Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-40511 Moving iMage Technologies, Inc. (Exact name of Registrant as specified in its charter) (State or other jurisdic ...

Moving iMage Technologies Inc (NYSE:MITQ) Q1 2024 Results Conference Call November 14, 2023 12:00 PM ET Company Participants Brian Siegel - Managing Director Phil Rafnson - President, CEO & Chairman of the Board Jose Delgado - Executive Vice President of Sales & Marketing Operator Greetings, and welcome to the Moving iMage Technologies First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-40511 Moving iMage Technologies, Inc. (Exact name of Registrant as specified in its charter) (State or other jurisdi ...

PART I [Business](index=3&type=section&id=Item%201.%20Business) MiT offers project management, proprietary products, third-party equipment, and new solutions for the motion picture exhibition industry - The company offers project management, proprietary product manufacturing, third-party equipment resale, and new solution development like multi-language translators and eSports gaming carts[17](index=17&type=chunk)[23](index=23&type=chunk) - Industry recovery, with the domestic box office reaching **$7.4 billion** in 2022, drives company growth, capitalizing on trends like luxury seating and laser projector upgrades[18](index=18&type=chunk)[22](index=22&type=chunk)[27](index=27&type=chunk) - New initiatives include the MiTranslator system for multi-language captioning and installations of the three leading Direct View LED cinema systems[41](index=41&type=chunk)[42](index=42&type=chunk) - Sales backlog increased to **$12.02 million** at June 30, 2023, from **$10.03 million** in 2022, with substantial shipment expected by January 31, 2024[52](index=52&type=chunk) - Top ten customers accounted for **37% of net revenues** in fiscal 2023, a decrease from **48%** in fiscal 2022, reducing customer concentration[47](index=47&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from the recovering movie exhibition industry, supply chain dependencies, internal control weaknesses, and concentrated insider ownership - Business sensitivity to movie exhibition industry recovery, evolving theatrical release windows, and streaming competition poses significant risks[60](index=60&type=chunk)[61](index=61&type=chunk) - Revenue dependence on third-party OEMs like NEC, Barco, and Dolby creates risks from relationship failures or supply chain disruptions[65](index=65&type=chunk)[66](index=66&type=chunk) - Material weaknesses in internal control over financial reporting include issues with the financial closing process, formal policies, segregation of duties, and journal entry review[122](index=122&type=chunk)[124](index=124&type=chunk) - Sales backlog of **$12.02 million** at June 30, 2023, carries conversion risk due to potential customer delays or cancellations[83](index=83&type=chunk) - Directors and executive officers beneficially owned approximately **31.6%** of the company's stock as of September 22, 2023, indicating concentrated influence[117](index=117&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - No unresolved staff comments were reported[134](index=134&type=chunk) [Properties](index=36&type=section&id=Item%202.%20Properties) The company leases all its facilities, including corporate headquarters and a warehouse in Fountain Valley, California, with leases expiring in 2024 - The company leases its **28,000 sq. ft.** corporate headquarters and a **13,000 sq. ft.** warehouse in Fountain Valley, CA, with both operating leases expiring in 2024[135](index=135&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material pending legal proceedings - No material pending legal proceedings were reported by the company[137](index=137&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[138](index=138&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NYSE American, has never paid dividends, and re-authorized a stock repurchase program in March 2023 - Common Stock is listed on the NYSE American under the symbol **MITQ**[140](index=140&type=chunk) - The company has never paid cash dividends and does not intend to in the foreseeable future[141](index=141&type=chunk) - A stock repurchase program of up to **$1 million** was re-authorized on March 23, 2023, resulting in **272,620 shares** repurchased at an average price of **$1.111 per share** in fiscal 2023[142](index=142&type=chunk) [Reserved](index=37&type=section&id=Item%206.%20Reserved) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales increased by **10.1%** to **$20.21 million** in fiscal 2023, with improved gross profit and margin, despite a **$0.95 million** impairment charge leading to a **$1.80 million** net loss, while liquidity improved to **$6.62 million** cash [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Fiscal 2023 saw **10.1%** net revenue growth to **$20.21 million** and **19.0%** gross profit increase to **$5.31 million**, but a **$0.95 million** impairment charge widened the net loss to **$1.80 million** Fiscal Year 2023 vs. 2022 Financial Performance (in thousands) | Metric | FY 2023 | FY 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $20,207 | $18,351 | 10.1% | | Gross Profit | $5,310 | $4,461 | 19.0% | | Gross Margin | 26.3% | 24.3% | +2.0 p.p. | | Operating Expenses | $7,285 | $6,223 | 17.1% | | Net Loss | $(1,798) | $(1,345) | 33.7% | - Gross margin improvement was primarily driven by a favorable product mix, with higher-margin parts and services contributing a larger percentage of total revenues[165](index=165&type=chunk) - A **$954,000** impairment charge on Goodwill, Intangible, and Note Receivable assets was recorded in fiscal 2023 due to declining Caddy revenues, with no comparable charge in 2022[171](index=171&type=chunk) - The net loss increase was largely due to the **$0.95 million** impairment charge and **$0.27 million** in stock option expense, partially offset by an **$0.85 million** increase in gross margin[173](index=173&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly improved in fiscal 2023, with cash increasing to **$6.62 million** from **$2.34 million**, driven by positive cash flow from operations and marketable securities liquidation Cash and Liquidity (in millions) | Metric | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Cash | $6.62 | $2.34 | | Short-term Investments | $0.00 | $4.36 | Cash Flow Summary (in millions) | Cash Flow Source | FY 2023 | FY 2022 | | :--- | :--- | :--- | | From Operating Activities | $0.27 | $(3.39) | | From Investing Activities | $4.31 | $(4.96) | | From Financing Activities | $(0.30) | $9.41 | - The company liquidated its marketable securities portfolio in March 2023 to reduce volatility and ensure stable returns, transferring proceeds to a savings account[172](index=172&type=chunk)[174](index=174&type=chunk) [Critical Accounting Policies and Estimates](index=47&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment, including Revenue Recognition (ASC 606), Inventory Valuation (lower of cost or net realizable value), and Income Taxes (deferred tax asset realizability) - Revenue Recognition follows ASC 606, recognizing revenue upon transfer of control, with allocation for multiple obligations based on standalone selling prices[188](index=188&type=chunk)[189](index=189&type=chunk) - Inventory Valuation is at the lower of cost (FIFO) or net realizable value, with management estimates for obsolescence and write-downs[195](index=195&type=chunk) - Income Taxes use an asset and liability approach, with a valuation allowance recorded against deferred tax assets if realization is unlikely[196](index=196&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to the company - This item is not applicable to the company[197](index=197&type=chunk) [Financial Statements and Supplementary Data](index=50&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2023 and 2022, showing **$13.33 million** in total assets and a **$1.80 million** net loss for 2023 - Haskell & White LLP, the independent registered public accounting firm, provided an unqualified opinion on the consolidated financial statements[284](index=284&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $12,391 | $13,362 | | **Total Assets** | $13,330 | $14,851 | | **Total Current Liabilities** | $5,600 | $5,414 | | **Total Liabilities** | $5,751 | $5,436 | | **Total Stockholders' Equity** | $7,579 | $9,415 | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended June 30, 2023 | Year Ended June 30, 2022 | | :--- | :--- | :--- | | Net Sales | $20,207 | $18,351 | | Gross Profit | $5,310 | $4,461 | | Operating Loss | $(1,975) | $(1,762) | | Net Loss | $(1,798) | $(1,345) | | Net Loss Per Share | $(0.16) | $(0.13) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=50&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants on accounting and financial disclosure - No disagreements with accountants on accounting and financial disclosure were reported[199](index=199&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of June 30, 2023, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2023[200](index=200&type=chunk) - Identified material weaknesses in internal controls include the financial reporting process, lack of formal accounting policies, segregation of duties, and journal entry review[205](index=205&type=chunk) - A remediation plan has been initiated, including hiring a new CFO and engaging external consultants to address identified weaknesses[207](index=207&type=chunk) - As an emerging growth company, an attestation report on internal control effectiveness from the independent registered public accounting firm is not required[209](index=209&type=chunk) [Other Information](index=52&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - No other information was reported by the company[210](index=210&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=52&type=section&id=Item%209C%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable to the company - This item is not applicable to the company[211](index=211&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=52&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details biographical information for directors and executive officers, board committee structure, audit committee financial expert designation, and notes delinquent Section 16(a) filings - Executive officers and directors include Phil Rafnson (President, CEO, Chairman), Jose Delgado (EVP, Sales), Bevan Wright (EVP, Operations), and William Greene (CFO)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - The board has Audit, Compensation, and Nominating committees, with independent directors John C. Stiska, Katherine D. Crothall, and Scott Lloyd Anderson serving on all three[231](index=231&type=chunk)[232](index=232&type=chunk)[235](index=235&type=chunk)[237](index=237&type=chunk) - John C. Stiska is designated as the **audit committee financial expert**[232](index=232&type=chunk) - Delinquent Section 16(a) filings were noted for CFO William Greene and directors John C. Stiska, Katherine D. Crothall, and Scott Lloyd Anderson during fiscal year 2023[239](index=239&type=chunk) [Executive Compensation](index=63&type=section&id=Item%2011.%20Executive%20Compensation) This section details Named Executive Officer and non-employee director compensation, including CEO Phil Rafnson's **$176,600** total compensation in fiscal 2023 and the reissuance of director stock options at a lower exercise price Named Executive Officer Compensation (Fiscal Year 2023) | Name and Principal Position | Salary ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | | Philip Rafnson, President and CEO | 176,600 | — | 176,600 | | Jose Delgado, EVP, Sales and Marketing | 233,730 | 23,373 | 257,103 | | Bevan Wright, EVP, Operations | 233,730 | 23,373 | 257,103 | Non-Employee Director Compensation (Fiscal Year 2023) | Name | Fees Paid in Cash ($) | Option Awards ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Katherine D. Crothall, Ph.D. | 8,400 | 55,000 | 11,000 | 74,400 | | John C. Stiska | 30,800 | 55,000 | 11,000 | 96,800 | | Scott Anderson | 79,376 | 55,000 | 11,000 | 145,376 | - On May 26, 2023, the Board cancelled **150,000** director options with a **$3.00** exercise price and granted **150,000** new options with a **$1.10** exercise price, vesting immediately[259](index=259&type=chunk)[389](index=389&type=chunk) - The company does not have employment, severance, or change-in-control agreements with its named executive officers[244](index=244&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=67&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of September 22, 2023, executive officers and directors as a group beneficially owned **31.6%** of common stock, with CEO Phil Rafnson holding **19.4%** Beneficial Ownership of Executive Officers and Directors | Name of Beneficial Owner | Shares Beneficially Owned | Percentage (%) | | :--- | :--- | :--- | | Phil Rafnson | 2,074,828 | 19.4% | | Bevan Wright | 600,630 | 5.6% | | Jose Delgado | 511,503 | 4.8% | | All executive officers, directors as a group (7 persons) | 3,453,628 | 31.6% | [Certain Relationships and Related Transactions, and Director Independence](index=68&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions include a **$50,000** payment to CEO Phil Rafnson for debt guarantees, while the Board determined three directors are independent - In July 2021, the company made a discretionary **$50,000** payment to CEO Phil Rafnson for his personal guarantees on debt financing[265](index=265&type=chunk) - The company has entered into indemnification agreements with each of its directors and executive officers[267](index=267&type=chunk) - The Board of Directors determined that Katherine D. Crothall, Ph.D., John C. Stiska, and Scott Lloyd Anderson are independent directors under NYSE American listing standards[272](index=272&type=chunk) [Principal Accounting Fees and Services](index=71&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The company engaged Haskell & White LLP as its new independent accounting firm in April 2022, with total auditor fees of **$240,020** in fiscal 2023 and **$336,943** in fiscal 2022 Auditor Fees (in USD) | | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Audit Fees - CohnReznick | $39,375 | $301,943 | | Audit Fees - H&W | $200,645 | $35,000 | | **Total Fees** | **$240,020** | **$336,943** | - The company engaged Haskell & White LLP as its independent registered public accounting firm on April 21, 2022[274](index=274&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=71&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) Financial statements are included in Item 8, schedules are omitted, and exhibits are incorporated by reference from the Exhibit Index - Financial statements are included in Item 8 of this report[277](index=277&type=chunk) - Financial statement schedules are omitted as not applicable, immaterial, or included in consolidated financial statements or notes[278](index=278&type=chunk) - Exhibits are incorporated by reference from the Exhibit Index[279](index=279&type=chunk) [Form 10-K Summary](index=71&type=section&id=Item%2016%20Form%2010-K%20Summary) No summary is provided under this item - No summary is provided under this item[280](index=280&type=chunk)

Financial Data and Key Metrics Changes - For Q4 2023, revenue was $5.8 million, up 3% from $5.6 million last year, with a full-year revenue increase of 10.1% [44] - Q4 gross profit decreased 5% to $1.4 million, with gross margin down 200 basis points to 24.2%, while full-year gross profit increased 19% and gross margin increased 200 basis points to 26.3% [45] - Q4 GAAP operating loss was $1.4 million compared to $0.5 million last year, with a full-year GAAP operating loss of $1.8 million versus $1.3 million last year [50][52] Business Line Data and Key Metrics Changes - FF&E projects constitute approximately 60% to 65% of revenue, with project margins in the mid-teens, while proprietary manufactured offerings have margins ranging from 35% to 55% [39][42] - The company aims to shift its mix towards higher-margin products to improve overall gross margins, with expectations for emerging products like MiTranslator and CineQC to have gross margins exceeding 50% [43][44] Market Data and Key Metrics Changes - The cinema market in Europe is beginning to recover from the pandemic, presenting new opportunities for the company [28] - The North American market has over 70 million non-English proficient speakers, representing a significant opportunity for the MiTranslator product [19] Company Strategy and Development Direction - The company is focusing on introducing disruptive technology into cinema, eSports, and live entertainment venues, with a strategy to expand its product offerings and improve margins [7][18] - The company is also targeting international markets for its products, leveraging established relationships and exploring new opportunities [35][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the impact of the Hollywood strike on box office recovery but remains optimistic about the future growth driven by new technology and market expansion [10][60] - The company is taking a conservative approach to budgeting for FY 2024, expecting similar growth to FY 2023, with potential upside from new product launches and international sales [55][57] Other Important Information - The company has experienced delays in project start dates, with over $3.4 million pushed out into the future, but expects most of this to materialize in FY 2024 [41] - The company has a cash balance of $6.6 million at the end of Q4 and has been active in share buybacks [54] Q&A Session Summary - There were no questions during the Q&A session, and the conference call concluded without further inquiries [62]

Financial Data and Key Metrics Changes - Gross profit decreased 24% to $1 million from $1.3 million last year, but gross margin expanded by 440 basis points to 27.9% [1] - Operating loss in Q3 was $0.5 million compared to $0.1 million last year, reflecting lower revenue [2] - GAAP net loss was approximately $0.4 million, with a loss per share of $0.04, compared to net income of $0.6 million or $0.06 per share last year [18] - Third quarter revenue of $3.7 million was down 36% from $5.8 million last year, with $1.7 million of anticipated revenue pushed into fiscal 2024 [50] Business Line Data and Key Metrics Changes - The company’s core business consists of FF&E projects, which make up roughly 60% to 65% of revenue, but these projects can be lumpy and challenging to forecast [45] - Proprietary manufactured products have margins ranging from 35% to 55%, and the company expects to shift its mix towards these higher-margin products [48] Market Data and Key Metrics Changes - The North American market has over 70 million non-English proficient speakers, presenting a significant opportunity for the MiTranslator product [3] - The box office recovered to over $7.5 billion in 2022, with expectations for continued growth in 2023 as box office releases are projected to increase nearly 50% [26] Company Strategy and Development Direction - The company aims to drive revenue growth from higher-margin products and is focusing on technology products with disruptive potential, such as MiTranslator and CineQC [31] - The company is expanding beyond traditional cinema and sees eSports as a significant growth driver for fiscal 2024 [9] - The company is also looking to expand internationally and has established relationships overseas, aiming to accelerate this expansion [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the industry’s recovery and the potential for growth driven by technology upgrades and new theater builds [25] - The company expects approximately 10% revenue growth for fiscal 2023 compared to fiscal 2022, with gross margin projected to be in the 26% to 27% range [21] Other Important Information - The company has repositioned its cash into money market funds to reduce risk and volatility [19] - The new CFO is working on improving forecasting, which has been challenging due to project timing [20] Q&A Session Summary Question: What are the expectations for revenue growth? - The company expects approximately 10% revenue growth for fiscal 2023 compared to fiscal 2022, with a focus on higher-margin products and technology offerings [21] Question: How is the company addressing the challenges in project timing? - The company acknowledges that project timing can be challenging and is focusing on adding new technology offerings with recurring revenue streams to mitigate this issue [50] Question: What is the outlook for the eSports initiative? - The company sees eSports as a significant growth driver and has expanded its strategic relationship with Sandbox to capitalize on this opportunity [10]

Financial Performance - Net sales decreased by 35.9% to $3.741 million for the three months ended March 31, 2023, compared to $5.835 million for the same period in 2022, attributed to fewer new movie releases leading theater owners to reduce construction [139]. - Net loss for the three months ended March 31, 2023, was $(0.424) million compared to net income of $0.593 million for the same period in 2022, reflecting a significant decrease in operating income [146]. - Net revenues increased by $1.707 million or 13.4% for the nine months ended March 31, 2023, reaching $14.435 million compared to $12.728 million for the same period in 2022 [147]. - Gross profit for the nine months ended March 31, 2023, increased by $0.927 million or 31.1%, totaling $3.912 million, with gross profit margin improving to 27.1% from 23.5% [147]. - The company reported a net loss of $(472,000) for the nine months ended March 31, 2023, an improvement from a net loss of $(626,000) in the same period in 2022 [153]. Expenses - Gross profit decreased by 23.8% to $1.042 million for the three months ended March 31, 2023, with gross profit percentage increasing to 27.9% from 23.4% due to lower cost strategic inventory purchases [140]. - Research and development expenses increased to $66,000 in Q1 2023 from $53,000 in Q1 2022, driven by anticipated revenue increases and product development initiatives [141]. - Selling, general and administrative expenses rose to $1.502 million in Q1 2023 from $1.445 million in Q1 2022, primarily due to increases in sales and marketing headcount [143]. - Research and development expenses increased to $195,000 for the nine months ended March 31, 2023, up from $172,000 in 2022, driven by higher payroll costs [149]. - Selling, general and administrative expenses rose to $4.331 million for the nine months ended March 31, 2023, compared to $4.123 million in 2022, primarily due to increased headcount and payroll expenses [150]. Cash Flow - Cash balance at March 31, 2023, was approximately $6.357 million, an increase from $2.430 million at June 30, 2022 [154]. - Net cash used by operating activities was $(0.685) million for the nine months ended March 31, 2023, compared to $(0.916) million for the same period in 2022 [155]. - Net cash provided by investing activities was $4.751 million for the nine months ended March 31, 2023, primarily from sales of investments [156]. Strategic Initiatives - The company plans to continue investing in expanding operations and increasing headcount to support growth, with total operating expenses expected to rise in the foreseeable future [128]. - The company aims to add new customers and expand sales to existing customers by investing in its field sales force and targeting large organizations that have yet to use its products [129]. - Future performance will depend on achieving brand recognition for proprietary products and increasing marketing expenditures to maintain brand awareness [130]. - The company expects to maintain gross margins by focusing on increased sales volume and introducing new products with higher gross margins [131]. - The company has developed new products, including a SaaS platform for theater management and a translator product for multilingual movie viewing, which are expected to disrupt the industry [123]. - The company expects research and development expenses to increase as a percentage of sales in the future, focusing on green products and SaaS offerings [149]. Impact of COVID-19 - The impact of the COVID-19 pandemic continues to affect the company's business, results of operations, cash flows, and financial condition [127].

Financial Data and Key Metrics Changes - The second quarter revenue increased by 42% to $4.8 million, with gross profit rising by 46% to $1.3 million, leading to a gross margin expansion of 90 basis points to 27.1% [61] - Operating losses in Q2 were $1 million compared to a loss of $0.6 million last year, while net income was approximately breakeven at $50,000 compared to a net loss of $0.6 million or $0.06 per share last year [25][48] - The company expects gross margin expansion to continue into the second half of the year, modeling a full-year gross margin of about 27% [26] Business Line Data and Key Metrics Changes - The company is focusing on proprietary manufactured products, which have margins ranging from 35% to 55%, and expects a favorable shift in product mix to positively impact gross margins [23] - The proprietary products are expected to drive revenue growth and margin expansion, particularly through the acquisition of the ADA product line and the introduction of the MiTranslator [35][36] Market Data and Key Metrics Changes - The North American market for cinema operators includes approximately 40,000 screens, with 18,000 outside the top five circuits, indicating a significant opportunity for growth [10] - The company is optimistic about the domestic box office improvement and technology upgrade cycles, which are expected to drive growth [11] Company Strategy and Development Direction - The company aims to drive revenue growth and margin expansion by shifting towards higher-margin proprietary products and expanding beyond cinema into stadiums and arenas [35][37] - The strategy includes leveraging relationships with stadium and arena owners to introduce a SaaS platform for quality control and venue management, similar to CineQC [18] - The company is also exploring international markets and has established relationships overseas, aiming to accelerate growth beyond North America [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the cinema industry post-COVID, with expectations for continued growth driven by a strong slate of releases and the failure of direct-to-streaming models [33] - The company highlighted the importance of the Shuttered Venue Operations grant program, which has provided significant funding to cinema operators, contributing to a multi-year growth cycle [34] Other Important Information - The company plans to initiate a stock buyback program, indicating confidence in its valuation and future prospects [66] - Operating expenses for fiscal 2023 are expected to be about $5.8 million, slightly higher than initial guidance due to increased compensation and compliance costs [63] Q&A Session Summary Question: Will sustainable earnings be likely going forward? - Management agreed that the plan is to improve profitability going forward, with the potential for breakeven earnings in some quarters due to the business's relatively small size [53] Question: Can you comment on the CineQC rollout with National Amusements? - Management stated that they are working closely with National Amusements to customize the platform and are about 90% complete, which will facilitate international expansion [75] Question: What are the marketable securities on the balance sheet? - Management did not provide a specific answer to this question during the call [80]

Financial Performance - Net sales increased by 41.6% to $4.843 million for the three months ended December 31, 2022, compared to $3.419 million for the same period in 2021, primarily due to recovery from COVID-19 impacts on the exhibition industry [133]. - Net revenues increased by 55.1% to $10.695 million for the six months ended December 31, 2022, compared to $6.893 million for the same period in 2021, primarily due to recovery from COVID-19 impacts [139]. - Net income for the three months ended December 31, 2022, was $46,000, an improvement from a net loss of $(644,000) in the same period of 2021 [138]. - Net loss for the six months ended December 31, 2022, was $(49,000), significantly improved from a net loss of $(1.221 million) in the same period of 2021 [146]. Gross Profit and Margins - Gross profit rose by 46.4% to $1.312 million for the three months ended December 31, 2022, from $0.896 million in the prior year, with gross profit as a percentage of total revenues increasing by 85 basis points to 27.09% [134]. - Gross profit rose by 77.4% to $2.871 million for the six months ended December 31, 2022, with gross profit margin improving to 26.8% from 23.5% in 2021 [140]. - The company expects to maintain gross margins despite competition and pricing pressures by focusing on increased sales volume and introducing new products with higher gross margins [122]. Expenses - Research and development expenses decreased to $61,000 in Q4 2022 from $65,000 in Q4 2021, with expectations for future increases as product development expands [135]. - Research and development expenses increased to $127,000 in the six months ended December 31, 2022, from $119,000 in 2021, reflecting increased activity in product development [141]. - Selling, general and administrative expenses decreased to $1.389 million in Q4 2022 from $1.473 million in Q4 2021, primarily due to the absence of stock compensation expenses in the 2022 period [136]. - Selling, general and administrative expenses rose to $2.834 million for the six months ended December 31, 2022, up from $2.680 million in 2021, primarily due to increased payroll and headcount [143][144]. Cash Flow - Cash balance at December 31, 2022, was approximately $1.575 million, down from $2.430 million at June 30, 2022 [147]. - Net cash used by operating activities was $705,000 for the six months ended December 31, 2022, compared to $2.845 million in the same period of 2021 [148]. - Net cash used in investing activities was $60,000 for the six months ended December 31, 2022, primarily related to marketable securities [149]. - No cash was provided by or used in financing activities for the six months ended December 31, 2022, following net cash provided of $10.529 million in the same period of 2021 [150]. Strategic Initiatives - The company plans to continue investing in expanding operations and increasing headcount to support growth, with total operating expenses expected to rise in the foreseeable future [119]. - The company aims to add new customers and expand sales to existing customers by investing in its field sales force and targeting large organizations that have not yet used its products [120]. - Future performance will depend on achieving brand recognition for proprietary products and increasing marketing expenditures to maintain brand awareness [121]. - The company has introduced new products, including a SaaS platform for theater management and augmented reality glasses for multilingual movie viewing, which are expected to disrupt the industry [116]. Market Conditions - Fluctuations in revenues and earnings are anticipated due to factors beyond the company's control, including customer requirements and market conditions [123].

Financial Data and Key Metrics Changes - First quarter revenue increased by 69% to $5.9 million, driven by strong demand related to technological upgrades and USL products [33] - Gross profit rose by 116% to $1.6 million from $0.7 million last year, with gross margin up 580 basis points to 26.6% [33] - Operating income improved to $50,000 compared to a loss of $0.5 million last year, with a net loss of approximately $100,000 versus a net loss of $0.5 million last year [34] Business Line Data and Key Metrics Changes - Projects account for roughly two-thirds of revenue, with margins in the mid-teens, while proprietary manufactured products have margins ranging from 35% to 55% [29][31] - The company expects margin expansion driven by an increase in proprietary manufactured products and high-margin technology resales [31][32] Market Data and Key Metrics Changes - The cinema industry is recovering from COVID-19, with box office receipts expected to strengthen in 2023 due to a robust slate of movie releases [8] - Government grants from the CARES Act have provided significant funding to cinema operators, contributing to a multiyear growth cycle [10] Company Strategy and Development Direction - The company is focusing on a four-pillar growth strategy: driving revenue growth through higher-margin products, expanding beyond cinema into stadiums and eSports, targeting international markets, and pursuing accretive M&A [15][18][24][25] - The introduction of innovative products like CineQC and MiTranslator is expected to enhance recurring revenue streams and drive higher margins [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's position, citing strong operational, financial, and competitive standing [14] - The company anticipates strong gross margin expansion in fiscal 2023, primarily due to a shift towards higher-margin proprietary products and improved performance from existing offerings [37] Other Important Information - The company has established relationships overseas and aims to accelerate international expansion [24] - The acquisition of the USL product line is highlighted as a successful example of the company's M&A strategy [25] Q&A Session Summary - No questions were raised during the Q&A session, and the call concluded without further inquiries [39][40]