Moving iMage Technologies, Inc. — Form 10-Q Summary
Business context and reporting period. The company designs, integrates, installs and distributes cinema equipment and related services, and also manufactures products through its Caddy Products subsidiary. This unaudited filing covers the fiscal second quarter and six months ended December 31, 2021; comparisons are with the corresponding periods in 2020. Amounts below are in millions unless otherwise noted.
Financial performance and position
| Metric | Three months ended Dec. 31 | Six months ended Dec. 31 |
|---|---|---|
| Revenue | $3.419 vs. $1.609; up 112.5% | $6.893 vs. $3.366; up 104.8% |
| Gross profit / margin | $0.896 / 26.2%, versus $0.421 / 26.2% | $1.618 / 23.5%, versus $0.874 / 25.9% |
| Operating expenses | $1.538 vs. $0.777 | $2.799 vs. $1.537 |
| Operating loss | $(0.642) vs. $(0.356) | $(1.181) vs. $(0.663) |
| Net loss | $(0.644), or $(0.06) per share, vs. $(0.157), or $(0.03) per share | $(1.221), or $(0.12) per share, vs. $(0.527), or $(0.09) per share |
| Operating cash flow | $2.845 cash used in the six months, versus $1.359 used in 2020 |
- Revenue growth was attributed primarily to recovery in the cinema exhibition industry. Six-month gross margin declined mainly because lower-margin product mix included a smaller share of higher-margin parts and services and Caddy cupholder sales.
- Selling, general and administrative expense rose to $1.473 million for the quarter and $2.680 million for six months. Management cited higher spending as the company emerged from pandemic cost controls and costs of operating as a public company. Research and development expense was $0.065 million for the quarter and $0.119 million for six months.
- Cash and cash equivalents were $8.952 million at December 31, 2021, versus $1.270 million at June 30. Current assets were $13.859 million and current liabilities $5.070 million. The company reported $0.698 million of PPP debt outstanding at quarter-end, including $0.147 million current; its former line of credit and Caddy notes had been repaid. The second PPP loan was reported forgiven in March 2022, with notice received in April.
- Operating cash use reflected the net loss and working-capital outflows, including a $1.964 million inventory increase, partly offset by $2.025 million of higher customer deposits. Financing provided $10.529 million, primarily from $12.360 million in net IPO proceeds, offset by debt repayments. Investing cash use was $0.002 million.
Material changes, outlook and risks
- The July 2021 IPO raised approximately $12.360 million net: 4.830 million shares were sold at $3.00 per share before offering costs. Shares outstanding increased substantially; 10,636,278 were outstanding at December 31, 2021.
- Management stated that existing liquidity was expected to fund operations and essential capital expenditures for at least 12 months from issuance of the financial statements. It also warned that COVID-19 and its effects on cinema customers were expected to materially adversely affect the remainder of fiscal 2022 and that the longer-term impact was uncertain. Management cited order delays or cancellations, customer collection risk, and gradual theater reopenings.
- Management expects operating expenses, including research and development as a percentage of sales, to rise as the company invests in sales, product development and expansion. Results may vary with customer order timing, seasonality, product mix, supplier costs, inventory management and the conversion of backlog into revenue and cash.
- Customer and vendor concentration is notable: two customers represented approximately 20% and 18% of quarterly sales; one vendor represented approximately 21% of quarterly purchases. For the six-month period, one vendor represented approximately 33% of purchases.
- Disclosure controls and procedures were deemed ineffective because of material weaknesses involving the close and reporting process, undocumented accounting policies, segregation of duties and journal-entry review. The filing also disclosed a required restatement of the previously issued September 2021 quarterly financial statements. Management described remediation efforts but gave no assurance of timely resolution.
- The company disclosed a February 2022 NYSE American notice of noncompliance for late filing of this 10-Q. Delisting could reduce liquidity and financing options. The filing reported no material pending legal proceedings.
Key facts for investors to verify
- Review the September 2021 restatement and its implications for the reliability of reported results and the company’s remediation of control weaknesses.
- Check the status of NYSE American listing compliance following the late-filing notice.
- Assess whether cash, customer deposits and working-capital needs support operations, particularly given operating cash use and higher inventory.
- Confirm the effect and accounting treatment of the PPP loan forgiveness received after quarter-end.
- Track cinema-industry recovery, customer concentration, supplier availability and costs, and gross-margin trends.