Greetings. Welcome to the MIND Technologies’ Third Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard. Thank you Mr. Dennard. You may begin.

Thank you, operator. Good morning and welcome to the MIND Technology fiscal 2022 third quarter conference call. We appreciate all of you joining us today. Your host today is Rob Capps, President and Chief Executive Officer. Before I turn the call over to Rob, I have a few house-keeping items to go through. If you would like to listen to a replay of today’s call, it will be available for 90 days via webcast by going on to the Investor Relations section of the Company’s website at mind-technology.com or via an instant replay telephonically until December 16. Information on how to access these replay features was provided in yesterday’s earnings release. Information reported on this call speaks only as of today, Thursday, December 09, 2021 and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. 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 that may cause the company’s actual future results or performance to materially differ from 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 in its filings with the SEC, including its Annual Report on Form 10-K for the year ended January 31, 2021. 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’d like to turn the call over to Rob Capps. Rob?

Okay, thanks Ken. I’d like to begin by first making some observations on the market environment before I discuss the financials in detail. And I'll then wrap things up with our general market outlook. As you may gathered, based on earlier pre-release, we are seeing a noticeable improvement in market conditions, with a growing activity in the marine industries driving a corresponding uptick in our orders. Assets, the favorable trend we observed in Q2 remains intact, with increasing inquiries in order activity spanning most of our markets and driving strong sequential top line gains in Q3. We have made additional progress on the disposal of assets from our legacy leasing business. As you may remember, from our prior call, we entered an agreement to sell a substantial portion of these assets. We also continue to make good progress on our strategic initiatives, which target growth areas in the marine technology space, such as synthetic aperture sonar, passive sonar arrays, and sensor systems for unmanned platforms. With conditions and activity improving, we have considerable optimism for our business in the coming quarters. However, I would also note that with external factors, such as the new Omicron COVID strain, and supply chain disruptions casting a shadow over economic activity worldwide, our optimism must remain tempered. As I've mentioned in the past, our quarter-to-quarter results can swing quite a bit due to changes or delays in customer orders. With the uncertainty in the global economic environment, things can change rapidly and significantly. That said, we believe the underlying fundamentals of the rain market are improving, and we expect this to hold for the foreseeable future. Looking at our third quarter results, consolidated revenues are up strongly both year-over-year and a sequential basis. When compared to last year’s third quarter, our total revenues were…

Thank you. [Operator Instructions] Our first question is from Tyson Bauer with KC Capital. Please proceed

Good morning, Rob.

Hey Tyson.

I like to also echo those comments you made about Guy except for he may not take my calls.

He may, you never know.

You talked about Q3 being kind of the base level, as we walk into Q4 because of some supply issues, some bottlenecks that are going on there. Are we looking at Q3 as kind of a baseline even beyond Q4, as we eliminate some of the seasonality and some of the lumpiness going forward with these new orders that are expected in backlog? Is that kind of the base level that you're looking for the foreseeable future?

Yes, I think so Tyson. I mean, as you know there's always a risk if you have a one order slide a few weeks, which has an impact. But I think generally speaking, that is kind of where we're looking, and looking to grow from that. I just - the point I think we wanted to make is, given the environment that we're in the supply chain issues, there is risk out there, and we wanted people to understand that risk. I think that is kind of the baseline we're looking at.

Okay, SG&A you've talked about that front running some of the revenue as you tried to build that up to secure - been at the shows those kinds of things. What should we see in SG&A as we go forward, as you try to get some of these orders procured and marketing some of these new products?

I don't see it changing dramatically. You might see a bit of a swing from quarter to quarter, just as things fall in, but I think it's not going to be materially different going forward. So I think the big thing is we'll just have better leverage, as we see the top line increase.

Okay. You sound highly confident on the backlog growth, these orders that are coming in. Will those be announceable, given the nature of the order and who you're working with. And two, are these more technology add-ons to existing orders that we don't have to go through that bid process, but they're now adding your features to maybe their physical product that already exists? And they're building for contract?

Yes and no, in that. Surely there's one kind of like that and -- for the first question. I think they probably will be annouceable, although, what specifics as far as who it is, there might be some issues there. But I think we will be able to announce in general that we have these things in hand. So in all cases, it's not necessarily not add on to existing stuff. There are some new installations involved here, new customers, new areas for us.

Okay, and the SaaS product that you've been in joint development with, has that now been tested and approved by military establishments. So it is just a function of getting orders and adding that technology to unmanned vehicles or other products.

It's in process is a way I’d describe that.

Okay, so that is still something that is we're not…

We're still in, in but you definitely call the development stage, but towards the latter part of the development stages, is the way I’d describe that.

Okay. Given the new costs and the additional preferred, we get some pushback from institutions revenue to cover, that cost now jumps up, probably closer, depending on your variable costs, they're 12 million a quarter is out about right.

And in that ballpark.

We're at eight, that implies a significant amount of growth there to cover that additional preferred costs. Is that something that's in your budget or in your line of sight that now we think we're comfortable and being able to cover that?

It is. It is Tyson.

Okay. These bids and these orders are a lot of these accordion features to them, especially on the military side?

In some cases, yes. But not in all cases, sometimes they roughly are. But in other cases it will be so, it's a mixed bag.

Okay. And we saw the increase in accounts receivable and working capital requirements to do these orders. Sure, inventory will be coming up also. What are you looking at as far as requirements on that, for your cash management and the working capital? As we go forward, are we getting into periods that we're going to be tight on capital? Are we got enough cushion there that that's not a concern anymore?

Yes, I think we have enough cushion. And that's one reason we wanted to do the offering was, we saw the potential need to get out ahead of some of the supply chain issues and be more aggressive in our, in our purchasing. This gives us the flexibility to do that. What we didn't want to have happen is, have a big order come in, and that we just couldn't execute on because if we couldn't get stuff. So in this environment you have to be more aggressive with your suppliers. So that could mean, ordering sooner, putting money down to make sure you're first in line, things like that.

Okay. And are you able to leverage your partner's capability on their procurement or supply that may have a better access to some of these components than yourself?

In some cases, yes. I'd say not across the board that there are some specific instances where we've been able to, to lean on them, and they certainly are helpful in that regard.

Okay. So the way it sounds, we will see some growth in the military side with orders and that, that, promise of that future growth should be realized in the coming quarters or the coming weeks, really in an order, and in the coming quarters as far as results.

Yes, we're definitely starting to see more activity, more traction in that area. I feel good about that.

All right. Thank you.

You bet, Tyson. This concludes the question and answer portion of our call. I would now like to turn the call back over to Rob Capps for any final comments.

Okay, just want to thank everyone for joining us today. And I look forward to talking to you again at the fourth quarter call early next year. Thanks.

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.