Item 5. Market for Registrant’s Common Equity
Item 5. Market for the Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our common stock, $0.01 par value per share (the "Common Stock") is traded on NASDAQ under the symbol “MIND.” As of April 21, 2025, there were approximately 3,400 beneficial holders of our Common Stock.
Dividend Policy
We have not paid any cash dividends on our Common Stock since our inception and our Board of Directors (the "Board") does not contemplate the payment of cash dividends on our Common Stock in the foreseeable future. In the future, our payment of dividends on our Common Stock will depend on the amount of funds available, our financial condition, capital requirements and such other factors as our Board of Directors may consider.
At the virtual Special Meeting of Preferred Stockholders held on August 29, 2024, our preferred stockholders approved an amendment (the “Amendment”) to our Certificate of Designations, Preferences and Rights of 9.00% Series A Cumulative preferred stock, to provide that, at the discretion of the Board deciding to file the Amendment with the Secretary of State of the State of Delaware at any time prior to October 31, 2024, each share of 9.00% Series A Cumulative Preferred Stock, $1.00 par value per share (the “Preferred Stock”) would be converted (the “Conversion”) into 3.9 shares of Common Stock upon the effective time of the Amendment. On August 30, 2024, the Board elected to proceed with the Conversion by filing the Amendment with the Delaware Secretary of State. Effective on September 4, 2024, all outstanding shares of Preferred Stock were converted into Common Stock and retired. The Company issued approximately 6,600,000 shares of Common Stock in connection with the conversion. Accordingly, the Company no longer has obligations regarding Preferred Stock dividends, including undeclared dividends from previous periods. The Common Stock issued was recorded at its market value at the date of issuance less transaction costs related to the conversion. The excess of the carrying value of the Preferred Stock over the market value of the Common Stock issued, which amounted to approximately $14.8 million, was credited directly to accumulated deficit and is reflected in the calculation of earnings per share attributable to common stockholders.
As of January 31, 2025, we had deposits in foreign banks equal to approximately $4.8 million. These funds may generally be transferred to our accounts in the United States without restriction. 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.
Unregistered Sales of Equity Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Neither we, nor any affiliated purchaser, purchased any of our equity securities during the fourth quarter of fiscal 2025.
Item 6. [Reserved]
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Our worldwide Seamap Marine Products 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 Marine Products 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.
The discontinued operations of the Klein Marine Products business related to sales of Klein products, which operated from Salem, New Hampshire.
Management believes that the performance of our continued operations is indicated by revenues from sales of products and by gross profit from those sales and the operating profit for those operations. 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.
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The following table presents certain operating information of our continuing operations:
Year Ended January 31,
2025
2024
(in thousands)
Revenues:
Sale of marine technology products
$
46,863
$
36,510
Cost of sales:
Sale of marine technology products
$
25,896
$
20,539
Gross profit
$
20,967
$
15,971
Operating expenses:
Selling, general and administrative
$
11,291
$
12,142
Research and development
$
1,914
$
2,133
Depreciation and amortization
$
944
$
1,178
Total operating expenses
$
14,149
$
15,453
Operating income
$
6,818
$
518
Year Ended January 31,
2025
2024
(in thousands)
Reconciliation of Net Income to EBITDA and Adjusted EBITDA from continuing operations
Net income
$
5,074
$
274
Interest expense, net
—
634
Depreciation and amortization
944
1,516
Provision for income taxes
1,984
1,355
EBITDA
8,002
3,779
Income from discontinued operations net of depreciation and amortization
—
(1,729
)
Stock-based compensation
235
261
Adjusted EBITDA from continuing operations (1)
$
8,237
$
2,311
Reconciliation of Net Cash Provided by (Used In) Operating Activities to EBITDA
Net cash provided by (used in) operating activities
$
651
$
(4,967
)
Stock-based compensation
(235
)
(261
)
Provision for inventory obsolescence
(68
)
(341
)
Changes in accounts receivable (current and long-term)
5,253
3,318
Interest paid
—
634
Taxes paid, net of refunds
1,654
847
Gain on sale of other equipment
457
476
Gain on sale of Klein
—
2,343
Changes in inventory
441
3,601
Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue
1,811
(2,744
)
Changes in prepaid expenses and other current and long-term assets
(1,897
)
847
Other
(65
)
26
EBITDA(1)
$
8,002
$
3,779
___________________________________________________________
(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.
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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.
The discontinued operations of our Klein business designed, manufactured, and sold side scan sonar and water-side security systems to commercial, governmental, and military customers throughout the world.
Business Outlook
Our financial results during fiscal year 2025 improved significantly when compared to fiscal 2024.
We have continued to experience significant inquiries and bid activity for our Seamap Marine products. As of January 31, 2025, our backlog of firm orders for Seamap Marine Products was approximately $16.9 million, which is a decrease of approximately 56% from the $38.4 million reported at January 31, 2024. In addition, we continue to pursue a number of other significant opportunities and expect to secure additional orders, primarily for delivery in fiscal 2026 and beyond. Subsequent to January 31, 2025 we received orders totaling approximately $15.9 million, which amounts are not included in our backlog as of January 31, 2025. 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. We believe our backlog as of January 31, 2024 provided visibility that allowed for improved production efficiency which in turn contributed to our improved results. Nonetheless, we believe there are other production efficiencies which can be obtained and could contribute to improved operating margins in fiscal 2026.
Despite improving results, our operations continue to be impacted by the following factors:
•
Extended lead times for key components.
•
Requirements for advanced payments from some vendors for key components.
•
Delays and uncertainties in the timing of orders due to customer delivery requirements.
Based on our current backlog of orders, pipeline of other prospects and continued product inquiries, and current production and delivery schedules, we expect revenue in fiscal 2026 to be comparable with fiscal 2025. If fiscal 2026 revenue is in-line with our expectations, we believe the Company will report net income and positive EBITDA for fiscal 2026. 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.
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We continue to address three primary markets through our continued operations 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
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 internally produced components in place of components currently sourced from third parties; and
•
Enhanced capabilities for existing products.
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We believe that the above initiatives expand our addressable markets and provide opportunities for further growth in our revenues; however, none have produced material revenue to date.
As we grow our business, we are also looking to control our costs. During fiscal 2024, 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. We believe many of our costs are variable in nature, such as raw materials and labor-related costs. Accordingly, we believe we can reduce such costs commensurate with any declines in our business.
General inflation levels have increased recently due in part to supply chain issues and geopolitical uncertainty. In addition, shortages of certain components, such as electronic components, have caused prices for available components to increase in some cases. These factors can be expected to have a negative impact on our costs; however, the magnitude of such an impact cannot be accurately determined. In response to these cost increases, in the first quarter of fiscal 2025, we increased the pricing for most of our products. The amount of the increase varied by product and ranged from approximately 5% to 10%.
Our revenues and results of operations have not been materially impacted by inflation or changing prices in the past two fiscal years, except as described below.
Results of Continuing Operations
For fiscal 2025 and 2024, we recorded operating income of approximately $6.8 million and $518,000, respectively. The improvement in operating results was driven primarily by significant increases in revenue for the Seamap product lines in addition to cost-saving efforts implemented in the current and prior fiscal year.
Revenues and cost of sales from continued operations were as follows:
Year Ended January 31,
2025
2024
(in thousands)
Sale of marine technology products
$
46,863
$
36,510
Cost of sales
25,896
20,539
Gross profit
$
20,967
$
15,971
Gross profit margin
45
%
44
%
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. A significant portion of our revenues result from “after market” activity such as spare parts, training, repairs and field service. In Fiscal 2025 and Fiscal 2024 approximately 37% and 45%, respectively of our revenue related to these activities. Our gross profit margin increased in fiscal 2025 as compared to fiscal 2024 due to higher overhead absorption from higher revenues and improved production efficiencies. This improvement was despite an increase in warranty costs in Fiscal 2025 to approximately $900,000 versus approximately $400,000 in Fiscal 2024.
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Operating Expenses
Selling, general and administrative expenses for fiscal 2025 amounted to approximately $11.3 million, compared to approximately $12.1 million in 2024. The year-over-year decrease of approximately 7% is primarily the result of reductions in headcount, compensation expense and other administrative costs due to cost reduction initiatives implemented throughout fiscal 2024 and fiscal 2025.
Research and development costs were approximately $1.9 million in fiscal 2025 as compared to approximately $2.1 million in fiscal 2024. 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 2025 or fiscal 2024. On January 31, 2025, and 2024, we had trade accounts and note receivables over 180 days past due of approximately $4,000 and $51,000, 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, 2025, 2024 and 2023, our allowance for credit losses receivable for continuing operations 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 $944,000 and $1.2 million for fiscal 2025 and 2024, respectively. The decrease in depreciation and amortization expense in fiscal 2025 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, 2025, we performed a qualitative analysis of our long-lived assets and determined that there were no indicators of impairment for fiscal 2025.
Other Income and Expense
In fiscal 2025, we recorded other income of approximately $240,000, consisting primarily of gain from the sale of other assets. In fiscal 2024, we recorded other expense of approximately $280,000, consisting of interest expense of approximately $675,000 related to the $3.75 million loan that was repaid, in full, in conjunction with the sale of Klein, partially offset by gains from sale of assets.
Provision for Income Taxes
Our provision for income taxes for continuing operations for fiscal 2025 was approximately $2.0 million compared to approximately $1.3 million for fiscal 2024. These amounts differed from the result expected when applying the U.S. statutory rate of 21% to our income or loss from continuing operations 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.
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Results of Discontinued Operations
Revenues and cost of sales from discontinued operations were comprised of the following:
Year Ended January 31,
2025
2024
(in thousands)
Revenues:
Sales of Klein Equipment
—
3,315
—
3,315
Cost of sales:
Cost of sales
—
1,979
Gross profit
—
1,336
Operating expenses:
Selling, general and administrative
—
2,022
Depreciation and amortization
—
338
Total operating expenses
—
2,360
Operating loss
—
(1,024
)
Other income, including $2.3 million gain on sale of Klein
—
2,415
Income before income taxes
—
1,391
Provision for income taxes
—
(17
)
Net income
—
1,374
In the third quarter of fiscal 2024, we sold the Klein business and therefore present those operations as discontinued operations.
In fiscal 2024, we recognized approximately $2.3 million of gain on the sale of Klein.
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We recorded provision for income taxes of approximately $17,000 related to the discontinued operations of Klein in fiscal 2024. The tax provision for the discontinued operations of Klein relates to state income tax and varies from the expected provision based on the U.S. statutory rate due to the proration of profit and loss allocable to the state taxing jurisdiction.
Liquidity and Capital Resources
The Company had a history of generating operating losses and negative cash from operating activities and had relied on cash from the sale of lease pool equipment, Preferred Stock and Common Stock for the past several years. However, the Company’s operating results improved significantly in fiscal 2025 as compared to fiscal 2024 and prior years, generating net income from operations and positive Adjusted EBITDA for the fiscal year ended January 31, 2025. In addition, the Company sold its Klein business on August 21, 2023, generating net proceeds of approximately $7.3 million after settlement of closing cost and all outstanding amounts due and owed, including principal, interest, and other charges, on the Company’s $3.75 million loan. The sale of Klein increased the Company’s working capital and improved its liquidity situation.
As of January 31, 2025, the Company had working capital of approximately $23.5 million, including cash and cash equivalents of approximately $5.3 million, compared to working capital of approximately $18.1 million, including cash and cash equivalents of approximately $5.3 million, as of January 31, 2024. The Company does 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.
In addition, management believes there are additional factors and actions available to the Company to address liquidity concerns, including the following:
•
The Company has no obligations or agreements containing “maintenance type” financial covenants.
•
The Company had working capital of approximately $23.5 million as of January 31, 2025, including cash of approximately $5.3 million.
•
In the last nine months of fiscal 2025, the Company generated approximately $5.4 million in cash flow from operating activities, including approximately $2.1 million in the fourth quarter.
•
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 two executive level positions, and additional reductions in operations, sales, and general and administrative headcount could be made, if deemed necessary by management.
•
The Company has a backlog of orders from continuing operations of approximately $16.9 million as of January 31, 2025, compared to approximately $26.2 million as of October 31, 2024, and $38.4 million as of January 31, 2024. However, the Company has received additional orders totaling approximately $15.9 million subsequent to January 31, 2025. Production for certain of these orders was in process and included in inventory as of January 31, 2025, thereby reducing the liquidity needed to complete the orders.
•
At the virtual Special Meeting of Preferred Stockholders held on August 29, 2024, our preferred stockholders approved an amendment to our Certificate of Designations, Preferences and Rights of 9.00% Series A Cumulative preferred stock, to provide that, at the discretion of the Board deciding to file the Amendment with the Secretary of State of the State of Delaware at any time prior to October 31, 2024, each share of Preferred Stock would be converted into 3.9 shares of Common Stock upon the effective time of the Amendment. On August 30, 2024, the Board elected to proceed with the Conversion by filing the Amendment with the Delaware Secretary of State. Effective on September 4, 2024, all outstanding shares of Preferred Stock were converted into Common Stock and retired. The Company issued approximately 6,600,000 shares of Common Stock in connection with the conversion. Accordingly, the Company no longer has obligations regarding Preferred Stock dividends, including undeclared dividends from previous periods. The Common Stock issued was recorded at its market value at the date of issuance less transaction costs related to the conversion. The excess of the carrying value of the Preferred Stock over the market value of the Common Stock issued, which amounted to approximately $14.8 million, was credited directly to accumulated deficit and is reflected in the calculation of earnings per share attributable to common stockholders.
•
Upon filing of this Annual Report on Form 10-K the Company expects to become eligible to utilize form S-3 and intends to file a shelf registration statement on this form. This will provide the Company the ability to efficiently raise additional capital 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 transaction. The Company demonstrated its ability to do this through a secured lending transaction in early fiscal 2024, which was repaid from the proceeds from the sale of Klein. The appraised value of this property is approximately $5.0 million.
As of April 23, 2025, under our Amended and Restated Certificate of Incorporation, we have 40,000,000 shares of Common Stock are authorized, of which 7,969,421 are currently outstanding and approximately 30,000 are reserved for issuance pursuant to our Amended and Restated Stock Awards Plan, leaving approximately 32,000,000 available for future issuance.
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Due to the rising level of sales and production activities, there are increasing requirements for purchases of inventory and other production costs. Additionally, 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 in order to secure some 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,
2025
2024
(in thousands)
Net cash provided by (used in) operating activities
$
651
$
(4,967
)
Net cash provided by investing activities
20
11,018
Net cash used in financing activities
(619
)
(1,535
)
Effect of changes in foreign exchange rates on cash and cash equivalents
(5
)
(5
)
Net increase in cash and cash equivalents
$
47
$
4,511
Cash Provided by (Used In) Operating Activities. Cash provided by operating activities amounted to approximately $651,000 in fiscal 2025, compared to cash used in operations of approximately $5.0 million in fiscal 2024. In fiscal 2025, the primary source of cash provided by operating activities was the increase in net income of approximately $5.1 million.
Cash Flows From Investing Activities . Cash provided by investing activities during fiscal 2025 decreased approximately $11 million from fiscal 2024, due primarily to proceeds from the sale of Klein totaling approximately $11.5 million in fiscal 2024.
Cash Flows From Financing Activities . 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. Net cash used in financing activities during fiscal 2024 consisted of approximately $946,000 of Preferred Stock dividend payments and approximately $589,000 of net outflows related to the borrowing and repayment of a short-term loan.
As of January 31, 2025, we have no funded debt and no obligations containing restrictive financial covenants. On February 2, 2023, we entered into a $3.75 million Loan and Security Agreement (“the Loan”). The Loan was due February 1, 2024, and bore interest at 12.9% per annum, payable monthly. However, the interest due through maturity and an origination fee equal to $240,000 were withheld from the proceeds issued by the Lender. The Loan was secured by mortgages on certain real estate owned by the Company and contained terms customary with this type of transaction, including representations, warranties, covenants, and reporting requirements. The terms of the Loan also allowed for prepayment at any time without penalty. On August 22, 2023, following the sale of Klein, all outstanding amounts due and owed, including principal, interest, and other charges, with respect to the Loan were repaid, in full.
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, 2025. Furthermore, we have concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial.
As of January 31, 2025, we had deposits in foreign banks equal to approximately $4.8 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.
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.
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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 2025, we increased our inventory obsolescence reserve for continuing operations by approximately $6,000. In fiscal 2024 we increased our inventory obsolescence reserve for continuing operations by approximately $316,000.
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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not required under Item 305 Regulation S-K for smaller reporting companies.
Item 8. Financial Statements and Supplementary Data
The information required by this Item appears beginning on page F-1 and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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