Moving iMage Technologies, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2021 (fiscal Q1 2022). Comparative results are for the three months ended September 30, 2020; the filing describes certain comparative per-share data as pro forma. Financial statement amounts below are in millions of dollars unless stated otherwise.
Business context
The company designs, integrates, installs and distributes cinema equipment and related services, and operates Caddy Products, which makes products for several industries. Its results remain closely tied to cinema customers’ activity and theater construction, refurbishment and reopening schedules. The July 2021 IPO and exchange of MiT LLC membership interests for company shares substantially changed the capital structure and left MiT LLC as a wholly owned subsidiary.
Financial performance and position
| Metric | Quarter ended Sep. 30, 2021 | Prior-year quarter | Change / context |
|---|---|---|---|
| Revenue | $3.474 | $1.757 | Up 97.7%; management attributes the increase primarily to recovery from COVID-19 disruption. |
| Gross profit | $0.722 | $0.453 | Up 59.4%. |
| Gross margin | 20.8% | 25.8% | Down 5.0 percentage points, primarily from product mix and lower Caddy cupholder sales. |
| Operating expenses | $1.261 | $0.760 | Higher selling, marketing and administrative costs, including public-company expenses. |
| Operating loss | $(0.539) | $(0.307) | Loss widened. |
| Interest expense | $0.037 | $0.082 | Lower following debt repayments. |
| Net loss / diluted loss per share | $(0.576) / $(0.06) | $(0.389) / $(0.07)* | Net loss increased; per-share comparison is affected by a larger share count. |
| Operating cash flow | $(0.777) | $(0.849) | Cash used in both periods. |
*The filing identifies the 2020 weighted-average shares and loss per share as pro forma information.
- Liquidity: Cash was $11.029 at September 30, versus $1.269 at June 30, 2021. Current assets were $14.480 and current liabilities were $5.096, or approximately $9.384 of working capital.
- Cash flows: Financing activities provided $10.537, principally from equity proceeds and partly offset by debt repayments. Investing cash flows were zero. Cash increased by $9.760 during the quarter.
- Debt: The line of credit and Caddy-related notes were repaid in July/August. At quarter-end, $0.698 remained on the second PPP loan, with $0.110 current and $0.588 long-term. The first PPP loan, approximately $0.694 plus interest, was forgiven in May 2021.
- Capital and equity: The company sold 4.83 million shares at $3.00 per share in its July IPO and exchanged MiT LLC interests for 2.35 million shares. It reported 10,636,278 shares issued and outstanding at September 30; 10,636,278 were also reported outstanding as of November 4.
Material changes, outlook and risks
- Backlog was $7.7 million at September 30, down from $9.3 million a year earlier; management says backlog represents orders expected to be realized within six months.
- Management expects COVID-19 and its effects on cinema customers and the broader economy to continue adversely affecting revenue and results during fiscal 2022. It provides no quantified earnings or revenue guidance.
- The company says available cash, including IPO proceeds, is expected to fund operations and essential capital expenditures for 12 months from the financial statements’ issuance date. It cautions that prolonged revenue deterioration could require additional liquidity, which may not be available on acceptable terms.
- Management cites possible supplier interruptions or price increases, margin pressure, customer and order concentration, demand and inventory forecasting, backlog conversion, seasonality, competition, cybersecurity exposure and execution of growth initiatives as risks. Two customers represented approximately 27% and 13% of quarterly sales; one vendor supplied approximately 21% of purchases.
- The company plans to use up to approximately $6.0 million of IPO proceeds to expand sales and marketing, with the balance for working capital, potentially including strategic acquisitions; no acquisition candidates had been identified.
- Disclosure controls were deemed ineffective at quarter-end due to material weaknesses involving the close and reporting process, documented policies and procedures, segregation of duties, and journal-entry review. Management says remediation is underway but cannot assure it will be successful.
- No material pending legal proceedings were reported. The company reported no goodwill or intangible-asset impairment for the quarter.
Most important facts for investors to verify
- Reconcile IPO net-proceeds disclosures: the filing cites approximately $12.584 million in the IPO note, $12.360 million in the cash-flow statement, approximately $12.3 million in MD&A, and approximately $11.5 million in the use-of-proceeds section.
- Track whether the $7.7 million backlog converts to revenue and cash, and whether customer reopening and spending sustain the reported revenue recovery.
- Monitor gross margin, operating expenses and cash burn, particularly as management resumes or expands spending on sales, marketing and product development.
- Confirm PPP loan forgiveness status for the remaining $0.698 million and assess any related repayment obligation.
- Follow remediation of internal-control material weaknesses and evaluate whether disclosure controls become effective.
- Consider customer/vendor concentration and the filing’s warning that COVID-19 impacts and future liquidity needs remain uncertain.