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 March 31, 2022

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)

Delaware	85-1836381
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

17760 Newhope Street,
Fountain Valley, California	92708
(Address of principal executive offices)	(Zip Code)

(714) 751-7998

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value	MITQ	NYSE American

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ◻.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ◻	Accelerated filer ◻
Non-accelerated filer þ	Smaller reporting company ☑
	Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No þ.

As of May 10, 2022, there were 10,828,378 shares of the registrant’s common stock, par value $0.00001 per share, outstanding.

MOVING iMAGE TECHNOLOGIES, INC.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements	F-3
	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and June 30, 2021	F-3
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended March 31, 2022 and 2021	F-4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and nine months ended March 31, 2021	F-5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and nine months ended March 31, 2022	F-5
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended March 31, 2022 and 2021	F-7
	Notes to Unaudited Condensed Consolidated Financial Statements	F-8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	34
ITEM 4.	Controls and Procedures	34
PART II - OTHER INFORMATION		36
ITEM 1.	Legal Proceedings	36
ITEM 1A.	Risk Factors	36
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
ITEM 3.	Defaults Upon Senior Securities	36
ITEM 4.	Mine Safety Disclosures	36
ITEM 5.	Other Information	36
ITEM 6.	Exhibits	37
SIGNATURES		38

F-2

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

MOVING IMAGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share amounts)

	March 31,		June 30,
	2022		2021
	(unaudited)		(Note 1)
Assets
Current Assets:
Cash and cash equivalents	$	6,337	$	1,270
Marketable securities		3,082		—
Accounts receivable, net		1,686		454
Inventories, net		2,985		1,534
Prepaid expenses and other		785		95
Total Current Assets		14,875		3,353
Long-Term Assets:
Marketable securities		347		—
Property, plant and equipment, net		24		21
Intangibles, net		863		935
Goodwill		287		287
Other assets		16		1,133
Total Long-Term Assets		1,537		2,376
Total Assets	$	16,412	$	5,729
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Accounts payable	$	2,237	$	1,911
Accrued expenses		515		620
Customer deposits		3,534		1,339
Line of credit		—		590
Notes payable – current		—		237
Unearned warranty revenue		37		34
Total Current Liabilities		6,321		4,731
Long-Term Liabilities:
Notes payable, net of current portion		—		1,702
Deferred rent		24		25
Total Long-Term Liabilities		24		1,727
Total Liabilities		6,345		6,458
Stockholders’ Equity (Deficit)
Common stock, $0.00001 par value, 100,000,000 shares authorized, 10,636,278 and 5,666,667 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively		—		—
Additional paid-in capital		12,433		1,011
Accumulated deficit		(2,368)		(1,740)
Total Stockholders’ Equity (Deficit)		10,065		(729)
Total Liabilities and Stockholders’ Equity (Deficit)	$	16,412	$	5,729

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

MOVING IMAGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except share and per share amounts)

(unaudited)

	Three Months		Three Months
	Ended		Ended		Nine Months Ended		Nine Months Ended
	March 31,		March 31,		March 31,		March 31,
	2022		2021		2022		2021
Net sales	$	5,835	$	1,710	$	12,728	$	5,076
Cost of goods sold		4,468		1,294		9,743		3,786
Gross profit		1,367		416		2,985		1,290
Operating expenses:
Research and development		53		42		172		103
Selling and marketing		539		277		1,653		934
General and administrative		906		389		2,470		1,209
Total operating expenses		1,498		708		4,295		2,244
Operating loss		(131)		(292)		(1,310)		(956)
Other (income) expense:
Unrealized gain on marketable securities		(17)		—		(17)		—
Realized gain on marketable securities		—		(185)		—		(459)
PPP loan and interest forgiveness		(705)		—		(705)		—
Interest and other income		(1)		—		(2)		—
Interest expense		2		57		40		194
Total other (income) expense		(724)		(128)		(684)		(265)
Net income (loss)	$	593	$	(164)	$	(626)	$	(691)
Weighted average shares outstanding: basic and diluted*		10,636,278		5,666,667		10,508,152		5,638,626
Net income (loss) per common share basic and diluted	$	0.06	$	(0.03)	$	(0.06)	$	(0.12)

*See Note 3

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

MOVING IMAGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

(in thousands except for share amounts)

						Retained Earnings
Three months ended September 30, 2020, December 31, 2020, and March 31, 2021:	Common Stock			Additional Paid-In		(Accumulated
	Shares	Amount		Capital		Deficit)		Total
Balance as of July 1, 2020	2,650,000	$	—	$	101	$	—	$	101
Share Exchange (see Note 1)	2,350,000		—		126		(1,095)		(969)
Balance as of July 1, 2020, as adjusted	5,000,000		—		227		(1,095)		(868)
Shares issued in private placement	666,667				784		—		784
Net loss	—		—		—		(370)		(370)
Balance as of September 30, 2020	5,666,667	$	—	$	1,011	$	(1,465)	$	(454)
Net loss	—		—		—		(157)		(157)
Balance as of December 31, 2020	5,666,667	$	—	$	1,011	$	(1,622)	$	(611)
Net loss	—		—		—		(164)		(164)
Balance as of March 31, 2021	5,666,667		—	$	1,011	$	(1,786)	$	(775)
Nine months ended March 31, 2021:
Balance as of July 1, 2020	2,650,000	$	—	$	101	$	—	$	101
Share Exchange (see Note 1)	2,350,000		—		126		(1,095)		(969)
Balance as of July 1, 2020, as adjusted	5,000,000		—		237		(1,095)		(868)
Shares issued in private placement	666,667		—		784		—		784
Net loss	—		—		—		(691)		(691)
Balance as of March 31, 2021	5,666,667	$	—	$	1,011	$	(1,786)	$	(775)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-5

MOVING IMAGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

(in thousands except for share amounts)

						Retained Earnings
Three months ended September 30, 2021, December 31, 2021, and March 31, 2022:	Common Stock			Additional Paid-In		(Accumulated
	Shares	Amount		Capital		Deficit)		Total
Balance as of July 1, 2021	5,666,667	$	—	$	1,011	$	(1,740)	$	(729)
Shares of common stock issued for cash, net of issuance costs	4,830,000		—		11,244		—		11,244
Cashless exercise of warrants	139,611		—		—		—		—
Grant of options for services	—		—		56		—		56
Net Loss	—		—		—		(577)		(577)
Balance as of September 30, 2021	10,636,278		—		12,311		(2,317)		9,994
Grant of options for services	—		—		62		—		62
Net Loss	—		—		—		(644)		(644)
Balance as of December 31, 2021	10,636,278	$	—	$	12,373	$	(2,961)	$	9,412
Grant of options for services	—		—		60		—		60
Net Income	—		—		—		593		593
Balance as of March 31, 2022	10,636,278	$	—	$	12,433	$	(2,368)	$	10,065
Nine months ended March 31, 2022:
Balance as of July 1, 2021	5,666,667	$	—	$	1,011	$	(1,740)	$	(729)
Shares of common stock issued for cash, net of issuance costs	4,830,000		—		11,244		—		11,244
Cashless exercise of warrants	139,611		—		—		—		—
Grant of options for services	—		—		178		—		178
Net Loss	—		—		—		(628)		(626)
Balance as of March 31, 2022	10,636,278	$	—	$	12,433	$	(2,368)	$	10,065

F-6

MOVING IMAGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended		Nine Months Ended
	March 31,		March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(626)	$	(691)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for (reversal of) doubtful accounts		(230)		8
Depreciation expense		15		99
Amortization expense		72		72
Unrealized gain on investments		(17)		—
Realized gain on investments		—		(459)
Deferred rent		(1)		5
Stock option compensation expense		178		—
PPP loan forgiveness		(705)		—
Changes in operating assets and liabilities
Accounts receivable		(1,002)		139
Inventories		(1,451)		(263)
Prepaid expenses and other		426		(104)
Accounts payable		326		(311)
Accrued expenses		(99)		(78)
Unearned warranty revenue		3		(21)
Customer deposits		2,195		(270)
Net cash used in operating activities		(916)		(1,874)
Cash flows from investing activities
Sale of (investment in) marketable securities		(3,412)		550
Purchases of property, plant and equipment		(18)		—
Net cash used in investing activities		(3,430)		550
Cash flows from financing activities
Net Proceeds from initial public offering		11,244		—
Payments on line of credit		(590)		(60)
Proceeds from private placement		—		1,334
Paycheck Protection Program loan proceeds		—		698
Payments on notes payable		(1,241)		(59)
Net cash provided by financing activities		9,413		1,363
Net increase (decrease) in cash and cash equivalents		5,067		39
Cash and cash equivalents, beginning of the period		1,270		1,059
Cash and cash equivalents, end of the period	$	6,337	$	1,098
Non-cash investing and financing activities:
Deferred IPO costs	$	—	$	72
Reclassification of IPO related costs from other assets to equity	$	1,116	$	—
Cash paid during the period:
Interest	$	40	$	165

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-7

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization: Moving iMage Technologies, Inc., a Delaware corporation, together with its wholly-owned subsidiaries unless the context indicates otherwise, the (“Company”) was incorporated in June 2020. The Company, through its wholly-owned subsidiary, Moving iMage Technologies, LLC (“MiT LLC”) and MiT LLC's wholly-owned subsidiary, Moving iMage Acquisition Co., (DBA Caddy Products), designs, integrates, installs and distributes proprietary and custom designed equipment as well as off the shelf cinema products needed for contemporary cinema requirements. The Company also offers single source solutions for cinema design, procurement, installation and service to the creative and production communities for screening, digital intermediate and other critical viewing rooms. Additionally, the Company offers a wide range of technical, design and consulting services such as custom engineering, systems design, integration and installation, and digital technology, as well as software solutions for operations enhancement and theatre management. The Company also provides turnkey furniture, fixtures and equipment services to commercial cinema exhibitors for new construction and remodels including design, consulting, installation and project management as well as procurement of seats, lighting, acoustical treatments, screens, projection and sound.

Moving iMage Acquisition Co. (DBA “Caddy Products”) designs, develops and manufactures innovative products for the entertainment, cinema, grocery, worship, restaurant, sports and restroom industries.

Share Exchange:

In June 2020, MiT LLC members created Moving iMage Technologies, Inc. (“MIT Inc.”) to facilitate the Company’s initial public offering offering (“IPO”). Upon formation of MiT, Inc., 2,000,000 shares of MiT, Inc. common stock were issued to members of MiT LLC. On July 7, 2021, MiT LLC and MiT Inc. entered into an exchange agreement (“Exchange Agreement”) whereby the members of MiT LLC exchanged their membership interest for 2,350,000 shares of common stock in MiT Inc. As a result of the Exchange Agreement, the members of MiT LLC owned approximately 79% or 4,452,334 of the outstanding common stock of MiT Inc. As a result, MiT LLC (the entity where the Company conducts its business) became a wholly-owned subsidiary of MiT Inc. (the SEC registrant).

The transaction was accounted for as a merger of entities under common ownership in accordance with generally accepted accounting principles in the United States of America (“GAAP”). This determination was primarily based on the facts that, immediately before and after the transaction: (i) MiT LLC owners owned a substantial majority of the voting rights in the combined company, (ii) MiT LLC designated a majority of the members of the initial board of directors of the combined company, and (iii) MiT LLC’s senior management holds all key positions in the senior management of the combined company. As a result, the historical financial statements of MiT LLC and MiT Inc. for the three months and for the nine months ended March 31, 2021 have been retroactively revised to reflect the consolidation of MiT, Inc. and MiT LLC. All inter-company transactions and balances between MiT Inc. and MiT, LLC have been eliminated.

The condensed consolidated statements of stockholders’ equity (deficit) for the periods ended March 31, 2022 and 2021 have been retroactively revised to give effect of the change in reporting entity accounting of MiT Inc. and MiT LLC.

F-8

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Initial Public Offering: On July 12, 2021, the Company closed its initial public offering (“IPO”) and issued 4,830,000 shares of its common stock at a price of $3.00 per share for net proceeds of approximately $12,360,000 after deducting underwriting discounts, commissions, and other expenses of approximately $2,130,000. Upon the completion of its IPO, the Company reclassified deferred IPO related costs of approximately $1,116,000 from other assets to additional paid-in capital. In connection with the Company’s IPO, the underwriters received warrants to acquire 241,500 shares of the Company’s common stock at $3.75 per share. None of the potentially dilutive securities were included in the computation of diluted earnings per share as their impact would be anti-dilutive.

On July 12, 2021, in connection with the IPO, warrants to purchase 139,611 shares of the Company’s common stock were exercised on a cashless basis.

COVID-19 Impact and Liquidity: In December 2019, COVID-19 was initially reported, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 has had a widespread and detrimental effect on the global economy as a result of the continued increase in the number of cases and affected countries and actions by public health and governmental authorities, businesses, other organizations and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns.

The repercussions of the COVID-19 global pandemic resulted in a significant impact to our customers, specifically those in the entertainment and cinema industries. Cinemas have been shuttered since March 2020 in an effort to stem the spread of COVID-19 and studios, for the most part, have rescheduled their film releases until cinemas can reopen. Specifically, the pandemic has had a material adverse effect on our business. A significant number of our customers have temporarily ceased operations and others have cancelled or pushed back the delivery of pending product orders and/or delayed the start of scheduled theater refurbishing and construction projects. In addition, we have experienced increased challenges in, or cost of, acquiring new customers and increased risk in collectability of accounts receivable. As a result of the aforementioned factors, our financial and operating results for the three and nine months ended March 31, 2022 and 2021, have been adversely affected. Additionally, our projected financial and operating results for the remainder of fiscal 2022 are expected to be materially adversely affected.

The ultimate impact of the COVID-19 pandemic on our business and results of operations in fiscal 2022 and beyond is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 pandemic and any additional preventative and protective actions that governments, or we, or our customers, may direct, which may result in an extended period of continued business disruption and reduced operations. We expect that our results of operations, including revenues, in future periods will continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions, which include the possibility of a global recession.

During the second half of the 2021 calendar year, several larger theater chains have reopened in many parts of the United States. The ability of these chains to reopen was predicated in large part on decisions by state and local officials to allow, limit or prohibit the reopening of establishments such as cinemas in response to regionally specific COVID-19 outbreaks. Such reopening has been done on a gradual basis with limited occupancy and specific procedures, products, and technologies required to be implemented to protect the safety and health of returning patrons and employees.

In response to uncertainties associated with the COVID-19 pandemic, we have taken, and are continuing to take, significant steps to preserve cash and remain in a strong competitive position when the current crisis subsides by eliminating non-essential costs, reducing employee hours and deferring all non-essential capital expenditures to minimum levels.

F-9

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

We have also implemented remote work policies for many employees, and the resources available to such employees may not enable them to maintain the same level of productivity and efficiency, and these and other employees may face additional demands on their time, such as increased responsibilities resulting from school closures or illness of family members. Our increased reliance on remote access to our information systems also increases our exposures to potential cybersecurity breaches.

As of the date these Condensed Consolidated Financial Statements were issued, with the actions taken above, existing cash, including the cash raised from our initial public offering (see Initial Public Offering), the Company will have sufficient liquidity to fund operations and essential capital expenditures for the 12 months from the date these condensed consolidated financial statements were available to be issued.

Principles of Consolidation: The condensed consolidated financial statements include the accounts of MiT Inc., its wholly-owned subsidiary, Moving iMage Technologies, LLC (“MiT LLC”), and MiT LLC’s wholly-owned subsidiary, Moving iMage Acquisition Co., (DBA Caddy Products). All significant intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation: The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Unaudited Interim Condensed Consolidated Financial Statements: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP. However, in the opinion of the management of the Company, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position and operating results have been included in these statements. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2021, and with the disclosures and risk factors presented therein. The June 30, 2021 condensed consolidated balance sheet has been derived from the audited consolidated financial statements and updated to reflect the effects of the exchange agreement between MiT LLC and MiT Inc. Operating results for the three months and nine months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending June 30, 2022.

Measurement of Fair Values: The Company’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities on either a recurring or nonrecurring basis. When measuring the fair value of an asset or a liability, the Company uses observable market data to the extent such information is available. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

— Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

— Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

— Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

Deferred Offering Costs: The Company capitalized certain legal, accounting and other third-party fees that are directly associated with its recent IPO as deferred offering costs (non-current) until such financings were consummated.

As of June 30, 2021, $1,116,000 of deferred offering costs were capitalized in other assets. After completion of the IPO in July 2021, these costs have been recorded in the condensed consolidated statements of changes in stockholders’ equity (deficit) as a reduction of proceeds received from the offering.

F-10

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates: The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities (including sales returns, bad debts, inventory reserves, warranty reserves, purchase price allocation and asset impairments), disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Concentration of Cash: The Company maintains its cash and cash equivalents in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes the Company is not exposed to any significant credit risk on its cash balances.

Cash Equivalents and Marketable Securities: All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. The Company’s investments in marketable debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as available-for sale. Realized gains and losses on available-for-sale debt securities are included in net income/loss. Unrealized gains and losses, net of tax, on available-for-sale debt securities are recognized in other comprehensive gain/(loss). The Company’s investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations. The Company’s marketable equity securities are measured at fair value with gains and losses recognized in other income/(expense), net. The cost of securities sold is determined using the specific identification method.

Accounts Receivable: Accounts receivable are carried at original invoice amount less allowance for bad debts. Management determines the allowance for bad debts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. Accounts receivable are considered to be past due if any portion of the receivable balance is outstanding for more than 90 days past the customer’s granted terms. The Company does not charge interest on past due balances or require collateral on its accounts receivable. As of March 31, 2022 and June 30, 2021, the allowance for bad debts is approximately $126,000 and $261,000, respectively.

Inventories: Inventories are stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out cost method of accounting. The Company purchases finished goods and materials to assemble kits in quantities that it anticipates will be fully used in the near term. Changes in operating strategy, customer demand, and fluctuations in market values can limit the Company’s ability to effectively utilize all products purchased and can result in finished goods with above-market carrying costs which may cause losses on sales to customers. The Company’s policy is to closely monitor inventory levels, obsolescence and lower market values compared to costs and, when necessary, reduce the carrying amount of its inventory to its net realizable value. As of March 31, 2022 and June 30, 2021, inventory on hand was comprised primarily of finished goods ready for sale. As of March 31, 2022 and June 30, 2021, inventory reserve was $581,000 and $375,000, respectively.

Revenue Recognition: The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Revenue is recognized when control of the promised goods is transferred at the point of shipment to a customer and when performance conditions are satisfied as per the agreement, in an amount that reflects the consideration that we expect to receive in exchange for those goods as per the agreement with the customer. We generate all our revenue from agreements with customers. In cases where there are agreements with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. We allocate the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation and then evaluate how the services are transferred to the customer to determine the timing of revenue recognition.

F-11

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company considers the U.S. GAAP criteria for determining whether to report revenue gross as a principal versus net as an agent. Factors considered include whether the Company is the primary obligor, has risks and rewards of ownership, and bears the risk that a customer may not pay for the products provided or services performed. If there are circumstances where the above criteria are not met, revenues recognized are presented net of cost of goods sold.

Contract assets consist of conditional or unconditional rights to consideration. Accounts receivable represent amounts billed to customers where the Company has an enforceable right to payment for performance completed to date (i.e., unconditional rights to consideration). Accounts receivable balance as of July 1, 2020 was $809,000. The Company does not have contract assets that represent conditional rights to consideration.

F-12

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Contract liabilities consist of refund and warranty liabilities, as well as deposits received in advance on sales to certain customers. Such deposits are reflected as customer deposits and recognized in revenue when control of the products is transferred or when performance conditions are satisfied per the agreement. The change in contract liabilities (customer deposits and unearned warranty revenue) during the nine months ended March 31, 2022 included $1.273 million for revenue recognized that was included in contract liability as of July 1, 2021. Contract liabilities as of July 1, 2020 were $.854 million.

Cost of goods sold includes cost of inventory sold during the period, net of vendor discounts and allowances, and shipping and handling costs, and sales taxes. Taxes collected from customers are included in accounts payable on a net basis (excluded from revenues) until remitted to the government.

Deferred contract acquisition costs consist of sales commissions paid to the sales force, and the related employer payroll taxes, and are considered incremental and recoverable costs of obtaining a contract with a customer. The Company has determined that sales commissions paid are an immaterial component of obtaining a customer’s contract and has elected to expense sales commissions when earned.

	For the Three		For the Three		For the Nine		For the Nine
	Months Ended		Months Ended		Months Ended		Months Ended
Disaggregation of Revenue (in 000’s):	March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021
Equipment upon delivery (point in time)	$	5,701	$	1,682	$	12,489	$	4,984
Installation (point in time)		134		28		239		92
Total revenues	$	5,835	$	1,710	$	12,728	$	5,076

Revenue from the sale of equipment is recognized upon delivery of such equipment to customers and when performance conditions are satisfied.

Revenue from installation is recognized upon completion of the installation project and when the performance obligation is complete.

Software subscription revenue for remote monitoring services is recognized on a straight-line basis over the term of the contract, usually one year. Services revenues are generally recognized over time as the contracts are performed. There were no software revenues during the three or nine months ended March 31, 2022 or 2021.

Returns and Allowances: The Company records allowances for discounts and product returns at the time of sale as a reduction of revenue as such allowances can be reliably estimated based on historical experience and known trends.

Shipping and Handling Costs: Shipping and handling costs are included in cost of goods sold and are recognized as a period expense during the period in which they are incurred.

Advertising Costs: Advertising costs were approximately $4,300 and $4,600 for the three months ended March 31, 2022 and 2021, respectively, and $16,000 and $9,700 for the nine months ended March 31, 2022 and 2021, respectively. Advertising costs are expensed as incurred within selling and marketing expenses.

F-13

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Goodwill and Intangible Assets: Goodwill as of March 31, 2022 and June 30, 2021 represents the excess of the purchase price over the fair value of the net identifiable assets acquired in the 2019 Caddy Acquisition. Goodwill is reviewed for impairment at least annually, in June, or more frequently if a triggering event occurs between impairment testing dates. The Company operates as a single operating segment and as a single reporting unit for the purpose of evaluating goodwill impairment. The Company’s impairment assessment begins with a qualitative assessment to determine whether it’s more likely than not that fair value of the reporting unit is less than its carrying value. The qualitative assessment includes comparing the overall financial performance of the Company against the planned results used in the last quantitative goodwill impairment test. Additionally, the Company’s fair value is assessed in light of certain events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity and Company specific events. The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. If it is determined under the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative impairment test is performed. Under the quantitative impairment test, the estimated fair value of the reporting unit would be compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, then no impairment exists. If the estimated fair value of the reporting unit is less than its carrying value, an impairment loss would be recognized for the excess of the carrying value of the reporting unit over the fair value, not to exceed the carrying amount of goodwill.

The Company tested goodwill impairment in relation to the COVID-19 pandemic and no impairments were identified for the three and nine months ended March 31, 2022 or 2021.

Goodwill is at risk of future impairment in the event of significant unexpected changes in the Company’s forecasted future results and cash flows, or if there is a negative change in the long-term outlook for the business or in other factors such as the discount rate, or if there is a decline in the stock price.

Intangible assets arising from business combinations, such as customer relationships, trade names, and/or intellectual property, are initially recorded at fair value. The Company amortizes these intangible assets over the determined useful life which generally ranges from 11 to 20 years. The Company reviews its intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. There were no intangible asset impairments recognized for the three months and nine months ended March 31, 2022 or 2021.

Business Combinations: The Company includes the results of operations of the businesses that it acquires commencing on the respective dates of acquisition. The Company allocates the fair value of the purchase price of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. The transaction resulted in the transferring of an entity under common control.

Income Taxes: The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.

F-14

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Because the Company has had recurring losses from operations, at March 31, 2022 it has taken a full valuation allowance against all potential deferred tax assets. Prior to July 7, 2021, MiT LLC was a limited liability company treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits (losses) of the Company being passed through to the members. As such, there is no recognition of federal or state income taxes in the financial statements prior to July 7, 2021. Any uncertain tax position taken by the members is not an uncertain position of the Company.

The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company evaluated the realizability of deferred tax assets (“DTA”) at June 30, 2021 (most recent year end, presented as comparative in 10Q balance sheet), July 7, 2021 (date of exchange agreement), September 30, 2021 (Q1 reporting period) December 31, 2021 (Q2 reporting period) and March 31, 2022 (Q3 reporting period). Because the Company has had recurring losses from operations at June 30, 2021, and further losses for the nine months ended March 31, 2022, which will generate NOL’s, and it has taken a full valuation allowance against all potential deferred tax assets.

Goodwill recognized in connection with acquisitions represents the residual amount of the purchase price over separately identifiable intangible assets and pursuant to 26 U.S. Code section 197 is deductible for tax purposes.

The following table summarizes deferred tax assets and liabilities as of the date of the Exchange Agreement through March 31, 2022:

	Deferred				Existing valuation allowance
	Tax Assets		Deferred Tax Liabilities		Prior to business combination		Net Position
MiT Inc.	$	—	$	—	$	—	$	—
MiT LLC		248		(13)		(235)		—
Total July 7, 2021	$	248	$	(13)	$	(235)	$	—
Deferred tax assets	$	622	$	—	$	—	$	622
Deferred tax liabilities		—		(12)		—		(12)
Valuation allowance		—		—		(610)		(610)
Total MiT Inc. March 31, 2022	$	622	$	(12)	$	(610)	$	—

F-15

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The following table summarizes the components of deferred tax assets and deferred tax liabilities through March 31, 2022:

	Deferred Tax
	Assets (Liabilities)
Inventory reserve	$	133
Accumulated depreciation		(7)
Accumulated goodwill amortization		(6)
Accumulated intangible amortization		13
Deferred rent		7
Warranty reserve		8
Allowance for doubtful accounts		100
Net		248
Valuation allowance		(248)
Total July 1, 2021	$	—
Inventory reserve	$	152
Accumulated depreciation		(1)
Accumulated goodwill amortization		(11)
Accumulated intangible amortization		17
Deferred rent		7
Warranty reserve		9
Stock compensation		50
Net operating loss carryforward		370
Allowance for doubtful accounts		35
Net		627
Valuation allowance		(627)
Total March 31, 2022	$	—

F-16

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Product Warranty: The Company’s digital equipment products are sold under various limited warranty arrangements ranging from one year to three years. Company policy is to establish reserves for estimated product warranty costs in the period when the related revenue is recognized. The Company has the right to return defective products for up to three years, depending on the manufacturers’ individual policies. As of June 30, 2021 and March 31, 2022, the Company has established a warranty reserve of $29,000 and $37,000, respectively, which is included in accrued expenses in the accompanying condensed consolidated balance sheets.

The changes in the Company’s aggregate warranty liabilities were as follows for the following periods (in thousands):

	Nine Months Ended		Twelve Months Ended
	March 31,		June 30,
	2022		2021
Product warranty liability, beginning of period	$	29	$	65
Accruals for warranties issued		37		29
Change in estimates		—		(37)
Settlements made		(29)		(28)
Product warranty liability, end of period	$	37	$	29

Research and Development: The Company incurs costs to develop new products, as well as improve the appeal and functionality of its existing products. Research and development costs are charged to expense when incurred.

Recently Issued Accounting Pronouncements: In February 2016, FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. The guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early application is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. Management is in the process of evaluating the impact of this standard effective July 1, 2022.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard is effective beginning July 1, 2022. The Company does not expect the adoption of ASU 2019-12 to have a material impact on its financial position and results of operations upon adoption.

F-17

MOVING IMAGE TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — INVESTMENTS

Other pronouncements issued by the FASB with future effective dates are either not applicable or not significant to the consolidated financial statements of the Company.

The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of March 31, 2022 (amounts in 000’s):

												Current		Non-current
		Adjusted		Unrealized		Unrealized		Fair		Cash and		Marketable		Marketable
		Cost		Gains		Losses		Value		Cash Equivalents		Securities		Securities
Cash	$	6,337	$	—	$	—	$	6,337	$	6,337	$	—	$	—
Equities
Communication		40		—		(1)		39		—		39		—
Consumer Discretionary		56		2		—		58		—		58		—
Consumer Staples		19		1		—		20		—		20		—
Energy		9