What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-11 compared with 2021-11-15 · 72 added, 63 removed, 137 unchanged (50% of the section changed)

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These risks and uncertainties, including those disclosed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with the Securities and Exchange Commission (the “SEC”) on September 29, 2021, and in our other filings with the SEC, could cause actual results to differ materially from those suggested by the forward-looking statements and include, without limitation:

● the potential duration and impact COVID-19 pandemic and its effect on our business, financial condition, results of operations and cash flows;

● interruptions of, or higher prices of, products and services from our suppliers;

● the potential duration and impact of the COVID-19 pandemic and its effect on our business, financial condition, results of operations and cash flows;

● interruptions or higher prices of products and services from our suppliers;

● inability to timely introduce new products and services or enhance existing products and services;

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Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements”, and elsewhere in this Report.

We are a digital cinema company who designs, manufactures, integrates, installs and distributes a full suite of proprietary and custom designed equipment as well as off the shelf cinema products needed for contemporary cinema requirements.

We are a digital cinema company that designs, manufactures, integrates, installs and distributes a full suite of proprietary and custom designed equipment as well as off the shelf cinema products needed for contemporary cinema requirements.

We also offer single source solutions for cinema design, procurement, installation and service to the creative and production communities for screening, digital intermediate and other critical viewing rooms.

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We also provide turnkey furniture, fixture and equipment services, or FF&E, to commercial cinema exhibitors for new construction and remodels, including design, consulting, installation and project management as well as procurement of seats, lighting, acoustical treatments, screens, projection and sound.

Moving iMage Technologies, LLC’s (“MiT LLC”) products and services focus on the integration needs associated with high quality motion picture exhibition.

Moving iMage Technologies, LLC’s products and services focus on the integration needs associated with high quality motion picture exhibition.

We provide purpose-built products for digital cinema, 3D, pre-show/alternative content and a variety of entertainment and educational applications.

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Through its wholly-owned subsidiary, Moving iMage Acquisition Co.

(DBA “Caddy Products”), the Company designs, develops and manufactures innovative products for the entertainment, cinema, grocery, worship, restaurant, sports and restroom industries.

On July 7, 2021, in connection with our initial public offering, we entered into an Exchange Agreement (the “Exchange Agreement”) whereby the equity holders of MiT LLC, assigned and transferred to the Moving iMage Technologies, Inc.

(“PubCo”) their units of MiT LLC, in exchange for an aggregate of 2,350,000 shares of Common Stock of PubCo (the “Share Exchange”).

MiT LLC is considered the acquirer for accounting purposes.

(DBA “Caddy Products”), MiT LLC designs, develops and manufactures innovative products for the entertainment, cinema, grocery, worship, restaurant, sports and restroom industries.

On July 7, 2021, we entered into an Exchange Agreement (the “Exchange Agreement”) whereby the owners of Moving iMage Technologies, LLC, a Delaware limited liability company (“MiT LLC”), assigned and transferred to MiT Inc.

their units of MiT LLC, in exchange for an aggregate of 2,350,000 shares of Common Stock of MiT Inc.

(see Share Exchange in Note 1 of the Condensed Consolidated Financial Statements).

The table below summarizes the effect to the Share Exchange, and the sale by us of shares of our common stock in our initial public offering, the number of shares of our common stock, the total consideration, and the average price per share (i) paid to us by our existing stockholders, which include the owners of the membership interests in MiT LLC, and (ii) to be paid by new investors participating in our initial public offering at an initial public offering price of $3.00 per share, before deducting underwriting discounts and commissions and offering expenses payable by us.

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New investors in the initial public offering

As a result of the Share Exchange, MiT LLC became a wholly-owned subsidiary of PubCo and is the entity where the Company’s business operations are located.

Because the Share Exchange occurred subsequent to the Company’s fiscal year ended June 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q includes information derived from the audited consolidated financial statements of MiT LLC at June 30, 2021 and the unaudited results of operations and cash flows of MiT LLC for the three months ended September 30, 2020.

As a result of the Share Exchange, MiT LLC became a wholly-owned subsidiary of MiT Inc.

and is the entity where the Company’s business operations are located.

Because the Share Exchange occurred subsequent to the Company’s fiscal year ended June 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q include information derived from the audited consolidated financial statements of MiT LLC at June 30, 2021 and the unaudited results of operations and cash flows of MiT LLC for the three and six months ended December 31, 2020 which have been retroactively restated to reflect the consolidation of MiT Inc.

and MiT LLC in connection with the exchange agreement.

See Note 1 of the condensed consolidated financial statements.

Factors affecting our performance

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In addition, we have experienced increased challenges in or cost of acquiring new customers and increased risk in collectability of accounts receivable.

As a result of the aforementioned factors, our financial and operating results for the year ended June 30, 2021 have been and our projected financial and operating results for the balance of fiscal 2022 are expected to be materially adversely affected.

As a result of the aforementioned factors, our financial and operating results for the six months ended December 31, 2021 and 2020, were adversely affected.

Additionally, our projected financial and operating results for the balance of fiscal 2022 are expected to be materially adversely affected.

The ultimate impact of the COVID-19 pandemic on our business and results of operations beyond fiscal 2022 is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 pandemic and any additional preventative and protective actions that governments, or we or our customers, may direct, which may result in an extended period of continued business disruption and reduced operations.

However, we expect that our results of operations, including revenues, in future periods will continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions, which include the possibility of a global recession.

Recently, several of the larger theater chains have announced plans to reopen and there had been some initial openings in several states with limited occupancy.

We expect that our results of operations, including revenues, in future periods will continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions, which include the possibility of a global recession.

During the second half of the 2021 calendar year, several of the larger theater chains have announced plans to reopen and there had been some initial openings in several state with limited occupancy.

The ability of these chains to reopen in part or in whole is predicate in large part on decisions by state and local officials to allow, limit or prohibit the reopening of establishments such as cinemas in response to regionally specific COVID-19 outbreaks.

It is reasonable to expect that any reopenings will continue to be done on a gradual basis with limited occupancy and specific procedures, products, and technologies required to be implemented to protect the safety and health of returning patrons and employees.

In response to uncertainties associated with the COVID-19 pandemic, we have taken, and are continuing to take, significant steps to preserve cash and remain in a strong competitive position when the current crisis subsides by eliminating non-essential costs, reducing employee hours and deferring all non-essential capital expenditures to minimum levels.

Among other mitigating actions, we have implemented targeted furloughs, significantly reduced our service and distribution activities and temporarily reduced compensation of our executive officers and certain other employees.

We have also implemented remote work policies for many employees, and the resources available to such employees may not enable them to maintain the same level of productivity and efficiency, and these and other employees may face additional demands on their time, such as increased responsibilities resulting from school closures or illness of family members.

Our increased reliance on remote access to our information systems also increases our exposures to potential cybersecurity breaches.

We cannot provide any assurance that these actions, or any other mitigating actions we may take, will help mitigate the impact of the COVID-19 pandemic on us.

We cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic.

As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition.

Furthermore, we received an aggregate of $1.39 million of financial support under the recently enacted COVID-19 relief legislation in the U.S.

However, the legislation and guidance from the authorities continue to evolve;

as such, the amount and timing of additional support, if any, that we could receive is not determinable at this time, and there can be no guarantees that we will receive additional financial support through these programs.

In the event of a sustained market deterioration, and continued declines in revenues, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

We cannot provide any assurance that we will be able to obtain additional sources of financing or liquidity on acceptable terms, or at all.

Investment in Growth .

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We believe that customer references have been, and will continue to be, an important factor in winning new business.

We expect that a substantial portion of our future sales will be sales to existing customers, including expansion of their products and service offerings, as we offer new products and services through the existing sales channel.

We expect that a substantial portion of our future sales will be sales to existing customers, including expansion of their product and service offerings, as we offer new products and services through the existing sales channel.

Our business and results of operations will depend on our ability to continue to add new customers and sell additional products and services to our growing base of customers.

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Both the sales cycle and the contract fulfillment cycle are dependent on a number of factors from our customers that are not in our control.

Accordingly, backlog, the recognition of backlog into revenue and related earnings may fluctuate from quarter to quarter depending on our customers’ particular requirements, which can sometimes change between the initial signing of a contract to its ultimate fulfillment.

Critical Accounting Policies and Estimates.

We discuss the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, under the caption “Management’s Discussion and Analysis of Financial Condition and results of Operations—Critical Accounting Policies and Estimates”.

There has been no material change in critical accounting policies or estimates during the period covered by this report.

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Cost of goods sold is also affected by inventory obsolescence if our inventory management is not effective or efficient.

We mitigate the risk of inventory obsolescence by stocking relatively small amounts of inventory at any given time, and relying instead on a strategy of manufacturing or acquiring products based on orders placed by our customers.

We mitigate the risk of inventory obsolescence by stocking inventory at any given time to meet demands, and relying instead on a strategy of manufacturing or acquiring products based on orders placed by our customers.

General and administrative expenses

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Results of Operations

Three months ended September 30, 2021 compared to year ended September 30, 2020

Three Months Ended September 30,

Net sales increased 97.7% to $3.474 million for the three months ended September 30, 2021 from $1.757 million for the three months ended September 30, 2020 primarily due to the recovery from the impact of COVID-19 on the exhibition industry.

Backlog at September 30, 2021 and 2020 was $7.7 million and $9.3 million, respectively.

Backlog represents orders expected to be realized in the next 6 months.

Three Months Ended September 30,

Gross profit increased 59.4% to $.722 million for the three months ended September 30, 2021 from $.453 million for the three months ended September 30, 2020.

As a percentage of total revenues, gross profit decreased to 20.8% for the three months ended September 30, 2021 from 25.8% for the three months ended September 30, 2020.

The decrease in gross margin as a percentage of revenues was driven primarily by product mix, as higher margin parts and services revenues made up a smaller percentage of total revenues.

In addition, the margin decrease was affected by decrease in higher margin Caddy cupholder sales.

Three months ended December 31, 2021 compared to the three months ended December 31, 2020

Three Months Ended December 31,

Net sales increased 112.5% to $3.419 million for the three months ended December 31, 2021 from $1.609 million for the three months ended December 31, 2020 primarily due to the recovery from the impact of COVID-19 on the exhibition industry.

Three Months Ended December 31,

Gross profit increased 112.8% to $.896 million for the three months ended December 31, 2021 from $.421 million for the three months ended December 31, 2020.

As a percentage of total revenues, gross profit remained constant at 26.2% for both periods.

Research and Development

Three Months Ended June 30,

Increase in research and development expense primarily associated with the impact of COVID-19 in the prior year.

Three Months Ended December 31,

Increase in research and development expense was primarily associated with the impact of COVID-19 in the 2020 period.

We expect research and development expense to increase as a percentage of sales in the future as we continue to increase product development on our green product line, SaaS (software as a service) products, LED screen support systems, Caddy products, and others as our business expands into new areas.

Selling, General and Administrative Expense

Three Months Ended September 30,

The increase in selling, general and administrative expense was due primarily to the impact of COVID-19 in the prior year as the Company instituted cost containment measures, such as headcount reduction, executive pay reduction and cost avoidance.

Three Months Ended December 31,

The increase in selling, general and administrative expense was due primarily to the impact of COVID-19 in the 2020 period as the Company instituted cost containment measures, such as headcount reduction, executive pay reduction and cost avoidance.

In addition, the Company incurred significant expenses associated with becoming a public company, such as increased legal, accounting and other regulatory costs.

Interest and Other (Expense)/ Income

Three Months Ended September 30,

The change in interest and other expense was primarily due to paying off outstanding debt in July 2021.

Three Months Ended September 30,

Net loss was $(.576) million for the three months ended September 30, 2021 compared to a net loss of $(.389) million for the three months ended September 30, 2020.

This increase in net loss was driven by an increase in public company related expenses, lower margins, and increase in other expenses.

Other (Income) Expense

Three Months Ended December 31,

The change in other (income) expense was primarily due to an unrealized gain in 2020.

Three Months Ended December 31,

Net loss was $(.644) million for the three months ended December 31, 2021 compared to a net loss of $(.157) million for the three months ended December 31, 2020.

This increase in net loss was driven by increase in public company related expenses and other selling, general and operating expenses.

Six months ended December 31, 2021 compared to six months ended December 31, 2020

Six Months Ended December 31,

Net revenues increased 104.8% to $6.893 million for the six months ended December 31, 2021 from $3.366 million for the six months ended December 31, 2020 primarily due to the recovery from the impact of COVID-19 on the exhibition industry.

Six Months Ended December 31,

Gross profit increased 85.1% to $1.618 million for the six months ended December 31, 2021 from $.874 million for the six months ended December 31, 2020.

As a percentage of total revenues, gross profit declined to 23.5% for the six months ended December 31, 2021 from 25.9% for the six months ended December 31, 2020.

The decrease in gross margin as a percentage of revenues was driven primarily by product mix, as higher margin parts and services revenue made up a smaller percentage of total revenues.

In addition, the margin decrease was affected by a decrease in higher margin Caddy cupholder sales.

Research and Development

Six Months Ended December 31,

Increase in research and development expense was primarily associated with the impact of COVID-19 in the 2020 period.

Selling, General and Administrative Expense

Six Months Ended December 31,

The increase in selling, general and administrative expense was due primarily to the impact of COVID-19 in the prior period as the Company instituted cost containment measures, such as headcount reduction, executive pay reduction and cost avoidance.

Additionally, the Company incurred significant expenses associated with becoming a public company, such as increased legal, accounting and other regulatory costs.

Interest and Other Expense

Six Months Ended December 31,

Due to an unrealized gain on short term investments offset by interest expense associated with paying off outstanding debt in July 2021.

Six Months Ended December 31,

Net loss was $(1.221) million for the six months ended December 31, 2021 compared to a net loss of $(.527) million for the six months ended December 31, 2020.

This increase in net loss was driven by increase in public company related expenses and other selling, general and operating expenses.

Liquidity and Capital Resources

During the past several years, we have primarily met our working capital and capital resource needs from our operating cash flows and financing activities.

We believe that our existing sources of liquidity, including cash and operating cash flow, will be sufficient to meet our projected capital needs for twelve months from the date these financial statements were available to be issued.

We believe that our existing sources of liquidity, including cash and operating cash flow, will be sufficient to fund our operations and to meet our projected capital needs for a period of at least 12 months from the date the condensed consolidated financial statements are available to be issued.

On July 7, 2021, the Company completed an initial public offering resulting in net proceeds of approximately $12.36 million.

Cash balance at September 30, 2021 was approximately $11.0 million, as compared to $1.269 million at June 30, 2021.

Cash balance at December 31, 2021 was approximately $8.95 million, as compared to $1.269 million at June 30, 2021.

Our increased reliance on remote access to our information systems also increases our exposures to potential cybersecurity breaches.

We cannot provide any assurance that these actions, or any other mitigating actions we may take, will help mitigate the impact of the COVID-19 pandemic on us.

Furthermore, we received an aggregate of $1.4 million of financial support under the recently enacted COVID-19 relief (PPP loan) legislation in the U.S.

However, the legislation and guidance from the authorities continues to evolve;

Furthermore, we received an aggregate of $1.39 million of financial support under the COVID-19 relief legislation in the U.S.

However, the legislation and guidance from the authorities continue to evolve;

as such, the amount and timing of additional support, if any, that we could receive are not determinable at this time, and there can be no guarantees that we will receive additional financial support through these programs.

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Cash Flows from Operating Activities

Net cash used in operating activities was $.777 million for the three months ended September 30, 2021 as compared to $.849 for the three months ended September 30, 2020, due to combined net changes in working capital items of $(.204) million.

The net change in working capital was primarily due to an increase in customer deposits.

Net cash used in operating activities was $.849 million for the three months ended September 30, 2020, due primarily to our net loss of $.389 million and net changes in working capital items of $.560 million.

Net cash used by operating activities was $2.845 million for the six months ended December 31, 2021, primarily due to a net loss of $1.221 million and combined net changes in working capital items of $1.763 million.

The net change in working capital was primarily due to an increase in inventory of $1.964 million and payments of accounts payable and accrued expenses, offset by an increase in customer deposits.

Net cash used in operating activities was $1.359 million for the six months ended December 31, 2020, due to our net loss of $.527 million and net changes in working capital items of $.790 million.

Cash Flows from Investing Activities

There were no net cash flows from investing activities for both of the three months ended September 30, 2021 or 2020.

Net cash used in investing activities was $2,000 for the six months ended December 31, 2021 for the purchase of equipment.

Net cash flow from investing activities was zero for the six months ended December 31, 2020, as we took steps to preserve cash during the pandemic.

Cash Flows from Financing Activities

Net cash provided by financing activities was $10.537 million for the three months ended September 30, 2021 as compared to $.738 for the three months ended September 30, 2020.

The increase relates to $12.4 million of IPO proceeds offset by repayment of $1.8 million of debt.

Net cash provided by financing activities was $0.738 million for the three months ended September 30, 2020, predominately the result of proceeds received from notes payable.

Net cash provided by financing activities was $10.529 million for the six months ended December 31, 2021.

The increase relates to $12.36 million of IPO net proceeds offset by net repayments of $1.831 million of debt.

Net cash provided by financing activities was $0.691 million for the six months ended December 31, 2020, predominately the result of proceeds received from the private placement.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis