What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-09-27 compared with 2023-09-27 · 37 added, 59 removed, 162 unchanged (37% of the section changed)

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

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.

As a result, the historical financial statements of MiT LLC and MiT Inc.

for the year ended June 30, 2022 have been retroactively revised to reflect the consolidation of MiT, Inc.

All inter-company transactions and balances between MiT Inc.

and MiT, LLC have been eliminated.

Factors affecting our performance

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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.

The repercussions of the COVID-19 global pandemic resulted in a significant impact on 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.

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Investment in growth .

We have invested, and intend to continue to invest, in expanding our operations, increasing our headcount, developing our products and services to support our growth and expanding our infrastructure.

We expect our total operating expenses to increase in the foreseeable future to meet our growth objectives.

We plan to continue to invest in our sales and support operations with a particular focus in the near term of adding additional sales personnel to further broaden our support and coverage of our existing customer base, in addition to developing new customer relationships.

Any investments we make in our sales and marketing organization will occur in advance of experiencing any benefits from such investments, and the return on these investments may be lower than we expect.

In addition, as we invest in expanding our operations internationally, our business and results of operations will become further subject to the risks and challenges of international operations, including higher operating expenses and the impact of legal and regulatory developments outside the United States.

Based on 2024 losses, we will selectively invest in expanding our operations.

We expect our total operating expenses to decrease in the foreseeable future to meet our revenue and cost control objectives.

We plan to invest in our sales and support operations to support our new product initiatives and budget goals.

Adding New Customers and Expanding Sales to Our Existing Customer Base .

We intend to target new customers by continuing to invest in our field sales force.

We intend to target new customers by selectively investing in our field sales force.

We also intend to continue to target large customers’ organizations who have yet to use our products and services.

A typical initial order involves educating prospective customers about the technical merits and capabilities and potential cost savings of our products and services as compared to our competitors’ products.

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

We believe that customer references

have been, and will continue to be, an important factor in winning new business.

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

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Our future performance will depend on our continued ability to achieve brand recognition for our proprietary line of products.

We plan to increase our marketing expenditures to continue to create and maintain prominent brand awareness.

We plan to selectively increase our marketing expenditures to continue to create and maintain prominent brand awareness.

Also, our future performance will depend on our ability to continue to offer high quality, high performance and high functionality products and services.

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Fluctuations in Revenues and Earnings .

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

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

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

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

In April 2022, the Company entered into an Asset Purchase Agreement with QSC, LLC to purchase an aggregate of $1.5 million of inventory from QSC, LLC.

This asset purchase agreement was not within the Company's normal policy of acquiring small amounts of inventory, however management viewed this purchase as a strategic opportunity to improve its gross margins and expand its strategy of enabling under-served communities to enjoy the movie going experience and as such entered into this transaction.

General and administrative expenses

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Year Ended June 30,

Net revenues increased 10.1% to $20.21 million for the year ended June 30, 2023 from $18.35 million for the prior fiscal year primarily due to the recovery from the impact of COVID-19 on the exhibition industry.

Backlog at June 30, 2023 was approximately $12.02 million, which represented orders currently planned to be shipped substantially by January 31, 2024.

Net revenues decreased 0.3% to $20.14 million for the year ended June 30, 2024 from $20.21 million for the prior fiscal year primarily due to the protracted SAG/AFTRA strike.

Backlog at June 30, 2024 was approximately $5.93 million, which represent orders currently planned for March 31, 2025 shipment.

Backlog at June 30, 2023 was $12.02 million.

All open orders at June 30, 2022, except one for approximately $0.2 million due to customer deferral, were fulfilled in the fiscal year 2023.

Year Ended June 30,

Gross profit increased 19.0% to $5.31 million or by $0.85 million for the year ended June 30, 2023 from $4.46 million for the prior fiscal year.

As a percentage of total revenues, gross margin increased to 26.3% for the year ended June 30, 2023 from 24.3% for the prior year.

The increase in gross margin as a percentage of revenues was driven primarily by product mix, as higher margin parts and services revenues such as the QSC LLC purchases made up a larger percentage of total revenues.

Along with the revenue decline for the year ended June 30, 2024, gross profit decreased 11.8% to $4.68 million or by $0.63 million for the year ended June 30, 2024 from $5.31 million for the prior fiscal year.

As a percentage of total revenues, gross margin decreased to 23.3% for the year ended June 30, 2024 from 26.3% for the prior year.

The decrease in gross margin as a percentage of revenues was driven primarily by product mix, as lower margin seat revenues made up a larger percentage of total revenues.

Research and Development

Year Ended June 30,

The increase in research and development expense was primarily associated with the impact of COVID-19 I in 2022.

We expect research and development expense and headcount 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.

The $16,000 increase in research and development expense was in line with the expected research and development expense as we continue to increase product development on our SaaS (software as a service) products, Caddy products, and others as our business expands into new areas.

Selling, General and Administrative Expense

Year Ended June 30,

2023 Selling, General and Administrative expense increased by a negligible $85,000 or 1% compared to 2022 as the Company controlled its spending in 2023.

2024 Selling, General and Administrative expense decreased by $107,000 or 1.8% compared to 2023 primarily due to lower legal, SEC edgarizing, D&O insurance and other public company compliance spending in 2024.

Impairment of Long Term Assets

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Year Ended June 30,

The Company realized investment income including dividends and interest earned in 2023 compared to investment losses in 2022.

The Company earned interest in 2024 compared to investment and interest income in 2023.

To reduce volatility in investments and assure stable returns, the Company liquidated its marketable securities portfolio in March 2023 and placed the proceeds into a savings account.

In 2022, the $(0.24) million unrealized loss was offset by $(0.71) million in PPP loan forgiveness for a net $(0.42) million.

Year Ended June 30,

Net loss of $(1.80) million for the year ended June 30, 2023 compared to a net loss of $(1.35) million for the prior year increased by $(0.45) million.

This net loss increase was largely due to the 2023 $(0.95) million Impairment of Long Term Assets, stock option expense of $(0.27) million in 2023 offset by higher gross margin of $0.85 million.

Net loss of $(1.37) million for the year ended June 30, 2024 compared to a net loss of $(1.80) million for the prior year improved by $0.43 million.

This net loss decrease was largely due to the nonrecurring 2023 $(0.95) million Impairment of Long Term Assets, offset primarily by lower gross margin of $0.63 million in 2024.

Liquidity and Capital Resources

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We believe that our existing sources of liquidity, including cash and operating cash flow, will be sufficient to meet our projected capital needs for the foreseeable future.

On July 7, 2021, the Company completed an initial public offering resulting in net proceeds of approximately $11.24 million.

Our cash balance at June 30, 2024 was approximately $5.28 million, as compared to $6.62 million at June 30, 2023.

Our short-term investments balance at June 30, 2023 was $0.00 million compared to the $4.36 million short-term investment balance at June 30, 2022 as the Company sold its investments in March 2023.

In response to uncertainties associated with the COVID-19 pandemic, we took significant steps to preserve cash and remain in a strong competitive position for when the crisis subsided.

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

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

As of June 30, 2024, a large majority of domestic and international theatres were open.

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Cash Flows from Operating Activities

Net cash provided by operating activities was $0.27 million for year ended June 30, 2023 including the operating loss of $(1.80) million.

Other sources of cash provided included accounts receivable, recovery of bad debts, non-cash impairment and amortization expense, non-cash option expense, and a decline in prepaid expense totaling $2.82 million.

Other uses of cash included a realized loss on investments, inventory increases to support the increased sales and related increases in accounts payable and lease liability totaling $(0.75) million.

Net cash used in operating activities was $3.39 million for the year ended June 30, 2022, due to the operating loss combined with, the non-cash gain on forgiveness of debt and net changes in working capital items of approximately $0.20 million.

The net change in working capital was primarily due to a decrease in accounts payable and prepaid and other, offset by a decrease in accounts receivable and an increase in customer deposits.

Net cash used in operating activities was $(0.80) million for year ended June 30, 2024, primarily due to $(0.60) million in working capital decreases along with the $(1.37) million in net losses and offset by $1.17 million in other non-cash expenses.

Within the $(0.60) million working capital decrease, cash used by operations included accounts receivable, prepaid expenses, customer deposits, lease liabilities and offset primarily by changes in inventory, accounts payable, accrued expenses.

For the year ended June 30, 2023, net cash provided by operating activities was $0.27 million, primarily due to $0.67 million in working capital increases along with the $(1.80) million operating loss and offset by $1.40 million in other non-cash expenses.

Within the $0.67 million working capital increases, cash provided by operations primarily included lower accounts receivable and prepaid expenses and higher accrued expenses.

Cash Flows from Investing Activities

Net cash provided by investing activities was $(4.31) million for the year ended June 30, 2023.

This was comprised primarily of marketable securities investment sales.

Net cash used by investing activities was $(4.96) million for the year ended June 30, 2022 was comprised predominately of sales of marketable securities.

For the year ended June 30, 2024, net cash used by investing activities was $(0.01) million for the year ended June 30, 2024 related to information technology asset upgrades.

For the year ended June 30, 2023, net cash provided by investing activities was $(4.31) million due to sales of marketable securities.

Cash Flows from Financing Activities

Net cash provided by financing activities was ($0.30) million for the year ended June 30, 2023 due the stock buyback program.

Net cash provided by financing activities of $9.41 million for the year ended June 30, 2022 was due to proceeds received from the IPO, less payments on notes payable and our line of credit.

For the year ended June 30, 2024 and the year ended June 30, 2023, net cash used by financing activities of $(0.53) million and $(0.30) million, respectively, due to the stock buyback program during both years.

Financial Instruments and Credit Risk Concentrations

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Critical Accounting Policies and Estimates

The following accounting policies involve judgments and estimates used in preparation of the financial statements.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 from those estimates.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.

Our accounting policies are discussed in Note 1 to the financial statements in this Report.

Our accounting policies are discussed in Note 1 of the financial statements in this Report.

Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the financial statements.

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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).

Management has assessed that the adoption of ASU 2016-13 has had no material impact on its June 30, 2024 10-K 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.

Contract liabilities consist of refund 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.

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.

Cost of goods sold includes cost of inventory sold during the period, net of vendor discounts and allowances, 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.

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The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes.

The provisions 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 difference 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 difference are expected to reverse.

The provisions for income taxes are based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income.

The effects on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

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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-K

Item 7. Management’s Discussion and Analysis