10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

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: 1-13906

BALLANTYNE STRONG, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	47-0587703
(State or Other Jurisdiction of	(IRS Employer
Incorporation or Organization)	Identification Number)
4201 Congress Street, Suite 175 Charlotte, North Carolina	28209
(Address of Principal Executive Offices)	(Zip Code)

(704) 994-8279

(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 Shares, $.01 par value	BTN	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 twelve 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 [X] 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). Yes [X] 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	[X]	Smaller reporting company	[X]
		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 [X]

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

Class	Outstanding as of May 8, 2020
Common Stock, $.01 par value	14,651,253 shares

TABLE OF CONTENTS

		Page No.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets, March 31, 2020 (Unaudited) and December 31, 2019	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	7
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	37
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 6.	Exhibits	39
	Signatures	40

2

PART I. Financial Information

Item 1. Financial Statements

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par values)

	March 31, 2020			December 31, 2019
		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,546		$	4,951
Restricted cash		351			351
Accounts receivable (net of allowance for doubtful accounts of $1,217 and $1,291, respectively)		10,252			12,898
Inventories, net		2,794			2,879
Recoverable income taxes		262			190
Other current assets		2,642			1,754
Total current assets		22,847			23,023
Property, plant and equipment (net of accumulated depreciation of $10,299 and $10,238, respectively)		9,836			10,560
Operating lease right-of-use assets		5,438			5,581
Finance lease right-of-use assets		2,333			2,563
Investments		14,368			13,311
Intangible assets, net		1,453			1,534
Goodwill		842			919
Other assets		98			142
Total assets	$	57,215		$	57,633
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,139		$	3,273
Accrued expenses		3,830			4,416
Short-term debt		3,188			3,080
Current portion of long-term debt		1,016			998
Current portion of operating lease obligations		974			971
Current portion of finance lease obligations		1,633			1,586
Deferred revenue and customer deposits		3,175			2,981
Total current liabilities		18,955			17,305
Long-term debt, net of current portion and debt issuance costs		2,757			3,019
Operating lease obligations, net of current portion		4,632			4,809
Finance lease obligations, net of current portion		3,561			3,988
Deferred revenue and customer deposits, net of current portion		32			38
Deferred income taxes		2,918			2,649
Other long-term liabilities		110			116
Total liabilities		32,965			31,924
Commitments, contingencies and concentrations (Note 13)
Stockholders’ equity:
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding		-			-
Common stock, par value $.01 per share; authorized 25,000 shares; issued 17,445 and 17,410 shares at March 31, 2020 and December 31, 2019, respectively; outstanding 14,651 and 14,616 shares at March 31, 2020 and December 31, 2019, respectively		174			174
Additional paid-in capital		42,862			42,589
Retained earnings		5,554			6,001
Less 2,794 of common shares in treasury, at cost		(18,586	)		(18,586	)
Accumulated other comprehensive loss		(5,754	)		(4,469	)
Total stockholders’ equity		24,250			25,709
Total liabilities and stockholders’ equity	$	57,215		$	57,633

See accompanying notes to unaudited condensed consolidated financial statements.

3

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2020 and 2019

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Net product sales	$	6,404		$	5,560
Net service revenues		7,171			8,746
Total net revenues		13,575			14,306
Cost of products sold		4,695			3,523
Cost of services		4,627			8,138
Total cost of revenues		9,322			11,661
Gross profit		4,253			2,645
Selling and administrative expenses:
Selling		1,344			1,228
Administrative		4,830			3,929
Total selling and administrative expenses		6,174			5,157
Loss on disposal of assets		-			(64	)
Loss from operations		(1,921	)		(2,576	)
Other income (expense):
Interest expense		(272	)		(119	)
Fair value adjustment to notes receivable		-			(510	)
Foreign currency transaction gain (loss)		488			(143	)
Other income, net		289			36
Total other income (expense)		505			(736	)
Loss before income taxes and equity method investment income (loss)		(1,416	)		(3,312	)
Income tax expense		(400	)		(141	)
Equity method investment income (loss)		1,369			(697	)
Net loss	$	(447	)	$	(4,150	)
Basic loss per share	$	(0.03	)	$	(0.29	)
Diluted loss per share	$	(0.03	)	$	(0.29	)
Weighted-average shares used in computing net loss per share:
Basic		14,625			14,438
Diluted		14,625			14,438

See accompanying notes to unaudited condensed consolidated financial statements.

4

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended March 31, 2020 and 2019

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Net loss	$	(447	)	$	(4,150	)
Adjustment to postretirement benefit obligation		(4	)		2
Unrealized loss on available-for-sale securities of equity method investments, net of tax		(76	)		(91	)
Currency translation adjustment:
Unrealized net change arising during period		(1,205	)		257
Total other comprehensive (loss) income		(1,285	)		168
Comprehensive loss	$	(1,732	)	$	(3,982	)

See accompanying notes to unaudited condensed consolidated financial statements.

5

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2020 and 2019

(In thousands)

(Unaudited)

The following summarizes the changes in stockholders’ equity for the three months ended March 31, 2020:

	Common Stock (Shares)		Common Stock ($)		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at December 31, 2019		17,410	$	174	$	42,589	$	6,001		$	(18,586	)	$	(4,469	)	$	25,709
Net loss		-		-		-		(447	)		-			-			(447	)
Net other comprehensive loss		-		-		-		-			-			(1,285	)		(1,285	)
Vesting of restricted stock		35		-		-		-			-			-			-
Stock-based compensation expense		-		-		273		-			-			-			273
Balance at March 31, 2020		17,445		174		42,862		5,554			(18,586	)		(5,754	)		24,250

The following summarizes the changes in stockholders’ equity for the three months ended March 31, 2019:

	Common Stock (Shares)		Common Stock ($)		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at December 31, 2018		17,237	$	172	$	41,471		$	13,319		$	(18,586	)	$	(5,378	)	$	30,998
Net loss		-		-		-			(4,150	)		-			-			(4,150	)
Net other comprehensive income		-		-		-			-			-			168			168
Cumulative effect of adoption of ASC 842		-		-		-			2,785			-			-			2,785
Vesting of restricted stock		76		1		(1	)		-			-			-			-
Stock-based compensation expense		-		-		243			-			-			-			243
Balance at March 31, 2019		17,313		173		41,713			11,954			(18,586	)		(5,210	)		30,044

See accompanying notes to unaudited condensed consolidated financial statements.

6

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2020 and 2019

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(447	)	$	(4,150	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Provision for (recovery of) doubtful accounts		819			(310	)
Provision for obsolete inventory		44			53
Provision for warranty		53			67
Depreciation and amortization		989			795
Amortization and accretion of operating leases		309			579
Fair value adjustment to notes receivable		-			510
Equity method investment (income) loss		(1,369	)		697
Loss on disposal of assets		-			64
Gain on Firefly transaction (Note 6)		(270	)		-
Deferred income taxes		23			50
Stock-based compensation expense		273			243
Changes in operating assets and liabilities:
Accounts receivable		1,499			1,819
Inventories		(118	)		(145	)
Current income taxes		(87	)		(444	)
Other assets		(277	)		(69	)
Accounts payable and accrued expenses		1,323			(605	)
Deferred revenue and customer deposits		216			11
Operating lease obligations		(341	)		(590	)
Net cash provided by (used in) operating activities		2,639			(1,425	)

(Continued on following page)

See accompanying notes to unaudited condensed consolidated financial statements.

7

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows - Continued

Three Months Ended March 31, 2020 and 2019

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment	$	-		$	86
Capital expenditures		(371	)		(257	)
Net cash used in investing activities		(371	)		(171	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		-			237
Principal payments on short-term debt		(55	)		(79	)
Principal payments on long-term debt		(243	)		(245	)
Payments on capital lease obligations		(380	)		(49	)
Net cash used in financing activities		(678	)		(136	)
Effect of exchange rate changes on cash and cash equivalents		5			23
Net increase (decrease) in cash and cash equivalents and restricted cash		1,595			(1,709	)
Cash and cash equivalents and restricted cash at beginning of period		5,302			7,048
Cash and cash equivalents and restricted cash at end of period	$	6,897		$	5,339
Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	6,546		$	4,989
Restricted cash		351			350
Total cash and cash equivalents and restricted cash	$	6,897		$	5,339
Supplemental disclosure of non-cash investing and financing activities:
Term loan borrowings to finance equipment purchases	$	-		$	198
Capital lease obligations for property and equipment	$	-		$	232
Short-term borrowings to finance insurance	$	421		$	202

See accompanying notes to unaudited condensed consolidated financial statements.

8

Ballantyne Strong, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

Ballantyne Strong, Inc. (“Ballantyne” or the “Company”), a Delaware corporation, is a holding company with diverse business activities focused on serving the entertainment, retail and advertising markets. The Company, and its wholly owned subsidiaries Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc. (“Strong/MDI”), Convergent Media Systems Corporation (“Convergent”) and Strong Digital Media, LLC (“SDM”) design, integrate and install technology solutions for a broad range of applications; develop and deliver out-of-home messaging, advertising and communications; manufacture projection screens; and provide managed services including monitoring of networked equipment to our customers.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and all majority owned and controlled domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America (also referred to as “GAAP”) for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The condensed consolidated balance sheet as of December 31, 2019 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary to present a fair statement of the financial position and the results of operations and cash flows for the respective interim periods. Certain prior period balances have been reclassified to conform to current period presentation. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

Unless otherwise indicated, all references to “dollars” and “$” in this Quarterly Report on Form 10-Q are to, and amounts are presented in, U.S. dollars.

Use of Management Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

There is significant ongoing uncertainty surrounding the COVID-19 global pandemic and the extent and duration of the impacts that it may have on the Company, as well as its customers, suppliers, and employees. There is heightened potential for future reserves against trade receivables, inventory write downs and impairments of long-lived assets, goodwill, intangible assets and investments. In the current environment, assumptions about future financial and operational performance, supply chain pricing and availability and customer creditworthiness have greater variability than normal, which could in the future significantly affect the valuation of the Company’s assets, both financial and non-financial. As an understanding of the longer-term impacts of COVID-19 on the Company’s customers and business develops, there is heightened potential for changes in these views over the remainder of 2020, and potentially beyond.

9

Restricted Cash

Restricted cash represents amounts held in a collateral account for the Company’s corporate travel and purchasing credit card program.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful accounts based on several factors, including overall customer credit quality, historical write-off experience and a specific analysis that projects the ultimate collectability of the account. As such, these factors may change over time causing the allowance level and bad debt expense to be adjusted accordingly. Since many of Strong Entertainment’s customers have been negatively impacted by COVID-19, the Company recorded $0.7 million of bad debt expense during the first quarter of 2020 as a result of the increased uncertainty related to collection of trade accounts receivable from these customers.

Investments

The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net income (loss) resulting from these investments is reported under the line item captioned “equity method investment income (loss)” in our condensed consolidated statements of operations. The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. The Company applies the cost method of accounting to investments when it does not have significant influence or a controlling interest in the investee and the fair value of the investment is not readily determinable. Dividends on cost method investments received are recorded as income.

The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Management reviewed the underlying net assets of the investees during the three months ended March 31, 2020 and determined that the Company’s proportionate economic interest in the investees indicate that the investments were not other than temporarily impaired. The carrying value of our equity method and cost method investments is reported as “investments” on the condensed consolidated balance sheets. Note 6 contains additional information on our equity method and cost method investments.

Fair Value of Financial Instruments

Assets and liabilities measured at fair value are categorized into a fair value hierarchy based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

● 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

10

The following tables present the Company’s financial assets measured at fair value based upon the level within the fair value hierarchy in which the fair value measurements are classified, as of March 31, 2020 and December 31, 2019.

Fair values measured on a recurring basis at March 31, 2020 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	6,546	$	-	$	-	$	6,546
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	6,897	$	-	$	-	$	6,897

Fair values measured on a recurring basis at December 31, 2019 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,951	$	-	$	-	$	4,951
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	5,302	$	-	$	-	$	5,302

The following table reconciles the beginning and ending balance of the Company’s notes receivable at fair value (in thousands):

	Three Months Ended March 31,
	2020		2019
Notes receivable balance, beginning of period	$	-	$	3,965
Fair value adjustment		-		(510	)
Notes receivable balance, end of period	$	-	$	3,455

During 2011, the Company entered into certain unsecured notes receivable arrangements with CDF2 Holdings, LLC pertaining to the sale and installation of digital projection equipment. The notes receivable accrue interest at a rate of 15% per annum. Interest not paid in any particular year is added to the principal and also accrues interest at 15%. In connection with this transaction, the Company also entered into an agreement with one of its customers, pursuant to which the Company is obligated to provide up to $1.1 million of credits against any amounts due to the Company from the customer based on cash collected on the notes receivable. In the event the Company does not have any outstanding balances due from the customer, the Company would be obligated to remit up to the first $1.1 million collected on the notes receivable directly to the customer.

The notes receivable are recorded at estimated fair value. The significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are the discount rate and percentage of default. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. Adjustments to the fair value of the notes receivable are included in other (expense) income on the Company’s condensed consolidated statements of operations.

11

In order to estimate the fair value, the Company reviews the financial position and estimated cash flows of the debtor of the notes receivable. During the year ended December 31, 2019, the Company adjusted the carrying value of the notes receivable to $0 based on management’s review of the debtor’s financial statements and changes in the underlying trend of historical and projected cash flows available to service the notes. The related $1.1 million contingent liability was also adjusted during the year ended December 31, 2019, based on the Company’s expectation that cash flow from the notes receivable will not be available. As of March 31, 2020, management estimated the fair value of the notes receivable to be $0.

The Company’s short-term and long-term debt is recorded at historical cost. As of March 31, 2020, the Company’s long-term debt, including current maturities, had a carrying value of $3.8 million. Based on discounted cash flows using current quoted interest rates (Level 2 of the fair value hierarchy), the estimated fair value at March 31, 2020 was $3.5 million.

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses and short-term debt, reported in the condensed consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. Note 6 includes fair value information related to our equity and cost method investments. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which include non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). The Company did not have any significant non-recurring measurements of non-financial assets or liabilities during the three months ended March 31, 2020 or 2019.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, “Intangibles- Goodwill and Other- Internal Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This ASU requires customers in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal use software guidance in ASC 350-40 to determine which implementation costs to capitalize or expense. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU improves the effectiveness of fair value measurement disclosures by eliminating, adding and modifying certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company believes the adoption of this ASU will not significantly impact its results of operations and financial position.

12

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. The effective date of the standard will be for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in the standard are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815.” This ASU clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives. The effective date of the standard will be for annual periods beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on its condensed consolidated financial statements and related disclosures.

In April 2020, the FASB issued a question-and-answer document to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the effects of the COVID-19 pandemic. The guidance will allow concessions related to the timing of payments, where the total consideration has not changed, to not be accounted for as lease modifications. Instead, any such concessions can be accounted for as if no change was made to the contract or as variable lease payments. The Company is currently assessing the impact of the question-and-answer document on its condensed consolidated financial statements, and will adopt the guidance in the second quarter of 2020, to the extent applicable.

3. Revenue

The Company accounts for revenue using the following steps:

● 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.

The Company combines contracts with the same customer into a single contract for accounting purposes when the contracts are entered into at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends on the other contract, or the services are considered a single performance obligation. If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements by determining the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is subsequently resolved. The Company considers the sensitivity of the estimate, its relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

As discussed in more detail below, revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company does not have any material extended payment terms, as payment is due at or shortly after the time of the sale. Observable prices are used to determine the standalone selling price of separate performance obligations, or a cost plus margin approach is used when observable prices are not available. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.

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The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients. Unbilled receivables are recorded as accounts receivable when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation.

The Company defers costs to acquire contracts, including commissions, incentives and payroll taxes, if they are incremental and recoverable costs of obtaining a customer contract with a term exceeding one year. Deferred contract costs are reported within other assets and amortized to selling expense over the contract term, which generally ranges from one to five years. The Company has elected to recognize the incremental costs of obtaining a contract with a term of less than one year as a selling expense when incurred. The Company did not have any deferred contract costs as of March 31, 2020 or December 31, 2019.

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three months ended March 31, 2020 and March 31, 2019 (in thousands):

	Three Months Ended March 31, 2020
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Screen system sales	$	2,956	$	-	$	-	$	-	$	2,956
Digital equipment sales		1,649		1,172		-		-		2,821
Extended warranty sales		159		-		-		-		159
Other product sales		468		-		-		-		468
Total product sales		5,232		1,172		-		-		6,404
Field maintenance and monitoring services		1,804		3,414		28		-		5,246
Installation services		257		357		-		-		614
Advertising		-		-		1,169		-		1,169
Other service revenues		22		19		-		101		142
Total service revenues		2,083		3,790		1,197		101		7,171
Total	$	7,315	$	4,962	$	1,197	$	101	$	13,575

	Three Months Ended March 31, 2019
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Screen system sales	$	2,819	$	-	$	-	$	-	$	2,819
Digital equipment sales		1,484		625		-		-		2,109
Extended warranty sales		234		-		-		-		234
Other product sales		398		-		-		-		398
Total product sales		4,935		625		-		-		5,560
Field maintenance and monitoring services		1,967		2,773		53		-		4,793
Installation services		670		2,118		-		-		2,788
Advertising		-		-		1,040		-		1,040
Other service revenues		29		19		-		77		125
Total service revenues		2,666		4,910		1,093		77		8,746
Total	$	7,601	$	5,535	$	1,093	$	77	$	14,306

Screen system sales

The Company recognizes revenue on the sale of its screen systems when control of the screen is transferred to the customer, usually at time of shipment. However, revenue is recognized upon delivery for certain international shipments with longer shipping transit time because control does not transfer to the customer until delivery. The cost of freight and shipping to the customer is recognized in cost of sales at the time of transfer of control to the customer.

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Digital equipment sales

The Company recognizes revenue on sales of digital equipment when the control of the equipment is transferred, which occurs at the time of shipment from the Company’s warehouse or drop-shipment from a third party. The cost of freight and shipping to the customer is recognized in cost of sales at the time of transfer of control to the customer.

Field maintenance and monitoring services

The Company sells service contracts that provide maintenance and monitoring services to Strong Entertainment and Convergent customers. In the Strong Entertainment segment, these contracts are generally 12 months in length, while the term for service contracts in the Convergent segment can be for multiple years. Revenue related to service contracts is recognized ratably over the term of the agreement.

The Company also performs discrete time and materials-based maintenance and repair work for customers in the Strong Entertainment and Convergent segments. Revenue related to time and materials-based maintenance and repair work is recognized at the point in time when the performance obligation has been fully satisfied.

Installation services

The Company performs installation services for both its Strong Entertainment and Convergent customers and recognizes revenue upon completion of the installations.

Extended warranty sales

The Company sells extended warranties to its Strong Entertainment customers. When the Company is the primary obligor, revenue is recognized on a gross basis ratably over the term of the extended warranty. In third party extended warranty sales, the Company is not the primary obligor, and revenue is recognized on a net basis at the time of the sale.

Advertising

Strong Outdoor sells advertising space on top of taxicabs. Advertising revenue is recognized ratably over the contracted advertising periods.

Timing of Revenue Recognition

The following tables disaggregate the Company’s revenue by the timing of transfer of goods or services to the customer for the three months ended March 31, 2020 and March 31, 2019 (in thousands):

	Three Months Ended March 31, 2020
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Point in time	$	5,717	$	1,794	$	1,197	$	4	$	8,712
Over time		1,598		3,168		-		97		4,863
Total	$	7,315	$	4,962	$	1,197	$	101	$	13,575

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	Three Months Ended March 31, 2019
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Point in time	$	6,044	$	2,992	$	1,093	$	-	$	10,129
Over time		1,557		2,543		-		77		4,177
Total	$	7,601	$	5,535	$	1,093	$	77	$	14,306

At March 31, 2020, the unearned revenue amount associated with maintenance and monitoring services, extended warranty sales and advertising services in which the Company is the primary obligor was $2.4 million. The Company expects to recognize $2.3 million of unearned revenue amounts throughout the rest of 2020, $0.1 million during 2021 and immaterial amounts during 2022 and 2023.

4. Loss Per Common Share

Basic loss per share has been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted loss per share would be computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to potential common shares from dilutive stock options and certain non-vested shares of restricted stock and restricted stock units. However, because the Company reported losses in all periods presented, there were no differences between average shares used to compute basic and diluted loss per share for the three months ended March 31, 2020 and March 31, 2019. The following table summarizes the weighted average shares used to compute basic and diluted loss per share (shares in thousands):

	Three Months Ended March 31,
	2020		2019
Weighted average shares outstanding:
Basic weighted average shares outstanding		14,625		14,438
Dilutive effect of stock options and certain non-vested restricted stock awards		-		-
Diluted weighted average shares outstanding		14,625		14,438

Options to purchase 1,057,000 and 833,500 shares of common stock were outstanding as of March 31, 2020 and March 31, 2019, respectively, but were not included in the computation of diluted loss per share as the options’ exercise prices were greater than the average market price of the common shares for each period. An additional 86,725 and 20,994 common stock equivalents related to options and restricted stock awards were excluded for the three months ended March 31, 2020 and March 31, 2019, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share.

5. Inventories

Inventories consist of the following (in thousands):

	March 31, 2020		December 31, 2019
Raw materials and components	$	1,562	$	1,584
Work in process		237		211
Finished goods		995		1,084
	$	2,794	$	2,879

The inventory balances are net of reserves of approximately $0.9 million as of both March 31, 2020 and December 31, 2019.

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6. Investments

The following summarizes our investments (dollars in thousands):

	March 31, 2020					December 31, 2019
	Carrying Amount		Economic Interest			Carrying Amount		Economic Interest
Equity Method Investments
1347 Property Insurance Holdings, Inc.	$	8,239		17.1	%	$	6,897		17.2	%
Itasca Capital, Ltd.		2,515		32.3	%		2,800		32.3	%
Total Equity Method Investments		10,754					9,697
Cost Method Investment
Firefly Systems, Inc.		3,614					3,614
Total Investments	$	14,368				$	13,311

Equity Method Investments

The following summarizes the income (loss) of equity method investees reflected in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2020			2019
Entity
1347 Property Insurance Holdings, Inc.	$	1,417		$	144
Itasca Capital, Ltd.		(48	)		(841	)
Total	$	1,369		$	(697	)

1347 Property Insurance Holdings, Inc. (“PIH”) is a publicly traded company that is implementing business plans to operate as a diversified holding company of insurance, reinsurance and investment management businesses. The Company’s Chairman and former Chief Executive Officer is the principal executive officer and chairman of the board of directors of PIH, and the Company’s Co-Chairman is co-chairman of the board of directors of PIH. As of March 31, 2020, they controlled entities that, when combined with the Company’s ownership in PIH, own greater than 20% of PIH, providing the Company with significant influence over PIH, but not controlling interest. The equity method income from PIH was primarily the result of PIH’s non-cash gains associated with the change in fair value of its investment in the common stock of FedNat Holding Company (Nasdaq: FNHC) and PIH’s gain on the sale of its homeowners insurance operations. As a result of the recent significant decline in global equity values, the Company expects to record a loss from its investment in PIH during the second quarter of 2020 of approximately $1.4 million. Effective April 21, 2020, the ownership of such entities, when combined with the Company’s ownership in PIH, exceeded 50% of PIH. The Company did not receive dividends from PIH during the three months ended March 31, 2020 or 2019. Based on quoted market prices, the market value of the Company’s ownership in PIH was $5.1 million at March 31, 2020.

Itasca Capital, Ltd. (“Itasca”) is a publicly traded Canadian company that is an investment vehicle seeking transformative strategic investments. The Company’s Chairman and former Chief Executive Officer is chairman of the board of directors of Itasca, and the Company’s Co-Chairman is also a member of the board of directors of Itasca. These board seats, combined with the Company’s 32.3% ownership of Itasca, provide the Company with significant influence over Itasca, but not controlling interest. The Company did not receive dividends from Itasca during the three months ended March 31, 2020 or 2019. Based on quoted market prices, the market value of the Company’s ownership in Itasca was $2.5 million at March 31, 2020.

As of March 31, 2020, the Company’s retained earnings included undistributed earnings from its equity method investees of approximately $13 thousand.

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The summarized financial information presented below reflects the financial information of the Company’s equity method investees for the three months ended December 31, 2019 and 2018, consistent with the Company’s recognition of the results of its equity method investments on a one-quarter lag (in thousands):

For the three months ended December 31,	2019		2018
Revenue	$	4,340	$	352
Operating income	$	3,977	$	240
Net income (loss)	$	8,121	$	(1,791	)

Cost Method Investment

On May 21, 2019, SDM entered into a Taxicab Advertising Collaboration Agreement (the “Commercial Agreement”) and a Unit Purchase Agreement (the “Unit Purchase Agreement”) with Firefly Systems, Inc. (“Firefly”), pursuant to which SDM has agreed to make available to Firefly 300 digital taxi tops and the parties have agreed to coordinate the fulfilling of SDM’s agreements with the Metropolitan Taxicab Board of Trade, Inc. (“MTBOT”) and Creative Mobile Media, LLC (“CMM”), each dated February 8, 2018. Firefly has agreed to fulfill the digital taxi top advertising obligations under the MTBOT agreement and CMM agreement, and SDM has agreed to fulfill the non-digital taxi top advertising obligations under the MTBOT agreement and CMM agreement. The Company is a party to the Unit Purchase Agreement and has agreed to guarantee the payment obligations of SDM under the Commercial Agreement. As consideration for entering into these agreements, the Company received $4.8 million of Firefly’s Series A-2 preferred shares (“Firefly Shares”). The Firefly Shares, including those subsequently issued pursuant to an earn-out provision (if any), will be subject to a repurchase option for a period of three years to cover SDM’s indemnity obligations and other post-closing covenants under the Commercial Agreement and the Unit Purchase Agreement. As a condition of the transaction, SDM has agreed to hold the Firefly Shares in an investment fund managed by Fundamental Global Investors, LLC, the controlling stockholder of the Company, that is wholly owned by SDM.

The 300 digital tops the Company has made available to Firefly are subject to a master equipment lease agreement the Company entered into during 2017. Pursuant to the master lease agreement and the Unit Purchase Agreement, the Company will remain the primary obligor until such time as the lease expires. In addition, of the $4.8 million of Firefly Shares received, $1.2 million are eligible for repurchase by Firefly if the Company does not exercise the purchase option contained within the master lease agreement. Accordingly, the Company has deferred recognizing an investment related to these Firefly Shares eligible for repurchase until such time it is reasonably certain the Company will exercise the purchase option. The transaction, in effect, transferred control of the underlying asset to Firefly. As additional consideration for the right to use the digital taxi tops, Firefly has agreed to pay for certain of Company’s operating expenses associated with the non-digital taxi tops. The Company concluded the payments that Firefly will make on its behalf are considered variable payments and were not included in the calculation of the selling profit. Therefore, the Company will record the benefit and the related operating expenses in the period when the changes in facts and circumstances on which the variable lease payments are based occur.

The Unit Purchase Agreement contains an earnout provision pursuant to which SDM can obtain additional Firefly Shares. The earnout period runs from May 22, 2019 through June 30, 2020. SDM will earn additional Firefly Shares equivalent to the cash collections under certain digital top contracts that were in place at the closing of the transaction. In connection with the additional Firefly Shares expected to be received, the Company recorded an additional $0.3 million gain on the Firefly transaction during the three months ended March 31, 2020. The Firefly Shares will be delivered to SDM shortly after the conclusion of the earnout period.

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7. Intangible Assets

Intangible assets consisted of the following at March 31, 2020 (dollars in thousands):

	Useful life		Gross		Accumulated Amortization			Net
	(Years)
Intangible assets not yet subject to amortization:
Software in development			$	223	$	-		$	223
Intangible assets subject to amortization:
Software in service		5		2,403		(1,219	)		1,184
Product formulation		10		431		(385	)	$	46
Total			$	3,057	$	(1,604	)	$	1,453

Intangible assets consisted of the following at December 31, 2019 (dollars in thousands):

	Useful life		Gross		Accumulated Amortization			Net
	(Years)
Intangible assets not yet subject to amortization:
Software in development			$	203	$	-		$	203
Intangible assets subject to amortization:
Software in service		5		2,362		(1,087	)		1,275
Product formulation		10		471		(415	)		56
Total			$	3,036	$	(1,502	)	$	1,534

Amortization expense relating to intangible assets was $0.2 million during each of the three months ended March 31, 2020 and 2019.

The following table shows the Company’s estimated future amortization expense related to intangible assets currently subject to amortization for the next five years (in thousands):

Remainder of 2020	$	415
2021		516
2022		242
2023		57
2024		-
Thereafter		-
Total	$	1,230

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8. Goodwill

The following represents a summary of changes in the Company’s carrying amount of goodwill for the three months ended March 31, 2020 (in thousands):

Balance as of December 31, 2019	$	919
Foreign currency translation adjustment		(77	)
Balance as of March 31, 2020	$	842

9. Debt

The Company’s debt consists of the following (in thousands):

	March 31, 2020			December 31, 2019
Short-term debt:
Strong/MDI installment loan	$	2,767		$	3,080
Insurance note payable		421			-
Current portion of long-term debt		1,016			998
Total short-term debt		4,204			4,078
Long-term debt:
Equipment term loans		3,788			4,031
Total principal balance of long-term debt		3,788			4,031
Less: current portion		(1,016	)		(998	)
Less: unamortized debt issuance costs		(15	)		(14	)
Total long-term debt		2,757			3,019
Total short-term and long-term debt	$	6,961		$	7,097

Equipment Term Loans

On May 22, 2018, Convergent entered into an installment payment agreement with an equipment financing company in order to purchase media players and related equipment in an aggregate amount of up to approximately $4.4 million. In each of December 2018 and June 2019, Convergent entered into additional installment payment agreements with other financing companies in order to purchase additional media players and related equipment, with each round of financing totaling approximately $0.6 million and $0.2 million, respectively. Installment payments under each contract are due monthly for a period of 60 months. The financing under each of the agreements is secured by the respective equipment. The borrowings under the agreements are recorded as long-term debt on the Company’s consolidated balance sheet. Collectively, the Company had $3.8 million of outstanding borrowings under equipment term loan agreements at March 31, 2020, which bear interest at a weighted-average fixed rate of 7.7%.

Strong/MDI Installment Loan

On September 5, 2017, the Company’s Canadian subsidiary, Strong/MDI, entered into a demand credit agreement, as amended and restated May 15, 2018, with a bank consisting of a revolving line of credit for up to CDN$3.5 million subject to a borrowing base requirement, a 20-year installment loan for up to CDN$6.0 million and a 5-year installment loan for up to CDN$500,000. Amounts outstanding under the line of credit are payable on demand and bear interest at the prime rate established by the lender. Amounts outstanding under the installment loans bear interest at the lender’s prime rate plus 0.5% and are payable in monthly installments, including interest, over their respective borrowing periods. The lender may also demand repayment of the installment loans at any time. The Strong/MDI credit facilities are secured by a lien on Strong/MDI’s Quebec, Canada facility and substantially all of Strong/MDI’s assets. The credit agreement requires Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity method investments) not exceeding 2 to 1, a current ratio (excluding amounts due from related parties) of at least 1.5 to 1 and minimum “effective equity” of CDN$8.0 million. On April 24, 2018, the Company borrowed CDN$3.5 million on the 20-year installment loan. There was CDN$3.9 million, or approximately $2.8 million, of principal outstanding on the 20-year installment loan as of March 31, 2020, which bears variable interest at 2.95%. Strong/MDI was in compliance with its debt covenants as of March 31, 2020. Subsequent to March 31, 2020, Strong/MDI drew down approximately CDN$2.9 million, or approximately $2.1 million, on its revolving line of credit. Amounts outstanding under Strong/MDI’s line of credit are payable upon demand and bear interest at a 2.45% variable rate.

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Scheduled repayments are as follows for the Company’s long-term debt outstanding as of March 31, 2020 (in thousands):

Remainder of 2020	$	758
2021		1,079
2022		1,146
2023		786
2024		19
Thereafter		-
Total	$	3,788

Paycheck Protection Program

On April 14, 2020, the Company entered into a promissory note evidencing a loan of $3.2 million (the “Loan”) under the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) of the CARES Act. The Company intended to use the Loan for qualifying payroll, rent and utility expenses in accordance with the terms of the CARES Act. At the time the Company applied for the Loan, the Company believed it qualified to receive the funds pursuant to the PPP.

On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that creates additional uncertainty regarding the qualification requirements for a PPP loan for public companies. The Company has less than 300 employees and continues to be severely impacted by the disruption to the cinema, theme park and advertising industries as a result of COVID-19. However, out of an abundance of caution and in light of the new guidance, the Company repaid the full amount of the Loan plus accrued interest to the lender on May 5, 2020.

10. Leases

The Company and its subsidiaries lease plant and office facilities and equipment under operating and finance leases expiring through 2028. The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.

Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain of the leases contain extension options; however, the Company has not included such options as part of its right-of-use assets and lease liabilities because it does not expect to extend the leases. The Company measures and records a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, the Company measures the right-of-use assets and lease liabilities using a discount rate equal to the Company’s estimated incremental borrowing rate for loans with similar collateral and duration.

The Company elected to not apply the recognition requirements of Topic 842 to leases of all classes of underlying assets that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Instead, lease payments for such short-term leases are recognized in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

The Company elected, as a lessee, for all classes of underlying assets, to not separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

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The following tables present the Company’s lease costs and other lease information (dollars in thousands):

Lease cost
	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Finance lease cost:
Amortization of right-of-use assets	$	380		$	49
Interest on lease liabilities		164			19
Operating lease cost		401			687
Short-term lease cost		15			6
Sublease income		(116	)		(86	)
Net lease cost	$	844		$	675

Other information
	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	164	$	19
Operating cash flows from operating leases	$	341	$	590
Financing cash flows from finance leases	$	380	$	49
Right-of-use assets obtained in exchange for new finance lease liabilities	$	-	$	232
Right-of-use assets obtained in exchange for new operating lease liabilities	$	109	$	644

	As of March 31, 2020
Weighted-average remaining lease term - finance leases (years)		2.9
Weighted-average remaining lease term - operating leases (years)		7.0
Weighted-average discount rate - finance leases		12.1	%
Weighted-average discount rate - operating leases		4.2	%

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The following table presents a maturity analysis of the Company’s finance and operating lease liabilities as of March 31, 2020 (in thousands):

	Operating Leases			Finance Leases
Remainder of 2020	$	920		$	1,630
2021		1,169			2,173
2022		820			1,967
2023		660			353
2024		669			88
Thereafter		2,447			-
Total lease payments		6,685			6,211
Less: Amount representing interest		(1,079	)		(1,017	)
Present value of lease payments		5,606			5,194
Less: Current maturities		(974	)		(1,633	)
Lease obligations, net of current portion	$	4,632		$	3,561

The Company subleases certain office and warehouse space and equipment to third parties. Sublease income is included in net service revenues in the condensed consolidated statements of operations. The following table presents a maturity analysis of the Company’s long-term subleases (in thousands):

Remainder of 2020	$	109
2021		137
2022		23
2023		-
2024		-
Thereafter		-
Total sublease payments	$	269

The Company leases certain equipment to customers as a component of its Digital Signage as a Service (“DSaaS”) offering. Under DSaaS, the Company provides support, maintenance and content management services in addition to the use of a media player to the customer. The Company elected, as a lessor, for all classes of underlying assets, to not separate nonlease components from lease components and, instead, to account for each separate lease component and the nonlease components associated with that lease component as a single component if the nonlease components otherwise would be accounted for under Accounting Standards Codification Topic 606 on revenue from contracts with customers, and both of the following conditions are met: 1) the timing and pattern of transfer for the lease component and nonlease components associated with that lease component are the same and 2) the lease component, if accounted for separately, would be classified as an operating lease in accordance with Topic 842. The combined component is accounted for as a single performance obligation under Topic 606 if the nonlease component or components are the predominant component(s) of the combined component. Otherwise, if the lease component is the predominant component, the combined component is accounted for as an operating lease under ASC 842. In the case of the Company’s DSaaS contracts, the nonlease components are predominant; therefore, revenue from DSaaS contracts is accounted for under Topic 606 and is included in net service revenues in the condensed consolidated statements of operations.

11. Income Taxes

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the available objective evidence, including recent updates to the taxing jurisdictions generating income, the Company concluded that a valuation allowance should be recorded against all of the Company’s U.S. tax jurisdiction deferred tax assets as of March 31, 2020 and December 31, 2019.

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The Tax Cuts and Jobs Act of 2017 provides for a territorial tax system, which began in 2018. It includes the global intangible low-taxed income (“GILTI”) provision. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. As a result of the GILTI provisions, the Company’s inclusion of taxable income was incorporated into the overall net operating loss and valuation allowance for the three months ended March 31, 2020 and March 31, 2019.

Changes in tax laws may affect recorded deferred tax assets and liabilities and the Company’s effective tax rate in the future. On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES Act made significant changes to Federal tax laws, including certain changes that are retroactive to the prior year. The effects of these changes relate to deferred tax assets and net operating losses; all of which are offset by valuation allowance.

The Company is subject to possible examinations not yet initiated for Federal purposes for fiscal years 2016 through 2019. In most cases, the Company is subject to possible examinations by state or local jurisdictions based on the particular jurisdiction’s statute of limitations.

12. Stock Compensation

The Company recognizes compensation expense for all stock-based payment awards made to employees and directors based on estimated grant date fair values. Stock-based compensation expense included in selling and administrative expenses was $0.3 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively.

The Company’s 2017 Omnibus Equity Compensation Plan (“2017 Plan”) was approved by the Company’s stockholders and provides the Compensation Committee of the Board of Directors with the discretion to grant stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units and other stock-based awards and cash-based awards. Vesting terms vary with each grant and may be subject to vesting upon a “change in control” of the Company. On December 17, 2019, the Company’s stockholders approved the amendment and restatement of the 2017 Plan to (i) increase the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by 1,975,000 shares and (ii) extend the expiration date of the 2017 Plan by approximately two years, until October 27, 2029. As of March 31, 2020, 2,366,778 shares were available for issuance under the amended and restated 2017 Plan.

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2020:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2019		1,107,000	$	4.47		7.9	$	148
Granted		-
Exercised		-
Forfeited		-
Expired		-
Outstanding at March 31, 2020		1,107,000	$	4.47		7.6	$	-
Exercisable at March 31, 2020		441,000	$	5.09		6.7	$	-

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The aggregate intrinsic value in the table above represents the total that would have been received by the option holders if all in-the-money options had been exercised and sold on the date indicated.

As of March 31, 2020, 666,000 stock option awards were non-vested. Unrecognized compensation cost related to non-vested stock options was approximately $1.0 million, which is expected to be recognized over a weighted average period of 3.0 years.

Restricted Stock Shares and Restricted Stock Units

The following table summarizes restricted stock share activity for the three months ended March 31, 2020:

	Number of Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		23,334		$	6.50
Granted		-
Shares vested		(23,334	)		6.50
Shares forfeited		-
Non-vested at March 31, 2020		-

The following table summarizes restricted stock unit activity for the three months ended March 31, 2020:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		522,379		$	3.14
Granted		-
Shares vested		(35,833	)		4.70
Shares forfeited		-
Non-vested at March 31, 2020		486,546		$	3.03

As of March 31, 2020, the total unrecognized compensation cost related to non-vested restricted stock unit awards was approximately $1.1 million, which is expected to be recognized over a weighted average period of 2.0 years.

13. Commitments, Contingencies and Concentrations

Litigation

The Company is involved, from time to time, in certain legal disputes in the ordinary course of business operations. No such disputes, individually or in the aggregate, are expected to have a material effect on the Company’s business or financial condition.

Concentrations

The Company’s top ten customers accounted for approximately 52% of consolidated net revenues during the three months ended March 31, 2020. Trade accounts receivable from these customers represented approximately 40% of net consolidated receivables at March 31, 2020. In addition, the Company had one customer account for more than 10% of both its consolidated net revenues during the three months ended March 31, 2020 and its net consolidated receivables as of March 31, 2020. While the Company believes its relationships with such customers are stable, most arrangements are made by purchase order and are terminable at will by either party. A significant decrease or interruption in business from the Company’s significant customers could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company could also be adversely affected by such factors as changes in foreign currency rates and weak economic and political conditions in each of the countries in which the Company sells its products.

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Financial instruments that potentially expose the Company to a concentration of credit risk principally consist of accounts receivable. The Company sells product to a large number of customers in many different geographic regions. To minimize credit risk, the Company performs ongoing credit evaluations of its customers’ financial condition.

Insurance Recoveries

During February 2019, one portion of Strong/MDI’s Quebec, Canada facility sustained damage as a result of inclement weather. The Company has property and casualty and business interruption insurance and has been working with its insurance carrier with regard to the insurance claims for reimbursement of incurred costs of the affected portion of the facility and compensation for the Company’s business interruption losses.

Through March 31, 2020, the insurance carrier has advanced $3.0 million of insurance proceeds to the Company, which included $1.9 million related to the property and casualty claim and the remaining $1.1 million related to our business interruption claim. Any additional future claims payments are at the discretion of the insurance carrier based on its continuing claims analysis.

For the three months ended March 31, 2020 and March 31, 2019, the Company recorded total insurance recoveries of its incurred costs totaling $0.1 million and $0.4 million, respectively. The Company has also deferred $0.8 million of proceeds received in connection with the business interruption claim within accrued expenses on the condensed consolidated balance sheet as of March 31, 2020. Recovery of lost profit under the business interruption coverage will be reflected in future periods as contingencies are resolved and the amounts are confirmed with the insurer.

14. Business Segment Information

The Company conducts its operations through three primary business segments: Strong Entertainment (formerly known as Strong Cinema), Convergent and Strong Outdoor. The Strong Entertainment segment name change is to the name only and had no impact on the Company’s historical financial position, results of operations, cash flow or segment level results previously reported. Strong Entertainment is one of the largest manufacturers of premium projection screens and also manufactures customized screen support systems, distributes other products and provides technical support services to the cinema, amusement park and other markets. Convergent delivers digital signage solutions and related services to large multi-location organizations in the United States and Canada. Strong Outdoor provides outdoor advertising and experiential marketing to advertising agencies and corporate accounts, primarily in New York City. The Company’s operating segments were determined based on the manner in which management organizes segments for making operating decisions and assessing performance.

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Summary by Business Segments

	Three Months Ended March 31,
	2020			2019
	(in thousands)
Net revenues
Strong Entertainment	$	7,315		$	7,601
Convergent		4,962			5,535
Strong Outdoor		1,197			1,093
Other		101			77
Total net revenues		13,575			14,306
Gross profit (loss)
Strong Entertainment		1,834			2,415
Convergent		1,985			1,569
Strong Outdoor		333			(1,416	)
Other		101			77
Total gross profit		4,253			2,645
Operating (loss) income
Strong Entertainment		(337	)		1,159
Convergent		857			752
Strong Outdoor		(376	)		(2,012	)
Other		(114	)		(237	)
Total segment operating income (loss)		30			(338	)
Unallocated administrative expenses		(1,951	)		(2,238	)
Loss from operations		(1,921	)		(2,576	)
Other income (expense), net		505			(736	)
Loss before income taxes and equity method investment loss	$	(1,416	)	$	(3,312	)

(In thousands)	March 31, 2020		December 31, 2019
Identifiable assets
Strong Entertainment	$	18,730	$	18,135
Convergent		13,736		15,797
Strong Outdoor		3,491		3,737
Corporate assets		21,258		19,964
Total	$	57,215	$	57,633

Summary by Geographical Area

	Three Months Ended March 31,
(In thousands)	2020		2019
Net revenue
United States	$	11,680	$	12,864
Canada		740		798
China		201		212
Mexico		78		3
Latin America		276		29
Europe		194		280
Asia (excluding China)		258		58
Other		148		62
Total	$	13,575	$	14,306

(In thousands)	March 31, 2020		December 31, 2019
Identifiable assets
United States	$	39,430	$	37,508
Canada		17,785		20,125
Total	$	57,215	$	57,633

Net revenues by business segment are to unaffiliated customers. Net revenues by geographical area are based on destination of sales. Identifiable assets by geographical area are based on location of facilities.

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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 and Section 21E of the Securities Exchange Act of 1934. 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, 2019 and the following risks and uncertainties: the Company’s ability to maintain and expand its revenue streams, 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 access to capital, the Company’s ability to successfully execute its capital allocation strategy, the Company’s ability to maintain its brand and reputation and retain or replace its significant customers, 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), 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 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), the adequacy of insurance and the impact of having a controlling stockholder. 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 be further be, exacerbated by the COVID-19 pandemic, its impact on the cinema and entertainment industry, 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.

Overview

Ballantyne Strong, Inc. (“BTN”, “Ballantyne”, “the Company”, “we”, “our” and “us”) is a holding company with diverse business activities focused on serving the entertainment, retail and advertising markets. The Company and its subsidiaries design, integrate and install technology solutions for a broad range of applications; develop and deliver out-of-home messaging, advertising and communications; manufacture projection screens; and provide managed services including monitoring of networked equipment to our customers. We add value through our design, engineering, manufacturing excellence and customer service.

We conduct our operations through three operating segments: Strong Entertainment (formerly known as Strong Cinema), Convergent and Strong Outdoor. The Strong Entertainment segment name change is to the name only and had no impact on our historical financial position, results of operations, cash flow or segment level results previously reported. Our Strong Entertainment business is one of the largest manufacturers of premium projection screens. We also manufacture customized screen support systems, distribute other products and provide technical support services to the cinema, amusement park and other markets. Convergent delivers digital signage solutions and related services to large multi-location organizations in the United States and Canada. Strong Outdoor provides outdoor advertising and experiential marketing to advertising agencies and corporate accounts, primarily in New York City.

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Our segments were determined based on the manner in which management organizes segments for making operating decisions and assessing performance. Approximately 54% of our revenues for the three months ended March 31, 2020 were from Strong Entertainment, approximately 37% were from Convergent and approximately 9% were from Strong Outdoor. Additional information related to our reporting segments can be found in Note 14 in the notes to the condensed consolidated financial statements.

Impact of COVID-19 Pandemic

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 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 ultimate impact of the COVID-19 pandemic on our business and results of operations 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. 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. While business and revenue for the first two months of 2020 started off strong, continuing the favorable trends from the last half of 2019, our customers, particularly those in the entertainment and advertising industries, have been significantly impacted by COVID-19.

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 is negatively impacting us. A significant number of our customers have temporarily ceased operations during the pandemic; 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. For instance, during this time, many movie theaters and other entertainment centers have been forced to close or curtail their hours; many advertisers began to reduce, postpone, or cancel their advertising campaigns as social distancing measures, including closures of schools and non-essential businesses, and restrictions around the free movement of people were implemented; and a number of events during which our experiential marketing services may have been provided have been postponed or cancelled. 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 have 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 was also delayed by the COVID-19 pandemic, and we are currently unable to estimate when the facility will be completed and operational. In addition, as a result of the recent significant decline in global equity values, the Company expects to record a loss from its investment in PIH during the second quarter of 2020 of approximately $1.4 million. 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; impairment charges; extreme currency exchange-rate fluctuations; inability to recover costs from insurance carriers; and business continuity concerns for us and our third-party vendors.

In response to uncertainties associated with the COVID-19 pandemic, we have taken, and are continuing to take, significant steps to preserve cash by eliminating non-essential costs, reducing employee hours and deferring all non-essential capital expenditures to minimum levels. Among other mitigating actions, we have implemented targeted furloughs, temporarily curtailed our service and distribution activities in the United States and temporarily reduced compensation of our executive officers and certain other employees. 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. We cannot provide any assurance that these actions will help mitigate the impact of the COVID-19 pandemic on us.

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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 first quarter of 2020, management decided to draw down CDN$2.9 million, or approximately $2.1 million, under Strong/MDI’s credit facility. Furthermore, we are in the process of reviewing and applying for wage subsidies, tax credits and other financial support under the newly enacted COVID-19 relief legislation in the U.S. and Canada. However, the legislation and guidance from the authorities continues to evolve; as such the amount and timing of support, if any, that we could receive is not determinable at this time, and there can be no guarantees that we will receive financial support through these programs. 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 cannot provide any assurance that these actions, or any other mitigating actions we may take, will help mitigate the impact of the COVID-19 pandemic on us.

The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. 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.

Results of Operations

The following table sets forth our operating results for the periods indicated:

	Three Months Ended March 31,
	2020			2019			$ Change			% Change
	(dollars in thousands)
Net revenues	$	13,575		$	14,306		$	(731	)		(5.1	)%
Cost of revenues		9,322			11,661			(2,339	)		(20.1	)%
Gross profit		4,253			2,645			1,608			60.8	%
Gross profit percentage		31.3	%		18.5	%
Selling and administrative expenses		6,174			5,157			1,017			19.7	%
Loss on disposal of assets		-			(64	)		64			(100.0	)%
Loss from operations		(1,921	)		(2,576	)		655			(25.4	)%
Other income (expense)		505			(736	)		1,241			(168.6	)%
Loss before income taxes and equity method investment income (loss)		(1,416	)		(3,312	)		1,896			(57.2	)%
Income tax expense		(400	)		(141	)		(259	)		183.7	%
Equity method investment income (loss)		1,369			(697	)		2,066			(296.4	)%
Net loss	$	(447	)	$	(4,150	)	$	3,703			(89.2	)%

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Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

Revenues

Net revenues during the quarter ended March 31, 2020 decreased 5.1% to $13.6 million from $14.3 million during the quarter ended March 31, 2019.

	Three Months Ended March 31,
	2020		2019		$ Change			% Change
	(dollars in thousands)
Strong Entertainment	$	7,315	$	7,601	$	(286	)		(3.8	)%
Convergent		4,962		5,535		(573	)		(10.4	)%
Strong Outdoor		1,197		1,093		104			9.5	%
Other		101		77		24			31.2	%
Total net revenues	$	13,575	$	14,306	$	(731	)		(5.1	)%

Strong Entertainment

Revenue from Strong Entertainment decreased 3.8% to $7.3 million in the first quarter of 2020 from $7.6 million in the first quarter of 2019. The decrease was primarily due to the impact of the COVID-19 pandemic, including the government mandated temporary closure of our screen manufacturing facility in Quebec and lower revenues from field service projects. Revenue during the first quarter of 2019 was negatively impacted by roof damage that caused the Company’s Quebec screen facility to temporarily halt operations for a portion of the first and second quarter of 2019.

In March 2020, the Quebec government ordered the closure of all non-essential businesses, including our Quebec facility. In April 2020, the Quebec government announced that the temporary shutdown of certain businesses, including our manufacturing facility, would end in May 2020, and we reopened our facility on May 11, 2020. In addition, while we originally expected to have our outsourced screen finishing facility in China up and running in the first quarter of 2020, the outbreak of COVID-19 in China has delayed those plans, and we are currently unable to estimate when the facility will be completed and operational. We expect that cinemas, theme parks and other entertainment venues will begin to reopen their doors to customers this summer.

Convergent

Revenue from Convergent decreased 10.4% to $5.0 million in the first quarter of 2020 from $5.5 million in the first quarter of 2019. Convergent’s service revenues increased approximately $0.6 million on growth in DSaaS customer installations, while revenue from non-recurring installation work decreased approximately $1.1 million due to a large non-recurring installation project during the first quarter of 2019. Convergent experienced moderate impact from COVID-19 in March and April 2020 and continues to support its retail customers, many of whom provide essential services and remain in operation.

Strong Outdoor

Revenue from Strong Outdoor was $1.2 million during the three months ended March 31, 2020 compared to $1.1 million during the three months ended March 31, 2019. The increase in revenue was due to higher revenue from our one-time experiential marketing campaigns and premium static taxitop advertising, partially offset by the reduction in revenue from digital taxitops as a result of the Firefly transaction. If the Firefly transaction had been effective as of January 1, 2019, and the digital taxitops transferred to Firefly as of that date, revenue during the first quarter of 2019 would have been lower by $0.6 million. Strong Outdoor’s advertising revenues have been significantly impacted by COVID-19 as its primary advertising market is New York City, which has been largely closed in April and May 2020.

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Gross Profit

Consolidated gross profit increased 60.8% to $4.3 million during the quarter ended March 31, 2020 from $2.6 million during the quarter ended March 31, 2019. As a percentage of revenue, gross profit improved to 31.3% for the quarter ended March 31, 2020 compared to 18.5% for the first quarter of 2019.

	Three Months Ended March 31,
	2020		2019			$ Change			% Change
	(dollars in thousands)
Strong Entertainment	$	1,834	$	2,415		$	(581	)		(24.1	)%
Convergent		1,985		1,569			416			26.5	%
Strong Outdoor		333		(1,416	)		1,749			(123.5	)%
Other		101		77			24			31.2	%
Total gross profit	$	4,253	$	2,645		$	1,608			60.8	%

Strong Entertainment

Gross profit in the Strong Entertainment segment was $1.8 million or 25.1% of revenues in the first quarter of 2020 compared to $2.4 million or 31.8% of revenues in the first quarter of 2019. The decrease in gross profit dollars is primarily due to the decline in screen and field service revenues related to COVID-19 and changes in product mix.

Convergent

Gross profit in the Convergent segment was $2.0 million or 40.0% of revenues in the first quarter of 2020 compared to $1.6 million or 28.3% of revenues in the first quarter of 2019. The increase in gross profit was driven primarily by the increase in higher margin DSaaS revenue.

Strong Outdoor

Gross profit in the Strong Outdoor segment was $0.3 million in the first quarter of 2020 compared negative gross profit of $1.4 million in the first quarter of 2019. Gross profit improved during the first quarter of 2020 due to increased revenue from experiential marketing campaigns and lower fixed operating costs, partially offset by reduced revenue from digital tops following the Firefly transaction. If the Firefly transaction had been effective as of January 1, 2019, Strong Outdoor’s costs of sales would have been reduced by $1.4 million during the first quarter of 2019.

Operating Income (Loss)

Consolidated operating loss was $1.9 million in the first quarter of 2020 compared to $2.6 million in the first quarter of 2019.

	Three Months Ended March 31,
	2020			2019			$ Change			% Change
	(dollars in thousands)
Strong Entertainment	$	(337	)	$	1,159		$	(1,496	)		(129.1	)%
Convergent		857			752			105			14.0	%
Strong Outdoor		(376	)		(2,012	)		1,636			(81.3	)%
Other		(114	)		(237	)		123			(51.9	)%
Total segment operating income (loss)		30			(338	)		368			(108.9	)%
Unallocated administrative expenses		(1,951	)		(2,238	)		287			(12.8	)%
Total operating loss	$	(1,921	)	$	(2,576	)	$	655			(25.4	)%

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Strong Entertainment generated an operating loss of $0.3 million in the first quarter of 2020 compared to operating income of $1.2 million in the first quarter of 2019. The decrease in operating income was primarily due to the decline in revenues as discussed above. In addition, since many of Strong Entertainment’s customers have been negatively impacted by COVID-19, we recorded $0.7 million of bad debt expense during the first quarter of 2020 as a result of the increased uncertainty related to collection of trade accounts receivable.

Convergent generated operating income of $0.9 million in the first quarter of 2020 compared to $0.8 million in the first quarter of 2019. Operating income during the first quarter of 2020 increased as a result of our investment to grow the higher margin recurring revenue business lines. The increased gross margin and higher operating income from recurring revenue was partially offset by a $0.5 million favorable bad debt recovery during the first quarter of 2019.

Strong Outdoor generated an operating loss of $0.4 million in the first quarter of 2020 compared to $2.0 million in the first quarter of 2019. The improvement in operating results was primarily due to the increased gross profit mentioned above.

Unallocated administrative expenses decreased to $2.0 million in the first quarter of 2020 compared to $2.2 million in the first quarter of 2019. The decrease was driven primarily by a reduction in costs associated with contractors and consultants and lower overall compensation expense.

Other Financial Items

Total other income of $0.5 million for the first quarter of 2020 primarily consisted of foreign currency transaction adjustments of $0.5 million and a $0.3 million gain related to the earnout provision associated with the Firefly transaction, partially offset by $0.3 million of interest expense. For the first quarter of 2019, total other loss of $0.7 million primarily consisted of a $0.5 million fair value adjustment to notes receivable, $0.1 million of foreign currency transaction adjustments and $0.1 million of interest expense. The estimated fair market value of the notes receivable is subject to upward and downward revisions each quarter as more information becomes available to estimate the ultimate cash proceeds to be received by the Company in the future.

Income tax expense was approximately $0.4 million during the first quarter of 2020 compared to $0.1 million during the first quarter of 2019. Our income tax expense consists primarily of income tax on foreign earnings.

We recorded equity method investment income of $1.4 million in the first quarter of 2020, consisting of equity method investment gains of $1.4 million from PIH and a loss of $48 thousand from Itasca. The equity method income from PIH was primarily the result of PIH’s non-cash gains associated with the change in fair value of its investment in the common stock of FedNat Holding Company (Nasdaq: FNHC) and PIH’s gain on the sale of its homeowners insurance operations. As a result of the recent significant decline in global equity values, we expect to record a loss from our investment in PIH during the second quarter of 2020 of approximately $1.4 million. The first quarter of 2019 includes equity method investment loss of $0.7 million, primarily consisting of losses from Itasca of $0.8 million, partially offset by income from PIH of $0.1 million.

As a result of the items outlined above, we generated a net loss of $0.4 million, or $0.03 per basic and diluted share in the first quarter of 2020, compared to a net loss of $4.2 million, or $0.29 per basic and diluted per share in the first quarter of 2019.

Liquidity and Capital Resources

During the past several years, we have primarily met our working capital and capital resource needs from our operating cash flows and credit facilities. Our primary cash requirements involve operating expenses, working capital fluctuations, capital expenditures, and other general corporate activities. We incurred operating losses and negative operating cash flow in our Convergent business for the first three quarters of 2018, as we executed our plans to restructure that business to reduce operating costs and invest in higher margin recurring revenue. Convergent’s financial performance has improved significantly as a result of those actions and is now generating positive operating income and cash from operations. The startup of Strong Outdoor negatively impacted our cash flow as we invested in building that business. Cash flow from Strong Entertainment and Convergent during 2019 was used to fund our corporate operating expenses and Strong Outdoor. Our capital expenditures during 2019 and the first quarter of 2020 included costs incurred in the construction of the Strong Entertainment production facility in Quebec that sustained damage as a result of inclement weather. The purchase of equipment in connection with the expansion of our Convergent business operations has recently been funded via term loan borrowings and capital leases, and we may continue to do so.

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We ended the first quarter of 2020 with total cash and cash equivalents and restricted cash of $6.9 million compared to $5.3 million at December 31, 2019. Of the $6.9 million as of March 31, 2020, $3.3 million was held by our Canadian subsidiary, Strong/MDI, and $0.4 million was restricted. Strong/MDI also makes intercompany loans to the U.S. parent company which do not trigger Canadian withholding taxes if they meet certain requirements. As of March 31, 2020, the parent company had outstanding intercompany loans from Strong/MDI of approximately $32.6 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 Canadian withholding taxes, which have been fully accrued as of March 31, 2020.

In response to the COVID-19 pandemic and related closures of cinemas, theme parks and entertainment venues, we have taken steps to conserve cash, reduce operating expenditures, delay capital expenditures, and to manage working capital. We have also implemented targeted furloughs, headcount reductions and temporary salary cuts for our executive officers and certain other employees in order to reduce expenses. Subsequent to March 31, 2020, Strong/MDI drew down approximately CDN $2.9 million, or approximately $2.1 million, on its revolving line of credit to provide additional liquidity during this period, and we have equity investments that could be monetized to generate additional cash.

We believe that our existing sources of liquidity, including cash and cash equivalents, operating cash flow, credit facilities, equity investments, receivables and other assets will be sufficient to meet our projected capital needs for the 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 and theme parks, our ability to achieve anticipated levels of revenues and cash flow from operations, 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 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 9 to the condensed consolidated financial statements for a description of our debt as of March 31, 2020.

Cash Flows from Operating Activities

Net cash provided by operating activities was $2.6 million during the three months ended March 31, 2020. Cash flows generated by Convergent and changes in working capital were partially offset by the operating loss generated by Strong Entertainment and Strong Outdoor as well as cash outflows for selling and administrative expenses. Net cash used in operating activities was $1.4 million in the first three months of 2019. The operating loss generated by Strong Outdoor and cash outflows for selling and administrative expenses were partially offset by the operating income and cash flows generated by Strong Entertainment and Convergent and improvements in working capital.

Cash Flows from Investing Activities

Net cash used in investing activities was $0.4 million during the three months ended March 31, 2020, consisting entirely of capital expenditures. Net cash used in investing activities was $0.2 million in the first three months of 2019, consisting of $0.3 million of capital expenditures, partially offset by $0.1 million of proceeds received from the disposal of assets.

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Cash Flows from Financing Activities

Net cash used in financing activities was $0.7 million during the three months ended March 31, 2020, consisting of principal payments on debt and capital lease obligations. Net cash used in financing activities was $0.1 million in the first quarter of 2019, primarily consisting of $0.3 million of principal payments on debt, partially offset by $0.2 million of proceeds from the issuance of debt.

Use of Non-GAAP Measures

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, the Company discloses 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 share-based compensation, impairment charges, equity method income (loss), fair value adjustments, severance, foreign currency transaction gains (losses), transactional 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 the Company’s operating performance. Accordingly, management believes that disclosure of these metrics offers investors, bankers and other stakeholders an additional view of the Company’s operations that, when coupled with the GAAP results, provides a more complete understanding of the Company’s financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net loss or to net cash used in 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 the Company’s 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.

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

	Three Months Ended March 31,
	2020														2019
	Strong Entertainment			Convergent		Strong Outdoor			Corporate and Other			Consolidated			Strong Entertainment			Convergent		Strong Outdoor			Corporate and Other			Consolidated
Net (loss) income	$	(156	)		616	$	(201	)		(706	)	$	(447	)	$	(348	)		579	$	(2,034	)		(2,347	)	$	(4,150	)
Interest expense, net		32			144		95			1			272			35			92		23			(31	)		119
Income tax expense		287			58		-			55			400			23			68		-			50			141
Depreciation and amortization		230			602		110			47			989			219			423		100			53			795
EBITDA		393			1,420		4			(603	)		1,214			(71	)		1,162		(1,911	)		(2,275	)		(3,095	)
Stock-based compensation expense		-			-		-			273			273			-			-		-			243			243
Fair value adjustment to notes receivable		-			-		-			-			-			510			-		-			-			510
Equity method investment loss (income)		48			-		-			(1,417	)		(1,369	)		841			-		-			(144	)		697
Loss on disposal of assets and impairment charges		-			-		-			-			-			63			1		-			-			64
Foreign currency transaction (gain) loss		(528	)		40		-			-			(488	)		128			15		-			-			143
Gain on Firefly transaction, net of transaction costs		-			-		(270	)		-			(270	)		-			-		9			-			9
Gain on property and casualty insurance recoveries		(16	)		-		-			-			(16	)		-			-		-			-			-
Adjusted EBITDA	$	(103	)	$	1,460	$	(266	)	$	(1,747	)	$	(656	)	$	1,471		$	1,178	$	(1,902	)	$	(2,176	)	$	(1,429	)

Hedging and Trading Activities

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.

Seasonality

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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for an entire fiscal year.

Recently Issued Accounting Pronouncements

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

Critical Accounting Policies and Estimates

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, 2019. We periodically re-evaluate and adjust our critical accounting policies as circumstances change. There were no significant changes in our critical accounting policies during the three months ended March 31, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable as we are a “smaller reporting company.”

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Item 4. Controls and Procedures

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 and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-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 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 SEC’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.

PART II. Other Information

Item 1. Legal Proceedings

In the ordinary course of business operations, we are involved, from time to time, in certain legal disputes. No such disputes, individually or in the aggregate, are expected to have a material effect on our business or financial condition.

Item 1A. Risk Factors

Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 includes a detailed discussion of the Company’s risk factors. There have been no material changes to the risk factors as previously disclosed, except as set forth below. However, many of the risk factors disclosed in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 have been, and we expect will continue to be further, heightened or exacerbated by the impact of the COVID-19 pandemic.

The COVID-19 pandemic and ensuing governmental responses have negatively impacted, and could further materially adversely affect, our business, financial condition, results of operations and cash flows.

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 ultimate impact of the COVID-19 pandemic on our business and results of operations 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. 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.

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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 is negatively impacting us. A significant number of our customers have temporarily ceased operations during the pandemic; 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. For instance, during this time, many movie theaters and other entertainment centers have been forced to close or curtail their hours; many advertisers began to reduce, postpone, or cancel their advertising campaigns as social distancing measures, including closures of schools and non-essential businesses, and restrictions around the free movement of people were implemented; and a number of events during which our experiential marketing services may have been provided, such as Coachella, have been postponed or cancelled. 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 have 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 was also delayed by the COVID-19 pandemic, and we are currently unable to estimate when the facility will be completed and operational. In addition, as a result of the recent significant decline in global equity values, the Company expects to record a loss from its investment in PIH during the second quarter of 2020 of approximately $1.4 million. 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; impairment charges; extreme currency exchange-rate fluctuations; inability to recover costs from insurance carriers; and business continuity concerns for us and our third-party vendors.

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. Among other mitigating actions, we have implemented targeted furloughs, temporarily curtailed our service and distribution activities in the United States and temporarily reduced compensation of our executive officers and certain other employees. 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. We cannot provide any assurance that these actions, or any other mitigating actions we may take, will help mitigate the impact of the COVID-19 pandemic on us.

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 first quarter of 2020, management decided to draw down CDN$2.9 million, or approximately $2.1 million, under Strong/MDI’s credit facility. Furthermore, we are in the process of reviewing and applying for wage subsidies, tax credits and other financial support under the newly enacted COVID-19 relief legislation in the U.S. and Canada. However, the legislation and guidance from the authorities continues to evolve; as such, the amount and timing of support, if any, that we could receive is not determinable at this time, and there can be no guarantees that we will receive financial support through these programs. 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 cannot provide any assurance that we will be able to obtain additional sources of financing or liquidity on acceptable terms, or at all.

The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. 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.

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

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. There were no repurchases during the three months ended March 31, 2020. As of March 31, 2020, there were 636,931 shares that may yet be purchased under the stock repurchase program.

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Item 6. Exhibits

		Incorporated by Reference
Exhibit Number	Document Description	Form	Exhibit	Filing Date	Filed Herewith
10.1*	Employment Agreement, dated March 20, 2019, between Ballantyne Strong, Inc. and Todd R. Major.				X
10.2*	Letter Agreement, dated as of April 29, 2020, by and between the Company and Mark D. Roberson.	8-K	10.1	April 30, 2020
10.3*	Letter Agreement, dated as of April 29, 2020, by and between the Company and Ray F. Boegner.	8-K	10.2	April 30, 2020
10.4*	Letter Agreement, dated as of April 29, 2020, by and between the Company and Todd R. Major.	8-K	10.3	April 30, 2020
31.1	Rule 13a-14(a) Certification of Chief Executive Officer.				X
31.2	Rule 13a-14(a) Certification of Chief Financial Officer.				X
32.1**	18 U.S.C. Section 1350 Certification of Chief Executive Officer.				X
32.2**	18 U.S.C. Section 1350 Certification of Chief Financial Officer.				X
101	The following materials from Ballantyne Strong, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to the Condensed Consolidated Financial Statements.				X

* Management contract or compensatory plan.

** Furnished herewith.

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SIGNATURES

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.

BALLANTYNE STRONG, INC.
By:	/s/ MARK D. ROBERSON	By:	/s/ TODD R. MAJOR
	Mark D. Roberson Chief Executive Officer (Principal Executive Officer)		Todd R. Major Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
Date:	May 12, 2020	Date:	May 12, 2020

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of March 20, 2019, by and between Ballantyne Strong, Inc. a Delaware corporation (the “Company”), and Todd Major, a South Carolina resident (the “Employee”).

The Company desires to employ Employee as its Senior Vice President of Finance, and the parties desire to enter into this Agreement with respect to such employment.

NOW, THEREFORE, in consideration of mutual promises and covenants herein contained, the parties hereto intending to become legally bound agree as follows:

1. Employment. The Company hereby agrees to employ the Employee and the Employee hereby agrees to be employed by the Company upon the terms and conditions hereinafter set forth.

2. Duties and Services.

2.1 Title and Duties. The Employee shall serve as Senior Vice President of Finance for the Company and shall perform such duties as are customary for such role in a public company registered with the SEC and listed on a national securities exchange and such other duties as may be assigned to him from time to time by the Chief Financial Officer of the Company, which services may include serving as an officer or director of a subsidiary or affiliate of the Company.

2.2 Time. The Employee shall devote his full business time and attention to the business of the Company and to the promotion of the Company’s best interest, subject to vacations, holidays and normal illnesses pursuant to the Company’s policies in place from time to time. The Employee shall at all times comply with Company policies in place from time to time, including but not limited to the Company’s Code of Ethics.

2.3 Travel. The Employee shall undertake such travel as may be necessary and desirable to promote the business and affairs of the Company, consistent with the Employee’s position and duties with the Company.

3. Term of Employment. The Employee’s employment will be “at-will,” meaning that either the Employee or the Company may terminate the Employee’s employment at any time and for any reason, with or without cause. In the event of a change of control that results in the Employee losing Employment with the Company, or if for any reason the Senior Vice President of Finance position is eliminated at the Company without the Employee being offered a mutually-agreed comparable opportunity at an affiliate Company, Employee will be entitled to severance equal to one year of the Employee’s base salary.

4. Compensation.

4.1 Base Salary. For all of the services to be rendered by the Employee under this Agreement, the Company shall pay the Employee a base salary equal to $200,000 (the “Base Salary”). The compensation paid hereunder to the Employee shall be paid in accordance with the normal payroll practices of the Company and shall be subject to the customary withholding taxes and other employment taxes as required with respect to compensation paid by a corporation to an employee. The Base Salary will be subject to annual review and adjustment based upon the Employee’s performance.

4.2 Additional Compensation. In addition to the Base Salary set forth in subparagraph 4.1 above, the Company shall pay the Employee additional compensation as set forth below.

4.2.1 Equity Grant Signing Bonus. The Company, within sixty (60) days after the date of this Agreement and subject to approval by the Compensation Committee, shall grant to the Employee restricted stock units equal to $75,000 of common stock of the Company pursuant to the Company’s 2017 Omnibus Equity Compensation Plan as determined based on the trading price of the company’s Common Stock on date of grant, vesting over a period of three years from the date of grant.

4.2.2 Cash Signing Bonus. The Company will pay the Employee a cash signing bonus in the aggregate amount of $30,000, payable in two equal installments of $15,000 payable as of 30 and 60 days, respectively, after the date of this Agreement. The Cash Signing Bonus is subject to forfeiture if the Employee resigns from the Company or is terminated for Cause, as defined in Section 4.4, below. Such bonus shall be payable in accordance with the Company’s normal payroll practices.

4.2.3 Annual Bonus. Commencing with respect to the Company’s 2019 fiscal year, the Employee will be eligible to receive a bonus in an amount targeted at 25% of base salary, payable in a combination of cash and equity in the Company, as determined by the Chief Financial Officer and Compensation Committee of the Ballantyne Board of Directors. The bonus will be subject to the achievement of performance metrics and other criteria as determined by the Chief Financial Officer and Compensation Committee of the Ballantyne Board of Directors. Any equity grants will vest over a period of three to five years from the date of grant as determined by the Compensation Committee. Any equity award shall be evidenced by and subject to the terms and conditions of an Award Agreement entered into between the Company and the Employee.

5. Vacation. The Employee shall be entitled to vacation of up to four (4) weeks per calendar year, pursuant to the applicable Company policy. All vacations shall be in addition to recognized national holidays. During all vacations, the Employee’s compensation and other benefits as stated herein shall continue to be paid in full. Such vacations shall be taken only at times convenient for the Company, as approved by the Chief Financial Officer.

6. Company Benefit Programs. In addition to the compensation and to the rights provided for elsewhere in this Agreement, the Employee shall be entitled to participate in each plan of the Company now or hereafter adopted and in effect from time to time for the benefit of Employee employees of the Company, to the extent permitted by such plans and by applicable law. Nothing in this Agreement shall limit the Company’s right to amend, modify and/or terminate any benefit plan, policies or programs at any time for any reason.

Company:   DKC
	2 of 6
Employee:   TM

7. Restrictive Covenants and Need for Protection. Employee acknowledges that, because of his senior Employee position with the Company, he has or will develop knowledge of the affairs of the Company and its subsidiaries and their relationships with dealers, distributors and customers such that he could do serious damage to the financial welfare of the Company and/or its subsidiaries should he compete or assist others in competing with the business of the Company and/or its subsidiaries. Consequently, and in consideration of his employment with the Company, and for the benefits he is to receive under this Agreement, and for other good and valuable consideration, the receipt of which he hereby acknowledges, the Employee agrees as follows:

7.1 Confidential Information.

7.1.1 Non-disclosure. Except as the Company may permit or direct in writing, during the term of this Agreement and thereafter, the Employee agrees that he will not disclose to any person or entity any confidential or proprietary information, knowledge or data of the Company or any of its subsidiaries which he may have obtained while in the employ of the Company, relating to any customers, customer lists, methods, distribution, sales, prices, profits, costs, contracts, inventories, suppliers, dealers, distributors, business prospects, business methods, manufacturing ideas, formulas, plans or techniques, research, trade secrets, or know-how of the Company or any of its subsidiaries. Nothing contained in this Agreement shall limit the Employee’s ability to respond to a lawful subpoena; to make a report to or cooperate with any government agency, including without limitation the ability to participate in an investigation, provide information, and recover any remuneration awarded for doing so; and to comply with any other legal obligations.

7.1.2 Return of Records. All records, documents, software, computer disks and any other form of information relating to the business of the Company or any of its subsidiaries, which are or were prepared or created by the Employee, or which may or did come into his possession during the term of his employment with the Company, including any and all copies thereof, shall immediately be returned to or, as the case may be, shall remain in the possession of the Company, as of the termination of the Employee’s employment with the Company.

7.2 Covenant Not to Compete. During the Employee’s employment and for a period of one year thereafter, the Employee agrees that he will not participate in or finance, directly or indirectly, for himself or on behalf of any third party, anywhere in the world, as principal, agent, employee, employer, consultant, investor or partner, or assist in the management of, or own any stock or any other ownership interest in, any business that is materially competitive with the business of the Company and/or any of its subsidiaries, as conducted at any time during the twelve-month period prior to the time in question. Notwithstanding the foregoing, the ownership of not more than two percent (2%) of the outstanding securities of any company listed on any public exchange or regularly traded in the over-the-counter market, provided that the Employee’s involvement with any such company is solely that of a passive security holder and the Employee discloses such ownership in advance to the Company’s Board of Directors, shall not constitute a violation of this paragraph.

Company:   DKC
	3 of 6
Employee:   TM

7.3 Covenant Not to Solicit. The Employee agrees that he will not, during the Employee’s employment and for a period of one (1) year thereafter:

(a) directly or indirectly, request or advise any of the customers, distributors or dealers of the Company or any of its subsidiaries to terminate or curtail their business with the Company or any of its subsidiaries, or to patronize another business which is materially competitive with the Company or any of its subsidiaries; or

(b) directly or indirectly, on behalf of himself or any other person or entity, request, advise or solicit any employee of the Company or any of its subsidiaries to leave such employment for any reason.

7.4 Judicial Modification. In the event that any court of law or equity shall consider or hold any aspect of this Section 7 to be unreasonable or otherwise unenforceable, the parties hereto agree that the aspect of this Section so found may be reduced or modified by appropriate order of the court and shall thereafter continue, as so modified, in full force and effect.

7.5 Injunctive Relief. The parties hereto acknowledge that the remedies at law for breach of this Section 7 will be inadequate, and that the Company shall be entitled to injunctive relief for violation thereof; provided, however, that nothing herein contained shall be construed as prohibiting the Company from pursuing any other remedies available for such breach or threatened breach, including the recovery of damages from the Employee.

8. Inventions and Discoveries. The Employee hereby sells, transfers and assigns to the Company or to any person or entity designated by the Company, all of Employee’s right, title and interest in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material made or conceived by the Employee, solely or jointly, during the term hereof which relate to the products and services provided by the Company or any of its subsidiaries or which otherwise relate or pertain to the business, functions or operations of the Company or any of its subsidiaries. The Employee agrees to communicate promptly and to disclose to the Company in such form as the Employee may be required to do so, all information, details and data pertaining to such inventions, ideas, disclosures and improvements and to execute and deliver to the Company such formal transfers and assignments and such other papers and documents as may be required of the Employee to permit the Company or any person or entity designated by the Company to file and prosecute the patent applications, and, as to copyrightable material, to obtain copyrights thereof.

9. Tax Withholding. All payments made and benefits provided by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

10. Survival of Obligations. All obligations of the Company and the Employee that by their nature involve performance, in any particular, after the termination of the Employee’s employment or the term of this Agreement, or that cannot be ascertained to have been fully performed until after the termination of Employee’s employment or the term of this Agreement, will survive the expiration or termination of the term of this Agreement.

Company:   DKC
	4 of 6
Employee:   TM

11. Officer Resignation. Upon termination of his employment with the Company for any reason, the Employee shall resign, as of the date of such termination, from any corporate office or director position held with the Company or any of its parent companies, subsidiaries or affiliates.

12. Miscellaneous. The following miscellaneous sections shall apply to this Agreement:

12.1 Modifications and Waivers. No provision of this Agreement may be modified, waived or discharged unless that modification, waiver or discharge is agreed to in writing by the Employee and the Company. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by that other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time, or at any prior or subsequent time.

12.2 Construction of Agreement. This Agreement supercedes any oral or written agreements between the Employee and the Company and any oral representations by the Company to the Employee with respect to the subject matter of this Agreement.

12.3 Governing Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of Delaware.

12.4 Severability. If any one or more of the provisions of this Agreement, including but not limited to Section 7 hereof, or any word, phrase, clause, sentence or other portion of a provision is deemed illegal or unenforceable for any reason, that provision or portion will be modified or deleted in such a manner as to make this Agreement as modified legal and enforceable to the fullest extent permitted under applicable laws. The validity and enforceability of the remaining provisions or portions will remain in full force and effect.

12.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which will take effect as an original and all of which will evidence one and the same agreement.

12.6 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of the parties hereto and their respective heirs, beneficiaries, personal representatives, successors and assigns.

12.7 Notices. Any notice, request or other communication required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered in person, on the next business day after being delivered to a nationally-recognized overnight courier service (for such next-day delivery) or five (5) days after being deposited in the United States mail, certified or registered, postage prepaid, return receipt requested and addressed to the other party at the respective addressees set forth below or to the other addresses of either party may have furnished to the other in writing in accordance with this Section 12.7, except that notice of change of address will be effective only upon receipt.

Company:   DKC
	5 of 6
Employee:   TM

If to Company:	Ballantyne Strong, Inc.
	11422 Miracle Hills Drive, Suite 300
	Omaha, NE 68154
	ATTN: Chief Executive Officer
If to Employee:	At the address for the Employee most recently on file with the Company.

12.8 Entire Agreement. This Agreement contains the entire agreement of the parties. All prior arrangements or understandings, whether written or oral, are merged herein. This Agreement may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.

BALLANTYNE STRONG, INC.		EMPLOYEE
By:	/s/ D. Kyle Cerminara	By:	/s/ Todd Major
Name:	D. Kyle Cerminara	Name:	Todd Major
Title:	Chairman & CEO	Date:	March 21, 2019
Date:	March 21, 2019

Company:   DKC
	6 of 6
Employee:   TM

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mark D. Roberson, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2020 of Ballantyne Strong, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ MARK D. ROBERSON
		Mark D. Roberson
		Chief Executive Officer
May 12, 2020

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Todd R. Major, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2020 of Ballantyne Strong, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ TODD R. MAJOR
	Todd R. Major
	Chief Financial Officer

May 12, 2020

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, Mark D. Roberson, Chief Executive Officer of Ballantyne Strong, Inc. (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020 (the “Report”).

The undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to his knowledge that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12^th day of May, 2020.

/s/ MARK D. ROBERSON

Mark D. Roberson

Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Ballantyne Strong, Inc. and will be retained by Ballantyne Strong, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, Todd R. Major, Chief Financial Officer of Ballantyne Strong, Inc. (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020 (the “Report”).

The undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to his knowledge that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12^th day of May, 2020.

/s/ TODD R. MAJOR

Todd R. Major

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Ballantyne Strong, Inc. and will be retained by Ballantyne Strong, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Business Segment Information - Schedule of Segment Reporting Information by Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Total net revenues	$ 13,575	$ 14,306
Total gross profit	4,253	2,645
Total segment operating income (loss)	30	(338)
Unallocated administrative expenses	(1,951)	(2,238)
Loss from operations	(1,921)	(2,576)
Other income (expense), net	50	(736)
Loss before income taxes and equity method investment loss	(1,416)	(3,312)
Strong Entertainment [Member]
Segment Reporting Information [Line Items]
Total net revenues	7,315	7,601
Total gross profit	1,834	2,415
Total segment operating income (loss)	(337)	1,159
Convergent [Member]
Segment Reporting Information [Line Items]
Total net revenues	4,962	5,535
Total gross profit	1,985	1,569
Total segment operating income (loss)	857	752
Strong Outdoor [Member]
Segment Reporting Information [Line Items]
Total net revenues	1,197	1,093
Total gross profit	333	(1,416)
Total segment operating income (loss)	(376)	(2,012)
Other [Member]
Segment Reporting Information [Line Items]
Total net revenues	101	77
Total gross profit	101	77
Total segment operating income (loss)	$ (114)	$ (237)

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Stock Compensation - Summary of Restricted Stock Activity (Details) - Restricted Stock Shares [Member]	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Restricted Stock, Non-vested beginning balance | shares	23,334
Number of Restricted Stock, Granted | shares
Number of Restricted Stock, Vested | shares	(23,333)
Number of Restricted Stock, Forfeited | shares
Number of Restricted Stock, Non-vested ending balance | shares
Weighted Average Grant Date Fair Value, Non-vested beginning balance | $ / shares	$ 6.50
Weighted Average Grant Date Fair Value, Granted | $ / shares
Weighted Average Grant Date Fair Value, Vested | $ / shares	6.50
Weighted Average Grant Date Fair Value, Forfeited | $ / shares
Weighted Average Grant Date Fair Value, Non-vested ending balance | $ / shares

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Inventories (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Inventory valuation reserves	$ 900	$ 900

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Investments - Summary of Income (Loss) of Equity Method Investees (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Schedule of Equity Method Investments [Line Items]
Equity method investment income (loss)	$ 1,369	$ (697)
1347 Property Insurance Holdings, Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Equity method investment income (loss)	1,417	144
Itasca Capital, Ltd. [Member]
Schedule of Equity Method Investments [Line Items]
Equity method investment income (loss)	$ (48)	$ (841)

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Investments (Tables)

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Summary of Investments

The following summarizes our investments (dollars in thousands):

	March 31, 2020					December 31, 2019
	Carrying Amount		Economic Interest			Carrying Amount		Economic Interest
Equity Method Investments
1347 Property Insurance Holdings, Inc.	$	8,239		17.1	%	$	6,897		17.2	%
Itasca Capital, Ltd.		2,515		32.3	%		2,800		32.3	%
Total Equity Method Investments		10,754					9,697
Cost Method Investment
Firefly Systems, Inc.		3,614					3,614
Total Investments	$	14,368				$	13,311

Summary of Income (Loss) of Equity Method Investees

The following summarizes the income (loss) of equity method investees reflected in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2020			2019
Entity
1347 Property Insurance Holdings, Inc.	$	1,417		$	144
Itasca Capital, Ltd.		(48	)		(841	)
Total	$	1,369		$	(697	)

Summarized Financial Information

For the three months ended December 31,	2019		2018
Revenue	$	4,340	$	352
Operating income	$	3,977	$	240
Net income (loss)	$	8,121	$	(1,791	)

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Schedule of Fair Value Measured Financial Assets and Liabilities

The following tables present the Company’s financial assets measured at fair value based upon the level within the fair value hierarchy in which the fair value measurements are classified, as of March 31, 2020 and December 31, 2019.

Fair values measured on a recurring basis at March 31, 2020 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	6,546	$	-	$	-	$	6,546
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	6,897	$	-	$	-	$	6,897

Fair values measured on a recurring basis at December 31, 2019 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,951	$	-	$	-	$	4,951
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	5,302	$	-	$	-	$	5,302

Summary of Notes Receivable Reconciliation

The following table reconciles the beginning and ending balance of the Company’s notes receivable at fair value (in thousands):

	Three Months Ended March 31,
	2020		2019
Notes receivable balance, beginning of period	$	-	$	3,965
Fair value adjustment		-		(510	)
Notes receivable balance, end of period	$	-	$	3,455

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 6,546	$ 4,951
Restricted cash	351	351
Accounts receivable (net of allowance for doubtful accounts of $1,217 and $1,291, respectively)	10,252	12,898
Inventories, net	2,794	2,879
Recoverable income taxes	262	190
Other current assets	2,642	1,754
Total current assets	22,847	23,023
Property, plant and equipment (net of accumulated depreciation of $10,299 and $10,238, respectively)	9,836	10,560
Operating lease right-of-use assets	5,438	5,581
Finance lease right-of-use assets	2,333	2,563
Investments	14,368	13,311
Intangible assets, net	1,453	1,534
Goodwill	842	919
Other assets	98	142
Total assets	57,215	57,633
Current liabilities:
Accounts payable	5,139	3,273
Accrued expenses	3,830	4,416
Short-term debt	3,188	3,080
Current portion of long-term debt	1,016	998
Current portion of operating lease obligations	974	971
Current portion of finance lease obligations	1,633	1,586
Deferred revenue and customer deposits	3,175	2,981
Total current liabilities	18,955	17,305
Long-term debt, net of current portion and debt issuance costs	2,757	3,019
Operating lease obligations, net of current portion	4,632	4,809
Finance lease obligations, net of current portion	3,561	3,988
Deferred revenue and customer deposits, net of current portion	32	38
Deferred income taxes	2,918	2,649
Other long-term liabilities	110	116
Total liabilities	32,965	31,924
Commitments, contingencies and concentrations (Note 13)
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding
Common stock, par value $.01 per share; authorized 25,000 shares; issued 17,445 and 17,410 shares at March 31, 2020 and December 31, 2019, respectively; outstanding 14,651 and 14,616 shares at March 31, 2020 and December 31, 2019, respectively	174	174
Additional paid-in capital	42,862	42,589
Retained earnings	5,554	6,001
Less 2,794 of common shares in treasury, at cost	(18,586)	(18,586)
Accumulated other comprehensive loss	(5,754)	(4,469)
Total stockholders' equity	24,250	25,709
Total liabilities and stockholders' equity	$ 57,215	$ 57,633

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at Dec. 31, 2018	$ 172	$ 41,471	$ 13,319	$ (18,586)	$ (5,378)	$ 30,998
Balance, shares at Dec. 31, 2018	17,237,000
Net loss			(4,150)			(4,150)
Net other comprehensive income (loss)					168	168
Cumulative effect of adoption of ASC 842			2,785			2,785
Vesting of restricted stock	$ 1	(1)
Vesting of restricted stock, shares	76,000
Stock-based compensation expense		243				243
Balance at Mar. 31, 2019	$ 173	41,713	11,954	(18,586)	(5,210)	30,044
Balance, shares at Mar. 31, 2019	17,313,000
Balance at Dec. 31, 2019	$ 174	42,589	6,001	(18,586)	(4,469)	25,709
Balance, shares at Dec. 31, 2019	17,410,000
Net loss			(447)			(447)
Net other comprehensive income (loss)					(1,285)	(1,285)
Vesting of restricted stock
Vesting of restricted stock, shares	35,000
Stock-based compensation expense		273				273
Balance at Mar. 31, 2020	$ 174	$ 42,862	$ 5,554	$ (18,586)	$ (5,754)	$ 24,250
Balance, shares at Mar. 31, 2020	17,445,000

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Stock Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Summary of Stock Options Activities

The following table summarizes stock option activity for the three months ended March 31, 2020:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2019		1,107,000	$	4.47		7.9	$	148
Granted		-
Exercised		-
Forfeited		-
Expired		-
Outstanding at March 31, 2020		1,107,000	$	4.47		7.6	$	-
Exercisable at March 31, 2020		441,000	$	5.09		6.7	$	-

Summary of Restricted Stock Activity

The following table summarizes restricted stock share activity for the three months ended March 31, 2020:

	Number of Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		23,334		$	6.50
Granted		-
Shares vested		(23,334	)		6.50
Shares forfeited		-
Non-vested at March 31, 2020		-

Schedule of Nonvested Restricted Stock Units Activity

The following table summarizes restricted stock unit activity for the three months ended March 31, 2020:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		522,379		$	3.14
Granted		-
Shares vested		(35,833	)		4.70
Shares forfeited		-
Non-vested at March 31, 2020		486,546		$	3.03

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Summary of Significant Accounting Policies - Summary of Notes Receivable Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Accounting Policies [Abstract]
Notes receivable balance, beginning of period		$ 3,965	$ 3,965
Fair value adjustment		(510)
Notes receivable balance, end of period		$ 3,455

XML

Goodwill

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

8. Goodwill

The following represents a summary of changes in the Company’s carrying amount of goodwill for the three months ended March 31, 2020 (in thousands):

Balance as of December 31, 2019	$	919
Foreign currency translation adjustment		(77	)
Balance as of March 31, 2020	$	842

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Loss Per Common Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Loss Per Common Share

4. Loss Per Common Share

Basic loss per share has been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted loss per share would be computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to potential common shares from dilutive stock options and certain non-vested shares of restricted stock and restricted stock units. However, because the Company reported losses in all periods presented, there were no differences between average shares used to compute basic and diluted loss per share for the three months ended March 31, 2020 and March 31, 2019. The following table summarizes the weighted average shares used to compute basic and diluted loss per share (shares in thousands):

	Three Months Ended March 31,
	2020		2019
Weighted average shares outstanding:
Basic weighted average shares outstanding		14,625		14,438
Dilutive effect of stock options and certain non-vested restricted stock awards		-		-
Diluted weighted average shares outstanding		14,625		14,438

Options to purchase 1,057,000 and 833,500 shares of common stock were outstanding as of March 31, 2020 and March 31, 2019, respectively, but were not included in the computation of diluted loss per share as the options’ exercise prices were greater than the average market price of the common shares for each period. An additional 86,725 and 20,994 common stock equivalents related to options and restricted stock awards were excluded for the three months ended March 31, 2020 and March 31, 2019, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share.

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Stock Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock Compensation

12. Stock Compensation

The Company recognizes compensation expense for all stock-based payment awards made to employees and directors based on estimated grant date fair values. Stock-based compensation expense included in selling and administrative expenses was $0.3 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively.

The Company’s 2017 Omnibus Equity Compensation Plan (“2017 Plan”) was approved by the Company’s stockholders and provides the Compensation Committee of the Board of Directors with the discretion to grant stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units and other stock-based awards and cash-based awards. Vesting terms vary with each grant and may be subject to vesting upon a “change in control” of the Company. On December 17, 2019, the Company’s stockholders approved the amendment and restatement of the 2017 Plan to (i) increase the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by 1,975,000 shares and (ii) extend the expiration date of the 2017 Plan by approximately two years, until October 27, 2029. As of March 31, 2020, 2,366,778 shares were available for issuance under the amended and restated 2017 Plan.

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2020:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2019		1,107,000	$	4.47		7.9	$	148
Granted		-
Exercised		-
Forfeited		-
Expired		-
Outstanding at March 31, 2020		1,107,000	$	4.47		7.6	$	-
Exercisable at March 31, 2020		441,000	$	5.09		6.7	$	-

The aggregate intrinsic value in the table above represents the total that would have been received by the option holders if all in-the-money options had been exercised and sold on the date indicated.

As of March 31, 2020, 666,000 stock option awards were non-vested. Unrecognized compensation cost related to non-vested stock options was approximately $1.0 million, which is expected to be recognized over a weighted average period of 3.0 years.

Restricted Stock Shares and Restricted Stock Units

The following table summarizes restricted stock share activity for the three months ended March 31, 2020:

	Number of Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		23,334		$	6.50
Granted		-
Shares vested		(23,334	)		6.50
Shares forfeited		-
Non-vested at March 31, 2020		-

The following table summarizes restricted stock unit activity for the three months ended March 31, 2020:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		522,379		$	3.14
Granted		-
Shares vested		(35,833	)		4.70
Shares forfeited		-
Non-vested at March 31, 2020		486,546		$	3.03

As of March 31, 2020, the total unrecognized compensation cost related to non-vested restricted stock unit awards was approximately $1.1 million, which is expected to be recognized over a weighted average period of 2.0 years.

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Leases - Schedule of Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Operating Leases, Remainder of 2020	$ 920
Operating Leases, 2021	1,169
Operating Leases, 2022	820
Operating Leases, 2023	660
Operating Leases, 2024	669
Operating Leases, Thereafter	2,447
Operating Leases, Total lease payments	6,685
Less: Amount representing interest	(1,079)
Present value of lease payments	5,606
Less: Current maturities	(974)	$ (971)
Lease obligations, net of current portion	4,632	4,809
Finance Leases, Remainder of 2020	1,630
Finance Leases, 2021	2,173
Finance Leases, 2022	1,967
Finance Leases, 2023	353
Finance Leases, 2024	88
Finance Leases, Thereafter
Finance Leases, Total lease payments	6,211
Less: Amount representing interest	(1,017)
Present value of lease payments	5,194
Less: Current maturities	(1,633)	(1,586)
Lease obligations, net of current portion	$ 3,561	$ 3,988

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Strong/MDI installment loan	$ 3,188	$ 3,080
Insurance note payable	421
Current portion of long-term debt	1,016	998
Total short-term debt	4,204	4,078
Total principal balance of long-term debt	3,788	4,031
Less: current portion	(1,016)	(998)
Less: unamortized debt issuance costs	(15)	(14)
Total long-term debt	2,757	3,019
Total short-term and long-term debt	6,961	7,097
Strong/MDI Installment Loan [Member]
Debt Instrument [Line Items]
Strong/MDI installment loan	2,767	3,080
Equipment Term Loans [Member]
Debt Instrument [Line Items]
Total principal balance of long-term debt	$ 3,788	$ 4,031

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Business Segment Information (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Schedule of Segment Reporting Information by Segment

Summary by Business Segments

	Three Months Ended March 31,
	2020			2019
	(in thousands)
Net revenues
Strong Entertainment	$	7,315		$	7,601
Convergent		4,962			5,535
Strong Outdoor		1,197			1,093
Other		101			77
Total net revenues		13,575			14,306
Gross profit (loss)
Strong Entertainment		1,834			2,415
Convergent		1,985			1,569
Strong Outdoor		333			(1,416	)
Other		101			77
Total gross profit		4,253			2,645
Operating (loss) income
Strong Entertainment		(337	)		1,159
Convergent		857			752
Strong Outdoor		(376	)		(2,012	)
Other		(114	)		(237	)
Total segment operating income (loss)		30			(338	)
Unallocated administrative expenses		(1,951	)		(2,238	)
Loss from operations		(1,921	)		(2,576	)
Other income (expense), net		505			(736	)
Loss before income taxes and equity method investment loss	$	(1,416	)	$	(3,312	)

Reconciliation of Assets from Segment to Consolidated

(In thousands)	March 31, 2020		December 31, 2019
Identifiable assets
Strong Entertainment	$	18,730	$	18,135
Convergent		13,736		15,797
Strong Outdoor		3,491		3,737
Corporate assets		21,258		19,964
Total	$	57,215	$	57,633

Schedule of Segment Reporting Information by Geographic Area

Summary by Geographical Area

	Three Months Ended March 31,
(In thousands)	2020		2019
Net revenue
United States	$	11,680	$	12,864
Canada		740		798
China		201		212
Mexico		78		3
Latin America		276		29
Europe		194		280
Asia (excluding China)		258		58
Other		148		62
Total	$	13,575	$	14,306

Summary of Identifiable Assets by Geographical Area

(In thousands)	March 31, 2020		December 31, 2019
Identifiable assets
United States	$	39,430	$	37,508
Canada		17,785		20,125
Total	$	57,215	$	57,633

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Revenue (Details Narrative) $ in Thousands	Mar. 31, 2020 USD ($)
Unearned revenue	$ 2,400
2021 [Member]
Unearned revenue	2,300
2021-2023 [Member]
Unearned revenue	$ 100

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Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the available objective evidence, including recent updates to the taxing jurisdictions generating income, the Company concluded that a valuation allowance should be recorded against all of the Company’s U.S. tax jurisdiction deferred tax assets as of March 31, 2020 and December 31, 2019.

The Tax Cuts and Jobs Act of 2017 provides for a territorial tax system, which began in 2018. It includes the global intangible low-taxed income (“GILTI”) provision. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. As a result of the GILTI provisions, the Company’s inclusion of taxable income was incorporated into the overall net operating loss and valuation allowance for the three months ended March 31, 2020 and March 31, 2019.

Changes in tax laws may affect recorded deferred tax assets and liabilities and the Company’s effective tax rate in the future. On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES Act made significant changes to Federal tax laws, including certain changes that are retroactive to the prior year. The effects of these changes relate to deferred tax assets and net operating losses; all of which are offset by valuation allowance.

The Company is subject to possible examinations not yet initiated for Federal purposes for fiscal years 2016 through 2019. In most cases, the Company is subject to possible examinations by state or local jurisdictions based on the particular jurisdiction’s statute of limitations.

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Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

7. Intangible Assets

Intangible assets consisted of the following at March 31, 2020 (dollars in thousands):

	Useful life		Gross		Accumulated Amortization			Net
	(Years)
Intangible assets not yet subject to amortization:
Software in development			$	223	$	-		$	223
Intangible assets subject to amortization:
Software in service		5		2,403		(1,219	)		1,184
Product formulation		10		431		(385	)	$	46
Total			$	3,057	$	(1,604	)	$	1,453

Intangible assets consisted of the following at December 31, 2019 (dollars in thousands):

	Useful life		Gross		Accumulated Amortization			Net
	(Years)
Intangible assets not yet subject to amortization:
Software in development			$	203	$	-		$	203
Intangible assets subject to amortization:
Software in service		5		2,362		(1,087	)		1,275
Product formulation		10		471		(415	)		56
Total			$	3,036	$	(1,502	)	$	1,534

Amortization expense relating to intangible assets was $0.2 million during each of the three months ended March 31, 2020 and 2019.

The following table shows the Company’s estimated future amortization expense related to intangible assets currently subject to amortization for the next five years (in thousands):

Remainder of 2020	$	415
2021		516
2022		242
2023		57
2024		-
Thereafter		-
Total	$	1,230

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Revenue

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue

3. Revenue

The Company accounts for revenue using the following steps:

● 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.

The Company combines contracts with the same customer into a single contract for accounting purposes when the contracts are entered into at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends on the other contract, or the services are considered a single performance obligation. If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements by determining the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is subsequently resolved. The Company considers the sensitivity of the estimate, its relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

As discussed in more detail below, revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company does not have any material extended payment terms, as payment is due at or shortly after the time of the sale. Observable prices are used to determine the standalone selling price of separate performance obligations, or a cost plus margin approach is used when observable prices are not available. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.

The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients. Unbilled receivables are recorded as accounts receivable when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation.

The Company defers costs to acquire contracts, including commissions, incentives and payroll taxes, if they are incremental and recoverable costs of obtaining a customer contract with a term exceeding one year. Deferred contract costs are reported within other assets and amortized to selling expense over the contract term, which generally ranges from one to five years. The Company has elected to recognize the incremental costs of obtaining a contract with a term of less than one year as a selling expense when incurred. The Company did not have any deferred contract costs as of March 31, 2020 or December 31, 2019.

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three months ended March 31, 2020 and March 31, 2019 (in thousands):

	Three Months Ended March 31, 2020
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Screen system sales	$	2,956	$	-	$	-	$	-	$	2,956
Digital equipment sales		1,649		1,172		-		-		2,821
Extended warranty sales		159		-		-		-		159
Other product sales		468		-		-		-		468
Total product sales		5,232		1,172		-		-		6,404
Field maintenance and monitoring services		1,804		3,414		28		-		5,246
Installation services		257		357		-		-		614
Advertising		-		-		1,169		-		1,169
Other service revenues		22		19		-		101		142
Total service revenues		2,083		3,790		1,197		101		7,171
Total	$	7,315	$	4,962	$	1,197	$	101	$	13,575

	Three Months Ended March 31, 2019
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Screen system sales	$	2,819	$	-	$	-	$	-	$	2,819
Digital equipment sales		1,484		625		-		-		2,109
Extended warranty sales		234		-		-		-		234
Other product sales		398		-		-		-		398
Total product sales		4,935		625		-		-		5,560
Field maintenance and monitoring services		1,967		2,773		53		-		4,793
Installation services		670		2,118		-		-		2,788
Advertising		-		-		1,040		-		1,040
Other service revenues		29		19		-		77		125
Total service revenues		2,666		4,910		1,093		77		8,746
Total	$	7,601	$	5,535	$	1,093	$	77	$	14,306

Screen system sales

The Company recognizes revenue on the sale of its screen systems when control of the screen is transferred to the customer, usually at time of shipment. However, revenue is recognized upon delivery for certain international shipments with longer shipping transit time because control does not transfer to the customer until delivery. The cost of freight and shipping to the customer is recognized in cost of sales at the time of transfer of control to the customer.

Digital equipment sales

The Company recognizes revenue on sales of digital equipment when the control of the equipment is transferred, which occurs at the time of shipment from the Company’s warehouse or drop-shipment from a third party. The cost of freight and shipping to the customer is recognized in cost of sales at the time of transfer of control to the customer.

Field maintenance and monitoring services

The Company sells service contracts that provide maintenance and monitoring services to Strong Entertainment and Convergent customers. In the Strong Entertainment segment, these contracts are generally 12 months in length, while the term for service contracts in the Convergent segment can be for multiple years. Revenue related to service contracts is recognized ratably over the term of the agreement.

The Company also performs discrete time and materials-based maintenance and repair work for customers in the Strong Entertainment and Convergent segments. Revenue related to time and materials-based maintenance and repair work is recognized at the point in time when the performance obligation has been fully satisfied.

Installation services

The Company performs installation services for both its Strong Entertainment and Convergent customers and recognizes revenue upon completion of the installations.

Extended warranty sales

The Company sells extended warranties to its Strong Entertainment customers. When the Company is the primary obligor, revenue is recognized on a gross basis ratably over the term of the extended warranty. In third party extended warranty sales, the Company is not the primary obligor, and revenue is recognized on a net basis at the time of the sale.

Advertising

Strong Outdoor sells advertising space on top of taxicabs. Advertising revenue is recognized ratably over the contracted advertising periods.

Timing of Revenue Recognition

The following tables disaggregate the Company’s revenue by the timing of transfer of goods or services to the customer for the three months ended March 31, 2020 and March 31, 2019 (in thousands):

	Three Months Ended March 31, 2020
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Point in time	$	5,717	$	1,794	$	1,197	$	4	$	8,712
Over time		1,598		3,168		-		97		4,863
Total	$	7,315	$	4,962	$	1,197	$	101	$	13,575

	Three Months Ended March 31, 2019
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Point in time	$	6,044	$	2,992	$	1,093	$	-	$	10,129
Over time		1,557		2,543		-		77		4,177
Total	$	7,601	$	5,535	$	1,093	$	77	$	14,306

At March 31, 2020, the unearned revenue amount associated with maintenance and monitoring services, extended warranty sales and advertising services in which the Company is the primary obligor was $2.4 million. The Company expects to recognize $2.3 million of unearned revenue amounts throughout the rest of 2020, $0.1 million during 2021 and immaterial amounts during 2022 and 2023.

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Leases - Schedule of Lease Costs And Other Lease Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Finance lease cost: Amortization of right-of-use assets	$ 380	$ 49
Finance lease cost: Interest on lease liabilities	164	19
Operating lease cost	401	687
Short-term lease cost	15	6
Sublease income	(116)	(86)
Net lease cost	844	675
Operating cash flows from finance leases	164	19
Operating cash flows from operating leases	341	590
Financing cash flows from finance leases	380	49
Right-of-use assets obtained in exchange for new finance lease liabilities		232
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 109	$ 644
Weighted-average remaining lease term - finance leases (years)	2 years 10 months 25 days
Weighted-average remaining lease term - operating leases (years)	7 years
Weighted-average discount rate - finance leases	12.10%
Weighted-average discount rate - operating leases	4.20%

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Debt (Details Narrative) $ in Thousands, $ in Thousands					3 Months Ended
	Apr. 14, 2020 USD ($)	May 22, 2018 USD ($)	Apr. 24, 2018 USD ($)	Sep. 05, 2017 CAD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2020 CAD ($)	Dec. 31, 2019 USD ($)
Debt Instrument [Line Items]
Long-term debt					$ 3,788		$ 4,031
Description on paycheck protection program					On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that creates additional uncertainty regarding the qualification requirements for a PPP loan for public companies. The Company has less than 300 employees and continues to be severely impacted by the disruption to the cinema, theme park and advertising industries as a result of COVID-19. However, out of an abundance of caution and in light of the new guidance, the Company repaid the full amount of the Loan plus accrued interest to the lender on May 5, 2020.	On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that creates additional uncertainty regarding the qualification requirements for a PPP loan for public companies. The Company has less than 300 employees and continues to be severely impacted by the disruption to the cinema, theme park and advertising industries as a result of COVID-19. However, out of an abundance of caution and in light of the new guidance, the Company repaid the full amount of the Loan plus accrued interest to the lender on May 5, 2020.
20-year Installment Loan [Member]
Debt Instrument [Line Items]
Loan term			20 years		20 years	20 years
Proceeds from issuance of debt					$ 2,800
Debt bearing interest fixed rate							2.45%
Loan [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Proceeds from issuance of debt	$ 3,200
Canadian Dollar [Member] | 20-year Installment Loan [Member]
Debt Instrument [Line Items]
Proceeds from issuance of debt			$ 3,500			$ 3,900
Installment Payment Agreement [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 4,400
Debt description		In each of December 2018 and June 2019, Convergent entered into additional installment payment agreements with other financing companies in order to purchase additional media players and related equipment, with each round of financing totaling approximately $0.6 million and $0.2 million, respectively. Installment payments under each contract are due monthly for a period of 60 months.
Number of installment payments		60 months
Equipment Term Loans [Member]
Debt Instrument [Line Items]
Long-term debt					$ 3,800
Weighted average fixed rate					7.70%
Demand Credit Agreement [Member]
Debt Instrument [Line Items]
Description on effective equity				The credit agreement requires Strong/MDI to maintain a ratio of liabilities to "effective equity" (tangible stockholders' equity, less amounts receivable from affiliates and equity method investments) not exceeding 2 to 1, a current ratio (excluding amounts due from related parties) of at least 1.5 to 1 and minimum "effective equity" of CDN$8.0 million.
Maximum liabilities to effective equity				200.00%
Minimum current ratio				150.00%
Demand Credit Agreement [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Interest rate on lender of installment loans				0.50%
Demand Credit Agreement [Member] | 20-year Installment Loan [Member]
Debt Instrument [Line Items]
Loan term				20 years
Demand Credit Agreement [Member] | 5-year Installment Loan [Member]
Debt Instrument [Line Items]
Loan term				5 years
Demand Credit Agreement [Member] | 5-year Installment Loan [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Interest rate on lender of installment loans				0.50%
Demand Credit Agreement [Member] | Canadian Dollar [Member]
Debt Instrument [Line Items]
Minimum effective equity				$ 8,000
Demand Credit Agreement [Member] | Canadian Dollar [Member] | 20-year Installment Loan [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity				6,000
Demand Credit Agreement [Member] | Canadian Dollar [Member] | 5-year Installment Loan [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity				500
Demand Credit Agreement [Member] | Line of Credit [Member] | Canadian Dollar [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity				$ 3,500

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Business Segment Information - Summary of Identifiable Assets by Geographical Area (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Segment Reporting Information [Line Items]
Identifiable assets	$ 57,215	$ 57,633
United States [Member]
Segment Reporting Information [Line Items]
Identifiable assets	39,430	37,508
Canada [Member]
Segment Reporting Information [Line Items]
Identifiable assets	$ 17,785	$ 20,125

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Business Segment Information (Details Narrative)	3 Months Ended
	Mar. 31, 2020 Segments
Segment Reporting [Abstract]
Number of business segments	3

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Stock Compensation - Summary of Stock Options Activities (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($) $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of Options, Outstanding Beginning Balance | shares	1,107,000
Number of Options, Granted | shares
Number of Options, Exercised | shares
Number of Options, Forfeited | shares
Number of Options, Expired | shares
Number of Options, Outstanding Ending Balance | shares	1,107,000
Number of Options, Exercisable | shares	441,000
Weighted Average Exercise Price Per Share, Outstanding Beginning Balance | $ / shares	$ 4.47
Weighted Average Exercise Price Per Share, Granted | $ / shares
Weighted Average Exercise Price Per Share, Exercised | $ / shares
Weighted Average Exercise Price Per Share, Forfeited | $ / shares
Weighted Average Exercise Price Per Share, Expired | $ / shares
Weighted Average Exercise Price Per Share, Outstanding Ending Balance | $ / shares	4.47
Weighted Average Exercise Price Per Share, Exercisable | $ / shares	$ 5.09
Weighted Average Remaining Contractual Term, Beginning Balance	7 years 10 months 25 days
Weighted Average Remaining Contractual Term, Ending Balance	7 years 7 months 6 days
Weighted Average Remaining Contractual Term, Exercisable	6 years 8 months 12 days
Aggregate Intrinsic Value, Beginning Balance | $	$ 148
Aggregate Intrinsic Value, Ending Balance | $
Aggregate Intrinsic Value, Exercisable | $

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Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw materials and components	$ 1,562	$ 1,584
Work in process	237	211
Finished goods	995	1,084
Inventories net	$ 2,794	$ 2,879

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Investments - Summarized Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Equity Method Investments and Joint Ventures [Abstract]
Revenue	$ 4,340	$ 352
Operating income	3,977	240
Net income (loss)	$ 8,121	$ (1,791)

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Inventories (Tables)

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following (in thousands):

	March 31, 2020		December 31, 2019
Raw materials and components	$	1,562	$	1,584
Work in process		237		211
Finished goods		995		1,084
	$	2,794	$	2,879

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and all majority owned and controlled domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America (also referred to as “GAAP”) for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The condensed consolidated balance sheet as of December 31, 2019 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary to present a fair statement of the financial position and the results of operations and cash flows for the respective interim periods. Certain prior period balances have been reclassified to conform to current period presentation. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

Unless otherwise indicated, all references to “dollars” and “$” in this Quarterly Report on Form 10-Q are to, and amounts are presented in, U.S. dollars.

Use of Management Estimates

Use of Management Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

There is significant ongoing uncertainty surrounding the COVID-19 global pandemic and the extent and duration of the impacts that it may have on the Company, as well as its customers, suppliers, and employees. There is heightened potential for future reserves against trade receivables, inventory write downs and impairments of long-lived assets, goodwill, intangible assets and investments. In the current environment, assumptions about future financial and operational performance, supply chain pricing and availability and customer creditworthiness have greater variability than normal, which could in the future significantly affect the valuation of the Company’s assets, both financial and non-financial. As an understanding of the longer-term impacts of COVID-19 on the Company’s customers and business develops, there is heightened potential for changes in these views over the remainder of 2020, and potentially beyond.

Restricted Cash

Restricted Cash

Restricted cash represents amounts held in a collateral account for the Company’s corporate travel and purchasing credit card program.

Accounts Receivable

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful accounts based on several factors, including overall customer credit quality, historical write-off experience and a specific analysis that projects the ultimate collectability of the account. As such, these factors may change over time causing the allowance level and bad debt expense to be adjusted accordingly. Since many of Strong Entertainment’s customers have been negatively impacted by COVID-19, the Company recorded $0.7 million of bad debt expense during the first quarter of 2020 as a result of the increased uncertainty related to collection of trade accounts receivable from these customers.

Investments

Investments

The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net income (loss) resulting from these investments is reported under the line item captioned “equity method investment income (loss)” in our condensed consolidated statements of operations. The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. The Company applies the cost method of accounting to investments when it does not have significant influence or a controlling interest in the investee and the fair value of the investment is not readily determinable. Dividends on cost method investments received are recorded as income.

The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Management reviewed the underlying net assets of the investees during the three months ended March 31, 2020 and determined that the Company’s proportionate economic interest in the investees indicate that the investments were not other than temporarily impaired. The carrying value of our equity method and cost method investments is reported as “investments” on the condensed consolidated balance sheets. Note 6 contains additional information on our equity method and cost method investments.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Assets and liabilities measured at fair value are categorized into a fair value hierarchy based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

● 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

The following tables present the Company’s financial assets measured at fair value based upon the level within the fair value hierarchy in which the fair value measurements are classified, as of March 31, 2020 and December 31, 2019.

Fair values measured on a recurring basis at March 31, 2020 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	6,546	$	-	$	-	$	6,546
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	6,897	$	-	$	-	$	6,897

Fair values measured on a recurring basis at December 31, 2019 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,951	$	-	$	-	$	4,951
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	5,302	$	-	$	-	$	5,302

The following table reconciles the beginning and ending balance of the Company’s notes receivable at fair value (in thousands):

	Three Months Ended March 31,
	2020		2019
Notes receivable balance, beginning of period	$	-	$	3,965
Fair value adjustment		-		(510	)
Notes receivable balance, end of period	$	-	$	3,455

During 2011, the Company entered into certain unsecured notes receivable arrangements with CDF2 Holdings, LLC pertaining to the sale and installation of digital projection equipment. The notes receivable accrue interest at a rate of 15% per annum. Interest not paid in any particular year is added to the principal and also accrues interest at 15%. In connection with this transaction, the Company also entered into an agreement with one of its customers, pursuant to which the Company is obligated to provide up to $1.1 million of credits against any amounts due to the Company from the customer based on cash collected on the notes receivable. In the event the Company does not have any outstanding balances due from the customer, the Company would be obligated to remit up to the first $1.1 million collected on the notes receivable directly to the customer.

The notes receivable are recorded at estimated fair value. The significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are the discount rate and percentage of default. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. Adjustments to the fair value of the notes receivable are included in other (expense) income on the Company’s condensed consolidated statements of operations.

In order to estimate the fair value, the Company reviews the financial position and estimated cash flows of the debtor of the notes receivable. During the year ended December 31, 2019, the Company adjusted the carrying value of the notes receivable to $0 based on management’s review of the debtor’s financial statements and changes in the underlying trend of historical and projected cash flows available to service the notes. The related $1.1 million contingent liability was also adjusted during the year ended December 31, 2019, based on the Company’s expectation that cash flow from the notes receivable will not be available. As of March 31, 2020, management estimated the fair value of the notes receivable to be $0.

The Company’s short-term and long-term debt is recorded at historical cost. As of March 31, 2020, the Company’s long-term debt, including current maturities, had a carrying value of $3.8 million. Based on discounted cash flows using current quoted interest rates (Level 2 of the fair value hierarchy), the estimated fair value at March 31, 2020 was $3.5 million.

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses and short-term debt, reported in the condensed consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. Note 6 includes fair value information related to our equity and cost method investments. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which include non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). The Company did not have any significant non-recurring measurements of non-financial assets or liabilities during the three months ended March 31, 2020 or 2019.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, “Intangibles- Goodwill and Other- Internal Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This ASU requires customers in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal use software guidance in ASC 350-40 to determine which implementation costs to capitalize or expense. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU improves the effectiveness of fair value measurement disclosures by eliminating, adding and modifying certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company believes the adoption of this ASU will not significantly impact its results of operations and financial position.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. The effective date of the standard will be for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in the standard are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815.” This ASU clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives. The effective date of the standard will be for annual periods beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on its condensed consolidated financial statements and related disclosures.

In April 2020, the FASB issued a question-and-answer document to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the effects of the COVID-19 pandemic. The guidance will allow concessions related to the timing of payments, where the total consideration has not changed, to not be accounted for as lease modifications. Instead, any such concessions can be accounted for as if no change was made to the contract or as variable lease payments. The Company is currently assessing the impact of the question-and-answer document on its condensed consolidated financial statements, and will adopt the guidance in the second quarter of 2020, to the extent applicable.

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 1,217	$ 1,291
Accumulated depreciation of property, plant and equipment	$ 10,299	$ 10,238
Preferred stock par value	$ .01	$ .01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding
Common stock par value	$ .01	$ .01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	17,445,000	17,410,000
Common stock, shares outstanding	14,651,000	14,616,000
Common shares in treasury, shares	2,794,000	2,794,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Cash flows from operating activities:
Net loss	$ (447)	$ (4,150)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Provision for (recovery of) doubtful accounts	819	(310)
Provision for obsolete inventory	44	53
Provision for warranty	53	67
Depreciation and amortization	989	795
Amortization and accretion of operating leases	309	579
Fair value adjustment to notes receivable		510
Equity method investment (income) loss	(1,369)	697
Loss on disposal of assets		64
Gain on Firefly transaction (Note 6)	(270)
Deferred income taxes	23	50
Stock-based compensation expense	273	243
Changes in operating assets and liabilities:
Accounts receivable	1,499	1,819
Inventories	(118)	(145)
Current income taxes	(87)	(444)
Other assets	(277)	(69)
Accounts payable and accrued expenses	1,323	(605)
Deferred revenue and customer deposits	216	11
Operating lease obligations	(341)	(590)
Net cash provided by (used in) operating activities	2,639	(1,425)
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment		86
Capital expenditures	(371)	(257)
Net cash used in investing activities	(371)	(171)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		237
Principal payments on short-term debt	(55)	(79)
Principal payments on long-term debt	(243)	(245)
Payments on capital lease obligations	(380)	(49)
Net cash used in financing activities	(678)	(136)
Effect of exchange rate changes on cash and cash equivalents	5	23
Net increase (decrease) in cash and cash equivalents and restricted cash	1,595	(1,709)
Cash and cash equivalents and restricted cash at beginning of period	5,302	7,048	7,048
Cash and cash equivalents and restricted cash at end of period	6,897	5,339	5,302
Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents	6,546	4,989	4,951
Restricted cash	351	350	$ 351
Total cash and cash equivalents and restricted cash	6,897	5,339
Supplemental disclosure of non-cash investing and financing activities:
Term loan borrowings to finance equipment purchases		198
Capital lease obligations for property and equipment		232
Short-term borrowings to finance insurance	$ 421	$ 202

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Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Debt

9. Debt

The Company’s debt consists of the following (in thousands):

	March 31, 2020			December 31, 2019
Short-term debt:
Strong/MDI installment loan	$	2,767		$	3,080
Insurance note payable		421			-
Current portion of long-term debt		1,016			998
Total short-term debt		4,204			4,078
Long-term debt:
Equipment term loans		3,788			4,031
Total principal balance of long-term debt		3,788			4,031
Less: current portion		(1,016	)		(998	)
Less: unamortized debt issuance costs		(15	)		(14	)
Total long-term debt		2,757			3,019
Total short-term and long-term debt	$	6,961		$	7,097

Equipment Term Loans

On May 22, 2018, Convergent entered into an installment payment agreement with an equipment financing company in order to purchase media players and related equipment in an aggregate amount of up to approximately $4.4 million. In each of December 2018 and June 2019, Convergent entered into additional installment payment agreements with other financing companies in order to purchase additional media players and related equipment, with each round of financing totaling approximately $0.6 million and $0.2 million, respectively. Installment payments under each contract are due monthly for a period of 60 months. The financing under each of the agreements is secured by the respective equipment. The borrowings under the agreements are recorded as long-term debt on the Company’s consolidated balance sheet. Collectively, the Company had $3.8 million of outstanding borrowings under equipment term loan agreements at March 31, 2020, which bear interest at a weighted-average fixed rate of 7.7%.

Strong/MDI Installment Loan

On September 5, 2017, the Company’s Canadian subsidiary, Strong/MDI, entered into a demand credit agreement, as amended and restated May 15, 2018, with a bank consisting of a revolving line of credit for up to CDN$3.5 million subject to a borrowing base requirement, a 20-year installment loan for up to CDN$6.0 million and a 5-year installment loan for up to CDN$500,000. Amounts outstanding under the line of credit are payable on demand and bear interest at the prime rate established by the lender. Amounts outstanding under the installment loans bear interest at the lender’s prime rate plus 0.5% and are payable in monthly installments, including interest, over their respective borrowing periods. The lender may also demand repayment of the installment loans at any time. The Strong/MDI credit facilities are secured by a lien on Strong/MDI’s Quebec, Canada facility and substantially all of Strong/MDI’s assets. The credit agreement requires Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity method investments) not exceeding 2 to 1, a current ratio (excluding amounts due from related parties) of at least 1.5 to 1 and minimum “effective equity” of CDN$8.0 million. On April 24, 2018, the Company borrowed CDN$3.5 million on the 20-year installment loan. There was CDN$3.9 million, or approximately $2.8 million, of principal outstanding on the 20-year installment loan as of March 31, 2020, which bears variable interest at 2.95%. Strong/MDI was in compliance with its debt covenants as of March 31, 2020. Subsequent to March 31, 2020, Strong/MDI drew down approximately CDN$2.9 million, or approximately $2.1 million, on its revolving line of credit. Amounts outstanding under Strong/MDI’s line of credit are payable upon demand and bear interest at a 2.45% variable rate.

Scheduled repayments are as follows for the Company’s long-term debt outstanding as of March 31, 2020 (in thousands):

Remainder of 2020	$	758
2021		1,079
2022		1,146
2023		786
2024		19
Thereafter		-
Total	$	3,788

Paycheck Protection Program

On April 14, 2020, the Company entered into a promissory note evidencing a loan of $3.2 million (the “Loan”) under the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) of the CARES Act. The Company intended to use the Loan for qualifying payroll, rent and utility expenses in accordance with the terms of the CARES Act. At the time the Company applied for the Loan, the Company believed it qualified to receive the funds pursuant to the PPP.

On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that creates additional uncertainty regarding the qualification requirements for a PPP loan for public companies. The Company has less than 300 employees and continues to be severely impacted by the disruption to the cinema, theme park and advertising industries as a result of COVID-19. However, out of an abundance of caution and in light of the new guidance, the Company repaid the full amount of the Loan plus accrued interest to the lender on May 5, 2020.

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Inventories

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Inventories

5. Inventories

Inventories consist of the following (in thousands):

	March 31, 2020		December 31, 2019
Raw materials and components	$	1,562	$	1,584
Work in process		237		211
Finished goods		995		1,084
	$	2,794	$	2,879

The inventory balances are net of reserves of approximately $0.9 million as of both March 31, 2020 and December 31, 2019.

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Revenue - Schedule of Disaggregation of Revenue (Timing of Transfer) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation of Revenue [Line Items]
Total net revenues	$ 13,575	$ 14,306
Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	8,712	10,129
Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	4,863	4,177
Strong Cinema [Member] | Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	5,717	6,044
Strong Cinema [Member] | Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,598	1,557
Convergent [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	4,962	5,535
Convergent [Member] | Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,794	2,992
Convergent [Member] | Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	3,168	2,543
Strong Outdoor [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,197	1,093
Strong Outdoor [Member] | Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,197	1,093
Strong Outdoor [Member] | Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Other [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	101	77
Other [Member] | Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	4
Other [Member] | Transferred Over Time [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	97	77
Strong Entertainment [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	$ 7,315	$ 7,601

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Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Schedule of Lease Costs and Other Lease Information

The following tables present the Company’s lease costs and other lease information (dollars in thousands):

Lease cost
	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Finance lease cost:
Amortization of right-of-use assets	$	380		$	49
Interest on lease liabilities		164			19
Operating lease cost		401			687
Short-term lease cost		15			6
Sublease income		(116	)		(86	)
Net lease cost	$	844		$	675

Other information
	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	164	$	19
Operating cash flows from operating leases	$	341	$	590
Financing cash flows from finance leases	$	380	$	49
Right-of-use assets obtained in exchange for new finance lease liabilities	$	-	$	232
Right-of-use assets obtained in exchange for new operating lease liabilities	$	109	$	644

	As of March 31, 2020
Weighted-average remaining lease term - finance leases (years)		2.9
Weighted-average remaining lease term - operating leases (years)		7.0
Weighted-average discount rate - finance leases		12.1	%
Weighted-average discount rate - operating leases		4.2	%

Schedule of Future Minimum Lease Payments

The following table presents a maturity analysis of the Company’s finance and operating lease liabilities as of March 31, 2020 (in thousands):

	Operating Leases			Finance Leases
Remainder of 2020	$	920		$	1,630
2021		1,169			2,173
2022		820			1,967
2023		660			353
2024		669			88
Thereafter		2,447			-
Total lease payments		6,685			6,211
Less: Amount representing interest		(1,079	)		(1,017	)
Present value of lease payments		5,606			5,194
Less: Current maturities		(974	)		(1,633	)
Lease obligations, net of current portion	$	4,632		$	3,561

Schedule of Maturity Analysis of Long-term Subleases

The following table presents a maturity analysis of the Company’s long-term subleases (in thousands):

Remainder of 2020	$	109
2021		137
2022		23
2023		-
2024		-
Thereafter		-
Total sublease payments	$	269

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Summary of Significant Accounting Policies - Schedule of Fair Value Measured Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 6,546	$ 4,951
Restricted cash	351	351	$ 350
Notes receivable
Total	6,897	5,302
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	6,546	4,951
Restricted cash	351	351
Notes receivable
Total	6,897	5,302
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents
Restricted cash
Notes receivable
Total
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents
Restricted cash
Notes receivable
Total

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Debt - Schedule of Long-term Debt Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Disclosure [Abstract]
Remainder of 2020	$ 758
2021	1,079
2022	1,146
2023	786
2024	19
Thereafter
Total	$ 3,788	$ 4,031

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Intangible Assets - Schedule of Intangible Assets Future Amortization Expense (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Total	$ 1,453	$ 1,534
Intangible Assets [Member]
Remainder of 2020	415
2021	516
2022	242
2023	57
2024
Thereafter
Total	$ 1,230

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Leases - Schedule of Maturity Analysis of Long-term Subleases (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Leases [Abstract]
Remainder of 2020	$ 109
2021	137
2022	23
2023
2024
Thereafter
Total sublease payments	$ 269

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Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Gross	$ 3,057	$ 3,036
Intangible assets, Accumulated amortization	(1,604)	(1,502)
Intangible assets, Net	$ 1,453	$ 1,534
Software in Service [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Useful life	5 years	5 years
Intangible assets, Gross	$ 2,403	$ 2,362
Intangible assets, Accumulated amortization	(1,219)	(1,087)
Intangible assets, Net	$ 1,184	$ 1,275
Product Formulation [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Useful life	10 years	10 years
Intangible assets, Gross	$ 431	$ 471
Intangible assets, Accumulated amortization	(385)	(415)
Intangible assets, Net	46	56
Software in Development [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Gross	223	203
Intangible assets, Accumulated amortization
Intangible assets, Net	$ 223	$ 203

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Loss Per Common Share - Schedule of Reconciliation Weighted Average Between Basic and Diluted Earnings Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share [Abstract]
Basic weighted average shares outstanding	14,625,000	14,438,000
Dilutive effect of stock options and certain non-vested restricted stock awards
Diluted weighted average shares outstanding	14,625,000	14,438,000

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Investments - Summary of Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]
Equity method investments, Carrying Amount	$ 10,754	$ 9,697
Total Investments	14,368	13,311
1347 Property Insurance Holdings, Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Equity method investments, Carrying Amount	$ 8,239	$ 6,897
Equity method investments, Economic Interest	17.20%	17.20%
Itasca Capital, Ltd. [Member]
Schedule of Equity Method Investments [Line Items]
Equity method investments, Carrying Amount	$ 2,515	$ 2,800
Equity method investments, Economic Interest	32.30%	32.30%
Firefly Systems, Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Cost method investment, Carrying Amount	$ 3,614	$ 3,614

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Business Segment Information - Reconciliation of Assets from Segment to Consolidated (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Segment Reporting, Asset Reconciling Item [Line Items]
Identifiable assets	$ 57,215	$ 57,633
Strong Entertainment [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Identifiable assets	18,730	18,135
Convergent [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Identifiable assets	13,736	15,797
Strong Outdoor [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Identifiable assets	3,491	3,737
Corporate Assets [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Identifiable assets	$ 21,258	$ 19,964

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Stock Compensation - Schedule of Nonvested Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Restricted Stock, Non-vested beginning balance | shares	522,379
Number of Restricted Stock, Granted | shares
Number of Restricted Stock, vested | shares	(35,833)
Number of Restricted Stock, forfeited | shares
Number of Restricted Stock, Non-vested ending balance | shares	486,546
Weighted Average Grant Date Fair Value, Non-vested beginning balance | $ / shares	$ 3.14
Weighted Average Grant Date Fair Value, Granted | $ / shares
Weighted Average Grant Date Fair Value, Vested | $ / shares	4.70
Weighted Average Grant Date Fair Value, Forfeited | $ / shares
Weighted Average Grant Date Fair Value, Non-vested ending balance | $ / shares	$ 3.03

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and all majority owned and controlled domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America (also referred to as “GAAP”) for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The condensed consolidated balance sheet as of December 31, 2019 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary to present a fair statement of the financial position and the results of operations and cash flows for the respective interim periods. Certain prior period balances have been reclassified to conform to current period presentation. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

Unless otherwise indicated, all references to “dollars” and “$” in this Quarterly Report on Form 10-Q are to, and amounts are presented in, U.S. dollars.

Use of Management Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

There is significant ongoing uncertainty surrounding the COVID-19 global pandemic and the extent and duration of the impacts that it may have on the Company, as well as its customers, suppliers, and employees. There is heightened potential for future reserves against trade receivables, inventory write downs and impairments of long-lived assets, goodwill, intangible assets and investments. In the current environment, assumptions about future financial and operational performance, supply chain pricing and availability and customer creditworthiness have greater variability than normal, which could in the future significantly affect the valuation of the Company’s assets, both financial and non-financial. As an understanding of the longer-term impacts of COVID-19 on the Company’s customers and business develops, there is heightened potential for changes in these views over the remainder of 2020, and potentially beyond.

Restricted Cash

Restricted cash represents amounts held in a collateral account for the Company’s corporate travel and purchasing credit card program.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful accounts based on several factors, including overall customer credit quality, historical write-off experience and a specific analysis that projects the ultimate collectability of the account. As such, these factors may change over time causing the allowance level and bad debt expense to be adjusted accordingly. Since many of Strong Entertainment’s customers have been negatively impacted by COVID-19, the Company recorded $0.7 million of bad debt expense during the first quarter of 2020 as a result of the increased uncertainty related to collection of trade accounts receivable from these customers.

Investments

The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net income (loss) resulting from these investments is reported under the line item captioned “equity method investment income (loss)” in our condensed consolidated statements of operations. The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. The Company applies the cost method of accounting to investments when it does not have significant influence or a controlling interest in the investee and the fair value of the investment is not readily determinable. Dividends on cost method investments received are recorded as income.

The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Management reviewed the underlying net assets of the investees during the three months ended March 31, 2020 and determined that the Company’s proportionate economic interest in the investees indicate that the investments were not other than temporarily impaired. The carrying value of our equity method and cost method investments is reported as “investments” on the condensed consolidated balance sheets. Note 6 contains additional information on our equity method and cost method investments.

Fair Value of Financial Instruments

Assets and liabilities measured at fair value are categorized into a fair value hierarchy based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

● 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

The following tables present the Company’s financial assets measured at fair value based upon the level within the fair value hierarchy in which the fair value measurements are classified, as of March 31, 2020 and December 31, 2019.

Fair values measured on a recurring basis at March 31, 2020 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	6,546	$	-	$	-	$	6,546
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	6,897	$	-	$	-	$	6,897

Fair values measured on a recurring basis at December 31, 2019 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,951	$	-	$	-	$	4,951
Restricted cash		351		-		-		351
Notes receivable		-		-		-		-
Total	$	5,302	$	-	$	-	$	5,302

The following table reconciles the beginning and ending balance of the Company’s notes receivable at fair value (in thousands):

	Three Months Ended March 31,
	2020		2019
Notes receivable balance, beginning of period	$	-	$	3,965
Fair value adjustment		-		(510	)
Notes receivable balance, end of period	$	-	$	3,455

During 2011, the Company entered into certain unsecured notes receivable arrangements with CDF2 Holdings, LLC pertaining to the sale and installation of digital projection equipment. The notes receivable accrue interest at a rate of 15% per annum. Interest not paid in any particular year is added to the principal and also accrues interest at 15%. In connection with this transaction, the Company also entered into an agreement with one of its customers, pursuant to which the Company is obligated to provide up to $1.1 million of credits against any amounts due to the Company from the customer based on cash collected on the notes receivable. In the event the Company does not have any outstanding balances due from the customer, the Company would be obligated to remit up to the first $1.1 million collected on the notes receivable directly to the customer.

The notes receivable are recorded at estimated fair value. The significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are the discount rate and percentage of default. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. Adjustments to the fair value of the notes receivable are included in other (expense) income on the Company’s condensed consolidated statements of operations.

In order to estimate the fair value, the Company reviews the financial position and estimated cash flows of the debtor of the notes receivable. During the year ended December 31, 2019, the Company adjusted the carrying value of the notes receivable to $0 based on management’s review of the debtor’s financial statements and changes in the underlying trend of historical and projected cash flows available to service the notes. The related $1.1 million contingent liability was also adjusted during the year ended December 31, 2019, based on the Company’s expectation that cash flow from the notes receivable will not be available. As of March 31, 2020, management estimated the fair value of the notes receivable to be $0.

The Company’s short-term and long-term debt is recorded at historical cost. As of March 31, 2020, the Company’s long-term debt, including current maturities, had a carrying value of $3.8 million. Based on discounted cash flows using current quoted interest rates (Level 2 of the fair value hierarchy), the estimated fair value at March 31, 2020 was $3.5 million.

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses and short-term debt, reported in the condensed consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. Note 6 includes fair value information related to our equity and cost method investments. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which include non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). The Company did not have any significant non-recurring measurements of non-financial assets or liabilities during the three months ended March 31, 2020 or 2019.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, “Intangibles- Goodwill and Other- Internal Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This ASU requires customers in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal use software guidance in ASC 350-40 to determine which implementation costs to capitalize or expense. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU improves the effectiveness of fair value measurement disclosures by eliminating, adding and modifying certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company believes the adoption of this ASU will not significantly impact its results of operations and financial position.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. The effective date of the standard will be for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in the standard are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815.” This ASU clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives. The effective date of the standard will be for annual periods beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on its condensed consolidated financial statements and related disclosures.

In April 2020, the FASB issued a question-and-answer document to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the effects of the COVID-19 pandemic. The guidance will allow concessions related to the timing of payments, where the total consideration has not changed, to not be accounted for as lease modifications. Instead, any such concessions can be accounted for as if no change was made to the contract or as variable lease payments. The Company is currently assessing the impact of the question-and-answer document on its condensed consolidated financial statements, and will adopt the guidance in the second quarter of 2020, to the extent applicable.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 08, 2020
Document And Entity Information
Entity Registrant Name	BALLANTYNE STRONG, INC.
Entity Central Index Key	0000946454
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Reporting Status Current	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		14,651,253
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Net loss	$ (447)	$ (4,150)
Adjustment to postretirement benefit obligation	(4)	2
Unrealized loss on available-for-sale securities of equity method investments, net of tax	(76)	(91)
Currency translation adjustment:
Unrealized net change arising during period	(1,205)	257
Total other comprehensive (loss) income	(1,285)	168
Comprehensive loss	$ (1,732)	$ (3,982)

XML

Revenue (Tables)

3 Months Ended

Mar. 31, 2020

Major Source [Member]

Schedule of Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three months ended March 31, 2020 and March 31, 2019 (in thousands):

	Three Months Ended March 31, 2020
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Screen system sales	$	2,956	$	-	$	-	$	-	$	2,956
Digital equipment sales		1,649		1,172		-		-		2,821
Extended warranty sales		159		-		-		-		159
Other product sales		468		-		-		-		468
Total product sales		5,232		1,172		-		-		6,404
Field maintenance and monitoring services		1,804		3,414		28		-		5,246
Installation services		257		357		-		-		614
Advertising		-		-		1,169		-		1,169
Other service revenues		22		19		-		101		142
Total service revenues		2,083		3,790		1,197		101		7,171
Total	$	7,315	$	4,962	$	1,197	$	101	$	13,575

	Three Months Ended March 31, 2019
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Screen system sales	$	2,819	$	-	$	-	$	-	$	2,819
Digital equipment sales		1,484		625		-		-		2,109
Extended warranty sales		234		-		-		-		234
Other product sales		398		-		-		-		398
Total product sales		4,935		625		-		-		5,560
Field maintenance and monitoring services		1,967		2,773		53		-		4,793
Installation services		670		2,118		-		-		2,788
Advertising		-		-		1,040		-		1,040
Other service revenues		29		19		-		77		125
Total service revenues		2,666		4,910		1,093		77		8,746
Total	$	7,601	$	5,535	$	1,093	$	77	$	14,306

Timing of Transfer [Member]

Schedule of Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by the timing of transfer of goods or services to the customer for the three months ended March 31, 2020 and March 31, 2019 (in thousands):

	Three Months Ended March 31, 2020
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Point in time	$	5,717	$	1,794	$	1,197	$	4	$	8,712
Over time		1,598		3,168		-		97		4,863
Total	$	7,315	$	4,962	$	1,197	$	101	$	13,575

	Three Months Ended March 31, 2019
	Strong Entertainment		Convergent		Strong Outdoor		Other		Total
Point in time	$	6,044	$	2,992	$	1,093	$	-	$	10,129
Over time		1,557		2,543		-		77		4,177
Total	$	7,601	$	5,535	$	1,093	$	77	$	14,306

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Commitments, Contingencies and Concentrations

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments, Contingencies and Concentrations

13. Commitments, Contingencies and Concentrations

Litigation

The Company is involved, from time to time, in certain legal disputes in the ordinary course of business operations. No such disputes, individually or in the aggregate, are expected to have a material effect on the Company’s business or financial condition.

Concentrations

The Company’s top ten customers accounted for approximately 52% of consolidated net revenues during the three months ended March 31, 2020. Trade accounts receivable from these customers represented approximately 40% of net consolidated receivables at March 31, 2020. In addition, the Company had one customer account for more than 10% of both its consolidated net revenues during the three months ended March 31, 2020 and its net consolidated receivables as of March 31, 2020. While the Company believes its relationships with such customers are stable, most arrangements are made by purchase order and are terminable at will by either party. A significant decrease or interruption in business from the Company’s significant customers could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company could also be adversely affected by such factors as changes in foreign currency rates and weak economic and political conditions in each of the countries in which the Company sells its products.

Financial instruments that potentially expose the Company to a concentration of credit risk principally consist of accounts receivable. The Company sells product to a large number of customers in many different geographic regions. To minimize credit risk, the Company performs ongoing credit evaluations of its customers’ financial condition.

Insurance Recoveries

During February 2019, one portion of Strong/MDI’s Quebec, Canada facility sustained damage as a result of inclement weather. The Company has property and casualty and business interruption insurance and has been working with its insurance carrier with regard to the insurance claims for reimbursement of incurred costs of the affected portion of the facility and compensation for the Company’s business interruption losses.

Through March 31, 2020, the insurance carrier has advanced $3.0 million of insurance proceeds to the Company, which included $1.9 million related to the property and casualty claim and the remaining $1.1 million related to our business interruption claim. Any additional future claims payments are at the discretion of the insurance carrier based on its continuing claims analysis.

For the three months ended March 31, 2020 and March 31, 2019, the Company recorded total insurance recoveries of its incurred costs totaling $0.1 million and $0.4 million, respectively. The Company has also deferred $0.8 million of proceeds received in connection with the business interruption claim within accrued expenses on the condensed consolidated balance sheet as of March 31, 2020. Recovery of lost profit under the business interruption coverage will be reflected in future periods as contingencies are resolved and the amounts are confirmed with the insurer.

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets consisted of the following at March 31, 2020 (dollars in thousands):

	Useful life		Gross		Accumulated Amortization			Net
	(Years)
Intangible assets not yet subject to amortization:
Software in development			$	223	$	-		$	223
Intangible assets subject to amortization:
Software in service		5		2,403		(1,219	)		1,184
Product formulation		10		431		(385	)	$	46
Total			$	3,057	$	(1,604	)	$	1,453

Intangible assets consisted of the following at December 31, 2019 (dollars in thousands):

	Useful life		Gross		Accumulated Amortization			Net
	(Years)
Intangible assets not yet subject to amortization:
Software in development			$	203	$	-		$	203
Intangible assets subject to amortization:
Software in service		5		2,362		(1,087	)		1,275
Product formulation		10		471		(415	)		56
Total			$	3,036	$	(1,502	)	$	1,534

Schedule of Intangible Assets Future Amortization Expense

The following table shows the Company’s estimated future amortization expense related to intangible assets currently subject to amortization for the next five years (in thousands):

Remainder of 2020	$	415
2021		516
2022		242
2023		57
2024		-
Thereafter		-
Total	$	1,230

XML

Loss Per Common Share (Details Narrative) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stock Option In Which Exercise Price Exceeds The Average Market Price of Common Shares [Member]
Anti dilutive securities excluded from computation of earnings per share	1,057,000	833,500
Common Stock Equivalents [Member]
Anti dilutive securities excluded from computation of earnings per share	86,725	20,994

XML

Investments (Details Narrative) - USD ($) $ in Thousands		3 Months Ended
	May 21, 2019	Mar. 31, 2020	Mar. 31, 2019	Apr. 21, 2020	Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]
Retained earnings undistributed earnings from our equity method investees		$ 13
Master Lease Agreement and Unit Purchase Agreement [Member]
Schedule of Equity Method Investments [Line Items]
Number of shares can be repurchased, amount	$ 1,200
Master Lease Agreement [Member] | Other Income (Expense) [Member]
Schedule of Equity Method Investments [Line Items]
Selling profit		300
Second Quarter of 2020 [Member]
Schedule of Equity Method Investments [Line Items]
Loss on investment		1,400
1347 Property Insurance Holdings, Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Dividend received
Quoted fair value of the company's ownership		$ 5,100
Equity method ownership percentage		17.20%			17.20%
1347 Property Insurance Holdings, Inc. [Member] | Minimum [Member]
Schedule of Equity Method Investments [Line Items]
Combined equity ownership percentage		20.00%
1347 Property Insurance Holdings, Inc. [Member] | Minimum [Member] | Subsequent Event [Member]
Schedule of Equity Method Investments [Line Items]
Combined equity ownership percentage				50.00%
Itasca Capital, Ltd. [Member]
Schedule of Equity Method Investments [Line Items]
Dividend received
Quoted fair value of the company's ownership		$ 2,500
Equity method ownership percentage		32.30%			32.30%
Firefly Systems, Inc. [Member] | Taxicab Advertising Collaboration Agreement [Member] | Series A-2 Preferred Shares [Member]
Schedule of Equity Method Investments [Line Items]
Consideration received for agreement	$ 4,800

XML

Intangible Assets (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 200	$ 200

XML

Business Segment Information - Schedule of Segment Reporting Information by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Net revenue	$ 13,575	$ 14,306
United States [Member]
Segment Reporting Information [Line Items]
Net revenue	11,680	12,864
Canada [Member]
Segment Reporting Information [Line Items]
Net revenue	740	798
China [Member]
Segment Reporting Information [Line Items]
Net revenue	201	212
Mexico [Member]
Segment Reporting Information [Line Items]
Net revenue	78	3
Latin America [Member]
Segment Reporting Information [Line Items]
Net revenue	276	29
Europe [Member]
Segment Reporting Information [Line Items]
Net revenue	194	280
Asia (Excluding China) [Member]
Segment Reporting Information [Line Items]
Net revenue	258	58
Other [Member]
Segment Reporting Information [Line Items]
Net revenue	$ 148	$ 62

XML

Commitments, Contingencies and Concentrations (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Strong/MDI's Quebec [Member]
Concentration Risk [Line Items]
Proceeds from insurance	$ 3,000
Insurance recoveries	100	$ 400
Strong/MDI's Quebec [Member] | Property and Casualty Claim [Member]
Concentration Risk [Line Items]
Proceeds from insurance	1,900
Strong/MDI's Quebec [Member] | Business Interruption Claim [Member]
Concentration Risk [Line Items]
Proceeds from insurance	1,100
Accrued expenses	$ 800
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Top 10 Customers [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	52.00%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | One Customer [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	10.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Top 10 Customers [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	40.00%

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Total net revenues	$ 13,575	$ 14,306
Total cost of revenues	9,322	11,661
Gross profit	4,253	2,645
Selling and administrative expenses:
Selling	1,344	1,228
Administrative	4,830	3,929
Total selling and administrative expenses	6,174	5,157
Loss on disposal of assets		(64)
Loss from operations	(1,921)	(2,576)
Other income (expense):
Interest expense	(272)	(119)
Fair value adjustment to notes receivable		(510)
Foreign currency transaction gain (loss)	488	(143)
Other income, net	289	36
Total other income (expense)	505	(736)
Loss before income taxes and equity method investment income (loss)	(1,416)	(3,312)
Income tax expense	(400)	(141)
Equity method investment income (loss)	1,369	(697)
Net loss	$ (447)	$ (4,150)
Basic loss per share	$ (0.03)	$ (0.29)
Diluted loss per share	$ (0.03)	$ (0.29)
Weighted-average shares used in computing net loss per share:
Basic	14,625,000	14,438,000
Diluted	14,625,000	14,438,000
Product [Member]
Total net revenues	$ 6,404	$ 5,560
Total cost of revenues	4,695	3,523
Service [Member]
Total net revenues	7,171	8,746
Total cost of revenues	$ 4,627	$ 8,138

XML

Nature of Operations

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

1. Nature of Operations

Ballantyne Strong, Inc. (“Ballantyne” or the “Company”), a Delaware corporation, is a holding company with diverse business activities focused on serving the entertainment, retail and advertising markets. The Company, and its wholly owned subsidiaries Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc. (“Strong/MDI”), Convergent Media Systems Corporation (“Convergent”) and Strong Digital Media, LLC (“SDM”) design, integrate and install technology solutions for a broad range of applications; develop and deliver out-of-home messaging, advertising and communications; manufacture projection screens; and provide managed services including monitoring of networked equipment to our customers.

XML

Goodwill (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Changes in Carrying Amount of Goodwill

The following represents a summary of changes in the Company’s carrying amount of goodwill for the three months ended March 31, 2020 (in thousands):

Balance as of December 31, 2019	$	919
Foreign currency translation adjustment		(77	)
Balance as of March 31, 2020	$	842

XML

Loss Per Common Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Schedule of Reconciliation Weighted Average Between Basic and Diluted Earnings Per Share

However, because the Company reported losses in all periods presented, there were no differences between average shares used to compute basic and diluted loss per share for the three months ended March 31, 2020 and March 31, 2019. The following table summarizes the weighted average shares used to compute basic and diluted loss per share (shares in thousands):

	Three Months Ended March 31,
	2020		2019
Weighted average shares outstanding:
Basic weighted average shares outstanding		14,625		14,438
Dilutive effect of stock options and certain non-vested restricted stock awards		-		-
Diluted weighted average shares outstanding		14,625		14,438

XML

Business Segment Information

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Business Segment Information

14. Business Segment Information

The Company conducts its operations through three primary business segments: Strong Entertainment (formerly known as Strong Cinema), Convergent and Strong Outdoor. The Strong Entertainment segment name change is to the name only and had no impact on the Company’s historical financial position, results of operations, cash flow or segment level results previously reported. Strong Entertainment is one of the largest manufacturers of premium projection screens and also manufactures customized screen support systems, distributes other products and provides technical support services to the cinema, amusement park and other markets. Convergent delivers digital signage solutions and related services to large multi-location organizations in the United States and Canada. Strong Outdoor provides outdoor advertising and experiential marketing to advertising agencies and corporate accounts, primarily in New York City. The Company’s operating segments were determined based on the manner in which management organizes segments for making operating decisions and assessing performance.

Summary by Business Segments

	Three Months Ended March 31,
	2020			2019
	(in thousands)
Net revenues
Strong Entertainment	$	7,315		$	7,601
Convergent		4,962			5,535
Strong Outdoor		1,197			1,093
Other		101			77
Total net revenues		13,575			14,306
Gross profit (loss)
Strong Entertainment		1,834			2,415
Convergent		1,985			1,569
Strong Outdoor		333			(1,416	)
Other		101			77
Total gross profit		4,253			2,645
Operating (loss) income
Strong Entertainment		(337	)		1,159
Convergent		857			752
Strong Outdoor		(376	)		(2,012	)
Other		(114	)		(237	)
Total segment operating income (loss)		30			(338	)
Unallocated administrative expenses		(1,951	)		(2,238	)
Loss from operations		(1,921	)		(2,576	)
Other income (expense), net		505			(736	)
Loss before income taxes and equity method investment loss	$	(1,416	)	$	(3,312	)

(In thousands)	March 31, 2020		December 31, 2019
Identifiable assets
Strong Entertainment	$	18,730	$	18,135
Convergent		13,736		15,797
Strong Outdoor		3,491		3,737
Corporate assets		21,258		19,964
Total	$	57,215	$	57,633

Summary by Geographical Area

	Three Months Ended March 31,
(In thousands)	2020		2019
Net revenue
United States	$	11,680	$	12,864
Canada		740		798
China		201		212
Mexico		78		3
Latin America		276		29
Europe		194		280
Asia (excluding China)		258		58
Other		148		62
Total	$	13,575	$	14,306

(In thousands)	March 31, 2020		December 31, 2019
Identifiable assets
United States	$	39,430	$	37,508
Canada		17,785		20,125
Total	$	57,215	$	57,633

Net revenues by business segment are to unaffiliated customers. Net revenues by geographical area are based on destination of sales. Identifiable assets by geographical area are based on location of facilities.

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Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

10. Leases

The Company and its subsidiaries lease plant and office facilities and equipment under operating and finance leases expiring through 2028. The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.

Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain of the leases contain extension options; however, the Company has not included such options as part of its right-of-use assets and lease liabilities because it does not expect to extend the leases. The Company measures and records a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, the Company measures the right-of-use assets and lease liabilities using a discount rate equal to the Company’s estimated incremental borrowing rate for loans with similar collateral and duration.

The Company elected to not apply the recognition requirements of Topic 842 to leases of all classes of underlying assets that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Instead, lease payments for such short-term leases are recognized in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

The Company elected, as a lessee, for all classes of underlying assets, to not separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

The following tables present the Company’s lease costs and other lease information (dollars in thousands):

Lease cost
	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Finance lease cost:
Amortization of right-of-use assets	$	380		$	49
Interest on lease liabilities		164			19
Operating lease cost		401			687
Short-term lease cost		15			6
Sublease income		(116	)		(86	)
Net lease cost	$	844		$	675

Other information
	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	164	$	19
Operating cash flows from operating leases	$	341	$	590
Financing cash flows from finance leases	$	380	$	49
Right-of-use assets obtained in exchange for new finance lease liabilities	$	-	$	232
Right-of-use assets obtained in exchange for new operating lease liabilities	$	109	$	644

	As of March 31, 2020
Weighted-average remaining lease term - finance leases (years)		2.9
Weighted-average remaining lease term - operating leases (years)		7.0
Weighted-average discount rate - finance leases		12.1	%
Weighted-average discount rate - operating leases		4.2	%

The following table presents a maturity analysis of the Company’s finance and operating lease liabilities as of March 31, 2020 (in thousands):

	Operating Leases			Finance Leases
Remainder of 2020	$	920		$	1,630
2021		1,169			2,173
2022		820			1,967
2023		660			353
2024		669			88
Thereafter		2,447			-
Total lease payments		6,685			6,211
Less: Amount representing interest		(1,079	)		(1,017	)
Present value of lease payments		5,606			5,194
Less: Current maturities		(974	)		(1,633	)
Lease obligations, net of current portion	$	4,632		$	3,561

The Company subleases certain office and warehouse space and equipment to third parties. Sublease income is included in net service revenues in the condensed consolidated statements of operations. The following table presents a maturity analysis of the Company’s long-term subleases (in thousands):

Remainder of 2020	$	109
2021		137
2022		23
2023		-
2024		-
Thereafter		-
Total sublease payments	$	269

The Company leases certain equipment to customers as a component of its Digital Signage as a Service (“DSaaS”) offering. Under DSaaS, the Company provides support, maintenance and content management services in addition to the use of a media player to the customer. The Company elected, as a lessor, for all classes of underlying assets, to not separate nonlease components from lease components and, instead, to account for each separate lease component and the nonlease components associated with that lease component as a single component if the nonlease components otherwise would be accounted for under Accounting Standards Codification Topic 606 on revenue from contracts with customers, and both of the following conditions are met: 1) the timing and pattern of transfer for the lease component and nonlease components associated with that lease component are the same and 2) the lease component, if accounted for separately, would be classified as an operating lease in accordance with Topic 842. The combined component is accounted for as a single performance obligation under Topic 606 if the nonlease component or components are the predominant component(s) of the combined component. Otherwise, if the lease component is the predominant component, the combined component is accounted for as an operating lease under ASC 842. In the case of the Company’s DSaaS contracts, the nonlease components are predominant; therefore, revenue from DSaaS contracts is accounted for under Topic 606 and is included in net service revenues in the condensed consolidated statements of operations.

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Investments

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments

6. Investments

The following summarizes our investments (dollars in thousands):

	March 31, 2020					December 31, 2019
	Carrying Amount		Economic Interest			Carrying Amount		Economic Interest
Equity Method Investments
1347 Property Insurance Holdings, Inc.	$	8,239		17.1	%	$	6,897		17.2	%
Itasca Capital, Ltd.		2,515		32.3	%		2,800		32.3	%
Total Equity Method Investments		10,754					9,697
Cost Method Investment
Firefly Systems, Inc.		3,614					3,614
Total Investments	$	14,368				$	13,311

Equity Method Investments

The following summarizes the income (loss) of equity method investees reflected in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2020			2019
Entity
1347 Property Insurance Holdings, Inc.	$	1,417		$	144
Itasca Capital, Ltd.		(48	)		(841	)
Total	$	1,369		$	(697	)

1347 Property Insurance Holdings, Inc. (“PIH”) is a publicly traded company that is implementing business plans to operate as a diversified holding company of insurance, reinsurance and investment management businesses. The Company’s Chairman and former Chief Executive Officer is the principal executive officer and chairman of the board of directors of PIH, and the Company’s Co-Chairman is co-chairman of the board of directors of PIH. As of March 31, 2020, they controlled entities that, when combined with the Company’s ownership in PIH, own greater than 20% of PIH, providing the Company with significant influence over PIH, but not controlling interest. The equity method income from PIH was primarily the result of PIH’s non-cash gains associated with the change in fair value of its investment in the common stock of FedNat Holding Company (Nasdaq: FNHC) and PIH’s gain on the sale of its homeowners insurance operations. As a result of the recent significant decline in global equity values, the Company expects to record a loss from its investment in PIH during the second quarter of 2020 of approximately $1.4 million. Effective April 21, 2020, the ownership of such entities, when combined with the Company’s ownership in PIH, exceeded 50% of PIH. The Company did not receive dividends from PIH during the three months ended March 31, 2020 or 2019. Based on quoted market prices, the market value of the Company’s ownership in PIH was $5.1 million at March 31, 2020.

Itasca Capital, Ltd. (“Itasca”) is a publicly traded Canadian company that is an investment vehicle seeking transformative strategic investments. The Company’s Chairman and former Chief Executive Officer is chairman of the board of directors of Itasca, and the Company’s Co-Chairman is also a member of the board of directors of Itasca. These board seats, combined with the Company’s 32.3% ownership of Itasca, provide the Company with significant influence over Itasca, but not controlling interest. The Company did not receive dividends from Itasca during the three months ended March 31, 2020 or 2019. Based on quoted market prices, the market value of the Company’s ownership in Itasca was $2.5 million at March 31, 2020.

As of March 31, 2020, the Company’s retained earnings included undistributed earnings from its equity method investees of approximately $13 thousand.

The summarized financial information presented below reflects the financial information of the Company’s equity method investees for the three months ended December 31, 2019 and 2018, consistent with the Company’s recognition of the results of its equity method investments on a one-quarter lag (in thousands):

For the three months ended December 31,	2019		2018
Revenue	$	4,340	$	352
Operating income	$	3,977	$	240
Net income (loss)	$	8,121	$	(1,791	)

Cost Method Investment

On May 21, 2019, SDM entered into a Taxicab Advertising Collaboration Agreement (the “Commercial Agreement”) and a Unit Purchase Agreement (the “Unit Purchase Agreement”) with Firefly Systems, Inc. (“Firefly”), pursuant to which SDM has agreed to make available to Firefly 300 digital taxi tops and the parties have agreed to coordinate the fulfilling of SDM’s agreements with the Metropolitan Taxicab Board of Trade, Inc. (“MTBOT”) and Creative Mobile Media, LLC (“CMM”), each dated February 8, 2018. Firefly has agreed to fulfill the digital taxi top advertising obligations under the MTBOT agreement and CMM agreement, and SDM has agreed to fulfill the non-digital taxi top advertising obligations under the MTBOT agreement and CMM agreement. The Company is a party to the Unit Purchase Agreement and has agreed to guarantee the payment obligations of SDM under the Commercial Agreement. As consideration for entering into these agreements, the Company received $4.8 million of Firefly’s Series A-2 preferred shares (“Firefly Shares”). The Firefly Shares, including those subsequently issued pursuant to an earn-out provision (if any), will be subject to a repurchase option for a period of three years to cover SDM’s indemnity obligations and other post-closing covenants under the Commercial Agreement and the Unit Purchase Agreement. As a condition of the transaction, SDM has agreed to hold the Firefly Shares in an investment fund managed by Fundamental Global Investors, LLC, the controlling stockholder of the Company, that is wholly owned by SDM.

The 300 digital tops the Company has made available to Firefly are subject to a master equipment lease agreement the Company entered into during 2017. Pursuant to the master lease agreement and the Unit Purchase Agreement, the Company will remain the primary obligor until such time as the lease expires. In addition, of the $4.8 million of Firefly Shares received, $1.2 million are eligible for repurchase by Firefly if the Company does not exercise the purchase option contained within the master lease agreement. Accordingly, the Company has deferred recognizing an investment related to these Firefly Shares eligible for repurchase until such time it is reasonably certain the Company will exercise the purchase option. The transaction, in effect, transferred control of the underlying asset to Firefly. As additional consideration for the right to use the digital taxi tops, Firefly has agreed to pay for certain of Company’s operating expenses associated with the non-digital taxi tops. The Company concluded the payments that Firefly will make on its behalf are considered variable payments and were not included in the calculation of the selling profit. Therefore, the Company will record the benefit and the related operating expenses in the period when the changes in facts and circumstances on which the variable lease payments are based occur.

The Unit Purchase Agreement contains an earnout provision pursuant to which SDM can obtain additional Firefly Shares. The earnout period runs from May 22, 2019 through June 30, 2020. SDM will earn additional Firefly Shares equivalent to the cash collections under certain digital top contracts that were in place at the closing of the transaction. In connection with the additional Firefly Shares expected to be received, the Company recorded an additional $0.3 million gain on the Firefly transaction during the three months ended March 31, 2020. The Firefly Shares will be delivered to SDM shortly after the conclusion of the earnout period.

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Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of Debt

The Company’s debt consists of the following (in thousands):

	March 31, 2020			December 31, 2019
Short-term debt:
Strong/MDI installment loan	$	2,767		$	3,080
Insurance note payable		421			-
Current portion of long-term debt		1,016			998
Total short-term debt		4,204			4,078
Long-term debt:
Equipment term loans		3,788			4,031
Total principal balance of long-term debt		3,788			4,031
Less: current portion		(1,016	)		(998	)
Less: unamortized debt issuance costs		(15	)		(14	)
Total long-term debt		2,757			3,019
Total short-term and long-term debt	$	6,961		$	7,097

Schedule of Long-term Debt Maturities

Scheduled repayments are as follows for the Company’s long-term debt outstanding as of March 31, 2020 (in thousands):

Remainder of 2020	$	758
2021		1,079
2022		1,146
2023		786
2024		19
Thereafter		-
Total	$	3,788

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Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands		3 Months Ended		12 Months Ended
	Dec. 31, 2011	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Bad debt expense		$ 819	$ (310)
Fair value adjustment of notes receivable			$ (510)
Fair value adjustment to contingent liability				1,100
Fair value of notes receivable
Long-term debt		3,788		$ 4,031
Estimated fair value of long term debt		$ 3,500
Unsecured Notes Receivable Arrangements [Member] | CDF2 Holdings, LLC [Member]
Percentage of notes receivable accrue interest rate	15.00%
Description of accrued interest rate	The notes receivable accrue interest at a rate of 15% per annum. Interest not paid in any particular year is added to the principal and also accrues interest at 15%.
Amount obligated to customer	$ 1,100
Amount obligated to remit from customer	$ 1,100

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Revenue - Schedule of Disaggregation of Revenue (Major Source) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation of Revenue [Line Items]
Total net revenues	$ 13,575	$ 14,306
Strong Entertainment [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	7,315	7,601
Convergent [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	4,962	5,535
Strong Outdoor [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,197	1,093
Other [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	101	77
Product [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	6,404	5,560
Product [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	2,956	2,819
Product [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	2,821	2,109
Product [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	159	234
Product [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	468	398
Product [Member] | Strong Entertainment [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	5,232	4,935
Product [Member] | Strong Entertainment [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	2,956	2,819
Product [Member] | Strong Entertainment [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,649	1,484
Product [Member] | Strong Entertainment [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	468	398
Product [Member] | Convergent [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,172	625
Product [Member] | Convergent [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Convergent [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,172	625
Product [Member] | Convergent [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Convergent [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Strong Outdoor [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Strong Outdoor [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Strong Outdoor [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Strong Outdoor [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Strong Outdoor [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Other [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Other [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Other [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Other [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Other [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Product [Member] | Entertainment [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	159	234
Service [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	7,171	8,746
Service [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	5,246	4,793
Service [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	614	2,788
Service [Member] | Advertising [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,169	1,040
Service [Member] | Other Service Revenues [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	142	125
Service [Member] | Strong Entertainment [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	2,083	2,666
Service [Member] | Strong Entertainment [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,804	1,967
Service [Member] | Strong Entertainment [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	257	670
Service [Member] | Strong Entertainment [Member] | Advertising [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Service [Member] | Strong Entertainment [Member] | Other Service Revenues [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	22	29
Service [Member] | Convergent [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	3,790	4,910
Service [Member] | Convergent [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	3,414	2,773
Service [Member] | Convergent [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	357	2,118
Service [Member] | Convergent [Member] | Advertising [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Service [Member] | Convergent [Member] | Other Service Revenues [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	19	19
Service [Member] | Strong Outdoor [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,197	1,093
Service [Member] | Strong Outdoor [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	28	53
Service [Member] | Strong Outdoor [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Service [Member] | Strong Outdoor [Member] | Advertising [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	1,169	1,040
Service [Member] | Strong Outdoor [Member] | Other Service Revenues [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Service [Member] | Other [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	101	77
Service [Member] | Other [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Service [Member] | Other [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Service [Member] | Other [Member] | Advertising [Member]
Disaggregation of Revenue [Line Items]
Total net revenues
Service [Member] | Other [Member] | Other Service Revenues [Member]
Disaggregation of Revenue [Line Items]
Total net revenues	$ 101	$ 77

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Stock Compensation (Details Narrative) - USD ($) $ in Thousands		3 Months Ended
	Dec. 17, 2019	Mar. 31, 2020	Mar. 31, 2019
Restricted Stock Shares and Restricted Stock Units [Member]
Compensation cost expected to be recognized, weighted average period		2 years
Unrecognized for restricted stock, value		$ 1,100
Stock Options [Member]
Share-based compensation arrangement by share-based payment award, options, non-vested, number		666,000
Total unrecognized compensation cost related to stock option awards		$ 1,000
Compensation cost expected to be recognized, weighted average period		3 years
Year 2017 Plan [Member]
Number of shares authorized for issuance	1,975,000
Share based compensation extended expiration date	Oct. 27, 2029
Share based compensation arrangement by share based payment award number of shares available for grant		2,366,778
Selling and Administrative Expenses [Member]
Share based compensation expense		$ 300	$ 200

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Leases (Details Narrative)	3 Months Ended
	Mar. 31, 2020
Leases [Abstract]
Operating lease expire, term	Expiring through 2028
Finance lease, expire term	Expiring through 2028

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Goodwill - Summary of Changes in Carrying Amount of Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Balance at beginning	$ 919
Foreign currency translation adjustment	(77)
Balance at end	$ 842