans, the buyer as it relates to certain applications, specifically side scan sonar.

Rob Capps: The conversion of the third shock to Comestalk is another important development that, in my opinion, provides a great deal of flexibility in pursuing these opportunities. Looking forward and barring any unexpected challenges or naps and circumstances, we expect the results from the second half of physical 2025 to be somewhat approved compared to the first half of the year. Our current visibility, healthy customer engagement, strong backlog, and favorable macro tailwinds continue to give us confidence. We will see a higher revenue and continued positive adjusted a bit off in the coming course, which we anticipate, culminating in another profitable year from mine.

Speaker Change #118: So right now we are promoting that in connection with our agreement our collaboration agreement with general Oceans. It's early days.

Rob Capps: The revenue permit has been diminimous. I mean, just a few tens of thousands of dollars so far. But I think it's pretty interesting. And that, you know, that the companies who have looked at it, and it's in the hands of a couple of significant customers around the world right now. The feedback is very positive that there's some unique things about this software suite. There's lots of ATR automatic target recognition software out there, lots of AI models out there. But there's some things about this as it relates to data handling and ability to develop new models, which we think is unique.

Speaker Change #118: Revenue from it has been de Minimis.

Speaker Change #118: Just a few tens of thousands of dollars so far but.

Speaker Change #119: I think it's something that's pretty interesting in that you know that the companies who have looked at it and it's in the hands of a couple of significant customers around the world right now and the feedback is very positive, but there are some unique things about this software suite.

Speaker Change #119: Yeah, there's lots of.

Rob Capps: We have a differentiated and market-leading switch of products, a favorable market environment, and now a very clean, debt-free capital structure. We look forward to capitalizing on these positive factors to increase talkable value as we move forward.

Speaker Change #120: A T. Our automatic target recognition software out there lunch. It also the AI models out there.

Speaker Change #120: But there's some things about this as it relates to data handling and ability to develop new models, which we think is unique. So we think there's an interesting opportunity there, but it is very early days.

Rob Capps: So we think there's an interesting opportunity there, but it is very early days, and we're still exploring the best way to exploit. that. It's not going to be a $50 million a year business, but it doesn't need to be. If it can be something much smaller than that, I think it could add some pretty meaningful value to it. So, it's one of the things that you can't bet the bank on it right now, but I think it's some interesting, that's not course, that we're trying to pursue. Great, thank you very much.

Speaker Change #120: We're still exploring the best way to exploit that.

And it's not going to be a 50 million dollar a year business.

Speaker Change #120: But no it doesn't need to be there can be no something much smaller than that.

Speaker Change #121: <unk> had some pretty meaningful value to them. So it's one of the things that you.

Operator: He is.

Tyson Bauer: Our first question is from Tyson Bauer with Casey Capitol. Please proceed. Congratulations, gentlemen. Thank you, Tyson. A lot less stressful for all involved now that the cap structure. Obviously, backlog will be somewhat of a focus, but I think your comments on the outlook are kind of soft in that. We go from 38 to 31, 26, add another six, so you're about 32. So you're maintaining your backlog. You mentioned sustained revenue as we go forth in the next couple of quarters with an improvement in the second half results. Do you look at that as kind of now we've hit that benchmark level where, other than maybe some unique timing issues, we should be at that 10 plus million going forward.

Speaker Change #121: You can bet the bank on them right now.

Speaker Change #121: But I think it's an interesting upside of course, but we're trying to pursue.

Great. Thank you very much.

Operator: We have reached the end of our question-and-answer session.

Speaker Change #121: We have reached the end of our question and answer session I would like to turn the conference back over to management for closing remarks.

Rob Capps: I would like to turn the conference back over to management for closing remarks. Okay, thanks very much. I'd like to thank everybody for joining us this morning, taking time to learn about what we stand for today, and where we're going forward.

Speaker Change #122: Okay. Thanks, very much thanks, everybody for joining us this morning.

Speaker Change #122: Taking time to learn about kind of.

Where we stand today and where we're going forward. We look forward to seeing you at the end of our third quarter for a few weeks thanks very much.

Operator: We look forward to visiting you at the end of our third quarter for a few weeks. Thanks very much.

Operator: Thank you; this will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Speaker Change #123: Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.