What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-09-27 compared with 2022-09-28 · 34 added, 32 removed, 339 unchanged (16% of the section changed)

7 unchanged sentences

The COVID-19 pandemic and ensuing governmental responses have negatively impacted, and could further materially adversely affect, our business, financial condition, results of operations and cash flows.

The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry.

The COVID-19 pandemic had an unprecedented impact on the world and the movie exhibition industry.

The social and economic effects have been widespread.

1 unchanged sentence

The repercussions of the COVID-19 global pandemic resulted in a significant impact to our customers, specifically those in the entertainment and cinema industries.

As a result, the Company implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, halting non-essential operating and capital expenditures, and negotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers.

Throughout 2020 and 2021 the theatres reopened as soon as local restrictions and the status of the COVID-19 pandemic would allow.

Through 2020 and 2022 the theatres reopened as soon as local restrictions and the status of the COVID-19 pandemic would allow.

As of June 30, 2023, a large majority of domestic and international theatres were open.

The industry’s recovery to historical levels of new film content, both in terms of the number of new films and box office performance, is still underway, as the

industry also continues to adjust to evolving theatrical release windows, competition from streaming and other delivery platforms, supply chain delays, inflationary pressures, labor shortages, wage rate pressures and other economic factors.

On September 7, 2022, Regal Cinema’s (our customer) parent company, Cineworld, filed for bankruptcy protection due to the slow recovery following the effects of COVID on the industry.

The industry’s recovery to historical levels of new film content, both in terms of the number of new films and box office performance, is still underway, as the industry also continues to adjust to evolving theatrical release windows, competition from streaming and other delivery platforms, supply chain delays, inflationary pressures, labor shortages, wage rate pressures and other economic factors.

On September 7, 2022, Regal Cinema’s (our customer) parent company, Cineworld, filed for bankruptcy protection due to the slow recovery following the effects of COVID on the industry resulting in a canceled order.

On August 1, 2023, Cineworld emerged from bankruptcy.

Based on our current estimates of recovery, we believe we have, and will generate, sufficient cash to sustain operations.

68 unchanged sentences

A large part of our business is concerned with new theater builds, which often see substantial delays due to weather, but also financing timing, permits and governmental delays, and other unpredictable problems often associated with large real estate projects.

Specifically, as a result of the effects of the COVID-19 pandemic, a significant number of our customers have cancelled and/or delayed the start of scheduled theater refurbishing and construction projects.

Also, our revenue growth generally is higher during the first and fourth quarters of the fiscal year as the weather improves, the digital cinema market becomes more active and consumers begin new theater builds or remodels projects.

8 unchanged sentences

Trade accounts receivable from these customers represented approximately 19% and 48% of net receivables at June 30, 2023 and 2022, respectively.

No customer accounted for more than 10% of the Company’s revenue for the year ended June 30, 2022.

One customer accounted for 23% of the Company’s revenue for the year ended June 30, 2021.

No customer accounted for more than 10% of the Company’s revenue for the year ended June 30, 2023 or 2022.

While we believe our relationships with such customers are stable, most arrangements are made by purchase order and are terminable at will by either party.

4 unchanged sentences

Maintaining, promoting, and positioning our brand depends largely on the success of our marketing efforts and our ability to provide consistent, high-quality products and services.

Our brand could be harmed if we fail to achieve these objectives or if our public image or brand were to be tarnished by negative publicity.

Our brand could be harmed

if we fail to achieve these objectives or if our public image or brand were to be tarnished by negative publicity.

We also believe that our reputation and brand may be harmed if we fail to maintain a consistently high level of customer service.

24 unchanged sentences

We may not convert all of our backlog into revenue and cash flows.

At June 30, 2022, our sales backlog was approximately $10.03 million, which represented orders to be shipped substantially in the next six months.

At June 30, 2023, our sales backlog was approximately $12.02 million, which represented orders to be shipped substantially by January 2024.

We list signed contracts for theater construction or refurbishing for which revenue has not been recognized as sales backlog prior to the time of revenue recognition.

over the term, but excludes contingent fees in excess of fixed minimum ongoing fees that might be received in the future and maintenance and extended warranty fees.

The total value of the sales backlog represents all signed agreements that are expected to be recognized as revenue in the future and includes initial fees along with the value of fixed minimum ongoing fees due over the term, but excludes contingent fees in excess of fixed minimum ongoing fees that might be received in the future and maintenance and extended warranty fees.

Notwithstanding the legal obligation to do so, not all of our customers with which we have signed contracts may complete theatrical construction or refurbishing systems that are included in our backlog.

2 unchanged sentences

Customer requested delays in the construction or refurbishing of theaters in backlog remain a recurring and unpredictable part of our business.

Specifically, as a result of the effects of the COVID-19 pandemic, a significant number of our customers had temporarily ceased operations and others have cancelled or pushed back the delivery of pending product orders and/or delayed the start of scheduled theater refurbishing and construction projects.

Specifically, as a result

of the effects of the COVID-19 pandemic, a significant number of our customers had temporarily ceased operations and others have cancelled or pushed back the delivery of pending product orders and/or delayed the start of scheduled theater refurbishing and construction projects.

We operate in a highly competitive market.

12 unchanged sentences

Our international operations subject us to indirect risks, which could adversely affect our operating results.

The Company primarily sells internationally thru existing domestic customers.

The Company sells internationally thru existing domestic customers.

Still, our international operations are exposed to the following risks, several of which are out of our control:

● political and economic instability, the effects of the COVID-19 pandemic, international terrorism and anti-American sentiment, particularly in emerging markets;

● political and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;

● preference for locally-branded products, and laws and business practices favoring local competition;

15 unchanged sentences

We may need to raise additional capital required to grow our business, and we may not be able to raise capital on terms acceptable to us or at all.

Growing and operating our business will require significant cash outlays and capital expenditures and commitments.

Growing and operating our business will require significant cash outlays, capital expenditures and commitments.

We have utilized cash on hand and cash generated from operations as sources of liquidity.

If cash on hand and cash generated from operations are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through equity or debt financing, to fund our growth.

Our ability to access the credit and capital markets in the future as a source of liquidity, and the borrowing costs associated with such financing, are dependent upon market conditions.

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.

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.

Our ability to access the credit and capital markets in the future as a source of liquidity, and the borrowing costs associated with such financing depend upon market conditions.

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.

In the event of a sustained market deterioration, and continued revenue declines, 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.

20 unchanged sentences

The expansion of our business has placed a significant strain on our limited managerial, operational, and financial resources.

We have been and will continue to be required to expand our operational and financial systems significantly and to expand, train and manage our work force in order to manage the expansion of our operations.

Our future success will depend in large part on our ability to attract, train, and retain additional highly skilled executive level management with experience in the digital cinema industry.

We have been and will continue to be required to expand our operational and financial systems significantly and to expand, train and manage our work force to manage the expansion of our operations.

Our future success will largely depend in large part on our ability to attract, train, and retain additional highly skilled executive level management with experience in the digital cinema industry.

Competition is intense for these types of personnel from more established organizations, many of which have significantly larger operations and greater financial, marketing, human, and other resources than we have.

We may not be successful in attracting and retaining qualified personnel on a timely basis, on competitive terms or at all.

We may not be successfully attract and retaining qualified personnel on a timely basis, on competitive terms or at all.

To date we have had to limit the engagement of critical management and other key personnel due in part to limited financial resources.

If we are not successful in attracting and retaining these personnel, our business, prospects, financial condition and operating results would be materially adversely affected.

If we are not successful in attracting and retain these personnel, our business, prospects, financial condition and operating results would be materially adversely affected.

Further, our ability to manage our growth effectively will require us to continue to improve our operational, financial and management controls, reporting systems and procedures, to install new management information and control systems and to train, motivate and manage employees.

3 unchanged sentences

In addition, certain of our officers have built highly regarded reputations in the digital cinema industry, and they aid in attracting and identifying opportunities and negotiating for us with large and institutional clients.

As we continue to grow, our success will largely depend on our ability to attract and retain qualified personnel in all areas of business.

As we continue to grow, our success will largely depend on our ability to attract and retain qualified personnel in all business areas.

We may be unable to continue to hire and retain a sufficient number of qualified personnel to support or keep pace with our planned growth.

2 unchanged sentences

We rely on a combination of trade secrets, confidentiality policies, non-disclosure and other contractual arrangements and copyright and trademark laws to protect our intellectual property rights.

we may not adequately protect these rights, and their disclosure to, or use by, third parties may harm our competitive position.

However, we may not adequately protect these rights, and their disclosure to, or use by, third parties may harm our competitive position.

Our inability to detect unauthorized use of, or to take appropriate or timely steps to enforce, our intellectual property rights may harm our business.

1 unchanged sentence

These claims may harm our reputation, cost us money to defend, distract the attention of our management and prevent us from offering some services.

Confidential intellectual property is increasingly stored or carried on mobile devices, such as laptop computers, which increases the risk of inadvertent disclosure where the mobile devices are lost or stolen and the information has not been adequately safeguarded or encrypted.

safeguarded or encrypted.

This also makes it easier for someone with access to our systems, or someone who gains unauthorized access, to steal information and use it to our disadvantage.

8 unchanged sentences

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, 2022 have been and our projected financial and operating results for fiscal 2023 are expected to be materially adversely affected.

As a result of the aforementioned factors, our financial and operating results for the year ended June 30, 2023 have been and our projected financial and operating results for fiscal 2024 will be adversely affected.

The occurrence of one or more other natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes;

1 unchanged sentence

or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks, could adversely affect our operations and financial performance.

The occurrence of the global COVID-19 pandemic has resulted in, and such other events could result in, among other things, operational disruptions, physical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and transportation disruptions.

The occurrence of the global COVID-19 pandemic has resulted in, and such other events could result in, among other things, operational disruptions, or disruption of one or more of our properties or properties used by third parties in connection with the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and transportation disruptions.

The occurrence of the global COVID-19 pandemic has caused, and these factors could also cause, consumer confidence and spending to decrease or result in increased volatility in the United States and global financial markets and economy.

Such occurrences have had and could in the future have a material adverse effect on us and could also have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable damage.

Our business could be adversely affected by entertainment content provider labor disputes, strikes and shutdowns.

From time to time, entertainment content providers can have labor disputes, strikes and shutdowns that curtail the production and release of entertainment content featured at the cinema venues that we support.

A lack of entertainment content at our customer cinema venues results in revenues losses at the cinema and may impact our customer’s ability to continue with existing or new venue upgrades using our products and services.

A lack of entertainment content featured at the cinema venues that we support as a result entertainment content providers labor disputes, strikes and shutdowns could ultimately have an adverse effect on our financial condition and results of operations.

Risks Related to Ownership of Our Common Stock

9 unchanged sentences

In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Report, these factors include:

● the continuing effects of the COVID-19 pandemic;

● the success of competitive products or technologies;

66 unchanged sentences

Prior to the completion of our IPO, we had been a private company with limited accounting personnel and other resources to address our internal control over financial reporting.

During the course of preparing our consolidated financial statements for the years ended June 30, 2022 and 2021, we determined that we had material weaknesses in our internal control over financial reporting relating to our financial reporting processes relating to (i) the design and operation of our closing and financial reporting process, (ii) the fact that we had no formal or documented accounting policies or procedures, (iii) the fact that certain segregation of duties issues existed and (iv) the fact that there was no formal review process around journal entries recorded.

During the course of preparing our consolidated financial statements for the years ended June 30, 2023 and 2022, we determined that we had material weaknesses in our internal control over financial reporting relating to (i) the design and operation of our closing and financial reporting process, (ii) the fact that we had no formal or documented accounting policies or procedures, (iii) the fact that certain segregation of duties issues existed and (iv) the fact that there was no formal review process around journal entries recorded.

For a discussion of our remediation plan, see Item 9A “Controls and Procedures”.

The actions we have taken are subject to continued review, supported by confirmation and testing by management.

While we have implemented a plan to remediate this weakness, we cannot assure you that we will be able to remediate this weakness, which could impair our ability to accurately and timely report our financial position, results of operations or cash flows.

While we have implemented a plan to remediate these weaknesses, we cannot assure you that we will be able to remediate this weakness, which could impair our ability to accurately and timely report our financial position, results of operations or cash flows.

Our failure to remediate the material weaknesses identified above or the identification of additional material weaknesses in the future, could adversely affect our ability to report financial information, including our filing of quarterly or annual reports with the Commission on a timely and accurate basis.

43 unchanged sentences

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-K

Item 1A. Risk Factors