Note 2 - Sale of a Subsidiary and Discontinued Operations

12 Months Ended

Jan. 31, 2024

Notes to Financial Statements

Sale of Subsidiaries and Subsequent Events [Text Block]

2. Sale of a Subsidiary and Discontinued Operations

On July 27, 2020, the Board determined to exit the Leasing Business. As a result, the assets, excluding cash, and liabilities of the Leasing Business are considered held for sale and its results of operations are reported as discontinued operations as of January 31, 2023 and for the year then ended. The Company originally anticipated selling the discontinued operations in multiple transactions, potentially involving the sale of legal entities, assets, or a combination of both, within the twelve months ending  July 31, 2021. As of January 31, 2023, we have substantially completed the sale of discontinued operations related to the Leasing Business.

On August 21, 2023, the Company sold Klein pursuant to a Stock Purchase Agreement (the “SPA”) with General Oceans AS (“the Buyer"). In connection with the SPA, the Company granted the Buyer a license to its Spectral Ai software suite (“Spectral Ai”). The license is exclusive to the Buyer as it relates to side scan sonar. The Company and the Buyer also entered into a collaboration agreement for the further development of Spectral Ai and potentially other software projects. The foregoing transactions contemplated by the SPA are referred to as the “Sale of Klein”. The aggregate consideration to the Company consisted of a cash payment of $10.8 million, resulting in a gain of approximately $2.4 million. The SPA contained customary representation and warranties. On August 22, 2023, following the closing of the Sale of Klein, all outstanding amounts due and owed, including principal, interest, and other charges, under the Loan were repaid in full and the Loan was terminated, and all liens and security interests granted thereunder were released and terminated (see Note 11 - "Notes Payable" for additional details). As a result of the sale, the assets, and liabilities of Klein, are considered assets and liabilities of discontinued operations in prior periods and its results of operations are reported as discontinued operations for the years ended  January 31, 2024 and 2023.

The assets reported as discontinued operations consist of the following:

	As of January 31,
	2024		2023
Assets of discontinued operations:	(in thousands)
Accounts receivable, net	$	—	$	746
Inventories, net		—		4,292
Prepaid expenses and other current assets		—		745
Total current assets of discontinued operations		—		5,783
Property, plant and equipment, net		—		2,992
Intangible and other assets, net		—		1,297
Total assets of discontinued operations	$	—	$	10,072

The liabilities of discontinued operations consist of the following:

	As of January 31,
	2024		2023
Current liabilities of discontinued operations:	(in thousands)
Accounts payable	$	—	$	1,607
Deferred revenue		—		20
Accrued expenses and other current liabilities		—		769
Income taxes payable		—		24
Total current liabilities of discontinued operations	$	—	$	2,420

The results of operations from discontinued operations for the twelve months ended January 31, 2024 and 2023, consist of the following:

	Twelve Months Ended January 31,
	2024			2023
Revenues:	(in thousands)
Revenue from discontinued operations	$	3,315		$	10,079
Cost of sales:
Cost of discontinued operations		1,979			7,145
Operating expenses:
Selling, general and administrative		2,022			5,185
Depreciation and amortization		338			543
Total operating expenses		2,360			5,728
Operating loss		(1,024	)		(2,794	)
Other income, including $2.3 million gain on sale of Klein		2,415			81
Income (loss) before income taxes from discontinued operations		1,391			(2,713	)
Provision for income taxes from discontinued operations		(17	)		(26	)
Net income (loss) from discontinued operations		1,374			(2,739	)

The significant operating and investing noncash items and capital expenditures related to discontinued operations are summarized below:

	Twelve Months Ended January 31,
	2024		2023
	(in thousands)
Depreciation and amortization	$	338	$	543
Gross profit from sale of other equipment	$	—	$	939
Gain on sale of Klein	$	2,343	$	—
Non-cash cumulative translation loss for discontinued operations	$	—	$	1,626

In fiscal 2023, our discontinued operations recognized a loss of approximately $1.6 million related to cumulative currency translation adjustments related to our subsidiary, Mitcham Canada, which was declared a discontinued entity. In addition, our discontinued operations recognized gains of approximately $939,000 related to the sales of lease pool equipment in fiscal 2023.