What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2024-02-14 · 47 added, 52 removed, 123 unchanged (45% of the section changed)

47 unchanged sentences

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.

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

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.

As of March 31, 2024, 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 recovers from the 2023 SAG-AFTRA strike, 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 our current estimates of recovery, we believe we have, and will generate, sufficient cash to sustain operations.

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.

Nonetheless, the COVID-19 pandemic and SAG-AFTRA strike has had, and continues to have, adverse effects on the Company’s business, results of operations, cash flows and financial condition.

Investment in Growth .

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Results of Operations

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.

Three months ended March 31, 2024 compared to the three months ended March 31, 2023

Three Months Ended March 31,

Net sales increased 4.0% to $3.890 million for the three months ended March 31, 2024 from $3.741 million for the three months ended March 31, 2023.

With fewer movie releases in 2024, theater owners reduced construction during the three months ended March 31, 2024.

In response, the Company increased sales by $0.149 million largely with lower margin equipment revenues.

Three Months Ended March 31,

While revenue increased, gross profit decreased 35.1% to $0.676 million for the three months ended March 31, 2024 from $1.402 million for the three months ended March 31, 2023 or an decrease of $(0.366) million.

As a percentage of total revenues, gross profit percentage decreased to 17.4% from 27.9% due to lower margin seat revenues.

Research and Development

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.

Three Months Ended March 31,

Research and development expense increased by $0.007 million or 11% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to higher compensation expense.

Selling, General and Administrative Expense

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.

Three Months Ended March 31,

The decrease in selling, general and administrative expense of $(0.250) million or 16.6% was due primarily to lower legal and public company filing expense as well as lower credit loss reserves in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Other Income (Expense)

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.

Three Months Ended March 31,

Other Income(Expense) was $0.048 million for the three months ended March 31, 2024 compared to Other Income(Expense) of $0.102 million for the three months ended March 31, 2023 or a decline $(0.054) million was primarily due to the higher marketable securities gains in the three months ended March 31, 2023 compared to the fixed interest income in the three months ended March 31, 2024.

Net Income (Loss)

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%.

Three Months Ended March 31,

Net loss was $(0.601) million for the three months ended March 31, 2024 compared to net loss of $(0.424) million for the three months ended March 31, 2023 or a decline $(0.177) million.

The decrease was due to the lower gross margin of $(0.366) million, offset by lower operating expenses of $0.243 million and lower other income of $(0.054) million.

Nine months ended March 31, 2024 compared to the nine months ended March 31, 2023

Nine Months Ended March 31,

Net sales decreased $(0.645) million or 4.5% to $13.790 million for the nine months ended March 31, 2024 from $14.435 million for the nine months ended March 31, 2023.

The July through November 2023 SAG-AFTRA strike impacted movie production and releases.

With fewer movie releases in 2023 and 2024, theater owners reduced construction during the nine months ended March 31, 2024.

Nine Months Ended March 31,

Along with the revenue decrease of 4.5%, gross profit decreased $(0.658) million or 16.8% to $3.254 million for the nine months ended March 31, 2024 from $3.912 million for the nine months ended March 31, 2023.

Due to lower margin product revenues, gross profit percentage decreased to 23.6% for the nine months ended March 31, 2024 from 27.1% for the nine months ended March 31, 2023.

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.

Nine Months Ended March 31,

Research and development expense increased by $0.017 million or 8.7% for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023 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.

Nine Months Ended March 31,

The decrease in selling, general and administrative expense of $(0.193) million or 4.5% was due primarily to lower legal and public company filing expense as well as lower credit loss reserves in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023.

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.

Nine Months Ended March 31,

The March 31, 2024 to March 31, 2023 decrease of $(0.002) million in other income (expense) was primarily due to the lower interest income of $0.140 million in the nine months ended March 31, 2024 compared to the net unrealized and realized marketable securities gains of $0.142 million in the nine months ended March 31, 2023.

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.

Nine Months Ended March 31,

Net loss was ($0.956) million for the nine months ended March 31, 2024 compared to a net loss of $(0.472) million for the nine months ended March 31, 2023 or a decline $(0.484) million.

The loss increase was due to lower revenues and related lower gross margin impact of $(0.658) million, lower operating expenses of $0.176 million and lower other income of $(0.002) 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 December 31, 2023 was approximately $5.139 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 March 31, 2024 was approximately $5.946 million, as compared to $6.616 million at June 30, 2023.

Cash Flows from Operating Activities

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.

Net cash provided by operating activities was $(0.337) million for the nine months ended March 31, 2024, primarily due to $(0.030) million in working capital decreases along with $(0.956) million in net losses and offset by $0.649 million in other non-cash expenses.

Within working capital change, the uses of cash of $(0.978) million included changes in inventory, prepaids, payables and lease liabilities offset by $0.948 million of changes in receivables, accrued expense, unearned warranty revenue and deposits.

Net cash used by operating activities was ($0.685) million for the nine months ended March 31, 2023, was primarily due to a net loss of ($0.472) million, $0.087 million in non-cash expenses and ($0.300) 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.

Cash Flows from Investing Activities

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.

Net cash used in investing activities was $(0.012) million for the nine months ended March 31, 2024, for equipment purchases.

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

Cash Flows from Financing Activities

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.

Net cash used in financing activities was $(0.334) million used to repurchase shares for the nine months ended March 31, 2024 and $(0.049) for March 31, 2023.

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