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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 June 30, 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)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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 August 7, 2023
Common Stock, $0.01 par value   19,638,248 shares

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page No.
     
  PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements 3
     
  Condensed Consolidated Balance Sheets, June 30, 2023 and December 31, 2022 (Unaudited) 3
     
  Condensed Consolidated Statements of Operations for the Three and Six months Ended June 30, 2023 and 2022 (Unaudited) 4
     
  Condensed Consolidated Statements of Comprehensive Loss for the Three and Six months Ended June 30, 2023 and 2022 (Unaudited) 5
     
  Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six months Ended June 30, 2023 and 2022 (Unaudited) 6
     
  Condensed Consolidated Statements of Cash Flows for the Six months Ended June 30, 2023 and 2022 (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 28
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 39
     
Item 4. Controls and Procedures 39
     
  PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 39
     
Item 1A. Risk Factors 40
     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

     
Item 6. Exhibits 40
     
  Signatures 41

 

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)

 

   June 30, 2023   December 31, 2022 
Assets          
Current assets:          
Cash and cash equivalents  $4,966   $3,789 
Accounts receivable (net of credit allowances of $250 and $409, respectively)   6,408    6,167 
Inventories, net   3,125    3,389 
Other current assets   12,009    4,871 
Total current assets   26,508    18,216 
Property, plant and equipment, net   12,586    12,649 
Operating lease right-of-use assets   259    310 
Finance lease right-of-use asset   906    666 
Equity holdings   30,240    37,522 
Film and television programming rights, net   7,691    1,501 
Intangible assets, net   2    5 
Goodwill   902    882 
Other assets   1    2 
Total assets  $79,095   $71,753 
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable  $3,637   $4,375 
Accrued expenses   7,521    5,167 
Short-term debt   14,927    2,510 
Current portion of long-term debt   220    216 
Current portion of operating lease obligations   116    116 
Current portion of finance lease obligations   179    117 
Deferred revenue and customer deposits   1,143    1,787 
Total current liabilities   27,743    14,288 
Operating lease obligations, net of current portion   200    257 
Finance lease obligations, net of current portion   732    550 
Long-term debt, net of current portion and deferred debt issuance costs, net   4,898    5,004 
Deferred income taxes   4,490    4,851 
Other long-term liabilities   720    105 
Total liabilities   38,783    25,055 
           
Commitments, contingencies and concentrations (Note 16)   -     -  
           
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   55,051    53,882 
Retained earnings   7,151    16,437 
Treasury stock, 2,794 shares at cost   (18,586)   (18,586)
Accumulated other comprehensive loss   (4,769)   (5,258)
Total FG Group Holdings shareholders’ equity   39,070    46,698 
Equity attributable to non-controlling interest   1,242    - 
Total stockholders’ equity   40,312    46,698 
Total liabilities and stockholders’ equity  $79,095   $71,753 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3
 

 

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2023 and 2022

(In thousands, except per share data)

(Unaudited)

 

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
Net product sales  $8,411   $6,683   $15,615   $14,386 
Net service revenues   9,611    2,460    12,516    4,783 
Total net revenues   18,022    9,143    28,131    19,169 
Total cost of products   6,305    4,833    11,770    10,690 
Total cost of services   4,270    1,890    6,436    3,547 
Total cost of revenues   10,575    6,723    18,206    14,237 
Gross profit   7,447    2,420    9,925    4,932 
Selling and administrative expenses:                    
Selling   618    684    1,152    1,225 
Administrative   7,602    2,621    10,326    5,354 
Total selling and administrative expenses   8,220    3,305    11,478    6,579 
Gain on disposal of assets   5    -    6    - 
Loss from operations   (768)   (885)   (1,547)   (1,647)
Other income (expense):                    
Interest income   -    1    -    7 
Interest expense   (138)   (88)   (249)   (147)
Foreign currency transaction (loss) gain   (426)   206    (307)   (136)
Unrealized loss on equity holdings   (1,647)   (4,178)   (4,538)   (2,451)
Other (expense) income, net   (14)   3    9    (198)
Total other expense   (2,225)   (4,056)   (5,085)   (2,925)
(Loss) income before income taxes and equity method holding loss   (2,993)   (4,941)   (6,632)   (4,572)
Income tax (expense) benefit   (355)   303    (56)   (47)
Equity method holding loss   (2,043)   (960)   (2,694)   (1,780)
Net loss   (5,391)   (5,598)   (9,382)   (6,399)
Net loss attributable to non-controlling interest   (118)   -    (118)   - 
Net loss attributable to FG Group Holdings  $(5,273)  $(5,598)  $(9,264)  $(6,399)
                     
Net loss per share:                    
Basic  $(0.27)  $(0.29)  $(0.48)  $(0.33)
Diluted  $(0.27)  $(0.29)  $(0.48)  $(0.33)
                     
Weighted-average shares used in computing net loss per share:                    
Basic   19,470    19,273    19,293    19,133 
Diluted   19,470    19,273    19,293    19,133 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4
 

 

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

Three and Six Months Ended June 30, 2023 and 2022

(In thousands)

(Unaudited)

 

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
Net loss  $(5,391)  $(5,598)  $(9,382)  $(6,399)
Adjustment to postretirement benefit obligation   (4)   (4)   (9)   (11)
Currency translation adjustment:                    
Unrealized net change arising during period   558    (730)   485    (553)
Total other comprehensive income (loss)   554    (734)   476    (564)
Comprehensive loss   (4,837)   (6,332)   (8,906)   (6,963)
Comprehensive loss attributable to non-controlling interest   (130)   -    (130)   - 
Comprehensive loss attributable to FG Group Holdings  $(4,707)  $(6,332)  $(8,776)  $(6,963)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5
 

 

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 30, 2023 and 2022

(In thousands)

(Unaudited)

 

   Common Stock (Shares)   Common Stock ($)   Additional Paid-In Capital   Retained Earnings   Treasury Stock   Accumulated Other Comprehensive Loss      Total FG Group Holdings Shareholders’ Equity       Non-contolling Interest     Total Stockholders’ Equity 
   Common Stock (Shares)   Common Stock ($)   Additional Paid-In Capital   Retained Earnings   Treasury Stock   Accumulated Other Comprehensive Loss      Total FG Group Holdings Shareholders’ Equity       Non-contolling Interest     Total Stockholders’ Equity 
Balance at December 31, 2022   22,264   $    223   $53,882   $16,437   $

(18,586

)  $

(5,258

)   $

46,698

     $ -     $       46,698 
Cumulative effect of adoption of accounting principle   -    -    -    (24)   -    -      (24 )     -      (24)
Net loss   -    -    -    (3,989)   -    -      (3,989 )     -      (3,989)
Net other comprehensive loss   -    -    -    -    -    (77)     (77 )     -      (77)
Stock-based compensation expense   -    -    127    -    -    -      127       -      127 
Balance at March 31, 2023   22,264    223    54,009    12,424    (18,586)   (5,335)     42,735       -      42,735 
Net loss   -    -    -    (5,273)   -    -      (5,273 )     (118 )    (5,391)
Net other comprehensive income   -    -    -    -    -    566     566       (12 )    554
IPO of Strong Global Entertainment, Inc. and issuance of Landmark warrant, net of costs   -    -    1,383   -    -    -      1,383       225      1,608
Non-controlling interest allocation             (1,147)                    (1,147 )     1,147      - 
Payments of withholding taxes for net share settlement of equity awards   -    -    (104)   -    -    -      (104 )     -      (104)
Stock-based compensation expense   -    -    910    -    -    -      910       -      910 
Balance at June 30, 2023  22,264   $223   $55,051   $7,151   $(18,586)  $(4,769)   $ 39,070 $ 1,242     $40,312 

 

   Common Stock (Shares)   Common Stock ($)   Additional Paid-In Capital   Retained Earnings   Treasury Stock   Accumulated Other Comprehensive Loss   Total FG Group Holdings Shareholders’ Equity   Non-contolling Interest   Total Stockholders’ Equity 
Balance at December 31, 2021   21,286   $213   $50,807   $23,591   $(18,586)  $     (3,748)  $        52,277   $              -   $         52,277 
Net loss   -    -    -    (802)   -    -    (802)   -    (802)
Net other comprehensive income   -    -    -    -    -    170    170    -    170 
Issuance of common stock   761    8    2,342    -    -    -    2,350    -    2,350 
Issuance of warrants   -    -    109    -    -    -    109    -    109 
Stock-based compensation expense   -    -    194    -    -    -    194    -    194 
Balance at March 31, 2022   22,047    221    53,452    22,789    (18,586)   (3,578)   54,298    -    54,298 
Net loss   -    -    -    (5,598)   -    -    (5,598)   -    (5,598)
Net other comprehensive loss   -    -    -    -    -    (734)   (734)   -    (734)
Vesting of restricted stock   73    -    (16)   -    -    -    (16)   -    (16)
Stock-based compensation expense   -    -    175    -    -    -    175    -    175 
Balance at June 30, 2022   22,120   $221   $53,611   $17,191   $(18,586)  $(4,312)  $48,125   $-   $48,125 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6
 

 

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2023 and 2022

(In thousands)

(Unaudited)

 

   2023   2022 
   Six Months Ended June 30, 
   2023   2022 
Cash flows from operating activities:          
Net loss  $(9,382)   $(6,399)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:          
Recovery of doubtful accounts   (3)    3 
Provision for obsolete inventory   29    6 
Provision for warranty   73    15 
Depreciation and amortization   2,527    702 
Amortization and accretion of operating leases   59    137 
Equity method holding loss   2,694    1,780 
Adjustment to SageNet promissory note in connection with prepayment   -    202 
Unrealized loss on equity holdings   4,538    2,451 
Deferred income taxes   (388)    (292)
Stock-based compensation expense   1,037    369 
Changes in operating assets and liabilities:          
Accounts receivable   (225)    (1,085)
Inventories   286   (602)
Current income taxes   (401)    (135)
Other assets   (8,692)    1,055 
Accounts payable and accrued expenses   5,978   (674)
Deferred revenue and customer deposits   (651)    (446)
Operating lease obligations   (65)    (132)
Net cash used in operating activities   (2,586)    (3,045)
           
Cash flows from investing activities:          
Capital expenditures   (318)    (840)
Acquisition of programming rights   (86)    (337)
Sale (purchase) of equity holdings   198     (2,000)
Receipt of SageNet promissory note   -     2,300 
Net cash used in investing activities   (206)    (877)
           
Cash flows from financing activities:          
Principal payments on short-term debt   (414)    (285)
Principal payments on long-term debt   (101)    (66)
Proceeds from Strong Global Entertainment initial public offering   2,411    -
Borrowings under credit facility   4,344     - 
Repayments under credit facility   (2,132)    - 
Payments of withholding taxes for net share settlement of equity awards   (104)   (15)
Payments on finance lease obligations   (66)    (2)
Net cash provided by (used in) financing activities   

3,938

    (368)
           
Effect of exchange rate changes on cash and cash equivalents   

31

    (30)
Net increase (decrease) in cash and cash equivalents and restricted cash   1,177    (4,320)
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  $4,966   $4,561 
           
Components of cash and cash equivalents and restricted cash:          
Cash and cash equivalents  $4,966    $4,411 
Restricted cash   -    150 
Total cash and cash equivalents and restricted cash  $4,966   $4,561 
           
Supplemental disclosure of non-cash investing and financing activities:          
Short-term borrowings to finance insurance  $586    $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 9)  $-    $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. The Company’s holdings primarily consist of equity securities in public and private companies and real estate holdings in the United States and Canada.

 

The Company has historically conducted a large portion of its operations primarily through its Strong Entertainment operating segment. The Company completed the Separation (as defined below) and initial public offering (“IPO”) of the Strong Entertainment business on May 18, 2023. Following this transaction, Strong Global Entertainment became a separate publicly listed company and FG Group Holdings holds approximately 84% of the Class A common shares and 100% of the Class B common shares as of the date hereof. As the Company continues to be the majority shareholder of Strong Global Entertainment, the financial results of Strong Global Entertainment are presented on a consolidated basis in the Company’s condensed consolidated financial statements. The Company reports the noncontrolling interest in Strong Global Entertainment as a component of equity separate from the Company’s equity. The Company’s net loss excludes the net loss attributable to the noncontrolling interest.

 

Strong Global Entertainment 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.

 

Following the Separation and IPO, the operations of the Strong Entertainment operating segment are part of a newly established British Columbia corporation, Strong Global Entertainment, Inc. (“Strong Global Entertainment”). Strong Global Entertainment’s common shares are listed on the NYSE American under the ticker symbol “SGE.” In connection with the IPO, the Company and Strong Global Entertainment (and the subsidiaries of each) entered into a Master Asset Purchase Agreement, an IP Assignment Agreement, the FG Group Holdings Asset Transfer Agreement, the FG Group Holdings IP Assignment Agreement, the Joliette Plant Lease, the Share Transfer Agreements and a number of other agreements to govern the separation of the legacy Strong Entertainment business from the Company and the contribution of certain of the related business and assets to Strong Global Entertainment (the “Separation”). Under the Management Services Agreement, Strong Global Entertainment and the Company provide certain services to each other, which include information technology, legal, finance and accounting, human resources, tax, treasury, and other services, and charges a fee that is based on its actual costs and expenses for those services in the future (with mark-up, if necessary, to comply with applicable transfer pricing principles under Canadian and U.S. tax regulations).

 

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 as discussed in Note 7.

 

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. Unless the context indicates otherwise, references to the “Company” include the Company and its majority-owned and controlled domestic and foreign subsidiaries.

 

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.

 

8
 

 

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”) had an 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 impact of COVID-19 on inflation and supply chains and the continued economic 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 June 30, 2023, $2.5 million of the $5.0 million in cash and cash equivalents was held in Canada by Strong Global Entertainment.

 

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.

 

9
 

 

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 June 30, 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 or six months ended June 30, 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 7 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. Where available, the Company utilizes certain governmental incentives, programs and other structures from states and foreign countries (e.g., refundable tax credits calculated based on the amount of money spent in the particular jurisdiction in connection with the production) to fund its film and television productions and reduce financial risk. 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. Participation costs represent contingent consideration payable based on the performance of the film or television program to parties associated with the film or television program, including producers, writers, directors or actors and estimated liabilities for participations are accrued based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned. 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 materially 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.

 

10
 

 

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 June 30, 2023 and December 31, 2022.

 

Fair values measured on a recurring basis at June 30, 2023 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Cash and cash equivalents  $4,966   $    -   $    -   $4,966 
Fair value method equity holding   12,205    -     -     12,205 
Total  $17,171   $-   $-   $17,171 

 

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 $5.1 million at June 30, 2023 (see Note 7).

 

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.

 

11
 

 

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 June 30, 2023 or December 31, 2022.

 

12
 

 

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three and six months ended June 30, 2023 and 2022 (in thousands):

   

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Three Months Ended June 30, 2023   Three Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Screen system sales  $4,046   $-   $4,046   $    3,251   $-   $3,251 
Digital equipment sales   3,537    -    3,537    2,673    -    2,673 
Extended warranty sales   49    -    49    84    -    84 
Other product sales   779    -    779    675    -    675 
Total product sales   8,411    -    8,411    6,683    -    6,683 
Field maintenance and monitoring services   1,912    -    1,912    1,649    -    1,649 
Installation services   1,038    -    1,038    469    -    469 
Strong Studios services   6,379    -    6,379    -    -    - 
Other service revenues   99    183    282    21    321    342 
Total service revenues   9,428    183    9,611    2,139    321    2,460 
Total  $17,839   $183   $18,022   $8,822   $321   $9,143 

 

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Six Months Ended June 30, 2023   Six Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Screen system sales  $     7,003   $-   $7,003   $     6,743   $-   $6,743 
Digital equipment sales   7,063    -    7,063    6,216    -    6,216 
Extended warranty sales   100    -    100    184    -    184 
Other product sales   1,449    -    1,449    1,243    -    1,243 
Total product sales   15,615    -    15,615    14,386    -    14,386 
Field maintenance and monitoring services   3,803    -    3,803    3,267    -    3,267 
Installation services   1,840    -    1,840    841    -    841 
Strong Studios services   6,379    -    6,379    -    -    - 
Other service revenues   153    341    494    49    626    675 
Total service revenues   12,175    341    12,516    4,157    626    4,783 
Total  $27,790   $341   $28,131   $18,543   $626   $19,169 

 

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.

 

13
 

 

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.

 

Strong Studios services

 

The Company develops and produces original films and television series, as well as acquires third-party rights to content for global multi-platform distribution and recognizes revenue upon the transfer or license of film and television programming rights and related intellectual property.

 

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 and six months ended June 30, 2023 and 2022 (in thousands):

   

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Three Months Ended June 30, 2023   Three Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Point in time  $   16,312   $34   $16,346   $     7,532   $14   $7,546 
Over time   1,527    149    1,676    1,290    307    1,597 
Total  $17,839   $183   $18,022   $8,822   $321   $9,143 

 

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Six Months Ended June 30, 2023   Six Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Point in time  $   24,742   $48   $24,790   $    15,974   $17   $15,991 
Over time   3,048    293    3,341    2,569    609    3,178 
Total  $27,790   $341   $28,131   $18,543   $626   $19,169 

 

At June 30, 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 $0.4 million. The Company expects to recognize $0.4 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):

   

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
Weighted average shares outstanding:                    
Basic weighted average shares outstanding   19,470    19,273    19,293    19,133 
Dilutive effect of stock options and certain non-vested restricted stock units   -    -    -    - 
Diluted weighted average shares outstanding   19,470    19,273    19,293    19,133 
                     
Anti-dilutive employee stock-based awards excluded   370    197    436    179 

 

Options to purchase 742,000 and 349,500 shares of common stock were outstanding as of June 30, 2023 and June 30, 2022, respectively, but were not included in the computation of diluted loss per share as the options’ exercise prices were greater than the average closing price of the common shares for each period.

 

5. Inventories

 

Inventories consisted of the following (in thousands):

  

   June 30, 2023   December 31, 2022 
Raw materials and components  $1,984   $1,826 
Work in process   312    279 
Finished goods   829    1,284 
 Total  $3,125   $3,389 

 

The inventory balances are net of reserves of approximately $0.5 million as of both June 30, 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 six months ended June 30, 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   29 
Inventory reserve balance at June 30, 2023  $499 

 

6. Other Current Assets

 

Other current assets consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands): 

 

   June 30, 2023   December 31, 2022 
Prepaid expenses  $1,346   $553 
Receivable from Safehaven 2022, Inc.   -    1,625 
Costs incurred in connection with Strong Global Entertainment initial public offering   -    1,920 
Unbilled accounts receivable   541    337 
Production tax rebate receivable   3,476    - 
Receivable from Ravenwood Productions LLC   6,379    - 
Other   267    436 
Total  $12,009   $4,871 

 

7. Equity Holdings

 

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

 

   June 30, 2023   December 31, 2022 
   Carrying Amount   Economic Interest   Carrying Amount   Economic Interest 
Equity Method Holding                    
FG Financial Holdings, LLC  $5,137    45.4%  $7,832    47.2%
                     
Fair Value Method Holding                    
GreenFirst Forest Products Inc.   12,205    8.3%   16,792    8.4%
                     
Cost Method Holding                    
Firefly Systems, Inc.   12,898         12,898      
Total Investments  $30,240        $37,522      

 

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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 closing stock of the securities 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 $5.1 million as of June 30, 2023.

 

The Company recorded an equity method loss related to FGF Holdings of $2.0 million and $2.7 million during the three and six months ended June 30, 2023, respectively. As of June 30, 2023, the Company’s retained earnings included an accumulated deficit from its equity method holding of approximately $8.7 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 holding of approximately $4.5 million and $2.5 million during the six months ended June 30, 2023 and June 30, 2023, respectively. The Company did not receive dividends from GreenFirst during the three and six months ended June 30, 2023 or June 30, 2022. Based on quoted closing stock price, the fair value of the Company’s ownership in GreenFirst was $12.2 million as of June 30, 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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8. Property, Plant and Equipment, Net

 

Property, plant and equipment, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Land  $2,342   $2,341 
Buildings and improvements   9,463    12,756 
Machinery and other equipment   4,976    4,786 
Office furniture and fixtures   873    860 
Construction in progress   238    11 
Total properties, cost   17,892    20,754 
Less: accumulated depreciation   (5,306)   (8,105)
Property, plant and equipment, net  $12,586   $12,649 

 

9. Film and Television Programming Rights, Net

 

Film and television programming rights, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Television series in development  $9,449   $1,308 
Films in development   222    193 
Total film and programming rights   9,671    1,501 
Accumulated amortization   (1,980)   - 
Total film and programming rights, net  $7,691   $1,501 

 

A rollforward of film and television programming rights, net for the six months ended June 30, 2023, is as follows (in thousands):

 Schedule of Film and Television Programming Rights

Balance at December 31, 2022  $1,501 
Expenditures on in-process projects   86 
Acquisition of distribution rights   8,188 
Amortization of film and programming rights   (1,980)
Adjustment to fair value of warrant issued to Landmark   (104)
Balance at June 30, 2023  $7,691 

 

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 June 30, 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 IPO 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 IPO, at an exercise price equal to the per-share offering price of Strong Global Entertainment’s Common Shares in the IPO (the “Landmark Warrant”). The Landmark Warrant allows for cashless exercise in certain limited circumstances and provides for certain registration rights for such warrant shares.

 

17
 

 

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. On June 30, 2023, Strong Studios amended the Safehaven AA Agreement with SMV resulting in Strong Studios retaining the worldwide global distribution rights for the Safehaven 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 owned 49% of Safehaven 2022 and the remaining 51% was owned by Unbounded Services, LLC (“Unbounded”). 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. Effective June 23, 2023, the Company increased its ownership in Safehaven 2022 from 49% to 100%, and Safehaven 2022 became a wholly owned subsidiary of Strong Studios.

 

Prior to acquiring 100% of Safehaven 2022 in June 2023, Strong Studios reviewed its ownership in Safehaven 2022 and concluded that it had 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 applied the equity method of accounting to its equity holding in Safehaven 2022 through June 30, 2023, at which time the Company increased its ownership interest in Safehaven 2022 from 49% to 100% and began consolidating Safehaven 2022 as a wholly owned subsidiary of Strong Studios. A summary of the balance sheet of Safehaven 2022 as of June 30, 2023, is as follows (in thousands):

 

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Cash  $164 
Television programming rights   8,142 
Other assets   3,505 
Total assets  $11,811 
      
Accounts payable and accrued expenses  $250 
Due to Strong Studios   1,710 
Debt   9,851 
Equity   - 
Total liabilities and equity  $11,811 

 

Effective June 30, 2023, Safehaven 2022 entered into a purchase agreement (the “Purchase Agreement”) with SMV, to purchase all of SMV’s right, title and interest in Safehaven. Under the terms of the Purchase Agreement, the purchase price payable to Safehaven 2022 was satisfied by the payment in full by Ravenwood-Productions, LLC (“Ravenwood”) of the amount due as a minimum guarantee under the Safehaven AA Distribution Agreement to Bank of Hope. SMV is entitled to receive no further payments in respect of the Safehaven series, provided that, upon Strong Studios’ receipt of $15.0 million in gross receipts, SMV shall be paid an amount equal to five percent (5%) of the net proceeds up to a maximum of $0.4 million.

 

Effective June 30, 2023, the Company and Ravenwood entered into a management agreement (the “Management Agreement”), pursuant to which:

 

  ● Ravenwood advanced the amount due to Bank of Hope in respect of the minimum guarantee under the Safehaven AA Distribution Agreement of approximately $6.4 million.
  ● Safehaven 2022, Strong Studios and Ravenwood will enter into a sales agent agreement with an agency to represent and sell the Safehaven series.
  ● Each of Ravenwood and Strong Studios will be paid a management commission of 20% and 7%, respectively, of the Net Sales Price of the Series (as defined in the Management Agreement).
  ● All Gross Receipts (as defined by the Management Agreement) shall be distributed according to an agreed waterfall, with the balance to be paid to the named participants, including Strong Studios which will be paid 32.5%.
  ● Safehaven 2022 conveyed to Ravenwood an undivided 75% interest in all rights in and to the Safehaven series, retaining 25% for itself.

 

Safehaven 2022 recognizes revenue and 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. During the quarter ended June 30, 2023, Safehaven 2022 recognized $6.4 million of revenue in connection with the sale of a portion of the intellectual property rights, recorded a total of $5.4 million of expenses, including $2.0 million amortization of the film and programming rights intangible asset and $3.4 million of accrued participation costs.

 

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10. Goodwill

 

The following represents a summary of changes in the Company’s carrying amount of goodwill for the six months ended June 30, 2023 (in thousands):

 

Balance as of December 31, 2022  $882 
Foreign currency translation adjustment   20 
Balance as of June 30, 2023  $902 

 

11. Accrued Expenses

 

The Company’s accrued expense consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Employee-related  $2,169   $1,428 
Warranty obligation   321    309 
Interest and taxes   309    671 
Legal and professional fees   279    725 
Accrued participation costs   3,473    - 
Film and television programming rights   650    1,709 
Other   320    325 
Total  $7,521   $5,167 

 

12. Debt

 

The Company’s short-term debt and long-term debt consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Short-term debt:          
Strong/MDI 20-year installment loan  $2,283   $2,289 
Strong/MDI 5-year equipment loan   -    221 
Strong/MDI revolving credit facility   2,237    - 
Safehaven production debt   9,851    - 
Insurance note payable   586    - 
Total short-term debt   14,957    2,510 
Less: deferred debt issuance costs, net   (30)   - 
Total short-term debt, net of issuance costs  $14,927   $2,510 
           
Long-term debt:          
Tenant improvement loan  $144   $162 
Digital Ignition building loan   5,015    5,105 
Total long-term debt  $5,159   $5,267 
Less: current portion   (220)   (216)
Less: deferred debt issuance costs, net   (41)   (47)
Long-term debt, net of current portion and deferred debt issuance costs, net  $4,898   $5,004 

 

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.

 

20
 

 

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 June 30, 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 June 30, 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 IPO. As of June 30, 2023, there was CAD$3.0 million, or approximately $2.2 million, of principal outstanding on the revolving credit facility, which bears variable interest at 7.95%

 

Safehaven Production Debt

 

Safehaven 2022 entered into a Loan and Security Agreement (“Loan Agreement”) with Bank of Hope to provide interim production financing for the Safehaven production. The Company is not a borrower or guarantor under the Loan Agreement, and Safehaven 2022 is the sole borrower and guarantor under the Loan Agreement. The maturity date of the Loan Agreement is the earlier of (i) the date on which payment is accelerated by Bank of Hope due to an event of default or (ii) March 15, 2024. As of June 30, 2023, Safehaven 2022 had borrowed $9.9 million under the facility for production costs incurred to that date. Subsequent to June 30, 2023, Ravenwood paid approximately $6.4 million of the outstanding production debt. The remaining balance on the Loan Agreement was satisfied in July 2023 upon receipt of the production tax rebates and incentives earned as a result of shooting the Safehaven series in Canada.

 

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.

 

21
 

 

Insurance Debt

 

The Company maintains certain commercial insurance policies, including management liability and other policies customarily held by publicly traded companies. The Company elected to finance a portion of the annual premium, which will be repaid in monthly installments through January 2024. The finance agreement bears fixed interest of approximately 9%.

 

Contractual Principal Payments

 

Contractual required principal payments on the Company’s long-term debt at June 30, 2023, are as follows (in thousands):

 

   Tenant Improvement Loan   Digital Ignitiion Building Loan   Total 
Remainder of 2023  $      18    90   $108 
2024   37    187    224 
2025   40    195    235 
2026   42    203    245 
2027   7    4,340    4,347 
Thereafter   -    -    - 
Total  $144   $5,015   $5,159 

 

13. 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):

 

   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Lease cost  Three Months Ended   Six Months Ended 
   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Finance lease cost:                    
Amortization of right-of-use assets  $37   $2   $70   $2 
Interest on lease liabilities   15    1    27    1 
Operating lease cost   39    46    73    150 
Short-term lease cost   14    14    31    28 
Sublease income   -    -    -    (32)
Net lease cost  $105   $63   $201   $149 

 

   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Other information  Three Months Ended   Six Months Ended 
   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Cash paid for amounts included in the measurement of lease liabilities:                    
Operating cash flows from finance leases  $15   $1   $27   $1 
Operating cash flows from operating leases  $33   $49   $65   $141 
Financing cash flows from finance leases  $38   $2   $66   $2 
Right-of-use assets obtained in exchange for new finance lease liabilities  $310   $68   $310   $68 
Right-of-use assets obtained in exchange for new operating lease liabilities  $-   $-   $-   $- 

 

   As of June 30, 2022 
Weighted-average remaining lease term - finance leases (years)   1.5 
Weighted-average remaining lease term - operating leases (years)   3.2 
Weighted-average discount rate - finance leases   4.8%
Weighted-average discount rate - operating leases   3.8%

 

The following table presents a maturity analysis of the Company’s operating and finance lease liabilities as of June 30, 2023 (in thousands):

 

   Operating Leases   Finance Leases 
Remainder of 2023  $66   $124 
2024   101    249 
2025   79    496 
2026   81    188 
2027   14    5 
Thereafter   -    - 
Total lease payments   341    1,062 
Less: Amount representing interest   (25)   (151)
Present value of lease payments   316    911 
Less: Current maturities   (116)   (179)
Lease obligations, net of current portion  $200   $732 

 

14. 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 June 30, 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 and six months ended June 30, 2023, as well as the year ended 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.

 

15. 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 $0.9 million and $0.2 million for the three months ended June 30, 2023 and June 30, 2022, respectively and $1.0 million and $0.4 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Consolidated stock-based compensation expense for the three months and six months ended June 30, 2023 includes approximately $0.7 million related to stock-based compensation at Strong Global Entertainment, pursuant to the equity compensation plans established at the subsidiary level.

 

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 June 30, 2023, approximately 1.8 million shares were available for issuance under the amended and restated 2017 Plan.

 

Stock Options

 

The Company granted a total of 107,500 options during the six months ended June 30, 2023. Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the date of the grant. The weighted average grant date fair value of stock options granted during the six months ended June 30, 2023 was $1.16. The fair value of each stock option granted is estimated on the date of grant using a Black-Scholes valuation model with the following weighted average assumptions:

 

Expected dividend yield at date of grant   0.00%
Risk-free interest rate   3.52%
Expected stock price volatility   68.2%
Expected life of options (in years)   5.0 

 

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The following table summarizes stock option activity for the six months ended June 30, 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   107,500   $1.96           
Exercised   -                
Forfeited   (5,000)  $1.96           
Expired   -                
Outstanding at June 30, 2023   742,000   $3.21    4.4   $35 
Exercisable at June 30, 2023   530,500   $4.06    4.7   $14 

 

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 June 30, 2023, 211,500 stock option awards were non-vested. Unrecognized compensation cost related to non-vested stock options was approximately $0.2 million, which is expected to be recognized over a weighted average period of 2.2 years.

 

Restricted Stock Units

 

The Company estimates the fair value of restricted stock awards based upon the closing price of the underlying common stock on the date of grant. The following table summarizes restricted stock unit activity for the six months ended June 30, 2023:

 

   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value 
Non-vested at December 31, 2022   206,934   $2.06 
Granted   390,000   $1.96 
Shares vested   -      
Shares forfeited   -      
Non-vested at June 30, 2023   596,934   $2.06 

 

As of June 30, 2023, the total unrecognized compensation cost related to non-vested restricted stock unit awards was approximately $0.7 million, which is expected to be recognized over a weighted average period of 2.7 years.

 

16. 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 June 30, 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 half 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 40% of consolidated net revenues during the six months ended June 30, 2023. Trade accounts receivable from these customers represented approximately 62% of net consolidated receivables at June 30, 2023. One of the Company’s customers accounted for more than 10% of both its consolidated net revenues during the six months ended June 30, 2023 and its net combined receivables as of June 30, 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.

 

17. 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

 

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
   (in thousands)    (in thousands) 
Net revenues                    
Strong Entertainment  $17,839   $8,822   $27,790   $18,543 
Other   183    321    341    626 
Total net revenues   18,022    9,143    28,131    19,169 
                     
Gross profit                    
Strong Entertainment   7,264    2,098    9,585    4,304 
Other   183    322    340    628 
Total gross profit   7,447    2,420    9,925    4,932 
                     
Operating income (loss)                    
Strong Entertainment   349   180    924    790 
Other   (122)   (36)   (291)   (170)
Total segment operating income   227   144    633   620 
Unallocated administrative expenses   (995)   (1,029)   (2,180)   (2,267)
Loss from operations   (768)   (885)   (1,547)   (1,647)
Other expense, net   (2,225)   (4,056)   (5,085)   (2,925)
Loss before income taxes and equity method holding loss  $(2,993)  $(4,941)  $(6,632)  $(4,572)

 

 

(In thousands)  June 30, 2023   December 31, 2022 
Identifiable assets          
Strong Entertainment  $39,843   $35,392 
Corporate assets   39,252    36,361 
Total  $79,095   $71,753 

 

Summary by Geographical Area

 

                 
   Three Months Ended June 30,   Six Months Ended June 30, 
(In thousands)  2023   2022   2023   2022 
Net revenues                    
United States  $17,072   $7,840   $25,808   $16,623 
Canada   108    466    420    873 
China   -    44    22    279 
Mexico   64    7    64    7 
Latin America   16    74    273    220 
Europe   171    169    566    265 
Asia (excluding China)   433    279    586    432 
Other   158    264    392    470 
Total  $18,022   $9,143   $28,131   $19,169 

 

(In thousands)  June 30, 2023   December 31, 2022 
Identifiable assets          
United States  $51,187   $51,423 
Canada   27,908    20,330 
Total  $79,095   $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.

 

In May 2023, we separated our Strong Entertainment operating business from the Company pursuant to an initial public offering to support the growth plans for that line of business. Following the separation, we continue to be the majority shareholder of Strong Global Entertainment, and this discussion and analysis is prepared on a consolidated basis.

 

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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, real estate or acquire other businesses, which may be within or outside of the Company’s existing markets.

 

Impact of COVID-19 Pandemic

 

The coronavirus pandemic (“COVID-19”) had an 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 impact of COVID-19 on inflation and supply chains and the continued economic 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. Our results of operations in future periods may continue to be adversely impacted by inflationary pressures and global supply chain issues, and other 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 June 30,     
   2023   2022   $ Change   % Change 
       (dollars in thousands)         
Net revenues  $18,022   $9,143   $8,879    97.1%
Cost of revenues   10,575    6,723    3,852    57.3%
Gross profit   7,447    2,420    5,027    207.7%
Gross profit percentage   41.3%   26.5%          
Selling and administrative expenses   8,220    3,305    4,915    148.7%
Gain on disposal of assets   5    -    5    100.0%
Loss from operations   (768)   (885)   117   (13.2)%
Other expense   (2,225)   (4,056)   1,831    (45.1)%
Loss before income taxes and equity method holding loss   (2,993)   (4,941)   1,948    (39.4)%
Income tax (expense) benefit    (355)   303    (658)   (217.2)%
Equity method holding loss   (2,043)   (960)   (1,083)   112.8%
Net loss  (5,391)  (5,598)  207   (3.7)%
Net loss attributable to non-controlling interest   (118)   -    (118)   N/M 
Net loss attributable to FG Group Holdings  $(5,273)  $(5,598)  $325    (5.8)%

 

   Six Months Ended June 30,         
   2023   2022   $ Change   % Change 
   (dollars in thousands)     
Net revenues  $28,131   $19,169   $8,962    46.8%
Cost of revenues   18,206    14,237    3,969    27.9%
Gross profit   9,925    4,932    4,993    101.2%
Gross profit percentage   35.3%   25.7%          
Selling and administrative expenses   11,478    6,579    4,899    74.5%
Gain on disposal of assets   6    -    6    100.0%
Loss from operations   (1,547)   (1,647)   100    (6.1)%
Other (expense) income   (5,085)   (2,925)   (2,160)   73.8%
Loss  before income taxes and equity method holding loss   (6,632)   (4,572)   (2,060)   45.1%
Income tax expense   (56)   (47)   (9)   19.1%
Equity method holding loss   (2,694)   (1,780)   (914)   51.3%
Net loss   (9,382)   (6,399)   (2,983)   46.6%
Net loss attributable to non-controlling interest   (118)   -    (118)   N/M 
Net loss attributable to FG Group Holdings  $(9,264)  $(6,399)  $(2,865)   44.8%

 

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

 

Revenues

 

Net revenues during the quarter ended June 30, 2023 was $18.0 million compared to $9.1 million during the quarter ended June 30, 2022.

 

   Three Months Ended June 30,         
   2023   2022   $ Change   % Change 
       (dollars in thousands)         
Strong Entertainment  $17,839   $8,822   $9,017    102.2%
Other   183    321    (138)   (43.0)%
Total net revenues  $18,022   $9,143   $8,879    97.1%

 

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Strong Entertainment

 

Revenue from Strong Entertainment more than doubled to $17.8 million in the second quarter of 2023 from $8.8 million in the second quarter of 2022. The increase from the prior year was due to $1.7 million of higher revenue from product sales and a $7.3 million increase in service revenue, which included $6.4 million from the sale of an ownership stake in the Safehaven series. The revenue recognized in connection with Strong Studios’ projects will vary from period to period and will depend on the timing of the monetization of the projects. Excluding the revenue related to Safehaven, total revenue during the second quarter of 2023 increased 29.9% over the prior year, and service revenue increased 42.5%.

 

The increase in revenue from products was primarily due to a 24% increase in sales of screen systems as the upgrade to laser projection continues across the industry, as well as a 32% increase in sales of digital equipment. We expect the upgrades from xenon to laser to accelerate throughout 2023 and continue for at least the next several years.

 

On the cinema services side, the primary driver of the revenue increase was from installation services, which grew 121% from the prior year as we have increased the scope of our offerings to better support our customers and to increase market share in cinema services, including cinema screen installation work performed for certain of our customers.

 

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.

 

Gross Profit

 

Consolidated gross profit was $7.4 million compared to $2.4 million during the quarter ended June 30, 2022. As a percentage of revenue, gross profit was 41.3% and 26.5% for the quarters ended June 30, 2023 and June 30, 2022, respectively.

 

   Three Months Ended June 30,         
   2023   2022   $ Change   % Change 
       (dollars in thousands)         
Strong Entertainment  $7,264   $2,098   $5,166    246.2%
Other   183    322    (139)   (43.2)%
Total gross profit  $7,447   $2,420   $5,027    207.7%

 

Strong Entertainment

 

Gross profit in the Strong Entertainment segment $7.3 million or 40.7% of revenues in the second quarter of 2023 compared to $2.1 million or 23.8% in the second quarter of 2022. Gross profit during the 2nd quarter of 2023 included approximately $4.4 million from the sale of an ownership stake in Safehaven. Gross profit generated from Strong Studios’ projects will vary from period to period and will depend on the timing of the monetization of the projects. Excluding the gross profit related to Safehaven, total gross profits during the second quarter of 2023 would have been 24.5% of revenue.

 

Gross profit from product sales was $2.2 million or 25.7% of revenues for the second quarter of 2023 compared to $1.8 million or 27.7% of revenues for the second quarter of 2022. The decrease in gross profit percentage from product sales resulted primarily from product mix as revenue from sales of lower margin digital equipment grew at a slightly faster rate than our higher margin cinema screens.

 

Gross profit from service revenue was $5.1 million or 54.1% of revenues for the second quarter of 2023 compared to $0.2 million or 11.6% of revenues for the second quarter of 2022. Gross profit percentage increased from the prior year due to the sale of an ownership stake in the Safehaven series, as well as slightly higher overall gross margin from cinema services. Gross margin on our installation services also improved from the prior year as we started to see the benefits from the transition from third-party screen installation costs to internal labor. We expect margins on installation services to continue to improve as we continue to onboard and utilize our internal installation team.

 

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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 during the quarter ended June 30, 2023 compared to $0.9 million during the quarter ended June 30, 2022.

 

   Three Months Ended June 30,         
   2023   2022   $ Change   % Change 
       (dollars in thousands)         
Strong Entertainment  $349  $180   $169   93.9%
Other   (122)   (36)   (86)   238.9%
Total segment operating income   227   144    83   57.6%
Unallocated administrative expenses   (995)   (1,029)   34    (3.3)%
Total loss from operations  $(768)  $(885)  $117   (13.2)%

 

The Strong Entertainment segment generated operating income of $0.3 million in the second quarter of 2023 compared to operating income of $0.2 million during the second quarter of 2022. We recorded approximately $1.2 million of costs in connection with the completion of the IPO and $3.4 million of production participation costs in connection with the sale of an ownership stake in the Safehaven series. The increase in gross profit was partially offset by higher selling and administrative expenses, including marketing and travel and entertainment expenses, as revenue and business activity increased.

 

Unallocated administrative expenses were $1.0 million in each of the second quarters 2023 and 2022. A decrease in stock-based compensation was partially offset by an increase in professional fees and higher overall compensation costs.

 

Other Financial Items

 

Total other expense of $2.2 million during the second quarter of 2023 primarily consisted of a $1.6 million unrealized loss on equity holdings, $0.4 million of foreign currency transaction adjustments and $0.1 million of interest expense. Total other expense of $4.1 million during the second quarter of 2022 primarily consisted of a $4.2 million unrealized loss on equity holdings and $0.1 million of interest expense, partially offset by $0.2 million of foreign currency transaction adjustments.

 

Income tax expense was $0.4 million during the second quarter of 2023 compared to income tax benefit of $0.3 million during the second quarter of 2022. Our income tax benefit/expense during the second 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 $2.0 million during the second quarter of 2023 compared to $1.0 million during the second quarter of 2022.

 

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As a result of the items outlined above, we generated a net loss attributable to FG Group Holdings of $5.3 million, or $0.27 per basic and diluted share, in the second quarter of 2023, compared to $5.6 million, or $0.29 per basic and diluted share, in the second quarter of 2022.

 

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

 

Revenues

 

Net revenues during the six months ended June 30, 2023 was $28.1 million compared to $19.2 million during the six months ended June 30, 2022.

 

   Six Months Ended June 30,         
   2023   2022   $ Change   % Change 
       (dollars in thousands)          
Strong Entertainment  $27,790   $18,543   $9,247    49.9%
Other   341    626    (285)   (45.5)%
Total net revenues  $28,131   $19,169   $8,962    46.8%

 

Strong Entertainment

 

Revenue from Strong Entertainment increased 49.9% to $27.8 million in the first half of 2023 from $18.5 million in the first half of 2022. The increase from the prior year was due to $1.2 million of higher revenue from product sales and $8.0 million increase in service revenue, which included $6.4 million from the sale of an ownership stake in the Safehaven series. The revenue recognized in connection with Strong Studios’ projects will vary from period to period and will depend on the timing of the monetization of the projects. Excluding the revenue related to Safehaven, total revenue during the first half of 2023 increased 15.5% over the prior year, and service revenue increased 39.4%.

 

The increase in revenue from products was primarily due to a $0.8 million increase in sales of digital equipment and $0.3 million of higher sales of traditional cinema screens. We expect the upgrades from xenon to laser to accelerate throughout 2023 and continue for at least the next several years.

 

On the cinema services side, the primary driver of the revenue increase was from installation services, which increased $1.0 million from the prior year as we have increased the scope of our offerings to better support our customers and to increase market share in cinema services, including cinema screen installation work performed for certain of our customers.

 

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.

 

Gross Profit

 

Consolidated gross profit was $9.9 million during the six months ended June 30, 2023 compared to $4.9 million during the six months ended June 30, 2022. As a percentage of revenue, gross profit was 35.3% and 25.7% for the six months ended June 30, 2023 and June 30, 2022, respectively.

 

   Six Months Ended June 30,     
   2023   2022   $ Change   % Change 
       (dollars in thousands)         
Strong Entertainment  $9,585   $4,304   $5,281    122.7%
Other   340    628    (288)   (45.9)%
Total gross profit  $9,925   $4,932   $4,993    101.2%

 

33
 

 

Strong Entertainment

 

Gross profit was $9.6 million or 34.5% of revenues in the first half of 2023 compared to $4.3 million or 22.7% in the first half of 2022. Gross profit during the first half of 2023 included approximately $4.4 million from the sale of an ownership stake in Safehaven. Gross profit generated from Strong Studios’ projects will vary from period to period and will depend on the timing of the monetization of the projects. Excluding the gross profit related to Safehaven, total gross profit during the first half of 2023 would have been 24.0% of revenue.

 

Gross profit from product sales was $3.9 million or 25.0% of revenues for the first half of 2023 compared to $3.7 million or 25.7% of revenues for the first half of 2022. The slight decrease in gross profit percentage from product sales resulted primarily from product mix as revenue from sales of lower margin digital equipment grew at a slightly faster rate than our higher margin traditional cinema screens.

 

Gross profit from service revenue was $5.7 million or 46.7% of revenues for the first half of 2023 compared to $0.6 million or 14.7% of revenues for the first half of 2022. Gross profit percentage increased from the prior year primarily due to the sale of an ownership stake in the Safehaven series. We expect margins on installation services to continue to improve as we continue to onboard and utilize our internal installation team.

 

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 for the first half of 2023 was $1.5 million compared to $1.6 million during the six months ended June 30, 2022.

 

   Six Months Ended June 30,     
   2023   2022   $ Change   % Change 
       (dollars in thousands)         
Strong Entertainment  $924   $790   $134   17.0%
Other   (291)   (170)   (121)   71.2%
Total segment operating income   633   620    13   2.1%
Unallocated administrative expenses   (2,180)   (2,267)   87    (3.8)%
Total loss from operations  $(1,547)  $(1,647)  $100   (6.1)%

 

The Strong Entertainment segment generated operating income of $0.9 million in the first half of 2023 compared to operating income of $0.8 million during the first half of 2022. We recorded approximately $1.2 million of costs in connection with the completion of the Strong Global Entertainment IPO and $3.4 million of production participation costs in connection with the sale of an ownership stake in the Safehaven series. In addition, selling and administrative expenses, marketing and travel and entertainment expenses were higher during the first half of 2023 as revenue and business activity increased, including the addition of Strong Studios, in the current period as compared to the prior year, which was offset by an increase in gross profit.

 

Unallocated administrative expenses were $2.2 million compared to $2.3 million during the six months ended June 30, 2022. A decrease in stock-based compensation was partially offset by an increase in professional fees and higher overall compensation costs.

 

Other Financial Items

 

Total other expense of $5.1 million during the six months of 2023 primarily consisted of a $4.5 million unrealized loss on equity holdings, $0.3 million of foreign currency transaction adjustments and $0.2 million of interest expense. Total other expense of $2.9 million during the first half of 2022 primarily consisted of a $2.5 million unrealized loss on equity holdings, a $0.2 million adjustment to the carrying value of the SageNet Promissory Note in connection with a prepayment, and $0.1 million of interest expense, and $0.1 million of foreign currency transaction adjustments.

 

34
 

 

Income tax expense was $0.1 million during the six months of 2023 compared to income tax expense of $47,000 during the six months of 2022. Our income tax benefit/expense during the six months 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 $2.7 million during the first six months of 2023 compared to $1.8 million during the first six months of 2022.

 

As a result of the items outlined above, we generated a net loss attributable to FG Group Holdings of $9.3 million, or $0.48 per basic and diluted share, in the first six months of 2023, compared to $6.4 million, or $0.33 per basic and diluted share, in the first six months of 2022.

 

Liquidity and Capital Resources

 

We ended the second quarter of 2023 with total cash and cash equivalents of $5.0 million compared to $3.8 million as of December 31, 2022. Of the $5.0 million as of June 30, 2023, $2.5 million was held in Canada by Strong Global Entertainment. 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 June 30, 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 June 30, 2023.

 

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 June 30, 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.

 

We believe that our existing sources of liquidity, including cash and cash equivalents, operating cash flow, credit facilities, proceeds from equity holdings, real estate, 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. In addition, following the separation and initial public offering of Strong Global Entertainment, treasury and liquidity management are managed separately and the costs of operating separate public companies will likely increase from historical levels. 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 12 to the condensed consolidated financial statements for a description of our debt as of June 30, 2023.

 

35
 

 

Cash Flows from Operating Activities

 

Net cash used in operating activities was $2.6 million during the six months ended June 30, 2023 and $3.0 million during the six months ended June 30, 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 $0.2 million during the six months ended June 30, 2023, which consisted of $0.2 million of proceeds from the sale of equity securities, offset by $0.3 million of capital expenditures and a $0.1 million outflow related to the acquisition of film and television programming rights. Net cash used in investing activities from continuing operations was $0.9 million during the six months ended June 30, 2022, which consisted of a $2.0 million purchase of common stock of FGF, $0.8 million of capital expenditures and $0.3 million outflow related to the acquisition of film and television programming rights, partially offset by the $2.3 million receipt of the SageNet Promissory Note.

 

Cash Flows from Financing Activities

 

Net cash provided by financing activities was $3.9 million during the six months ended June 30, 2023, which primarily consisted of $2.4 million of net proceeds from the Strong Global Entertainment IPO and $2.2 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 from continuing operations was $0.4 million during the six months ended June 30, 2022, which primarily 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.

 

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.

 

36
 

 

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 June 30, 
   2023   2022 
                         
   Strong Entertainment   Corporate and Other   Consolidated   Strong Entertainment   Corporate and Other   Consolidated 
Net (loss) income  $(623)  $(4,768)  $(5,391)  $561   $(6,159)  $(5,598)
Interest expense, net   62    76    138    29    58    87 
Income tax expense (benefit)   413    (58)   355    (271)   (32)   (303)
Depreciation and amortization   2,130    125    2,255    154    182    336 
EBITDA   1,982    (4,625)   (2,643)   473    (5,951)   (5,478)
Stock-based compensation expense   714    196    910    -    175    175 
Equity method holding loss   -    2,043    2,043    -    960    960 
Unrealized loss on equity holdings   -    1,647    1,647    -    4,178    4,178 
IPO related expenses   475    -    475    -    -    - 
Gain on disposal of assets   -    (5)   (5)   -    -    - 
Foreign currency transaction loss (income)   426    -    426    (206)   -    (206)
Adjusted EBITDA  $3,597   $(744)  $2,853   $267   $(638)  $(371)

 

37
 

 

   Six Months Ended June 30, 
   2023   2022 
                         
   Strong Entertainment   Corporate and Other   Consolidated   Strong Entertainment   Corporate and Other   Consolidated 
Net income (loss)  $246   $(9,628)  $(9,382)  $427   $(6,826)  $(6,399)
Interest expense, net   118    131    249    53    87    140 
Income tax expense   113    (57)   56    40    7    47 
Depreciation and amortization   2,309    212    2,521    367    335    702 
EBITDA   2,786    (9,342)   (6,556)   887    (6,397)   (5,510)
Stock-based compensation expense   714    323    1,037    -    369    369 
Equity method holding loss   -    2,694    2,694    -    1,780    1,780 
Unrealized loss on equity holdings   -    4,538    4,538    -    2,451    2,451 
IPO related expenses   475    -    475    -    -    - 
Gain on disposal of assets   -    (5)   (5)   -    -    - 
Foreign currency transaction loss (income)   309    (2)   307    134    2    136 
Severance and other   -    -    -    -    222    222 
Adjusted EBITDA  $4,284   $(1,794)  $2,490   $1,021   $(1,573)  $(552)

 

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 six months ended June 30, 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.

 

38
 

 

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 six months ended June 30, 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.

 

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 June 30, 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 half 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.

 

39
 

 

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 June 30, 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 
                 
April 2023         -   $       -             -    636,931 
May 2023   -    -    -    636,931 
June 2023   -    -    -    636,931 
Quarter Ended June 30, 2023   -   $-   $-    636,931 

 

Item 6. Exhibits

 

        Incorporated by Reference    
Exhibit Number   Document Description   Form   Exhibit   Filing Date   Filed Herewith
                     
3.1   Amended and Restated Articles of Incorporation of FG Group Holdings Inc.  

8-K

 		  

3.4

  

December 23, 2022

    
 3.2  

Bylaws of FG Group Holdings Inc.

  

8-K

   3.5   December 23, 2022    

10.1

  

Underwriting Agreement dated May 15, 2023, by and among Strong Global Entertainment, Inc., FG Group Holdings Inc., Strong/MDI Screen Systems, Inc. and ThinkEquity LLC

  

8-K

  

10.1

  

May 19, 2023

    
10.2†  

Master Asset Purchase Agreement dated May 18, 2023, by and between Strong/MDI Screen Systems, Inc. and Strong/MDI Screen Systems, Inc.

  

8-K

  

10.2

  

May 19, 2023

    
10.3†  

Confirmatory of Ownership Assignment of Intellectual Property dated May 18, 2023, by and between Strong/MDI Screen Systems, Inc. and Strong/MDI Screen Systems, Inc.

  

8-K

  

10.3

  

May 19, 2023

    

10.4†

  

FG Group Holdings Asset Transfer Agreement dated May 18, 2023, by and between FG Group Holdings Inc. and Strong Technical Services, Inc.

  

8-K

  

10.4

  

May 19, 2023

    

10.5†

  

Patent Assignment dated May 18, 2023, by and between FG Group Holdings Inc. and Strong Technical Services, Inc.

  

8-K

  

10.5

  

May 19, 2023

    
10.6†  

Management Services Agreement dated May 18, 2023, by and between FG Group Holdings Inc. and Strong Global Entertainment Inc.

  

8-K

  

10.6

  

May 19, 2023

    

10.7

  

Lease Agreement dated May 18, 2023, by and between Strong/MDI Screen Systems, Inc. and Strong/MDI Screen Systems, Inc.

  

8-K

  

10.7

  

May 19, 2023

    
10.8  

Share Transfer Agreement dated May 18, 2023, by and between FG Group Holdings Inc. and Strong/MDI Screen Systems, Inc.

  

8-K

  

10.8

  

May 19, 2023

    
10.9  

Mutual Termination and Release dated May 18, 2023, by and between FG Group Holdings Inc. and Ray F. Boegner.

  

8-K

  

10.9

  

May 19, 2023

    

10.10+†

  

Amended and Restated Employment Agreement dated May 18, 2023, by and between FG Group Holdings Inc. and Mark D. Roberson.

  

8-K

  

10.10

  

May 19, 2023

    

10.11+†

  

Amended and Restated Employment Agreement dated May 18, 2023, by and between FG Group Holdings Inc. and Todd R. Major.

  

8-K

  

10.11

  

May 19, 2023

    
                     
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 June 30, 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

 

 

 

+ Indicates management contract or compensatory plan.
† Exhibits and schedules to this Exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5). The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
** Furnished herewith.

 

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SIGNATURES

 

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

 

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: August 14, 2023   Date: August 14, 2023

 

41

 

 

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 June 30, 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
August 14, 2023    

 

 

 

 

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 June 30, 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

 

August 14, 2023

 

 

 

 

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 June 30, 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 14th day of August 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.

 

 

 

 

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 June 30, 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 14th day of August 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.

 

 

 

v3.23.2
Cover - shares
 6 Months Ended
Jun. 30, 2023
Aug. 07, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2023  
Document Fiscal Period Focus Q2  
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, $0.01 par value  
Trading Symbol FGH  
Security Exchange Name NYSEAMER  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   19,638,248
v3.23.2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Current assets:    
Cash and cash equivalents $ 4,966 $ 3,789
Accounts receivable (net of credit allowances of $250 and $409, respectively) 6,408 6,167
Inventories, net 3,125 3,389
Other current assets 12,009 4,871
Total current assets 26,508 18,216
Property, plant and equipment, net 12,586 12,649
Operating lease right-of-use assets 259 310
Finance lease right-of-use asset 906 666
Equity holdings 30,240 37,522
Film and television programming rights, net 7,691 1,501
Intangible assets, net 2 5
Goodwill 902 882
Other assets 1 2
Total assets 79,095 71,753
Current liabilities:    
Accounts payable 3,637 4,375
Accrued expenses 7,521 5,167
Short-term debt 14,927 2,510
Current portion of long-term debt 220 216
Current portion of operating lease obligations 116 116
Current portion of finance lease obligations 179 117
Deferred revenue and customer deposits 1,143 1,787
Total current liabilities 27,743 14,288
Operating lease obligations, net of current portion 200 257
Finance lease obligations, net of current portion 732 550
Long-term debt, net of current portion and deferred debt issuance costs, net 4,898 5,004
Deferred income taxes 4,490 4,851
Other long-term liabilities 720 105
Total liabilities 38,783 25,055
Commitments, contingencies and concentrations (Note 16)
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 55,051 53,882
Retained earnings 7,151 16,437
Treasury stock, 2,794 shares at cost (18,586) (18,586)
Accumulated other comprehensive loss (4,769) (5,258)
Total FG Group Holdings shareholders’ equity 39,070 46,698
Equity attributable to non-controlling interest 1,242
Total stockholders’ equity 40,312 46,698
Total liabilities and stockholders’ equity $ 79,095 $ 71,753
v3.23.2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
shares in Thousands, $ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Allowance for credit losses $ 250 $ 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
v3.23.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Total net revenues $ 18,022 $ 9,143 $ 28,131 $ 19,169
Total cost of revenues 10,575 6,723 18,206 14,237
Gross profit 7,447 2,420 9,925 4,932
Selling and administrative expenses:        
Selling 618 684 1,152 1,225
Administrative 7,602 2,621 10,326 5,354
Total selling and administrative expenses 8,220 3,305 11,478 6,579
Gain on disposal of assets 5 6
Loss from operations (768) (885) (1,547) (1,647)
Other income (expense):        
Interest income 1 7
Interest expense (138) (88) (249) (147)
Foreign currency transaction (loss) gain (426) 206 (307) (136)
Unrealized loss on equity holdings (1,647) (4,178) (4,538) (2,451)
Other (expense) income, net (14) 3 9 (198)
Total other expense (2,225) (4,056) (5,085) (2,925)
(Loss) income before income taxes and equity method holding loss (2,993) (4,941) (6,632) (4,572)
Income tax (expense) benefit (355) 303 (56) (47)
Equity method holding loss (2,043) (960) (2,694) (1,780)
Net loss (5,391) (5,598) (9,382) (6,399)
Net loss attributable to non-controlling interest (118) (118)
Net loss attributable to FG Group Holdings $ (5,273) $ (5,598) $ (9,264) $ (6,399)
Net loss per share:        
Basic $ (0.27) $ (0.29) $ (0.48) $ (0.33)
Diluted $ (0.27) $ (0.29) $ (0.48) $ (0.33)
Weighted-average shares used in computing net loss per share:        
Basic 19,470 19,273 19,293 19,133
Diluted 19,470 19,273 19,293 19,133
Product [Member]        
Total net revenues $ 8,411 $ 6,683 $ 15,615 $ 14,386
Total cost of revenues 6,305 4,833 11,770 10,690
Service [Member]        
Total net revenues 9,611 2,460 12,516 4,783
Total cost of revenues $ 4,270 $ 1,890 $ 6,436 $ 3,547
v3.23.2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Income Statement [Abstract]        
Net loss $ (5,391) $ (5,598) $ (9,382) $ (6,399)
Adjustment to postretirement benefit obligation (4) (4) (9) (11)
Currency translation adjustment:        
Unrealized net change arising during period 558 (730) 485 (553)
Total other comprehensive income (loss) 554 (734) 476 (564)
Comprehensive loss (4,837) (6,332) (8,906) (6,963)
Comprehensive loss attributable to non-controlling interest (130) (130)
Comprehensive loss attributable to FG Group Holdings $ (4,707) $ (6,332) $ (8,776) $ (6,963)
v3.23.2
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]
Parent [Member]
Noncontrolling Interest [Member]
Total
Beginning balance, value at Dec. 31, 2021 $ 213 $ 50,807 $ 23,591 $ (18,586) $ (3,748) $ 52,277 $ 52,277
Beginning balance, shares at Dec. 31, 2021 21,286              
Net loss (802) (802) (802)
Net other comprehensive income/loss 170 170 170
Stock-based compensation expense 194 194 194
Issuance of common stock $ 8 2,342 2,350 2,350
Issuance of common stock, shares 761              
Issuance of warrants 109 109 109
Ending balance, value at Mar. 31, 2022 $ 221 53,452 22,789 (18,586) (3,578) 54,298 54,298
Ending balance, shares at Mar. 31, 2022 22,047              
Beginning balance, value at Dec. 31, 2021 $ 213 50,807 23,591 (18,586) (3,748) 52,277 52,277
Beginning balance, shares at Dec. 31, 2021 21,286              
Net loss               (6,399)
Net other comprehensive income/loss               (564)
Ending balance, value at Jun. 30, 2022 $ 221 53,611 17,191 (18,586) (4,312) 48,125 48,125
Ending balance, shares at Jun. 30, 2022 22,120              
Beginning balance, value at Mar. 31, 2022 $ 221 53,452 22,789 (18,586) (3,578) 54,298 54,298
Beginning balance, shares at Mar. 31, 2022 22,047              
Net loss (5,598) (5,598) (5,598)
Net other comprehensive income/loss (734) (734) (734)
Stock-based compensation expense 175 175 175
Vesting of restricted stock (16) (16) (16)
Vesting of restricted stock, shares 73              
Ending balance, value at Jun. 30, 2022 $ 221 53,611 17,191 (18,586) (4,312) 48,125 48,125
Ending balance, shares at Jun. 30, 2022 22,120              
Beginning balance, value at Dec. 31, 2022 $ 223 53,882 16,437 (18,586) (5,258) 46,698 46,698
Beginning balance, shares at Dec. 31, 2022 22,264              
Cumulative effect of adoption of accounting principle (24) (24) (24)
Net loss (3,989) (3,989) (3,989)
Net other comprehensive income/loss (77) (77) (77)
Stock-based compensation expense 127 127 127
Ending balance, value at Mar. 31, 2023 $ 223 54,009 12,424 (18,586) (5,335) 42,735 42,735
Ending balance, shares at Mar. 31, 2023 22,264              
Beginning balance, value at Dec. 31, 2022 $ 223 53,882 16,437 (18,586) (5,258) 46,698 46,698
Beginning balance, shares at Dec. 31, 2022 22,264              
Net loss               (9,382)
Net other comprehensive income/loss               476
Ending balance, value at Jun. 30, 2023 $ 223 55,051 7,151 (18,586) (4,769) 39,070 1,242 40,312
Ending balance, shares at Jun. 30, 2023 22,264              
Beginning balance, value at Mar. 31, 2023 $ 223 54,009 12,424 (18,586) (5,335) 42,735 42,735
Beginning balance, shares at Mar. 31, 2023 22,264              
Net loss (5,273) (5,273) (118) (5,391)
Net other comprehensive income/loss 566 566 (12) 554
Stock-based compensation expense 910 910 910
IPO of Strong Global Entertainment, Inc. and issuance of Landmark warrant, net of costs 1,383 1,383 225 1,608
Non-controlling interest allocation   (1,147)       (1,147) 1,147
Vesting of restricted stock (104) (104) (104)
Ending balance, value at Jun. 30, 2023 $ 223 $ 55,051 $ 7,151 $ (18,586) $ (4,769) $ 39,070 $ 1,242 $ 40,312
Ending balance, shares at Jun. 30, 2023 22,264              
v3.23.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Cash flows from operating activities:    
Net loss $ (9,382) $ (6,399)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:    
Recovery of doubtful accounts (3) 3
Provision for obsolete inventory 29 6
Provision for warranty 73 15
Depreciation and amortization 2,527 702
Amortization and accretion of operating leases 59 137
Equity method holding loss 2,694 1,780
Adjustment to SageNet promissory note in connection with prepayment 202
Unrealized loss on equity holdings 4,538 2,451
Deferred income taxes (388) (292)
Stock-based compensation expense 1,037 369
Changes in operating assets and liabilities:    
Accounts receivable (225) (1,085)
Inventories 286 (602)
Current income taxes (401) (135)
Other assets (8,692) 1,055
Accounts payable and accrued expenses 5,978 (674)
Deferred revenue and customer deposits (651) (446)
Operating lease obligations (65) (132)
Net cash used in operating activities (2,586) (3,045)
Cash flows from investing activities:    
Capital expenditures (318) (840)
Acquisition of programming rights (86) (337)
Sale (purchase) of equity holdings 198 (2,000)
Receipt of SageNet promissory note 2,300
Net cash used in investing activities (206) (877)
Cash flows from financing activities:    
Principal payments on short-term debt (414) (285)
Principal payments on long-term debt (101) (66)
Proceeds from Strong Global Entertainment initial public offering 2,411
Borrowings under credit facility 4,344
Repayments under credit facility (2,132)
Payments of withholding taxes for net share settlement of equity awards (104) (15)
Payments on finance lease obligations (66) (2)
Net cash provided by (used in) financing activities 3,938 (368)
Effect of exchange rate changes on cash and cash equivalents 31 (30)
Net increase (decrease) in cash and cash equivalents and restricted cash 1,177 (4,320)
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 4,966 4,561
Components of cash and cash equivalents and restricted cash:    
Cash and cash equivalents 4,966 4,411
Restricted cash 150
Total cash and cash equivalents and restricted cash 4,966 4,561
Supplemental disclosure of non-cash investing and financing activities:    
Short-term borrowings to finance insurance 586 392
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 9) $ 1,345
v3.23.2
Nature of Operations
 6 Months Ended
Jun. 30, 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. The Company’s holdings primarily consist of equity securities in public and private companies and real estate holdings in the United States and Canada.

 

The Company has historically conducted a large portion of its operations primarily through its Strong Entertainment operating segment. The Company completed the Separation (as defined below) and initial public offering (“IPO”) of the Strong Entertainment business on May 18, 2023. Following this transaction, Strong Global Entertainment became a separate publicly listed company and FG Group Holdings holds approximately 84% of the Class A common shares and 100% of the Class B common shares as of the date hereof. As the Company continues to be the majority shareholder of Strong Global Entertainment, the financial results of Strong Global Entertainment are presented on a consolidated basis in the Company’s condensed consolidated financial statements. The Company reports the noncontrolling interest in Strong Global Entertainment as a component of equity separate from the Company’s equity. The Company’s net loss excludes the net loss attributable to the noncontrolling interest.

 

Strong Global Entertainment 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.

 

Following the Separation and IPO, the operations of the Strong Entertainment operating segment are part of a newly established British Columbia corporation, Strong Global Entertainment, Inc. (“Strong Global Entertainment”). Strong Global Entertainment’s common shares are listed on the NYSE American under the ticker symbol “SGE.” In connection with the IPO, the Company and Strong Global Entertainment (and the subsidiaries of each) entered into a Master Asset Purchase Agreement, an IP Assignment Agreement, the FG Group Holdings Asset Transfer Agreement, the FG Group Holdings IP Assignment Agreement, the Joliette Plant Lease, the Share Transfer Agreements and a number of other agreements to govern the separation of the legacy Strong Entertainment business from the Company and the contribution of certain of the related business and assets to Strong Global Entertainment (the “Separation”). Under the Management Services Agreement, Strong Global Entertainment and the Company provide certain services to each other, which include information technology, legal, finance and accounting, human resources, tax, treasury, and other services, and charges a fee that is based on its actual costs and expenses for those services in the future (with mark-up, if necessary, to comply with applicable transfer pricing principles under Canadian and U.S. tax regulations).

 

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 as discussed in Note 7.

 
v3.23.2
Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 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. Unless the context indicates otherwise, references to the “Company” include the Company and its majority-owned and controlled domestic and foreign subsidiaries.

 

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”) had an 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 impact of COVID-19 on inflation and supply chains and the continued economic 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 June 30, 2023, $2.5 million of the $5.0 million in cash and cash equivalents was held in Canada by Strong Global Entertainment.

 

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 June 30, 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 or six months ended June 30, 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 7 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. Where available, the Company utilizes certain governmental incentives, programs and other structures from states and foreign countries (e.g., refundable tax credits calculated based on the amount of money spent in the particular jurisdiction in connection with the production) to fund its film and television productions and reduce financial risk. 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. Participation costs represent contingent consideration payable based on the performance of the film or television program to parties associated with the film or television program, including producers, writers, directors or actors and estimated liabilities for participations are accrued based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned. 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 materially 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 June 30, 2023 and December 31, 2022.

 

Fair values measured on a recurring basis at June 30, 2023 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Cash and cash equivalents  $4,966   $    -   $    -   $4,966 
Fair value method equity holding   12,205    -     -     12,205 
Total  $17,171   $-   $-   $17,171 

 

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 $5.1 million at June 30, 2023 (see Note 7).

 

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.

 

 
v3.23.2
Revenue
 6 Months Ended
Jun. 30, 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 June 30, 2023 or December 31, 2022.

 

 

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three and six months ended June 30, 2023 and 2022 (in thousands):

   

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Three Months Ended June 30, 2023   Three Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Screen system sales  $4,046   $-   $4,046   $    3,251   $-   $3,251 
Digital equipment sales   3,537    -    3,537    2,673    -    2,673 
Extended warranty sales   49    -    49    84    -    84 
Other product sales   779    -    779    675    -    675 
Total product sales   8,411    -    8,411    6,683    -    6,683 
Field maintenance and monitoring services   1,912    -    1,912    1,649    -    1,649 
Installation services   1,038    -    1,038    469    -    469 
Strong Studios services   6,379    -    6,379    -    -    - 
Other service revenues   99    183    282    21    321    342 
Total service revenues   9,428    183    9,611    2,139    321    2,460 
Total  $17,839   $183   $18,022   $8,822   $321   $9,143 

 

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Six Months Ended June 30, 2023   Six Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Screen system sales  $     7,003   $-   $7,003   $     6,743   $-   $6,743 
Digital equipment sales   7,063    -    7,063    6,216    -    6,216 
Extended warranty sales   100    -    100    184    -    184 
Other product sales   1,449    -    1,449    1,243    -    1,243 
Total product sales   15,615    -    15,615    14,386    -    14,386 
Field maintenance and monitoring services   3,803    -    3,803    3,267    -    3,267 
Installation services   1,840    -    1,840    841    -    841 
Strong Studios services   6,379    -    6,379    -    -    - 
Other service revenues   153    341    494    49    626    675 
Total service revenues   12,175    341    12,516    4,157    626    4,783 
Total  $27,790   $341   $28,131   $18,543   $626   $19,169 

 

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.

 

Strong Studios services

 

The Company develops and produces original films and television series, as well as acquires third-party rights to content for global multi-platform distribution and recognizes revenue upon the transfer or license of film and television programming rights and related intellectual property.

 

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 and six months ended June 30, 2023 and 2022 (in thousands):

   

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Three Months Ended June 30, 2023   Three Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Point in time  $   16,312   $34   $16,346   $     7,532   $14   $7,546 
Over time   1,527    149    1,676    1,290    307    1,597 
Total  $17,839   $183   $18,022   $8,822   $321   $9,143 

 

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Six Months Ended June 30, 2023   Six Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Point in time  $   24,742   $48   $24,790   $    15,974   $17   $15,991 
Over time   3,048    293    3,341    2,569    609    3,178 
Total  $27,790   $341   $28,131   $18,543   $626   $19,169 

 

At June 30, 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 $0.4 million. The Company expects to recognize $0.4 million of the unearned revenue amounts during the remainder of 2023, and immaterial amounts from 2024 through 2026.

 

 
v3.23.2
Net Loss Per Common Share
 6 Months Ended
Jun. 30, 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):

   

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
Weighted average shares outstanding:                    
Basic weighted average shares outstanding   19,470    19,273    19,293    19,133 
Dilutive effect of stock options and certain non-vested restricted stock units   -    -    -    - 
Diluted weighted average shares outstanding   19,470    19,273    19,293    19,133 
                     
Anti-dilutive employee stock-based awards excluded   370    197    436    179 

 

Options to purchase 742,000 and 349,500 shares of common stock were outstanding as of June 30, 2023 and June 30, 2022, respectively, but were not included in the computation of diluted loss per share as the options’ exercise prices were greater than the average closing price of the common shares for each period.

 
v3.23.2
Inventories
 6 Months Ended
Jun. 30, 2023
Inventory Disclosure [Abstract]  
Inventories

5. Inventories

 

Inventories consisted of the following (in thousands):

  

   June 30, 2023   December 31, 2022 
Raw materials and components  $1,984   $1,826 
Work in process   312    279 
Finished goods   829    1,284 
 Total  $3,125   $3,389 

 

The inventory balances are net of reserves of approximately $0.5 million as of both June 30, 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 six months ended June 30, 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   29 
Inventory reserve balance at June 30, 2023  $499 

 
v3.23.2
Other Current Assets
 6 Months Ended
Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Current Assets

6. Other Current Assets

 

Other current assets consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands): 

 

   June 30, 2023   December 31, 2022 
Prepaid expenses  $1,346   $553 
Receivable from Safehaven 2022, Inc.   -    1,625 
Costs incurred in connection with Strong Global Entertainment initial public offering   -    1,920 
Unbilled accounts receivable   541    337 
Production tax rebate receivable   3,476    - 
Receivable from Ravenwood Productions LLC   6,379    - 
Other   267    436 
Total  $12,009   $4,871 

 
v3.23.2
Equity Holdings
 6 Months Ended
Jun. 30, 2023
Equity Method Investments and Joint Ventures [Abstract]  
Equity Holdings

7. Equity Holdings

 

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

 

   June 30, 2023   December 31, 2022 
   Carrying Amount   Economic Interest   Carrying Amount   Economic Interest 
Equity Method Holding                    
FG Financial Holdings, LLC  $5,137    45.4%  $7,832    47.2%
                     
Fair Value Method Holding                    
GreenFirst Forest Products Inc.   12,205    8.3%   16,792    8.4%
                     
Cost Method Holding                    
Firefly Systems, Inc.   12,898         12,898      
Total Investments  $30,240        $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 closing stock of the securities 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 $5.1 million as of June 30, 2023.

 

The Company recorded an equity method loss related to FGF Holdings of $2.0 million and $2.7 million during the three and six months ended June 30, 2023, respectively. As of June 30, 2023, the Company’s retained earnings included an accumulated deficit from its equity method holding of approximately $8.7 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 holding of approximately $4.5 million and $2.5 million during the six months ended June 30, 2023 and June 30, 2023, respectively. The Company did not receive dividends from GreenFirst during the three and six months ended June 30, 2023 or June 30, 2022. Based on quoted closing stock price, the fair value of the Company’s ownership in GreenFirst was $12.2 million as of June 30, 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.

 

 
v3.23.2
Property, Plant and Equipment, Net
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment, Net

8. Property, Plant and Equipment, Net

 

Property, plant and equipment, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Land  $2,342   $2,341 
Buildings and improvements   9,463    12,756 
Machinery and other equipment   4,976    4,786 
Office furniture and fixtures   873    860 
Construction in progress   238    11 
Total properties, cost   17,892    20,754 
Less: accumulated depreciation   (5,306)   (8,105)
Property, plant and equipment, net  $12,586   $12,649 

 
v3.23.2
Film and Television Programming Rights, Net
 6 Months Ended
Jun. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
Film and Television Programming Rights, Net

9. Film and Television Programming Rights, Net

 

Film and television programming rights, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Television series in development  $9,449   $1,308 
Films in development   222    193 
Total film and programming rights   9,671    1,501 
Accumulated amortization   (1,980)   - 
Total film and programming rights, net  $7,691   $1,501 

 

A rollforward of film and television programming rights, net for the six months ended June 30, 2023, is as follows (in thousands):

 Schedule of Film and Television Programming Rights

Balance at December 31, 2022  $1,501 
Expenditures on in-process projects   86 
Acquisition of distribution rights   8,188 
Amortization of film and programming rights   (1,980)
Adjustment to fair value of warrant issued to Landmark   (104)
Balance at June 30, 2023  $7,691 

 

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 June 30, 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 IPO 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 IPO, at an exercise price equal to the per-share offering price of Strong Global Entertainment’s Common Shares in the IPO (the “Landmark Warrant”). The Landmark Warrant allows for cashless exercise in certain limited circumstances and provides for certain registration rights for such warrant shares.

 

 

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. On June 30, 2023, Strong Studios amended the Safehaven AA Agreement with SMV resulting in Strong Studios retaining the worldwide global distribution rights for the Safehaven 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 owned 49% of Safehaven 2022 and the remaining 51% was owned by Unbounded Services, LLC (“Unbounded”). 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. Effective June 23, 2023, the Company increased its ownership in Safehaven 2022 from 49% to 100%, and Safehaven 2022 became a wholly owned subsidiary of Strong Studios.

 

Prior to acquiring 100% of Safehaven 2022 in June 2023, Strong Studios reviewed its ownership in Safehaven 2022 and concluded that it had 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 applied the equity method of accounting to its equity holding in Safehaven 2022 through June 30, 2023, at which time the Company increased its ownership interest in Safehaven 2022 from 49% to 100% and began consolidating Safehaven 2022 as a wholly owned subsidiary of Strong Studios. A summary of the balance sheet of Safehaven 2022 as of June 30, 2023, is as follows (in thousands):

 

 

      
Cash  $164 
Television programming rights   8,142 
Other assets   3,505 
Total assets  $11,811 
      
Accounts payable and accrued expenses  $250 
Due to Strong Studios   1,710 
Debt   9,851 
Equity   - 
Total liabilities and equity  $11,811 

 

Effective June 30, 2023, Safehaven 2022 entered into a purchase agreement (the “Purchase Agreement”) with SMV, to purchase all of SMV’s right, title and interest in Safehaven. Under the terms of the Purchase Agreement, the purchase price payable to Safehaven 2022 was satisfied by the payment in full by Ravenwood-Productions, LLC (“Ravenwood”) of the amount due as a minimum guarantee under the Safehaven AA Distribution Agreement to Bank of Hope. SMV is entitled to receive no further payments in respect of the Safehaven series, provided that, upon Strong Studios’ receipt of $15.0 million in gross receipts, SMV shall be paid an amount equal to five percent (5%) of the net proceeds up to a maximum of $0.4 million.

 

Effective June 30, 2023, the Company and Ravenwood entered into a management agreement (the “Management Agreement”), pursuant to which:

 

  ● Ravenwood advanced the amount due to Bank of Hope in respect of the minimum guarantee under the Safehaven AA Distribution Agreement of approximately $6.4 million.
  ● Safehaven 2022, Strong Studios and Ravenwood will enter into a sales agent agreement with an agency to represent and sell the Safehaven series.
  ● Each of Ravenwood and Strong Studios will be paid a management commission of 20% and 7%, respectively, of the Net Sales Price of the Series (as defined in the Management Agreement).
  ● All Gross Receipts (as defined by the Management Agreement) shall be distributed according to an agreed waterfall, with the balance to be paid to the named participants, including Strong Studios which will be paid 32.5%.
  ● Safehaven 2022 conveyed to Ravenwood an undivided 75% interest in all rights in and to the Safehaven series, retaining 25% for itself.

 

Safehaven 2022 recognizes revenue and 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. During the quarter ended June 30, 2023, Safehaven 2022 recognized $6.4 million of revenue in connection with the sale of a portion of the intellectual property rights, recorded a total of $5.4 million of expenses, including $2.0 million amortization of the film and programming rights intangible asset and $3.4 million of accrued participation costs.

 

 
v3.23.2
Goodwill
 6 Months Ended
Jun. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill

10. Goodwill

 

The following represents a summary of changes in the Company’s carrying amount of goodwill for the six months ended June 30, 2023 (in thousands):

 

Balance as of December 31, 2022  $882 
Foreign currency translation adjustment   20 
Balance as of June 30, 2023  $902 

 
v3.23.2
Accrued Expenses
 6 Months Ended
Jun. 30, 2023
Payables and Accruals [Abstract]  
Accrued Expenses

11. Accrued Expenses

 

The Company’s accrued expense consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Employee-related  $2,169   $1,428 
Warranty obligation   321    309 
Interest and taxes   309    671 
Legal and professional fees   279    725 
Accrued participation costs   3,473    - 
Film and television programming rights   650    1,709 
Other   320    325 
Total  $7,521   $5,167 

 
v3.23.2
Debt
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Debt

12. Debt

 

The Company’s short-term debt and long-term debt consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Short-term debt:          
Strong/MDI 20-year installment loan  $2,283   $2,289 
Strong/MDI 5-year equipment loan   -    221 
Strong/MDI revolving credit facility   2,237    - 
Safehaven production debt   9,851    - 
Insurance note payable   586    - 
Total short-term debt   14,957    2,510 
Less: deferred debt issuance costs, net   (30)   - 
Total short-term debt, net of issuance costs  $14,927   $2,510 
           
Long-term debt:          
Tenant improvement loan  $144   $162 
Digital Ignition building loan   5,015    5,105 
Total long-term debt  $5,159   $5,267 
Less: current portion   (220)   (216)
Less: deferred debt issuance costs, net   (41)   (47)
Long-term debt, net of current portion and deferred debt issuance costs, net  $4,898   $5,004 

 

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 June 30, 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 June 30, 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 IPO. As of June 30, 2023, there was CAD$3.0 million, or approximately $2.2 million, of principal outstanding on the revolving credit facility, which bears variable interest at 7.95%

 

Safehaven Production Debt

 

Safehaven 2022 entered into a Loan and Security Agreement (“Loan Agreement”) with Bank of Hope to provide interim production financing for the Safehaven production. The Company is not a borrower or guarantor under the Loan Agreement, and Safehaven 2022 is the sole borrower and guarantor under the Loan Agreement. The maturity date of the Loan Agreement is the earlier of (i) the date on which payment is accelerated by Bank of Hope due to an event of default or (ii) March 15, 2024. As of June 30, 2023, Safehaven 2022 had borrowed $9.9 million under the facility for production costs incurred to that date. Subsequent to June 30, 2023, Ravenwood paid approximately $6.4 million of the outstanding production debt. The remaining balance on the Loan Agreement was satisfied in July 2023 upon receipt of the production tax rebates and incentives earned as a result of shooting the Safehaven series in Canada.

 

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.

 

 

Insurance Debt

 

The Company maintains certain commercial insurance policies, including management liability and other policies customarily held by publicly traded companies. The Company elected to finance a portion of the annual premium, which will be repaid in monthly installments through January 2024. The finance agreement bears fixed interest of approximately 9%.

 

Contractual Principal Payments

 

Contractual required principal payments on the Company’s long-term debt at June 30, 2023, are as follows (in thousands):

 

   Tenant Improvement Loan   Digital Ignitiion Building Loan   Total 
Remainder of 2023  $      18    90   $108 
2024   37    187    224 
2025   40    195    235 
2026   42    203    245 
2027   7    4,340    4,347 
Thereafter   -    -    - 
Total  $144   $5,015   $5,159 

 
v3.23.2
Leases
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
Leases

13. 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):

 

   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Lease cost  Three Months Ended   Six Months Ended 
   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Finance lease cost:                    
Amortization of right-of-use assets  $37   $2   $70   $2 
Interest on lease liabilities   15    1    27    1 
Operating lease cost   39    46    73    150 
Short-term lease cost   14    14    31    28 
Sublease income   -    -    -    (32)
Net lease cost  $105   $63   $201   $149 

 

   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Other information  Three Months Ended   Six Months Ended 
   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Cash paid for amounts included in the measurement of lease liabilities:                    
Operating cash flows from finance leases  $15   $1   $27   $1 
Operating cash flows from operating leases  $33   $49   $65   $141 
Financing cash flows from finance leases  $38   $2   $66   $2 
Right-of-use assets obtained in exchange for new finance lease liabilities  $310   $68   $310   $68 
Right-of-use assets obtained in exchange for new operating lease liabilities  $-   $-   $-   $- 

 

   As of June 30, 2022 
Weighted-average remaining lease term - finance leases (years)   1.5 
Weighted-average remaining lease term - operating leases (years)   3.2 
Weighted-average discount rate - finance leases   4.8%
Weighted-average discount rate - operating leases   3.8%

 

The following table presents a maturity analysis of the Company’s operating and finance lease liabilities as of June 30, 2023 (in thousands):

 

   Operating Leases   Finance Leases 
Remainder of 2023  $66   $124 
2024   101    249 
2025   79    496 
2026   81    188 
2027   14    5 
Thereafter   -    - 
Total lease payments   341    1,062 
Less: Amount representing interest   (25)   (151)
Present value of lease payments   316    911 
Less: Current maturities   (116)   (179)
Lease obligations, net of current portion  $200   $732 

 
v3.23.2
Income and Other Taxes
 6 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income and Other Taxes

14. 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 June 30, 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 and six months ended June 30, 2023, as well as the year ended 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.

 
v3.23.2
Stock Compensation
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Stock Compensation

15. 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 $0.9 million and $0.2 million for the three months ended June 30, 2023 and June 30, 2022, respectively and $1.0 million and $0.4 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Consolidated stock-based compensation expense for the three months and six months ended June 30, 2023 includes approximately $0.7 million related to stock-based compensation at Strong Global Entertainment, pursuant to the equity compensation plans established at the subsidiary level.

 

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 June 30, 2023, approximately 1.8 million shares were available for issuance under the amended and restated 2017 Plan.

 

Stock Options

 

The Company granted a total of 107,500 options during the six months ended June 30, 2023. Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the date of the grant. The weighted average grant date fair value of stock options granted during the six months ended June 30, 2023 was $1.16. The fair value of each stock option granted is estimated on the date of grant using a Black-Scholes valuation model with the following weighted average assumptions:

 

Expected dividend yield at date of grant   0.00%
Risk-free interest rate   3.52%
Expected stock price volatility   68.2%
Expected life of options (in years)   5.0 

 

 

The following table summarizes stock option activity for the six months ended June 30, 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   107,500   $1.96           
Exercised   -                
Forfeited   (5,000)  $1.96           
Expired   -                
Outstanding at June 30, 2023   742,000   $3.21    4.4   $35 
Exercisable at June 30, 2023   530,500   $4.06    4.7   $14 

 

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 June 30, 2023, 211,500 stock option awards were non-vested. Unrecognized compensation cost related to non-vested stock options was approximately $0.2 million, which is expected to be recognized over a weighted average period of 2.2 years.

 

Restricted Stock Units

 

The Company estimates the fair value of restricted stock awards based upon the closing price of the underlying common stock on the date of grant. The following table summarizes restricted stock unit activity for the six months ended June 30, 2023:

 

   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value 
Non-vested at December 31, 2022   206,934   $2.06 
Granted   390,000   $1.96 
Shares vested   -      
Shares forfeited   -      
Non-vested at June 30, 2023   596,934   $2.06 

 

As of June 30, 2023, the total unrecognized compensation cost related to non-vested restricted stock unit awards was approximately $0.7 million, which is expected to be recognized over a weighted average period of 2.7 years.

 
v3.23.2
Commitments, Contingencies and Concentrations
 6 Months Ended
Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments, Contingencies and Concentrations

16. 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 June 30, 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 half 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 40% of consolidated net revenues during the six months ended June 30, 2023. Trade accounts receivable from these customers represented approximately 62% of net consolidated receivables at June 30, 2023. One of the Company’s customers accounted for more than 10% of both its consolidated net revenues during the six months ended June 30, 2023 and its net combined receivables as of June 30, 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.

 
v3.23.2
Business Segment Information
 6 Months Ended
Jun. 30, 2023
Segment Reporting [Abstract]  
Business Segment Information

17. 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

 

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
   (in thousands)    (in thousands) 
Net revenues                    
Strong Entertainment  $17,839   $8,822   $27,790   $18,543 
Other   183    321    341    626 
Total net revenues   18,022    9,143    28,131    19,169 
                     
Gross profit                    
Strong Entertainment   7,264    2,098    9,585    4,304 
Other   183    322    340    628 
Total gross profit   7,447    2,420    9,925    4,932 
                     
Operating income (loss)                    
Strong Entertainment   349   180    924    790 
Other   (122)   (36)   (291)   (170)
Total segment operating income   227   144    633   620 
Unallocated administrative expenses   (995)   (1,029)   (2,180)   (2,267)
Loss from operations   (768)   (885)   (1,547)   (1,647)
Other expense, net   (2,225)   (4,056)   (5,085)   (2,925)
Loss before income taxes and equity method holding loss  $(2,993)  $(4,941)  $(6,632)  $(4,572)

 

 

(In thousands)  June 30, 2023   December 31, 2022 
Identifiable assets          
Strong Entertainment  $39,843   $35,392 
Corporate assets   39,252    36,361 
Total  $79,095   $71,753 

 

Summary by Geographical Area

 

                 
   Three Months Ended June 30,   Six Months Ended June 30, 
(In thousands)  2023   2022   2023   2022 
Net revenues                    
United States  $17,072   $7,840   $25,808   $16,623 
Canada   108    466    420    873 
China   -    44    22    279 
Mexico   64    7    64    7 
Latin America   16    74    273    220 
Europe   171    169    566    265 
Asia (excluding China)   433    279    586    432 
Other   158    264    392    470 
Total  $18,022   $9,143   $28,131   $19,169 

 

(In thousands)  June 30, 2023   December 31, 2022 
Identifiable assets          
United States  $51,187   $51,423 
Canada   27,908    20,330 
Total  $79,095   $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.
v3.23.2
Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 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. Unless the context indicates otherwise, references to the “Company” include the Company and its majority-owned and controlled domestic and foreign subsidiaries.

 

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”) had an 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 impact of COVID-19 on inflation and supply chains and the continued economic 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 June 30, 2023, $2.5 million of the $5.0 million in cash and cash equivalents was held in Canada by Strong Global Entertainment.

 
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 June 30, 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 or six months ended June 30, 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 7 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. Where available, the Company utilizes certain governmental incentives, programs and other structures from states and foreign countries (e.g., refundable tax credits calculated based on the amount of money spent in the particular jurisdiction in connection with the production) to fund its film and television productions and reduce financial risk. 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. Participation costs represent contingent consideration payable based on the performance of the film or television program to parties associated with the film or television program, including producers, writers, directors or actors and estimated liabilities for participations are accrued based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned. 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 materially 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 June 30, 2023 and December 31, 2022.

 

Fair values measured on a recurring basis at June 30, 2023 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Cash and cash equivalents  $4,966   $    -   $    -   $4,966 
Fair value method equity holding   12,205    -     -     12,205 
Total  $17,171   $-   $-   $17,171 

 

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 $5.1 million at June 30, 2023 (see Note 7).

 
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.
v3.23.2
Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Schedule of Fair Value Measured Financial Assets and Liabilities

Fair values measured on a recurring basis at June 30, 2023 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Cash and cash equivalents  $4,966   $    -   $    -   $4,966 
Fair value method equity holding   12,205    -     -     12,205 
Total  $17,171   $-   $-   $17,171 

 

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 
v3.23.2
Revenue (Tables)
 6 Months Ended
Jun. 30, 2023
Schedule of Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three and six months ended June 30, 2023 and 2022 (in thousands):

   

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Three Months Ended June 30, 2023   Three Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Screen system sales  $4,046   $-   $4,046   $    3,251   $-   $3,251 
Digital equipment sales   3,537    -    3,537    2,673    -    2,673 
Extended warranty sales   49    -    49    84    -    84 
Other product sales   779    -    779    675    -    675 
Total product sales   8,411    -    8,411    6,683    -    6,683 
Field maintenance and monitoring services   1,912    -    1,912    1,649    -    1,649 
Installation services   1,038    -    1,038    469    -    469 
Strong Studios services   6,379    -    6,379    -    -    - 
Other service revenues   99    183    282    21    321    342 
Total service revenues   9,428    183    9,611    2,139    321    2,460 
Total  $17,839   $183   $18,022   $8,822   $321   $9,143 

 

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Six Months Ended June 30, 2023   Six Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Screen system sales  $     7,003   $-   $7,003   $     6,743   $-   $6,743 
Digital equipment sales   7,063    -    7,063    6,216    -    6,216 
Extended warranty sales   100    -    100    184    -    184 
Other product sales   1,449    -    1,449    1,243    -    1,243 
Total product sales   15,615    -    15,615    14,386    -    14,386 
Field maintenance and monitoring services   3,803    -    3,803    3,267    -    3,267 
Installation services   1,840    -    1,840    841    -    841 
Strong Studios services   6,379    -    6,379    -    -    - 
Other service revenues   153    341    494    49    626    675 
Total service revenues   12,175    341    12,516    4,157    626    4,783 
Total  $27,790   $341   $28,131   $18,543   $626   $19,169 
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 and six months ended June 30, 2023 and 2022 (in thousands):

   

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Three Months Ended June 30, 2023   Three Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Point in time  $   16,312   $34   $16,346   $     7,532   $14   $7,546 
Over time   1,527    149    1,676    1,290    307    1,597 
Total  $17,839   $183   $18,022   $8,822   $321   $9,143 

 

   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
   Six Months Ended June 30, 2023   Six Months Ended June 30, 2022 
   Strong Entertainment   Other   Total   Strong Entertainment   Other   Total 
Point in time  $   24,742   $48   $24,790   $    15,974   $17   $15,991 
Over time   3,048    293    3,341    2,569    609    3,178 
Total  $27,790   $341   $28,131   $18,543   $626   $19,169 
v3.23.2
Net Loss Per Common Share (Tables)
 6 Months Ended
Jun. 30, 2023
Earnings Per Share [Abstract]  
Schedule of Net(Loss) Income Per Share

   

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
Weighted average shares outstanding:                    
Basic weighted average shares outstanding   19,470    19,273    19,293    19,133 
Dilutive effect of stock options and certain non-vested restricted stock units   -    -    -    - 
Diluted weighted average shares outstanding   19,470    19,273    19,293    19,133 
                     
Anti-dilutive employee stock-based awards excluded   370    197    436    179 
v3.23.2
Inventories (Tables)
 6 Months Ended
Jun. 30, 2023
Inventory Disclosure [Abstract]  
Schedule of Inventories

Inventories consisted of the following (in thousands):

  

   June 30, 2023   December 31, 2022 
Raw materials and components  $1,984   $1,826 
Work in process   312    279 
Finished goods   829    1,284 
 Total  $3,125   $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   29 
Inventory reserve balance at June 30, 2023  $499 
v3.23.2
Other Current Assets (Tables)
 6 Months Ended
Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Schedule of Other Current Assets

Other current assets consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands): 

 

   June 30, 2023   December 31, 2022 
Prepaid expenses  $1,346   $553 
Receivable from Safehaven 2022, Inc.   -    1,625 
Costs incurred in connection with Strong Global Entertainment initial public offering   -    1,920 
Unbilled accounts receivable   541    337 
Production tax rebate receivable   3,476    - 
Receivable from Ravenwood Productions LLC   6,379    - 
Other   267    436 
Total  $12,009   $4,871 
v3.23.2
Equity Holdings (Tables)
 6 Months Ended
Jun. 30, 2023
Equity Method Investments and Joint Ventures [Abstract]  
Summary of Investments

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

 

   June 30, 2023   December 31, 2022 
   Carrying Amount   Economic Interest   Carrying Amount   Economic Interest 
Equity Method Holding                    
FG Financial Holdings, LLC  $5,137    45.4%  $7,832    47.2%
                     
Fair Value Method Holding                    
GreenFirst Forest Products Inc.   12,205    8.3%   16,792    8.4%
                     
Cost Method Holding                    
Firefly Systems, Inc.   12,898         12,898      
Total Investments  $30,240        $37,522      
v3.23.2
Property, Plant and Equipment, Net (Tables)
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Schedule of Property, Plant and Equipment

Property, plant and equipment, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Land  $2,342   $2,341 
Buildings and improvements   9,463    12,756 
Machinery and other equipment   4,976    4,786 
Office furniture and fixtures   873    860 
Construction in progress   238    11 
Total properties, cost   17,892    20,754 
Less: accumulated depreciation   (5,306)   (8,105)
Property, plant and equipment, net  $12,586   $12,649 
v3.23.2
Film and Television Programming Rights, Net (Tables)
 6 Months Ended
Jun. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
Schedule of Development Assets Acquired

 

   June 30, 2023   December 31, 2022 
Television series in development  $9,449   $1,308 
Films in development   222    193 
Total film and programming rights   9,671    1,501 
Accumulated amortization   (1,980)   - 
Total film and programming rights, net  $7,691   $1,501 
Schedule of Film and Television Programming Rights

A rollforward of film and television programming rights, net for the six months ended June 30, 2023, is as follows (in thousands):

 Schedule of Film and Television Programming Rights

Balance at December 31, 2022  $1,501 
Expenditures on in-process projects   86 
Acquisition of distribution rights   8,188 
Amortization of film and programming rights   (1,980)
Adjustment to fair value of warrant issued to Landmark   (104)
Balance at June 30, 2023  $7,691 
Schedule of Balance Sheets

 

      
Cash  $164 
Television programming rights   8,142 
Other assets   3,505 
Total assets  $11,811 
      
Accounts payable and accrued expenses  $250 
Due to Strong Studios   1,710 
Debt   9,851 
Equity   - 
Total liabilities and equity  $11,811 
v3.23.2
Goodwill (Tables)
 6 Months Ended
Jun. 30, 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 six months ended June 30, 2023 (in thousands):

 

Balance as of December 31, 2022  $882 
Foreign currency translation adjustment   20 
Balance as of June 30, 2023  $902 
v3.23.2
Accrued Expenses (Tables)
 6 Months Ended
Jun. 30, 2023
Payables and Accruals [Abstract]  
Schedule of Accrued Expense

The Company’s accrued expense consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Employee-related  $2,169   $1,428 
Warranty obligation   321    309 
Interest and taxes   309    671 
Legal and professional fees   279    725 
Accrued participation costs   3,473    - 
Film and television programming rights   650    1,709 
Other   320    325 
Total  $7,521   $5,167 
v3.23.2
Debt (Tables)
 6 Months Ended
Jun. 30, 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 June 30, 2023 and December 31, 2022 (in thousands):

 

   June 30, 2023   December 31, 2022 
Short-term debt:          
Strong/MDI 20-year installment loan  $2,283   $2,289 
Strong/MDI 5-year equipment loan   -    221 
Strong/MDI revolving credit facility   2,237    - 
Safehaven production debt   9,851    - 
Insurance note payable   586    - 
Total short-term debt   14,957    2,510 
Less: deferred debt issuance costs, net   (30)   - 
Total short-term debt, net of issuance costs  $14,927   $2,510 
           
Long-term debt:          
Tenant improvement loan  $144   $162 
Digital Ignition building loan   5,015    5,105 
Total long-term debt  $5,159   $5,267 
Less: current portion   (220)   (216)
Less: deferred debt issuance costs, net   (41)   (47)
Long-term debt, net of current portion and deferred debt issuance costs, net  $4,898   $5,004 
Schedule of Contractual Principal Payments of Long-term Debt

Contractual required principal payments on the Company’s long-term debt at June 30, 2023, are as follows (in thousands):

 

   Tenant Improvement Loan   Digital Ignitiion Building Loan   Total 
Remainder of 2023  $      18    90   $108 
2024   37    187    224 
2025   40    195    235 
2026   42    203    245 
2027   7    4,340    4,347 
Thereafter   -    -    - 
Total  $144   $5,015   $5,159 
v3.23.2
Leases (Tables)
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
Schedule of Lease Costs and Other Lease Information

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

 

   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Lease cost  Three Months Ended   Six Months Ended 
   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Finance lease cost:                    
Amortization of right-of-use assets  $37   $2   $70   $2 
Interest on lease liabilities   15    1    27    1 
Operating lease cost   39    46    73    150 
Short-term lease cost   14    14    31    28 
Sublease income   -    -    -    (32)
Net lease cost  $105   $63   $201   $149 

 

   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Other information  Three Months Ended   Six Months Ended 
   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
Cash paid for amounts included in the measurement of lease liabilities:                    
Operating cash flows from finance leases  $15   $1   $27   $1 
Operating cash flows from operating leases  $33   $49   $65   $141 
Financing cash flows from finance leases  $38   $2   $66   $2 
Right-of-use assets obtained in exchange for new finance lease liabilities  $310   $68   $310   $68 
Right-of-use assets obtained in exchange for new operating lease liabilities  $-   $-   $-   $- 

 

   As of June 30, 2022 
Weighted-average remaining lease term - finance leases (years)   1.5 
Weighted-average remaining lease term - operating leases (years)   3.2 
Weighted-average discount rate - finance leases   4.8%
Weighted-average discount rate - operating leases   3.8%
Schedule of Future Minimum Lease Payments

The following table presents a maturity analysis of the Company’s operating and finance lease liabilities as of June 30, 2023 (in thousands):

 

   Operating Leases   Finance Leases 
Remainder of 2023  $66   $124 
2024   101    249 
2025   79    496 
2026   81    188 
2027   14    5 
Thereafter   -    - 
Total lease payments   341    1,062 
Less: Amount representing interest   (25)   (151)
Present value of lease payments   316    911 
Less: Current maturities   (116)   (179)
Lease obligations, net of current portion  $200   $732 
v3.23.2
Stock Compensation (Tables)
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Schedule of Fair Value Valuation Model

 

Expected dividend yield at date of grant   0.00%
Risk-free interest rate   3.52%
Expected stock price volatility   68.2%
Expected life of options (in years)   5.0 
Summary of Stock Option Activities

The following table summarizes stock option activity for the six months ended June 30, 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   107,500   $1.96           
Exercised   -                
Forfeited   (5,000)  $1.96           
Expired   -                
Outstanding at June 30, 2023   742,000   $3.21    4.4   $35 
Exercisable at June 30, 2023   530,500   $4.06    4.7   $14 
Summary of Restricted Stock Activity

The Company estimates the fair value of restricted stock awards based upon the closing price of the underlying common stock on the date of grant. The following table summarizes restricted stock unit activity for the six months ended June 30, 2023:

 

   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value 
Non-vested at December 31, 2022   206,934   $2.06 
Granted   390,000   $1.96 
Shares vested   -      
Shares forfeited   -      
Non-vested at June 30, 2023   596,934   $2.06 
v3.23.2
Business Segment Information (Tables)
 6 Months Ended
Jun. 30, 2023
Segment Reporting [Abstract]  
Schedule of Segment Reporting Information by Segment

Summary by Business Segments

 

   2023   2022   2023   2022 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2023   2022   2023   2022 
   (in thousands)    (in thousands) 
Net revenues                    
Strong Entertainment  $17,839   $8,822   $27,790   $18,543 
Other   183    321    341    626 
Total net revenues   18,022    9,143    28,131    19,169 
                     
Gross profit                    
Strong Entertainment   7,264    2,098    9,585    4,304 
Other   183    322    340    628 
Total gross profit   7,447    2,420    9,925    4,932 
                     
Operating income (loss)                    
Strong Entertainment   349   180    924    790 
Other   (122)   (36)   (291)   (170)
Total segment operating income   227   144    633   620 
Unallocated administrative expenses   (995)   (1,029)   (2,180)   (2,267)
Loss from operations   (768)   (885)   (1,547)   (1,647)
Other expense, net   (2,225)   (4,056)   (5,085)   (2,925)
Loss before income taxes and equity method holding loss  $(2,993)  $(4,941)  $(6,632)  $(4,572)
Reconciliation of Assets from Segment to Consolidated

 

(In thousands)  June 30, 2023   December 31, 2022 
Identifiable assets          
Strong Entertainment  $39,843   $35,392 
Corporate assets   39,252    36,361 
Total  $79,095   $71,753 
Schedule of Segment Reporting Information by Geographic Area

Summary by Geographical Area

 

                 
   Three Months Ended June 30,   Six Months Ended June 30, 
(In thousands)  2023   2022   2023   2022 
Net revenues                    
United States  $17,072   $7,840   $25,808   $16,623 
Canada   108    466    420    873 
China   -    44    22    279 
Mexico   64    7    64    7 
Latin America   16    74    273    220 
Europe   171    169    566    265 
Asia (excluding China)   433    279    586    432 
Other   158    264    392    470 
Total  $18,022   $9,143   $28,131   $19,169 
Summary of Identifiable Assets by Geographical Area

(In thousands)  June 30, 2023   December 31, 2022 
Identifiable assets          
United States  $51,187   $51,423 
Canada   27,908    20,330 
Total  $79,095   $71,753 
v3.23.2
Schedule of Fair Value Measured Financial Assets and Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Jun. 30, 2022
Platform Operator, Crypto-Asset [Line Items]      
Cash and cash equivalents $ 4,966 $ 3,789  
Fair value method equity holding 12,205 16,792  
Total 17,171 20,581  
Fair Value, Inputs, Level 1 [Member]      
Platform Operator, Crypto-Asset [Line Items]      
Cash and cash equivalents 4,966 3,789  
Fair value method equity holding 12,205 16,792  
Total 17,171 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  
v3.23.2
Summary of Significant Accounting Policies (Details Narrative)
$ in Thousands
Jun. 30, 2023
USD ($)
Accounting Policies [Abstract]  
Cash $ 2,500
Cash equivalents 5,000
Quoted fair value of company's ownership 5,100
Cumulative effect adjustment $ 24
v3.23.2
Schedule of Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Disaggregation of Revenue [Line Items]        
Total $ 18,022 $ 9,143 $ 28,131 $ 19,169
Transferred at Point in Time [Member]        
Disaggregation of Revenue [Line Items]        
Total 16,346 7,546 24,790 15,991
Transferred over Time [Member]        
Disaggregation of Revenue [Line Items]        
Total 1,676 1,597 3,341 3,178
Product [Member]        
Disaggregation of Revenue [Line Items]        
Total 8,411 6,683 15,615 14,386
Product [Member] | Screen System Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 4,046 3,251 7,003 6,743
Product [Member] | Digital Equipment Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 3,537 2,673 7,063 6,216
Product [Member] | Extended Warranty Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 49 84 100 184
Product [Member] | Other Product Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 779 675 1,449 1,243
Service [Member]        
Disaggregation of Revenue [Line Items]        
Total 9,611 2,460 12,516 4,783
Service [Member] | Field Maintenance And Monitoring Services [Member]        
Disaggregation of Revenue [Line Items]        
Total 1,912 1,649 3,803 3,267
Service [Member] | Installation Services [Member]        
Disaggregation of Revenue [Line Items]        
Total 1,038 469 1,840 841
Service [Member] | Strong Studios Services [Member]        
Disaggregation of Revenue [Line Items]        
Total 6,379 6,379
Service [Member] | Other Service [Member]        
Disaggregation of Revenue [Line Items]        
Total 282 342 494 675
Strong Entertainment [Member]        
Disaggregation of Revenue [Line Items]        
Total 17,839 8,822 27,790 18,543
Strong Entertainment [Member] | Transferred at Point in Time [Member]        
Disaggregation of Revenue [Line Items]        
Total 16,312 7,532 24,742 15,974
Strong Entertainment [Member] | Transferred over Time [Member]        
Disaggregation of Revenue [Line Items]        
Total 1,527 1,290 3,048 2,569
Strong Entertainment [Member] | Product [Member]        
Disaggregation of Revenue [Line Items]        
Total 8,411 6,683 15,615 14,386
Strong Entertainment [Member] | Product [Member] | Screen System Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 4,046 3,251 7,003 6,743
Strong Entertainment [Member] | Product [Member] | Digital Equipment Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 3,537 2,673 7,063 6,216
Strong Entertainment [Member] | Product [Member] | Extended Warranty Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 49 84 100 184
Strong Entertainment [Member] | Product [Member] | Other Product Sales [Member]        
Disaggregation of Revenue [Line Items]        
Total 779 675 1,449 1,243
Strong Entertainment [Member] | Service [Member]        
Disaggregation of Revenue [Line Items]        
Total 9,428 2,139 12,175 4,157
Strong Entertainment [Member] | Service [Member] | Field Maintenance And Monitoring Services [Member]        
Disaggregation of Revenue [Line Items]        
Total 1,912 1,649 3,803 3,267
Strong Entertainment [Member] | Service [Member] | Installation Services [Member]        
Disaggregation of Revenue [Line Items]        
Total 1,038 469 1,840 841
Strong Entertainment [Member] | Service [Member] | Strong Studios Services [Member]        
Disaggregation of Revenue [Line Items]        
Total 6,379 6,379
Strong Entertainment [Member] | Service [Member] | Other Service [Member]        
Disaggregation of Revenue [Line Items]        
Total 99 21 153 49
Other Segments [Member]        
Disaggregation of Revenue [Line Items]        
Total 183 321 341 626
Other Segments [Member] | Transferred at Point in Time [Member]        
Disaggregation of Revenue [Line Items]        
Total 34 14 48 17
Other Segments [Member] | Transferred over Time [Member]        
Disaggregation of Revenue [Line Items]        
Total 149 307 293 609
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 183 321 341 626
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] | Strong Studios Services [Member]        
Disaggregation of Revenue [Line Items]        
Total
Other Segments [Member] | Service [Member] | Other Service [Member]        
Disaggregation of Revenue [Line Items]        
Total $ 183 $ 321 $ 341 $ 626
v3.23.2
Revenue (Details Narrative)
$ in Millions
 6 Months Ended
Jun. 30, 2023
USD ($)
Revenue $ 0.4
During 2023 [Member]  
Unearned revenue $ 0.4
Minimum [Member]  
Amortized contract term 1 year
Maximum [Member]  
Amortized contract term 5 years
v3.23.2
Schedule of Net(Loss) Income Per Share (Details) - shares
shares in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Earnings Per Share [Abstract]        
Basic weighted average shares outstanding 19,470 19,273 19,293 19,133
Dilutive effect of stock options and certain non-vested restricted stock units
Diluted weighted average shares outstanding 19,470 19,273 19,293 19,133
Anti-dilutive employee stock-based awards excluded 370 197 436 179
v3.23.2
Net Loss Per Common Share (Details Narrative) - shares
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 370,000 197,000 436,000 179,000
Options to Purchase Shares of Common Stock [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount     742,000 349,500
v3.23.2
Schedule of Inventories (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Inventory Disclosure [Abstract]    
Raw materials and components $ 1,984 $ 1,826
Work in process 312 279
Finished goods 829 1,284
 Total $ 3,125 $ 3,389
v3.23.2
Schedule of Inventory Reserve (Details) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Inventory Disclosure [Abstract]    
Inventory reserve balance at December 31, 2022 $ 486  
Inventory write-offs during 2023 (16)  
Provision for inventory reserve during 2023 29 $ 6
Inventory reserve balance at June 30, 2023 $ 499  
v3.23.2
Inventories (Details Narrative) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Inventory Disclosure [Abstract]    
Inventory valuation reserves $ 499 $ 486
v3.23.2
Schedule of Other Current Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Prepaid expenses $ 1,346 $ 553
Receivable from Safehaven 2022, Inc. 1,625
Costs incurred in connection with Strong Global Entertainment initial public offering 1,920
Unbilled accounts receivable 541 337
Production tax rebate receivable 3,476
Receivable from Ravenwood Productions LLC 6,379
Other 267 436
Total $ 12,009 $ 4,871
v3.23.2
Summary of Investments (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Schedule of Equity Method Investments [Line Items]    
Equity holdings $ 30,240 $ 37,522
FG Financial Holdings, LLC [Member]    
Schedule of Equity Method Investments [Line Items]    
Equity method investments carrying amount $ 5,137 $ 7,832
Equity method ownership percentage 45.40% 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 $ 12,205 $ 16,792
Firefly Systems Inc [Member]    
Schedule of Equity Method Investments [Line Items]    
Equity securities, FV-NI, current $ 12,898 $ 12,898
v3.23.2
Equity Holdings (Details Narrative) - USD ($)
shares in Thousands, $ in Thousands
 1 Months Ended 3 Months Ended 6 Months Ended
Sep. 12, 2022
Apr. 30, 2021
Aug. 31, 2020
May 31, 2019
Jun. 30, 2023
Mar. 31, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Schedule of Equity Method Investments [Line Items]                  
Fair value method holding         $ 12,205   $ 12,205   $ 16,792
Loss on equity holdings             (2,694) $ (1,780)  
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%.              
Loss on equity holdings             4,500 $ 2,500  
Fair value of investment         12,200   $ 12,200    
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]                  
Common stock voting rights description             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.    
Fair value method holding         5,100   $ 5,100    
Gain loss on equity holdings         $ 2,000   $ 2,700    
FG Financial Holdings, LLC [Member] | Minimum [Member]                  
Schedule of Equity Method Investments [Line Items]                  
Combined equity ownership percentage         50.00%   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                
v3.23.2
Schedule of Property, Plant and Equipment (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Total properties, cost $ 17,892 $ 20,754
Less: accumulated depreciation (5,306) (8,105)
Property, plant and equipment, net 12,586 12,649
Land [Member]    
Property, Plant and Equipment [Line Items]    
Total properties, cost 2,342 2,341
Building Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total properties, cost 9,463 12,756
Machinery and Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total properties, cost 4,976 4,786
Office Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Total properties, cost 873 860
Construction in Progress [Member]    
Property, Plant and Equipment [Line Items]    
Total properties, cost $ 238 $ 11
v3.23.2
Schedule of Development Assets Acquired (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Business Combination, Separately Recognized Transactions [Line Items]    
Television series in development $ 7,691 $ 1,501
Films in development 222 193
Total film and programming rights 9,671 1,501
Accumulated amortization (1,980)
Total film and programming rights, net 7,691 1,501
Television Series In Development [Member]    
Business Combination, Separately Recognized Transactions [Line Items]    
Television series in development $ 9,449 $ 1,308
v3.23.2
Schedule of Film and Television Programming Rights (Details)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
USD ($)
Business Combination and Asset Acquisition [Abstract]  
Beginning balance $ 1,501
Expenditures on in-process projects 86
Acquisition of distribution rights 8,188
Amortization of film and programming rights (1,980)
Adjustment to fair value of warrant issued to Landmark (104)
Ending balance $ 7,691
v3.23.2
Schedule of Balance Sheets (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Cash $ 2,500  
Television programming rights 7,691 $ 1,501
Total assets 79,095 71,753
Debt 5,159  
Equity 39,070 46,698
Total liabilities and stockholders’ equity 79,095 $ 71,753
Safehaven 2022 [Member]    
Cash 164  
Television programming rights 8,142  
Other assets 3,505  
Total assets 11,811  
Accounts payable and accrued expenses 250  
Due to Strong Studios 1,710  
Debt 9,851  
Equity  
Total liabilities and stockholders’ equity $ 11,811  
v3.23.2
Film and Television Programming Rights, Net (Details Narrative) - USD ($)
$ in Thousands
 1 Months Ended 6 Months Ended
Mar. 31, 2022
Jun. 30, 2023
Jun. 30, 2022
Jun. 23, 2023
Dec. 31, 2022
Business Acquisition [Line Items]          
Gross receipts   $ (198) $ 2,000    
Intellectual property   12,586     $ 12,649
Ravenwood Productions LLC [Member]          
Business Acquisition [Line Items]          
Proceeds from Bank Debt   $ 6,400      
Subsidiary, ownership percentage, parent   75.00%      
Safehaven, Inc [Member]          
Business Acquisition [Line Items]          
Subsidiary, ownership percentage, parent   25.00%      
Safehaven, Inc [Member]          
Business Acquisition [Line Items]          
Gross receipts   $ 15,000      
Percentage of net proceeds intangible assets   5.00%      
Revenue   $ 6,400      
Intellectual property   5,400      
Amortization of intangile assets   2,000      
Accrued participation costs   $ 3,400      
Minimum [Member]          
Business Acquisition [Line Items]          
Management commission payment percentage   7.00%      
Maximum [Member]          
Business Acquisition [Line Items]          
Management commission payment percentage   20.00%      
Gross receipts percentage   32.50%      
Maximum [Member] | Safehaven, Inc [Member]          
Business Acquisition [Line Items]          
Gross receipts   $ 400      
Flagrant [Member]          
Business Acquisition [Line Items]          
Payments to Acquire Businesses, Gross $ 300        
Asset Acquisition, Consideration Transferred   2,500      
Shadows in Vineyard [Member]          
Business Acquisition [Line Items]          
Payments to Acquire Businesses, Gross 400        
Safehaven, Inc [Member]          
Business Acquisition [Line Items]          
Payments to Acquire Businesses, Gross 1,000        
Asset Acquisition, Consideration Transferred   $ 6,500      
Ownership percentage   100.00% 49.00%    
Safehaven, Inc [Member] | Minimum [Member]          
Business Acquisition [Line Items]          
Ownership percentage   49.00%   49.00%  
Safehaven, Inc [Member] | Maximum [Member]          
Business Acquisition [Line Items]          
Ownership percentage   100.00%   100.00%  
Unbounded Services, LLC [Member]          
Business Acquisition [Line Items]          
Ownership percentage     51.00%    
Strong Studios Inc [Member] | Landmark Studio Group LLC [Member]          
Business Acquisition [Line Items]          
Payments to Acquire Businesses, Gross 1,700        
Business Combination, Consideration Transferred $ 300        
Class of Warrant or Right, Number of Securities Called by Warrants or Rights 150,000        
v3.23.2
Summary of Changes in Carrying Amount of Goodwill (Details)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill, beginning balance $ 882
Foreign currency translation adjustment 20
Goodwill, ending balance $ 902
v3.23.2
Schedule of Accrued Expense (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Payables and Accruals [Abstract]    
Total $ 7,521 $ 5,167
v3.23.2
Schedule of Short term and Long term Debt (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Short-Term Debt [Line Items]    
Insurance note payable $ 14,927 $ 2,510
Total short-term debt 14,957 2,510
Less: deferred debt issuance costs, net (30)
Total short-term debt, net of issuance costs 14,927 2,510
Digital Ignition building loan 5,159  
Total long-term debt 5,159 5,267
Less: current portion (220) (216)
Less: deferred debt issuance costs, net (41) (47)
Long-term debt, net of current portion and deferred debt issuance costs, net 4,898 5,004
Tenant Improvement Loan [Member]    
Short-Term Debt [Line Items]    
Digital Ignition building loan 144 162
Digital Ignition Building Loan [Member]    
Short-Term Debt [Line Items]    
Digital Ignition building loan 5,015 5,105
Installment Loan [Member]    
Short-Term Debt [Line Items]    
Insurance note payable 2,283 2,289
Equipment Loan [Member]    
Short-Term Debt [Line Items]    
Insurance note payable 221
Revolving Credit Loan [Member]    
Short-Term Debt [Line Items]    
Insurance note payable 2,237
Safehaven Production Debt [Member]    
Short-Term Debt [Line Items]    
Insurance note payable 9,851
Insurance Note Payable [Member]    
Short-Term Debt [Line Items]    
Insurance note payable $ 586
v3.23.2
Schedule of Short term and Long term Debt (Details) (Parenthetical)
 1 Months Ended 6 Months Ended 12 Months Ended
Jan. 31, 2023
Jun. 30, 2023
Dec. 31, 2022
Short-Term Debt [Line Items]      
Loan term 5 years 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 5 years
v3.23.2
Schedule of Contractual Principal Payments of Long-term Debt (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
Remainder of 2023 $ 108  
2024 224  
2025 235  
2026 245  
2027 4,347  
Thereafter  
Total 5,159  
Tenant Improvement Loan [Member]    
Debt Instrument [Line Items]    
Remainder of 2023 18  
2024 37  
2025 40  
2026 42  
2027 7  
Thereafter  
Total 144 $ 162
Digital Ignition Building Loan [Member]    
Debt Instrument [Line Items]    
Remainder of 2023 90  
2024 187  
2025 195  
2026 203  
2027 4,340  
Thereafter  
Total $ 5,015 $ 5,105
v3.23.2
Debt (Details Narrative)
$ in Thousands, $ in Millions
 1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Feb. 01, 2022
USD ($)
Sep. 05, 2017
CAD ($)
Jan. 31, 2023
CAD ($)
Jun. 30, 2023
USD ($)
Jun. 30, 2022
USD ($)
Dec. 31, 2021
USD ($)
Jun. 30, 2023
USD ($)
Jun. 30, 2022
USD ($)
Dec. 31, 2022
USD ($)
Jun. 30, 2023
CAD ($)
May 31, 2023
CAD ($)
Debt Instrument [Line Items]                      
Debt instrument, term     5 years       20 years        
Short-Term Debt       $ 14,927     $ 14,927   $ 2,510    
Operating Lease, Cost       39 $ 46   73 $ 150      
Lease, Cost       105 63   201 $ 149      
Long term debt       $ 5,159     $ 5,159        
Installment Loan [Member]                      
Debt Instrument [Line Items]                      
Short-Term Debt, Percentage Bearing Variable Interest Rate       7.20%     7.20%     7.20%  
20-year Installment Loan [Member]                      
Debt Instrument [Line Items]                      
Short-Term Debt       $ 2,300     $ 2,300     $ 3.1  
Tenant Improvement Loan [Member]                      
Debt Instrument [Line Items]                      
Operating Lease, Cost         200 $ 200          
[custom:BuildoutInterestRate-0]       7.95%   50.00% 7.95%     7.95%  
Lease, Cost           $ 400          
Costs and Expenses, Related Party         $ 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                    
Insurance Debt [Member]                      
Debt Instrument [Line Items]                      
Fixed interest rate 9.00%                    
Demand Credit Agreement [Member] | Prime Rate [Member]                      
Debt Instrument [Line Items]                      
Debt instrument basis spread on variable rate   0.50% 1.00%                
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] | Prime Rate [Member]                      
Debt Instrument [Line Items]                      
Debt instrument basis spread on variable rate     0.50%                
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                  
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                  
Loan and Security Agreement [Member] | Safehaven, Inc [Member]                      
Debt Instrument [Line Items]                      
Production costs incurred       $ 9,900     $ 9,900        
Loan and Security Agreement [Member] | Ravenhood [Member]                      
Debt Instrument [Line Items]                      
Production costs incurred       $ 6,400     6,400        
Line of Credit [Member]                      
Debt Instrument [Line Items]                      
Operating Lease, Cost             $ 2,200        
Line of Credit [Member] | Demand Credit Agreement [Member]                      
Debt Instrument [Line Items]                      
Line of credit facility maximum borrowing capacity   $ 3.5 $ 5.0             $ 3.0 $ 3.4
v3.23.2
Schedule of Lease Costs and Other Lease Information (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Leases [Abstract]        
Amortization of right-of-use assets $ 37 $ 2 $ 70 $ 2
Interest on lease liabilities 15 1 27 1
Operating lease cost 39 46 73 150
Short-term lease cost 14 14 31 28
Sublease income (32)
Net lease cost 105 63 201 149
Operating cash flows from finance leases 15 1 27 1
Operating cash flows from operating leases 33 49 65 141
Financing cash flows from finance leases 38 2 66 2
Right-of-use assets obtained in exchange for new finance lease liabilities 310 68 310 68
Right-of-use assets obtained in exchange for new operating lease liabilities
Weighted-average remaining lease term - finance leases (years)   1 year 6 months   1 year 6 months
Weighted-average remaining lease term - operating leases (years)   3 years 2 months 12 days   3 years 2 months 12 days
Weighted-average discount rate finance leases   4.80%   4.80%
Weighted-average discount rate operating leases   3.80%   3.80%
v3.23.2
Schedule of Future Minimum Lease Payments (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Leases [Abstract]    
Operating lease Remainder of 2022 $ 66  
Finance lease Remainder of 2022 124  
Operating lease Remainder of 2022 101  
Finance lease Remainder of 2022 249  
Operating lease 2023 79  
Finance lease 2023 496  
Operating lease 2024 81  
Finance lease 2025 188  
Operating lease 2026 14  
Finance lease 2025 5  
Operating lease Thereafter  
Finance lease Thereafter  
Operating lease ,Total lease payments 341  
Finance lease ,Total lease payments 1,062  
Less: Amount representing interest (25)  
Less: Amount representing interest (151)  
Present value of lease payments 316  
Present value of lease payments 911  
Less: Current maturities (116) $ (116)
Less: Current maturities (179) (117)
Lease obligations, net of current portion 200 257
Lease obligations, net of current portion $ 732 $ 550
v3.23.2
Leases (Details Narrative)
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
Operating and finance lease, expire term expiring through 2027
v3.23.2
Income and Other Taxes (Details Narrative)
 6 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Effective tax rate 18.90%
v3.23.2
Schedule of Fair Value Valuation Model (Details)
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Expected dividend yield at date of grant 0.00%
Risk-free interest rate 3.52%
Expected stock price volatility 68.20%
Expected life of options (in years) 5 years
v3.23.2
Summary of Stock Option Activities (Details) - USD ($)
$ / shares in Units, $ in Thousands
 6 Months Ended 12 Months Ended
Jun. 30, 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 4 years 4 months 24 days 5 years 7 months 6 days
Aggregate intrinsic value, beginning balance $ 127  
Number of options, granted 107,500  
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Granted $ 1.96  
Number of options, exercised  
Number of options, forfeited (5,000)  
Weighted average exercise price per share, forfeited $ 1.96  
Number of options, forfeited  
Number of options, outstanding ending balance 742,000 639,500
Weighted average exercise price per share, outstanding ending balance $ 3.21 $ 3.72
Aggregate intrinsic value, ending balance $ 35 $ 127
Number of options, exercisable 530,500  
Weighted average exercise price per share, exercisable $ 4.06  
Weighted average remaining contractual term (years), exercisable 4 years 8 months 12 days  
Aggregate intrinsic value, exercisable $ 14  
v3.23.2
Summary of Restricted Stock Activity (Details) - Restricted Stock Units (RSUs) [Member]
 6 Months Ended
Jun. 30, 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 390,000
Weighted average grant date fair value, granted | $ / shares $ 1.96
Number of restricted stock, shares vested
Number of restricted stock, shares granted
Number of restricted stock, non-vested ending balance 596,934
Weighted average grant date fair value, non-vested ending balance | $ / shares $ 2.06
v3.23.2
Stock Compensation (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Dec. 17, 2019
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Share based compensation       $ 1,037 $ 369
Common stock granted       107,500  
weighted average grant per share       $ 1.96  
Equity Option [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
weighted average grant per share       $ 1.16  
Stock option non vested   211,500   211,500  
Unrecognized compensation cost   $ 200   $ 200  
Compensation cost expected to be recognized, weighted average period       2 years 2 months 12 days  
Restricted Stock Units (RSUs) [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Compensation cost expected to be recognized, weighted average period       2 years 8 months 12 days  
Unrecognized for restricted stock, value   $ 700   $ 700  
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   1.8   1.8  
Strong Global Entertainment [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Share based compensation       $ 700  
Selling, General and Administrative Expenses [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Share based compensation expense   $ 900 $ 200 $ 1,000 $ 400
v3.23.2
Commitments, Contingencies and Concentrations (Details Narrative)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
USD ($)
Product Information [Line Items]  
Loss contingency $ 200
Payments to litigation $ 53
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | TopTen Customers [Member]  
Product Information [Line Items]  
Concentration risk, percentage 40.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | TopTen Customers [Member]  
Product Information [Line Items]  
Concentration risk, percentage 62.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | One Customer [Member]  
Product Information [Line Items]  
Concentration risk, percentage 10.00%
v3.23.2
Schedule of Segment Reporting Information by Segment (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Segment Reporting Information [Line Items]        
Total net revenues $ 18,022 $ 9,143 $ 28,131 $ 19,169
Total gross profit 7,447 2,420 9,925 4,932
Total segment operating income 227 144 633 620
Unallocated administrative expenses (995) (1,029) (2,180) (2,267)
Loss from operations (768) (885) (1,547) (1,647)
Other expense, net (2,225) (4,056) (5,085) (2,925)
Loss before income taxes and equity method holding loss (2,993) (4,941) (6,632) (4,572)
Strong Entertainment [Member]        
Segment Reporting Information [Line Items]        
Total net revenues 17,839 8,822 27,790 18,543
Total gross profit 7,264 2,098 9,585 4,304
Total segment operating income 349 180 924 790
Other Segments [Member]        
Segment Reporting Information [Line Items]        
Total net revenues 183 321 341 626
Total gross profit 183 322 340 628
Total segment operating income $ (122) $ (36) $ (291) $ (170)
v3.23.2
Reconciliation of Assets from Segment to Consolidated (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Segment Reporting Information [Line Items]    
Total $ 79,095 $ 71,753
Strong Entertainment [Member]    
Segment Reporting Information [Line Items]    
Total 39,843 35,392
Corporate Assets [Member]    
Segment Reporting Information [Line Items]    
Total $ 39,252 $ 36,361
v3.23.2
Schedule of Segment Reporting Information by Geographic Area (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total $ 18,022 $ 9,143 $ 28,131 $ 19,169
UNITED STATES        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total 17,072 7,840 25,808 16,623
CANADA        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total 108 466 420 873
CHINA        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total 44 22 279
MEXICO        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total 64 7 64 7
Latin America [Member]        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total 16 74 273 220
Europe [Member]        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total 171 169 566 265
Asia Excluding China [Member]        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total 433 279 586 432
Other Countries [Member]        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Total $ 158 $ 264 $ 392 $ 470
v3.23.2
Summary of Identifiable Assets by Geographical Area (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Revenues from External Customers and Long-Lived Assets [Line Items]    
Total $ 79,095 $ 71,753
UNITED STATES    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Total 51,187 51,423
CANADA    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Total $ 27,908 $ 20,330
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