What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-05-15 · 32 added, 57 removed, 126 unchanged (41% of the section changed)

10 unchanged sentences

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, 2022, filed with the Securities and Exchange Commission (the “SEC”) on September 28, 2022, 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 of the COVID-19 pandemic and its effect on our business, financial condition, results of operations and cash flows;

● the potential duration and impact of potential future pandemics 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;

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For example, our operations enhancement and theater management solution include a software-as-a-service (SaaS) platform combined with other technologies that allow theater operators to improve their quality control.

We have also developed a translator product and service that will enable moviegoers to watch a movie in any language that the film is available in, all in the same auditorium through a set of augmented reality

We have also developed a translator product and service that will enable moviegoers to

watch a movie in any language that the film is available in, all in the same auditorium through a set of augmented reality glasses.

Another example is a proprietary mobile cart we’ve developed to enable eSports and gaming in movie-theater auditoriums.

Factors affecting our performance

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

Effect of COVID-19 global pandemic .

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

The social and economic effects have been widespread.

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

As of March 31, 2023, a large majority of domestic and international theatres were open.

As of September 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.

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Our gross margins have been and are expected to continue to be affected by a variety of factors, including competition, the timing of changes in pricing, shipment volumes, new product introductions, changes in product mixes, changes in our purchase price of components and assembly and test service costs and inventory write downs, if any.

Our goal is to strive to maintain gross profits for products that may have a declining average selling price by continuing to focus on increased

sales volume and looking to reduce operating costs.

to strive to maintain gross profits for products that may have a declining average selling price by continuing to focus on increased sales volume and looking to reduce operating costs.

Decreases in average selling prices are primarily driven by competition and by reduced demand for products that face potential or actual technological obsolescence.

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● A major disruption of our information technology infrastructure,

● Unforeseen catastrophic events such as the COVID-19 pandemic, armed conflict, terrorism, fires, typhoons and earthquakes, and

● Unforeseen catastrophic events such as the COVID-19 pandemic, armed conflict, terrorism, fires, typhoons and earthquakes,

● A lack of entertainment content caused by entertainment content provider labor disputes, strikes and work shutdowns, and

● Any other disruptions, such as labor shortages, unplanned maintenance or other manufacturing problems.

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Results of Operations

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Three Months Ended March 31,

Net sales decreased 35.9% to $3.741 million for the three months ended March 31, 2023 from $5.835 million for the three months ended March 31, 2022.

In 2023, with fewer new movie releases theater owners chose to reduce theater construction during the three months ended March 31, 2023.

Three Months Ended March 31,

Along with the revenue decrease of 35.9%, gross profit decreased 23.8% to $1.042 million for the three months ended March 31, 2023 from $1.367 million for the three months ended March 31, 2022.

Three months ended September 30, 2023 compared to the three months ended September 30, 2022

Three Months Ended September 30,

Net sales increased 13.4% to $6.635 million for the three months ended September 30, 2023 from $5.852 million for the three months ended September 30, 2022.

In 2023, with more new movie releases compared to prior years theater owners were encouraged to increase theater construction during the three months ended September 30, 2023.

Three Months Ended September 30,

Along with the revenue increase of 13.4%, gross profit increased 16.7% to $1.819 million for the three months ended September 30, 2023 from $1.559 million for the three months ended September 30, 2022 or an increase of $0.260 million.

As a percentage of total revenues, gross profit percentage increased to 27.4% from 26.6%.

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Research and Development

Three Months Ended March 31,

The increase in research and development expense was primarily the result of the timing of activity.

As part of future anticipated revenue increases, we also anticipate future research and development expense increases to fund product development on our green product line, SaaS (software as a service) products, LED screen support systems and Caddy products.

Three Months Ended September 30,

Research and development expense was virtually unchanged for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Selling, General and Administrative Expense

Three Months Ended March 31,

The increase in selling, general and administrative expense was due primarily to sales and marketing head count increases.

Three Months Ended September 30,

The decrease in selling, general and administrative expense was due primarily to lower consulting, audit, tax and legal compliance costs.

Other Income (Expense)

Three Months Ended March 31,

The March 31 2023 to March 31, 2022 change in other (income) expense was primarily due to the $705,000 gain on extinguishment of PPP debt in March 2022 offset by $83,000 in net gains on marketable securities.

Three Months Ended September 30,

The September 30, 2023 to September 30, 2022 change in other income (expense) was primarily due to the $55,000 interest income in the three months ended September 30, 2023 compared to the unrealized marketable securities losses in the three months ended September 30, 2022.

Net Income (Loss)

Three Months Ended March 31,

Net loss was ($0.424) million for the three months ended March 31, 2023 compared to net income of $0.593 million for the three months ended March 31, 2022.

The decrease was due to lower operating income from decreased sales and gross profit offset by gains on investment sales.

In 2022, the increase in income was driven by a $0.705 million gain on the extinguishment due to forgiveness of the PPP loan, offset by an increase in public company related expenses and other selling, general and operating expenses.

Nine months ended March 31, 2023 compared to nine months ended March 31, 2022

Nine Months Ended March 31,

Net revenues increased by $1.707 million or 13.4% for the nine months ended March 31, 2023 from $12.728 million for the nine months ended March 31, 2022 primarily due to the COVID-19 Shutter Venue Operators Grants (SVOG) exhibition industry program incentives hat increased revenues during the nine months ended March 31, 2023

Nine Months Ended March 31,

Compared to the revenue increase of 13.4%, gross profit increased by $0.927 million or 31.1% for the nine months ended March 31, 2023 from $2,985 million for the nine months ended March 31, 2022.

As a percentage of total revenues, gross profit improved to 27.1% for the nine months ended March 31, 2023 from 23.5% for the nine months ended March 31, 2022.

The combination of increased sales and the Company’s lower cost strategic inventory purchases, improved the gross margin percentage.

Both the lower cost QSC purchases and the sales of lower cost used and refurbished equipment resulted in higher gross margin percentages.

Research and Development

Nine Months Ended March 31,

The increase in research and development expense was primarily associated with increased payroll cost in the 2023 period.

We expected 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

Nine Months Ended March 31,

The increase in selling, general and administrative expense was due primarily to higher headcount, payroll and compensation expense in 2023.

Other (Income) Expense

Nine Months Ended March 31,

The change in other (income) expense is primarily due to the $0.704 million of PPP loan forgiveness.

Nine Months Ended March 31,

Net loss was $(472,000) for the nine months ended March 31, 2023 compared to a net loss of $(626,000) for the nine months ended March 31, 2022.

This improvement is the net result of higher sales and gross margins, PPP loan forgiveness, offset by increase in public company related expenses and other selling, general and operating expenses.

Three Months Ended September 30,

Net income was $0.439 million for the three months ended September 30, 2023 compared to net loss of $(0.095) million for the three months ended September 30, 2022 or an improvement of $0.534 million.

The increase was due to higher revenues and related gross margin of $0.260 million, lower operating expenses of $0.077 million and higher other income of $0.197 million.

Liquidity and Capital Resources

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On July 7, 2021, the Company completed an initial public offering resulting in net proceeds of approximately $12.360 million.

Cash balance at March 31, 2023 was approximately $6.357 million, as compared to $2.430 million at June 30, 2022.

In March 2023, the Company sold all its marketable securities with the proceeds deposited to the Company’s cash account.

Investments in marketable securities $4.688 million at June 30, 2022.

Cash balance at September 30, 2023 was approximately $6.408 million, as compared to $6.616 million at June 30, 2023.

Cash Flows from Operating Activities

Net cash used by operating activities was ($0.685) million for the nine months ended March 31, 2023, primarily due to a net loss of ($0.472) million and ($0.213) million in other working capital balances.

The net change in other working capital was primarily due to increases in inventory and payables and decreases in customer deposits, offset by decreases in accounts receivable and prepaid expenses.

The Net cash used by operating activities was $0.916 million for the nine months ended March 31, 2022, primarily due to net loss of ($0.626) million offset by net changes in working capital items of $(0.398) million.

The net change in working capital was primarily due to an increase in inventory of $1.451 million and accounts receivable of $1.02 million, offset by an increase in customer deposits of $2.195 million.

Net cash used in operating activities was $(0.207) million for the three months ended September 30, 2023, primarily due to $(0.735) million in working capital declines offset by the $0.439 million in net income and $0.090 million in other non-cash expenses.

The net change in other working capital was primarily due to increases in receivables, inventory and payables and decreases in customer deposits, offset by decreases in prepaid and accrued expenses.

The net cash used in operating activities was $(0.020) million for the three months ended September 30, 2022, primarily due to net loss of $(0.095) million offset by net changes in working capital items of $(0.398) million.

The net change in working capital was primarily due to increases in inventory and customer deposits offset by lower payables and other items.

Cash Flows from Investing Activities

Net cash provided by investing activities was $4.751 million for the nine months ended March 31, 2023, predominantly the result of sales of investments of $4.758 million.

Net cash used in investing activities was $3.430 million for the nine months ended March 31, 2022 primarily due to the investment in marketable securities.

Net cash used in investing activities was $(0.001) million for the three months ended September 30, 2023, for equipment purchases.

Net cash used in investing activities was $(0.026) million for the three months ended September 30, 2022 primarily due to the net result of marketable securities purchases and sales.

Cash Flows from Financing Activities

Net cash used in financing activities was $49,000 for share repurchases for the three and the nine months ended March 31, 2023.

Net cash provided by financing activities was $9.413 million for the nine months ended March 31, 2022.

The increase relates to $11.244 million of IPO net proceeds offset by net repayments of $1.831 million of debt.

Net cash used in financing activities was zero for the three months ended September 30, 2023 and September 30, 2022.

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