MOVING iMAGE TECHNOLOGIES INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS MOVING IMAGE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ June 30, ​ ​ 2023 2023 ​ ​ ​ (unaudited) ​ ​ ​ ​ Assets ​ ​ Current Assets: ​ ​ Cash ​ $ 6,408 ​ $ 6,616 ​ Accounts receivable, net ​ 2,042 ​ 905 ​ Inventories, net ​ 4,752 ​ 4,419 ​ Prepaid expenses and other ​ 248 ​ 451 ​ Total Current Assets ​ 13,450 ​ 12,391 ​ Long-Term Assets: ​ ​ ​ Right-of-use asset ​ ​ 349 ​ ​ 415 ​ Property and equipment, net ​ 26 ​ 28 ​ Intangibles, net ​ 466 ​ 480 ​ Other assets ​ 16 ​ 16 ​ Total Long-Term Assets ​ 857 ​ 939 ​ Total Assets ​ $ 14,307 ​ $ 13,330 ​ ​ ​ ​ ​ ​ Liabilities And Stockholders’ Equity ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 2,912 ​ $ 1,507 ​ Accrued expenses ​ 843 ​ 618 ​ Customer deposits ​ 2,153 ​ 3,169 ​ Lease liability–current ​ 288 ​ 280 ​ Unearned warranty revenue ​ 12 ​ 26 ​ Total Current Liabilities ​ 6,208 ​ 5,600 ​ ​ ​ ​ ​ Long-Term Liabilities: ​ ​ ​ Lease liability–non-current ​ 76 ​ 151 ​ Total Long-Term Liabilities ​ 76 ​ 151 ​ Total Liabilities ​ 6,284 ​ 5,751 ​ Stockholders’ Equity ​ ​ ​ ​ ​ Common stock, $ 0.00001 par value, 100,000,000 shares authorized, 10,685,778 and 10,685,778 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively ​ ​ — ​ ​ — ​ Additional paid-in capital ​ ​ 12,467 ​ ​ 12,462 ​ Accumulated deficit ​ ​ ( 4,444 ) ​ ​ ( 4,883 ) ​ Total Stockholders’ Equity ​ ​ 8,023 ​ ​ 7,579 ​ Total Liabilities and Stockholders’ Equity ​ $ 14,307 ​ $ 13,330 ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ F-3 Table of Contents MOVING IMAGE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except share and per share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Three Months Ended ​ ​ September 30, ​ September 30, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ ​ (unaudited) ​ ​ ​ ​ Net sales ​ $ 6,635 ​ $ 5,852 ​ Cost of goods sold ​ 4,816 ​ 4,293 ​ Gross profit ​ 1,819 ​ 1,559 ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ Research and development ​ 67 ​ 66 ​ Selling and marketing ​ 542 ​ 610 ​ General and administrative ​ 826 ​ 835 ​ Total operating expenses ​ 1,435 ​ 1,511 ​ Operating profit ​ 384 ​ 48 ​ Other income (expense) ​ ​ ​ Unrealized loss on marketable securities ​ ​ — ​ ​ ( 140 ) ​ Realized loss on marketable securities ​ ​ — ​ ​ ( 23 ) ​ Interest and other income, net ​ 55 ​ 20 ​ Total other income (expense) ​ 55 ​ ( 143 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net profit/(loss) ​ $ 439 ​ $ ( 95 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding: basic and diluted (Note 3) ​ ​ 10,685,778 ​ ​ 10,928,724 ​ Net profit/(loss) per common share basic and diluted ​ $ 0.04 ​ $ ( 0.01 ) ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ F-4 Table of Contents MOVING IMAGE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited) (in thousands except for share amounts) ​ Three months ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retained Earnings ​ ​ ​ ​ Common Stock ​ Additional Paid-in ​ (Accumulated ​ ​ ​ Shares Amount Capital Deficit) Total Balance as of June 30, 2023 ​ 10,685,778 ​ $ — ​ $ 12,462 ​ $ ( 4,883 ) ​ $ 7,579 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grant of options to officer ​ — ​ ​ — ​ ​ 5 ​ ​ — ​ ​ 5 Net income ​ — ​ ​ — ​ ​ — ​ ​ 439 ​ ​ 439 Balance as of September 30, 2023 ​ 10,685,778 ​ $ — ​ $ 12,467 ​ $ ( 4,444 ) ​ $ 8,023 ​ ​ Three months ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retained Earnings ​ ​ ​ ​ ​ Common Stock ​ Additional Paid-in ​ (Accumulated ​ ​ ​ ​ Shares Amount Capital Deficit) Total Balance as of June 30, 2022 10,828,398 ​ $ — ​ $ 12,500 ​ $ ( 3,085 ) ​ $ 9,415 Issuance of stock to employees 130,000 ​ — ​ 153 ​ — ​ 153 Net loss — ​ ​ — ​ ​ — ​ ​ ( 95 ) ​ ​ ( 95 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of September 30, 2022 ​ 10,958,398 ​ $ — ​ $ 12,653 ​ $ ( 3,180 ) ​ $ 9,473 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ F-5 Table of Contents ​ ​ ​ MOVING IMAGE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Three Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2023 ​ 2022 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net profit/(loss) ​ $ 439 ​ $ ( 95 ) Adjustments to reconcile net profit/(loss) to net cash provided by (used in) operating activities: ​ ​ ​ ​ ​ ​ Provision for doubtful accounts ​ 1 ​ ​ 3 Depreciation expense ​ 3 ​ ​ 2 Amortization expense ​ 14 ​ ​ 24 ROU amortization ​ 66 ​ ​ ( 5 ) Stock option compensation expense ​ ​ 5 ​ ​ — Unrealized loss on investments ​ ​ — ​ ​ 140 Realized loss on investments ​ ​ — ​ ​ 23 Changes in operating assets and liabilities ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 1,138 ) ​ ​ 9 Inventories, net ​ ( 333 ) ​ ​ ( 887 ) Prepaid expenses and other ​ 203 ​ ​ 425 Accounts payable ​ 1,405 ​ ​ 1,597 Accrued expenses ​ 225 ​ ​ 28 Unearned warranty revenue ​ ( 14 ) ​ ​ 28 Customer deposits ​ ( 1,016 ) ​ ​ ( 1,312 ) Lease liabilities ​ ​ ( 67 ) ​ ​ — Net cash used in operating activities ​ ( 207 ) ​ ​ ( 20 ) Cash flows from investing activities ​ ​ ​ ​ ​ ​ Sales of marketable securities ​ ​ — ​ ​ 493 Purchases of marketable securities ​ ​ — ​ ​ ( 517 ) Purchases of property and equipment ​ ​ ( 1 ) ​ ​ ( 2 ) Net cash used in investing activities ​ ( 1 ) ​ ​ ( 26 ) ​ ​ ​ ​ ​ ​ ​ Net decrease in cash ​ ( 208 ) ​ ​ ( 46 ) Cash, beginning of the year ​ 6,616 ​ ​ 2,340 Cash, end of the year ​ $ 6,408 ​ $ 2,294 Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Issuance of stock to employees ​ $ — ​ $ 153 Right-of-use assets from ASC842 adoption ​ $ — ​ $ 681 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ F-6 Table of Contents NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: Moving iMage Technologies, Inc., a Delaware corporation, together with its wholly-owned subsidiaries unless the context indicates otherwise, the (“Company”) was incorporated in June 2020. The Company, through its wholly-owned subsidiary, Moving iMage Technologies, LLC (“MiT LLC”) and MiT LLC’s wholly-owned subsidiary, Moving iMage Acquisition Co., (DBA “Caddy Products”), designs, integrates, installs and distributes proprietary and custom designed equipment as well as off the shelf cinema products needed for contemporary cinema requirements. The Company also offers 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. Additionally, the Company offers a wide range of technical, design and consulting services such as custom engineering, systems design, integration and installation, and digital technology, as well as software solutions for operations enhancement and theatre management. The Company also provides turnkey furniture, fixture and equipment services 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 Acquisition Co. (DBA “Caddy Products”) designs, develops and manufactures innovative products for the entertainment, cinema, grocery, worship, restaurant, sports and restroom industries. Share Exchange: In June 2020, MiT LLC members created Moving iMage Technologies, Inc. (“MIT Inc.”) to facilitate the Company’s initial public offering (“IPO”). Upon formation of MiT, Inc., 2,000,000 shares of MiT, Inc. common stock were issued to members of MiT LLC. On July 7, 2021, MiT LLC and MiT Inc. entered into an exchange agreement (“Exchange Agreement”) whereby the members of MiT LLC exchanged their membership interest for 2,350,000 shares of common stock in MiT Inc. As a result of the Exchange Agreement, the members of MiT LLC owned approximately 79 % or 4,452,334 of the outstanding common stock of MiT Inc. As a result, MiT LLC (the entity where the Company conducts its business) became a wholly-owned subsidiary of MiT Inc. (the SEC registrant). The transaction was accounted for as a merger of entities under common ownership in accordance with generally accepted accounting principles in the United States of America (“GAAP”). This determination was primarily based on the facts that, immediately before and after the transaction: (i) MiT LLC owners owned a substantial majority of the voting rights in the combined company, (ii) MiT LLC designated a majority of the members of the initial board of directors of the combined company, and (iii) MiT LLC’s senior management holds all key positions in the senior management of the combined company. Initial Public Offering: On July 12, 2021, the Company closed its initial public offering and issued 4,830,000 shares of its common stock at a price of $ 3.00 per share for net proceeds of approximately $ 12,360,000 after deducting underwriting discounts, commissions, and other expenses of approximately $ 2,130,000 . On July 12, 2021, in connection with the IPO, warrants to purchase 139,611 shares of the Company’s common stock were exercised on a cashless basis. ​ F-7 Table of Contents NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ​ Impact of the COVID-19 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. At various points during the pandemic, authorities around the world imposed measures intended to control the spread of COVID-19, including stay-at-home orders and restrictions on large public gatherings, which caused movie theaters in countries around the world to temporarily close. 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 2022 the theatres reopened as soon as local restrictions and the status of the COVID-19 pandemic would allow. 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. Based on the Company’s current estimates of recovery, it believes it will generate, sufficient cash to sustain operations for a period of 12 months from the issuance of these financial statements. Nonetheless, the COVID-19 pandemic has had, and continues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition. Principles of Consolidation : The condensed consolidated financial statements include the accounts of MiT Inc., its wholly-owned subsidiary, MiT LLC, and MiT LLC’s wholly-owned subsidiary, Moving iMage Acquisition Co., (DBA “Caddy Products”). All significant intercompany transactions and balances have been eliminated in consolidation. Basis of Presentation: The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Unaudited Interim Condensed Consolidated Financial Statements: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP. However, in the opinion of the management of the Company, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position and operating results have been included in these statements. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2023, and with the disclosures and risk factors presented therein. The June 30, 2023 condensed consolidated balance sheet has been derived from the audited consolidated financial statements. Operating results for the three months ended September 30, 2023 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending June 30, 2024. ​ F-8 Table of Contents NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ​ Marketable Securities: In March 2023, the Company sold all its marketable securities with the proceeds deposited to the Company’s cash account. As a result, the prior fair value and market data disclosure are no longer needed for the period ended September 30, 2023 and June 30 , 2023. The carrying amounts of accounts receivable, accounts payable, and notes payable approximate fair value due to their short maturities. Assets and Liabilities Not Measured - In addition to assets and liabilities that are measured at fair value on a recurring basis, we also measure certain assets and liabilities at fair value on a nonrecurring basis. Our non-financial assets, including goodwill, intangible assets and property and equipment, are measured at fair value when there is an indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows. These assets are recorded at fair value only when an impairment charge is recognized. For the year ended June 30, 2023, the Company impaired $( 0.287 ) million in Goodwill, $( 0.363 ) million in Intangible assets and $( 0.304 ) in Note Receivables. There were no impairments recognized for the period ended September 30, 2023. ​ Use of Estimates: The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities (including sales returns, bad debts, inventory reserves, warranty reserves, purchase price allocation and asset impairments), disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Concentration of Cash: The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes the Company is not exposed to any significant credit risk on its cash balances. Accounts Receivable: Accounts receivable are carried at original invoice amount less allowance for bad debts. Management determines the allowance for bad debts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. Accounts receivable are considered to be past due if any portion of the receivable balance is outstanding for more than 90 days past the customer’s granted terms. The Company does not charge interest on past due balances or require collateral on its accounts receivable. As of September 30, 2023 and June 30, 2023 the allowance for bad debts is approximately $ 128,000 and $ 127,000 , respectively. Inventories: Inventories are stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out cost method of accounting. The Company purchases finished goods and materials to assemble kits in quantities that it anticipates will be fully used in the near term. Changes in operating strategy, customer demand, and fluctuations in market values can limit the Company’s ability to effectively utilize all products purchased and can result in finished goods with above-market carrying costs which may cause losses on sales to customers. The Company’s policy is to closely monitor inventory levels, obsolescence and lower market values compared to costs and, when necessary, reduce the carrying amount of its inventory to its net realizable value. As of September 30, 2023 and June 30, 2023, the inventory reserve was $ 647,000 and $ 584,000 , respectively, and inventory on hand was comprised primarily of finished goods ready for sale. Revenue Recognition: The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ​ ​ NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ​ Revenue is recognized when control of the promised goods is transferred at the point of shipment to a customer, and when performance conditions are satisfied, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods as per the agreement with the customer. The Company generates all its revenue from agreements with customers. In case F-9 Table of Contents there are agreements with multiple performance obligations, the Company identifies each performance obligation and evaluates whether the performance obligations are distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. The Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation and then evaluates how the services are transferred to the customer to determine the timing of revenue recognition. ​ The Company considers the U.S. GAAP criteria for determining whether to report revenue gross as a principal versus net as an agent. Factors considered include whether the Company is the primary obligor, has risks and rewards of ownership, and bears the risk that a customer may not pay for the products provided or services performed. If there are circumstances where the above criteria are not met, revenues recognized are presented net of cost of goods sold. Contract assets consist of conditional or unconditional rights to consideration. Accounts receivable represent amounts billed to customers where the Company has an enforceable right to payment for performance completed to date (i.e., unconditional rights to consideration). The Company does not have contract assets that represent conditional rights to consideration. Contract liabilities consist of customer refunds and warranty liabilities, as well as deposits received in advance on sales to certain customers. Such deposits are reflected as customer deposits and recognized in revenue when control of the products is transferred or when performance conditions are satisfied per the agreement. The change in contract liabilities (customer deposits and unearned warranty revenue) during the three months ended September 30, 2023 included $ 1.982 million for revenue recognized that was included in contract liability as of July 1, 2023. ​ ​ ​ ​ ​ ​ ​ ​ Contract Liabilities ($ in Thousands) September 30, 2023 June 30, 2023 Customer deposits ​ $ 2,153 ​ $ 3,169 Unearned warranty revenue ​ 12 ​ 26 Customer refunds ​ ​ 383 ​ ​ 139 Total contract liabilities ​ $ 2,548 ​ $ 3,334 ​ Cost of goods sold includes cost of inventory sold during the period, net of vendor discounts and allowances, and shipping and handling costs, and sales taxes. Taxes collected from customers are included in accounts payable on a net basis (excluded from revenues) until remitted to the government. Deferred contract acquisition costs consist of sales commissions paid to the sales force, and the related employer payroll taxes, and are considered incremental and recoverable costs of obtaining a contract with a customer. The Company has determined that sales commissions paid are an immaterial component of obtaining a customer’s contract and has elected to expense sales commissions when earned. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended Disaggregation of Revenue (in 000’s): September 30, 2023 September 30, 2022 Equipment upon delivery (point in time) ​ $ 6,557 ​ $ 5,714 Installation (point in time) ​ 60 ​ 126 Software and services (over time) ​ 18 ​ 12 Total revenues ​ $ 6,635 ​ $ 5,852 ​ ​ NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue from the sale of equipment is recognized upon delivery of such equipment to customers and when performance conditions are satisfied. Revenue from installation is recognized upon completion of the installation project and when the performance obligation is complete. F-10 Table of Contents Software subscription revenue for remote monitoring services is recognized on a straight-line basis over the term of the contract, usually one year. Services revenues are generally recognized over time as the contracts are performed. ​ Returns and Allowances: The Company records allowances for discounts and product returns at the time of sale as a reduction of revenue as such allowances can be reliably estimated based on historical experience and known trends. Shipping and Handling Costs: Shipping and handling costs are included in cost of goods sold and are recognized as a period expense during the period in which they are incurred. Advertising Costs Advertising costs were approximately $ 3,400 and $ 6,700 for the three months ended September 30, 2023 and 2022, respectively. Advertising costs are expensed as incurred within selling and marketing expenses. Goodwill and Intangible Assets: The Company had no Goodwill as of September 30, 2023 and June 30, 2023. Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in the 2019 Caddy Acquisition. Goodwill is reviewed for impairment at least annually, in June, or more frequently if a triggering event occurs between impairment testing dates. The Company operates as a single operating segment and as a single reporting unit for the purpose of evaluating goodwill impairment. On July 1, 2022, the Company adopted ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” . As such, the Company’s goodwill impairment test includes a one-step qualitative impairment test whereby a goodwill impairment loss will be measured as the excess of a reporting units carrying amount over its fair value. The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. If the fair value of the reporting unit exceeds its carrying value, then no impairment exists. If the estimated fair value of the reporting unit is less than its carrying value, an impairment loss would be recognized for the excess of the carrying value of the reporting unit over the fair value, not to exceed the carrying amount of goodwill. Goodwill is at risk of future impairment in the event of significant unexpected changes in the Company’s forecasted future results and cash flows, or if there is a negative change in the long-term outlook for the business or in other factors such as the discount rate, or if there is a decline in the stock price. Intangible assets arising from business combinations, such as customer relationships, trade names, and/or intellectual property, are initially recorded at fair value. The Company amortizes these intangible assets over the determined useful life which generally ranges from 11 to 20 years . Management reviews its intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. There were no intangible asset impairments recognized for the three months months ended September 30, 2023 or 2022. Business Combinations: The Company includes the results of operations of the businesses that it acquires commencing on the respective dates of acquisition. The Company allocates the fair value of the purchase price of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes: The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. F-11 Table of Contents ​ The following table summarizes the components of deferred tax assets and deferred tax liabilities at June 30, 2023 and September 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred Tax Assets (Liabilities) ​ ​ September 30, 2023 June 30, 2023 Inventory reserve ​ $ 181 ​ $ 163 Accumulated depreciation ​ ( 6 ) ​ ( 5 ) Accumulated goodwill amortization ​ 67 ​ ( 13 ) Accumulated intangible amortization ​ 129 ​ ​ 130 Unrealized loss on investments ​ — ​ ​ 68 Deferred rent ​ 4 ​ 4 Warranty reserve ​ 3 ​ 7 Stock compensation ​ 68 ​ ​ 68 Net operating loss carryforward ​ 974 ​ ​ 1,097 Allowance for doubtful accounts ​ 36 ​ 36 Net ​ ​ 1,456 ​ ​ 1,555 Valuation allowance ​ ( 1,456 ) ​ ( 1,555 ) Total ​ $ — ​ $ — ​ Leases : On July 1, 2022 the Company adopted ASU 2016-02, Leases (Topic 842) which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. In accordance with ASC 842, on July 1, 2022 the Company recognized Right of Use Assets in the amount of $ 665,000 and a lease liability of $ 681,000 for the leases associated with its executive office and warehouse space, as described in Note 9. Product Warranty: The Company’s digital equipment products are sold under various limited warranty arrangements ranging from one year to three years . Company policy is to establish reserves for estimated product warranty costs in the period when the related revenue is recognized. The Company has the right to return defective products for up to three years , depending on the manufacturers’ individual policies. As of September 30, 2023 and June 30, 2023, the Company has established a warranty reserve of $ 61,000 and $ 53,000 , respectively, which is included in accrued expenses in the accompanying condensed consolidated balance sheets. NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The changes in the Company’s aggregate warranty liabilities were as follows for the following periods (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ June 30, ​ 2023 ​ 2023 Product warranty liability beginning of period ​ $ 53 ​ $ 55 Accruals for warranties issued ​ 61 ​ 162 Change in estimates ​ - ​ - Settlements made ​ ( 53 ) ​ ( 164 ) Product warranty liability end of the period ​ $ 61 ​ $ 53 ​ Research and Development: The Company incurs costs to develop new products, as well as improve the appeal and functionality of its existing products. Research and development costs are charged to expense when incurred. ​ Recently Issued Accounting Pronouncements: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. F-12 Table of Contents ​ The Company adopted the new pronouncement on July 1, 2023. The allowance for credit losses has been adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, Management has estimated an allowance for expected credit losses on trade receivables. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods. ​ Management has assessed that the adoption of ASU 2016-13 has had no impact on its September 30, 2023 10-Q consolidated financial statements. Due the Management’s continuing ability to obtain 90 % of contract value in up-front customer deposits, MIT’s risk is only the remaining 10 % of the customer’s contract value. The combined effect of up-front customer deposits, prompt collection of trade receivables and application of historical aging criteria has resulted in minimal bad debts and allowances for doubtful accounts. ​ ​ NOTE 2 — INVESTMENTS In March 2023, the Company sold all its marketable securities with the proceeds deposited to the Company’s cash account. ​ ​ F-13 Table of Contents NOTE 3 — LOSS PER SHARE ​ Basic loss per share data for each period presented is computed using the weighted average number of shares of common stock outstanding during each such period. Diluted loss per share data is computed using the weighted average number of common and potentially dilutive securities outstanding during each period. Potentially dilutive securities consist of shares that would be issued upon the exercise of stock options and warrants, computed using the treasury stock method. A reconciliation of basic and diluted loss per share is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands For the Three Months Ended For the Three Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2023 ​ 2022 Numerator: ​ ​ Net profit/(loss) ​ $ 439 ​ $ ( 95 ) Denominator: ​ ​ Weighted average common shares outstanding, basic and diluted ​ 10,685,778 ​ 10,928,724 ​ ​ ​ ​ ​ ​ ​ Profit/(loss) per share ​ ​ Basic and diluted ​ $ 0.04 ​ $ ( 0.01 ) ​ The following securities were excluded from the calculation of diluted loss per share in each period because their inclusion would have been anti-dilutive: ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Three Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2023 ​ 2022 Options 250,000 150,000 Warrants — — Total potentially dilutive shares 250,000 150,000 ​ For the three months ended September 30, 2023 the Company had net income and the three months ended June 30, 2023 had a net loss. However, all potentially dilutive securities were also deemed to be anti-dilutive because their exercise price exceeded the weighted average trading price of the Company’s stock for the period. ​ F-14 Table of Contents NOTE 4 — PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ June 30, ​ 2023 2023 Production equipment ​ $ 308 ​ $ 308 Leasehold improvements ​ 213 ​ 213 Furniture and fixtures ​ 45 ​ 45 Computer equipment ​ 61 ​ 60 Other equipment ​ 120 ​ 120 Total ​ 747 ​ 746 Accumulated depreciation ​ ( 721 ) ​ ( 718 ) Net property and equipment ​ $ 26 ​ $ 28 ​ Depreciation expense related to property and equipment was $ 2,500 of which $ 2,100 is included in cost of goods and $ 400 in general and administrative expense. F or the three months ended September 30, 2022, depreciation expense related to property and equipment was $ 2,000 , of which $ 0 is included in cost of goods sold and $ 2,000 in general and administrative expense. Depreciation of property and equipment is calculated using the straight-line method over their estimated useful lives as follows: ​ ​ ​ ​ ​ Useful Lives Leasehold improvements 5 years or remaining lease term Furniture and fixtures 5 years Production equipment 3 – 7 years Computer equipment 3 years Other equipment 3 – 7 years ​ ​ NOTE 5 — INTANGIBLE ASSETS The following table summarizes the Company’s intangible assets as of September 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ Gross Asset ​ Accumulated ​ Net Book ​ Period Cost Amortization Value Customer relations 11 years ​ $ 970 ​ $ 621 ​ $ 349 Patents 20 years ​ 70 ​ 15 ​ 55 Trademark 20 years ​ 78 ​ 16 ​ 62 ​ ​ $ 1,118 ​ $ 652 ​ $ 466 ​ ​ F-15 Table of Contents NOTE 5 — INTANGIBLE ASSETS (continued) ​ The following table summarizes the Company’s intangible assets as of June 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ Gross Asset ​ Accumulated ​ Net Book ​ Period Cost Amortization Value Customer relations 11 years ​ $ 970 ​ $ 609 ​ $ 361 Patents 20 years ​ 70 ​ 14 ​ 56 Trademark 20 years ​ 78 ​ 15 ​ 63 ​ ​ $ 1,118 ​ $ 638 ​ $ 480 ​ Amortization expense was $ 14,000 and $ 24,000 for the three months ended September 30, 2023 and 2022, respectively, and is included in general and administrative expense. ​ Estimated amortization expense related to intangible assets subject to amortization at September 30, 2023 in each of the five years subsequent to September 30, 2023, and thereafter is as follows (amounts in thousands): ​ ​ ​ ​ ​ 2024 $ 44 2025 ​ 59 2026 ​ 59 2027 ​ 59 Thereafter ​ 245 Total ​ $ 466 ​ ​ NOTE 6 — ACCRUED EXPENSES Accrued expenses consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2023 2022 Employee compensation ​ $ 238 ​ $ 180 Accrued warranty ​ ​ 61 ​ ​ 53 Customer refund ​ ​ 383 ​ ​ 139 Legal fees ​ ​ 1 ​ ​ 56 Freight ​ ​ 20 ​ ​ 29 Sales tax ​ ​ 87 ​ ​ 27 Others ​ 53 ​ 134 Total ​ $ 843 ​ $ 618 ​ ​ ​ F-16 Table of Contents NOTE 7 — STOCKHOLDERS’ EQUITY In 2019, the Company adopted the 2019 Omnibus Incentive Plan (the “Plan”). The Plan, as amended, provides for the issuance of stock-based awards to employees. As of September 30, 2023, the Plan provides for the issuance of up to 1,500,000 stock-based awards. There are 1,220,000 stock-based awards available to grant under the Plan at September 30, 2023. In July 2021, MiT Inc. entered into an Exchange Agreement with MiT LLC pursuant to which MiT Inc. agreed to exchange membership units for 2,350,000 shares of Common Stock representing 41.4 % of the equity as of such date on a fully diluted basis for no consideration. The shares were exchanged as part of the Exchange Agreement with the Company as described in Note 1. In July 2021, the Company granted options to non-employee directors to purchase an aggregate of 150,000 shares of its common stock at an exercise price of $ 3.00 per share. The options vest one year from the date of grant, expire ten years from the date of grant and had an aggregate grant date fair value of $ 244,200 , which will be recognized ratably over the vesting period. On May 26, 2023, the Board of Directors cancelled 150,000 options consisting of 50,000 options each to John Stiska, Katherine Crothall and Scott Anderson with an exercise price of $ 3.00 . In its place, the Board granted 150,000 options consisting of 50,000 options each with an exercise price of $ 1.10 vesting immediately to John Stiska, Katherine Crothall and Scott Anderson . In addition to the director options, the Board granted CFO William Greene 100,000 options with an exercise price of $ 1.10 with 25 % vesting immediately the remainder vesting at 25 % per year thereafter. These options, which were the only options granted during the year ended June 30, 2023, had a grant-date fair value of $ 1.10 per share. The Company recognized compensation expense for stock option awards of approximately $ 113,000 during the year ended June 30, 2023. None of these potentially dilutive securities were included in the computation of diluted earnings per share as their impact would be anti-dilutive. The Company recognized $ 5,000 in compensation expense for stock options during the three months ended September 30, 2023. On March 6, 2023, the Board of Directors (the “Board”) of Moving iMage Technologies, Inc. (the “Company”) approved an amendment (the “Amendment”) to the Company’s Amended and Restated Bylaws that amends the quorum for a stockholders’ meeting or action to be at least 33 1/3% of all shares of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy. At September 30, 2023, there was no unrecognized compensation cost related to nonvested stock option awards and no option grants during the period. The estimated fair value of each option award granted was determined on the date of grant using the Black-Scholes option valuation model. No options were granted during the three months ended September 30, 2023. The following weighted average assumptions were used for option grants during the three months ended June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Director ​ ​ Officer ​ ​ ​ Options ​ ​ Options ​ ​ ​ ​ ​ ​ ​ ​ Risk-free interest rate 3.92 % ​ 3.86 % Expected volatility 82.0 % ​ 82.0 % Dividend yield — % ​ — % Expected option term in years 5 ​ 7 ​ ​ On March 23, 2023 the Board of Directors re-authorized a stock repurchase program. Under the stock repurchase program, the Company may repurchase up to $ 1 million of its outstanding common stock over the next 12 months. During the period of March 24 through June 30, 2023, the Company repurchased 272,620 of the Company’s stock representing 2.55 % of the 10,685,778 outstanding NOTE 7 — STOCKHOLDERS’ EQUITY (continued) shares at the end of June 30, 2023 at an average price of $ 1.11 per share. There were no share repurchases for the three months ended September 30, 2023. ​ F-17 Table of Contents $ in Thousands, except shares and dollar per share amounts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Approximate ​ ​ ​ ​ ​ ​ ​ Shares ​ Dollar Value of ​ ​ ​ ​ ​ ​ ​ Purchased as ​ Shares that May ​ ​ Total Number of ​ ​ ​ ​ Part of Publicly ​ Yet Be Purchased ​ ​ Shares ​ Average Price ​ Announced Plans ​ Under the Plans Period ​ Purchased ​ Paid per Share ​ or Programs ​ or Programs March 23, 2023 – June 30, 2023 ​ 272,620 ​ $ 1.11 ​ 272,620 ​ $ 697,000 Total ​ 272,620 ​ $ 1.11 ​ 272,620 ​ $ 697,000 ​ On July 12, 2022, the Company granted 130,000 shares of common stock, with a fair market value of approximately $ 153,000 , to employees as compensation for previously provided service, which was accrued as of June 30, 2022. ​ A summary of the status of the Company’s stock options as of September 30, 2023 and changes during the three months ended September 30, 2023 are presented below. ​ ​ ​ ​ ​ ​ ​ ​ ​ Wtd. Avg. ​ ​ ​ ​ Exercise ​ ​ Options ​ Price Balance, July 1, 2023 250,000 ​ $ 1.10 Granted during the year — ​ — Exercised during the year — ​ — Cancelled during the year — ​ — Balance, September 30, 2023 250,000 ​ $ 1.10 ​ A summary of the status of the Company’s stock options as of September 30, 2022 and changes during the three months ended September 30, 2022 are presented below. ​ ​ ​ ​ ​ ​ ​ ​ ​ Wtd. Avg. ​ ​ ​ ​ Exercise ​ ​ Options ​ Price Balance, July 1, 2022 — ​ $ — Granted during the period 150,000 ​ 3.00 Exercised during the period — ​ — Terminated/Expired during the period — ​ — Balance, September 30, 2022 150,000 ​ $ 3.00 ​ The following table summarizes information about outstanding and exercisable stock options at September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Range of Number Number ​ Wtd. Avg. Exercise Price ​ Outstanding ​ Exercisable ​ Wtd. Avg, Life ​ Exercise Price $ 1.10 250,000 175,000 9.0 years ​ $ 1.10 ​ There was no warrant activity during the year ended June 30, 2023 or for the three months ended September 30, 2023. ​ NOTE 8 — CUSTOMER AND VENDOR CONCENTRATIONS Customers : Two customers accounted for 15 % and 14 % of the Company’s sales for the three months ended September 30, 2023. At September 30, 2023, the amount of outstanding receivables related to the two customers was approximately $ 612,000 . One customer accounted for approximately 17 % of the Company’s sales for the three months ended September 30, 2022. At September 30, 2022, the amount of outstanding receivables related to this customers was zero . F-18 Table of Contents Vendors: Approximately 23 % and 20 % of the Company’s purchases were provided by two vendors for the three months ended September 30, 2023. Approximately 32 % and 14 % of the Company’s purchases were provided by two vendors for the three months ended September 30, 2022. ​ NOTE 9 — LEASE COMMITMENTS AND CONTINGENCIES Operating Leases: The Company leases executive office and warehouse space in Fountain Valley, CA, pursuant to separate lease agreements. Under ASC 842, at contract inception the Company determined whether the contract is or contains a lease and whether the lease should be classified as on operating or a financing lease. Operating leases are included in ROU (right-of-use) assets and operating lease liabilities in our condensed consolidated balance sheet. The Company’s executive office and warehouse lease agreements are classified as operating leases. The lease agreements, as amended, expire on January 31, 2025 and do not include any renewal options. The agreements provide for initial monthly base amounts plus annual escalations through the term of the leases. In addition to the monthly base amounts in the lease agreements, the Company is required to pay a portion of real estate taxes and common operating expenses during the lease terms. The Company’s operating lease expense was $ 73,000 and $ 68,000 for the three months ended September 30, 2023 and 2022, respectively. ​ F-19 Table of Contents ​ NOTE 9 — LEASE COMMITMENTS AND CONTINGENCIES (continued) Future minimum lease payments at September 30, 2023 under these arrangements are as follows: ​ ​ ​ ​ ​ ​ (in thousands) ​ ​ Total Operating leases ​ Payments 2024 ​ $ 227 2025 ​ 154 Total undiscounted operating lease payments ​ $ 381 Less imputed interest (at 8 % ) ​ ( 17 ) Present value of operating lease payments ​ $ 364 ​ The following table sets forth the ROU assets and operating lease liabilities as of September 30, 2023: ​ ​ ​ ​ ​ Assets (in thousands) ROU assets-net ​ $ 349 ​ ​ ​ ​ Liabilities ​ Current operating lease liabilities ​ $ 288 Long-term operating lease liabilities ​ 76 Total ROU liabilities ​ $ 364 ​ The Company’s weighted average remaining lease term for its operating leases is 1.50 years. ​ Legal Matters: From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company’s financial position. ​ NOTE 10 — SUBSEQUENT EVENTS On October 2, 2023, the Company entered into a 10b5-1 stock trading plan to facilitate the Company’s previously re-authorized one-year , $ 1 million share repurchase program announced on March 23, 2023. All repurchases will be implemented in accordance with the applicable requirements of Rule 10b-18 under the U.S. Securities Exchange Act of 1934. Through June 30, 2023, the Company had repurchased approximately 273,000 shares for $ 303,000 , leaving $ 697,000 available for future repurchases. On November 1, 2023, the Company increased CEO Phil Rafnson’s compensation from $ 150,000 to $ 200,000 annually. ​ Management has evaluated events from September 30, 2023 through November 14 2023, the date these financial statements were available to be issued and determined that there have been no other events that occurred that would require adjustment to our disclosures in the condensed consolidated financial statements. ​ ​ F-20 Table of Contents ​