Moving iMage Technologies(MITQ) - 2025 Q4 - Annual Report

PART I Business Overview Moving iMage Technologies (MiT) supplies technology, products, and services to movie theaters and entertainment venues, offering proprietary and third-party solutions, and developing disruptive innovations like CineQC and MiTranslator, adapting to industry shifts including new projection technologies - MiT is a key provider of technology, products, and services to movie theater operators and sports and entertainment venues[16] Movie Release Revenues (2023-2024) | Year | Revenue (Billions) | | :--- | :----------------- | | 2023 | $9.0 | | 2024 | $8.6 | 2024 Global Box Office Revenue Breakdown | Market | Revenue (Billions) | Percentage of Total | | :------------ | :----------------- | :------------------ | | Global Total | $30 | 100% | | U.S./Canada | $8.8 | 29.3% | | International | $21.2 | 70.7% | - The company offers comprehensive services including project management, design, and installation, alongside designing proprietary ADA-compliant products and reselling third-party technologies like projectors and servers[22] - Recently introduced disruptive products include CineQC (a software-as-a-service platform for quality control), MiTranslator (a multi-language augmented reality glasses system for moviegoers), and a proprietary mobile cart for eSports and gaming in auditoriums[22] - As of 2024, roughly the low-teens percentage of cinema screens worldwide were laser-equipped, with 99% of new projectors sold by MiT having laser light sources, offering brighter images and longer lifespan[25][26] - MiT is the only company that has installed and commissioned the three leading DCI Directview LED cinema systems (Samsung ONYX Cinema, LG DVLED Cinema, & SONY Crystal LED), which are considered disruptive to traditional projection by offering improved contrast and energy efficiency[43][44] Sales Backlog (as of June 30) | Year | Backlog (Millions) | | :--- | :----------------- | | 2025 | $7.52 | | 2024 | $5.93 | - The company employed 25 full-time equivalent personnel as of June 30, 2025[58] Risk Factors The company faces significant risks from adverse economic conditions, supply chain disruptions, intense competition, and operational challenges, alongside risks related to common stock ownership, insider control, and identified material weaknesses in internal controls - Top ten customers accounted for approximately 44% and 45% of net revenues for the years ended June 30, 2025 and 2024, respectively, and 41% and 62% of net receivables at June 30, 2025 and 2024, respectively[47][70] - The company's sales backlog of approximately $7.52 million at June 30, 2025, may not fully convert into revenue and cash flows due to potential customer delays or cancellations[75] - The markets for the company's products and services are highly competitive, leading to pricing pressures and potential loss of market share[55][76][77] - International operations expose the company to risks such as political/economic instability, foreign laws, customization costs, intellectual property protection challenges, and difficulties in managing foreign operations[78][80] - The company has identified material weaknesses in its internal control over financial reporting, including issues with the closing and financial reporting process, lack of formal accounting policies, segregation of duties, and journal entry review[124][205] - The company does not anticipate paying any cash dividends in the foreseeable future, intending to retain all future earnings to finance business growth[127][270] - Directors and executive officers beneficially owned approximately 36% of the outstanding capital stock as of September 26, 2025, allowing them to exercise significant influence over corporate matters[114] - As an 'emerging growth company,' the company takes advantage of reduced disclosure and governance requirements, which could make its shares less attractive to investors and potentially hinder capital raising efforts[115][118] Unresolved Staff Comments There are no unresolved staff comments to report - None[135] Cybersecurity The company manages cybersecurity risks through basic protocols, with management overseeing identification, assessment, and mitigation, and reported no material incidents in fiscal year 2025 - The company manages cybersecurity risks by utilizing basic security protocols, such as network monitoring and access controls[136] - Management is responsible for identifying, considering, and assessing material cybersecurity risks, establishing monitoring processes, implementing mitigation measures, and maintaining cybersecurity programs[136] - During the fiscal year ended June 30, 2025, no cybersecurity incident that would materially affect the business was identified[136] Properties The company leases all its facilities, including a 14,700 sq ft corporate headquarters in Fountain Valley, CA, and a 6,300 sq ft warehouse in Whittier, CA, with leases expiring in 2030 and 2028, respectively - Corporate headquarters: 14,700 square feet in Fountain Valley, California, under an operating lease expiring in 2030 at a monthly rental of $20,267[137] - Additional facility: 6,300 square foot warehouse in Whittier, California, under an operating lease expiring in 2028 at a monthly rental of $6,209[137] - The company leases all its facilities and does not own any real property[137] Legal Proceedings The company is not currently party to any material pending legal proceedings, though it may be subject to routine litigation in the ordinary course of business - The company is not party to any material pending legal proceedings[138] - From time to time, the company may be subject to legal proceedings and claims arising in the ordinary course of business[138] Mine Safety Disclosures This item is not applicable to the company - Not applicable[139] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock is listed on the NYSE American under "MITQ" with 12 holders of record as of September 26, 2025, and it has never paid cash dividends, intending to retain earnings for growth, with no unregistered equity sales reported for the fiscal year - The company's Common Stock is listed on the NYSE American under the symbol "MITQ"[141] - As of September 26, 2025, there were 12 holders of record of the company's Common Stock[141] - The company has never declared or paid cash dividends on its capital stock and currently intends to retain all future earnings to finance business growth and development[142] - For this fiscal year, there were no unregistered securities to report that had not been previously included in other SEC filings[143] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations The company, a technology and services provider to entertainment venues, saw a 9.9% decrease in FY2025 net sales due to the SAG/AFTRA strike, yet improved its net loss by $0.424 million and increased gross margin to 25.2%, while maintaining liquidity and focusing on strategic investments Net Sales (Year Ended June 30) | Year | Net Sales (in 000's) | | :--- | :------------------- | | 2025 | $18,147 | | 2024 | $20,139 | - Net revenues decreased 9.9% for the year ended June 30, 2025, primarily due to the protracted SAG/AFTRA strike[160] Gross Profit (Year Ended June 30) | Year | Gross Profit (in 000's) | Gross Margin % | | :--- | :---------------------- | :------------- | | 2025 | $4,573 | 25.2% | | 2024 | $4,683 | 23.3% | Net Loss (Year Ended June 30) | Year | Net Loss (in 000's) | | :--- | :------------------ | | 2025 | $(948) | | 2024 | $(1,372) | - Net loss improved by $0.424 million in 2025 compared to the prior year, largely due to staff reductions related to headcount[170] Cash Balance (as of June 30) | Year | Cash (Millions) | | :--- | :-------------- | | 2025 | $5.715 | | 2024 | $5.278 | Net Cash from Operating Activities (Year Ended June 30) | Year | Net Cash from Operating Activities (Millions) | | :--- | :-------------------------------------------- | | 2025 | $0.437 | | 2024 | $(0.796) | Operating Lease Contractual Obligations (as of June 30, 2025) | Year | Payments (Thousands) | | :--- | :------------------- | | 2026 | $313 | | 2027 | $326 | | 2028 | $303 | | 2029 | $266 | | 2030 | $159 | | Total Future Minimum Lease Payments | $1,367 | | Less Imputed Interest | $(222) | | Present Value of Operating Lease Payments | $1,145 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk in this annual report - As a smaller reporting company, the Company is not required to include Quantitative and Qualitative Disclosures About Market Risk[198] Financial Statements and Supplementary Data The financial statements required by this item are incorporated by reference and can be found following Item 16 of this Annual Report - The financial statements required by this item are set forth following Item 16 of this Annual Report and are incorporated herein by reference[199] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - None[200] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were ineffective as of June 30, 2025, due to material weaknesses in financial reporting processes, segregation of duties, and journal entry review, with remediation efforts currently in progress - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[201] - Management concluded that internal controls over financial reporting were not effective as of June 30, 2025, due to identified material weaknesses[204] - Material weaknesses identified include deficiencies in the design and operation of the closing and financial reporting process, lack of formal accounting policies/procedures, segregation of duties issues, and absence of a formal review process for journal entries until March 2024[205] - Remediation efforts include hiring a seasoned financial executive as CFO (April 2023), updating month-end close checklists, implementing more segregation of duties, and formalizing CFO approval of month-end journal entries (starting March 2024)[205][207] Other Information There is no other information to report under this item - None[211] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable[212] PART III Directors, Executive Officers and Corporate Governance The company's executive officers and directors, including CEO Phil Rafnson and President/COO Francois Godfrey, oversee corporate governance through independent committees, adhering to a code of conduct and insider trading policies, though some Section 16(a) reports were filed late - Phil Rafnson serves as Chief Executive Officer and Chairman of the Board[214] - Francois Godfrey was appointed President and Chief Operating Officer and to the Board on October 30, 2024[215] - The Board of Directors has determined that Katherine D. Crothall, Ph.D., John C. Stiska, and Scott Lloyd Anderson qualify as independent directors[278] - John C. Stiska has been designated as an 'audit committee financial expert'[228] - Certain directors and executive officers (William Greene, John C. Stiska, Katherine D. Crothall, Ph.D., Scott Lloyd Anderson, and Jose Delgado) did not timely file Form 4 reports for stock option or stock awards[232] Executive Compensation Executive compensation for FY2025 and FY2024 is detailed, noting Francois Godfrey's increased total compensation, the absence of employment agreements, the adoption of a clawback policy in November 2023, and the 2019 Omnibus Incentive Stock Plan reserving 1,150,000 shares for issuance with 450,000 options outstanding at June 30, 2025, including re-priced director options Named Executive Officer Compensation (Year Ended June 30) | Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :---------- | :--------- | :-------- | :------------------------- | :-------- | | Philip Rafnson | 2025 | $160,985 | $100,000 | — | $260,985 | | President and Chief Executive Officer | 2024 | $218,667 | $28,000 | — | $246,667 | | Francois Godfrey | 2025 | $209,113 | $15,000 | $92,000 | $316,113 | | President and Chief Operating Officer | 2024 | $180,000 | $8,000 | — | $188,000 | | Jose Delgado | 2025 | $215,361 | — | — | $215,361 | | Executive Vice President, Sales and Marketing | 2024 | $233,730 | $28,000 | — | $261,730 | | Bevan Wright | 2025 | $215,294 | — | — | $215,294 | | Executive Vice President, Operations | 2024 | $233,730 | $28,000 | — | $261,730 | | William Greene | 2025 | $203,088 | — | — | $203,088 | | Chief Financial Officer | 2024 | $220,487 | $28,000 | — | $248,487 | - A clawback policy was adopted on November 30, 2023, allowing the company to recover excess incentive compensation from current and former executive officers in the event of a material financial restatement[242] - As of June 30, 2025, an aggregate of 1,150,000 shares of Common Stock are reserved for issuance and available for awards under the 2019 Omnibus Incentive Stock Plan[243] Outstanding Stock Options (as of June 30, 2025) | Options Outstanding | Weighted-Average Exercise Price | | :------------------ | :------------------------------ | | 450,000 | $0.65 | - On March 25, 2025, the Board re-priced 150,000 options for outside directors from $1.10 to $0.65 per share, resulting in an incremental stock-based compensation charge of $11,000 for the year ended June 30, 2025[256][258] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of September 26, 2025, executive officers and directors collectively owned 36.0% of the company's 9,896,850 outstanding common shares, with Phil Rafnson holding the largest individual stake at 20.9%, and the company, which does not grant equity awards based on nonpublic information, has 1,220,000 shares available under its 2019 Incentive Stock Plan and no plans for cash dividends Beneficial Ownership (as of September 26, 2025) | Name of Beneficial Owner | Shares Beneficially Owned | % Ownership | | :----------------------- | :------------------------ | :---------- | | Phil Rafnson | 2,074,828 | 20.9% | | All executive officers, directors as a group (8 persons) | 3,572,682 | 36.0% | - Applicable percentage ownership is based on 9,896,850 shares of Common Stock outstanding at September 26, 2025[260] Securities Available Under Equity Compensation Plans (as of June 30, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price per share of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :------------ | :---------------------------------------------------------------------------------------- | :---------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------- | | Stockholder-approved plans | 450,000 | $0.65 | 1,220,000 | - The company does not grant equity awards in anticipation of the release of material nonpublic information and does not time public release of such information based on award grant dates[267] - The company has never declared or paid cash dividends and intends to retain all future earnings to finance business growth[270] Certain Relationships and Related Transactions, and Director Independence The company maintains indemnification agreements with officers and directors, a related person transaction policy requiring audit committee approval for transactions over $120,000, and in February 2024, Jose Delgado sold 49,586 shares for $33,073 to cover obligations and taxes, with Katherine D. Crothall, John C. Stiska, and Scott Lloyd Anderson qualifying as independent directors - The company has entered into indemnification agreements with each of its directors and executive officers, requiring indemnification to the fullest extent permitted by Delaware law[272] - A written related person transaction policy requires audit committee review and approval for transactions exceeding $120,000 where a related person has a direct or indirect material interest[274] - On February 28, 2024, Jose Delgado, Executive Vice President of Sales, sold 49,586 shares of common stock to the company for $33,073 to satisfy a $25,037 outstanding obligation and cover an estimated $8,037 in taxes[276] - Katherine D. Crothall, Ph.D., John C. Stiska, and Scott Lloyd Anderson qualify as independent directors under NYSE American listing standards[278] Principal Accounting Fees and Services The audit committee pre-approves all services from Haskell & White LLP, the independent registered public accounting firm, with audit fees totaling $221,615 and tax fees $13,100 for the fiscal year ended June 30, 2025 - The Audit Committee is directly responsible for approving all audit engagement fees and terms, and for oversight of the work of the company's independent registered public accounting firm[280] Fees Billed by Haskell & White LLP (Fiscal Years Ended June 30) | Fee Type | 2025 ($) | 2024 ($) | | :--------- | :--------- | :--------- | | Audit Fees | $221,615 | $210,105 | | Tax Fees | $13,100 | $10,200 | | Total Fees | $234,715 | $220,305 | PART IV Exhibits, Financial Statement Schedules This section lists the financial statements, financial statement schedules, and exhibits included in the Annual Report on Form 10-K - The financial statements have been included in Item 8 and are set forth following Item 16 of this Report[283] - Financial statement schedules have been omitted because they are not applicable, not material, or the information is included in the consolidated financial statements or notes[284] - Exhibits are incorporated by reference from the Exhibit Index[285] Form 10-K Summary This item indicates that no Form 10-K summary is provided - None[286] Financial Statements The financial statements for Moving iMage Technologies, Inc. for the years ended June 30, 2025 and 2024, encompass the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and comprehensive Notes, with Haskell & White LLP issuing an unqualified opinion - Haskell & White LLP, the independent registered public accounting firm, issued an unqualified opinion on the consolidated financial statements for the years ended June 30, 2025 and 2024[290] Report of Independent Registered Public Accounting Firm Haskell & White LLP provided an unqualified opinion on the consolidated financial statements of Moving iMage Technologies, Inc. for the fiscal years ended June 30, 2025 and 2024, affirming their fair presentation in accordance with U.S. GAAP - The independent registered public accounting firm, Haskell & White LLP, expressed an unqualified opinion that the consolidated financial statements present fairly, in all material respects, the financial position and results of operations for the years ended June 30, 2025 and 2024[290] - The audit was conducted in accordance with PCAOB standards, assessing risks of material misstatement and evaluating accounting principles and estimates[292][293] Consolidated Balance Sheets The consolidated balance sheets show total assets increased slightly to $10.888 million in 2025 from $10.523 million in 2024, driven by cash and right-of-use assets, while total liabilities also rose due to accounts payable and long-term lease liabilities, and stockholders' equity decreased Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :---------------------- | :------------ | :------------ | | Cash | $5,715 | $5,278 | | Accounts receivable, net| $1,464 | $1,048 | | Inventories, net | $2,066 | $3,117 | | Total Current Assets | $9,407 | $9,913 | | Right-of-use asset | $1,087 | $144 | | Total Assets | $10,888 | $10,523 | | Accounts payable | $3,009 | $2,261 | | Total Current Liabilities | $5,113 | $4,813 | | Lease liability–non-current | $918 | — | | Total Liabilities | $6,031 | $4,813 | | Total Stockholders' Equity | $4,857 | $5,710 | Consolidated Statements of Operations The consolidated statements of operations show net sales decreased to $18.147 million in 2025 from $20.139 million in 2024, yet the net loss improved to $(0.948) million from $(1.372) million, primarily due to reduced operating expenses Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :-------------------------- | :----------------------- | :----------------------- | | Net sales | $18,147 | $20,139 | | Cost of goods sold | $13,574 | $15,456 | | Gross profit | $4,573 | $4,683 | | Total operating expenses | $5,659 | $6,240 | | Operating (loss) | $(1,086) | $(1,557) | | Interest and other income, net | $138 | $185 | | Net (loss) | $(948) | $(1,372) | | Net (loss) income per common share basic and diluted | $(0.10) | $(0.13) | Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased from $5.710 million at June 30, 2024, to $4.857 million at June 30, 2025, primarily due to the net loss, partially offset by increases in additional paid-in capital from stock option grants and issuances Changes in Stockholders' Equity (in thousands) | Item | June 30, 2024 Balance | Grant of options to officer | Issuance of stock to board members | Repriced option for directors and officer | Net loss | June 30, 2025 Balance | | :------------------------------------ | :-------------------- | :-------------------------- | :--------------------------------- | :---------------------------------------- | :------- | :-------------------- | | Common Stock Shares | 9,896,850 | — | 42,230 | — | — | 9,939,080 | | Common Stock Amount | $0 | — | — | — | — | $0 | | Additional Paid-In Capital | $11,965 | $59 | $26 | $11 | — | $12,061 | | Accumulated Deficit | $(6,255) | — | — | — | $(948) | $(7,204) | | Total Stockholders' Equity | $5,710 | $59 | $26 | $11 | $(948) | $4,857 | Consolidated Statements of Cash Flows The consolidated statements of cash flows show net cash provided by operating activities of $0.437 million in 2025, a positive shift from $(0.796) million used in 2024, with minimal investing activities and no cash impact from financing activities in 2025 Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :------------------------------ | :----------------------- | :----------------------- | | Net cash provided by (used in) operating activities | $437 | $(796) | | Net cash (used in) investing activities | — | $(12) | | Net cash (used in) financing activities | — | $(530) | | Net increase (decrease) in cash | $437 | $(1,338) | | Cash, end of the period | $5,715 | $5,278 | Notes to Consolidated Financial Statements These notes detail the company's business activities, significant accounting policies, and financial position, covering areas such as COVID-19 impact, revenue recognition, share-based compensation, and specific notes on SNDBX agreements, share buybacks, loss per share, property, intangible assets, accrued expenses, stockholders' equity, income taxes, concentrations, commitments, and segment information - The COVID-19 pandemic has had a significant adverse impact on the company's business, results of operations, cash flows, and financial condition, leading to cash preservation strategies and ongoing industry recovery challenges[303][305] Allowance for Credit Losses (as of June 30) | Year | Allowance for Credit Losses (Thousands) | | :--- | :-------------------------------------- | | 2025 | $436 | | 2024 | $378 | Inventory Reserve (as of June 30) | Year | Inventory Reserve (Thousands) | | :--- | :---------------------------- | | 2025 | $1,304 | | 2024 | $1,106 | Disaggregation of Revenue (Year Ended June 30, 2025, in Thousands) | Revenue Type | Amount | | :-------------------- | :----- | | Equipment upon delivery | $17,999 | | Installation | $94 | | Software and services | $54 | | Total revenues | $18,147 | Net Intangible Assets (as of June 30) | Year | Net Intangible Assets | | :--- | :-------------------- | | 2025 | $364 | | 2024 | $422 | Product Warranty Liability (as of June 30) | Year | Product Warranty Liability | | :--- | :------------------------- | | 2025 | $37 | | 2024 | $69 | - The company recognized approximately $70,000 in stock compensation expense during the year ended June 30, 2025[372] - As of June 30, 2025, the company has approximately $6,241,000 of U.S. Federal and State Net Operating Loss (NOL) carryforwards available to offset future taxable income[384] - For the year ended June 30, 2025, three customers provided 18%, 16%, and 13% of accounts receivable[386] Operating Lease Liabilities (as of June 30, 2025, in thousands) | Liability Type | Amount | | :-------------------------- | :----- | | Current operating lease liabilities | $228 | | Long-term operating lease liabilities | $918 | | Total ROU liabilities | $1,146 | NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the company's business as a cinema equipment and solutions provider, outlines the COVID-19 pandemic's industry impact, and summarizes significant accounting policies including revenue recognition, inventory, and intangible assets - Moving iMage Technologies, Inc. (MiT) designs, integrates, installs, and distributes proprietary and custom-designed equipment, as well as off-the-shelf cinema products. It also offers single-source solutions for cinema design, procurement, installation, and service, including software solutions for operations enhancement and theatre management[301] - The COVID-19 pandemic significantly impacted the entertainment and cinema industries, leading the company to implement cash preservation strategies. As of June 30, 2025, most theaters were open, but the industry's recovery to historical levels of film content and box office performance is ongoing, facing challenges like evolving release windows, streaming competition, supply chain delays, and inflation[303][304] - The company has determined it operates as a single operating and reportable segment, with the chief operating decision maker reviewing financial information on a consolidated basis[308] Allowance for Credit Losses (as of June 30) | Year | Allowance for Credit Losses (Thousands) | | :--- | :-------------------------------------- | | 2025 | $436 | | 2024 | $378 | Inventory Reserve (as of June 30) | Year | Inventory Reserve (Thousands) | | :--- | :---------------------------- | | 2025 | $1,304 | | 2024 | $1,106 | - Revenue is recognized when control of promised goods is transferred at the point of shipment to a customer and performance conditions are satisfied, or over time for software and services[316][326] Contract Liabilities (as of June 30, in Thousands) | Contract Liabilities | 2025 | 2024 | | :------------------- | :----- | :----- | | Customer deposits | $1,101 | $1,651 | | Unearned warranty revenue | $35 | $31 | | Customer refunds | $379 | $399 | | Total | $1,514 | $2,081 | Disaggregation of Revenue (Year Ended June 30, in Thousands) | Revenue Type | 2025 | 2024 | | :-------------------- | :------ | :------ | | Equipment upon delivery | $17,999 | $19,943 | | Installation | $94 | $130 | | Software and services | $54 | $66 | | Total revenues | $18,147 | $20,139 | Net Intangible Assets (as of June 30, in thousands) | Year | Net Intangible Assets | | :--- | :-------------------- | | 2025 | $364 | | 2024 | $422 | Product Warranty Liability (as of June 30, in thousands) | Year | Product Warranty Liability | | :--- | :------------------------- | | 2025 | $37 | | 2024 | $69 | - The company adopted ASU 2023-07, Segment Reporting, on June 30, 2025, which impacted segment reporting disclosures[339] - The FASB issued ASU 2023-3 (Disaggregation of Income Statement Expenses) and ASU 2023-09 (Improvements to Income Tax Disclosures), effective for fiscal years beginning after December 15, 2026, and July 1, 2025, respectively, which the company is currently assessing for disclosure impact[340][341] NOTE 2 — SNDBX AGREEMENTS This note details the company's agreements with The Five Agency and SNDBX, INC., involving a $300,000 loan and a $100,000 convertible note, both fully reserved by June 30, 2024, due to execution risks - In April 2023, the company entered a Letter Agreement with The Five Agency, agreeing to lend $300,000 and receive 5% equity in SNDBX, INC., a new Florida corporation for gaming leagues[343] - The initial loan of $150,000 was disbursed with 10% annual interest, secured by equipment patents, and an additional $150,000 was contingent on definitive agreements and a $3 million equipment purchase commitment by SNDBX[344][348] - In June 2023, the company entered a Convertible Note Purchase Agreement with SNDBX for $100,000, convertible into 20 Founders Shares at $5,000 per share, with a maturity date of June 5, 2024[346][347] - As of June 30, 2024, the company fully reserved the $0.400 million Notes Receivable balance due to SNDBX delays and execution risk, recognizing it as an impairment expense[353] NOTE 3 — SHARE BUYBACK This note outlines the company's stock repurchase programs, including a $1 million authorization in March 2023, under which approximately 273,000 shares were repurchased for $303,000 by June 30, 2024, and a subsequent $697,000 program that expired - On March 23, 2023, the Board authorized a stock repurchase program of up to $1 million. By June 30, 2024, the company repurchased approximately 273,000 shares for $303,000[354] - A new share repurchase program for up to $697,000 was authorized on April 1, 2024, expiring June 30, 2024. The remaining unpurchased shares of $133,000 expired[355] Share Repurchase Activity (March 2023 - June 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | | :---------------------- | :------------------------------- | :------------------------------- | | Mar 23, 2023 - Mar 31, 2023 | 47,467 | 1.04 | | May 18 - Jun 30, 2023 | 225,153 | 1.13 | | Nov 1, 2023 - Dec 31, 2023 | 109,135 | 0.93 | | Jan 1, 2024 - Mar 31, 2024 | 260,024 | 0.77 | | Apr 1, 2024 - Jun 30, 2024 | 389,121 | 0.59 | | Total | 1,030,900 | 0.81 | NOTE 4— LOSS PER SHARE This note presents the calculation of basic and diluted loss per share for 2025 and 2024, with all potentially dilutive securities excluded due to the company incurring net losses Loss Per Share (Year Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------------- | :----------- | :----------- | | Net (loss) (Thousands) | $(948) | $(1,372) | | Weighted average common shares outstanding, basic and diluted | 9,910,244 | 10,482,857 | | Net (loss) per share Basic and diluted ($) | $(0.10) | $(0.13) | Potentially Dilutive Securities Excluded (as of March 31) | Security Type | 2025 | 2024 | | :------------ | :-------- | :-------- | | Options | 450,000 | 250,000 | | Total | 450,000 | 250,000 | - All potentially dilutive securities were excluded from the calculation of diluted loss per share for both years due to the company incurring net losses, making their inclusion anti-dilutive[360] NOTE 5 — PROPERTY AND EQUIPMENT This note provides a breakdown of net property and equipment, including production equipment and leasehold improvements, and details the depreciation expense for 2025 and 2024 Net Property and Equipment (as of June 30, in thousands) | Item | 2025 ($) | 2024 ($) | | :---------------------- | :------- | :------- | | Production equipment | 308 | 308 | | Leasehold improvements | 213 | 213 | | Furniture and fixtures | 45 | 45 | | Computer equipment | 72 | 72 | | Other equipment | 120 | 120 | | Total | 758 | 758 | | Accumulated depreciation| (743) | (730) | | Net property and equipment | 15 | 28 | Depreciation Expense (Year Ended June 30, in thousands) | Year | Depreciation Expense | | :--- | :------------------- | | 2025 | $13 | | 2024 | $12 | NOTE 6 — INTANGIBLE ASSETS This note details the company's intangible assets, including customer relations, patents, and trademarks, their gross cost, accumulated amortization, net book value, and estimated future amortization expense for fiscal years 2025 and 2024 Intangible Assets (as of June 30, 2025, in thousands) | Item | Amortization Period (years) | Gross Asset Cost ($) | Accumulated Amortization ($) | Net Book Value ($) | | :--------------- | :-------------------------- | :------------------- | :--------------------------- | :----------------- | | Customer relations | 11 | 970 | 711 | 260 | | Patents | 20 | 70 | 21 | 49 | | Trademark | 20 | 78 | 23 | 55 | | Total | | 1,118 | 755 | 364 | Intangible Assets (as of June 30, 2024, in thousands) | Item | Amortization Period (years) | Gross Asset Cost ($) | Accumulated Amortization ($) | Net Book Value ($) | | :--------------- | :-------------------------- | :------------------- | :--------------------------- | :----------------- | | Customer relations | 11 | 970 | 660 | 310 | | Patents | 20 | 70 | 17 | 53 | | Trademark | 20 | 78 | 19 | 59 | | Total | | 1,118 | 696 | 422 | Amortization Expense (Year Ended June 30, in thousands) | Year | Amortization Expense | | :--- | :------------------- | | 2025 | $58 | | 2024 | $58 | Estimated Future Amortization Expense (as of June 30, 2025, in thousands) | Fiscal Year | Amount | | :---------- | :----- | | 2026 | $60 | | 2027 | $60 | | 2028 | $60 | | 2029 | $60 | | Thereafter | $124 | | Total | $364 | NOTE 7 — ACCRUED EXPENSES This note provides a breakdown of accrued expenses, including employee compensation, accrued warranty, freight, and sales tax, for the fiscal years ended June 30, 2025 and 2024 Accrued Expenses (as of June 30, in thousands) | Item | 2025 ($) | 2024 ($) | | :------------------- | :------- | :------- | | Employee compensation| 225 | 178 | | Accrued warranty | 37 | 69 | | Freight | 16 | 32 | | Sales tax | 28 | 14 | | Other | 56 | 27 | | Total | 362 | 320 | NOTE 8— STOCKHOLDERS' EQUITY This note details stockholders' equity, including the 2019 Omnibus Incentive Plan with 1,220,000 stock-based awards available, the grant of 200,000 options to Francis Godfrey, the re-pricing of 150,000 director options, and the recognition of $70,000 in stock compensation expense for 2025 - The 2019 Omnibus Incentive Plan provides for the issuance of stock-based awards to employees, with 1,220,000 stock-based awards available to grant as of June 30, 2025[370] - On October 30, 2024, Francis Godfrey was granted 200,000 options with an exercise price of $0.65, vesting 25% immediately and 25% annually thereafter[372] - On March 25, 2025, the Board re-priced 150,000 options for directors from $1.10 to $0.65 per share, resulting in an incremental stock-based compensation charge of $11,000 for the year ended June 30, 2025[372] - The company recognized approximately $70,000 in compensation expense for stock option awards during the year ended June 30, 2025[372] Stock Option Activity (Year Ended June 30, 2025) | Item | Options | Weighted-Average Exercise Price ($) | | :----------------------- | :-------- | :---------------------------------- | | Balance, July 1, 2024 | 250,000 | 1.10 | | Granted during the period| 450,000 | 0.65 | | Cancelled during the period | (250,000) | (1.10) | | Balance, June 30, 2025 | 450,000 | 0.65 | Outstanding Stock Options (as of June 30, 2025) | Range of Exercise Price ($) | Number Outstanding | Number Exercisable | Weighted-Average Remaining Contractual Life (years) | Weighted-Average Exercise Price ($) | | :-------------------------- | :----------------- | :----------------- | :-------------------------------------------------- | :---------------------------------- | | $0.65 | 450,000 | 275,000 | 8.54 | $0.65 | NOTE 9 — INCOME TAXES This note details deferred tax assets and liabilities, including inventory reserves and net operating loss carryforwards, and the recognition of a full valuation allowance against deferred tax assets due to uncertainty of realization Deferred Tax Assets (Liabilities) (as of June 30, in thousands) | Item | 2025 ($) | 2024 ($) | | :------------------------ | :------- | :------- | | Inventory reserve | 395 | 309 | | Accumulated depreciation | (3) | (6) | | Accumulated goodwill amortization | 57 | 63 | | Accumulated intangible amortization | 121 | 125 | | ROU Asset | (304) | - | | ROU Liability | 321 | - | | Warranty reserve | 10 | 9 | | Stock compensation | 68 | 68 | | Net operating loss carryforward | 997 | 1,481 | | Tax credits | 86 | - | | Allowance for doubtful accounts | 66 | 106 | | Net | 1,814 | 2,157 | | Valuation allowance | (1,814) | (2,157) | | Total | - | - | - As of June 30, 2025, the company has approximately $6,241,000 of U.S. Federal and State NOL carryforwards available for future use to offset taxable income[384] - A valuation allowance of $1,814,000 and $2,157,000 was recognized as of June 30, 2025 and 2024, respectively, as all U.S. Federal and state deferred tax assets were determined to be not more likely than not realizable[385] NOTE 10 — CUSTOMER AND VENDOR CONCENTRATIONS This note highlights significant customer and vendor concentrations, with three customers accounting for 18%, 16%, and 13% of accounts receivable, and two vendors providing 21% and 11% of purchases for the year ended June 30, 2025 - For the year ended June 30, 2025, three customers accounted for 18%, 16%, and 13% of accounts receivable[386] - For the year ended June 30, 2025, the two largest vendors provided 21% and 11% of the company's purchases[388] - As of June 30, 2025, one vendor accounted for 35% of accounts payable[388] NOTE 11— COMMITMENTS AND CONTINGENCIES This note details the company's operating lease commitments for its executive office and warehouse, expiring in 2030 and 2028 respectively, and confirms no material pending legal proceedings - The company's executive office and warehouse lease agreements are classified as operating leases, with the office lease expiring January 31, 2030, and the Whittier warehouse lease expiring January 31, 2028[390] Future Minimum Lease Payments (as of June 30, 2025, in thousands) | Year | Payments | | :--- | :------- | | 2026 | $313 | | 2027 | $326 | | 2028 | $303 | | 2029 | $266 | | 2030 | $159 | | Total future minimum lease payments | $1,367 | | Less imputed interest | $(222) | | Present value of operating lease payments | $1,145 | ROU Assets and Operating Lease Liabilities (as of June 30, 2025, in thousands) | Item | Amount | | :-------------------------- | :----- | | ROU assets-net | $1,087 | | Current operating lease liabilities | $228 | | Long-term operating lease liabilities | $918 | | Total ROU liabilities | $1,146 | - The company is not involved in any pending significant legal proceedings that management believes would have a material adverse effect on its financial position[397] NOTE 12—SEGMENT INFORMATION This note confirms the company operates as a single operating segment, with the President managing resources and evaluating performance on a consolidated basis, and provides segment financial information for 2025 and 2024 - The company operates as a single operating segment, focusing on identifying, developing, and manufacturing products for the cinema market[398] - The chief operating decision maker (President) manages and allocates resources on a consolidated basis, using consolidated financial information for performance evaluation, forecasting, and setting incentive targets[398] Segment Financial Information (Year Ended June 30, in Thousands) | Metric | 2025 ($) | 2024 ($) | | :------------------------ | :------- | :------- | | Revenue | 18,147 | 20,139 | | Cost of Sales | 13,574 | 15,456 | | Gross Margin | 4,573 | 4,683 | | Total segment operating expenses | 5,659 | 6,235 | | Interest and other Income | 138 | 180 | | Net loss | (948) | (1,372) | NOTE 13— SUBSEQUENT EVENTS Management evaluated events from June 30, 2025, through September 25, 2025, and determined that no other events occurred requiring adjustment to disclosures in the condensed consolidated financial statements - Management evaluated events from June 30, 2025, through September 25, 2025, and determined that no other events occurred requiring adjustment to disclosures in the condensed consolidated financial statements[400]