MIND Technology Bags New Orders But Leaves Preferred Stockholders Out In The Rain

Soon after the near of Wednesday’s common session, Brain Engineering (NASDAQ:Head, NASDAQ:MINDP) or “Brain”, announced the receipt of an combination $7.7 million in new orders for sonar and source controller systems.

That said, the firm had currently projected these orders to occur as a result of and accordingly incorporated them in its stated $22.9 million “complete e book of enterprise” disclosed in the two its Q1/FY2023 press launch and quarterly report on Kind 10-Q final thirty day period.

These new orders experienced been anticipated, but it is an crucial stage to have them in hand. The equipment to be shipped features multi-beam sonar methods, together with associated handling products, and seismic resource controller devices. We be expecting all these orders to be concluded and shipped in our recent fiscal calendar year. We consider these orders show the toughness in military and exploration markets and we count on additional orders in the in close proximity to upcoming.

As a outcome, these orders would not final result in upside to the company’s formerly communicated anticipations.

In addition, Thoughts astonished traders with the final decision not to declare a quarterly dividend on its 9.00% Sequence A Cumulative Chosen Stock (“Collection A Most popular Inventory”) for the next quarter of its fiscal calendar year ending January 31, 2023.

Because of to liquidity requires to finish these, and other, orders and the uncertainty as to the timing of sure funds movement, we sense it prudent to defer the payment of the second quarter dividend on our Series A Chosen Inventory. The Company carries on to have good operating capital and no funded debt.

As the Series A Most popular Stock is cumulative, the non-payment technically signifies a deferral:

The Enterprise might defer dividend payments on the Series A Chosen Stock, but the dividend is a cumulative dividend that accrues for payment in the foreseeable future. In the course of a deferral period of time, the Enterprise is prohibited from paying out dividends or distributions on its common stock, or redeeming any of individuals shares. Even more, if the Organization does not pay out dividends on its Collection A Chosen Stock for six or additional quarters, the holders of Collection A Desired Stock will have the appropriate to appoint two directors to the Company’s board.

While liquidity was presently down to a paltry $.8 million at the conclusion of April, management attempted to reassure investors on the recent Q1 convention get in touch with:

MIND’s cash structure and liquidity keep on being superior. As of April 30, 2022, we had functioning capital of somewhere around $16.7 million and hard cash of about $817,000. We collected around $4 million of accounts receivable in May possibly, so our money circumstance has improved significantly and we have very good visibility on added receivables that are imminent.

Obviously, the board of administrators did not share administration sights as it decided to keep off on the $.95 million quarterly dividend payment.

You should be aware that just seven months in the past, the firm completed a $10.5 million comply with-on offering of its Series A Favored Inventory at a value of $24.25 for every share.

But with a lot more than $20 million of income employed in functioning routines due to the fact the starting of FY2022, signals of distress have develop into apparent in the stock rate in latest months. At Wednesday’s closing value of $13.40, the desired shares had been down somewhere around 45% from the offering price tag in November.

In FY2022, the organization elevated an additional $5.2 million from advertising most popular shares into the open up market place less than its at-the-current market (“ATM”) presenting method with Ladenburg Thalmann.

But with the dividend produce approaching 17%, the cost of cash has turn into prohibitive for the firm. Although Intellect also has the potential to market widespread shares less than the ATM, the weak inventory cost and very small investing quantity effectively precludes the organization from heading by this avenue.

Base Line

Brain Know-how baggage some nicely-predicted orders but shocks traders with the choice to “defer” the quarterly dividend on its 9.00% Series A Cumulative Most well-liked Inventory in buy to maintain liquidity for apparent functioning funds specifications.

Offered the company’s ongoing liquidity challenges, I do not count on
Mind to catch up on the favored inventory dividend whenever quickly.

With pretty minimal more sources of liquidity available to the corporation at this issue, preferred stockholders ought to critically take into consideration promoting current positions and shifting on.