SEC Info - Ballantyne Strong, Inc. - ‘10-Q’ for 9/30/22

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		Alternative Formats (Word, et al.) Condensed Consolidated Balance Sheets, September 30, 2022 and December 31, 2021 (Unaudited) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited) Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited) Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited) Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited) Controls and Procedures Exhibits Financial Statements Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Notes to the Condensed Consolidated Financial Statements (Unaudited) Part I. Financial Information Part Ii. Other Information Quantitative and Qualitative Disclosures about Market Risk Risk Factors Signatures Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Part I. Financial Information
"	Financial Statements
"	Condensed Consolidated Balance Sheets, September 30, 2022 and December 31, 2021 (Unaudited)
"	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)
"	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)
"	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)
"	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)
"	Notes to the Condensed Consolidated Financial Statements (Unaudited)
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures about Market Risk
"	Controls and Procedures
"	Part Ii. Other Information
"	Legal Proceedings
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Exhibits
"	Signatures

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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. i Yes ☒ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ 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.

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 ☐ i No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

See accompanying notes to unaudited condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report. Management’s discussion and analysis contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect expectations for future Company performance. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and the following risks and uncertainties: the negative impact that the COVID-19 pandemic has already had, and may continue to have, on the Company’s business and financial condition; the general economic impact of the current geopolitical environment, including the ongoing military conflict in Ukraine and the impact of related sanctions being imposed by the U.S. Government and the governments of other countries; the Company’s ability to maintain and expand its revenue streams to compensate for the lower demand for the Company’s digital cinema products and installation services; potential interruptions of supplier relationships or higher prices charged by suppliers; the Company’s ability to successfully compete and introduce enhancements and new features that achieve market acceptance and that keep pace with technological developments; the Company’s ability to successfully execute its capital allocation strategy or achieve the returns it expects from these holdings; the Company’s ability to maintain its brand and reputation and retain or replace its significant customers; challenges associated with the Company’s long sales cycles; the impact of a challenging global economic environment or a downturn in the markets (such as the current economic disruption and market volatility generated by the ongoing COVID-19 pandemic and geopolitical environment); economic and political risks of selling products in foreign countries (including tariffs); risks of non-compliance with U.S. and foreign laws and regulations, potential sales tax collections and claims for uncollected amounts; cybersecurity risks and risks of damage and interruptions of information technology systems; the Company’s ability to retain key members of management and successfully integrate new executives; the Company’s ability to complete acquisitions, strategic investments, entry into new lines of business, divestitures, mergers or other transactions on acceptable terms, or at all; the impact of the COVID-19 pandemic and the current geopolitical tension and related sanctions on the companies in which the Company holds equity stakes; the Company’s ability to utilize or assert its intellectual property rights, the impact of natural disasters and other catastrophic events (such as the ongoing COVID-19 pandemic or the ongoing military conflict in Ukraine); the adequacy of insurance; the impact of having a controlling stockholder and vulnerability to fluctuation in the Company’s stock price. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Many of the risks listed above have been, and may further be, exacerbated by the COVID-19 pandemic, its impact on the cinema and entertainment industry, and general economic conditions, including the ongoing military conflict in Ukraine and related sanctions, such as inflationary pressures and disruptions in the global supply chain and the worsening economic environment. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except where required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

Ballantyne Strong, Inc. (“Ballantyne Strong,” “the Company,” “we,” “our,” and “us”) is a holding company with business operations in the entertainment industry and holdings in public and privately held companies. Our Strong Entertainment segment includes one of the largest manufacturers of premium projection screens and customized screen support systems, and we also distribute other products and provide technical support services to the cinema, amusement park and other markets.

We recently launched Strong Studios with the goal of expanding Strong Entertainment to include content creation and production of feature films and series. The launch of Strong Studios is intended to further diversify our revenue streams and increase our addressable markets, while leveraging and expanding our existing relationships in the industry.

In connection with the sale of our Strong Outdoor operating business to Firefly in August 2020, we entered into a Master Services Agreement and agreed to provide certain support services to Firefly. In addition, we use our facility in Alpharetta, Georgia for our Digital Ignition technology incubator and co-working facility. Results of those operations are included within “Other” in our results of operations.

We also continue to evaluate capital allocation opportunities to invest in other public or private companies or acquire other businesses, which may be within or outside of the Company’s existing markets. During 2021, we completed the divestiture of our Convergent digital signage business. In addition, during 2021 we allocated additional capital to increase our position in GreenFirst, and in both 2021 and 2022 we allocated additional capital to increase our position in FGF. In February 2022, we also completed the acquisition of the land and building housing our Digital Ignition incubator and co-working business.

As part of a transaction that closed on February 1, 2021, we divested our Convergent business segment. The purchase price was (i) $15.0 million in cash and (ii) $2.5 million in the form of a subordinated promissory note. Additionally, a portion of the Purchase Price was placed in escrow and a portion of the purchase price was subject to a working capital adjustment. As further consideration, the buyer also assumed approximately $5.7 million of debt, bringing the total enterprise value for Convergent sale to approximately $23.2 million. We recorded a gain of approximately $14.8 million during 2021 related to the sale of Convergent.

On August 3, 2020, we sold certain assets of the Strong Outdoor operating business to Firefly, and we continue to make available 300 digital taxi tops to Firefly. Strong Digital Media, LLC (“SDM”), an indirect subsidiary of Ballantyne Strong, retained certain accounts receivable as well as liabilities other than executory obligations under transferred contracts to the extent such liabilities are required to be performed following closing or constitute certain deferred revenue. The transaction closed on the same day.

As a result of these divestitures, we have presented Convergent’s and Strong Outdoor’s operating results as discontinued operations for all periods presented. Note 3 contains additional information regarding these transactions.

In December 2019, a novel coronavirus disease (“COVID-19”) was initially reported, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 and variants thereof have had a widespread and detrimental effect on the global economy as a result of the continued increase in the number of cases, particularly in the United States, 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 ultimate impact of the COVID-19 pandemic on our business and results of operations remains 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, including repeat or cyclical outbreaks, 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. Any resulting financial impact cannot be reasonably estimated at this time, but we expect it will continue to have a material impact on our business, financial condition and results of operations.

The repercussions of the COVID-19 global pandemic resulted in a significant impact to our customers, specifically those in the entertainment and advertising industries, and their ability and willingness to spend on our products and services, which continues to negatively impact us in certain geographic regions. A significant number of our customers temporarily ceased operations during the pandemic, some of which continue to be suspended; as such, we have experienced, and anticipate that we will continue to experience at least until our customers have resumed normal operations, a significant decline in our results of operations. Many movie theaters and other entertainment centers were forced to close or curtail their hours and, correspondingly, have terminated or deferred their non-essential capital expenditures. Although most movie theaters and chains have re-opened, theater operators may continue to experience reduced revenues for an extended period due to, among other things, consumer concerns over safety and social distancing, depressed consumer sentiment due to adverse economic conditions, including job losses, capacity restrictions, and postponed release dates, shortened “release windows” between the release of motion pictures in theaters and an alternative delivery method, or the release of motion pictures directly to alternative delivery methods, bypassing the theater entirely, for certain movies, and continued COVID-19 outbreaks could cause these theaters to suspend operations again. The COVID-19 pandemic also adversely affected film production and may adversely affect the pipeline of feature films available in the short- or long-term. In addition to decreased business spending by our customers and prospective customers and reduced demand for our products, lower renewal rates by our customers, increased customer losses/churn, increased challenges in or cost of acquiring new customers and increased risk in collectability of accounts receivable may have a material adverse effect on our business and results of operations. We have also experienced other negative impacts; among other actions, we were required to temporarily close our screen manufacturing facility in Canada due to the governmental response to COVID-19, which we were able to re-open on May 11, 2020, and experienced lower revenues from field services and a reduction in non-recurring time and materials-based services. The completion of our outsourced screen finishing facility in China by a third party was also delayed by the COVID-19 pandemic. We may also experience one or more of the following conditions that could have a material adverse impact on our business operations and financial condition: adverse effects on our strategic partners’ businesses or on the businesses of companies in which we hold equity stakes; impairment charges; extreme currency exchange-rate fluctuations; inability to recover costs from insurance carriers; and business continuity concerns for us, our customers and our third-party vendors.

The future and ultimate impact of the COVID-19 pandemic on our business and results of operations beyond the third quarter of fiscal year 2022 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. However, 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.

We cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic. As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition.

The Consolidated Appropriations Act extended and expanded the availability of the CARES Act employee retention credit through June 30, 2021. Subsequently, the American Rescue Plan Act of 2021 (“ARP Act”), enacted on March 11, 2021, extended and expanded the availability of the employee retention credit through December 31, 2021, however, certain provisions apply only after December 31, 2020. This new legislation expanded the group of qualifying business to include businesses with fewer than 500 employees and those who previously qualified for the Paycheck Protection Program (the “PPP Loan”). The employee retention credit is calculated to be equal to 70% of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70% credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $7,000 per employee per qualifying calendar quarter of 2021. We have determined that the qualifications for the credit were met in the first and second quarters of 2021. In July 2021, we applied for a refund of $1.5 million of payroll taxes previously paid and recognized a corresponding reduction in compensation expenses during the three months ending June 30, 2021. In September 2021, we applied for a refund of $0.6 million of payroll taxes previously paid and recognized a corresponding reduction in compensation expenses during the three months ended September 30, 2021. Of the $0.6 million, $0.4 million was recorded within cost of services and $0.2 million was recorded within general and administrative expenses.

Net revenues during the quarter ended September 30, 2022 increased 68.0% to $10.3 million from $6.1 million during the quarter ended September 30, 2021. The increase in consolidated net revenue was primarily due to the continuing recovery of the Strong Entertainment business from the impact of COVID-19 as demand increased for services and screens.

Revenue from Strong Entertainment increased 70.1% to $9.9 million in the third quarter of 2022 from $5.8 million in the third quarter of 2021. The increase from the prior year was due to a $3.6 million increase in product revenue and a $0.5 million increase in service revenue.

Demand and revenue from products and services benefited from the continuing recovery in the cinema industry. As the industry recovery has progressed, exhibitors are beginning to re-examine capital improvements, including upgrading their auditoriums from xenon projection to laser projection, with helps drive demand for our products and services. We have also increased the scope of our services to better support our customers and to increase market share in cinema services. We expect the upgrades from xenon to laser to accelerate in 2023 and continue for at least the next several years.

We expect the pace of recovery of our revenue will continue to be dependent upon the overall measures in place to control COVID-19, and any variants thereof, and the pace at which studios release new feature films to the market.

Consolidated gross profit increased $0.3 million to $2.7 million during the quarter ended September 30, 2022 from $2.4 million during the quarter ended September 30, 2021. As a percentage of revenue, gross profit was 26.7% and 40.0% for the quarters ended September 30, 2022 and September 30, 2021, respectively.

Excluding the impact of employee retention credits, which favorably impacted the prior year period, gross profit during the quarter ended September 30, 2021 would have been 33.1% as compared to 26.7% in the current period.

Gross profit in the Strong Entertainment segment was $2.4 million or 23.9% of revenues in the third quarter of 2022. Gross profit in the Strong Entertainment segment was $2.2 million or 37.0% of revenues in the third quarter of 2021, which included a positive impact of $0.4 million from employee retention credits. Excluding the impact of the employee retention credits, gross profit would have been 29.7% of revenue as compared to 23.9% in the current period.

Gross profit from product sales was $2.1 million or 27.9% of revenues for the third quarter of 2022 compared to $1.5 million or 35.8% of revenues for the third quarter of 2021. The decrease in gross profit percentage resulted primarily from product mix as revenue from projection and audio equipment grew at a faster rate than our higher margin screen products and services. Costs of labor, materials, packaging and shipping also increased, partially offsetting the favorable impact of higher revenue levels.

Gross profit from service revenue was $0.2 million or 10.1% of revenues for the third quarter of 2022 compared to $0.7 million or 39.9% of revenues for the third quarter of 2021. Excluding the impact of the employee retention credits, gross profit from service revenue for the third quarter of 2021 would have been $0.3 million or 12.2% of revenue.

Consolidated loss from operations was $0.3 million in the third quarter of 2022 compared to $0.1 million in the third quarter of 2021. Excluding the impact of employee retention credits, which favorably impacted the prior year period, loss from operations during the quarter ended September 30, 2021 would have been $0.7 million.

The Strong Entertainment segment generated operating income of $0.7 million in the third quarter of 2022 compared to $1.0 million in the third quarter of 2021. The decrease in income from operations was primarily due to the favorable impact on the prior year period of $0.4 million of employee retention credits and $0.1 million bad debt recovery, which did not recur in the current period. In addition, there were also increases to selling and administrative expenses, marketing and travel and entertainment expenses related to the increased revenue and business activity, including Strong Studios, in the current period as compared to the prior year.

Unallocated administrative expenses was $1.0 million in both the third quarter of 2022 and 2021. The recognition of employee retention credits of $0.1 million in the prior year was partially offset by lower stock-based compensation in the current period.

Total other expense of $0.9 million during the third quarter of 2022 primarily consisted of a $1.3 million unrealized loss on equity holdings and $0.1 million of interest expense, partially offset by $0.5 million of foreign currency transaction adjustments. Total other income of $10.2 million during the third quarter of 2021 primarily consisted of a $8.4 million unrealized gain on equity holdings, $1.7 million realized gain on equity holdings, and $0.2 million of foreign currency transaction adjustments.

Income tax expense was $0.2 million during the third quarter of 2022 compared to $2.7 million during the third quarter of 2021. Our income tax expense during the third quarter of 2022 and 2021 consisted primarily of current and deferred income tax on foreign earnings, which includes the unrealized (loss) gain on equity holdings.

We recorded a loss on our equity method holding of $0.8 million during the third quarter of 2022, which included a $1.7 million loss from FGF, partially offset by a $0.9 million gain recorded in connection with the change in interest resulting from transfer of our 2.9 million shares of FGF common stock to a new equity method holding. We recorded equity method investment loss of $0.3 million during the third quarter of 2021, which primarily consisted of $0.4 million from GreenFirst, partially offset by $0.1 million of income from FGF.

As a result of the items outlined above, we generated a net loss from continuing operations of $2.2 million, or $0.11 per basic and diluted share, in the third quarter of 2022, compared to a net income from continuing operations of $7.1 million, or $0.38 per basic and diluted share, in the third quarter of 2021.

Net revenues during the nine months ended September 30, 2022 increased 73.4% to $29.4 million from $17.0 million during the nine months ended September 30, 2021. The increase in consolidated net revenue was primarily due to the continuing recovery of the Strong Entertainment business from the impact of COVID-19 as demand increased for services and screens.

Revenue from Strong Entertainment increased 76.5% to $28.4 million in the first nine months of 2022 from $16.1 million in the first nine months of 2021. The increase from the prior year was due to a $10.3 million increase in product revenue and a $2.0 million increase in service revenue.

Consolidated gross profit increased to $7.7 million during the nine months ended September 30, 2022 from $6.1 million during the nine months ended September 30, 2021. As a percentage of revenue, gross profit was 26.1% and 35.8% for the nine months ended September 30, 2022 and September 30, 2021, respectively. Excluding the impact of the employee retention credit, gross profit during the nine months ended September 30, 2021 would have been 28.3%.

Gross profit in the Strong Entertainment segment was $6.7 million or 23.5% of revenues in the first nine months of 2022. Gross profit in the Strong Entertainment segment was $5.4 million or 33.7% of revenues in the first nine months of 2021, which included a positive impact of $1.3 million from employee retention credits. Excluding the impact of the employee retention credit in the prior period, gross profit would have been 25.8% of revenue as compared to 23.5% in the current period.

Gross profit from product sales was $5.8 million or 26.5% of revenues for the first nine months of 2022 compared to $4.0 million or 33.7% of revenues for the first nine months of 2021. The decrease in gross profit percentage resulted primarily from product mix as revenue from projection and audio equipment grew at a faster rate than our higher margin screen products and services. Costs of labor, materials, packaging and shipping also increased, partially offsetting the favorable impact of higher revenue levels.

Gross profit from service revenue was $0.8 million or 13.1% of revenues for the first nine months of 2022 compared to $1.5 million or 34.9% of revenues for the first nine months of 2021. Excluding the impact of the employee retention credits, gross profit from service revenue for the first nine months of 2021 would have been $0.3 million or 4.2% of revenue.

Consolidated loss from operations was $1.9 million in each of the first nine months of 2022 and 2021. Excluding the impact of employee retention credits, which favorably impacted the prior year period, loss from operations during the nine months ended September 30, 2021 would have been $3.7 million.

The Strong Entertainment segment generated income from operations of $1.5 million in the first nine months of 2022 compared to operating income of $2.2 million in the first nine months of 2021. The decrease in income from operations was primarily due to the favorable impact on the prior year period of $1.3 million of employee retention credits and $0.3 million bad debt recovery, which did not recur in the current period. In addition, there were also increases to selling and administrative expenses due to higher compensation and benefits, marketing and travel and entertainment expenses related to the increased revenue and business activity, including the startup of Strong Studios, in the current period as compared to the prior year.

Unallocated administrative expenses decreased to $3.3 million in the first nine months of 2022 compared to $3.4 million in the first nine months of 2021. Compensation and benefits expenses, including stock-based compensation expense, decreased in the current period as compared to prior year but were partially offset by the recognition of employee retention credits of $0.3 million recognized in the prior year.

Total other expense of $3.9 million during the first nine months of 2022 primarily consisted of a $3.8 million unrealized loss on equity holdings, a $0.2 million adjustment to the carrying value of the SageNet Promissory Note in connection with a prepayment, and $0.2 million of interest expense, partially offset by and $0.4 million of foreign currency transaction adjustments. Total other income of $9.9 million during the first nine months of 2021 primarily consisted of a $8.4 million unrealized gain on equity holdings, $1.7 million realized gain on equity holdings, a $0.1 million gain on our property and insurance claim for the weather-related incident at our production facility in Quebec, Canada, partially offset by $0.1 million of foreign currency transaction adjustments and $0.2 million of interest expense.

Income tax expense was approximately $0.3 million during the first nine months of 2022 compared to $2.8 million during the first nine months of 2021. Our income tax expense consisted primarily of current and deferred income tax on foreign earnings, which includes unrealized (loss) gain on equity holdings.

We recorded a loss on our equity method holding of $2.6 million during the first nine months of 2022 which included a $3.5 million loss from FGF, partially offset by a $0.9 million gain recorded in connection with the change in interest resulting from the transfer of our 2.9 million shares of FGF common stock to a new equity method holding. We recorded an equity method investment loss of $1.5 million during the first nine months of 2021, consisting of $1.1 million from GreenFirst and $0.3 million from FGF.

As a result of the items outlined above, we generated a net loss from continuing operations of $8.6 million, or $0.45 per basic and diluted share, in the first nine months of 2022, compared to a net income from continuing operations of $3.8 million, or $0.21 per basic and diluted share, in the first nine months of 2021.

During the past several years, we have primarily met our working capital and capital resource needs from our operating cash flows, sales of our common stock and credit facilities. Our primary cash requirements involve operating expenses, working capital, capital expenditures, equity holdings, and other general corporate activities.

We ended the third quarter of 2022 with total cash and cash equivalents and restricted cash of $4.3 million compared to $8.9 million as of December 31, 2021. Of the $4.3 million as of September 30, 2022, $1.6 million was held by our Canadian subsidiary, Strong/MDI, and $0.2 million was restricted. Strong/MDI makes intercompany loans to the U.S. parent company which do not trigger Canadian withholding taxes if they meet certain requirements. As of September 30, 2022, the parent company had outstanding intercompany loans from Strong/MDI of approximately $38.6 million. In the event those loans are not repaid, or are recharacterized as dividends to the U.S. parent company, we would be required to pay 5% Canadian withholding taxes, which have been fully accrued as of September 30, 2022.

In response to the COVID-19 pandemic and related closures of cinemas, theme parks and entertainment venues, we took decisive actions to conserve cash, reduce operating expenditures, delay capital expenditures, and manage working capital.

On June 7, 2021, Strong/MDI entered into a demand credit agreement (the “2021 Credit Agreement”), which amended and restated the demand credit agreement dated as of September 5, 2017. The 2021 Credit Agreement consists of a revolving line of credit for up to CDN$2.0 million subject to a borrowing base requirement, a 20-year installment loan for up to CDN$5.1 million and a 5-year installment loan for up to CDN$0.5 million. These borrowings are due on demand by the lender and total $2.6 million as of September 30, 2022.

We believe that our existing sources of liquidity, including cash and cash equivalents, operating cash flow, credit facilities, equity holdings, receivables and other assets will be sufficient to meet our projected capital needs for at least the next twelve months. However, our ability to continue to meet our cash requirements will depend on, among other things, the duration of COVID-19 related restrictions on cinemas, theme parks and other entertainment venues, our ability to achieve anticipated levels of revenues and cash flow from operations, performance of our equity holdings, our ability to manage costs and working capital successfully and the continued availability of financing, if needed. We cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic. As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition. In the event of a sustained market deterioration, and continued declines in net sales, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions. We may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in additional public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions, including those resulting from the COVID-19 pandemic, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all, and we cannot provide any assurance that we will be able to obtain any additional sources of financing or liquidity on acceptable terms, or at all. See Note 11 to the condensed consolidated financial statements for a description of our debt as of September 30, 2022.

Net cash used in operating activities from continuing operations was $2.8 million during the nine months ended September 30, 2022 and $0.3 million during the nine months ended September 30, 2021. Cash used in operating activities from continuing operations increased primarily due to increases in working capital accompanying revenue growth in the Strong Entertainment business during the current period.

Net cash used in investing activities from continuing operations was $1.0 million during the nine months ended September 30, 2022, which consisted of a $2.0 million purchase of common stock of FGF, $0.9 million of capital expenditures and $0.4 million outflow related to the acquisition of film and television programming rights, partially offset by the $2.3 million receipt of the SageNet Promissory Note. Net cash used in investing activities from continuing operations was $10.6 million during the nine months ended September 30, 2021, which consisted of a $10.0 million increase to our investment in GreenFirst and $0.7 million of capital expenditures.

Net cash used in financing activities from continuing operations was $0.6 million during the nine months ended September 30, 2022, which primarily consisted of principal payments on short-term and long-term debt. Net cash provided by financing activities from continuing operations was $3.6 million during the nine months ended September 30, 2021, which primarily consisted of $6.3 million of net proceeds from the issuance of our common stock, partially offset by $2.6 million of principal payments on finance leases and short-term debt.

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”). In addition to disclosing financial results prepared in accordance with GAAP, we disclose information regarding Adjusted EBITDA, which differs from the term EBITDA as it is commonly used. In addition to adjusting net income (loss) to exclude income taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes discontinued operations, share-based compensation, impairment charges, equity method income (loss), fair value adjustments, severance, foreign currency transaction gains (losses), transactional gains and expenses, gains on insurance recoveries and other cash and non-cash charges and gains.

EBITDA and Adjusted EBITDA are not measures of performance defined in accordance with GAAP. However, Adjusted EBITDA is used internally in planning and evaluating our operating performance. Accordingly, management believes that disclosure of these metrics offers investors, bankers and other stakeholders an additional view of our operations that, when coupled with the GAAP results, provides a more complete understanding of our financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or to net cash from operating activities as measures of operating results or liquidity. Our calculation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating our performance.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our working capital needs, (iii) EBITDA and Adjusted EBITDA do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations, and (vii) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

We believe EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present EBITDA and Adjusted EBITDA because (i) we believe these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally as benchmarks to evaluate our operating performance or compare our performance to that of our competitors.

The following table sets forth reconciliations of net (loss) income under GAAP to EBITDA and Adjusted EBITDA (in thousands):

Our primary exposure to foreign currency fluctuations pertains to our subsidiary in Canada. In certain instances, we may enter into a foreign exchange contract to manage a portion of this risk. We do not have any trading activities that include non-exchange traded contracts at fair value.

Generally, our revenue and earnings fluctuate moderately from quarter to quarter. As we increase our sales in our current markets, and as we expand into new markets in different geographies, it is possible we may experience different seasonality patterns in our business. As a result, the results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for an entire fiscal year.

See Note 2, Summary of Significant Accounting Policies, to the condensed consolidated financial statements for a description of recently issued accounting pronouncements.

In preparing our consolidated financial statements in conformity with U.S. generally accepted accounting principles, management must make a variety of decisions which impact the reported amounts and the related disclosures. These decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In making these decisions, management applies its judgment based on its understanding and analysis of the relevant circumstances and our historical experience.

Our accounting policies and estimates that are most critical to the presentation of our results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as our critical accounting policies. See further discussion of our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for our year ended December 31, 2021. We periodically re-evaluate and adjust our critical accounting policies as circumstances change. Other than the addition of our policy related to film and television programming rights, there were no significant changes in our critical accounting policies during the three months ended September 30, 2022.

Commencing in March 2022, we began producing original productions and acquiring rights to films and television programming. Film and television programming rights include the unamortized costs of in-process or in-development content produced or acquired by us. Our capitalized costs include all direct production and financing costs, capitalized interest when applicable, and production overhead. Film and television program rights are stated at the lower of amortized cost or estimated fair value.

The costs of producing content are amortized using the individual-film-forecast method. These costs are amortized based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned (“Ultimate Revenue”) as of each reporting date to reflect the most current available information. Management’s judgment is required in estimating Ultimate Revenue and the costs to be incurred throughout the life of each film or television program. Amortization is adjusted when necessary to reflect increases or decreases in forecasted Ultimate Revenues.

For an episodic television series, the period over which Ultimate Revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. For films, Ultimate Revenue includes estimates over a period not to exceed ten years following the date of initial release.

Content assets are expected to be predominantly monetized individually and therefore are reviewed at the individual level when an event or change in circumstance indicates a change in the expected usefulness of the content or the fair value may be less than the unamortized cost.

Due to the inherent uncertainties involved in making such estimates of Ultimate Revenues and expenses, these estimates may differ from actual results. In addition, in the normal course of our business, some films and titles will be more successful or less successful than anticipated. Management regularly reviews and revises, when necessary, its Ultimate Revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value. An increase in the estimate of Ultimate Revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of Ultimate Revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically result in an impairment requiring a write-down of the film cost to the title’s fair value. We have not yet incurred any of these write-downs.

An impairment charge would be recorded in the amount by which the unamortized costs exceed the estimated fair value. Estimates of future revenue involve measurement uncertainties and it is therefore possible that reductions in the carrying value of film library costs may be required because of changes in management’s future revenue estimates.

Not applicable as we are a “smaller reporting company” as defined by Item 229.10(f)(1) of Regulation S-K.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures (as defined in § 240.13a-15(e) or 240.15d-15(e) of Regulation S-K) were effective at ensuring that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (as amended) is (1) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting. The Company determined that no material changes to its internal control over financial reporting occurred or were required in response to the measures it has taken related to the COVID-19 pandemic, including remote working arrangements for many of its employees. The Company is continually monitoring and assessing the impact of COVID-19 on its internal controls in an effort to ensure that its internal controls respond to any changes in its operating environment.

In the ordinary course of our business operations, we are involved, from time to time, in certain legal disputes. We and certain of our subsidiaries are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of commercial lighting products containing wiring that may have contained asbestos. Each case names dozens of corporate defendants in addition to us. In our experience, a large percentage of these types of claims have never been substantiated and have been dismissed by the courts. We have not suffered any adverse verdict in a trial court proceeding related to asbestos claims and intends to continue to defend these lawsuits. During 2021, we recorded a loss contingency reserve of approximately $0.3 million, which represents our estimate of our potential losses related to the settlement of open cases. There have been no changes to this loss contingency reserve during 2022. When appropriate, we may settle certain claims. We do not expect the resolution of these cases to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”) includes a detailed discussion of the Company’s risk factors. As of the date of this filing, except as set forth herein, there have been no material changes to the risk factors as previously disclosed. The Risk Factors set forth in the 2021 Form 10-K should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 2021 Form 10-K, could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

We are entering a new line of business which could require additional capital.

The production, acquisition and distribution of feature films and series content requires substantial capital. We intend to mitigate risks by pre-selling rights to content and utilizing tax credit incentives in most cases to offset production costs. However, a significant amount of time may elapse between our expenditure of funds and the receipt of revenues after release or distribution of such content. Although we intend to reduce the risks of production exposure through pre-sale of rights, tax credit programs, government and industry programs, co-financiers and other sources, we cannot assure you that we will successfully implement these arrangements or that we will not be subject to substantial financial risks relating to the production, acquisition and distribution of content. Additionally, the production, completion and distribution of motion picture and television content can be subject to a number of uncertainties, including delays and increased expenditures due to disruptions or events beyond our control. As a result, if production incurs substantial budget overruns, we may have to seek additional financing or fund the overrun ourselves. We cannot make assurances regarding the availability of such additional financing on terms acceptable to us, or that we will recoup these costs. For instance, increased costs or budget overruns incurred with respect to a particular film may prevent a picture from being completed or released or may result in a delayed release and the postponement to a potentially less favorable date, all of which could cause a decline in performance, and, thus, the overall financial success of such film. Any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We may incur significant write-offs if our projects do not perform well enough to recoup costs.

We will be required to amortize content capitalized production costs over the expected revenue streams as we recognize revenue from films or other projects. The amount of production costs that will be amortized each quarter depends on, among other things, how much future revenue we expect to receive from each project. Unamortized production costs will be evaluated for impairment each reporting period on a project-by-project basis. If estimated remaining revenue is not sufficient to recover the unamortized production costs, including because of delayed theatrical distribution of films as a result of the COVID-19 global pandemic and its effects, those costs would be written down to fair value. In any given quarter, if we lower our previous forecast with respect to total anticipated revenue from any film or other project, we may be required to accelerate amortization or record impairment charges with respect to the unamortized costs, even if we previously recorded impairment charges for such film or other project. Such impairment charges could adversely impact our business, operating results and financial condition.

Our revenues and results of operations may fluctuate significantly from period to period.

Our revenues and results of operations can vary based on the timing of shipments of our cinema products particularly with regard to the timing of cinema screen shipments and timing of customer orders and shipments of projection equipment. With the launch of Strong Studios, those fluctuations could increase on a quarter-to-quarter basis as timing of revenue and amortization of production costs will depend on timing delivery of content, among other factors. The degree of commercial success of content that we sell, license or distribute, which cannot be predicted with certainty may cause our revenue and earnings results to fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future periods.

On August 20, 2015, we announced that our Board of Directors adopted a stock repurchase program authorizing the repurchase of up to 700,000 shares of our outstanding Common Stock pursuant to a plan adopted under Rule 10b5-1 of the Securities Exchange Act of 1934 (as amended). The repurchase program has no expiration date. The following table provides information about purchases made by us of our common stock for each month included in the quarter ended September 30, 2022:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

i Delaware		i 47-0587703
(State or Other Jurisdiction of		(IRS Employer
Incorporation or Organization)		Identification Number)

i 5960 Fairview Road, i Suite 275 i Charlotte, i North Carolina		i 28210
(Address of Principal Executive Offices)		(Zip Code)

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
i Common Stock, $0.01 par value		i BTN		i NYSE American

Large accelerated filer	☐	Accelerated filer	☐
i Non-accelerated filer	☒	Smaller reporting company	i ☒
		Emerging growth company	i ☐

Class		Outstanding as of November 4, 2022
Common Stock, $0.01 par value		i 19,469,649 shares

		Page No.

	PART I. FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets, September 30, 2022 and December 31, 2021 (Unaudited)	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)	7

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4.	Controls and Procedures	41

	PART II. OTHER INFORMATION	41

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 6.	Exhibits	43

	Signatures	44

Ballantyne Strong, Inc. – ‘10-Q’ for 9/30/22

On: Tuesday, 11/8/22, at 4:36pm ET · For: 9/30/22 · Accession #: 1493152-22-30956 · File #: 1-13906

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Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

	September 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	i 4,191		$	i 8,731
Restricted cash		i 151			i 150
Accounts receivable (net of allowance for doubtful accounts of $ i 557 and $ i 607, respectively)		i 4,900			i 4,631
Inventories, net		i 3,666			i 3,271
Other current assets		i 4,760			i 4,992
Total current assets		i 17,668			i 21,775
Property, plant and equipment, net		i 13,345			i 6,226
Operating lease right-of-use assets		i 335			i 3,975
Finance lease right-of-use asset		i 63			-
Note receivable, net of current portion		-			i 1,667
Equity holdings		i 35,624			i 41,133
Film and television programming rights, net		i 1,449			-
Intangible assets, net		i 8			i 69
Goodwill		i 871			i 942
Other assets		i 1			i 22
Total assets	$	i 69,364		$	i 75,809

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	i 4,378		$	i 4,245
Accrued expenses		i 4,089			i 2,994
Short-term debt		i 2,686			i 2,998
Current portion of long-term debt		i 213			i 23
Current portion of operating lease obligations		i 114			i 577
Current portion of finance lease obligations		i 12			-
Deferred revenue and customer deposits		i 2,277			i 3,292
Total current liabilities		i 13,769			i 14,129
Operating lease obligations, net of current portion		i 287			i 3,586
Finance lease obligations, net of current portion		i 51			-
Long-term debt, net of current portion and deferred debt issuance costs, net		i 5,056			i 105
Deferred income taxes		i 4,980			i 5,594
Other long-term liabilities		i 631			i 118
Total liabilities		i 24,774			i 23,532

Commitments, contingencies and concentrations (Note 15)		-			-

Stockholders’ equity:
Preferred stock, par value $ i i .01 / per share; authorized i i 1,000 / shares, i i none / outstanding		-			-
Common stock, par value $ i i .01 / per share; authorized i 50,000 and i 25,000 shares at September 30, 2022 and December 31, 2021, respectively; issued i 22,231 and i 21,286 shares at September 30, 2022 and December 31, 2021, respectively; outstanding i 19,437 and i 18,492 shares at September 30, 2022 and December 31, 2021, respectively		i 222			i 213
Additional paid-in capital		i 53,752			i 50,807
Retained earnings		i 14,992			i 23,591
Treasury stock, 2,794 shares at cost		( i 18,586	)		( i 18,586	)
Accumulated other comprehensive loss		( i 5,790	)		( i 3,748	)
Total stockholders’ equity		i 44,590			i 52,277
Total liabilities and stockholders’ equity	$	i 69,364		$	i 75,809

		2022			2021			2022			2021
	Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021
Net (loss) income	$	( i 2,199	)	$	i 7,086		$	( i 8,598	)	$	i 18,469
Adjustment to postretirement benefit obligation		( i 4	)		( i 8	)		( i 15	)		( i 54	)
Removal of unrealized gain on available-for sale securities of equity method holding		( i 121	)		-			( i 121	)		-
Currency translation adjustment:
Unrealized net change arising during period		( i 1,353	)		( i 60	)		( i 1,906	)		( i 314	)
Total other comprehensive loss		( i 1,478	)		( i 68	)		( i 2,042	)		( i 368	)
Comprehensive (loss) income	$	( i 3,677	)	$	i 7,018		$	( i 10,640	)	$	i 18,101

	●	Level 1 – inputs to the valuation techniques are quoted prices in active markets for identical assets or liabilities
	●	Level 2 – inputs to the valuation techniques are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly
	●	Level 3 – inputs to the valuation techniques are unobservable for the assets or liabilities

	●	Identify the contract, or contracts, with a customer;
	●	Identify the performance obligations in the contract;
	●	Determine the transaction price;
	●	Allocate the transaction price to the identified performance obligations; and
	●	Recognize revenue when, or as, the Company satisfies the performance obligations.

		September 30, 2022		December 31, 2021
Raw materials and components	$	i 1,591	$	i 1,680
Work in process		i 364		i 399
Finished goods		i 1,711		i 1,192
Inventories, net	$	i 3,666	$	i 3,271


Inventory reserve balance at December 31, 2021	$	i 467
Inventory reserve, beginning balance	$	i 467
Inventory write-offs and other adjustments during 2022		i 5
Provision for inventory reserve during 2022		-
Inventory reserve balance at September 30, 2022	$	i 472
Inventory reserve, ending balance	$	i 472

		September 30, 2022			December 31, 2021
Land	$	i 2,340		$	i 51
Buildings and improvements		i 12,669			i 6,886
Machinery and other equipment		i 5,837			i 5,992
Office furniture and fixtures		i 846			i 837
Construction in progress		i 11			i 393
Total properties, cost		i 21,703			i 14,159
Less: accumulated depreciation		( i 8,358	)		( i 7,933	)
Property, plant and equipment, net	$	i 13,345		$	i 6,226

		September 30, 2022		December 31, 2021
Television series in development	$	i 1,257	$	-
Films in development		i 192		-
Total	$	i 1,449	$	-

Balance at December 31, 2021	$	-
In-process projects acquired from Landmark		i 1,670
Warrant to be issued to Landmark		i 364
Expenditures on in-process projects		i 407
Reclass from other assets		i 124
Reclass of reimbursable costs associated with Safehaven		( i 1,116	)
Balance at September 30, 2022	$	i 1,449

Expected dividend yield at date of grant	i 0.00	%
Risk-free interest rate	i 1.7	%
Expected stock price volatility	i 72.9	%
Expected life of warrants (in years)	i 3.0


Cash	$	i 194
Television programming rights		i 10,439
Other assets		i 337
Total assets	$	i 10,970

Accounts payable and accrued expenses	$	i 946
Due to Strong Studios		i 1,375
Debt		i 8,649
Equity		-
Total liabilities and equity	$	i 10,970

Balance as of December 31, 2021	$	i 942
Foreign currency translation adjustment		( i 71	)
Balance as of September 30, 2022	$	i 871


	September 30, 2022			December 31, 2021
Short-term debt:
Strong/MDI i i 20 / -year installment loan	$	i 2,316		$	i 2,682
Strong/MDI i i 5 / -year equipment loan		i 237			i 316
Insurance note payable		i 133			-
Total short-term debt	$	i 2,686		$	i 2,998

Long-term debt:
Tenant improvement loan	$	i 170		$	i 128
Digital Ignition building loan		i 5,149			-
Total long-term debt	$	i 5,319		$	i 128
Less: current portion		( i 213	)		( i 23	)
Less: deferred debt issuance costs, net		( i 50	)		-
Long-term debt, net of current portion and deferred debt issuance costs, net	$	i 5,056		$	i 105

	September 30, 2022			December 31, 2021
Deferred debt issuance costs	$	i 56		$	-
Less: accumulated amortization	$	( i 6	)		-
Deferred debt issuance costs, net	$	i 50		$	-


Remainder of 2022	$	i 4
2023		i 11
2024		i 11
2025		i 11
2026		i 11
Thereafter		i 2
Total	$	i 50

	As of September 30, 2022
Weighted-average remaining lease term - finance leases (years)		i 4.5
Weighted-average remaining lease term - operating leases (years)		i 4.9
Weighted-average discount rate - finance leases		i 6.4	%
Weighted-average discount rate - operating leases		i 6.0	%

	Operating Leases			Finance Leases
Remainder of 2022	$	i 32		$	i 4
2023		i 131			i 16
2024		i 101			i 16
2025		i 79			i 16
2026		i 81			i 16
Thereafter		i 14			i 5
Total lease payments		i 438			i 73
Less: Amount representing interest		( i 37	)		( i 10	)
Present value of lease payments		i 401			i 63
Less: Current maturities		( i 114	)		( i 12	)
Lease obligations, net of current portion	$	i 287		$	i 51

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2021		i 314,079		$	i 2.45
Granted		i 120,829			i 2.40
Shares vested		( i 189,641	)		i 3.02
Shares forfeited		-
Non-vested at September 30, 2022		i 245,267		$	i 1.99


(In thousands)	September 30, 2022		December 31, 2021
Identifiable assets
Strong Entertainment	$	i 33,344	$	i 38,518
Corporate assets		i 36,020		i 37,291
Total	$	i 69,364	$	i 75,809

	Quarters Ended September 30,
	2022											2021

	Strong Entertainment			Corporate and Other			Discontinued Operations		Consolidated			Strong Entertainment			Corporate and Other			Discontinued Operations		Consolidated
Net income (loss)	$	315		$	(2,514	)	$	-	$	(2,199	)	$	7,685		$	(599	)	$	-	$	7,086
Net income from discontinued operations		-			-			-		-			-			-			-		-
Net income (loss) from continuing operations		315			(2,514	)		-		(2,199	)		7,685			(599	)		-		7,086
Interest expense, net		33			58			-		91			25			(18	)		-		7
Income tax expense		202			43			-		245			2,327			369			-		2,696
Depreciation and amortization		153			183			-		336			216			129			-		345
EBITDA		703			(2,230	)		-		(1,527	)		10,253			(119	)		-		10,134
Stock-based compensation expense		-			142			-		142			-			213			-		213
Equity method holding loss (income)		-			798			-		798			414			(91	)		-		323
Realized gain on equity holdings		-			-			-		-			(1,689	)					-		(1,689	)
Unrealized loss (gain) on equity holdings		631			670			-		1,301			(7,648	)		(728	)		-		(8,376	)
Foreign currency transaction income		(517	)		-			-		(517	)		(162	)		-			-		(162	)
Employee retention credit		-			-			-		-			(527	)		(90	)		-		(617	)
Adjusted EBITDA	$	817		$	(620	)	$	-	$	197		$	641		$	(815	)	$	-	$	(174	)