Annual Report for Fiscal Year Ending 01-31, 2026 (Form 10-K)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our worldwide Seamap business includes Seamap Pte Ltd, MIND Maritime Acoustics, LLC, Seamap (Malaysia) Sdn Bhd and Seamap (UK) Ltd (collectively "Seamap"), which designs, manufactures and sells specialized marine seismic equipment.

Revenue from the Seamap business relates to sales of Seamap products, which operates from locations near Bristol, United Kingdom; Huntsville, Texas; Johor, Malaysia and in Singapore. The majority of our revenues are contracted through our Singapore subsidiary, Seamap Pte Ltd. The majority of manufacturing activity is performed, and therefore the majority of our material purchases are made, by Seamap Pte Ltd or our Malaysian subsidiary, Seamap (Malaysia) Sdn Bhd.

Management monitors EBITDA and Adjusted EBITDA, both as defined and reconciled to the most directly comparable financial measures calculated and presented in accordance with United States generally accepted accounting principles ("GAAP"), in the following table, as key indicators of our overall performance and liquidity.

The following table presents certain operating information of our operations:

		Year Ended January 31,
		2026				2025
		(in thousands)
Revenues:
Sale of marine technology products		$	40,947			$	46,863
Cost of sales:
Sale of marine technology products			22,283				25,896
Gross profit			18,664				20,967
Operating expenses:
Selling, general and administrative			13,347				11,291
Research and development			1,586				1,914
Depreciation and amortization			873				944
Total operating expenses			15,806				14,149
Operating income		$	2,858			$	6,818

		Year Ended January 31,
		2026				2025
		(in thousands)
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Net income		$	750			$	5,074
Depreciation and amortization			873				944
Provision for income taxes			2,151				1,984
EBITDA			3,774				8,002
Stock-based compensation			1,550				235
Adjusted EBITDA from continuing operations (1)		$	5,324			$	8,237
Reconciliation of Net Cash Provided by (Used In) Operating Activities to EBITDA
Net cash provided by operating activities		$	2,586			$	651
Stock-based compensation			(1,550	)			(235	)
Provision for inventory obsolescence			(227	)			(68	)
Changes in accounts receivable (current and long-term)			755				5,253
Taxes paid, net of refunds			2,202				1,654
Gain on sale of other equipment			-				457
Changes in inventory			(2,366	)			441
Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue			1,498				1,811
Changes in prepaid expenses and other current and long-term assets			895				(1,897	)
Other			(19	)			(65	)
EBITDA(1)		$	3,774			$	8,002

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(1)

EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as net income before (a) interest income and interest expense, (b) provision for (or benefit from) income taxes and (c) depreciation and amortization. Adjusted EBITDA excludes non-cash foreign exchange gains and losses, stock-based compensation, impairment of intangible assets and other non-cash tax related items. We consider EBITDA and Adjusted EBITDA to be important indicators for the performance of our business, but not measures of performance or liquidity calculated in accordance with GAAP. We have included these non-GAAP financial measures because management utilizes this information for assessing our performance and liquidity, and as indicators of our ability to make capital expenditures, service debt and finance working capital requirements and we believe that EBITDA and Adjusted EBITDA are measurements that are commonly used by analysts and some investors in evaluating the performance and liquidity of companies such as us. In particular, we believe that it is useful to our analysts and investors to understand this relationship because it excludes transactions not related to our core cash operating activities. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP and should not be considered in isolation or as alternatives to cash flow from operating activities or net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. In evaluating our performance as measured by EBITDA, management recognizes and considers the limitations of this measurement. EBITDA and Adjusted EBITDA do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of the measurements that management utilizes. Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do. EBITDA and Adjusted EBITDA may not be comparable with similarly titled measures reported by other companies.

Within our Seamap business, we design, manufacture and sell a variety of products used primarily in oceanographic, hydrographic, seismic and maritime security industries. Seamap's primary products include (i) the GunLink seismic source acquisition and control systems; (ii) the BuoyLink RGNSS positioning system used to provide precise positioning of seismic sources and streamers and (iii) SeaLink marine sensors and solid streamer systems (collectively, the "SeaLink" product line or "towed streamer products"). These towed streamer products are primarily designed for three-dimensional, high-resolution marine surveys in survey and exploration applications.

Business Outlook

As of January 31, 2026, our backlog of firm orders for Seamap was approximately $13.9 million, which is a decrease of approximately 18% from the $16.9 million reported at January 31, 2025. We continue to pursue a number of other significant opportunities and expect to secure additional orders, primarily for delivery in fiscal 2027 and beyond. The level of backlog at a particular point in time may not necessarily be indicative of results in subsequent periods as the size and delivery period of individual orders can vary significantly.

During fiscal 2026, we experienced a decline in order activity, as is evidenced by the decline in our backlog. We believe this decline was due in large part to global economic and political uncertainty and believe this decline to be temporary. Based on discussions with our customers and general industry commentary, we think the longer-term outlook for marine exploration and survey activity is very encouraging. Recent disruptions in global energy markets due to the war in Iran are generally expected to result in renewed energy exploration and survey activity. However, the reduced order activity does result in less visibility for fiscal 2027. We maintain a robust and promising pipeline of prospects, the timing of which is uncertain. We expect the first quarter of fiscal 2027 to be comparable to recent quarters, but we have less visibility into subsequent periods. Accordingly, it is more likely than not that revenue in fiscal 2027 will be less than that in fiscal 2026. Nonetheless, we expect to maintain positive Adjusted EBITDA for the full year of fiscal 2027.

However, no assurances of such results can be made, and there are a number of risks which could cause results to be less than anticipated. Those risks include the following:

	•	Inability of our customers to accept delivery of orders as scheduled;
	•	Cancellation of orders;
	•	Production difficulties, including supply chain disruptions, which could delay the completion of orders as scheduled; and
	•	Higher than anticipated costs.

Our operation can also be impacted by the following factors:

	•	Extended lead time for key components;
	•	Requirements for advance payments from some vendors for key components; and
	•	Delays and uncertainties in the timing of orders due to customer delivery requirements.

We address three primary markets through our Seamap businesses -

	•	Marine Survey;
	•	Marine Exploration; and
	•	Maritime Defense.

Specific applications within those markets include sea-floor survey, mineral and geophysical exploration and maritime security. We have existing technology and products that meet the needs in such markets -

	•	Marine seismic equipment, such as GunLink and BuoyLink; and
	•	Acoustic arrays, such as SeaLink

Despite the near-term uncertainty discussed above, we are optimistic for the future of the Company. We see a number of opportunities to add to our technology and to apply existing technology and products to new applications.

In response, we have initiated certain strategic initiatives in order to exploit the perceived opportunities including the following:

	•	Product and production process refinements which would allow us to pursue larger projects for Sea Link systems;
	•	Adaption or development of acoustic array technology for passive sonar arrays for use in maritime security applications;
	•	Development of new products in cooperation with third parties;
	•	Development of internally produced components in place of components currently sourced from third parties; and
	•	Enhanced capabilities for existing products.

We also continue to explore ways in which to expand the scale of our operations. We think this can be achieved in a number of ways, including acquiring businesses, entering into business combinations or other strategic transactions or a potential sale of the Company. We are exploring all these options, but no assurance can be given that any such transactions will be pursued or consummated.

As we grow our business, we are also looking to control our costs. Over the past several fiscal years, we eliminated several executive and management level positions to control general and administrative costs. Should future financial results fall below our expectation, we may take further steps to reduce costs. Many of our costs, including raw materials and labor-related costs, are variable in nature. Accordingly, we believe we can reduce such costs commensurate with any declines in our business.

Results of Operations

For fiscal 2026 and 2025, we recorded operating income of approximately $2.9 million and $6.8 million respectively. The decline in fiscal 2026 operating results was driven primarily by decreases in revenue and increases in professional fees, stock-based compensation, and franchise tax expense.

Revenues and cost of sales were as follows:

		Year Ended January 31,
		2026				2025
		(in thousands)
Sale of marine technology products		$	40,947			$	46,863
Cost of sales			22,283				25,896
Gross profit		$	18,664			$	20,967
Gross profit margin			46	%			45	%

A significant portion of Seamap's sales consist of large discrete orders, the timing of which is dictated by our customers. This timing generally relates to the availability of a vessel in port so that our products can be installed. Accordingly, there can be significant variation in sales from one period to another, which does not necessarily indicate a fundamental change in demand for these products. The decline in fiscal 2026 revenue resulted from the timing of order deliveries and the impact of the reduced order activity discussed above. A significant portion of our revenues result from "after-market" activity such as spare parts, training, repairs and field service. In fiscal 2026 and fiscal 2025, approximately 60% and 37%, respectively, of our revenue related to these activities. Our gross profit margin remained essentially flat in fiscal 2026 as compared to fiscal 2025.

Operating Expenses

Selling, general and administrative expenses for fiscal 2026 amounted to approximately $13.3 million, compared to approximately $11.3 million in 2025. The year-over-year increase of approximately 17% is primarily the result of increased professional fees, stock-based compensation and franchise tax.

Research and development costs were approximately $1.6 million in fiscal 2026 as compared to approximately $1.9 million in fiscal 2025. The majority of these costs relate to the development of a next generation streamer system and related activities.

We did not record a provision for credit losses in fiscal 2026 or 2025. On January 31, 2026, and 2025, we had trade accounts and note receivables over 180 days past due of approximately $52,000 and $4,000, respectively. Contractual payment terms vary by customer and by contract and, under certain circumstances, we may grant extended payment terms to our customers. In our industry, and in our experience, it is not unusual for accounts to become delinquent from time-to-time, and this is not necessarily indicative of an account becoming uncollectable. As of January 31, 2026, and 2025 our allowance for credit losses receivable amounted to approximately $332,000.

Depreciation and amortization expense relates primarily to the depreciation of furniture and fixtures, office and manufacturing equipment and the amortization of intangible assets. Depreciation and amortization expense was approximately $873,000 and $944,000 for fiscal 2026 and 2025, respectively. The decrease in depreciation and amortization expense in fiscal 2026 is due primarily to tangible and intangible assets becoming fully depreciated during the current fiscal year.

We periodically evaluate the recoverability of our long-lived assets. As of January 31, 2026, we performed a qualitative analysis of our long-lived assets and determined that there were no indicators of impairment for fiscal 2026.

Other Income and Expense

In fiscal 2026, we recorded other income of approximately $43,000, consisting primarily of interest income on interest bearing cash deposits. In fiscal 2025, we recorded other income of approximately $240,000, consisting primarily of gain from the sale of other assets.

Provision for Income Taxes

Our provision for income taxes for fiscal 2026 was approximately $2.2 million compared to approximately $2.0 million for fiscal 2025. These amounts differed from the result expected when applying the U.S. statutory rate of 21% to our income or loss before income taxes for the respective periods due primarily to the impact of income taxes accrued in certain foreign jurisdictions, primarily in Singapore, which do not have net operating losses available to offset taxable income, and because valuation allowances have been recorded against increases in our deferred tax assets. Valuation allowances have been provided against all deferred tax assets in the United States and several foreign jurisdictions.

Liquidity and Capital Resources

The Company has a recent history of generating operating income and positive EBITDA, including in fiscal 2026 and the two previous fiscal years.

As of January 31, 2026, the Company had working capital of approximately $37.4 million, including cash and cash equivalents of approximately $19.1 million, compared to working capital of approximately $23.5 million, including cash and cash equivalents of approximately $5.3 million, as of January 31, 2025, the Company did not have a credit facility in place and depends on cash on hand and cash flows from operations to satisfy its liquidity needs.

The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, potential financing secured by company owned real property, disciplined working capital commitments, and potentially securing a credit facility or some other form of financing.

Such belief is supported by the following factors and actions available to the Company:

•

The Company has no obligations or agreements containing "maintenance type" financial covenants.

•

The Company had working capital of approximately $37.4 million as of January 31, 2026, including cash of approximately $19.1 million.

•

In fiscal 2026, the Company generated approximately $2.6 million in cash flow from operating activities.

•

Should revenues be less than projected, the Company believes it is able, and has plans in place, to reduce costs proportionately in an effort to maintain positive cash flow.

•

The majority of the Company's costs are variable in nature, such as raw materials and personnel related costs. The Company has recently eliminated several executive and management level positions, and additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management.

•

During fiscal 2026 the Company established an at-the-market ("ATM") offering of common stock from which it raised approximately $11.7 million. Management believes additional capital could be raised through this facility should the need arise.

•

The Company owns unencumbered real estate near Huntsville, Texas which could be used to generate capital if needed through a mortgage or sale lease-back transaction. The appraised value of this property is approximately $5.0 million.

As of April 16, 2026, under our Amended and Restated Certificate of Incorporation, 40,000,000 shares of Common Stock are authorized, of which 9,089,055 are currently outstanding and approximately 52,000 are reserved for issuance pursuant to our Amended and Restated Stock Awards Plan, leaving approximately 30,860,000 available for future issuance.

Due to component shortages and long-lead times for certain items there are requirements in some cases to purchase items well in advance. Furthermore, some suppliers require prepayments to secure certain items. All of these factors combine to impact the Company's working capital requirements. Furthermore, Management believes there are opportunities to increase production capacity and efficiencies. However, some of these opportunities may require investments such as production equipment or other fixed assets. If we are unable to meet suppliers' demands, we may not be able to produce products and fulfill orders from our customers.

The following table sets forth selected historical information regarding cash flows from our Consolidated Statements of Cash Flows:

		Year Ended January 31,
		2026				2025
		(in thousands)
Net cash provided by operating activities		$	2,586			$	651
Net cash (used in) provided by investing activities			(663	)			20
Net cash provided by (used in) financing activities			11,785				(619	)
Effect of changes in foreign exchange rates on cash and cash equivalents			6				(5	)
Net increase in cash and cash equivalents		$	13,714			$	47

Cash Provided by Operating Activities. Cash provided by operating activities amounted to approximately $2.6 million in fiscal 2026, compared to approximately $651,000 in fiscal 2025. In fiscal 2026, the primary source of cash provided by operating activities was the consumption of inventories.

Cash Flows (Used in) Provided by Investing Activities. Cash used in investing activities during fiscal 2026 increased approximately $683,000 from fiscal 2025, due primarily to the build-out of the Huntsville facility in fiscal 2026.

Cash Flows Provided by (Used in) Financing Activities. Net cash provided by financing activities during fiscal 2026 consisted of approximately $11.8 million of sales of common stock primarily related to sales at the market. Net cash used in financing activities during fiscal 2025 consisted of approximately $619,000 of transaction costs associated with the conversion of the Preferred Stock.

As of January 31, 2026, we have no funded debt and no obligations containing restrictive financial covenants.

We regularly evaluate opportunities to expand our business through the acquisition of other companies, businesses or product lines. If we were to make any such acquisitions, we believe they could generally be financed with a combination of cash on hand and cash flows from operations. However, should these sources of financing not be adequate, we may seek other sources of capital to fund future acquisitions. These additional sources of capital may include bank credit facilities or the issuance of debt or equity securities.

We have determined that, due to the potential requirement for additional investment and working capital to achieve our objectives, the undistributed earnings of foreign subsidiaries are not deemed indefinitely reinvested outside of the United States as of January 31, 2026. Furthermore, we have concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial.

As of January 31, 2026, we had deposits in foreign banks equal to approximately $6.5 million, all of which we believe could be distributed to the United States without adverse tax consequences. However, in certain cases the transfer of these funds may result in withholding taxes payable to foreign taxing authorities. These factors could limit our ability to pay cash dividends in the future.

Subsequent to the close of fiscal 2026, Semap Pte Ltd entered into a trade finance facility with The Hong Kong Bank Corporation Limited, Singapore Branch ("HSBC Singapore") for the issuance from time to time of letters of credit or bank guarantees.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of Regulation S-K.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in determining the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Critical accounting estimates made by us in the accompanying consolidated financial statements relate to the allowances for inventory obsolescence.

Critical accounting estimates are those that are most important to the portrayal of a company's financial position and results of operations and require management's subjective judgment. Below is a brief discussion of our critical accounting estimates.

Inventory Obsolescence

We value our inventory based on our cost. We adjust the value of our inventory to the extent we determine that our cost cannot be recovered due to obsolescence or other factors. In order to make these determinations, we may use estimates of future demand for our products to determine appropriate inventory reserves and to make corresponding reductions in inventory values to reflect the lower of cost or market value. Our estimates related to inventory obsolescence are subject to uncertainty because we estimate future demand for our products based on historical activity which may not be an accurate indicator due to factors beyond our control and subject to change and variation. For fiscal 2026, we increased our inventory obsolescence reserve by approximately $58,000. In fiscal 2025 we increased our inventory obsolescence reserve by approximately $6,000.

Significant Accounting and Disclosure Changes

See Note 3 - "New Accounting Pronouncements" in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.