What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-02-14 compared with 2023-11-14 · 68 added, 51 removed, 107 unchanged (53% 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 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;

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

● our dependence on distributors, dealers and resellers to sell and market our products and services, and any failure on our part to maintain and further develop our sales channels;

● inability to accurately forecast consumer demand for our products and services and adequately manage our inventory;

● increasing product costs that may cause our operating margins to decline;

● significant variation in revenues and profitability in a particular quarter as a result of the length, unpredictability and seasonality of our sales and contract fulfillment cycles;

● significant customers who cease purchasing our products and services at any time;

● inability ability to maintain our brand;

● inability to offer high-quality customer support;

● our ability to successfully address any product liability claims as well as other legal proceedings;

● our ability to convert all of our backlog into revenue and cash flows;

● our ability to operate in a highly competitive market;

● the extent of competitive pricing pressure from our customers;

● our ability to successfully enter into and operate new lines of business;

● our ability to successfully acquire other businesses, product lines and technologies and address any problems encountered therewith;

● our ability to attract and retain highly skilled personnel and to manage our growth with our limited resources effectively;

● our ability to protect our trademarks and other intellectual property;

● the impact of security breaches through cyber-attacks, cyber intrusions or otherwise;

● the impact of general political, social and economic conditions.

● The condition of the economy in general and of the cinema and/or cinema equipment industry in particular,

● Our customers’ adjustments in their order levels,

● Seasonality in our business, specifically our second fiscal quarter which is traditionally weaker,

● Changes in our pricing policies or the pricing policies of our competitors or suppliers,

● The addition or termination of key supplier relationships,

● The rate of introduction and acceptance by our customers of new products and services,

● Our ability to compete effectively with our current and future competitors,

● Our ability to enter into and renew key relationships with our customers and vendors,

● Changes in foreign currency exchange rates,

● A major disruption of our information technology infrastructure

● 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.

Given these uncertainties, you should not place undue reliance on any forward-looking statements in this Report.

15 unchanged sentences

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 glasses.

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.

7 unchanged sentences

Throughout 2020 and 2021 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.

As of December 31, 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.

22 unchanged sentences

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.

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.

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.

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

32 unchanged sentences

Results of Operations

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%.

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.

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

Three Months Ended December 31,

Net sales decreased 32.6% to $3.265 million for the three months ended December 31, 2023 from $4.843 million for the three months ended December 31, 2022.

The $(1.578) million sales decline was largely due to the absence of a one-time Covid-19 relief program, the Shuttered Venue Operators Grant or SVOG that ended in 2022.

In 2022, the Company’s customers took advantage of the SVOG incentives to invest in their venues and purchased our goods and services.

This one-time 2022 event did not repeat in 2023.

In a comparable period without SVOG effects, in the three months ended December 31, 2021, sales were $3.419 million.

Compared to the three months ended December 31, 2021, the December 31, 2023 sales of $3.265 million declined by $(0.154) million or 4.5%.

Three Months Ended December 31,

Along with the revenue decrease of 32.6%, gross profit decreased 42.2% to $0.759 million for the three months ended December 31, 2023 from $1.312 million for the three months ended December 31, 2022 or an decrease of $(0.553) million.

As a percentage of total revenues, gross profit percentage decreased to 23.2% from 27.1% as a result of product mix towards lower margin equipment.

Research and Development

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.

Three Months Ended December 31,

Research and development expense increased by $0.011 million or 18% for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 due to higher compensation expense.

Selling, General and Administrative Expense

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.

Three Months Ended December 31,

The increase in selling, general and administrative expense of $0.126 million or 9.2% was due primarily to higher compensation expense in the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Other Income (Expense)

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.

Three Months Ended December 31,

The December 31, 2023 to December 31, 2022 decline of $(0.148) imillion in other income (expense) was primarily due to the lower $0.036 million interest income in the three months ended December 31, 2023 compared to the net unrealized and realized marketable securities gains of $0.184 million in the three months ended December 31, 2022.

Net Income (Loss)

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.

Three Months Ended December 31,

Net loss was $(0.794) million for the three months ended December 31, 2023 compared to net income of $0.046 million for the three months ended December 31, 2022 or a decline $(0.840) million.

The decrease was due to lower revenues $(1.578) million, as a result of the non-recurring 2022 SVOG incentives in 2023, the related lower gross margin impact of $(0.553) million, higher operating expenses of $(0.157) million and lower other income of $(0.130) million.

Six months ended December 31, 2023 compared to the six months ended December 31, 2022

Six Months Ended December 31,

Net sales decreased $(0.795) million or 7.4% to $9.900 million for the six months ended December 31, 2023 from $10.695 million for the six months ended December 31, 2022.

The absence of SVOG incentives in 2023 compared to 2022 and the prolonged SAG-AFTRA strike reduced new movie releases in 2023.

As a result, theater owners reduced construction during the six months ended December 31, 2023.

Six Months Ended December 31,

Along with the revenue decrease of 7.4%, gross profit decreased 10.2% to $2.578 million for the six months ended December 31, 2023 from $2.8719 million for the six months ended December 31, 2022 or a decrease of $(0.293) million.

As a percentage of total revenues, gross profit percentage decreased to 26.0% from 26.8%.

Research and Development

Six Months Ended December 31,

Research and development expense increased by $0.012 million or 9.4% for the six months ended December 31, 2023 compared to the six months ended December 31, 2022 due to higher compensation expense.

Selling, General and Administrative Expense

Six Months Ended December 31,

The increase in selling, general and administrative expense of $0.052 million or 1.8% was due primarily to higher compensation expense in the six months ended December 31, 2023 compared to the six months ended December 31, 2022.

Other Income (Expense)

Six Months Ended December 31,

The December 31, 2023 to December 31, 2022 increase of $0.068 million in other income (expense) was primarily due to the higher interest income of $0.109 million in the six months ended December 31, 2023 compared to the net unrealized and realized marketable securities gains of $0.041 million in the six months ended December 31, 2022.

Net Income (Loss)

Six Months Ended December 31,

Net loss was ($0.355) million for the six months ended December 31, 2023 compared to a net loss of $(0.049) million for the six months ended December 31, 2022 or a decline $(0.306) million.

The decrease was due to lower revenues $(0.795) million, as a result of the non-recurring 2022 SVOG incentives in 2023, the related lower gross margin impact of $(0.293) million, higher operating expenses of $0.081 million offset by higher other income of $0.068 million.

Liquidity and Capital Resources

1 unchanged sentence

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 $12.360 million.

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

On July 7, 2021, the Company completed an initial public offering

resulting in net proceeds of approximately $12.360 million.

Cash balance at December 31, 2023 was approximately $5.139 million, as compared to $6.616 million at June 30, 2023.

Cash Flows from Operating Activities

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.

Net cash used in operating activities was $(1.364) million for the six months ended December 31, 2023, primarily due to $(1.190) million in working capital decreases along with $(0.355) million in net losses and offset by $0.181 million in other non-cash expenses.

Within working capital change, the uses of cash of $(1.268) million included changes in receivables, inventory, prepaids, payables and customer deposits.

Cash provided by working capital of $0.078 million was due to the changes in accrued expenses and lease liabilities.

The net cash used in operating activities was $(0.705) million for the six months ended December 31, 2022, primarily due to net loss of $(0.049) million offset by net changes in working capital items of $(0.656) million.

The net change in working capital was primarily due to increases in inventory and decreases in accrued expense and customer deposits offset by reduced receivables and prepaids.

Cash Flows from Investing Activities

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.

Net cash used in investing activities was $(0.012) million for the six months ended December 31, 2023, for equipment purchases.

Net cash used in investing activities was $(0.060) million for the six months ended December 31, 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 zero for the three months ended September 30, 2023 and September 30, 2022.

Net cash used in financing activities was $0.101 million used to repurchases shares for the six months ended December 31, 2023 and zero for December 31, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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