10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2023

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

FG GROUP HOLDINGS INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	47-0587703
(State or Other Jurisdiction of	(IRS Employer
Incorporation or Organization)	Identification Number)
5960 Fairview Road, Suite 275 Charlotte, North Carolina	28210
(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 Stock, $0.01 par value	FGH	NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 ☒ 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	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

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 12, 2023
Common Stock, $0.01 par value	19,469,649 shares

TABLE OF CONTENTS

		Page No.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets, March 31, 2023 and December 31, 2022 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 20221 (Unaudited)	7
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	34
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.	Exhibits	36
	Signatures	37

2

PART I. Financial Information

Item 1. Financial Statements

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(Unaudited)

	March 31, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	4,349		$	3,789
Accounts receivable (net of allowance for credit losses of $273 and $409, respectively)		5,552			6,167
Inventories, net		3,660			3,389
Other current assets		5,387			4,871
Total current assets		18,948			18,216
Property, plant and equipment, net		12,493			12,649
Operating lease right-of-use assets		285			310
Finance lease right-of-use asset		633			666
Equity holdings		33,756			37,522
Film and television programming rights, net		1,584			1,501
Intangible assets, net		4			5
Goodwill		882			882
Other assets		2			2
Total assets	$	68,587		$	71,753
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,964		$	4,375
Accrued expenses		4,743			5,167
Short-term debt		4,088			2,510
Current portion of long-term debt		217			216
Current portion of operating lease obligations		118			116
Current portion of finance lease obligations		125			117
Deferred revenue and customer deposits		2,402			1,787
Total current liabilities		15,657			14,288
Operating lease obligations, net of current portion		227			257
Finance lease obligations, net of current portion		514			550
Long-term debt, net of current portion and deferred debt issuance costs, net		4,951			5,004
Deferred income taxes		4,400			4,851
Other long-term liabilities		103			105
Total liabilities		25,852			25,055
Commitments, contingencies and concentrations (Note 14)
Stockholders’ equity:
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding		-			-
Common stock, par value $.01 per share; authorized 50,000 shares; issued 22,264 shares; outstanding 19,470		223			223
Additional paid-in capital		54,009			53,882
Retained earnings		12,424			16,437
Treasury stock, 2,794 shares at cost		(18,586	)		(18,586	)
Accumulated other comprehensive loss		(5,335	)		(5,258	)
Total stockholders’ equity		42,735			46,698
Total liabilities and stockholders’ equity	$	68,587		$	71,753

See accompanying notes to unaudited condensed consolidated financial statements.

3

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2023 and 2022

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2023			2022
Net product sales	$	7,204		$	7,703
Net service revenues		2,905			2,323
Total net revenues		10,109			10,026
Total cost of products		5,465			5,858
Total cost of services		2,166			1,657
Total cost of revenues		7,631			7,515
Gross profit		2,478			2,511
Selling and administrative expenses:
Selling		534			541
Administrative		2,723			2,733
Total selling and administrative expenses		3,257			3,274
Gain on disposal of assets		1			-
Loss from operations		(778	)		(763	)
Other income (expense):
Interest income		-			6
Interest expense		(111	)		(59	)
Foreign currency transaction gain (loss)		119			(342	)
Unrealized (loss) gain on equity holdings		(2,891	)		1,728
Other income (expense), net		24			(202	)
Total other (expense) income		(2,859	)		1,131
(Loss) income before income taxes and equity method holding loss		(3,637	)		368
Income tax benefit (expense)		299			(350	)
Equity method holding loss		(651	)		(820	)
Net loss	$	(3,989	)	$	(802	)
Net loss per share
Basic	$	(0.20	)	$	(0.04	)
Diluted	$	(0.20	)	$	(0.04	)
Weighted-average shares used in computing net loss per share:
Basic		19,470			18,990
Diluted		19,470			18,990

See accompanying notes to unaudited condensed consolidated financial statements.

4

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended March 31, 2023 and 2022

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2023			2022
Net loss	$	(3,989	)	$	(802	)
Adjustment to postretirement benefit obligation		(5	)		(8	)
Currency translation adjustment:
Unrealized net change arising during period		(72	)		178
Total other comprehensive (loss) income		(77	)		170
Comprehensive loss	$	(4,066	)	$	(632	)

See accompanying notes to unaudited condensed consolidated financial statements.

5

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2023 and 2022

(In thousands)

(Unaudited)

	Common Stock (Shares)		Common Stock ($)		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at December 31, 2022		22,264	$	223	$	53,882	$	16,437		$	(18,586	)	$	(5,258	)	$	46,698
Cumulative effect of adoption of accounting principle (Note 2)		-		-		-		(24	)		-			-			(24	)
Net loss		-		-		-		(3,989	)		-			-			(3,989	)
Net other comprehensive loss		-		-		-		-			-			(77	)		(77	)
Stock-based compensation expense		-		-		127		-			-			-			127
Balance at March 31, 2023		22,264	$	223	$	54,009	$	12,424		$	(18,586	)	$	(5,335	)	$	42,735

	Common Stock (Shares)		Common Stock ($)		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at December 31, 2021		21,286	$	213	$	50,807	$	23,591		$	(18,586	)	$	(3,748	)	$	52,277
Net loss		-		-		-		(802	)		-			-			(802	)
Net other comprehensive income		-		-		-		-			-			170			170
Issuance of common stock		761		8		2,342		-			-			-			2,350
Issuance of warrants		-		-		109		-			-			-			109
Stock-based compensation expense		-		-		194		-			-			-			194
Balance at March 31, 2022		22,047	$	221	$	53,452	$	22,789		$	(18,586	)	$	(3,578	)	$	54,298

See accompanying notes to unaudited condensed consolidated financial statements.

6

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2023 and 2022

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(3,989	)	$	(802	)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Recovery of doubtful accounts		(18	)		(15	)
Provision for obsolete inventory		14			13
Provision for warranty		44			11
Depreciation and amortization		266			366
Amortization and accretion of operating leases		29			97
Equity method holding loss		651			820
Adjustment to SageNet promissory note in connection with prepayment		-			202
Unrealized loss (gain) on equity holdings		2,891			(1,728	)
Deferred income taxes		(443	)		239
Stock-based compensation expense		127			194
Changes in operating assets and liabilities:
Accounts receivable		612			(407	)
Inventories		(284	)		426
Current income taxes		(186	)		(185	)
Other assets		2			(246	)
Accounts payable and accrued expenses		(827	)		149
Deferred revenue and customer deposits		615			(728	)
Operating lease obligations		(32	)		(89	)
Net cash used in operating activities		(528	)		(1,683	)
Cash flows from investing activities:
Capital expenditures		(75	)		(763	)
Acquisition of programming rights		(83	)		(395	)
Sale of equity holdings		198			-
Receipt of SageNet promissory note		-			2,300
Net cash provided by investing activities		40			1,142
Cash flows from financing activities:
Principal payments on short-term debt		(250	)		(79	)
Principal payments on long-term debt		(51	)		(18	)
Borrowings under credit facility		1,596
Repayments under credit facility		(225	)		-
Payments on finance lease obligations		(28	)		-
Net cash provided by (used in) financing activities		1,042			(97	)
Effect of exchange rate changes on cash and cash equivalents		6			40
Net increase (decrease) in cash and cash equivalents and restricted cash		560			(598	)
Cash and cash equivalents and restricted cash at beginning of period		3,789			8,881
Cash and cash equivalents and restricted cash at end of period	$	4,349		$	8,283
Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	4,349		$	8,133
Restricted cash		-			150
Total cash and cash equivalents and restricted cash	$	4,349		$	8,283
Supplemental disclosure of non-cash investing and financing activities:
Short-term borrowings to finance insurance	$	453		$	392
Issuance of debt, common shares, and warrants in connection with purchase of Digital Ignition building	$	-		$	7,609
Amount payable to Landmark Studio Group in connection with aquistion of projects (Note 8)	$	-		$	1,345

See accompanying notes to unaudited condensed consolidated financial statements.

7

FG Group Holdings Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

FG Group Holdings Inc. (previously Ballantyne Strong, Inc.) (“FG Group Holdings,” or the “Company”), a Nevada corporation, is a holding company with business operations in the entertainment industry and holdings in public and privately held companies. The Company historically has conducted a large portion of its operations primarily through its Strong Entertainment operating segment, which manufactures and distributes premium large format projection screens and provides technical support services and other related products and services to the cinema exhibition industry, theme parks, schools, museums and other entertainment-related markets. Strong Entertainment also distributes and supports third party products, including digital projectors, servers, library management systems, menu boards and sound systems. In March 2022, the Company launched Strong Studios, Inc. (“Strong Studios”) with the goal of expanding Strong Entertainment to include content creation and production of feature films and series. The launch of Strong Studios is intended to further diversify our revenue streams and increase our addressable markets, while leveraging and expanding our existing relationships in the industry.

The Company owns and operates its Digital Ignition technology incubator and co-working facility in Alpharetta, Georgia. In addition, the Company holds minority equity positions in three companies.

The Company has announced plans to establish the Strong Entertainment business as a separate publicly listed company. Following the planned separation, the operations of the Strong Entertainment operating segment are expected to become part of a newly established British Columbia corporation, Strong Global Entertainment, Inc. (“Strong Global Entertainment”). Strong Global Entertainment has filed a registration statement with the U.S. Securities and Exchange Commission (“SEC”) and intends to commence an initial public offering of its common shares during 2023 to raise additional capital to support its growth plans. If successful, the Company expects to apply to have the Strong Global Entertainment common shares trade on the NYSE American under the ticker symbol “SGE” following the initial public offering, and the Company expects to continue to be the majority shareholder of Strong Global Entertainment.

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, 2022.

The condensed consolidated balance sheet as of December 31, 2022, 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.

8

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.

The coronavirus pandemic (“COVID-19”) and inflationary pressures have been posing and may continue to pose challenges for our business. The COVID-19 global pandemic resulted in unprecedented impact to consumer behaviors and our customers, particularly our customers’ ability and willingness to purchase our products and services. The Company believes that consumer reticence to engage in outside-the-home activities, caused by the risk of contracting COVID-19, has abated, and our customers have resumed more typical, pre-COVID-19 purchasing behaviors. And while we believe our customers made significant progress in its recovery from the pandemic, the ongoing recovery will be contingent upon several key factors, including the volume of new film content available, the box office performance of new film content released, the duration of the exclusive theatrical release window, and evolving consumer behavior with competition from other forms of in- and out-of-home entertainment. There can be no assurances that there will be no additional public health crises, including further resurgence or variants of COVID-19, which could reverse the current trend and have a negative impact on the Company’s results of operations

Cash and Cash Equivalents

All short-term, highly liquid financial instruments are classified as cash equivalents in the condensed consolidated balance sheets and statements of cash flows. Generally, these instruments have maturities of three months or less from date of purchase. As of March 31, 2023, $0.6 million of the $4.3 million in cash and cash equivalents was held by our foreign subsidiary.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for credit losses 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. Past due accounts are written off when our efforts have been unsuccessful in collecting amounts due.

Equity Holdings

The Company accounts for its equity holdings using the equity method, at cost, or at fair value depending on the facts and circumstances related to each individual holding. The Company applies the equity method of accounting to its holdings when it has significant influence, but not controlling interest, in the entity. Judgment regarding the level of influence over each equity method holding 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 or loss resulting from these equity holdings is reported under the line item captioned “equity method holding loss” in our condensed consolidated statements of operations. The Company’s equity method holding is reported at cost and adjusted each period for the Company’s share of the entity’s income or loss and dividends paid, if any. The Company’s share of the entity’s income or loss is recorded on a one quarter lag for all equity method holdings. The Company classifies distributions received from equity method holdings using the cumulative earnings approach on the condensed consolidated statements of cash flows.

Changes in fair value of holdings in marketable equity securities of unconsolidated entities in which the Company is not able to exercise significant influence (“Fair Value Holdings”) are recognized on the consolidated statement of operations. Nonmarketable equity holdings in unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Holdings”) are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends on Fair Value Holdings and Cost Method Holdings received are recorded as income.

9

The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company’s equity method holding as of March 31, 2023 and determined that the Company’s proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for an identical or similar holding or security of the Company’s Cost Method Holding during the three months ended March 31, 2023. The carrying value of our equity method, Fair Value Holdings and Cost Method Holdings is reported as “equity holdings” on the condensed consolidated balance sheets. Note 6 contains additional information on our equity method, Fair Value Holdings and Cost Method Holdings

Film and Television Programming Rights

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

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

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

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

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

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

10

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, 2023 and December 31, 2022.

Fair values measured on a recurring basis at March 31, 2023 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,349	$	-	$	-	$	4,349
Fair value method equity holding		13,677						13,677
Total	$	18,026	$	-	$	-	$	18,026

Fair values measured on a recurring basis at December 31, 2022 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	3,789	$	-	$	-	$	3,789
Fair value method equity holding		16,792		-		-		16,792
Total	$	20,581	$	-	$	-	$	20,581

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses and short-term debt reported in the consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. Based on a combination of the cash on hand as well as quoted market prices of the securities held by FGF Holdings (as defined below), the liquidation value of the Company’s equity method holding was $7.4 million at March 31, 2023 (see Note 6).

Recently Adopted 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 requires 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 Company adopted this ASU effective January 1, 2023. Upon adoption the Company recorded a cumulative effect adjustment decreasing retained earnings by $24 thousand.

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.

11

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 whether they are distinct, 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 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 typically does not have any material extended payment terms, as payment is due at or shortly after the time of the sale. 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, or receives cash, 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, 2023 or December 31, 2022.

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Screen system sales	$	2,582	$	-	$	2,582	$	3,306	$	-	$	3,306
Digital equipment sales		3,526		-		3,526		3,544		-		3,544
Extended warranty sales		51		-		51		100		-		100
Other product sales		1,045		-		1,045		753		-		753
Total product sales		7,204		-		7,204		7,703		-		7,703
Field maintenance and monitoring services		1,891		-		1,891		1,618		-		1,618
Installation services		802		-		802		371		-		371
Other service revenues		54		158		212		28		306		334
Total service revenues		2,747		158		2,905		2,017		306		2,323
Total	$	9,951	$	158	$	10,109	$	9,720	$	306	$	10,026

Screen system sales

The Company typically 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 times because control transfers upon customer 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. For contracts that are long-term in nature, the Company believes that the use of the percentage-of-completion method is appropriate as the Company has the ability to make reasonably dependable estimates of the extent of progress towards completion, contract revenues, and contract costs. Under the percentage-of-completion method, revenue is recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract.

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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 typically 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 its Strong Entertainment customers. These contracts are generally 12 months in length. Revenue related to service contracts is recognized ratably over the term of the agreement.

In addition to selling service contracts, the Company also performs discrete time and materials-based maintenance and repair work for customers in the Strong Entertainment segment. 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 its Strong Entertainment customers and recognizes revenue upon completion of the installations.

Extended warranty sales

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

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, 2023 and 2022 (in thousands):

	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Point in time	$	8,430	$	14	$	8,444	$	8,442	$	3	$	8,445
Over time		1,521		144		1,665		1,278		303		1,581
Total	$	9,951	$	158	$	10,109	$	9,720	$	306	$	10,026

At March 31, 2023, the unearned revenue amount associated with long-term projects that the Company uses the percentage-of-completion method to recognize revenue, maintenance and monitoring services and extended warranty sales in which the Company is the primary obligor was $0.8 million. The Company expects to recognize $0.8 million of the unearned revenue amounts during the remainder of 2023, and immaterial amounts from 2024 through 2026.

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4. Net Loss Per Common Share

Basic net loss per share has been computed on the basis of the weighted average number of shares of common stock outstanding. In periods when the Company reported a net loss, there were no differences between average shares used to compute basic and diluted loss per share as inclusion of stock options and restricted stock units would have been anti-dilutive in those periods. The following table summarizes the weighted average shares used to compute basic and diluted net loss per share (in thousands):

	Three Months Ended March 31,
	2023		2022
Weighted average shares outstanding:
Basic weighted average shares outstanding		19,470		18,990
Dilutive effect of stock options and certain non-vested restricted stock units		-		-
Diluted weighted average shares outstanding		19,470		18,990

A total of 140,420 and 225,379 common stock equivalents related to stock options and restricted stock units were excluded for the three months ended March 31, 2023 and March 31, 2022, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share. Options to purchase 489,500 and 354,500 shares of common stock were outstanding as of March 31, 2023 and March 31, 2022, 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.

5. Inventories

Inventories consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
Raw materials and components	$	1,925	$	1,826
Work in process		448		279
Finished goods		1,287		1,284
	$	3,660	$	3,389

The inventory balances are net of reserves of approximately $0.5 million as of both March 31, 2023 and December 31, 2022. The inventory reserves primarily related to the Company’s finished goods inventory. A rollforward of the inventory reserve for the three months ended March 31, 2023, is as follows (in thousands):

Inventory reserve balance at December 31, 2022	$	486
Inventory write-offs during 2023		(16	)
Provision for inventory reserve during 2023		14
Inventory reserve balance at March 31, 2023	$	484

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6. Equity Holdings

The following summarizes our equity holdings (dollars in thousands):

	March 31, 2023					December 31 2022
	Carrying Amount		Economic Interest			Carrying Amount		Economic Interest
Equity Method Holding
FG Financial Holdings, LLC	$	7,181		47.3	%	$	7,832		47.2	%
Fair Value Method Holding
GreenFirst Forest Products Inc.		13,677		8.3	%		16,792		8.4	%
Cost Method Holding
Firefly Systems, Inc.		12,898					12,898
Total Investments	$	33,756				$	37,522

Equity Method Holding

FG Financial Holdings, LLC (“FGF Holdings”) is a limited liability company formed under the Delaware Limited Liability Company Act. The Company is a member of FGF Holdings and contributed its 2.9 million shares of FG Financial Group, Inc. (“FGF”) common stock to FGF Holdings on September 12, 2022. FGF is a publicly-traded reinsurance and investment management holding company focused on opportunistic collateralized and loss capped reinsurance, while allocating capital to special purpose acquisition companies (each, a “SPAC”) and SPAC sponsor-related businesses.

In consideration of its contribution to FGF Holdings, the Company was issued Series B Common Interests of FGF Holdings and 50% of the voting power over FGF Holdings. The members of FGF Holdings agreed that the powers of FGF Holdings shall be exercised by, or under the authority of, its managers. FGF Holdings has two managers, one of which was appointed by the Company. The Company designated its Chairman, D. Kyle Cerminara, to serve as a manager of FGF Holdings. The managers of FGF Holdings, acting unanimously, have the right, power and authority on behalf of FGF Holdings and in its name to execute documents or other instruments and exercise all of the rights, power and authority of FGF Holdings. Allocations of profits and losses and distributions of cash are made in accordance with the terms of the FGF Holdings operating agreement.

The Company has the ability to significantly influence FGF Holdings through its 50% voting power but does not maintain a controlling interest. Based on quoted market prices of the assets held by FGF Holdings, as well as the liabilities and cash balance on hand, the liquidation value of the Company’s LLC interest in FGF Holdings was approximately $7.4 million as of March 31, 2023.

The Company recorded an equity method loss related to FGF Holdings of $0.7 million during the three months ended March 31, 2023. As of March 31, 2023, the Company’s retained earnings included an accumulated deficit from its equity method holdings of approximately $6.7 million.

Fair Value Method Holding

GreenFirst Forest Products Inc. (“GreenFirst”) is a publicly-traded Canadian company focused on environmentally sustainable forest management and lumber production. In April 2021, GreenFirst announced that it had entered into an asset purchase agreement pursuant to which it would acquire a portfolio of forest and paper product assets (the “GreenFirst Acquisition”). The Company’s Chairman, Mr. Cerminara, served as a member of the board of directors of GreenFirst from June 2016 to October 2021, and was also appointed Chairman of GreenFirst from June 2018 to June 2021. Prior to the closing of the GreenFirst Acquisition, the Company held a 20.7% ownership position in GreenFirst. The Company’s 20.7% ownership of GreenFirst, combined with Mr. Cerminara’s board seat, provided the Company with significant influence over GreenFirst, but not a controlling interest. Accordingly, the Company applied the equity method of accounting to its equity holding in GreenFirst. Following the GreenFirst Acquisition and GreenFirst’s issuance of additional common shares, the Company’s ownership percentage decreased to 8.6%. As a result, the Company is no longer able to exercise significant influence over GreenFirst and the equity holding in GreenFirst no longer qualified for equity method accounting. As a result of applying the fair value method of accounting, the Company recorded a loss on equity holdings of approximately $2.9 million during the three months ended March 31, 2023, and a gain on equity holdings of 1.7 million during the three months ended March 31, 2022. The Company did not receive dividends from GreenFirst during the three months ended March 31, 2023 or March 31, 2022. Based on quoted market prices, the fair value of the Company’s ownership in GreenFirst was $13.7 million as of March 31, 2023.

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Cost Method Holding

Firefly Systems, Inc. (“Firefly”) is a private company which operates a media network and digital advertising solutions on taxi and rideshare vehicles. The Company holds approximately 1.1 million and 0.6 million Firefly Series B-1 and Firefly Series B-2 preferred shares, respectively, which were acquired in connection with the transactions with Firefly in May 2019 and August 2020. In addition, the Company holds an additional 0.7 million Firefly Series B-2 preferred shares, which were acquired in August 2020 pursuant to a stock purchase agreement with Firefly. The Company and its affiliated entities have designated Kyle Cerminara, Chairman of the Company’s board of directors and a principal of the Company’s largest shareholder, to Firefly’s board of directors.

7. Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023			December 31, 2022
Land	$	2,341		$	2,341
Buildings and improvements		12,761			12,756
Machinery and other equipment		4,860			4,786
Office furniture and fixtures		860			860
Construction in progress		15			11
Total properties, cost		20,837			20,754
Less: accumulated depreciation		(8,344	)		(8,105	)
Property, plant and equipment, net	$	12,493		$	12,649

8. Film and Television Programming Rights, Net

Film and television programming rights, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
Television series in development	$	1,362	$	1,308
Films in development		222		193
Total	$	1,584	$	1,501

The Company has not yet commenced amortization of the projects as they were still in development at March 31, 2023.

A rollforward of film and television programming rights, net for the three months ended March 31, 2023, is as follows (in thousands):

Balance at December 31, 2022	$	1,501
Expenditures on in-process projects		83
Balance at March 31, 2023	$	1,584

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In March 2022, Strong Studios acquired the rights to original feature films and television series from Landmark Studio Group LLC (“Landmark”), including the assignment of third party rights to content for global multiplatform distribution. The transaction entailed the acquisition of certain projects which are in varying stages of development, none of which have produced revenue as of March 31, 2023. In connection with such assignment and purchase, Strong Studios agreed to pay to Landmark approximately $1.7 million in four separate payments, $0.3 million of which was paid upon the closing of the transaction. The $1.7 million acquisition price was allocated to three projects in development: $1.0 million to Safehaven, $0.3 million to Flagrant and $0.4 million to Shadows in the Vineyard. The Company also agreed to issue to Landmark no later than 10 days after the completion of the initial public offering of Strong Global Entertainment, a warrant to purchase up to 150,000 common shares of Strong Global Entertainment, exercisable for three years beginning six months after the consummation of the initial public offering, at an exercise price equal to the per-share offering price of Strong Global Entertainment’s common shares in the initial public offering (the “Landmark Warrant”). The Landmark Warrant allows for cashless exercise in certain limited circumstances and provides for certain registration rights for such warrant shares. In the event that an initial public offering of Strong Global Entertainment does not occur within a specified time, Landmark would have the right to surrender the warrant in exchange for 2.5% ownership in Strong Studios.

As a condition precedent to entry into the AA Agreement, Strong Studios agreed to enter into distribution agreements for Safehaven and Flagrant (the “AA Distribution Agreements”) with Screen Media Ventures, LLC (“SMV”). Pursuant to the AA Distribution Agreements, SMV agreed to purchase the global distribution rights to Safehaven for $6.5 million and Flagrant for $2.5 million upon delivery of each project. In January 2023, Strong Studios amended its agreement with SMV resulting in Strong Studios retaining the worldwide global distribution rights for the Flagrant series and releasing SMV from the obligation to purchase the distribution rights for the series.

During the second quarter of 2022, Safehaven 2022, Inc. (“Safehaven 2022”) was established to manage the production and financing of Safehaven. Strong Studios owns 49% of Safehaven 2022 and the remaining 51% is owned by Unbounded Services, LLC (“Unbounded”). No consideration was paid by Strong Studios in exchange for its 49% equity interest in Safehaven 2022. Unbounded also did not contribute any assets or liabilities to Safehaven 2022 and agreed to provide day-to-day management services in exchange for their 51% ownership. Unbounded will also serve as a co-producer on the project. Strong Studios assigned the Landmark distribution agreement to Safehaven 2022, and the Landmark distribution agreement serves as collateral for the production financing at Safehaven 2022. Strong Studios and Unbounded will share profits and losses, if any, from Safehaven 2022 on a pro-rata basis based on their relative ownership percentages.

Strong Studios allocated $1.0 million of the $1.7 million acquisition price to Safehaven and incurred an additional $0.1 million of development costs during 2022. Strong Studios transferred the $1.1 million in intellectual property representing the rights and assets related to Safehaven and Safehaven 2022 agreed to reimburse Strong Studios $1.1 million for those costs following payment of any senior secured debt and prior to any profit participations or equity distributions. Safehaven 2022 reimbursed the $0.1 million of development costs incurred by Strong Studios, and the remaining $1.0 million payable to Strong Studios represents an obligation of Safehaven 2022 to Strong Studios and is not contingent on any specific event. Accordingly, the Company has classified the amount due from Safehaven 2022 as a receivable within other current assets on its consolidated balance sheet as of March 31, 2023. Strong Studios expects Safehaven 2022 to reimburse the acquisition cost allocated to the project based on its ultimate expected revenues and profits from the exploitation of the project. Safehaven 2022 will begin to generate revenue and expenses upon delivery of the completed Safehaven series to SMV, which is expected to occur in mid-2023. The $6.5 million minimum guarantee is due and payable to Safehaven 2022 in installments of 25% upon delivery and acceptance, 25% three months thereafter, and the remaining 50% six months thereafter. Upon delivery and acceptance, Safehaven 2022 expects to recognize $6.5 million in initial revenue from the distribution rights and will record cost of sales using the individual-film-forecast method based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned. Safehaven 2022 is an equity method holding and the Company will reflect its proportionate share of the net periodic profit and loss of Safehaven 2022 as equity method income (loss) during each reporting period.

Safehaven 2022 entered into a Loan and Security Agreement with Bank of Hope to provide interim production financing for the Safehaven production, secured by the Landmark distribution agreement. Safehaven 2022 is the sole borrower and guarantor under the loan agreement. As of March 31, 2023, Safehaven 2022 had borrowed $9.6 million under the facility for production costs incurred to that date. Safehaven 2022 has also received working capital advances of $0.6 million from Strong Studios. Strong Studios expects Safehaven 2022 to reimburse the working capital advances in the second half of 2023.

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Strong Studios reviewed its ownership in Safehaven 2022 and concluded that it has significant influence, but not a controlling interest, in Safehaven 2022 based on its ownership being less than 50% along with having one of three representatives on the board of managers of Safehaven 2022. Strong Studios also reviewed whether it otherwise had the power to make decisions that significantly impact the economic performance of Safehaven 2022 and concluded that it did not control the entity and is not the primary beneficiary. Accordingly, the Company will apply the equity method of accounting to its equity holding in Safehaven 2022 and will record its proportionate share of the net income/loss resulting from the equity holding as a single line item captioned “equity method holding income (loss)” on its consolidated statement of operations.

Safehaven 2022 did not record any income or expense during the three months ended March 31, 2023, because all costs incurred by Safehaven 2022 related to the in-process production have been capitalized. Upon delivery and acceptance of the project, Safehaven 2022 expects to recognize revenue from the distribution rights and will record cost of sales using the individual-film-forecast method based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned. A summary of the balance sheet of Safehaven 2022 as of March 31, 2023, is as follows (in thousands):

Cash	$	37
Television programming rights		11,118
Other assets		76
Total assets	$	11,231
Accounts payable and accrued expenses	$	10
Due to Strong Studios		1,625
Debt		9,596
Equity		-
Total liabilities and equity	$	11,231

9. Goodwill

The following represents a summary of changes in the Company’s carrying amount of goodwill for the three months ended March 31, 2023 (in thousands):

Balance as of December 31, 2022	$	882
Foreign currency translation adjustment		-
Balance as of March 31, 2023	$	882

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10. Debt

The Company’s short-term debt and long-term debt consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023			December 31, 2022
Short-term debt:
Strong/MDI 20-year installment loan	$	2,262		$	2,289
Strong/MDI 5-year equipment loan		-			221
Strong/MDI revolving credit facility		1,372			-
Insurance note payable		454			-
Total short-term debt	$	4,088		$	2,510
Long-term debt:
Tenant improvement loan	$	153		$	162
Digital Ignition building loan		5,059			5,105
Total long-term debt	$	5,212		$	5,267
Less: current portion		(217	)		(216	)
Less: deferred debt issuance costs, net		(44	)		(47	)
Long-term debt, net of current portion and deferred debt issuance costs, net	$	4,951		$	5,004

	March 31, 2023			December 31, 2022
Deferred debt issuance costs	$	56		$	56
Less: accumulated amortization		(12	)		(9	)
Deferred debt issuance costs, net	$	44		$	47

Estimated future amortization expense of deferred debt issuance costs is as follows (in thousands):

Remainder of 2023	$	9
2024		11
2025		11
2026		11
2027		2
Thereafter		-
Total	$	44

Strong/MDI Installment Loans and Revolving Credit Facility

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 Canadian Imperial Bank of Commerce (“CIBC”) consisting of a revolving line of credit for up to CAD$3.5 million, subject to a borrowing base requirement, a 20-year installment loan for up to CAD$6.0 million and a 5-year installment loan for up to CAD$0.5 million. On June 7, 2021, Strong/MDI entered into a demand credit agreement (the “2021 Credit Agreement”), which amended and restated the demand credit agreement dated as of September 5, 2017. The 2021 credit agreement consisted of a revolving line of credit for up to CAD$2.0 million subject to a borrowing base requirement, a 20- year installment loan for up to CAD$5.1 million and a 5-year installment loan for up to CAD$0.5 million. Amounts outstanding under the line of credit are payable on demand and bear interest at the prime rate established by CIBC. Amounts outstanding under the installment loans bear interest at CIBC’s prime rate plus 0.5% and are payable in monthly installments, including interest, over their respective borrowing periods. CIBC 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 2021 Credit Agreement required Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity method holdings) not exceeding 2.5 to 1, a current ratio (excluding amounts due from related parties) of at least 1.3 to 1 and minimum “effective equity” of CAD$4.0 million.

19

In January 2023, Strong/MDI and CIBC entered into a demand credit agreement (the “2023 Credit Agreement”), which amended and restated the 2021 Credit Agreement. The 2023 Credit Agreement consists of a revolving line of credit for up to CAD$5.0 million and a 20-year installment loan for up to CAD$3.1 million. Under the 2023 Credit Agreement: (i) the amount outstanding under the line of credit is payable on demand and bears interest at the lender’s prime rate plus 1.0% and (ii) the amount outstanding under the installment loan bears interest at the lender’s prime rate plus 0.5% and is payable in monthly installments, including interest, over their respective borrowing periods. The lender may also demand repayment of the installment loan at any time. The 2023 Credit Agreement is secured by a lien on Strong/MDI’s Quebec, Canada facility and substantially all of Strong/MDI’s assets. The 2023 Credit Agreement requires Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity holdings) not exceeding 2.5 to 1 and a fixed charge coverage ratio of not less than 1.1 times earnings before interest, income taxes, depreciation and amortization. The 5-year installment note was paid in full in connection with entering into the 2023 Credit Agreement. As of March 31, 2023, there was CAD$3.1 million, or approximately $2.3 million, of principal outstanding on the 20-year installment loan, which bears variable interest at 7.20%. Strong/MDI was in compliance with its debt covenants as of March 31, 2023. In May 2023, Strong/MDI and CIBC entered into an amendment to the 2023 Credit Agreement which reduced the amount available under the revolving line of credit to CAD$3.4 million, and CIBC provided an undertaking to Strong/MDI to a release of CIBC’s security interest in certain assets to be transferred to a subsidiary in connection with transactions related to the announced initial public offering of Strong Global Entertainment.

Tenant Improvement Loan

During the fourth quarter of 2021, the Company entered into a lease for a combined office and warehouse in Omaha, Nebraska. The Company incurred total costs of approximately $0.4 million to complete the build-out of the new combined office and warehouse facility. The landlord has agreed to fund approximately 50% of the build-out costs, and the Company is required to repay the portion funded by the landlord in equal monthly installments through the end of the initial lease term in February 2027. Through the end of 2021, the Company incurred approximately $0.2 million of total costs to build out the facility, of which approximately $0.1 million was funded by the landlord. The Company completed the build-out during the first quarter of 2022 and incurred an additional $0.2 million of total costs to complete the build-out, of which approximately $0.1 million was funded by the landlord.

Digital Ignition Building Loam

In January 2022, the Company purchased a parcel of land with buildings and improvements in Alpharetta, Georgia. In connection with the purchase of the land and building, the Company entered into a Commercial Loan Agreement (the “Loan Agreement”) with Community First Bank (the “Lender”), dated February 1, 2022. Pursuant to the Loan Agreement, the Lender agreed to lend the Company approximately $5.3 million (the “Loan Amount”), and the Borrower agreed to repay the Loan Amount pursuant to the terms of a promissory note (the “Note”).

The term of the Loan Agreement runs from February 1, 2022, until the Loan Amount is repaid in full by the Company or the Loan Agreement is terminated pursuant to its terms or by agreement between the Company and the Lender. The terms of the Note include (i) a fixed interest rate of 4%, (ii) maturity date of February 1, 2027, (iii) monthly payments of approximately $32 thousand beginning on March 1, 2022, and continuing on the first of each month until the maturity date or until the Note has been paid in full, (iv) a default interest of 8% in the event of a default pursuant to the terms of the Note, and (v) prepayment penalties of (a) 3% of all excess payments during the first two years of the term of the Note, (b) 2% of all excess payments during the third and fourth years of the term of the Note, and (c) 1% of all excess payments made during the fifth year of the term of the Note.

The Note includes standard events of default and references defaults under the Loan Agreement and the Deed to Secure Debt as events of default under the Note. The Company has a right to cure any curable events of default.

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Contractual Principal Payments

Contractual required principal payments on the Company’s long-term debt at March 31, 2023, are as follows (in thousands):

	Tenant Improvement Loan		Digital Ignitiion Building Loan		Total
Remainder of 2023	$	26		134	$	160
2024		38		187		225
2025		40		195		235
2026		42		203		245
2027		7		4,340		4,347
Thereafter		-		-		-
Total	$	153	$	5,059	$	5,212

11. Leases

The Company and its subsidiaries lease plant and office facilities and equipment under operating and finance leases expiring through 2027. 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 Accounting Standards Codification Topic 842, “Leases,” 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 operations 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, 2023		March 31, 2022
Finance lease cost:
Amortization of right-of-use assets	$	33	$	-
Interest on lease liabilities		13		-
Operating lease cost		36		105
Short-term lease cost		17		14
Sublease income		-		(32	)
Net lease cost	$	99	$	87

Other information	Three Months Ended
	March 31, 2023		March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	13	$	-
Operating cash flows from operating leases	$	32	$	92
Financing cash flows from finance leases	$	26	$	-
Right-of-use assets obtained in exchange for new finance lease liabilities	$	-	$	-
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	-
Weighted-average remaining lease term - finance leases (years)				1.7
Weighted-average remaining lease term - operating leases (years)				3.4
Weighted-average discount rate - finance leases				4.7	%
Weighted-average discount rate - operating leases				3.7	%

The following table presents a maturity analysis of the Company’s operating and finance lease liabilities as of March 31, 2023 (in thousands):

	Operating Leases			Finance Leases
Remainder of 2023	$	99		$	127
2024		101			170
2025		79			416
2026		81			16
2027		14			5
Thereafter		-			-
Total lease payments		374			734
Less: Amount representing interest		(29	)		(95	)
Present value of lease payments		345			639
Less: Current maturities		(118	)		(125	)
Lease obligations, net of current portion	$	227		$	514

12. Income and Other 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, 2023 and December 31, 2022.

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The Tax Cuts and Jobs Act 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. The GILTI provisions also allow for a high-tax exclusion if the effective tax rate of the tested income is greater than 18.9%. The Company has evaluated these regulations in determining the appropriate amount of the inclusion for the tax provision. The effective tax rate on the tested income is greater than 18.9%; thus, the Company is utilizing the GILTI high-tax exclusion for purposes of the tax provision for the three months ended March 31, 2023, as well as December 31, 2022.

Changes in tax laws may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and made significant changes to Federal tax laws, including certain changes that were retroactive to the 2019 tax year. The effects of these changes relate to deferred tax assets and net operating losses; all of which are offset by valuation allowance. There were no material income tax consequences of this enacted legislation on the reporting period of these financial statements.

The Company is subject to possible examinations not yet initiated for Federal purposes for the fiscal years 2019 through 2021. The Company is also subject to possible examinations for state and local purposes. In most cases, these examinations in the state and local jurisdictions remain open based on the particular jurisdiction’s statute of limitations.

13. Stock Compensation

The Company recognizes compensation expense for all stock-based payment awards based on estimated grant date fair values. Stock-based compensation expense included in selling and administrative expenses approximated $0.1 million and $0.2 million for the three months ended March 31, 2023 and March 31, 2022, 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, 2023, approximately 2.3 million shares were available for issuance under the amended and restated 2017 Plan.

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Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2023:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		639,500	$	3.72		5.6	$	127
Granted		-
Exercised		-
Forfeited		-
Expired		-
Outstanding at March 31, 2023		639,500	$	3.72		5.3	$	45
Exercisable at March 31, 2023		499,500	$	4.13		4.9	$	18

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, 2023, 140,000 stock option awards were non-vested. Unrecognized compensation cost related to non-vested stock options was approximately $0.1 million, which is expected to be recognized over a weighted average period of 1.8 years.

Restricted Stock Units

The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant. The following table summarizes restricted stock unit activity for the three months ended March 31, 2023:

	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2022		206,934	$	2.06
Granted		-
Shares vested		-
Shares forfeited		-
Non-vested at March 31, 2023		206,934	$	2.06

As of March 31, 2023, the total unrecognized compensation cost related to non-vested restricted stock unit awards was approximately $0.1 million, which is expected to be recognized over a weighted average period of 0.3 years.

14. Commitments, Contingencies and Concentrations

Litigation

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

The Company and certain of its subsidiaries are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of commercial lighting products containing wiring that may have contained asbestos. Each case names dozens of corporate defendants in addition to the Company. In the Company’s experience, a large percentage of these types of claims have never been substantiated and have been dismissed by the courts. The Company has not suffered any adverse verdict in a trial court proceeding related to asbestos claims and intends to continue to defend these lawsuits. As of March 31, 2023, the Company has a loss contingency reserve of approximately $0.2 million, which represents the Company’s estimate of its potential losses related to the settlement of open cases. During 2022 and the first quarter of 2023, the Company settled three cases, which resulted in payments totaling $53 thousand. When appropriate, the Company may settle additional claims in the future. The Company does not expect the resolution of these cases to have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

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Concentrations

The Company’s top ten customers accounted for approximately 57% of consolidated net revenues during the three months ended March 31, 2023. Trade accounts receivable from these customers represented approximately 80% of net consolidated receivables at March 31, 2023. One of the Company’s customers accounted for more than 10% of both its consolidated net revenues during the three months ended March 31, 2023 and its net consolidated receivables as of March 31, 2023. 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.

15. Business Segment Information

The Company conducts its operations primarily through its Strong Entertainment business segment which manufactures and distributes premium large format projection screens and provides technical support services and other related products and services to the cinema exhibition industry, theme parks, schools, museums and other entertainment-related markets. Strong Entertainment also distributes and supports third party products, including digital projectors, servers, library management systems, menu boards and sound systems. Strong Studios, which is part of the Strong Entertainment operating segment, develops and produces original feature films and television series. 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,
	2023			2022
	(in thousands)
Net revenues
Strong Entertainment	$	9,951		$	9,720
Other		158			306
Total net revenues		10,109			10,026
Gross profit
Strong Entertainment		2,320			2,205
Other		158			306
Total gross profit		2,478			2,511
Operating income (loss)
Strong Entertainment		576			610
Other		(169	)		(134	)
Total segment operating income		407			476
Unallocated administrative expenses		(1,185	)		(1,239	)
Loss from operations		(778	)		(763	)
Other (expense) income, net		(2,859	)		1,131
(Loss) income before income taxes and equity method holding loss	$	(3,637	)	$	368

(In thousands)	March 31, 2023		December 31, 2022
Identifiable assets
Strong Entertainment	$	34,196	$	35,392
Corporate assets		34,391		36,361
Total	$	68,587	$	71,753

Summary by Geographical Area

	Three Months Ended March 31,
(In thousands)	2023		2022
Net revenues
United States	$	8,735	$	8,783
Canada		313		406
China		22		235
Latin America		256		147
Europe		396		96
Asia (excluding China)		153		153
Other		234		206
Total	$	10,109	$	10,026

(In thousands)	March 31, 2023		December 31, 2022
Identifiable assets
United States	$	49,638	$	51,423
Canada		18,949		20,330
Total	$	68,587	$	71,753

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. In addition to historical information, this Quarterly Report on Form 10–Q, including management’s discussion and analysis, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect expectations for future Company performance. Forward-looking statements may be identified by the use of words such as “may,” “will,” “forecast,” “estimate,” “project,” “intend,” “plan,” “expect,” “should,” “believe” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and speak only as of the date on which it is made. 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, 2022, and the following risks and uncertainties: the Company’s ability to maintain and expand its revenue streams to compensate for the lower demand for the Company’s digital cinema products and installation services; potential interruptions of supplier relationships or higher prices charged by suppliers; the Company’s ability to successfully compete and introduce enhancements and new features that achieve market acceptance and that keep pace with technological developments; the Company’s ability to successfully execute its capital allocation strategy or achieve the returns it expects from these holdings; the Company’s ability to maintain its brand and reputation and retain or replace its significant customers; challenges associated with the Company’s long sales cycles; the impact of a challenging global economic environment or a downturn in the markets; the effects of economic, public health, and political conditions that impact business and consumer confidence and spending, including rising interest rates, periods of heightened inflation and market instability, the outbreak of any highly infectious or contagious diseases, such as COVID-19 and its variants or other health epidemics or pandemics, and armed conflicts, such as the ongoing military conflict in Ukraine and related sanctions; economic and political risks of selling products in foreign countries (including tariffs); risks of non-compliance with U.S. and foreign laws and regulations, potential sales tax collections and claims for uncollected amounts; cybersecurity risks and risks of damage and interruptions of information technology systems; the Company’s ability to retain key members of management and successfully integrate new executives; the Company’s ability to complete acquisitions, strategic investments, entry into new lines of business, divestitures, mergers or other transactions on acceptable terms, or at all; the impact of economic, public health and political conditions on the companies in which the Company holds equity stakes; the Company’s ability to utilize or assert its intellectual property rights, the impact of natural disasters and other catastrophic events, whether natural, man-made, or otherwise (such as the outbreak of any highly infectious or contagious diseases, or armed conflict); the adequacy of the Company’s insurance; the impact of having a controlling stockholder and vulnerability to fluctuation in the Company’s stock price. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Many of the risks listed above have been, and may further be, exacerbated by the impact of economic, public health (such as a resurgence of the COVID-19 pandemic) and political conditions (such as the military conflict in Ukraine) that impact consumer confidence and spending, particularly in the cinema, entertainment, and other industries in which the Company and the companies in which the Company holds an equity stake operate, 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

FG Group Holdings Inc. (“FG Group Holdings”, the “Company”, “we”, “our”, and “us”) is a holding company with business operations in the entertainment industry and holdings in public and privately held companies. Our Strong Entertainment segment includes one of the largest manufacturers of premium projection screens and customized screen support systems, and we also distribute other products and provide technical support services to the cinema, amusement park and other markets. We are focused on improving our operating performance as the United States and other countries recover from COVID-19 related business disruptions. We plan to manage the Strong Entertainment business segment to grow market share and organic revenue and improve operating results, with the intent of expanding the ultimate valuation of the business. We intend to separate our Strong Entertainment operating business from the Company and pursue an initial public offering to support the growth plans for that line of business. Following the planned separation, we intend to continue to be the majority shareholder of Strong Global Entertainment.

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In addition, we use our facility in Alpharetta, Georgia for our Digital Ignition technology incubator and co-working facility. Results of those operations are included within “Other” in our results of operations.

We also continue to evaluate capital allocation opportunities to invest in other public or private companies or acquire other businesses, which may be within or outside of the Company’s existing markets.

Impact of COVID-19 Pandemic

In December 2019, a novel coronavirus disease 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, particularly in the United States, and actions by public health and governmental authorities, businesses, other organizations and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns. The ultimate impact of the COVID-19 pandemic on our business and results of operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including repeat or cyclical outbreaks, and any additional preventative and protective actions that governments, or we or our customers, may direct, which may result in an extended period of continued business disruption and reduced operations. We believe that consumer reticence to engage in outside-the-home activities, caused by the risk of contracting COVID-19, is abating, and our customers have resumed more typical, pre-COVID-19 purchasing behaviors. There can be no assurances, however, that there will be no further resurgence or variants of COVID-19 which could reverse the current trend.

The repercussions of the COVID-19 global pandemic resulted in a significant impact to our customers, specifically those in the entertainment and advertising industries, and their ability and willingness to spend on our products and services, which continues to negatively impact us. A significant number of our customers temporarily ceased operations during the pandemic, which negatively impacted our results of operations. For instance, during this time, many movie theaters and other entertainment centers were forced to close or curtail their hours and, correspondingly, terminated or deferred their non-essential capital expenditures. The COVID-19 pandemic also adversely affected film production and the pipeline of feature films available in the short- or long-term. However, we believe there is now pent-up demand for out-of-home entertainment that will drive favorable trends post-COVID-19 in the cinema exhibition and theme park industries. We also experienced other negative impacts during the pandemic; among other actions, we were required to temporarily close our screen manufacturing facility in Canada due to the governmental response to COVID-19, experienced lower revenues from field services, and saw a reduction in non-recurring time and materials-based services. The impact of any future outbreak of contagious disease, or a worsening or resurgence of COVID-19, is not readily ascertainable, is uncertain and cannot be predicted, but could have an adverse impact on the Company’s business, financial condition and results of operations, and could also have a material adverse impact on our strategic partners’ businesses or on the businesses of companies in which we hold equity stakes.

While the current impacts of COVID-19 are reflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter. 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 and the related length of their impact on the global economy, which are uncertain and cannot be predicted at this time. Even as the COVID-19 pandemic subsides, we may continue to experience an adverse impact to our business as a result of its national and global economic impact. Our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.

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Results of Operations

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

	Three Months Ended March 31,
	2023			2022			$ Change			% Change
	(dollars in thousands)
Net revenues	$	10,109		$	10,026		$	83			0.8	%
Cost of revenues		7,631			7,515			116			1.5	%
Gross profit		2,478			2,511			(33	)		(1.3	)%
Gross profit percentage		24.5	%		25.0	%
Selling and administrative expenses		3,257			3,274			(17	)		(0.5	)%
Gain on disposal of assets		1			-			1			100.0	%
Loss from operations		(778	)		(763	)		(15	)		2.0	%
Other (expense) income		(2,859	)		1,131			(3,990	)		(352.8	)%
(Loss) income before income taxes and equity method holding loss		(3,637	)		368			(4,005	)		(1088.3	)%
Income tax benefit (expense)		299			(350	)		649			(185.4	)%
Equity method holding loss		(651	)		(820	)		169			(20.6	)%
Net loss	$	(3,989	)	$	(802	)	$	(3,187	)		397.4	%

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Revenues

Net revenues during the quarter ended March 31, 2023 was $10.1 million compared to $10.0 million during the quarter ended March 31,2022.

	Three Months Ended March 31,
	2023		2022		$ Change			% Change
	(dollars in thousands)
Strong Entertainment	$	9,951	$	9,720	$	231			2.4	%
Other		158		306		(148	)		(48.4	)%
Total net revenues	$	10,109	$	10,026	$	83			0.8	%

Strong Entertainment

Revenue from Strong Entertainment increased 2.4% to $10.0 million in the first quarter of 2023 from $9.7 million in the first quarter of 2022. The increase from the prior year was due to $0.7 million of higher service revenue, partially offset by and a $0.5 million decrease in product revenue.

We have increased the scope of our services to better support our customers and to increase market share in cinema services, including cinema screen installation work performed for certain of our customers. The decline in revenue from products was primarily due to the timing of projects utilizing our Eclipse curvilinear screens, which was partially offset by higher sales of traditional cinema screens as the upgrade to laser projection continues across the industry. We expect the upgrades from xenon to laser to accelerate throughout 2023 and continue for at least the next several years.

Other

The decrease in other revenue primarily related to the expiration of the agreement covering support services provided to Firefly, which expired at the end of 2022.

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Gross Profit

Consolidated gross profit was $2.5 million during both the quarter ended March 31, 2023 and March 31, 2022. As a percentage of revenue, gross profit was 24.5% and 25.0% for the quarters ended March 31, 2023 and March 31, 2022, respectively.

	Three Months Ended March 31,
	2023		2022		$ Change			% Change
	(dollars in thousands)
Strong Entertainment	$	2,320	$	2,205	$	115			5.2	%
Other		158		306		(148	)		(48.4	)%
Total gross profit	$	2,478	$	2,511	$	(33	)		(1.3	)%

Strong Entertainment

Gross profit in the Strong Entertainment segment was $2.3 million or 23.3% of revenues in the first quarter of 2023 compared to $2.2 million or 22.7% in the first quarter of 2022.

Gross profit from product sales was $1.7 million or 24.1% of revenues for the first quarter of 2023 compared to $1.6 million or 21.1% of revenues for the first quarter of 2022. The increase in gross profit percentage resulted primarily from product mix as revenue from our higher margin traditional cinema screens grew at a faster rate than that of our other products.

Gross profit from service revenue was $0.6 million or 21.2% of revenues for the first quarter of 2023 compared to $0.6 million or 28.7% of revenues for the first quarter of 2022. Gross profit percentage declined from the prior year as the increase in gross margin from our field services and contract revenue was more than offset by third-party screen installation costs. Third-party screen installation costs are expected to be replaced with internal labor as we continue to onboard the team during the first half of 2023, which is expected to improve margins later in the year.

Other

Other gross profit decreased primarily related to the expiration of the agreement covering support services provided to Firefly, which expired at the end of 2022.

Loss From Operations

Consolidated loss from operations was $0.8 million in the first quarter of both 2023 and 2022.

	Three Months Ended March 31,
	2023			2022			$ Change			% Change
	(dollars in thousands)
Strong Entertainment	$	576		$	610		$	(34	)		(5.6	)%
Other		(169	)		(134	)		(35	)		26.1	%
Total segment operating income		407			476			(69	)		(14.5	)%
Unallocated administrative expenses		(1,185	)		(1,239	)		54			(4.4	)%
Total loss from operations	$	(778	)	$	(763	)	$	(15	)		2.0	%

The Strong Entertainment segment generated operating income of $0.6 million in both the first quarter of 2023 and 2022. There were increases to selling and administrative expenses, marketing and travel and entertainment expenses related to the increased revenue and business activity, including that of Strong Studios, in the current period as compared to the prior year.

Unallocated administrative expenses were $1.2 million in the first quarter of both 2023 and 2022. A decrease in stock-based compensation was partially offset by an increase in professional fees and higher overall compensation costs.

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Other Financial Items

Total other expense of $2.9 million during the first quarter of 2023 primarily consisted of a $2.9 million unrealized loss on equity holdings and $0.1 million of interest expense, partially offset by $0.1 million of foreign currency transaction adjustments. Total other income of $1.1 million during the first quarter of 2022 primarily consisted of a $1.7 million unrealized gain on equity holdings, partially offset by $0.3 million of foreign currency transaction adjustments, a $0.2 million adjustment to the carrying value of a promissory note receivable in connection with a prepayment, and $0.1 million of interest expense.

Income tax benefit was $0.3 million during the first quarter of 2023 compared to income tax expense of $0.4 million during the first quarter of 2022. Our income tax benefit/expense during the first quarter of 2023 and 2022 consisted primarily of current and deferred income tax on foreign earnings, which includes the unrealized (loss) gain on equity holdings.

We recorded a loss on our FGF Holdings equity method holding of $0.7 million during the first quarter of 2023 compared to $0.8 million during the first quarter of 2022.

As a result of the items outlined above, we generated a net loss of $4.0 million, or $0.20 per basic and diluted share, in the first quarter of 2023, compared to $0.8 million, or $0.04 per basic and diluted share, in the first quarter of 2022.

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, sales of our common stock and credit facilities. Our primary cash requirements involve operating expenses, working capital, capital expenditures, equity holdings, and other general corporate activities.

We ended the first quarter of 2023 with total cash and cash equivalents of $4.3 million compared to $3.8 million as of December 31, 2022. Of the $4.3 million as of March 31, 2023, $0.6 million was held by our Canadian subsidiary, Strong/MDI. Strong/MDI makes intercompany loans to the U.S. parent company which do not trigger Canadian withholding taxes if they meet certain requirements. As of March 31, 2023, the parent company had outstanding intercompany loans from Strong/MDI of approximately $38.6 million. In the event those loans are not repaid, or are recharacterized as dividends to the U.S. parent company, we would be required to pay 5% Canadian withholding taxes, which have been fully accrued as of March 31, 2023.

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

On June 7, 2021, Strong/MDI entered into a demand credit agreement (the “2021 Credit Agreement”) with CIBC, which amended and restated the demand credit agreement dated as of September 5, 2017. The 2021 Credit Agreement consisted of a revolving line of credit for up to CDN$2.0 million subject to a borrowing base requirement, a 20-year installment loan for up to CDN$5.1 million and a 5-year installment loan for up to CDN$0.5 million. These borrowings were due on demand by the lender. In January 2023, Strong/MDI entered into a demand credit agreement (the “2023 Credit Agreement”), which amended and restated the 2021 Credit Agreement. The 2023 Credit Agreement consists of a revolving line of credit for up to CAD$5.0 million and a 20-year installment loan for up to CAD$3.1 million. Under the 2023 Credit Agreement: (i) the amount outstanding under the line of credit is payable on demand and bears interest at the lender’s prime rate plus 1.0% and (ii) the amount outstanding under the installment loan bears interest at the lender’s prime rate plus 0.5% and is payable in monthly installments, including interest, over their respective borrowing periods. The lender may also demand repayment of the installment loan at any time. The 2023 Credit Agreement is secured by a lien on Strong/MDI’s Quebec, Canada facility and substantially all of Strong/MDI’s assets. The 2023 Credit Agreement requires Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity holdings) not exceeding 2.5 to 1 and a fixed charge coverage ratio of not less than 1.1 times earnings before interest, income taxes, depreciation and amortization. These borrowings are due on demand by the lender and total $3.6 million as of March 31, 2023. In May 2023, Strong/MDI and CIBC entered into an amendment to the 2023 Credit Agreement which reduced the amount available under the revolving line of credit to CAD$3.4 million, and CIBC provided an undertaking to Strong/MDI to a release of CIBC’s security interest in certain assets to be transferred to a subsidiary in connection with transactions related to the announced initial public offering of Strong Global Entertainment.

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We believe that our existing sources of liquidity, including cash and cash equivalents, operating cash flow, credit facilities, equity holdings, receivables and other assets will be sufficient to meet our projected capital needs for at least the next twelve months. However, our ability to continue to meet our cash requirements will depend on, among other things, our ability to achieve anticipated levels of revenues and cash flow from operations, performance of our equity holdings, our ability to manage costs and working capital successfully, any unforeseen disruptions of cinemas, theme parks and other entertainment venues (such as those experienced with COVID-19), 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 variability and unpredictability of the current economic environment. In the event of a sustained market deterioration or declines in net sales or other events, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions. We may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in additional public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all, and we cannot provide any assurance that we will be able to obtain any additional sources of financing or liquidity on acceptable terms, or at all. See Note 10 to the condensed consolidated financial statements for a description of our debt as of March 31, 2023.

Cash Flows from Operating Activities

Net cash used in operating activities was $0.5 million during the three months ended March 31, 2023 and $1.7 million during the three months ended March 31, 2022. Cash used in operating activities decreased primarily due to improvements in working capital including the collection of accounts receivable and customer deposits, which was partially offset by higher payments to our vendors and for other accrued expenses.

Cash Flows from Investing Activities

Net cash provided by investing activities was $40 thousand during the three months ended March 31, 2023, which consisted of $0.2 million of proceeds from the sale of equity securities, offset by $0.1 million of capital expenditures and a $0.1 million outflow related to the acquisition of film and television programming rights. Net cash provided by investing activities during the three months ended March 31, 2022 was $1.1 million, which consisted of a $2.3 million receipt of a promissory note, partially offset by $0.8 million of capital expenditures and a $0.4 million outflow related to the acquisition of film and television programming rights. The capital expenditures during the three months ended March 31, 2022 primarily related to the purchase of the Digital Ignition building in Alpharetta, Georgia.

Cash Flows from Financing Activities

Net cash provided by financing activities was $1.0 million during the three months ended March 31, 2023, which primarily consisted of $1.3 million of net borrowings under the CIBC revolving line of credit, partially offset by principal payments on short-term and long-term debt and finance lease obligations. Net cash used in financing activities was $0.1 million during the three months ended March 31, 2022 consisted of principal payments on short-term and long-term 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, we disclose information regarding Adjusted EBITDA, which differs from the term EBITDA as it is commonly used. In addition to adjusting net income (loss) to exclude income taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes share-based compensation, impairment charges, equity method income (loss), fair value adjustments, severance, foreign currency transaction gains (losses), transactional gains and expenses, gains on insurance recoveries and other cash and non-cash charges and gains.

32

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

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

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

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

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

	Quarters Ended March 31,
	2023									2022
	Strong Entertainment			Corporate and Other			Consolidated			Strong Entertainment			Corporate and Other			Consolidated
Net (loss) income	$	(752	)	$	(3,237	)	$	(3,989	)	$	735		$	(1,537	)	$	(802	)
Interest expense, net		57			54			111			24			29			53
Income tax (benefit) expense		(301	)		2			(299	)		311			39			350
Depreciation and amortization		179			87			266			213			153			366
EBITDA		(817	)		(3,094	)		(3,911	)		1,283			(1,316	)		(33	)
Stock-based compensation expense		-			127			127			-			194			194
Equity method holding loss		-			651			651			-			820			820
Unrealized loss (gain) on equity holdings		1,622			1,269			2,891			(868	)		(860	)		(1,728	)
Foreign currency transaction (gain) loss		(117	)		(2	)		(119	)		342			-			342
Severance and other		-			-			-			-			222			222
Adjusted EBITDA	$	688		$	(1,049	)	$	(361	)	$	757		$	(940	)	$	(183	)

33

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, 2023 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, 2022. 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, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

34

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 our business operations, we are involved, from time to time, in certain legal disputes. We and certain of our subsidiaries are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of commercial lighting products containing wiring that may have contained asbestos. Each case names dozens of corporate defendants in addition to us. In our experience, a large percentage of these types of claims have never been substantiated and have been dismissed by the courts. We have not suffered any adverse verdict in a trial court proceeding related to asbestos claims and intend to continue to defend these lawsuits. As of March 31, 2023, the Company has a loss contingency reserve of approximately $0.2 million, which represents our estimate of our potential losses related to the settlement of open cases. During 2022 and the first quarter of 2023, we settled three cases, which resulted in payments totaling $53 thousand. When appropriate, we may settle additional claims in the future. We do not expect the resolution of these cases to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Item 1A. Risk Factors

Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 includes a detailed discussion of the Company’s risk factors. As of the date of this filing there have been no material changes to the risk factors as previously disclosed.

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. The following table provides information about purchases made by us of our common stock for each month included in the quarter ended March 31, 2023:

ISSUER PURCHASES OF EQUITY SECURITIES 

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		The Maximum Number of Shares That May Still be Purchased Under the Plans or Programs
January 2023		-	$	-		-		636,931
February 2023		-		-		-		636,931
March 31, 2023		-		-		-		636,931
Quarter Ended March 31, 2023		-	$	-	$	-		636,931

Item 5. Other Information

In May 2023, Strong/MDI and CIBC entered into an amendment to the 2023 Credit Agreement (the “Amendment”) which reduced the amount available under the revolving line of credit to CAD$3.4 million, and CIBC provided an undertaking to Strong/MDI to a release of CIBC’s security interest in certain assets to be transferred to a subsidiary in connection with transactions related to the announced initial public offering of Strong Global Entertainment. The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment, which is filed herewith as Exhibit 10.3 and incorporated herein by reference.

35

Item 6. Exhibits

		Incorporated by Reference
Exhibit Number	Document Description	Form	Exhibit	Filing Date	Filed Herewith
10.1	Amendment and Termination Agreement dated as of January 13, 2023, between Strong Studios, Inc., Landmark Studio Group LLC and Screen Media Ventures, LLC.	8-K	10.2	January 18, 2023
10.2	Amended and restated demand credit agreement dated as of January 13, 2023, between Strong/MDI Screen Systems Inc. and Canadian Imperial Bank of Commerce.	8-K	10.1	January 18, 2023
10.3	Amendment #1 to Demand Credit Agreement, dated as of January 13, 2023, between Canadian Imperial Bank of Commerce and Strong/MDI Screen Systems Inc., dated May 8, 2023.				X
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 FG Group Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets (unaudited); (ii) the Condensed Consolidated Statements of Operations (unaudited); (iii) the Condensed Consolidated Statements of Comprehensive Loss (unaudited); (iv) the Condensed Consolidated Statements of Stockholders’ Equity (unaudited); (v) the Condensed Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Consolidated Financial Statements (unaudited).				X
104	XBRL Cover Page Interactive Data File (embedded within the Inline XBRL document).				X

** Furnished herewith.

36

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.

FG GROUP HOLDINGS 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 15, 2023	Date:	May 15, 2023

37

EX-10.3

Exhibit 10.3

Strong/MDI Screen Systems, Inc.

1440 Raoul-Charette

Joliette, Quebec, J6E 8S7

Attention : Mr. Mark Roberson

Amendment # 1 to the Existing Credit Agreement

dated January 13, 2023 (including all previous amendments thereto, the “Agreement”)

between Canadian Imperial Bank of Commerce (“CIBC”) and Strong/MDI Screen Systems, Inc. (the

“Borrower”)

Amendments. The Agreement is amended as follows:

Demand Operating Credit

Credit Limit: $3,400,000 (decreased from $5,000,000)

An amendment fee of $2,500 shall be payable upon acceptance of the Amendment #1 to the Existing Credit Agreement.

All other terms and conditions remain unchanged.

Confirmation:	As revised by this Amendment, the Agreement remains in full force.
Dated as of:	May 8th, 2023

For CIBC:		For the Borrower:
By:	/s/ Mark Stein	By:	/s/ Mark D. Roberson	By:
Name:	Mark Stein	Name:	Mark D. Roberson	Name:
Title:	Authorized Signatory	Title:	Chairman	Title:
By:		By:		By:
Name:		Name:		Name:
Title:		Title:		Title:

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, 2023 of FG Group Holdings 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 15, 2023

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, 2023 of FG Group Holdings 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 15, 2023

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 FG Group Holdings 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 quarterly period ended March 31, 2023 (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 15^th day of May 2023.

/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 FG Group Holdings Inc. and will be retained by FG Group Holdings 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 FG Group Holdings 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 quarterly period ended March 31, 2023 (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 15^th day of May 2023.

/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 FG Group Holdings Inc. and will be retained by FG Group Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	May 12, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	1-13906
Entity Registrant Name	FG GROUP HOLDINGS INC.
Entity Central Index Key	0000946454
Entity Tax Identification Number	47-0587703
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	5960 Fairview Road
Entity Address, Address Line Two	Suite 275
Entity Address, City or Town	Charlotte
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	28210
City Area Code	(704)
Local Phone Number	994-8279
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	FGH
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		19,469,649

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 4,349	$ 3,789
Accounts receivable (net of allowance for credit losses of $273 and $409, respectively)	5,552	6,167
Inventories, net	3,660	3,389
Other current assets	5,387	4,871
Total current assets	18,948	18,216
Property, plant and equipment, net	12,493	12,649
Operating lease right-of-use assets	285	310
Finance lease right-of-use asset	633	666
Equity holdings	33,756	37,522
Film and television programming rights, net	1,584	1,501
Intangible assets, net	4	5
Goodwill	882	882
Other assets	2	2
Total assets	68,587	71,753
Current liabilities:
Accounts payable	3,964	4,375
Accrued expenses	4,743	5,167
Short-term debt	4,088	2,510
Current portion of long-term debt	217	216
Current portion of operating lease obligations	118	116
Current portion of finance lease obligations	125	117
Deferred revenue and customer deposits	2,402	1,787
Total current liabilities	15,657	14,288
Operating lease obligations, net of current portion	227	257
Finance lease obligations, net of current portion	514	550
Long-term debt, net of current portion and deferred debt issuance costs, net	4,951	5,004
Deferred income taxes	4,400	4,851
Other long-term liabilities	103	105
Total liabilities	25,852	25,055
Commitments, contingencies and concentrations (Note 14)
Stockholders’ equity:
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding
Common stock, par value $.01 per share; authorized 50,000 shares; issued 22,264 shares; outstanding 19,470	223	223
Additional paid-in capital	54,009	53,882
Retained earnings	12,424	16,437
Treasury stock, 2,794 shares at cost	(18,586)	(18,586)
Accumulated other comprehensive loss	(5,335)	(5,258)
Total stockholders’ equity	42,735	46,698
Total liabilities and stockholders’ equity	$ 68,587	$ 71,753

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Allowance for credit losses	$ 273	$ 409
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	22,264	22,264
Common stock, shares outstanding	19,470	19,470
Common shares in treasury, shares	2,794	2,794

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Total net revenues	$ 10,109	$ 10,026
Total cost of revenues	7,631	7,515
Gross profit	2,478	2,511
Selling and administrative expenses:
Selling	534	541
Administrative	2,723	2,733
Total selling and administrative expenses	3,257	3,274
Gain on disposal of assets	1
Loss from operations	(778)	(763)
Other income (expense):
Interest income		6
Interest expense	(111)	(59)
Foreign currency transaction gain (loss)	119	(342)
Unrealized (loss) gain on equity holdings	(2,891)	1,728
Other income (expense), net	24	(202)
Total other (expense) income	(2,859)	1,131
(Loss) income before income taxes and equity method holding loss	(3,637)	368
Income tax benefit (expense)	299	(350)
Equity method holding loss	(651)	(820)
Net loss	$ (3,989)	$ (802)
Net loss per share
Basic	$ (0.20)	$ (0.04)
Diluted	$ (0.20)	$ (0.04)
Weighted-average shares used in computing net loss per share:
Basic	19,470	18,990
Diluted	19,470	18,990
Product [Member]
Total net revenues	$ 7,204	$ 7,703
Total cost of revenues	5,465	5,858
Service [Member]
Total net revenues	2,905	2,323
Total cost of revenues	$ 2,166	$ 1,657

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Net loss	$ (3,989)	$ (802)
Adjustment to postretirement benefit obligation	(5)	(8)
Currency translation adjustment:
Unrealized net change arising during period	(72)	178
Total other comprehensive (loss) income	(77)	170
Comprehensive loss	$ (4,066)	$ (632)

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock, Common [Member]	AOCI Attributable to Parent [Member]	Total
Beginning balance, value at Dec. 31, 2021	$ 213	$ 50,807	$ 23,591	$ (18,586)	$ (3,748)	$ 52,277
Beginning balance, shares at Dec. 31, 2021	21,286
Net loss			(802)			(802)
Net other comprehensive income					170	170
Stock-based compensation expense		194				194
Issuance of common stock	$ 8	2,342				2,350
Issuance of common stock, shares	761
Issuance of warrants		109				109
Ending balance, value at Mar. 31, 2022	$ 221	53,452	22,789	(18,586)	(3,578)	54,298
Ending balance, shares at Mar. 31, 2022	22,047
Beginning balance, value at Dec. 31, 2022	$ 223	53,882	16,437	(18,586)	(5,258)	46,698
Beginning balance, shares at Dec. 31, 2022	22,264
Cumulative effect of adoption of accounting principle (Note 2)			(24)			(24)
Net loss			(3,989)			(3,989)
Net other comprehensive income					(77)	(77)
Stock-based compensation expense		127				127
Ending balance, value at Mar. 31, 2023	$ 223	$ 54,009	$ 12,424	$ (18,586)	$ (5,335)	$ 42,735
Ending balance, shares at Mar. 31, 2023	22,264

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net loss	$ (3,989)	$ (802)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Recovery of doubtful accounts	(18)	(15)
Provision for obsolete inventory	14	13
Provision for warranty	44	11
Depreciation and amortization	266	366
Amortization and accretion of operating leases	29	97
Equity method holding loss	651	820
Adjustment to SageNet promissory note in connection with prepayment		202
Unrealized loss (gain) on equity holdings	2,891	(1,728)
Deferred income taxes	(443)	239
Stock-based compensation expense	127	194
Changes in operating assets and liabilities:
Accounts receivable	612	(407)
Inventories	(284)	426
Current income taxes	(186)	(185)
Other assets	2	(246)
Accounts payable and accrued expenses	(827)	149
Deferred revenue and customer deposits	615	(728)
Operating lease obligations	(32)	(89)
Net cash used in operating activities	(528)	(1,683)
Cash flows from investing activities:
Capital expenditures	(75)	(763)
Acquisition of programming rights	(83)	(395)
Sale of equity holdings	198
Receipt of SageNet promissory note		2,300
Net cash provided by investing activities	40	1,142
Cash flows from financing activities:
Principal payments on short-term debt	(250)	(79)
Principal payments on long-term debt	(51)	(18)
Borrowings under credit facility	1,596
Repayments under credit facility	(225)
Payments on finance lease obligations	(28)
Net cash provided by (used in) financing activities	1,042	(97)
Effect of exchange rate changes on cash and cash equivalents	6	40
Net increase (decrease) in cash and cash equivalents and restricted cash	560	(598)
Cash and cash equivalents and restricted cash at beginning of period	3,789	8,881
Cash and cash equivalents and restricted cash at end of period	4,349	8,283
Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents	4,349	8,133
Restricted cash		150
Total cash and cash equivalents and restricted cash	4,349	8,283
Supplemental disclosure of non-cash investing and financing activities:
Short-term borrowings to finance insurance	453	392
Issuance of debt, common shares, and warrants in connection with purchase of Digital Ignition building		7,609
Amount payable to Landmark Studio Group in connection with aquistion of projects (Note 8)		$ 1,345

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Nature of Operations

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Nature of Operations

1. Nature of Operations

FG Group Holdings Inc. (previously Ballantyne Strong, Inc.) (“FG Group Holdings,” or the “Company”), a Nevada corporation, is a holding company with business operations in the entertainment industry and holdings in public and privately held companies. The Company historically has conducted a large portion of its operations primarily through its Strong Entertainment operating segment, which manufactures and distributes premium large format projection screens and provides technical support services and other related products and services to the cinema exhibition industry, theme parks, schools, museums and other entertainment-related markets. Strong Entertainment also distributes and supports third party products, including digital projectors, servers, library management systems, menu boards and sound systems. In March 2022, the Company launched Strong Studios, Inc. (“Strong Studios”) with the goal of expanding Strong Entertainment to include content creation and production of feature films and series. The launch of Strong Studios is intended to further diversify our revenue streams and increase our addressable markets, while leveraging and expanding our existing relationships in the industry.

The Company owns and operates its Digital Ignition technology incubator and co-working facility in Alpharetta, Georgia. In addition, the Company holds minority equity positions in three companies.

The Company has announced plans to establish the Strong Entertainment business as a separate publicly listed company. Following the planned separation, the operations of the Strong Entertainment operating segment are expected to become part of a newly established British Columbia corporation, Strong Global Entertainment, Inc. (“Strong Global Entertainment”). Strong Global Entertainment has filed a registration statement with the U.S. Securities and Exchange Commission (“SEC”) and intends to commence an initial public offering of its common shares during 2023 to raise additional capital to support its growth plans. If successful, the Company expects to apply to have the Strong Global Entertainment common shares trade on the NYSE American under the ticker symbol “SGE” following the initial public offering, and the Company expects to continue to be the majority shareholder of Strong Global Entertainment.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

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, 2022.

The condensed consolidated balance sheet as of December 31, 2022, 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.

The coronavirus pandemic (“COVID-19”) and inflationary pressures have been posing and may continue to pose challenges for our business. The COVID-19 global pandemic resulted in unprecedented impact to consumer behaviors and our customers, particularly our customers’ ability and willingness to purchase our products and services. The Company believes that consumer reticence to engage in outside-the-home activities, caused by the risk of contracting COVID-19, has abated, and our customers have resumed more typical, pre-COVID-19 purchasing behaviors. And while we believe our customers made significant progress in its recovery from the pandemic, the ongoing recovery will be contingent upon several key factors, including the volume of new film content available, the box office performance of new film content released, the duration of the exclusive theatrical release window, and evolving consumer behavior with competition from other forms of in- and out-of-home entertainment. There can be no assurances that there will be no additional public health crises, including further resurgence or variants of COVID-19, which could reverse the current trend and have a negative impact on the Company’s results of operations

Cash and Cash Equivalents

All short-term, highly liquid financial instruments are classified as cash equivalents in the condensed consolidated balance sheets and statements of cash flows. Generally, these instruments have maturities of three months or less from date of purchase. As of March 31, 2023, $0.6 million of the $4.3 million in cash and cash equivalents was held by our foreign subsidiary.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for credit losses 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. Past due accounts are written off when our efforts have been unsuccessful in collecting amounts due.

Equity Holdings

The Company accounts for its equity holdings using the equity method, at cost, or at fair value depending on the facts and circumstances related to each individual holding. The Company applies the equity method of accounting to its holdings when it has significant influence, but not controlling interest, in the entity. Judgment regarding the level of influence over each equity method holding 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 or loss resulting from these equity holdings is reported under the line item captioned “equity method holding loss” in our condensed consolidated statements of operations. The Company’s equity method holding is reported at cost and adjusted each period for the Company’s share of the entity’s income or loss and dividends paid, if any. The Company’s share of the entity’s income or loss is recorded on a one quarter lag for all equity method holdings. The Company classifies distributions received from equity method holdings using the cumulative earnings approach on the condensed consolidated statements of cash flows.

Changes in fair value of holdings in marketable equity securities of unconsolidated entities in which the Company is not able to exercise significant influence (“Fair Value Holdings”) are recognized on the consolidated statement of operations. Nonmarketable equity holdings in unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Holdings”) are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends on Fair Value Holdings and Cost Method Holdings received are recorded as income.

The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company’s equity method holding as of March 31, 2023 and determined that the Company’s proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for an identical or similar holding or security of the Company’s Cost Method Holding during the three months ended March 31, 2023. The carrying value of our equity method, Fair Value Holdings and Cost Method Holdings is reported as “equity holdings” on the condensed consolidated balance sheets. Note 6 contains additional information on our equity method, Fair Value Holdings and Cost Method Holdings

Film and Television Programming Rights

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

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

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

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

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

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

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, 2023 and December 31, 2022.

Fair values measured on a recurring basis at March 31, 2023 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,349	$	-	$	-	$	4,349
Fair value method equity holding		13,677						13,677
Total	$	18,026	$	-	$	-	$	18,026

Fair values measured on a recurring basis at December 31, 2022 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	3,789	$	-	$	-	$	3,789
Fair value method equity holding		16,792		-		-		16,792
Total	$	20,581	$	-	$	-	$	20,581

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses and short-term debt reported in the consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. Based on a combination of the cash on hand as well as quoted market prices of the securities held by FGF Holdings (as defined below), the liquidation value of the Company’s equity method holding was $7.4 million at March 31, 2023 (see Note 6).

Recently Adopted 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 requires 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 Company adopted this ASU effective January 1, 2023. Upon adoption the Company recorded a cumulative effect adjustment decreasing retained earnings by $24 thousand.

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Revenue

3 Months Ended

Mar. 31, 2023

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 whether they are distinct, 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 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 typically does not have any material extended payment terms, as payment is due at or shortly after the time of the sale. 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, or receives cash, 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, 2023 or December 31, 2022.

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Screen system sales	$	2,582	$	-	$	2,582	$	3,306	$	-	$	3,306
Digital equipment sales		3,526		-		3,526		3,544		-		3,544
Extended warranty sales		51		-		51		100		-		100
Other product sales		1,045		-		1,045		753		-		753
Total product sales		7,204		-		7,204		7,703		-		7,703
Field maintenance and monitoring services		1,891		-		1,891		1,618		-		1,618
Installation services		802		-		802		371		-		371
Other service revenues		54		158		212		28		306		334
Total service revenues		2,747		158		2,905		2,017		306		2,323
Total	$	9,951	$	158	$	10,109	$	9,720	$	306	$	10,026

Screen system sales

The Company typically 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 times because control transfers upon customer 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. For contracts that are long-term in nature, the Company believes that the use of the percentage-of-completion method is appropriate as the Company has the ability to make reasonably dependable estimates of the extent of progress towards completion, contract revenues, and contract costs. Under the percentage-of-completion method, revenue is recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract.

Digital equipment sales

The Company recognizes revenue on sales of digital equipment when the control of the equipment is transferred, which typically 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 its Strong Entertainment customers. These contracts are generally 12 months in length. Revenue related to service contracts is recognized ratably over the term of the agreement.

In addition to selling service contracts, the Company also performs discrete time and materials-based maintenance and repair work for customers in the Strong Entertainment segment. 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 its Strong Entertainment customers and recognizes revenue upon completion of the installations.

Extended warranty sales

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

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, 2023 and 2022 (in thousands):

	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Point in time	$	8,430	$	14	$	8,444	$	8,442	$	3	$	8,445
Over time		1,521		144		1,665		1,278		303		1,581
Total	$	9,951	$	158	$	10,109	$	9,720	$	306	$	10,026

At March 31, 2023, the unearned revenue amount associated with long-term projects that the Company uses the percentage-of-completion method to recognize revenue, maintenance and monitoring services and extended warranty sales in which the Company is the primary obligor was $0.8 million. The Company expects to recognize $0.8 million of the unearned revenue amounts during the remainder of 2023, and immaterial amounts from 2024 through 2026.

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Net Loss Per Common Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Net Loss Per Common Share

4. Net Loss Per Common Share

Basic net loss per share has been computed on the basis of the weighted average number of shares of common stock outstanding. In periods when the Company reported a net loss, there were no differences between average shares used to compute basic and diluted loss per share as inclusion of stock options and restricted stock units would have been anti-dilutive in those periods. The following table summarizes the weighted average shares used to compute basic and diluted net loss per share (in thousands):

	Three Months Ended March 31,
	2023		2022
Weighted average shares outstanding:
Basic weighted average shares outstanding		19,470		18,990
Dilutive effect of stock options and certain non-vested restricted stock units		-		-
Diluted weighted average shares outstanding		19,470		18,990

A total of 140,420 and 225,379 common stock equivalents related to stock options and restricted stock units were excluded for the three months ended March 31, 2023 and March 31, 2022, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share. Options to purchase 489,500 and 354,500 shares of common stock were outstanding as of March 31, 2023 and March 31, 2022, 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.

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Inventories

3 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Inventories

5. Inventories

Inventories consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
Raw materials and components	$	1,925	$	1,826
Work in process		448		279
Finished goods		1,287		1,284
	$	3,660	$	3,389

The inventory balances are net of reserves of approximately $0.5 million as of both March 31, 2023 and December 31, 2022. The inventory reserves primarily related to the Company’s finished goods inventory. A rollforward of the inventory reserve for the three months ended March 31, 2023, is as follows (in thousands):

Inventory reserve balance at December 31, 2022	$	486
Inventory write-offs during 2023		(16	)
Provision for inventory reserve during 2023		14
Inventory reserve balance at March 31, 2023	$	484

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Equity Holdings

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Equity Holdings

6. Equity Holdings

The following summarizes our equity holdings (dollars in thousands):

	March 31, 2023					December 31 2022
	Carrying Amount		Economic Interest			Carrying Amount		Economic Interest
Equity Method Holding
FG Financial Holdings, LLC	$	7,181		47.3	%	$	7,832		47.2	%
Fair Value Method Holding
GreenFirst Forest Products Inc.		13,677		8.3	%		16,792		8.4	%
Cost Method Holding
Firefly Systems, Inc.		12,898					12,898
Total Investments	$	33,756				$	37,522

Equity Method Holding

FG Financial Holdings, LLC (“FGF Holdings”) is a limited liability company formed under the Delaware Limited Liability Company Act. The Company is a member of FGF Holdings and contributed its 2.9 million shares of FG Financial Group, Inc. (“FGF”) common stock to FGF Holdings on September 12, 2022. FGF is a publicly-traded reinsurance and investment management holding company focused on opportunistic collateralized and loss capped reinsurance, while allocating capital to special purpose acquisition companies (each, a “SPAC”) and SPAC sponsor-related businesses.

In consideration of its contribution to FGF Holdings, the Company was issued Series B Common Interests of FGF Holdings and 50% of the voting power over FGF Holdings. The members of FGF Holdings agreed that the powers of FGF Holdings shall be exercised by, or under the authority of, its managers. FGF Holdings has two managers, one of which was appointed by the Company. The Company designated its Chairman, D. Kyle Cerminara, to serve as a manager of FGF Holdings. The managers of FGF Holdings, acting unanimously, have the right, power and authority on behalf of FGF Holdings and in its name to execute documents or other instruments and exercise all of the rights, power and authority of FGF Holdings. Allocations of profits and losses and distributions of cash are made in accordance with the terms of the FGF Holdings operating agreement.

The Company has the ability to significantly influence FGF Holdings through its 50% voting power but does not maintain a controlling interest. Based on quoted market prices of the assets held by FGF Holdings, as well as the liabilities and cash balance on hand, the liquidation value of the Company’s LLC interest in FGF Holdings was approximately $7.4 million as of March 31, 2023.

The Company recorded an equity method loss related to FGF Holdings of $0.7 million during the three months ended March 31, 2023. As of March 31, 2023, the Company’s retained earnings included an accumulated deficit from its equity method holdings of approximately $6.7 million.

Fair Value Method Holding

GreenFirst Forest Products Inc. (“GreenFirst”) is a publicly-traded Canadian company focused on environmentally sustainable forest management and lumber production. In April 2021, GreenFirst announced that it had entered into an asset purchase agreement pursuant to which it would acquire a portfolio of forest and paper product assets (the “GreenFirst Acquisition”). The Company’s Chairman, Mr. Cerminara, served as a member of the board of directors of GreenFirst from June 2016 to October 2021, and was also appointed Chairman of GreenFirst from June 2018 to June 2021. Prior to the closing of the GreenFirst Acquisition, the Company held a 20.7% ownership position in GreenFirst. The Company’s 20.7% ownership of GreenFirst, combined with Mr. Cerminara’s board seat, provided the Company with significant influence over GreenFirst, but not a controlling interest. Accordingly, the Company applied the equity method of accounting to its equity holding in GreenFirst. Following the GreenFirst Acquisition and GreenFirst’s issuance of additional common shares, the Company’s ownership percentage decreased to 8.6%. As a result, the Company is no longer able to exercise significant influence over GreenFirst and the equity holding in GreenFirst no longer qualified for equity method accounting. As a result of applying the fair value method of accounting, the Company recorded a loss on equity holdings of approximately $2.9 million during the three months ended March 31, 2023, and a gain on equity holdings of 1.7 million during the three months ended March 31, 2022. The Company did not receive dividends from GreenFirst during the three months ended March 31, 2023 or March 31, 2022. Based on quoted market prices, the fair value of the Company’s ownership in GreenFirst was $13.7 million as of March 31, 2023.

Cost Method Holding

Firefly Systems, Inc. (“Firefly”) is a private company which operates a media network and digital advertising solutions on taxi and rideshare vehicles. The Company holds approximately 1.1 million and 0.6 million Firefly Series B-1 and Firefly Series B-2 preferred shares, respectively, which were acquired in connection with the transactions with Firefly in May 2019 and August 2020. In addition, the Company holds an additional 0.7 million Firefly Series B-2 preferred shares, which were acquired in August 2020 pursuant to a stock purchase agreement with Firefly. The Company and its affiliated entities have designated Kyle Cerminara, Chairman of the Company’s board of directors and a principal of the Company’s largest shareholder, to Firefly’s board of directors.

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Property, Plant and Equipment, Net

3 Months Ended

Mar. 31, 2023

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment, Net

7. Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023			December 31, 2022
Land	$	2,341		$	2,341
Buildings and improvements		12,761			12,756
Machinery and other equipment		4,860			4,786
Office furniture and fixtures		860			860
Construction in progress		15			11
Total properties, cost		20,837			20,754
Less: accumulated depreciation		(8,344	)		(8,105	)
Property, plant and equipment, net	$	12,493		$	12,649

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Film and Television Programming Rights, Net

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Film and Television Programming Rights, Net

8. Film and Television Programming Rights, Net

Film and television programming rights, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
Television series in development	$	1,362	$	1,308
Films in development		222		193
Total	$	1,584	$	1,501

The Company has not yet commenced amortization of the projects as they were still in development at March 31, 2023.

A rollforward of film and television programming rights, net for the three months ended March 31, 2023, is as follows (in thousands):

Balance at December 31, 2022	$	1,501
Expenditures on in-process projects		83
Balance at March 31, 2023	$	1,584

In March 2022, Strong Studios acquired the rights to original feature films and television series from Landmark Studio Group LLC (“Landmark”), including the assignment of third party rights to content for global multiplatform distribution. The transaction entailed the acquisition of certain projects which are in varying stages of development, none of which have produced revenue as of March 31, 2023. In connection with such assignment and purchase, Strong Studios agreed to pay to Landmark approximately $1.7 million in four separate payments, $0.3 million of which was paid upon the closing of the transaction. The $1.7 million acquisition price was allocated to three projects in development: $1.0 million to Safehaven, $0.3 million to Flagrant and $0.4 million to Shadows in the Vineyard. The Company also agreed to issue to Landmark no later than 10 days after the completion of the initial public offering of Strong Global Entertainment, a warrant to purchase up to 150,000 common shares of Strong Global Entertainment, exercisable for three years beginning six months after the consummation of the initial public offering, at an exercise price equal to the per-share offering price of Strong Global Entertainment’s common shares in the initial public offering (the “Landmark Warrant”). The Landmark Warrant allows for cashless exercise in certain limited circumstances and provides for certain registration rights for such warrant shares. In the event that an initial public offering of Strong Global Entertainment does not occur within a specified time, Landmark would have the right to surrender the warrant in exchange for 2.5% ownership in Strong Studios.

As a condition precedent to entry into the AA Agreement, Strong Studios agreed to enter into distribution agreements for Safehaven and Flagrant (the “AA Distribution Agreements”) with Screen Media Ventures, LLC (“SMV”). Pursuant to the AA Distribution Agreements, SMV agreed to purchase the global distribution rights to Safehaven for $6.5 million and Flagrant for $2.5 million upon delivery of each project. In January 2023, Strong Studios amended its agreement with SMV resulting in Strong Studios retaining the worldwide global distribution rights for the Flagrant series and releasing SMV from the obligation to purchase the distribution rights for the series.

During the second quarter of 2022, Safehaven 2022, Inc. (“Safehaven 2022”) was established to manage the production and financing of Safehaven. Strong Studios owns 49% of Safehaven 2022 and the remaining 51% is owned by Unbounded Services, LLC (“Unbounded”). No consideration was paid by Strong Studios in exchange for its 49% equity interest in Safehaven 2022. Unbounded also did not contribute any assets or liabilities to Safehaven 2022 and agreed to provide day-to-day management services in exchange for their 51% ownership. Unbounded will also serve as a co-producer on the project. Strong Studios assigned the Landmark distribution agreement to Safehaven 2022, and the Landmark distribution agreement serves as collateral for the production financing at Safehaven 2022. Strong Studios and Unbounded will share profits and losses, if any, from Safehaven 2022 on a pro-rata basis based on their relative ownership percentages.

Strong Studios allocated $1.0 million of the $1.7 million acquisition price to Safehaven and incurred an additional $0.1 million of development costs during 2022. Strong Studios transferred the $1.1 million in intellectual property representing the rights and assets related to Safehaven and Safehaven 2022 agreed to reimburse Strong Studios $1.1 million for those costs following payment of any senior secured debt and prior to any profit participations or equity distributions. Safehaven 2022 reimbursed the $0.1 million of development costs incurred by Strong Studios, and the remaining $1.0 million payable to Strong Studios represents an obligation of Safehaven 2022 to Strong Studios and is not contingent on any specific event. Accordingly, the Company has classified the amount due from Safehaven 2022 as a receivable within other current assets on its consolidated balance sheet as of March 31, 2023. Strong Studios expects Safehaven 2022 to reimburse the acquisition cost allocated to the project based on its ultimate expected revenues and profits from the exploitation of the project. Safehaven 2022 will begin to generate revenue and expenses upon delivery of the completed Safehaven series to SMV, which is expected to occur in mid-2023. The $6.5 million minimum guarantee is due and payable to Safehaven 2022 in installments of 25% upon delivery and acceptance, 25% three months thereafter, and the remaining 50% six months thereafter. Upon delivery and acceptance, Safehaven 2022 expects to recognize $6.5 million in initial revenue from the distribution rights and will record cost of sales using the individual-film-forecast method based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned. Safehaven 2022 is an equity method holding and the Company will reflect its proportionate share of the net periodic profit and loss of Safehaven 2022 as equity method income (loss) during each reporting period.

Safehaven 2022 entered into a Loan and Security Agreement with Bank of Hope to provide interim production financing for the Safehaven production, secured by the Landmark distribution agreement. Safehaven 2022 is the sole borrower and guarantor under the loan agreement. As of March 31, 2023, Safehaven 2022 had borrowed $9.6 million under the facility for production costs incurred to that date. Safehaven 2022 has also received working capital advances of $0.6 million from Strong Studios. Strong Studios expects Safehaven 2022 to reimburse the working capital advances in the second half of 2023.

Strong Studios reviewed its ownership in Safehaven 2022 and concluded that it has significant influence, but not a controlling interest, in Safehaven 2022 based on its ownership being less than 50% along with having one of three representatives on the board of managers of Safehaven 2022. Strong Studios also reviewed whether it otherwise had the power to make decisions that significantly impact the economic performance of Safehaven 2022 and concluded that it did not control the entity and is not the primary beneficiary. Accordingly, the Company will apply the equity method of accounting to its equity holding in Safehaven 2022 and will record its proportionate share of the net income/loss resulting from the equity holding as a single line item captioned “equity method holding income (loss)” on its consolidated statement of operations.

Safehaven 2022 did not record any income or expense during the three months ended March 31, 2023, because all costs incurred by Safehaven 2022 related to the in-process production have been capitalized. Upon delivery and acceptance of the project, Safehaven 2022 expects to recognize revenue from the distribution rights and will record cost of sales using the individual-film-forecast method based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned. A summary of the balance sheet of Safehaven 2022 as of March 31, 2023, is as follows (in thousands):

Cash	$	37
Television programming rights		11,118
Other assets		76
Total assets	$	11,231
Accounts payable and accrued expenses	$	10
Due to Strong Studios		1,625
Debt		9,596
Equity		-
Total liabilities and equity	$	11,231

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Goodwill

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

9. Goodwill

The following represents a summary of changes in the Company’s carrying amount of goodwill for the three months ended March 31, 2023 (in thousands):

Balance as of December 31, 2022	$	882
Foreign currency translation adjustment		-
Balance as of March 31, 2023	$	882

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Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

10. Debt

The Company’s short-term debt and long-term debt consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023			December 31, 2022
Short-term debt:
Strong/MDI 20-year installment loan	$	2,262		$	2,289
Strong/MDI 5-year equipment loan		-			221
Strong/MDI revolving credit facility		1,372			-
Insurance note payable		454			-
Total short-term debt	$	4,088		$	2,510
Long-term debt:
Tenant improvement loan	$	153		$	162
Digital Ignition building loan		5,059			5,105
Total long-term debt	$	5,212		$	5,267
Less: current portion		(217	)		(216	)
Less: deferred debt issuance costs, net		(44	)		(47	)
Long-term debt, net of current portion and deferred debt issuance costs, net	$	4,951		$	5,004

	March 31, 2023			December 31, 2022
Deferred debt issuance costs	$	56		$	56
Less: accumulated amortization		(12	)		(9	)
Deferred debt issuance costs, net	$	44		$	47

Estimated future amortization expense of deferred debt issuance costs is as follows (in thousands):

Remainder of 2023	$	9
2024		11
2025		11
2026		11
2027		2
Thereafter		-
Total	$	44

Strong/MDI Installment Loans and Revolving Credit Facility

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 Canadian Imperial Bank of Commerce (“CIBC”) consisting of a revolving line of credit for up to CAD$3.5 million, subject to a borrowing base requirement, a 20-year installment loan for up to CAD$6.0 million and a 5-year installment loan for up to CAD$0.5 million. On June 7, 2021, Strong/MDI entered into a demand credit agreement (the “2021 Credit Agreement”), which amended and restated the demand credit agreement dated as of September 5, 2017. The 2021 credit agreement consisted of a revolving line of credit for up to CAD$2.0 million subject to a borrowing base requirement, a 20- year installment loan for up to CAD$5.1 million and a 5-year installment loan for up to CAD$0.5 million. Amounts outstanding under the line of credit are payable on demand and bear interest at the prime rate established by CIBC. Amounts outstanding under the installment loans bear interest at CIBC’s prime rate plus 0.5% and are payable in monthly installments, including interest, over their respective borrowing periods. CIBC 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 2021 Credit Agreement required Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity method holdings) not exceeding 2.5 to 1, a current ratio (excluding amounts due from related parties) of at least 1.3 to 1 and minimum “effective equity” of CAD$4.0 million.

In January 2023, Strong/MDI and CIBC entered into a demand credit agreement (the “2023 Credit Agreement”), which amended and restated the 2021 Credit Agreement. The 2023 Credit Agreement consists of a revolving line of credit for up to CAD$5.0 million and a 20-year installment loan for up to CAD$3.1 million. Under the 2023 Credit Agreement: (i) the amount outstanding under the line of credit is payable on demand and bears interest at the lender’s prime rate plus 1.0% and (ii) the amount outstanding under the installment loan bears interest at the lender’s prime rate plus 0.5% and is payable in monthly installments, including interest, over their respective borrowing periods. The lender may also demand repayment of the installment loan at any time. The 2023 Credit Agreement is secured by a lien on Strong/MDI’s Quebec, Canada facility and substantially all of Strong/MDI’s assets. The 2023 Credit Agreement requires Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity holdings) not exceeding 2.5 to 1 and a fixed charge coverage ratio of not less than 1.1 times earnings before interest, income taxes, depreciation and amortization. The 5-year installment note was paid in full in connection with entering into the 2023 Credit Agreement. As of March 31, 2023, there was CAD$3.1 million, or approximately $2.3 million, of principal outstanding on the 20-year installment loan, which bears variable interest at 7.20%. Strong/MDI was in compliance with its debt covenants as of March 31, 2023. In May 2023, Strong/MDI and CIBC entered into an amendment to the 2023 Credit Agreement which reduced the amount available under the revolving line of credit to CAD$3.4 million, and CIBC provided an undertaking to Strong/MDI to a release of CIBC’s security interest in certain assets to be transferred to a subsidiary in connection with transactions related to the announced initial public offering of Strong Global Entertainment.

Tenant Improvement Loan

During the fourth quarter of 2021, the Company entered into a lease for a combined office and warehouse in Omaha, Nebraska. The Company incurred total costs of approximately $0.4 million to complete the build-out of the new combined office and warehouse facility. The landlord has agreed to fund approximately 50% of the build-out costs, and the Company is required to repay the portion funded by the landlord in equal monthly installments through the end of the initial lease term in February 2027. Through the end of 2021, the Company incurred approximately $0.2 million of total costs to build out the facility, of which approximately $0.1 million was funded by the landlord. The Company completed the build-out during the first quarter of 2022 and incurred an additional $0.2 million of total costs to complete the build-out, of which approximately $0.1 million was funded by the landlord.

Digital Ignition Building Loam

In January 2022, the Company purchased a parcel of land with buildings and improvements in Alpharetta, Georgia. In connection with the purchase of the land and building, the Company entered into a Commercial Loan Agreement (the “Loan Agreement”) with Community First Bank (the “Lender”), dated February 1, 2022. Pursuant to the Loan Agreement, the Lender agreed to lend the Company approximately $5.3 million (the “Loan Amount”), and the Borrower agreed to repay the Loan Amount pursuant to the terms of a promissory note (the “Note”).

The term of the Loan Agreement runs from February 1, 2022, until the Loan Amount is repaid in full by the Company or the Loan Agreement is terminated pursuant to its terms or by agreement between the Company and the Lender. The terms of the Note include (i) a fixed interest rate of 4%, (ii) maturity date of February 1, 2027, (iii) monthly payments of approximately $32 thousand beginning on March 1, 2022, and continuing on the first of each month until the maturity date or until the Note has been paid in full, (iv) a default interest of 8% in the event of a default pursuant to the terms of the Note, and (v) prepayment penalties of (a) 3% of all excess payments during the first two years of the term of the Note, (b) 2% of all excess payments during the third and fourth years of the term of the Note, and (c) 1% of all excess payments made during the fifth year of the term of the Note.

The Note includes standard events of default and references defaults under the Loan Agreement and the Deed to Secure Debt as events of default under the Note. The Company has a right to cure any curable events of default.

Contractual Principal Payments

Contractual required principal payments on the Company’s long-term debt at March 31, 2023, are as follows (in thousands):

	Tenant Improvement Loan		Digital Ignitiion Building Loan		Total
Remainder of 2023	$	26		134	$	160
2024		38		187		225
2025		40		195		235
2026		42		203		245
2027		7		4,340		4,347
Thereafter		-		-		-
Total	$	153	$	5,059	$	5,212

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Leases

3 Months Ended

Mar. 31, 2023

Leases

Leases

11. Leases

The Company and its subsidiaries lease plant and office facilities and equipment under operating and finance leases expiring through 2027. 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 Accounting Standards Codification Topic 842, “Leases,” 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 operations 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, 2023		March 31, 2022
Finance lease cost:
Amortization of right-of-use assets	$	33	$	-
Interest on lease liabilities		13		-
Operating lease cost		36		105
Short-term lease cost		17		14
Sublease income		-		(32	)
Net lease cost	$	99	$	87

Other information	Three Months Ended
	March 31, 2023		March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	13	$	-
Operating cash flows from operating leases	$	32	$	92
Financing cash flows from finance leases	$	26	$	-
Right-of-use assets obtained in exchange for new finance lease liabilities	$	-	$	-
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	-
Weighted-average remaining lease term - finance leases (years)				1.7
Weighted-average remaining lease term - operating leases (years)				3.4
Weighted-average discount rate - finance leases				4.7	%
Weighted-average discount rate - operating leases				3.7	%

The following table presents a maturity analysis of the Company’s operating and finance lease liabilities as of March 31, 2023 (in thousands):

	Operating Leases			Finance Leases
Remainder of 2023	$	99		$	127
2024		101			170
2025		79			416
2026		81			16
2027		14			5
Thereafter		-			-
Total lease payments		374			734
Less: Amount representing interest		(29	)		(95	)
Present value of lease payments		345			639
Less: Current maturities		(118	)		(125	)
Lease obligations, net of current portion	$	227		$	514

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Income and Other Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income and Other Taxes

12. Income and Other 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, 2023 and December 31, 2022.

The Tax Cuts and Jobs Act 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. The GILTI provisions also allow for a high-tax exclusion if the effective tax rate of the tested income is greater than 18.9%. The Company has evaluated these regulations in determining the appropriate amount of the inclusion for the tax provision. The effective tax rate on the tested income is greater than 18.9%; thus, the Company is utilizing the GILTI high-tax exclusion for purposes of the tax provision for the three months ended March 31, 2023, as well as December 31, 2022.

Changes in tax laws may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and made significant changes to Federal tax laws, including certain changes that were retroactive to the 2019 tax year. The effects of these changes relate to deferred tax assets and net operating losses; all of which are offset by valuation allowance. There were no material income tax consequences of this enacted legislation on the reporting period of these financial statements.

The Company is subject to possible examinations not yet initiated for Federal purposes for the fiscal years 2019 through 2021. The Company is also subject to possible examinations for state and local purposes. In most cases, these examinations in the state and local jurisdictions remain open based on the particular jurisdiction’s statute of limitations.

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Stock Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock Compensation

13. Stock Compensation

The Company recognizes compensation expense for all stock-based payment awards based on estimated grant date fair values. Stock-based compensation expense included in selling and administrative expenses approximated $0.1 million and $0.2 million for the three months ended March 31, 2023 and March 31, 2022, 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, 2023, approximately 2.3 million 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, 2023:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		639,500	$	3.72		5.6	$	127
Granted		-
Exercised		-
Forfeited		-
Expired		-
Outstanding at March 31, 2023		639,500	$	3.72		5.3	$	45
Exercisable at March 31, 2023		499,500	$	4.13		4.9	$	18

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, 2023, 140,000 stock option awards were non-vested. Unrecognized compensation cost related to non-vested stock options was approximately $0.1 million, which is expected to be recognized over a weighted average period of 1.8 years.

Restricted Stock Units

The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant. The following table summarizes restricted stock unit activity for the three months ended March 31, 2023:

	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2022		206,934	$	2.06
Granted		-
Shares vested		-
Shares forfeited		-
Non-vested at March 31, 2023		206,934	$	2.06

As of March 31, 2023, the total unrecognized compensation cost related to non-vested restricted stock unit awards was approximately $0.1 million, which is expected to be recognized over a weighted average period of 0.3 years.

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Commitments, Contingencies and Concentrations

3 Months Ended

Mar. 31, 2023

Retirement Benefits [Abstract]

Commitments, Contingencies and Concentrations

14. Commitments, Contingencies and Concentrations

Litigation

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

The Company and certain of its subsidiaries are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of commercial lighting products containing wiring that may have contained asbestos. Each case names dozens of corporate defendants in addition to the Company. In the Company’s experience, a large percentage of these types of claims have never been substantiated and have been dismissed by the courts. The Company has not suffered any adverse verdict in a trial court proceeding related to asbestos claims and intends to continue to defend these lawsuits. As of March 31, 2023, the Company has a loss contingency reserve of approximately $0.2 million, which represents the Company’s estimate of its potential losses related to the settlement of open cases. During 2022 and the first quarter of 2023, the Company settled three cases, which resulted in payments totaling $53 thousand. When appropriate, the Company may settle additional claims in the future. The Company does not expect the resolution of these cases to have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

Concentrations

The Company’s top ten customers accounted for approximately 57% of consolidated net revenues during the three months ended March 31, 2023. Trade accounts receivable from these customers represented approximately 80% of net consolidated receivables at March 31, 2023. One of the Company’s customers accounted for more than 10% of both its consolidated net revenues during the three months ended March 31, 2023 and its net consolidated receivables as of March 31, 2023. 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.

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Business Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Business Segment Information

15. Business Segment Information

The Company conducts its operations primarily through its Strong Entertainment business segment which manufactures and distributes premium large format projection screens and provides technical support services and other related products and services to the cinema exhibition industry, theme parks, schools, museums and other entertainment-related markets. Strong Entertainment also distributes and supports third party products, including digital projectors, servers, library management systems, menu boards and sound systems. Strong Studios, which is part of the Strong Entertainment operating segment, develops and produces original feature films and television series. 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,
	2023			2022
	(in thousands)
Net revenues
Strong Entertainment	$	9,951		$	9,720
Other		158			306
Total net revenues		10,109			10,026
Gross profit
Strong Entertainment		2,320			2,205
Other		158			306
Total gross profit		2,478			2,511
Operating income (loss)
Strong Entertainment		576			610
Other		(169	)		(134	)
Total segment operating income		407			476
Unallocated administrative expenses		(1,185	)		(1,239	)
Loss from operations		(778	)		(763	)
Other (expense) income, net		(2,859	)		1,131
(Loss) income before income taxes and equity method holding loss	$	(3,637	)	$	368

(In thousands)	March 31, 2023		December 31, 2022
Identifiable assets
Strong Entertainment	$	34,196	$	35,392
Corporate assets		34,391		36,361
Total	$	68,587	$	71,753

Summary by Geographical Area

	Three Months Ended March 31,
(In thousands)	2023		2022
Net revenues
United States	$	8,735	$	8,783
Canada		313		406
China		22		235
Latin America		256		147
Europe		396		96
Asia (excluding China)		153		153
Other		234		206
Total	$	10,109	$	10,026

(In thousands)	March 31, 2023		December 31, 2022
Identifiable assets
United States	$	49,638	$	51,423
Canada		18,949		20,330
Total	$	68,587	$	71,753

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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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

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, 2022.

The condensed consolidated balance sheet as of December 31, 2022, 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.

The coronavirus pandemic (“COVID-19”) and inflationary pressures have been posing and may continue to pose challenges for our business. The COVID-19 global pandemic resulted in unprecedented impact to consumer behaviors and our customers, particularly our customers’ ability and willingness to purchase our products and services. The Company believes that consumer reticence to engage in outside-the-home activities, caused by the risk of contracting COVID-19, has abated, and our customers have resumed more typical, pre-COVID-19 purchasing behaviors. And while we believe our customers made significant progress in its recovery from the pandemic, the ongoing recovery will be contingent upon several key factors, including the volume of new film content available, the box office performance of new film content released, the duration of the exclusive theatrical release window, and evolving consumer behavior with competition from other forms of in- and out-of-home entertainment. There can be no assurances that there will be no additional public health crises, including further resurgence or variants of COVID-19, which could reverse the current trend and have a negative impact on the Company’s results of operations

Cash and Cash Equivalents

Cash and Cash Equivalents

All short-term, highly liquid financial instruments are classified as cash equivalents in the condensed consolidated balance sheets and statements of cash flows. Generally, these instruments have maturities of three months or less from date of purchase. As of March 31, 2023, $0.6 million of the $4.3 million in cash and cash equivalents was held by our foreign subsidiary.

Accounts Receivable

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for credit losses 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. Past due accounts are written off when our efforts have been unsuccessful in collecting amounts due.

Equity Holdings

Equity Holdings

The Company accounts for its equity holdings using the equity method, at cost, or at fair value depending on the facts and circumstances related to each individual holding. The Company applies the equity method of accounting to its holdings when it has significant influence, but not controlling interest, in the entity. Judgment regarding the level of influence over each equity method holding 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 or loss resulting from these equity holdings is reported under the line item captioned “equity method holding loss” in our condensed consolidated statements of operations. The Company’s equity method holding is reported at cost and adjusted each period for the Company’s share of the entity’s income or loss and dividends paid, if any. The Company’s share of the entity’s income or loss is recorded on a one quarter lag for all equity method holdings. The Company classifies distributions received from equity method holdings using the cumulative earnings approach on the condensed consolidated statements of cash flows.

Changes in fair value of holdings in marketable equity securities of unconsolidated entities in which the Company is not able to exercise significant influence (“Fair Value Holdings”) are recognized on the consolidated statement of operations. Nonmarketable equity holdings in unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Holdings”) are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends on Fair Value Holdings and Cost Method Holdings received are recorded as income.

The Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company’s equity method holding as of March 31, 2023 and determined that the Company’s proportionate economic interest in the entity indicates that the equity holding was not impaired. There were no observable price changes in orderly transactions for an identical or similar holding or security of the Company’s Cost Method Holding during the three months ended March 31, 2023. The carrying value of our equity method, Fair Value Holdings and Cost Method Holdings is reported as “equity holdings” on the condensed consolidated balance sheets. Note 6 contains additional information on our equity method, Fair Value Holdings and Cost Method Holdings

Film and Television Programming Rights

Film and Television Programming Rights

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

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

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

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

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

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

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, 2023 and December 31, 2022.

Fair values measured on a recurring basis at March 31, 2023 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,349	$	-	$	-	$	4,349
Fair value method equity holding		13,677						13,677
Total	$	18,026	$	-	$	-	$	18,026

Fair values measured on a recurring basis at December 31, 2022 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	3,789	$	-	$	-	$	3,789
Fair value method equity holding		16,792		-		-		16,792
Total	$	20,581	$	-	$	-	$	20,581

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses and short-term debt reported in the consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. Based on a combination of the cash on hand as well as quoted market prices of the securities held by FGF Holdings (as defined below), the liquidation value of the Company’s equity method holding was $7.4 million at March 31, 2023 (see Note 6).

Recently Adopted Accounting Pronouncements

Recently Adopted 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 requires 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 Company adopted this ASU effective January 1, 2023. Upon adoption the Company recorded a cumulative effect adjustment decreasing retained earnings by $24 thousand.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Schedule of Fair Value Measured Financial Assets and Liabilities

Fair values measured on a recurring basis at March 31, 2023 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,349	$	-	$	-	$	4,349
Fair value method equity holding		13,677						13,677
Total	$	18,026	$	-	$	-	$	18,026

Fair values measured on a recurring basis at December 31, 2022 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	3,789	$	-	$	-	$	3,789
Fair value method equity holding		16,792		-		-		16,792
Total	$	20,581	$	-	$	-	$	20,581

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Revenue (Tables)

3 Months Ended

Mar. 31, 2023

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, 2023 and 2022 (in thousands):

	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Screen system sales	$	2,582	$	-	$	2,582	$	3,306	$	-	$	3,306
Digital equipment sales		3,526		-		3,526		3,544		-		3,544
Extended warranty sales		51		-		51		100		-		100
Other product sales		1,045		-		1,045		753		-		753
Total product sales		7,204		-		7,204		7,703		-		7,703
Field maintenance and monitoring services		1,891		-		1,891		1,618		-		1,618
Installation services		802		-		802		371		-		371
Other service revenues		54		158		212		28		306		334
Total service revenues		2,747		158		2,905		2,017		306		2,323
Total	$	9,951	$	158	$	10,109	$	9,720	$	306	$	10,026

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, 2023 and 2022 (in thousands):

	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Point in time	$	8,430	$	14	$	8,444	$	8,442	$	3	$	8,445
Over time		1,521		144		1,665		1,278		303		1,581
Total	$	9,951	$	158	$	10,109	$	9,720	$	306	$	10,026

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Net Loss Per Common Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Schedule of Net(Loss) Income Per Share

	Three Months Ended March 31,
	2023		2022
Weighted average shares outstanding:
Basic weighted average shares outstanding		19,470		18,990
Dilutive effect of stock options and certain non-vested restricted stock units		-		-
Diluted weighted average shares outstanding		19,470		18,990

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Inventories (Tables)

3 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
Raw materials and components	$	1,925	$	1,826
Work in process		448		279
Finished goods		1,287		1,284
	$	3,660	$	3,389

Schedule of Inventory Reserve

Inventory reserve balance at December 31, 2022	$	486
Inventory write-offs during 2023		(16	)
Provision for inventory reserve during 2023		14
Inventory reserve balance at March 31, 2023	$	484

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Equity Holdings (Tables)

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Summary of Investments

The following summarizes our equity holdings (dollars in thousands):

	March 31, 2023					December 31 2022
	Carrying Amount		Economic Interest			Carrying Amount		Economic Interest
Equity Method Holding
FG Financial Holdings, LLC	$	7,181		47.3	%	$	7,832		47.2	%
Fair Value Method Holding
GreenFirst Forest Products Inc.		13,677		8.3	%		16,792		8.4	%
Cost Method Holding
Firefly Systems, Inc.		12,898					12,898
Total Investments	$	33,756				$	37,522

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Property, Plant and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023			December 31, 2022
Land	$	2,341		$	2,341
Buildings and improvements		12,761			12,756
Machinery and other equipment		4,860			4,786
Office furniture and fixtures		860			860
Construction in progress		15			11
Total properties, cost		20,837			20,754
Less: accumulated depreciation		(8,344	)		(8,105	)
Property, plant and equipment, net	$	12,493		$	12,649

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Film and Television Programming Rights, Net (Tables)

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of Development Assets Acquired

	March 31, 2023		December 31, 2022
Television series in development	$	1,362	$	1,308
Films in development		222		193
Total	$	1,584	$	1,501

Schedule of Film and Television Programming Rights

A rollforward of film and television programming rights, net for the three months ended March 31, 2023, is as follows (in thousands):

Balance at December 31, 2022	$	1,501
Expenditures on in-process projects		83
Balance at March 31, 2023	$	1,584

Schedule of Balance Sheets

Cash	$	37
Television programming rights		11,118
Other assets		76
Total assets	$	11,231
Accounts payable and accrued expenses	$	10
Due to Strong Studios		1,625
Debt		9,596
Equity		-
Total liabilities and equity	$	11,231

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Goodwill (Tables)

3 Months Ended

Mar. 31, 2023

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, 2023 (in thousands):

Balance as of December 31, 2022	$	882
Foreign currency translation adjustment		-
Balance as of March 31, 2023	$	882

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Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Short term and Long term Debt

The Company’s short-term debt and long-term debt consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023			December 31, 2022
Short-term debt:
Strong/MDI 20-year installment loan	$	2,262		$	2,289
Strong/MDI 5-year equipment loan		-			221
Strong/MDI revolving credit facility		1,372			-
Insurance note payable		454			-
Total short-term debt	$	4,088		$	2,510
Long-term debt:
Tenant improvement loan	$	153		$	162
Digital Ignition building loan		5,059			5,105
Total long-term debt	$	5,212		$	5,267
Less: current portion		(217	)		(216	)
Less: deferred debt issuance costs, net		(44	)		(47	)
Long-term debt, net of current portion and deferred debt issuance costs, net	$	4,951		$	5,004

	March 31, 2023			December 31, 2022
Deferred debt issuance costs	$	56		$	56
Less: accumulated amortization		(12	)		(9	)
Deferred debt issuance costs, net	$	44		$	47

Schedule of Amortization Expense of Deferred Issuance Costs

Estimated future amortization expense of deferred debt issuance costs is as follows (in thousands):

Remainder of 2023	$	9
2024		11
2025		11
2026		11
2027		2
Thereafter		-
Total	$	44

Schedule of Contractual Principal Payments of Long-term Debt

Contractual required principal payments on the Company’s long-term debt at March 31, 2023, are as follows (in thousands):

	Tenant Improvement Loan		Digital Ignitiion Building Loan		Total
Remainder of 2023	$	26		134	$	160
2024		38		187		225
2025		40		195		235
2026		42		203		245
2027		7		4,340		4,347
Thereafter		-		-		-
Total	$	153	$	5,059	$	5,212

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases

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, 2023		March 31, 2022
Finance lease cost:
Amortization of right-of-use assets	$	33	$	-
Interest on lease liabilities		13		-
Operating lease cost		36		105
Short-term lease cost		17		14
Sublease income		-		(32	)
Net lease cost	$	99	$	87

Other information	Three Months Ended
	March 31, 2023		March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	13	$	-
Operating cash flows from operating leases	$	32	$	92
Financing cash flows from finance leases	$	26	$	-
Right-of-use assets obtained in exchange for new finance lease liabilities	$	-	$	-
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	-
Weighted-average remaining lease term - finance leases (years)				1.7
Weighted-average remaining lease term - operating leases (years)				3.4
Weighted-average discount rate - finance leases				4.7	%
Weighted-average discount rate - operating leases				3.7	%

Schedule of Future Minimum Lease Payments

The following table presents a maturity analysis of the Company’s operating and finance lease liabilities as of March 31, 2023 (in thousands):

	Operating Leases			Finance Leases
Remainder of 2023	$	99		$	127
2024		101			170
2025		79			416
2026		81			16
2027		14			5
Thereafter		-			-
Total lease payments		374			734
Less: Amount representing interest		(29	)		(95	)
Present value of lease payments		345			639
Less: Current maturities		(118	)		(125	)
Lease obligations, net of current portion	$	227		$	514

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Stock Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activities

The following table summarizes stock option activity for the three months ended March 31, 2023:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		639,500	$	3.72		5.6	$	127
Granted		-
Exercised		-
Forfeited		-
Expired		-
Outstanding at March 31, 2023		639,500	$	3.72		5.3	$	45
Exercisable at March 31, 2023		499,500	$	4.13		4.9	$	18

Summary of Restricted Stock Activity

The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant. The following table summarizes restricted stock unit activity for the three months ended March 31, 2023:

	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2022		206,934	$	2.06
Granted		-
Shares vested		-
Shares forfeited		-
Non-vested at March 31, 2023		206,934	$	2.06

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Business Segment Information (Tables)

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Schedule of Segment Reporting Information by Segment

Summary by Business Segments

	Three Months Ended March 31,
	2023			2022
	(in thousands)
Net revenues
Strong Entertainment	$	9,951		$	9,720
Other		158			306
Total net revenues		10,109			10,026
Gross profit
Strong Entertainment		2,320			2,205
Other		158			306
Total gross profit		2,478			2,511
Operating income (loss)
Strong Entertainment		576			610
Other		(169	)		(134	)
Total segment operating income		407			476
Unallocated administrative expenses		(1,185	)		(1,239	)
Loss from operations		(778	)		(763	)
Other (expense) income, net		(2,859	)		1,131
(Loss) income before income taxes and equity method holding loss	$	(3,637	)	$	368

Reconciliation of Assets from Segment to Consolidated

(In thousands)	March 31, 2023		December 31, 2022
Identifiable assets
Strong Entertainment	$	34,196	$	35,392
Corporate assets		34,391		36,361
Total	$	68,587	$	71,753

Schedule of Segment Reporting Information by Geographic Area

Summary by Geographical Area

	Three Months Ended March 31,
(In thousands)	2023		2022
Net revenues
United States	$	8,735	$	8,783
Canada		313		406
China		22		235
Latin America		256		147
Europe		396		96
Asia (excluding China)		153		153
Other		234		206
Total	$	10,109	$	10,026

Summary of Identifiable Assets by Geographical Area

(In thousands)	March 31, 2023		December 31, 2022
Identifiable assets
United States	$	49,638	$	51,423
Canada		18,949		20,330
Total	$	68,587	$	71,753

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Schedule of Fair Value Measured Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Platform Operator, Crypto-Asset [Line Items]
Cash and cash equivalents	$ 4,349	$ 3,789
Fair value method equity holding	13,677	16,792
Total	18,026	20,581
Fair Value, Inputs, Level 1 [Member]
Platform Operator, Crypto-Asset [Line Items]
Cash and cash equivalents	4,349	3,789
Fair value method equity holding	13,677	16,792
Total	18,026	20,581
Fair Value, Inputs, Level 2 [Member]
Platform Operator, Crypto-Asset [Line Items]
Cash and cash equivalents
Fair value method equity holding
Total
Fair Value, Inputs, Level 3 [Member]
Platform Operator, Crypto-Asset [Line Items]
Cash and cash equivalents
Fair value method equity holding
Total

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Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Accounting Policies [Abstract]
Cash equivalents	$ 600
Cash equivalents	4,349	$ 3,789	$ 8,133
Quoted fair value of company's ownership	7,400
Cumulative effect adjustment	$ 24

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Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Total	$ 10,109	$ 10,026
Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total	8,444	8,445
Transferred over Time [Member]
Disaggregation of Revenue [Line Items]
Total	1,665	1,581
Product [Member]
Disaggregation of Revenue [Line Items]
Total	7,204	7,703
Product [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total	2,582	3,306
Product [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total	3,526	3,544
Product [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total	51	100
Product [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total	1,045	753
Service [Member]
Disaggregation of Revenue [Line Items]
Total	2,905	2,323
Service [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total	1,891	1,618
Service [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total	802	371
Service [Member] | Other Service [Member]
Disaggregation of Revenue [Line Items]
Total	212	334
Strong Entertainment [Member]
Disaggregation of Revenue [Line Items]
Total	9,951	9,720
Strong Entertainment [Member] | Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total	8,430	8,442
Strong Entertainment [Member] | Transferred over Time [Member]
Disaggregation of Revenue [Line Items]
Total	1,521	1,278
Strong Entertainment [Member] | Product [Member]
Disaggregation of Revenue [Line Items]
Total	7,204	7,703
Strong Entertainment [Member] | Product [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total	2,582	3,306
Strong Entertainment [Member] | Product [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total	3,526	3,544
Strong Entertainment [Member] | Product [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total	51	100
Strong Entertainment [Member] | Product [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total	1,045	753
Strong Entertainment [Member] | Service [Member]
Disaggregation of Revenue [Line Items]
Total	2,747	2,017
Strong Entertainment [Member] | Service [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total	1,891	1,618
Strong Entertainment [Member] | Service [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total	802	371
Strong Entertainment [Member] | Service [Member] | Other Service [Member]
Disaggregation of Revenue [Line Items]
Total	54	28
Other Segments [Member]
Disaggregation of Revenue [Line Items]
Total	158	306
Other Segments [Member] | Transferred at Point in Time [Member]
Disaggregation of Revenue [Line Items]
Total	14	3
Other Segments [Member] | Transferred over Time [Member]
Disaggregation of Revenue [Line Items]
Total	144	303
Other Segments [Member] | Product [Member]
Disaggregation of Revenue [Line Items]
Total
Other Segments [Member] | Product [Member] | Screen System Sales [Member]
Disaggregation of Revenue [Line Items]
Total
Other Segments [Member] | Product [Member] | Digital Equipment Sales [Member]
Disaggregation of Revenue [Line Items]
Total
Other Segments [Member] | Product [Member] | Extended Warranty Sales [Member]
Disaggregation of Revenue [Line Items]
Total
Other Segments [Member] | Product [Member] | Other Product Sales [Member]
Disaggregation of Revenue [Line Items]
Total
Other Segments [Member] | Service [Member]
Disaggregation of Revenue [Line Items]
Total	158	306
Other Segments [Member] | Service [Member] | Field Maintenance and Monitoring Services [Member]
Disaggregation of Revenue [Line Items]
Total
Other Segments [Member] | Service [Member] | Installation Services [Member]
Disaggregation of Revenue [Line Items]
Total
Other Segments [Member] | Service [Member] | Other Service [Member]
Disaggregation of Revenue [Line Items]
Total	$ 158	$ 306

XML

Revenue (Details Narrative) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Revenue	$ 0.8
During 2023 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unearned revenue	$ 0.8

XML

Schedule of Net(Loss) Income Per Share (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Earnings Per Share [Abstract]
Basic weighted average shares outstanding	19,470	18,990
Dilutive effect of stock options and certain non-vested restricted stock units
Diluted weighted average shares outstanding	19,470	18,990

XML

Net Loss Per Common Share (Details Narrative) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Common Stock Equivalents [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of share not included in computation of diluted loss per share	140,420	225,379
Options to Purchase Shares of Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of share not included in computation of diluted loss per share	489,500	354,500

XML

Schedule of Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials and components	$ 1,925	$ 1,826
Work in process	448	279
Finished goods	1,287	1,284
Total	$ 3,660	$ 3,389

XML

Schedule of Inventory Reserve (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Inventory Disclosure [Abstract]
Inventory reserve balance at December 31, 2022	$ 486
Inventory write-offs during 2023	(16)
Provision for inventory reserve during 2023	14
Inventory reserve balance at March 31, 2023	$ 484

XML

Inventories (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Inventory valuation reserves	$ 484	$ 486

XML

Summary of Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Schedule of Equity Method Investments [Line Items]
Equity holdings	$ 33,756	$ 37,522
FG Financial Holdings, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Equity method investments carrying amount	$ 7,181	$ 7,832
Equity method ownership percentage	47.30%	47.20%
GreenFirst Forest Products Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Equity method ownership percentage	8.30%	8.40%
Investment owned, at fair value	$ 13,677	$ 16,792
Firefly Systems Inc [Member]
Schedule of Equity Method Investments [Line Items]
Equity securities, FV-NI, current	$ 12,898	$ 12,898

XML

Equity Holdings (Details Narrative) - USD ($) shares in Thousands, $ in Thousands		1 Months Ended			3 Months Ended
	Sep. 12, 2022	Apr. 30, 2021	Aug. 31, 2020	May 31, 2019	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Schedule of Equity Method Investments [Line Items]
Fair value method holding					$ 13,677		$ 16,792
Retained earnings					(651)	$ (820)
Retained earnings					12,424		$ 16,437
Unrealized gain loss on investments					(2,891)	1,728
GreenFirst Forest Products Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Business acquisition of acquired entity description		The Company’s Chairman, Mr. Cerminara, served as a member of the board of directors of GreenFirst from June 2016 to October 2021, and was also appointed Chairman of GreenFirst from June 2018 to June 2021. Prior to the closing of the GreenFirst Acquisition, the Company held a 20.7% ownership position in GreenFirst. The Company’s 20.7% ownership of GreenFirst, combined with Mr. Cerminara’s board seat, provided the Company with significant influence over GreenFirst, but not a controlling interest. Accordingly, the Company applied the equity method of accounting to its equity holding in GreenFirst. Following the GreenFirst Acquisition and GreenFirst’s issuance of additional common shares, the Company’s ownership percentage decreased to 8.6%.
Gain loss on equity holdings					2,900	$ 1,700
Unrealized gain loss on investments					13,700
Firefly Systems Inc [Member] | Series B-1 Preferred Stock [Member]
Schedule of Equity Method Investments [Line Items]
Business acquisition, equity interest issued shares				1,100
Firefly Systems Inc [Member] | Serie B-2 Preferred Stock [Member]
Schedule of Equity Method Investments [Line Items]
Business acquisition, equity interest issued shares			600
Firefly Systems Inc [Member] | Serie B-2 Preferred Stock [Member] | Stock Purchase Agreement [Member]
Schedule of Equity Method Investments [Line Items]
Business acquisition, equity interest issued shares			700
Common Stock [Member]
Schedule of Equity Method Investments [Line Items]
Number of common stock issued						761
FG Financial Holdings, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Fair value method holding					7,400
Retained earnings					700
Retained earnings					$ 6,700
FG Financial Holdings, LLC [Member] | Minimum [Member]
Schedule of Equity Method Investments [Line Items]
Combined equity ownership percentage					50.00%
FG Financial Holdings, LLC [Member] | IPO [Member] | Common Stock [Member]
Schedule of Equity Method Investments [Line Items]
Number of common stock issued	2,900

XML

Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Total properties, cost	$ 20,837	$ 20,754
Less: accumulated depreciation	(8,344)	(8,105)
Property, plant and equipment, net	12,493	12,649
Land [Member]
Property, Plant and Equipment [Line Items]
Total properties, cost	2,341	2,341
Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Total properties, cost	12,761	12,756
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total properties, cost	4,860	4,786
Office Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total properties, cost	860	860
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Total properties, cost	$ 15	$ 11

XML

Schedule of Development Assets Acquired (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Business Combination, Separately Recognized Transactions [Line Items]
Total	$ 1,584	$ 1,501
Television Series in Development [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total	1,362	1,308
Films In Development [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total	$ 222	$ 193

XML

Schedule of Film and Television Programming Rights (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Business Combination and Asset Acquisition [Abstract]
Beginning balance	$ 1,501
Expenditures on in-process projects	83
Ending balance	$ 1,584

XML

Schedule of Balance Sheets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Television programming rights	$ 1,584	$ 1,501
Total assets	68,587	71,753
Debt	5,212
Equity	42,735	46,698	$ 54,298	$ 52,277
Total liabilities and stockholders’ equity	68,587	$ 71,753
Safehaven, Inc [Member]
Cash	37
Television programming rights	11,118
Other assets	76
Total assets	11,231
Accounts payable and accrued expenses	10
Due to Strong Studios	1,625
Debt	9,596
Equity
Total liabilities and stockholders’ equity	$ 11,231

XML

Film and Television Programming Rights, Net (Details Narrative) - USD ($) $ in Millions	1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022
Safehaven, Inc [Member]
Business Acquisition [Line Items]
Payment for obligation		$ 1.1
Description of payment terms			The $6.5 million minimum guarantee is due and payable to Safehaven 2022 in installments of 25% upon delivery and acceptance, 25% three months thereafter, and the remaining 50% six months thereafter.
Initial revenue from distribution rights			$ 6.5
Safehaven, Inc [Member] | Loan And Security Agreement [Member]
Business Acquisition [Line Items]
Production costs incurred		9.6
Flagrant [Member]
Business Acquisition [Line Items]
Acquistion price		0.3
Asset Acquisition, Consideration Transferred		2.5
Shadows in Vineyard [Member]
Business Acquisition [Line Items]
Acquistion price		0.4
Safehaven, Inc [Member]
Business Acquisition [Line Items]
Acquistion price		1.0
Payment for obligation		$ 1.7
Equity Method Investment, Ownership Percentage		50.00%		49.00%
Asset Acquisition, Consideration Transferred		$ 6.5
Development cost		0.1
Strong Studios Inc [Member]
Business Acquisition [Line Items]
Equity Method Investment, Ownership Percentage	2.50%
Unbounded Services, LLC [Member]
Business Acquisition [Line Items]
Equity Method Investment, Ownership Percentage				51.00%
Strong Studios Inc [Member]
Business Acquisition [Line Items]
Payment for obligation		1.0
Payment for obligation		1.1
Development costs		0.1
Strong Studios Inc [Member] | Safehaven, Inc [Member] | Loan And Security Agreement [Member]
Business Acquisition [Line Items]
Working capital advances, amount		0.6
Strong Studios Inc [Member] | Landmark Studio Group LLC [Member]
Business Acquisition [Line Items]
Acquistion price	$ 1.7	$ 1.7
Payment for obligation	$ 0.3
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	150,000

XML

Summary of Changes in Carrying Amount of Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, beginning balance	$ 882
Foreign currency translation adjustment
Goodwill, ending balance	$ 882

XML

Schedule of Short term and Long term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Short-Term Debt [Line Items]
Total short-term debt	$ 4,088	$ 2,510
Digital Ignition building loan	5,212
Total long-term debt	5,212	5,267
Less: current portion	(217)	(216)
Less: deferred debt issuance costs, net	(44)	(47)
Long-term debt, net of current portion and deferred debt issuance costs, net	4,951	5,004
Deferred debt issuance costs	56	56
Less: accumulated amortization	(12)	(9)
Deferred debt issuance costs, net	44	47
Tenant Improvement Loan [Member]
Short-Term Debt [Line Items]
Digital Ignition building loan	153	162
Digital Ignition Building Loan [Member]
Short-Term Debt [Line Items]
Digital Ignition building loan	5,059	5,105
Installment Loan [Member]
Short-Term Debt [Line Items]
Total short-term debt	2,262	2,289
Equipment Loan [Member]
Short-Term Debt [Line Items]
Total short-term debt		221
Revolving Credit Loan [Member]
Short-Term Debt [Line Items]
Total short-term debt	1,372
Insurance Note Payable [Member]
Short-Term Debt [Line Items]
Total short-term debt	$ 454

XML

Schedule of Short term and Long term Debt (Details) (Parenthetical)	1 Months Ended	3 Months Ended	12 Months Ended
	Jan. 31, 2023	Mar. 31, 2023	Dec. 31, 2022
Installment Loan [Member]
Short-Term Debt [Line Items]
Loan term		20 years
Demand Credit Agreement [Member] | Installment Loan [Member]
Short-Term Debt [Line Items]
Loan term	20 years	20 years	20 years
Demand Credit Agreement [Member] | Equipment Loan [Member]
Short-Term Debt [Line Items]
Loan term			5 years

XML

Schedule of Amortization Expense of Deferred Issuance Costs (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
Remainder of 2023	$ 9
2024	11
2025	11
2026	11
2027	2
Thereafter
Total	$ 44	$ 47

XML

Schedule of Contractual Principal Payments of Long-term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Remainder of 2023	$ 160
2024	225
2025	235
2026	245
2027	4,347
Thereafter
Total	5,212
Tenant Improvement Loan [Member]
Debt Instrument [Line Items]
Remainder of 2023	26
2024	38
2025	40
2026	42
2027	7
Thereafter
Total	153	$ 162
Digital Ignition Building Loan [Member]
Debt Instrument [Line Items]
Remainder of 2023	134
2024	187
2025	195
2026	203
2027	4,340
Thereafter
Total	$ 5,059	$ 5,105

XML

Debt (Details Narrative) $ in Thousands, $ in Millions			1 Months Ended	3 Months Ended			12 Months Ended
	Feb. 01, 2022 USD ($)	Sep. 05, 2017 CAD ($)	Jan. 31, 2023 CAD ($)	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2022 USD ($)	May 31, 2023 CAD ($)	Mar. 31, 2023 CAD ($)
Debt Instrument [Line Items]
Short-term debt				$ 4,088			$ 2,510
Lease cost				99	$ 87
Lease cost				36	105
Long term debt				$ 5,212
Installment Loan [Member]
Debt Instrument [Line Items]
Debt instrument, term				20 years
Short-term debt, percentage bearing variable interest rate				7.20%					7.20%
20-year Installment Loan [Member]
Debt Instrument [Line Items]
Short-term debt				$ 2,300					$ 3.1
Tenant Improvement Loan [Member]
Debt Instrument [Line Items]
Lease cost						$ 400
Build-out interest rate						50.00%
Lease cost					200	$ 200
Costs and expenses					$ 100	$ 100
Digital Ignition Building Loan [Member]
Debt Instrument [Line Items]
Long term debt	$ 5,300
Debt instrument description	The terms of the Note include (i) a fixed interest rate of 4%, (ii) maturity date of February 1, 2027, (iii) monthly payments of approximately $32 thousand beginning on March 1, 2022, and continuing on the first of each month until the maturity date or until the Note has been paid in full, (iv) a default interest of 8% in the event of a default pursuant to the terms of the Note, and (v) prepayment penalties of (a) 3% of all excess payments during the first two years of the term of the Note, (b) 2% of all excess payments during the third and fourth years of the term of the Note, and (c) 1% of all excess payments made during the fifth year of the term of the Note.
Fixed interest rate	4.00%
Monthly periodic payment	$ 32
Demand Credit Agreement [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Debt instrument basis spread on variable rate		0.50%	1.00%
Debt instrument basis spread on variable rate			0.50%
Demand Credit Agreement [Member] | Installment Loan [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity			$ 3.1
Debt instrument, term			20 years	20 years			20 years
Demand Credit Agreement [Member] | Installment Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity		$ 6.0
Debt instrument, term		20 years
Demand Credit Agreement [Member] | Installment Loan [Member] | Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity		$ 0.5
Debt instrument, term		5 years
Demand Credit Agreement [Member] | Installment Note [Member]
Debt Instrument [Line Items]
Debt instrument, term				5 years
2021 Credit Agreement [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity		$ 2.0
Description on effective equity		The 2021 Credit Agreement required Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity method holdings) not exceeding 2.5 to 1, a current ratio (excluding amounts due from related parties) of at least 1.3 to 1 and minimum “effective equity” of CAD$4.0 million.
Minimum effective equity		$ 4.0
2021 Credit Agreement [Member] | Installment Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity		$ 5.1
Debt instrument, term		20 years
2021 Credit Agreement [Member] | Installment Loan [Member] | Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity		$ 0.5
Debt instrument, term		5 years
Line of Credit [Member] | Demand Credit Agreement [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity		$ 3.5	$ 5.0
Line of Credit [Member] | Demand Credit Agreement [Member] | Forecast [Member]
Debt Instrument [Line Items]
Line of credit facility maximum borrowing capacity								$ 3.4

XML

Schedule of Lease Costs and Other Lease Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases
Amortization of right-of-use assets	$ 33
Interest on lease liabilities	13
Operating lease cost	36	105
Short-term lease cost	17	14
Sublease income		(32)
Net lease cost	99	87
Operating cash flows from finance leases	13
Operating cash flows from operating leases	32	92
Financing cash flows from finance leases	26
Right-of-use assets obtained in exchange for new finance lease liabilities
Right-of-use assets obtained in exchange for new operating lease liabilities
Weighted-average remaining lease term - finance leases (years)	1 year 8 months 12 days
Weighted-average remaining lease term - operating leases (years)	3 years 4 months 24 days
Weighted-average discount rate finance leases	4.70%
Weighted-average discount rate operating leases	3.70%

XML

Schedule of Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Leases
Operating lease Remainder of 2022	$ 99
Finance lease Remainder of 2022	127
Operating lease Remainder of 2022	101
Finance lease Remainder of 2022	170
Operating lease 2023	79
Finance lease 2023	416
Operating lease 2024	81
Finance lease 2025	16
Operating lease 2026	14
Finance lease 2025	5
Operating lease Thereafter
Finance lease Thereafter
Operating lease ,Total lease payments	374
Finance lease ,Total lease payments	734
Less: Amount representing interest	(29)
Less: Amount representing interest	(95)
Present value of lease payments	345
Present value of lease payments	639
Less: Current maturities	(118)	$ (116)
Less: Current maturities	(125)	(117)
Lease obligations, net of current portion	227	257
Lease obligations, net of current portion	$ 514	$ 550

XML

Leases (Details Narrative)	3 Months Ended
	Mar. 31, 2023
Leases
Operating and finance lease, expire term	expiring through 2027

XML

Income and Other Taxes (Details Narrative)	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Minimum [Member]
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Effective tax rate	18.90%	18.90%

XML

Summary of Stock Option Activities (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]
Number of options, outstanding beginning balance	639,500
Weighted average exercise price per share, outstanding beginning balance	$ 3.72
Weighted average remaining contractual term (years), ending balance	5 years 3 months 18 days	5 years 7 months 6 days
Aggregate intrinsic value, beginning balance	$ 127
Number of options, granted
Number of options, exercised
Number of options, forfeited
Number of options, forfeited
Number of options, outstanding ending balance	639,500	639,500
Weighted average exercise price per share, outstanding ending balance	$ 3.72	$ 3.72
Aggregate intrinsic value, ending balance	$ 45	$ 127
Number of options, exercisable	499,500
Weighted average exercise price per share, exercisable	$ 4.13
Weighted average remaining contractual term (years), exercisable	4 years 10 months 24 days
Aggregate intrinsic value, exercisable	$ 18

XML

Summary of Restricted Stock Activity (Details) - Restricted Stock Shares [Member]	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of restricted stock, non-vested beginning balance	206,934
Weighted average grant date fair value, non-vested beginning balance | $ / shares	$ 2.06
Number of restricted stock, shares granted
Number of restricted stock, shares vested
Number of restricted stock, shares granted
Number of restricted stock, non-vested ending balance	206,934
Weighted average grant date fair value, non-vested ending balance | $ / shares	$ 2.06

XML

Stock Compensation (Details Narrative) - USD ($) $ in Millions		3 Months Ended		12 Months Ended
	Dec. 17, 2019	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Compensation cost expected to be recognized, weighted average period		5 years 3 months 18 days		5 years 7 months 6 days
Equity Option [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options, non-vested, number		140,000
Unrecognized compensation cost related to stock option awards		$ 0.1
Compensation cost expected to be recognized, weighted average period		1 year 9 months 18 days
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized for restricted stock, value		$ 0.1
Compensation cost expected to be recognized, weighted average period		3 months 18 days
2017 Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of shares authorized for issuance	1,975,000
Share based compensation extended expiration date	Oct. 27, 2029
Share based compensation arrangement, number of shares available for grant		2.3
Selling, General and Administrative Expenses [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share based compensation expense		$ 0.1	$ 0.2

XML

Commitments, Contingencies and Concentrations (Details Narrative) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Product Information [Line Items]
Loss contingency	$ 200
Payments to litigation	$ 53	$ 53
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | TopTen Customers [Member]
Product Information [Line Items]
Concentration risk, percentage	57.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | TopTen Customers [Member]
Product Information [Line Items]
Concentration risk, percentage	80.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | One Customer [Member]
Product Information [Line Items]
Concentration risk, percentage	10.00%

XML

Schedule of Segment Reporting Information by Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Segment Reporting Information [Line Items]
Total net revenues	$ 10,109	$ 10,026
Total gross profit	2,478	2,511
Total segment operating income	407	476
Unallocated administrative expenses	(1,185)	(1,239)
Loss from operations	(778)	(763)
Other (expense) income, net	(2,859)	1,131
(Loss) income before income taxes and equity method holding loss	(3,637)	368
Strong Entertainment [Member]
Segment Reporting Information [Line Items]
Total net revenues	9,951	9,720
Total gross profit	2,320	2,205
Total segment operating income	576	610
Other Segments [Member]
Segment Reporting Information [Line Items]
Total net revenues	158	306
Total gross profit	158	306
Total segment operating income	$ (169)	$ (134)

XML

Reconciliation of Assets from Segment to Consolidated (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Segment Reporting Information [Line Items]
Total	$ 68,587	$ 71,753
Strong Entertainment [Member]
Segment Reporting Information [Line Items]
Total	34,196	35,392
Corporate Assets [Member]
Segment Reporting Information [Line Items]
Total	$ 34,391	$ 36,361

XML

Schedule of Segment Reporting Information by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 10,109	$ 10,026
UNITED STATES
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	8,735	8,783
CANADA
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	313	406
CHINA
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	22	235
Latin America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	256	147
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	396	96
Asia (Excluding China) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	153	153
Other Countries [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 234	$ 206

XML

Summary of Identifiable Assets by Geographical Area (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 68,587	$ 71,753
UNITED STATES
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	49,638	51,423
CANADA
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 18,949	$ 20,330