0001493152-17-008654.txt : 20170808 0001493152-17-008654.hdr.sgml : 20170808 20170808161706 ACCESSION NUMBER: 0001493152-17-008654 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 80 CONFORMED PERIOD OF REPORT: 20170630 FILED AS OF DATE: 20170808 DATE AS OF CHANGE: 20170808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALLANTYNE STRONG, INC. CENTRAL INDEX KEY: 0000946454 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 470587703 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13906 FILM NUMBER: 171014969 BUSINESS ADDRESS: STREET 1: 4350 MCKINLEY ST CITY: OMAHA STATE: NE ZIP: 68112 BUSINESS PHONE: 4024534444 MAIL ADDRESS: STREET 1: 4350 MCKINLEY ST CITY: OMAHA STATE: NE ZIP: 68112 FORMER COMPANY: FORMER CONFORMED NAME: BALLANTYNE OF OMAHA INC DATE OF NAME CHANGE: 19950608 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2017

 

OR

 

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

 

For the transition period from                  to                  

 

 

 

Commission File Number: 1-13906

 

BALLANTYNE STRONG, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

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

 

11422 Miracle Hills Drive, Suite 300, Omaha, Nebraska   68154
(Address of Principal Executive Offices)   (Zip Code)

 

(402) 453-4444

(Registrant’s telephone number, including area code:)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 (check one):

 

Large accelerated filer [  ] Accelerated filer [X]
Non-accelerated filer [  ]  (Do not check if a smaller reporting company)    
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 [X]

 

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

 

Class   Outstanding as of August 4, 2017
Common Stock, $.01, par value   14,416,040 shares

 

 

 

   
 

 

TABLE OF CONTENTS

 

    Page No.
     
  PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
     
  Condensed Consolidated Balance Sheets, June 30, 2017 and December 31, 2016 3
     
  Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and 2016 4
     
 

Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2017 and 2016

5
     
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 6
     
  Notes to the Condensed Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 26
     
Item 4. Controls and Procedures 26
     
  PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 27
     
Item 1A. Risk Factors 27
     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

     
Item 6. Exhibits 28
     
  Signatures 30

 

 2 
 

 

PART I. Financial Information

Item 1. Financial Statements

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par values)

 

   June 30, 2017   December 31, 2016 
   (Unaudited)     
Assets          
Current assets:          
Cash and cash equivalents  $2,800   $7,596 
Accounts receivable (net of allowance for doubtful accounts of $1,482 and $1,097, respectively)   16,943    16,316 
Inventories:          
Finished goods, net   1,261    1,341 
Work in process   418    247 
Raw materials and components, net   5,285    4,975 
Total inventories, net   6,964    6,563 
Recoverable income taxes   1,041    672 
Deposit on equipment to be leased   2,500     
Other current assets   1,996    1,746 
Current assets held for sale       188 
Total current assets   32,244    33,081 
Property, plant and equipment (net of accumulated depreciation of $7,968 and $7,066, respectively)   11,187    11,187 
Equity method investments   18,134    13,098 
Intangible assets, net   3,641    2,357 
Goodwill   920    889 
Notes receivable   1,669    1,669 
Deferred income taxes       84 
Other assets   165    74 
Total assets  $67,960   $62,439 
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable  $7,062   $5,175 
Accrued expenses   3,793    4,097 
Short-term debt   2,500     
Current portion of long-term debt   63     
Customer deposits/deferred revenue   3,201    4,211 
Income tax payable   198    108 
Current liabilities held for sale       57 
Total current liabilities   16,817    13,648 
Long-term debt, net of current portion   1,899     
Deferred revenue   1,226    1,226 
Deferred income taxes   2,704    1,841 
Other accrued expenses, net of current portion   491    570 
Total liabilities   23,137    17,285 
Stockholders’ equity:          
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding        
Common stock, par value $.01 per share; authorized 25,000 shares; issued 17,210 and 17,047 shares at June 30, 2017 and December 31, 2016, respectively; 14,416 and 14,268 shares outstanding at June 30, 2017 and December 31, 2016, respectively   169    169 
Additional paid-in capital   40,121    39,758 
Accumulated other comprehensive income:          
Foreign currency translation   (4,891)   (5,709)
Postretirement benefit obligations   97    97 
Unrealized gain on available-for-sale securities of equity method investment   315    136 
Retained earnings   27,598    29,187 
    63,409    63,638 
Less 2,794 and 2,779 of common shares in treasury, at cost at June 30, 2017 and December 31, 2016, respectively   (18,586)   (18,484)
Total stockholders’ equity   44,823    45,154 
Total liabilities and stockholders’ equity  $67,960   $62,439 

 

See accompanying notes to condensed consolidated financial statements.

 

 3 
 

  

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2017 and 2016

(In thousands, except per share data)

(Unaudited)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2017   2016   2017   2016 
Net product sales  $12,917   $14,862   $25,493   $26,597 
Net service revenues   6,483    5,696    11,832    11,075 
Total net revenues   19,400    20,558    37,325    37,672 
Cost of products sold   10,429    11,280    20,817    20,038 
Cost of services   3,697    3,129    6,795    6,249 
Total cost of revenues   14,126    14,409    27,612    26,287 
Gross profit   5,274    6,149    9,713    11,385 
Selling and administrative expenses:                    
Selling   1,419    1,149    2,909    2,174 
Administrative   4,688    3,037    8,234    6,135 
Total selling and administrative expenses   6,107    4,186    11,143    8,309 
(Loss) income from operations   (833)   1,963    (1,430)   3,076 
Other (expense) income:                    
Interest income       27    22    40 
Interest expense   (28)   (27)   (38)   (40)
Foreign currency transaction loss   (107)   (180)   (104)   (1,005)
Change in value of marketable securities       116        (366)
Excess distribution from joint venture       502        502 
Other income, net   7    6    10    43 
Total other (expense) income   (128)   444    (110)   (826)
(Loss) earnings before income taxes and equity method investment (loss) income   (961)   2,407    (1,540)   2,250 
Income tax expense   776    653    2,269    1,337 
Equity method investment (loss) income   (212)       2,269    41 
Net (loss) earnings from continuing operations   (1,949)   1,754    (1,540)   954 
Net loss from discontinued operations, net of tax   (26)   (921)   (49)   (734)
Net (loss) earnings  $(1,975)  $833   $(1,589)  $220 
Net (loss) earnings per share - basic                    
Net (loss) earnings from continuing operations  $(0.14)  $0.12   $(0.11)  $0.07 
Net loss from discontinued operations   (0.00)   (0.06)   (0.00)   (0.05)
Net (loss) earnings  $(0.14)  $0.06   $(0.11)  $0.02 
Net (loss) earnings per share - diluted                    
Net (loss) earnings from continuing operations  $(0.14)  $0.12   $(0.11)  $0.07 
Net loss from discontinued operations   (0.00)   (0.06)   (0.00)   (0.05)
Net (loss) earnings  $(0.14)  $0.06   $(0.11)  $0.02 

 

See accompanying notes to condensed consolidated financial statements.

 

 4 
 

  

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three and Six Months Ended June 30, 2017 and 2016

(In thousands)

(Unaudited)

 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2017   2016   2017   2016 
Net (loss) earnings  $(1,975)  $833   $(1,589)  $220 
Currency translation adjustment:                    
Unrealized net change arising during period   709    33    818    1,625 
Unrealized gain on available-for-sale securities of equity method investments, net of tax   181    21    179    21 
Total other comprehensive income   890    54    997    1,646 
Comprehensive (loss) income  $(1,085)  $887   $(592)  $1,866 

 

See accompanying notes to condensed consolidated financial statements.

 

 5 
 

 

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2017 and 2016

(In thousands)

(Unaudited)

 

   Six Months Ended June 30, 
   2017   2016 
Cash flows from operating activities:          
Net (loss) earnings  $(1,589)  $220 
Net loss from discontinued operations, net of tax   49    734 
Net (loss) earnings from continuing operations   (1,540)   954 
Adjustments to reconcile net (loss) earnings from continuing operations to net cash used in operating activities:          
Provision for doubtful accounts   418    (44)
Provision for obsolete inventory   (175)   47 
Provision for warranty   171    171 
Depreciation and amortization   1,004    1,127 
Equity method investment income   (2,269)   (41)
Unrealized loss on marketable securities       366 
Deferred income taxes   913    (146)
Stock-based compensation expense   330    244 
Changes in operating assets and liabilities:          
Accounts receivable   (935)   (2,684)
Inventories   (170)   (522)
Other current assets   (247)   (321)
Accounts payable   2,497    1,361 
Accrued expenses   (438)   358 
Customer deposits/deferred revenue   (1,023)   (570)
Current income taxes   (247)   (1,620)
Other assets   (474)   (124)
Net cash flows from operating activities – continuing operations   (2,185)   (1,444)
Net cash flows from operating activities – discontinued operations   (146)   (2,724)
Net cash used in operating activities   (2,331)   (4,168)
           
Cash flows from investing activities:          
Purchase of equity securities   (2,525)   (3,764)
Dividends received from investee in excess of cumulative earnings   103    103 
Capital expenditures   (2,103)   (653)
Proceeds from sale of business   60     
Net cash used in investing activities   (4,465)   (4,314)
           
Cash flows from financing activities:          
Proceeds from issuance of long-term debt   2,000     
Payment of debt issuance costs   (36)    
Principal payments on long-term debt   (2)    
Purchase of treasury stock   (102)   (133)
Proceeds from exercise of stock options   33    53 
Payments on capital lease obligations   (134)   (159)
Excess tax benefits from share-based arrangements       6 
Net cash provided by (used in) financing activities – continuing operations   1,759    (233)
Effect of exchange rate changes on cash and cash equivalents –continuing operations   66    916 
Effect of exchange rate changes on cash and cash equivalents – discontinued operations       (69)
Net decrease in cash and cash equivalents   (4,971)   (7,868)
Discontinued operations cash activity included above:          
Add: Cash balance included in assets held for sale at beginning of period   175    4,208 
Less: Cash balance included in assets held for sale at end of period       (1,415)
Cash and cash equivalents at beginning of period   7,596    17,862 
Cash and cash equivalents at end of period  $2,800   $12,787 
Supplemental disclosure of non-cash investing and financing activities:          
Issuance of short-term progress payment note payable (See Note 9)  $2,500   $ 

 

See accompanying notes to condensed consolidated financial statements.

 

 6 
 

 

Ballantyne Strong, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

1. Nature of Operations

 

Ballantyne Strong, Inc. (“Ballantyne” or the “Company”), a Delaware corporation, is a holding company with diverse business activities focused on serving the cinema, retail, financial, and government markets. The Company, and its wholly owned subsidiaries Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc., Convergent Corporation, and Convergent Media Systems Corporation (“Convergent” or “CMS”), design, integrate, and install technology solutions for a broad range of applications; develop and deliver out-of-home messaging, advertising and communications; manufacture projection screens; and provide managed services including monitoring of networked equipment to our customers. On November 4, 2016, Strong Westrex (Beijing) Technology Inc. (“SWBTI”), a subsidiary of Strong Westrex, Inc. (“SWI”), was sold, and on May 17, 2017, SWI was sold (see Note 2).

 

The Company’s products are distributed to the retail, financial, government and cinema markets throughout the world.

 

2. Discontinued Operations

 

On June 23, 2016, the Company’s Board of Directors approved a plan to pursue a sale of the operations conducted by its subsidiaries SWBTI and SWI (the “China Operations”) which have historically been included in the Cinema segment. The purpose of the plan was to focus the efforts of the Company on the business units that have opportunities for higher return on invested capital. We reflected the results of the China Operations as discontinued operations for all periods presented. The assets and liabilities of the China Operations have been reclassified as assets and liabilities held for sale in the condensed consolidated balance sheets for all periods presented.

 

On November 4, 2016, the Company sold SWBTI to GABO Filter, Inc. for total proceeds of $0.4 million. On May 17, 2017, SWI was sold for total proceeds of $0.1 million. The Company recorded an insignificant gain on the sale of SWI.

 

The summary comparative financial results of discontinued operations were as follows (in thousands):

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2017   2016   2017   2016 
Total net revenues  $12   $2,435   $24   $5,857 
Total cost of revenues   22    2,899    48    5,791 
Total selling and administrative expenses   43    346    53    706 
Loss from operations of discontinued operations   (53)   (810)   (77)   (640)
Loss before income taxes   (26)   (807)   (49)   (620)
Income tax expense       (114)       (114)
Net loss from discontinued operations, net of tax  $(26)  $(921)  $(49)  $(734)

 

Depreciation and amortization related to discontinued operations was immaterial for the three and six month periods ended June 30, 2017 and 2016. There were no capital expenditures related to discontinued operations for the six months ended June 30, 2017 and 2016.

 

3. Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

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

 

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K/A. 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/A for the fiscal year ended December 31, 2016.

 

 7 
 

 

The condensed consolidated balance sheet as of December 31, 2016 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. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

 

During the second quarter of 2017, the Company began classifying software in development as an intangible asset rather than property, plant and equipment, to be consistent with its classification of software assets in service. Accordingly, approximately $0.5 million of software in development at December 31, 2016 was reclassified to intangible assets from property, plant and equipment on the condensed consolidated balance sheet to conform to the current period presentation. This reclassification had no effect on the Company’s reported results of operations, comprehensive income, or cash flows.

 

Use of Management Estimates

 

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. 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 condensed 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.

 

Marketable Securities

 

For the six months ended June 30, 2016, the Company’s marketable securities were comprised of investments in the common stock of a publicly traded company. Changes in fair value, based on the market price of the investee’s stock, were recognized in other income in the condensed consolidated statement of operations. The Company used the fair value option to account for the investment to more appropriately recognize the value of this investment in our condensed consolidated financial statements since the Company did not exert significant influence over the investment, in which case the equity method of accounting would have been applied. None of the Company’s investments were classified as marketable securities or accounted for using the fair value option during the six months ended June 30, 2017.

 

Equity Method Investments

 

We apply the equity method of accounting to investments when we have significant influence, but not controlling interest in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net (loss) income resulting from these investments is reported under the line item captioned “equity method investment (loss) income” in our condensed consolidated statements of operations. The carrying value of our equity method investments is reported in equity method investments in the condensed consolidated balance sheets. The Company’s equity method investments are reported initially at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. The Company did not record any impairments related to its investments during the three and six month periods ended June 30, 2017 or 2016. Note 5 contains additional information on our equity method investments, which are held by the Company’s Cinema segment.

 

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

 

 8 
 

 

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 fall, as of June 30, 2017 and December 31, 2016.

 

Fair values measured on a recurring basis at June 30, 2017 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Cash and cash equivalents  $2,800   $   $   $2,800 
Notes receivable           1,669    1,669 
Total  $2,800   $   $1,669   $4,469 

 

Fair values measured on a recurring basis at December 31, 2016 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Cash and cash equivalents  $7,596   $   $   $7,596 
Notes receivable           1,669    1,669 
Total  $7,596   $   $1,669   $9,265 

 

Quantitative information about the Company’s level 3 fair value measurements at June 30, 2017 is set forth below:

 

  

Fair Value at
6/30/2017

(in thousands)

   Valuation Technique  Unobservable input  Range  
Notes receivable  $1,669   Discounted cash flow  Probability of default   53 %
           Discount rate   18 %

 

The notes receivable are recorded at estimated fair value at June 30, 2017.

 

The significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are discount rate and probability of default. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement. There were no changes in the fair value of the Company’s notes receivable recorded during the three and six months ended June 30, 2017 or 2016.

 

The Company’s short-term and long-term debt are recorded at historical cost. As of June 30, 2017, the Company’s long-term debt, including current maturities, had a carrying value of $2.0 million. Based on discounted cash flows using current quoted interest rates (Level 2 of the fair value hierarchy), the estimated fair value at June 30, 2017 was $2.0 million.

 

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses, and short-term debt, reported in the condensed consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). During the six months ended June 30, 2017, the Company did not have any significant non-recurring measurements of non-financial assets or liabilities.

 

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The guidance is effective for the Company beginning January 1, 2018. An entity may adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the ASU. The Company has obtained an understanding of ASU 2014-09 and has begun to analyze the impact of the new standard on its financial results. The Company has completed a high-level assessment of the attributes within its contracts for its major products and services, and has started assessing potential impacts to its internal processes, control environment, and disclosures. The Company expects to adopt this ASU through a cumulative effect adjustment as of January 1, 2018. While the Company has not yet quantified the impact that the adoption of ASU 2014-09 will have on the consolidated financial statements, the Company is continuing to evaluate the impact of the new standard on our financial results and other possible impacts. The Company will continue to provide enhanced disclosures as we continue our assessment.

 

 9 
 

 

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 requires an entity utilizing the first in-first out inventory method to change their measurement principle for inventory changes from the lower of cost or market to lower of cost or net realizable value. The Company prospectively adopted the guidance effective January 1, 2017. The adoption of ASU 2015-11 did not have a material effect on the Company’s consolidated financial statements.

 

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU 2016-01 requires equity investments that do not result in consolidation and are not accounted under the equity method to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets; and modifies certain fair value disclosure requirements. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is not permitted. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. ASU 2016-02 requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases with a term greater than twelve months, on its balance sheet. This ASU is effective in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is evaluating the requirements of ASU 2016-02 and its potential impact on the Company’s financial statements. The Company has leases primarily for property and equipment and is in the process of identifying and evaluating these leases for purposes of ASU 2016-02. For each of these leases, the term will be evaluated, including extension and renewal options as well as the lease payments. While the Company has not yet quantified the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements, the Company expects to record assets and liabilities on its balance sheet upon adoption of this standard, which may be material. The Company will continue to provide enhanced disclosures as it continues its assessment.

 

In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 simplifies accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, and certain classifications on the statement of cash flows. The Company adopted the guidance effective January 1, 2017 on a prospective basis. Additionally, as required by ASU 2016-09, when calculating diluted earnings per share, excess tax benefits were excluded from the calculation of assumed proceeds since such amounts are recognized in the income statement. The Company applied the cash flow presentation requirements prospectively, and the 2016 statement of cash flows was not adjusted. ASU 2016-09 also allows an entity to elect as an accounting policy either to estimate the total number of awards for which the requisite service period will not be rendered or to account for forfeitures for service-based awards as they occur. The Company has elected to account for forfeitures as they occur.

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. The Company believes its adoption will not significantly impact the Company’s results of operations and financial position.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which eliminates the diversity in practice related to eight cash flow classification issues. The Company adopted this ASU in the first quarter of 2017 on a prospective basis. Adoption affected the classification of dividends received from equity method investees on the statement of cash flows, but did not have any other impact.

 

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The new guidance eliminates Step 2 of the goodwill impairment testing which requires the fair value of individual assets and liabilities of a reporting unit to be determined when measuring goodwill impairment. The new guidance may result in different amounts of impairment that could be recognized compared to existing guidance. In addition, failing step 1 of the impairment test, where the carrying value of a reporting unit is compared to its fair value, may not result in impairment under existing guidance. However, under the revised guidance, failing step 1 will always result in a goodwill impairment. ASU 2017-04 is to be applied prospectively for goodwill impairment testing performed in years beginning after December 15, 2019. The Company does not believe the adoption will significantly impact the Company’s results of operations or financial position.

 

 10 
 

 

4. (Loss) Earnings Per Common Share

 

Basic (loss) earnings per share has been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted (loss) earnings per share has been computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to potential common shares from dilutive stock options and certain non-vested shares of restricted stock. The following table provides the reconciliation between average shares used to compute basic and diluted (loss) earnings per share:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2017   2016   2017   2016 
Weighted average shares outstanding (in thousands):                    
Basic weighted average shares outstanding   14,263    14,213    14,264    14,208 
Dilutive effect of stock options and certain non-vested shares of restricted stock      80        87 
Diluted weighted average shares outstanding  14,263   14,293   14,264   14,295 

 

For each of the three and six month periods ended June 30, 2017, options to purchase 445,000 shares of common stock were outstanding but were not included in the computation of diluted loss per share as the option’s exercise price was greater than the average market price of the common shares for the each period. An additional 156,606 and 176,479 common stock equivalents related to options and restricted stock awards were excluded for the three and six months ended June 30, 2017, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share. For the three and six month periods ended June 30, 2016, options to purchase 350,000 and 430,000 shares of common stock, respectively, were outstanding but were not included in the computation of diluted earnings per share as the option’s exercise price was greater than the average market price of the common shares for the respective periods. An additional 79,167 and 87,387 common stock equivalents related to options and restricted stock awards were excluded from the calculation of diluted net loss per share from discontinued operations for the three and six months ended June 30, 2016, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share.

 

5. Equity Method Investments

 

The following summarizes our equity method investments:

 

   June 30, 2017   December 31, 2016 
   (dollars in thousands) 
Entity   Carrying
Amount
    Economic
Interest
    Carrying
Amount
    Economic
Interest
 
RELM Wireless Corporation  $4,328    8.3%  $4,382    8.3%
Itasca Capital, Ltd.   5,870    32.3%   3,368    32.3%
1347 Property Insurance Holdings, Inc.   7,936    17.4%   5,348    12.1%
Total  $18,134        $13,098      

 

The following summarizes the (loss) income of equity method investees reflected in the Statement of Operations:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2017   2016   2017   2016 
Entity  (in thousands) 
RELM Wireless Corporation  $(105)  $   $(97)  $41 
Itasca Capital, Ltd.   (150)       2,311     
1347 Property Insurance Holdings, Inc.   43        55     
Total (loss) income  $(212)  $   $2,269   $41 

 

 11 
 

 

RELM Wireless Corporation (“RELM”) is a publicly traded company that designs, manufactures, and markets two-way land mobile radios, repeaters, base stations, and related components and subsystems. The Company’s Chief Executive Officer is chairman of the board of directors of RELM, and controls entities that, when combined with the Company’s ownership in RELM, own greater than 20% of RELM, providing the Company with significant influence over RELM, but not controlling interest. The Company received dividends of $0.1 million and $0 for the three month periods ended June 30, 2017 and 2016, respectively. The Company received dividends of $0.2 million and $0 for the six month periods ended June 30, 2017 and 2016, respectively. Based on quoted market prices, the market value of the Company’s ownership in RELM was $4.3 million at June 30, 2017.

 

Itasca Capital, Ltd. (“Itasca”) is a publicly traded Canadian company that is an investment vehicle seeking transformative strategic investments. The Company’s Chief Executive Officer is a member of the board of directors of Itasca. This board seat, combined with the Company’s 32.3% ownership of Itasca, provide the Company with significant influence over Itasca, but not controlling interest. The Company did not receive dividends from Itasca during the three and six month periods ended June 30, 2017 or 2016. Based on quoted market prices, the market value of the Company’s ownership in Itasca was $3.8 million at June 30, 2017.

 

As of December 31, 2016, the Company owned 12.1% of 1347 Property Insurance Holdings, Inc. (“PIH”) and purchased shares increasing its ownership to 17.4% during the six months ended June 30, 2017 for an additional $2.5 million. PIH is a publicly traded company that provides property and casualty insurance in the States of Louisiana, Texas, and Florida. The Company’s Chief Executive Officer was named to the board of directors of PIH in December 2016. This board seat and the Chief Executive Officer’s control of other entities that own shares of PIH, combined with the Company’s 17.4% ownership of PIH, provide the Company with significant influence over PIH, but not controlling interest. The Company did not receive dividends from PIH during the three and six month periods ended June 30, 2017 or 2016. Based on quoted market prices, the market value of the Company’s ownership in PIH was $8.3 million at June 30, 2017.

 

As of June 30, 2017, our retained earnings included undistributed earnings from our equity method investees of $1.9 million.

 

The summarized financial information presented below reflects the financial information of the Company’s significant equity method investee, Itasca, for the six months ended March 31, 2017, consistent with the Company’s recognition of the results of its equity method investments on a one-quarter lag. The summarized financial information is presented only for the periods when the Company owned its investment.

 

For the six months ended March 31,  2017 
   (in thousands) 
Revenue  $ 
Gross profit  $ 
Operating loss from continuing operations  $(114)
Net income  $7,207(1)

 

(1) Net income primarily related to unrealized gains on investments.  

 

6. Intangible Assets

 

Intangible assets consisted of the following at June 30, 2017:

 

  

Useful

life

   Gross   Accumulated
amortization
   Net 
   (Years)   (in thousands) 
Intangible assets not yet subject to amortization:                    
Software in development       $1,273   $   $1,273 
Intangible assets subject to amortization:                    
Software in service   5    2,496    (285)   2,211 
Product formulation   10    470    (313)   157 
Total       $4,239   $(598)  $3,641 

 

 12 
 

 

Intangible assets consisted of the following at December 31, 2016:

 

  

Useful

life

   Gross   Accumulated
amortization
   Net 
   (Years)   (in thousands) 
Intangible assets not yet subject to amortization:                    
Software in development       $508   $   $508 
Intangible assets subject to amortization:                    
Software in service   5    1,764    (93)   1,671 
Product formulation   10    454    (276)   178 
Total      $2,726   $(369)  $2,357 

 

Amortization expense relating to intangible assets was $0.2 million and insignificant, respectively, for the six months ended June 30, 2017 and 2016.

 

The following table shows the Company’s estimated future amortization expense related to intangible assets currently subject to amortization for the next five years.

 

   Amount 
    (in thousands) 
Remainder 2017  $286 
2018   561 
2019   550 
2020   541 
2021   405 
Thereafter   25 
Total  $2,368 

 

7. Goodwill

 

The following represents a summary of changes in the Company’s carrying amount of goodwill for the six months ended June 30, 2017 (in thousands):

 

Balance as of December 31, 2016  $889 
Foreign currency translation   31 
Balance as of June 30, 2017  $920 

 

8. Warranty Reserves

 

In most instances, the Company’s digital projection products are covered by the manufacturing firm’s original warranty; however, for certain customers the Company may grant warranties in excess of the manufacturer’s warranty for digital products. In addition, the Company provides warranty coverage on screens it manufactures. The Company accrues for these costs at the time of sale. The following table summarizes warranty activity for the three and six months ended June 30, 2017 and 2016:

 

   Three Months Ended
June 30,
   Six Months Ended
June 30,
 
   2017   2016   2017   2016 
   (in thousands) 
Warranty accrual at beginning of period  $462   $314   $645   $310 
Charged to expense   128    191    175    348 
Claims paid, net of recoveries   (142)   (123)   (373)   (281)
Foreign currency adjustment   9    (2)   10    3 
Warranty accrual at end of period  $457   $380   $457   $380 

 

 13 
 

 

9. Debt

 

Long-term debt

 

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

 

   June 30, 2017   December 31, 2016 
$2 million term loan  $1,998   $ 
Less: current portion   (63)    
Less: unamortized debt issuance costs   (37)    
Long-term debt  $1,899   $ 

 

On April 27, 2017, the Company entered into a debt agreement with a bank consisting of 1) a $2 million five-year term loan secured by a first lien deed of trust on the Company’s Alpharetta, GA facility, bearing interest at a fixed rate of 4.5% and payable in equal monthly installments of principal and interest calculated based on a 20-year amortization schedule with a final balloon payment of approximately $1.7 million due on May 10, 2022, and 2) a line of credit of up to $1 million secured by a second lien deed of trust on the Company’s Alpharetta, GA facility, bearing interest at the Prime Rate published in the Wall Street Journal plus 0.25% and with a term ending May 10, 2018. The debt agreement requires the Company to maintain a ratio of total liabilities to tangible net worth not in excess of 3:1 and maintain minimum liquidity of $2 million. The Company was in compliance with its debt covenants as of June 30, 2017. There were no borrowings outstanding on the line of credit as of June 30, 2017. The Company’s Chairman and Chief Executive Officer is also a member of the bank’s board of directors.

 

Scheduled long-term debt repayments are as follows (in thousands):

 

 Remainder of 2017   $31 
 2018    64 
 2019    68 
 2020    70 
 2021    74 
 Thereafter    1,691 
 Total   $1,998 

 

Short-term Debt

 

Short-term debt at June 30, 2017 consists of a $2.5 million progress payment note to facilitate the lessor’s purchase of equipment to be leased by the Company. The total purchase price for the equipment is expected to be approximately $5.6 million. The lessor made a progress payment of $2.5 million to the seller of the equipment on June 26, 2017, which represents the principal amount under the note and was recorded as a deposit on equipment to be leased on the condensed consolidated balance sheet. The note bears interest at a rate of 3.25% and will be considered repaid when the lessor pays the remaining balance of the purchase price to the seller of the equipment and the Company executes a lease for the equipment under a master lease agreement. Any outstanding principal balance on the note not considered repaid on or before August 31, 2017 will become due and payable on demand.

 

10. Income Taxes

 

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the available objective evidence, including recent updates to the taxing jurisdictions generating income, the Company concluded that a valuation allowance should be recorded against all of the Company’s U.S. tax jurisdiction deferred tax assets as of June 30, 2017 and December 31, 2016.

 

The Company has completed the examination for Federal purposes for the 2011 fiscal year with no changes. The Company is subject to examination for Federal purposes for fiscal years 2013, 2014, 2015, and 2016. In most cases, the Company is subject to examinations by state or local jurisdictions based on the particular jurisdiction’s statute of limitations.

 

 14 
 

 

11. Stock Compensation

 

The Company recognizes compensation expense for all stock-based payment awards made to employees and directors based on their estimated grant date fair values. Stock-based compensation expense included in selling and administrative expenses approximated $0.2 million and $0.1 million for the three months ended June 30, 2017 and 2016, respectively, and $0.3 million and $0.2 million, respectively, for the six months ended June 30, 2017 and 2016, respectively.

 

Equity Compensation Plans

 

The Company’s 2010 Long-Term Incentive Plan (“2010 Plan”) provided 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, and performance units. Vesting terms varied with each grant and could be subject to vesting upon a “change in control” of the Company.

 

The Ballantyne Strong, Inc. 2014 Non-Employee Directors’ Restricted Stock Plan (the “2014 Non-Employee Plan”) provided for the award of restricted shares to outside directors. Shares issued under the 2014 Non-Employee Plan vested the day preceding the Company’s Annual Meeting of Stockholders in the year following issuance. The 2010 Plan and the 2014 Non-Employee Plan were replaced during the second quarter of 2017 by the 2017 Omnibus Equity Compensation Plan (“2017 Plan”), and therefore, no additional awards will be granted under the 2010 Plan or the 2014 Non-Employee Plan.

 

The 2017 Plan was approved by the Company’s shareholders at the annual meeting on June 15, 2017, 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 share-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. The total number of shares reserved for issuance under the 2017 Plan is 1,371,189 shares.

 

Options

 

The Company granted a total of 395,000 and 100,000 options during the six month periods ended June 30, 2017 and 2016, respectively. 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 grant.

 

The weighted average grant date fair value of stock options granted during the six month periods ended June 30, 2017 and 2016 was $2.42 and $1.42, respectively. The fair value of each stock option granted was estimated on the date of grant using a Black-Scholes valuation model with the following weighted average assumptions:

  

   2017   2016 
Expected dividend yield at date of grant   0.00%   0.00%
Risk-free interest rate   2.01%   1.35%
Expected stock price volatility   34.77%   32.26%
Expected life of options (in years)   6.0    6.0 

 

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. During 2017, the expected volatility was based on historical daily price changes of the Company’s stock for six years prior to the date of grant. During 2016, the Company used a one year period to calculate volatility, but updated this assumption in the current year to align the expected volatility with the expected life of the options. The expected life of options is the average number of years the Company estimates that options will be outstanding.

 

 15 
 

 

The following table summarizes stock option activity for the six months ended June 30, 2017:

 

  

Number of

Options

  

Weighted
Average
Exercise Price

Per Share

   Weighted
Average
Remaining
Contractual
Term
  

Aggregate
Intrinsic Value

(in thousands)

 
Outstanding at December 31, 2016   545,300   $4.78    9.68   $1,757 
Granted   395,000    6.53           
Exercised   (7,000)   4.70           
Forfeited   (10,000)   6.87           
Outstanding at June 30, 2017   923,300   $5.54    9.14   $1,124 
Exercisable at June 30, 2017   141,300   $4.33    8.10   $335 

 

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 June 30, 2017.

 

As of June 30, 2017, 782,000 stock option awards were non-vested. Unrecognized compensation cost related to stock option awards was approximately $1.5 million, which is expected to be recognized over a weighted average period of 4.3 years.

 

Restricted Stock

 

The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant. As of June 30, 2017, the total unrecognized compensation cost related to non-vested restricted stock awards was approximately $0.8 million, which is expected to be recognized over a weighted average period of 2.1 years.

 

The following table summarizes restricted share activity for the six months ended June 30, 2017:

 

  

Number of Restricted

Stock Shares

   Weighted Average Grant
Price Fair Value
 
Non-vested at December 31, 2016   58,295   $4.77 
Granted   85,000    6.50 
Shares vested   (43,295)   4.92 
Shares forfeited        
Non-vested at June 30, 2017   100,000   $6.17 

 

The following table summarizes restricted stock unit activity for the six months ended June 30, 2017:

 

  

Number of Restricted

Stock Units

  

Weighted Average Grant

Price Fair Value

 
Non-vested at December 31, 2016   13,750   $4.24 
Granted   30,835    6.81 
Shares vested        
Shares forfeited        
Non-vested at June 30, 2017   44,585   $6.02 

 

12. Commitments, Contingencies and Concentrations

 

Litigation

 

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

 

 16 
 

 

Concentrations

 

The Company’s top ten customers accounted for approximately 53.3% and 50.7% of total consolidated net revenues for the three and six months ended June 30, 2017, respectively. Trade accounts receivable from these customers represented approximately 42.7% of net consolidated receivables at June 30, 2017. 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 concentration risk, the Company performs ongoing credit evaluations of its customers’ financial condition.

 

Leases

The Company and its subsidiaries lease plant and office facilities, furniture, autos and equipment under operating leases expiring through 2021. These leases generally contain renewal options and the Company expects to renew or replace certain of these leases in the ordinary course of business.

 

The Company’s future minimum lease payments for leases at June 30, 2017 are as follows:

 

  Capital
Leases
   Operating
Leases
 
   (In thousands) 
Remainder 2017  $131   $248 
2018   246    469 
2019   132    442 
2020       264 
2021       152 
Thereafter        
Total minimum lease payments  $509   $1,575 
Less: Amount representing interest   (25)     
Present value of minimum lease payments   484      
Less: Current maturities   (240)     
Capital lease obligations, net of current portion  $244      

 

13. Business Segment Information

 

As of June 30, 2017, the Company’s operations were conducted principally through two business segments: Cinema and Digital Media. Cinema operations include the sale of digital projection equipment, screens, and sound systems. Digital Media operations include the delivery of end to end digital signage solutions, video communication solutions, content creation and management and service of digital signage and digital cinema equipment. The Company allocates resources to business segments and evaluates the performance of these segments based upon reported segment operating profit. The Company records intersegment sales at cost and has eliminated all significant intersegment sales in consolidation. The results of discontinued operations are excluded from the Cinema segment information below.

 

 17 
 

 

Summary by Business Segments

 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
(In thousands)  2017   2016   2017   2016 
                 
Net revenue                    
Cinema  $9,633   $11,288   $18,934   $21,015 
Digital Media   9,777    9,753    18,430    17,499 
Total segment net revenue   19,410    21,041    37,364    38,514 
Eliminations   (10)   (483)   (39)   (842)
Total net revenue  $19,400   $20,558  $37,325   $37,672 
                     
Operating income (loss)                    
Cinema  $2,235   $3,066   $4,276   $6,113 
Digital Media   (238)   831    (712)   945 
Total segment operating income   1,997    3,897    3,564    7,058 
Unallocated general and administrative expenses   (2,830)   (1,934)   (4,994)   (3,982)
Other (expense) income                    
Interest, net   (28)        (16)    
Cinema – foreign currency transaction loss   (137)   (154)   (222)   (1,039)
Digital Media – foreign currency transaction (loss) gain   30    (26)   118    34 
Cinema - excess distribution from joint venture       502        502 
Cinema   7    9    10    50 
Digital Media       (3)       (7)
Change in value of marketable securities – Corporate asset       116        (366)
Total other (expense) income   (128)   444    (110)   (826)
(Loss) earnings before income taxes and equity method investment (loss) income  $(961)  $2,407   $(1,540)  $2,250 

 

(In thousands)  June 30, 2017   December 31, 2016 
Identifiable assets, excluding assets held for sale          
Cinema  $25,953   $29,881 
Digital Media   23,873    19,272 
Corporate assets   18,134    13,098 
Total  $67,960   $62,251 

 

 18 
 

 

Summary by Geographical Area

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(In thousands)  2017   2016   2017   2016 
Net revenue                    
United States  $14,884   $16,309   $29,218   $29,541 
China   1,431    1,843    2,896    2,798 
Latin America   520    593    804    975 
Canada   1,787    1,172    3,007    2,277 
Mexico   383    447    739    1,344 
Europe   79    119    195    592 
Asia (excluding China)   212    17    278    25 
Other   104    58    188    120 
Total  $19,400   $20,558   $37,325   $37,672 

 

(In thousands)  June 30, 2017   December 31, 2016 
Identifiable assets, excluding assets held for sale          
United States  $46,003   $40,255 
Canada   21,957    21,996 
Total  $67,960   $62,251 

 

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

 

 19 
 

 

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

 

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

 

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2016 and the following risks and uncertainties: the Company’s ability to expand its revenue streams to compensate for the lower demand for its 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 investment strategy, the Company’s ability to retain or replace its significant customers, the impact of a challenging global economic environment or a downturn in the markets, economic and political risks of selling products in foreign countries, risks of non-compliance with U.S. and foreign laws and regulations, 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, acquisition-related risks, the Company’s ability to assert its intellectual property rights, the impact of natural disasters and other catastrophic events, the adequacy of insurance, and the impact of having a controlling stockholder. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except where required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

 

Overview

 

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

 

We conduct our operations through two primary business segments: Cinema and Digital Media. The Cinema segment provides a full range of product solutions primarily for the theater exhibition industry, including a wide spectrum of premier audio-visual products and accessories such as digital projectors, state of the art projection screens, servers, library management systems, menu boards, flat panel displays, and sound systems. The Digital Media segment delivers solutions and services across two primary markets: digital out-of-home and cinema. While there is digital signage and cinema equipment sold within this segment, the primary focus of this segment is providing solutions and services to our customers.

 

Our segments were determined based on the manner in which management organizes segments for making operating decisions and assessing performance. Approximately 51% of our revenues for the six months ended June 30, 2017 were from Cinema and approximately 49% were from Digital Media. Additional information related to our reporting segments can be found in the notes to the condensed consolidated financial statements.

 

On June 23, 2016, the Company’s Board of Directors approved a plan to pursue a sale of the operations conducted by its subsidiaries SWBTI and SWI (the “China Operations”) which have historically been included in the Cinema segment. The purpose of the plan was to focus the efforts of the Company on the business units that have opportunities for higher return on invested capital. We reflected the results of the China Operations as discontinued operations for all periods presented. The assets and liabilities of the China Operations have been reclassified as assets and liabilities held for sale in the condensed consolidated balance sheets for all periods presented.

 

On November 4, 2016, the Company sold SWBTI to GABO Filter, Inc. for total proceeds of $0.4 million. As a result of this sale the Company recorded a loss on disposal of discontinued operations of approximately $0.6 million in the fourth quarter of 2016, which was included in net income from discontinued operations. The sale of SWI was completed on May 17, 2017 for total proceeds of $0.1 million. We recorded an insignificant gain on the sale of the business.

 

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Results of Operations:

 

Three Months Ended June 30, 2017 Compared to the Three Months Ended June 30, 2016

 

Revenues

 

Net revenues during the three months ended June 30, 2017 decreased 5.6% to $19.4 million from $20.6 million during the three months ended June 30, 2016.

 

  

Three Months Ended

June 30,

 
   2017   2016 
   (In thousands) 
Cinema  $9,633   $11,288 
Digital Media   9,777    9,753 
Total segment revenues   19,410    21,041 
Eliminations   (10)   (483)
Total net revenues  $19,400   $20,558 

 

Cinema

 

Sales of cinema products and services decreased 14.6% to $9.6 million in the second quarter of 2017 from $11.3 million in the second quarter of 2016. This decrease was driven by decreased sales of projectors, digital parts, and warranties, partially offset by a slight increase in screen sales. We expect cinema revenues to further decrease as we terminated our distributorship for certain cinema lamp products in July 2017, due to the very low margins earned on these products. The lamp products were expected to generate approximately $3 million in revenues during the second half of 2017.

 

Digital Media

 

Sales of digital media products and services were essentially flat at $9.8 million in the second quarter of 2017 and 2016. Increases in sales of digital signage equipment and installation services were offset by decreases in recurring service contract revenue.

 

Export Revenues

 

Sales outside the United States (primarily from the cinema segment) increased to $4.5 million in the second quarter of 2017 from $4.2 million a year ago resulting primarily from increased sales in Canada, partially offset by decreased sales in China. Export sales are sensitive to worldwide economic and political conditions that lead to volatility. Certain areas of the world are more cost conscious than the U.S. market and there are instances where our products are priced higher than local manufacturers, making it more difficult to generate sufficient profit to justify selling into these regions. Additionally, foreign exchange rates and excise taxes sometimes make it difficult to market our products overseas at reasonable selling prices.

 

Gross Profit

 

Consolidated gross profit was $5.3 million in the second quarter of 2017 and $6.1 million in the second quarter of 2016, and as a percent of revenue was 27.2% and 29.9% in the second quarter of 2017 and the second quarter of 2016, respectively. Gross profit in the cinema segment decreased to $3.0 million in the second quarter of 2017 from $3.7 million in the second quarter of 2016 and decreased as a percentage of revenue to 31.0% in 2017 from 32.4% in 2016. This decrease in gross margin as a percentage of revenue was driven by lower margins on projectors and digital parts. Gross profit in the cinema segment is not expected to be significantly impacted by our termination of our cinema lamp product distributorship discussed above, due to the very low margins that we earned on the lamps.

 

The gross profit in the digital media segment decreased to $2.3 million or 23.3% as a percentage of revenues in the second quarter of 2017 from $2.5 million or 25.5% as a percentage of revenues in the second quarter of 2016. The decrease in gross margin as a percentage of revenue was driven by revenue mix, as lower margin digital signage equipment sales and services accounted for a larger percentage of digital media revenues.

 

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Selling Expenses

 

Selling expenses increased 23.4% to $1.4 million in the second quarter of 2017 compared to $1.1 million a year-ago and as a percentage of revenues increased to 7.3% from 5.6% a year-ago. The increase in selling expenses was primarily due to a $0.2 million increase in employee-related costs.

 

Administrative Expenses

 

Administrative expenses increased 54.4% to $4.7 million in the second quarter of 2017 from $3.0 million in the second quarter of 2016 and as a percent of total revenue increased to 24.2% in the second quarter of 2017 from 14.8% in the second quarter of 2016. This increase was driven by a $0.4 million increase in consulting and software licensing costs associated with our CRM and ERP systems implementation, $0.4 million in bad debt expense, $0.4 million in audit and legal expenses primarily related to the restatement of our 2016 financial statements and our internal control remediation efforts, and $0.3 million in employee-related costs.

 

Other Financial Items

 

The second quarter of 2017 includes total other expense of $(0.1) million, primarily consisting of foreign currency transaction losses. The second quarter of 2016 includes total other income of $0.4 million, primarily due to $0.5 million of excess joint venture distributions recognized as income, partially offset by $0.2 million of net losses on foreign currency transactions.

 

The effective tax rate differs from the statutory rates primarily as a result of the valuation allowance recorded against the Company’s U.S. tax jurisdiction deferred tax assets and differing foreign and U.S. tax rates applied to respective pre-tax earnings by tax jurisdiction.

 

As a result of the items outlined above, we generated net losses from continuing operations of approximately $1.9 million and basic and diluted losses per share from continuing operations of $0.14 in the second quarter of 2017, compared to net earnings from continuing operations of $1.8 million and basic and diluted earnings per share from continuing operations of $0.12 in the second quarter of 2016.

 

Results of Discontinued Operations

 

Our discontinued operations generated a negligible after tax loss and negligible basic and diluted loss per share in the second quarter of 2017 compared to an after tax loss of ($0.9) million and basic and diluted loss per share of ($0.06) in the second quarter of 2016.

 

Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016

 

Revenues

 

Net revenues during the six months ended June 30, 2017 decreased 0.9% to $37.3 million from $37.7 million during the six months ended June 30, 2016.

 

  

Six Months Ended

June 30,

 
   2017   2016 
   (In thousands) 
Cinema  $18,934   $21,015 
Digital Media   18,430    17,499 
Total segment revenues   37,364    38,514 
Eliminations   (39)   (842)
Total net revenues  $37,325   $37,672 

 

Cinema

 

Sales of cinema products and services decreased 9.9% to $18.9 million in the first half of 2017 from $21.0 million in the first half of 2016. This decrease was driven by lower sales of lamps and digital projectors and parts and lower warranty revenue. A decrease in screen sales was mostly offset by increased screen support sales.

 

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Digital Media

 

Sales of digital media products and services increased 5.3% to $18.4 million in the first half of 2017 from $17.5 million in the first half of 2016. This increase was driven by increased digital media equipment sales, digital signage as a service revenues and nonrecurring maintenance revenues, partially offset by decreased recurring maintenance contract revenue.

 

Export Revenues

 

Sales outside the United States (primarily from the cinema segment) were essentially flat at $8.1 million for the first half of both 2017 and 2016. Increased sales in Canada were offset by decreased sales in Mexico and Europe. Certain areas of the world are more cost conscious than the U.S. market and there are instances where our products are priced higher than local manufacturers, making it more difficult to generate sufficient profit to justify selling into these regions. Additionally, foreign exchange rates and excise taxes sometimes make it difficult to market our products overseas at reasonable selling prices.

 

Gross Profit

 

Consolidated gross profit was $9.7 million in the first half of 2017 and $11.4 million in the first half of 2016, and as a percent of revenue was 26.0% and 30.2% in the first half of 2017 and 2016, respectively. Gross profit in the cinema segment decreased to $5.6 million in the first half of 2017 from $7.3 million in the first half of 2016 and decreased as a percentage of revenue to 29.7% in 2017 from 34.5% in 2016. The decrease in gross margin and gross margin as a percentage of revenue from the Cinema segment was driven by lower coverage of fixed operating costs due to lower overall revenues.

 

The gross profit in the digital media segment was unchanged at $4.1 million, or 22.2% of revenues in the first half of 2017 from $4.1 million or 23.6% of revenues in the first half of 2016. The decreased margin percentage was due to lower margin equipment sales and services accounting for a larger portion of revenues in 2017.

 

Selling Expenses

 

Selling expenses increased 33.7% to $2.9 million in the first half of 2017 compared to $2.2 million a year-ago and as a percentage of revenues increased to 7.8% from 5.8% a year-ago. The increase in selling expenses was primarily due to increased employee-related costs.

 

Administrative Expenses

 

Administrative expenses increased 34.2% to $8.2 million in the first half of 2017 from $6.1 million in the first half of 2017 and as a percent of total revenue increased to 22.1% in the first half of 2017 from 16.3% in the first half of 2016. This increase was driven by a $0.6 million increase in consulting and software licensing costs associated with our CRM and ERP systems implementation, $0.5 million in bad debt expense, $0.6 million in audit and legal expenses primarily related to the restatement of our 2016 financial statements and our internal control remediation efforts, and $0.5 million in employee-related costs.

 

Other Financial Items

 

The first six months of 2017 includes total other expense of $(0.1) million, consisting primarily of foreign currency transaction losses. The first half of 2016 includes total other expense of $0.8 million primarily consisting of $1.0 million of net losses on foreign currency transactions and $0.4 million of decrease in market value of marketable securities, partially offset by $0.5 million of excess joint venture distributions recognized as income.

 

The effective tax rate differs from the statutory rates primarily as a result of the valuation allowance recorded against the Company’s U.S. tax jurisdiction deferred tax assets and differing foreign and U.S. tax rates applied to respective pre-tax earnings by tax jurisdiction.

 

As a result of the items outlined above, we generated net losses from continuing operations of approximately $1.5 million and basic and diluted losses per share from continuing operations of $0.11 in the first half of 2017, compared to net earnings from continuing operations of $1.0 million and basic and diluted earnings per share from continuing operations of $0.07 for the first half of 2016.

 

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Results of Discontinued Operations

 

Our discontinued operations generated an after tax loss of ($49) thousand and negligible basic and diluted loss per share of in the first half of 2017, compared to an after tax loss of ($0.7) million and basic and diluted loss per share of ($0.05) in the first half of 2016, respectively.

 

Liquidity and Capital Resources

 

During the past several years, we have primarily met our working capital and capital resource needs from our operating cash flows. We believe that our existing sources of liquidity, including cash and cash equivalents, a revolving line of credit and operating cash flow, will be sufficient to meet our projected capital needs for the foreseeable future. However, we are also exploring debt financing in the form of term loans and lines of credit. On April 27, 2017, we entered into a debt agreement with a bank consisting of 1) a $2 million five-year term loan secured by a first lien deed of trust on our Alpharetta, GA facility, bearing interest at a fixed rate of 4.5% and payable in equal monthly installments of principal and interest calculated based on a 20-year amortization schedule with a final balloon payment of approximately $1.7 million due on May 10, 2022, and 2) a line of credit of up to $1 million secured by a second lien deed of trust on our Alpharetta, GA facility, bearing interest at the Prime Rate published in the Wall Street Journal plus 0.25% and with a term ending May 10, 2018. Under the debt agreement, we must maintain a ratio of total liabilities to tangible net worth not in excess of 3 to 1 and maintain minimum liquidity of $2 million. At June 30, 2017, there were no borrowings outstanding on our line of credit. At June 30, 2017, we were in compliance with our debt covenants.

 

We may also enter into leases for certain equipment used in our business. Our short-term debt at June 30, 2017 consists of a $2.5 million progress payment note to facilitate the lessor’s purchase of certain equipment we intend to lease. The lessor made a progress payment of $2.5 million to the seller of the equipment on June 26, 2017, which represents the principal amount under the note. The note bears interest at a rate of 3.25% and will be considered repaid when the lessor pays the remaining balance of the purchase price to the seller of the equipment and we execute a lease for the equipment under a master lease agreement. Any outstanding principal balance on the note not considered repaid on or before August 31, 2017 will become due and payable on demand.

 

We ended the second quarter with total cash and cash equivalents of $2.8 million, compared to $7.6 million at December 31, 2016. As of June 30, 2017, $1.3 million of the $2.8 million in cash and cash equivalents was held by our foreign subsidiary. If these funds are needed for our operations in the U.S., we would be required to pay U.S. income taxes and foreign withholding taxes on a portion of these funds when repatriated back to the U.S.

 

Cash Flows from Operating Activities

 

Net cash used in operating activities from continuing operations was $2.2 million in the first half of 2017, which included net losses from continuing operations of $1.5 million and $2.3 million of equity method investment earnings, partially offset by non-cash charges of deferred taxes, share-based compensation, depreciation and amortization and bad debt expense. Changes in working capital decreased cash from operating activities of continuing operations by $1.0 million, primarily due to increases in accounts receivable and other assets and decreases in customer deposits/deferred revenue, mostly offset by increases in accounts payable. Accounts payable increased $2.5 million due to the timing of orders and payments to vendors at the end of the quarter.

 

Net cash used in operating activities from continuing operations was $1.4 million in the first half of 2016, which included net earnings from continuing operations of $1.0 million, offset by non-cash charges (benefits) of deferred tax expense, depreciation and amortization, reserve provisions, change in value of marketable securities and non-cash stock compensation totaling $1.7 million. Changes in working capital decreased cash from operating activities of continuing operations by $4.1 million, primarily due to an increase in accounts receivable and a decrease in current income taxes, partially offset by an increase in accounts payable. Accounts payable increased by $1.4 million primarily due to timing of payments on equipment orders at the end of the quarter. Current income taxes decreased $1.6 million primarily due to payments for Canadian income taxes.

 

Net cash used in operating activities of discontinued operations was $0.2 million in the first half of 2017 compared to $2.7 million in the first half of 2016, as the significant discontinued operations were divested in the fourth quarter of 2016.

 

Cash Flows from Investing Activities

 

Net cash used in investing activities was $4.5 million in the first half of 2017 due to $2.5 million in purchases of equity securities and $2.1 million for capital expenditures. Net cash used in investing activities was $4.3 million in the first half of 2016 due to $3.8 million in purchases of equity securities and $0.7 million for capital expenditures.

 

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Cash Flows from Financing Activities

 

Net cash provided by financing activities was $1.8 million in the first half of 2017 due to $2.0 million of proceeds from issuance of long-term debt, offset slightly by $0.1 million of treasury stock purchases and $0.1 million of capital lease payments.

 

Net cash used in financing activities in the first half of 2016 was $0.2 million and was primarily for treasury stock purchases and capital lease payments.

 

The effect of changes in foreign exchange rates from continuing operations increased cash and cash equivalents by $0.1 million and $0.9 million in the first half of 2017 and 2016, respectively.

 

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.

 

Off Balance Sheet Arrangements and Contractual Obligations

 

The future estimated payments under these arrangements are summarized below along with our other contractual obligations:

 

Contractual Obligations  Total  

Remaining

in 2017

   One to Three Years   Three to Five Years   Thereafter 
                     

Long-term debt, including current maturities

  $2,410   $76   $306   $306   $1,722 
Short-term debt (1)   2,500    2,500             
Postretirement benefits   128    12    30    30    56 
Capital leases   509    131    378         
Operating leases   1,575    248    911    416     
Contractual cash obligations  $7,122   $2,967   $1,625   $752   $1,778 

 

  (1) Short-term debt consists of a progress payment note toward the lessor’s purchase of certain equipment that we intend to lease. It will not be settled in cash unless we fail to enter into a lease for the equipment under a master lease agreement.

 

There were no other material contractual obligations other than inventory and property, plant and equipment purchases in the ordinary course of business.

 

Seasonality

 

Generally, our quarterly revenue and earnings fluctuate moderately from quarter to quarter. As we increase our sales in our current markets, and as we expand into new markets in different geographies, it is possible we may experience different seasonality patterns in our business. As a result, the results of operations for the three months and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for an entire fiscal year.

 

Recently Issued Accounting Pronouncements

 

See Note 3, Summary of Significant Accounting Policies to the condensed consolidated financial statements for a description of recently issued accounting pronouncements.

 

Critical Accounting Policies and Estimates

 

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

 

Our accounting policies and estimates that are most critical to the presentation of our results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as our critical accounting policies. See further discussion of our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K/A for our year ended December 31, 2016. 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, 2017.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

The principal market risks affecting us are exposure to interest rates and foreign currency exchange rates. We market our products throughout the United States and the world. As a result, we could be adversely affected by such factors as changes in foreign currency rates and weak economic conditions. As a majority of our sales are currently denominated in U.S. dollars, a strengthening of the dollar can and sometimes has made our products less competitive in foreign markets.

 

Interest Rates—Interest rate risks from our interest related accounts such as our postretirement obligations are not deemed significant. We currently have long-term notes receivables bearing interest rates of 15% which are recorded at fair value. A change in long-term interest rates for comparable types of instruments would have the effect of us recording changes in fair value through our statement of operations.

 

Foreign Exchange—Exposures to transactions denominated in currencies other than the entity’s functional currency are primarily related to our Canadian subsidiary. Fluctuations in the value of foreign currencies create exposures, which can adversely affect our results of operations. From time to time, as market conditions indicate, we will enter into foreign currency contracts to manage the risks associated with forecasted transactions. A portion of our cash in our Canadian subsidiary is denominated in foreign currencies, where fluctuations in exchange rates will impact our cash balances in U.S. dollar terms. A hypothetical 10% change in the value of the U.S. dollar would impact our reported cash balance by approximately $0.1 million.

 

Equity Price Risk—We are exposed to price risk related to our investments in equity securities. At June 30, 2017, our investments in equity securities aggregated $18.1 million, all of which were accounted for using the equity method. The fair value of these investments was $16.4 million at June 30, 2017. A change in the equity price of the equity method investments would result in a change in the fair value or economic value of such securities.

 

Item 4. Controls and Procedures

 

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were ineffective, due to the material weaknesses described below.

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

During the fourth quarter of fiscal 2016, we implemented a new integrated Customer Relationship Management (CRM) system and a new enterprise resource planning (ERP) system including inventory management and financial reporting modules that will upgrade and standardize our information systems. We have completed the implementation with respect to some of our subsidiaries and plan to continue to roll out the CRM and ERP system modules over the next year for certain of our other subsidiaries. Therefore, as appropriate, we modified the design and are still in the process of updating certain documentation of internal control processes and procedures to supplement and complement existing internal controls over financial reporting to accommodate the system changes. The CRM and ERP resulted in changes that materially affected our system of internal control over financial reporting during the three months ended December 31, 2016. As a result, our controls over system access were not fully aligned with our functional segregation of duties. During the six months ended June 30, 2017, we made progress in aligning our system access with our functional segregation of duties for certain of our subsidiaries. However, our system access was not yet fully aligned with our functional segregation of duties as of June 30, 2017.

 

In the course of our preparations for making management’s report on internal control over financial reporting in our most recent Form 10-K as required by Section 404 of the Sarbanes-Oxley Act of 2002, we identified areas in need of improvement and have taken remedial actions to strengthen the affected controls as appropriate. One such area was our documentation of business processes, procedures and internal controls for one of our subsidiaries that enters into arrangements with its customers involving multiple deliverables which affects revenue recognition. As of December 31, 2016, we were still in the process of updating our documentation as resource constraints stemming from the aforementioned CRM and ERP implementation have delayed our efforts in making these updates. We evaluated our current documentation over revenue recognition for arrangements with multiple deliverables and concluded it was not sufficient to ensure internal controls over this accounting were effective. We believe this deficiency in aggregate with the aforementioned deficiency stemming from our CRM and ERP system segregation of duties result in a material weakness which may have a material effect on our internal control over financial reporting impacting controls over revenue recognition.

 

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We plan to continue to implement the CRM and other significant modules of the ERP in these and other subsidiaries in the coming years, as we believe these changes will simplify our business processes and system of internal control over financial reporting. In connection with these and future enhancements, the Company will update its internal controls over financial reporting, as necessary, to accommodate any modification to its business processes and procedures.

 

In addition, during the preparation of its Form 10-Q for the quarter ended March 31, 2017, management of the Company identified two misstatements in the Company’s previously issued consolidated financial statements for the year ended December 31, 2016. The first misstatement related to approximately $477,000 of maintenance service revenue that was pre-billed at a customer’s request, but related to services not completed by December 31, 2016. This revenue was improperly recognized during the year ended December 31, 2016. The second misstatement related to earnings at one of the Company’s Canadian subsidiaries that would be subject to a withholding tax if repatriated to the U.S. The Company improperly excluded earnings to the extent of certain intercompany loans between its Canada and U.S. entities from its provision for deferred income taxes, resulting in an understatement of deferred income tax expense of approximately $238,000.

 

The Company has restated its Consolidated Balance Sheet as of December 31, 2016, and the related Consolidated Statement of Operations, Consolidated Statement of Comprehensive (Loss) Income, Consolidated Statement of Stockholders’ Equity and Consolidated Statement of Cash Flows for the year then ended to correct the misstatements described above. We determined our controls over cutoff for maintenance service revenues were insufficient, resulting in a material weakness that had a material effect on our internal control over financial reporting impacting revenue recognition.

 

During the six months ended June 30, 2017, we engaged a consulting firm to assist us in evaluating our internal controls, including controls over cutoff for maintenance service revenues, and updating our documentation, including documentation related to arrangements with customers involving multiple deliverables. This engagement is expected to continue into late 2017. We expect to fully remediate the above-mentioned material weaknesses before the end of the fiscal year ending December 31, 2017.

 

The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated any change during the fiscal quarter for the period covered by this report and have concluded that, except for changes to system access as described above, there has been no other change that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II. Other Information

 

Item 1. Legal Proceedings

 

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

 

Item 1A. Risk Factors

 

Item 1A “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2016 includes a detailed discussion of the Company’s risk factors. 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. Repurchases during the quarter ended June 30, 2017 are reflected in the following table.

 

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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
   Maximum
Number of
Shares (or
approximate
dollar value)
that May Yet
Be
Purchased
Under the
Plans or
Programs
 
                 
April 1 — April 30, 2017   3,800   $6.21    3,800    639,006 
May 1 — May 31, 2017   2,000   $6.30    2,000    637,006 
June 1 — June 30, 2017      $        637,006 
Total   5,800         5,800      

 

Item 6. Exhibits

 

        Incorporated by Reference    
Exhibit
Number
  Document Description   Form   Exhibit   Filing
Date
  Filed
Herewith
                     
10.1   Ballantyne Strong, Inc. 2017 Omnibus Equity Compensation Plan.   S-8   4.12   6-15-17    
                     
10.2   Form of Stock Option Agreement under the Ballantyne Strong, Inc. 2017 Omnibus Equity Compensation Plan.   S-8   4.13   6-15-17    
                     
10.3   Form of Restricted Share Agreement under the Ballantyne Strong, Inc. 2017 Omnibus Equity Compensation Plan.   S-8   4.14   6-15-17    
                     
10.4   Form of Restricted Stock Unit Agreement under the Ballantyne Strong, Inc. 2017 Omnibus Equity Compensation Plan.   S-8   4.15   6-15-17    
                     
10.5   Master Lease Agreement between Huntington Technology Finance, Inc. and Convergent Media Systems Corporation.   8-K   10.1   6-27-17    
                     
10.6   Progress Payment Note and Reimbursement Agreement between Convergent Media Systems Corporation and Huntington Technology Finance, Inc, effective as of June 22, 2017.   8-K   10.2   6-27-17    
                     
10.7   Term Loan Business Loan Agreement, dated April 27, 2017, by and between Convergent Media Systems Corporation, as Borrower, and blueharbor bank, as Lender.   8-K   10.1   5-3-17    
                     
10.8   Term Loan Promissory Note, dated April 27, 2017, by and between Convergent Media Systems Corporation, as Borrower, and blueharbor bank, as Lender.   8-K   10.2   5-3-17    
                     
10.9   Line of Credit Business Loan Agreement, dated April 27, 2017, by and between Convergent Media Systems Corporation, as Borrower, and blueharbor bank, as Lender.   8-K   10.3   5-3-17    
                     
10.10   Credit Agreement, dated April 27, 2017, by and between Convergent Media Systems Corporation, as Borrower, and blueharbor bank, as Lender.   8-K   10.4   5-3-17    

 

 28 
 

 

        Incorporated by Reference    
Exhibit
Number
  Document Description   Form   Exhibit   Filing
Date
  Filed
Herewith
                     
31.1   Rule 13a-14(a) Certification of Chief Executive Officer.               X
                     
31.2   Rule 13a-14(a) Certification of Chief Financial Officer.               X
                     
32.1 * 18 U.S.C. Section 1350 Certification of Chief Executive Officer.               X
                     
32.2 * 18 U.S.C. Section 1350 Certification of Chief Financial Officer.               X
                     
101   The following materials from Ballantyne Strong, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.               X

 

 

* Furnished herewith.

 

 29 
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BALLANTYNE STRONG, INC.
         
By: /s/ D. Kyle Cerminara   By: /s/ Lance V. Schulz
 

D. Kyle Cerminara,

Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)

 

    Lance V. Schulz,
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
         
Date: August 8, 2017   Date: August 8, 2017

 

 30 
 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION

 

I, D. Kyle Cerminara, certify that:

 

1.       I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2017 of Ballantyne Strong, Inc.;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.       The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of 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/ D. KYLE CERMINARA
    D. Kyle Cerminara
    Chairman and Chief Executive Officer
     
August 8, 2017    

 

 

 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION

 

I, Lance V. Schulz, certify that:

 

1.       I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2017 of Ballantyne Strong, Inc.;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.       The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of 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/ LANCE V. SCHULZ
    Lance V. Schulz
    Chief Financial Officer

 

August 8, 2017

 

 

 

EX-32.1 4 ex32-1.htm

 

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, D. Kyle Cerminara, Chief Executive Officer of Ballantyne Strong, Inc. (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2017 (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 8th day of August, 2017.

 

/s/ D. KYLE CERMINARA    
D. Kyle Cerminara    
Chairman and Chief Executive Officer    

 

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

 

   

 

EX-32.2 5 ex32-2.htm

 

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, Lance V. Schulz, Chief Financial Officer of Ballantyne Strong, Inc. (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2017 (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 8th day of August, 2017.

 

/s/ LANCE V. SCHULZ    
Lance V. Schulz    
Chief Financial Officer    

 

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

 

   

 

 

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PropertyInsuranceHoldingsLtdMember Inventory, Net Assets, Current Assets [Default Label] Liabilities, Current Deferred Tax Liabilities, Net, Noncurrent Liabilities Defined Benefit Plan, Accumulated Other Comprehensive (Income) Loss, before Tax Stockholders' Equity before Treasury Stock Treasury Stock, Value Stockholders' Equity Attributable to Parent Liabilities and Equity Cost of Goods and Services Sold Gross Profit Selling, General and Administrative Expense Interest Expense, Other Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent Net Income (Loss) Attributable to Parent Income (Loss) from Continuing Operations, Per Diluted Share Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Diluted Share Earnings Per Share, Diluted Other Comprehensive Income (Loss), Net of Tax Comprehensive Income (Loss), Net of Tax, Attributable to Parent Marketable Securities, Unrealized Gain (Loss) Deferred Income Tax Expense (Benefit) Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Other Current Assets Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Customer Deposits Increase (Decrease) in Other Operating Assets Net Cash Provided by (Used in) Operating Activities, Continuing Operations Net Cash Provided by (Used in) Operating Activities Payments to Acquire Productive Assets Net Cash Provided by (Used in) Investing Activities Payments of Debt Issuance Costs Repayments of Long-term Debt Payments for Repurchase of Equity Repayments of Long-term Capital Lease Obligations Net Cash Provided by (Used in) Financing Activities, Continuing Operations Cash and Cash Equivalents, Period Increase (Decrease) Disposal Group, Including Discontinued Operation, Cash and Cash Equivalents Goodwill Disclosure [Text Block] Equity Method Investments [Policy Text Block] Discontinued Operation, Tax Effect of Discontinued Operation Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest Cash and Cash Equivalents, Fair Value Disclosure Goodwill, Foreign Currency Translation Gain (Loss) Standard and Extended Product Warranty Accrual ProductWarrantyAccrualWarrantiesWrittenOffNetOfRecoveries Debt Instrument, Unamortized Discount (Premium) and Debt Issuance Costs, Net Long-term Debt, Maturities, Repayments of Principal, Remainder of Fiscal Year Long-term Debt, Maturities, Repayments of Principal in Year Two Long-term Debt, Maturities, Repayments of Principal in Year Three Long-term Debt, Maturities, Repayments of Principal in Year Four Long-term Debt, Maturities, Repayments of Principal in Year Five Long-term Debt, Maturities, Repayments of Principal after Year Five Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest EX-101.PRE 11 btn-20170630_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.7.0.1
Document And Entity Information - shares
6 Months Ended
Jun. 30, 2017
Aug. 04, 2017
Document And Entity Information    
Entity Registrant Name BALLANTYNE STRONG, INC.  
Entity Central Index Key 0000946454  
Document Type 10-Q  
Document Period End Date Jun. 30, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   14,416,040
Trading Symbol BTN  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2017  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 2,800 $ 7,596
Accounts receivable (net of allowance for doubtful accounts of $1,482 and $1,097, respectively) 16,943 16,316
Inventories:    
Finished goods, net 1,261 1,341
Work in process 418 247
Raw materials and components, net 5,285 4,975
Total inventories, net 6,964 6,563
Recoverable income taxes 1,041 672
Deposit on equipment to be leased 2,500
Other current assets 1,996 1,746
Current assets held for sale 188
Total current assets 32,244 33,081
Property, plant and equipment (net of accumulated depreciation of $7,968 and $7,066, respectively) 11,187 11,187
Equity method investments 18,134 13,098
Intangible assets, net 3,641 2,357
Goodwill 920 889
Notes receivable 1,669 1,669
Deferred income taxes 84
Other assets 165 74
Total assets 67,960 62,439
Current liabilities:    
Accounts payable 7,062 5,175
Accrued expenses 3,793 4,097
Short-term debt 2,500
Current portion of long-term debt 63
Customer deposits/deferred revenue 3,201 4,211
Income tax payable 198 108
Current liabilities held for sale 57
Total current liabilities 16,817 13,648
Long-term debt, net of current portion 1,899
Deferred revenue 1,226 1,226
Deferred income taxes 2,704 1,841
Other accrued expenses, net of current portion 491 570
Total liabilities 23,137 17,285
Stockholders' equity:    
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding
Common stock, par value $.01 per share; authorized 25,000 shares; issued 17,210 and 17,047 shares at June 30, 2017 and December 31, 2016, respectively; 14,416 and 14,268 shares outstanding at June 30, 2017 and December 31, 2016, respectively 169 169
Additional paid-in capital 40,121 39,758
Accumulated other comprehensive income:    
Foreign currency translation (4,891) (5,709)
Postretirement benefit obligations 97 97
Unrealized gain on available-for-sale securities of equity method investment 315 136
Retained earnings 27,598 29,187
Treasury stock before, cost 63,409 63,638
Less 2,794 and 2,779 of common shares in treasury, at cost at June 30, 2017 and December 31, 2016, respectively (18,586) (18,484)
Total stockholders' equity 44,823 45,154
Total liabilities and stockholders' equity $ 67,960 $ 62,439
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Accounts receivable, allowance for doubtful accounts $ 1,482 $ 1,097
Property, plant and equipment, accumulated depreciation $ 7,968 $ 7,066
Preferred stock par value $ 0.01 $ 0.01
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares outstanding
Common stock par value $ 0.01 $ 0.01
Common stock, shares authorized 25,000,000 25,000,000
Common stock, shares issued 17,210,000 17,047,000
Common stock, shares outstanding 14,416,000 14,268,000
Common shares in treasury, shares 2,794,000 2,779,000
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Income Statement [Abstract]        
Net product sales $ 12,917 $ 14,862 $ 25,493 $ 26,597
Net service revenues 6,483 5,696 11,832 11,075
Total net revenues 19,400 20,558 37,325 37,672
Cost of products sold 10,429 11,280 20,817 20,038
Cost of services 3,697 3,129 6,795 6,249
Total cost of revenues 14,126 14,409 27,612 26,287
Gross profit 5,274 6,149 9,713 11,385
Selling and administrative expenses:        
Selling 1,419 1,149 2,909 2,174
Administrative 4,688 3,037 8,234 6,135
Total selling and administrative expenses 6,107 4,186 11,143 8,309
(Loss) income from operations (833) 1,963 (1,430) 3,076
Other (expense) income:        
Interest income 27 22 40
Interest expense (28) (27) (38) (40)
Foreign currency transaction loss (107) (180) (104) (1,005)
Change in value of marketable securities 116 (366)
Excess distribution from joint venture 502 502
Other income, net 7 6 10 43
Total other (expense) income (128) 444 (110) (826)
(Loss) earnings before income taxes and equity method investment (loss) income (961) 2,407 (1,540) 2,250
Income tax expense 776 653 2,269 1,337
Equity method investment (loss) income (212) 2,269 41
Net (loss) earnings from continuing operations (1,949) 1,754 (1,540) 954
Net loss from discontinued operations, net of tax (26) (921) (49) (734)
Net (loss) earnings $ (1,975) $ 833 $ (1,589) $ 220
Net (loss) earnings per share - basic        
Net (loss) earnings from continuing operations $ (0.14) $ 0.12 $ (0.11) $ 0.07
Net loss from discontinued operations (0.00) (0.06) (0.00) (0.05)
Net (loss) earnings (0.14) 0.06 (0.11) 0.02
Net (loss) earnings per share - diluted        
Net (loss) earnings from continuing operations (0.14) 0.12 (0.11) 0.07
Net loss from discontinued operations (0.00) (0.06) (0.00) (0.05)
Net (loss) earnings $ (0.14) $ 0.06 $ (0.11) $ 0.02
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Statement of Comprehensive Income [Abstract]        
Net (loss) earnings $ (1,975) $ 833 $ (1,589) $ 220
Currency translation adjustment:        
Unrealized net change arising during period 709 33 818 1,625
Unrealized gain on available-for-sale securities of equity method investments, net of tax 181 21 179 21
Total other comprehensive income 890 54 997 1,646
Comprehensive (loss) income $ (1,085) $ 887 $ (592) $ 1,866
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Cash flows from operating activities:    
Net (loss) earnings $ (1,589) $ 220
Net loss from discontinued operations, net of tax 49 734
Net (loss) earnings from continuing operations (1,540) 954
Adjustments to reconcile net (loss) earnings from continuing operations to net cash used in operating activities:    
Provision for doubtful accounts 418 (44)
Provision for obsolete inventory (175) 47
Provision for warranty 171 171
Depreciation and amortization 1,004 1,127
Equity method investment income (2,269) (41)
Unrealized loss on marketable securities 366
Deferred income taxes 913 (146)
Stock-based compensation expense 330 244
Changes in operating assets and liabilities:    
Accounts receivable (935) (2,684)
Inventories (170) (522)
Other current assets (247) (321)
Accounts payable 2,497 1,361
Accrued expenses (438) 358
Customer deposits/deferred revenue (1,023) (570)
Current income taxes (247) (1,620)
Other assets (474) (124)
Net cash flows from operating activities – continuing operations (2,185) (1,444)
Net cash flows from operating activities – discontinued operations (146) (2,724)
Net cash used in operating activities (2,331) (4,168)
Cash flows from investing activities:    
Purchase of equity securities (2,525) (3,764)
Dividends received from investee in excess of cumulative earnings 103 103
Capital expenditures (2,103) (653)
Proceeds from sale of business 60
Net cash used in investing activities (4,465) (4,314)
Cash flows from financing activities:    
Proceeds from issuance of long-term debt 2,000
Payment of debt issuance costs (36)
Principal payments on long-term debt (2)
Purchase of treasury stock (102) (133)
Proceeds from exercise of stock options 33 53
Payments on capital lease obligations (134) (159)
Excess tax benefits from share-based arrangements 6
Net cash provided by (used in) financing activities – continuing operations 1,759 (233)
Effect of exchange rate changes on cash and cash equivalents –continuing operations 66 916
Effect of exchange rate changes on cash and cash equivalents – discontinued operations (69)
Net decrease in cash and cash equivalents (4,971) (7,868)
Discontinued operations cash activity included above:    
Add: Cash balance included in assets held for sale at beginning of period 175 4,208
Less: Cash balance included in assets held for sale at end of period (1,415)
Cash and cash equivalents at beginning of period 7,596 17,862
Cash and cash equivalents at end of period 2,800 12,787
Supplemental disclosure of non-cash investing and financing activities:    
Issuance of short-term progress payment note payable (See Note 9) $ 2,500
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.7.0.1
Nature of Operations
6 Months Ended
Jun. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations

1. Nature of Operations

 

Ballantyne Strong, Inc. (“Ballantyne” or the “Company”), a Delaware corporation, is a holding company with diverse business activities focused on serving the cinema, retail, financial, and government markets. The Company, and its wholly owned subsidiaries Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc., Convergent Corporation, and Convergent Media Systems Corporation (“Convergent” or “CMS”), design, integrate, and install technology solutions for a broad range of applications; develop and deliver out-of-home messaging, advertising and communications; manufacture projection screens; and provide managed services including monitoring of networked equipment to our customers. On November 4, 2016, Strong Westrex (Beijing) Technology Inc. (“SWBTI”), a subsidiary of Strong Westrex, Inc. (“SWI”), was sold, and on May 17, 2017, SWI was sold (see Note 2).

 

The Company’s products are distributed to the retail, financial, government and cinema markets throughout the world.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
Discontinued Operations
6 Months Ended
Jun. 30, 2017
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

2. Discontinued Operations

 

On June 23, 2016, the Company’s Board of Directors approved a plan to pursue a sale of the operations conducted by its subsidiaries SWBTI and SWI (the “China Operations”) which have historically been included in the Cinema segment. The purpose of the plan was to focus the efforts of the Company on the business units that have opportunities for higher return on invested capital. We reflected the results of the China Operations as discontinued operations for all periods presented. The assets and liabilities of the China Operations have been reclassified as assets and liabilities held for sale in the condensed consolidated balance sheets for all periods presented.

 

On November 4, 2016, the Company sold SWBTI to GABO Filter, Inc. for total proceeds of $0.4 million. On May 17, 2017, SWI was sold for total proceeds of $0.1 million. The Company recorded an insignificant gain on the sale of SWI.

 

The summary comparative financial results of discontinued operations were as follows (in thousands):

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
Total net revenues   $ 12     $ 2,435     $ 24     $ 5,857  
Total cost of revenues     22       2,899       48       5,791  
Total selling and administrative expenses     43       346       53       706  
Loss from operations of discontinued operations     (53 )     (810 )     (77 )     (640 )
Loss before income taxes     (26 )     (807 )     (49 )     (620 )
Income tax expense           (114 )           (114 )
Net loss from discontinued operations, net of tax   $ (26 )   $ (921 )   $ (49 )   $ (734 )

 

Depreciation and amortization related to discontinued operations was immaterial for the three and six month periods ended June 30, 2017 and 2016. There were no capital expenditures related to discontinued operations for the six months ended June 30, 2017 and 2016.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

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

 

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K/A. 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/A for the fiscal year ended December 31, 2016.

 

The condensed consolidated balance sheet as of December 31, 2016 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. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

 

During the second quarter of 2017, the Company began classifying software in development as an intangible asset rather than property, plant and equipment, to be consistent with its classification of software assets in service. Accordingly, approximately $0.5 million of software in development at December 31, 2016 was reclassified to intangible assets from property, plant and equipment on the condensed consolidated balance sheet to conform to the current period presentation. This reclassification had no effect on the Company’s reported results of operations, comprehensive income, or cash flows.

 

Use of Management Estimates

 

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. 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 condensed 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.

 

Marketable Securities

 

For the six months ended June 30, 2016, the Company’s marketable securities were comprised of investments in the common stock of a publicly traded company. Changes in fair value, based on the market price of the investee’s stock, were recognized in other income in the condensed consolidated statement of operations. The Company used the fair value option to account for the investment to more appropriately recognize the value of this investment in our condensed consolidated financial statements since the Company did not exert significant influence over the investment, in which case the equity method of accounting would have been applied. None of the Company’s investments were classified as marketable securities or accounted for using the fair value option during the six months ended June 30, 2017.

 

Equity Method Investments

 

We apply the equity method of accounting to investments when we have significant influence, but not controlling interest in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net (loss) income resulting from these investments is reported under the line item captioned “equity method investment (loss) income” in our condensed consolidated statements of operations. The carrying value of our equity method investments is reported in equity method investments in the condensed consolidated balance sheets. The Company’s equity method investments are reported initially at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. The Company did not record any impairments related to its investments during the three and six month periods ended June 30, 2017 or 2016. Note 5 contains additional information on our equity method investments, which are held by the Company’s Cinema segment.

 

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 fall, as of June 30, 2017 and December 31, 2016.

 

Fair values measured on a recurring basis at June 30, 2017 (in thousands):

 

    Level 1     Level 2     Level 3     Total  
Cash and cash equivalents   $ 2,800     $     $     $ 2,800  
Notes receivable                 1,669       1,669  
Total   $ 2,800     $     $ 1,669     $ 4,469  

 

Fair values measured on a recurring basis at December 31, 2016 (in thousands):

 

    Level 1     Level 2     Level 3     Total  
Cash and cash equivalents   $ 7,596     $     $     $ 7,596  
Notes receivable                 1,669       1,669  
Total   $ 7,596     $     $ 1,669     $ 9,265  

 

Quantitative information about the Company’s level 3 fair value measurements at June 30, 2017 is set forth below:

 

   

Fair Value at
6/30/2017

(in thousands)

    Valuation Technique   Unobservable input   Range  
Notes receivable   $ 1,669     Discounted cash flow   Probability of default     53 %  
                Discount rate     18 %  

 

The notes receivable are recorded at estimated fair value at June 30, 2017.

 

The significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are discount rate and probability of default. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement. There were no changes in the fair value of the Company’s notes receivable recorded during the three and six months ended June 30, 2017 or 2016.

 

The Company’s short-term and long-term debt are recorded at historical cost. As of June 30, 2017, the Company’s long-term debt, including current maturities, had a carrying value of $2.0 million. Based on discounted cash flows using current quoted interest rates (Level 2 of the fair value hierarchy), the estimated fair value at June 30, 2017 was $2.0 million.

 

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses, and short-term debt, reported in the condensed consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). During the six months ended June 30, 2017, the Company did not have any significant non-recurring measurements of non-financial assets or liabilities.

 

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The guidance is effective for the Company beginning January 1, 2018. An entity may adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the ASU. The Company has obtained an understanding of ASU 2014-09 and has begun to analyze the impact of the new standard on its financial results. The Company has completed a high-level assessment of the attributes within its contracts for its major products and services, and has started assessing potential impacts to its internal processes, control environment, and disclosures. The Company expects to adopt this ASU through a cumulative effect adjustment as of January 1, 2018. While the Company has not yet quantified the impact that the adoption of ASU 2014-09 will have on the consolidated financial statements, the Company is continuing to evaluate the impact of the new standard on our financial results and other possible impacts. The Company will continue to provide enhanced disclosures as we continue our assessment.

 

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 requires an entity utilizing the first in-first out inventory method to change their measurement principle for inventory changes from the lower of cost or market to lower of cost or net realizable value. The Company prospectively adopted the guidance effective January 1, 2017. The adoption of ASU 2015-11 did not have a material effect on the Company’s consolidated financial statements.

 

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU 2016-01 requires equity investments that do not result in consolidation and are not accounted under the equity method to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets; and modifies certain fair value disclosure requirements. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is not permitted. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. ASU 2016-02 requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases with a term greater than twelve months, on its balance sheet. This ASU is effective in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is evaluating the requirements of ASU 2016-02 and its potential impact on the Company’s financial statements. The Company has leases primarily for property and equipment and is in the process of identifying and evaluating these leases for purposes of ASU 2016-02. For each of these leases, the term will be evaluated, including extension and renewal options as well as the lease payments. While the Company has not yet quantified the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements, the Company expects to record assets and liabilities on its balance sheet upon adoption of this standard, which may be material. The Company will continue to provide enhanced disclosures as it continues its assessment.

 

In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 simplifies accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, and certain classifications on the statement of cash flows. The Company adopted the guidance effective January 1, 2017 on a prospective basis. Additionally, as required by ASU 2016-09, when calculating diluted earnings per share, excess tax benefits were excluded from the calculation of assumed proceeds since such amounts are recognized in the income statement. The Company applied the cash flow presentation requirements prospectively, and the 2016 statement of cash flows was not adjusted. ASU 2016-09 also allows an entity to elect as an accounting policy either to estimate the total number of awards for which the requisite service period will not be rendered or to account for forfeitures for service-based awards as they occur. The Company has elected to account for forfeitures as they occur.

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. The Company believes its adoption will not significantly impact the Company’s results of operations and financial position.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which eliminates the diversity in practice related to eight cash flow classification issues. The Company adopted this ASU in the first quarter of 2017 on a prospective basis. Adoption affected the classification of dividends received from equity method investees on the statement of cash flows, but did not have any other impact.

 

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The new guidance eliminates Step 2 of the goodwill impairment testing which requires the fair value of individual assets and liabilities of a reporting unit to be determined when measuring goodwill impairment. The new guidance may result in different amounts of impairment that could be recognized compared to existing guidance. In addition, failing step 1 of the impairment test, where the carrying value of a reporting unit is compared to its fair value, may not result in impairment under existing guidance. However, under the revised guidance, failing step 1 will always result in a goodwill impairment. ASU 2017-04 is to be applied prospectively for goodwill impairment testing performed in years beginning after December 15, 2019. The Company does not believe the adoption will significantly impact the Company’s results of operations or financial position.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
(Loss) Earnings Per Common Share
6 Months Ended
Jun. 30, 2017
Earnings Per Share [Abstract]  
(Loss) Earnings Per Common Share

4. (Loss) Earnings Per Common Share

 

Basic (loss) earnings per share has been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted (loss) earnings per share has been computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to potential common shares from dilutive stock options and certain non-vested shares of restricted stock. The following table provides the reconciliation between average shares used to compute basic and diluted (loss) earnings per share:

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
Weighted average shares outstanding (in thousands):                                
Basic weighted average shares outstanding     14,263       14,213       14,264       14,208  
Dilutive effect of stock options and certain non-vested shares of restricted stock           80             87  
Diluted weighted average shares outstanding     14,263       14,293       14,264       14,295  

 

For each of the three and six month periods ended June 30, 2017, options to purchase 445,000 shares of common stock were outstanding but were not included in the computation of diluted loss per share as the option’s exercise price was greater than the average market price of the common shares for the each period. An additional 156,606 and 176,479 common stock equivalents related to options and restricted stock awards were excluded for the three and six months ended June 30, 2017, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share. For the three and six month periods ended June 30, 2016, options to purchase 350,000 and 430,000 shares of common stock, respectively, were outstanding but were not included in the computation of diluted earnings per share as the option’s exercise price was greater than the average market price of the common shares for the respective periods. An additional 79,167 and 87,387 common stock equivalents related to options and restricted stock awards were excluded from the calculation of diluted net loss per share from discontinued operations for the three and six months ended June 30, 2016, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
Equity Method Investments
6 Months Ended
Jun. 30, 2017
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments

5. Equity Method Investments

 

The following summarizes our equity method investments:

 

    June 30, 2017     December 31, 2016  
    (dollars in thousands)  
Entity     Carrying
Amount
      Economic
Interest
      Carrying
Amount
      Economic
Interest
 
RELM Wireless Corporation   $ 4,328       8.3 %   $ 4,382       8.3 %
Itasca Capital, Ltd.     5,870       32.3 %     3,368       32.3 %
1347 Property Insurance Holdings, Inc.     7,936       17.4 %     5,348       12.1 %
Total   $ 18,134             $ 13,098          

 

The following summarizes the (loss) income of equity method investees reflected in the Statement of Operations:

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
Entity   (in thousands)  
RELM Wireless Corporation   $ (105 )   $     $ (97 )   $ 41  
Itasca Capital, Ltd.     (150 )           2,311        
1347 Property Insurance Holdings, Inc.     43             55        
Total (loss) income   $ (212 )   $     $ 2,269     $ 41  

 

RELM Wireless Corporation (“RELM”) is a publicly traded company that designs, manufactures, and markets two-way land mobile radios, repeaters, base stations, and related components and subsystems. The Company’s Chief Executive Officer is chairman of the board of directors of RELM, and controls entities that, when combined with the Company’s ownership in RELM, own greater than 20% of RELM, providing the Company with significant influence over RELM, but not controlling interest. The Company received dividends of $0.1 million and $0 for the three month periods ended June 30, 2017 and 2016, respectively. The Company received dividends of $0.2 million and $0 for the six month periods ended June 30, 2017 and 2016, respectively. Based on quoted market prices, the market value of the Company’s ownership in RELM was $4.3 million at June 30, 2017.

 

Itasca Capital, Ltd. (“Itasca”) is a publicly traded Canadian company that is an investment vehicle seeking transformative strategic investments. The Company’s Chief Executive Officer is a member of the board of directors of Itasca. This board seat, combined with the Company’s 32.3% ownership of Itasca, provide the Company with significant influence over Itasca, but not controlling interest. The Company did not receive dividends from Itasca during the three and six month periods ended June 30, 2017 or 2016. Based on quoted market prices, the market value of the Company’s ownership in Itasca was $3.8 million at June 30, 2017.

 

As of December 31, 2016, the Company owned 12.1% of 1347 Property Insurance Holdings, Inc. (“PIH”) and purchased shares increasing its ownership to 17.4% during the six months ended June 30, 2017 for an additional $2.5 million. PIH is a publicly traded company that provides property and casualty insurance in the States of Louisiana, Texas, and Florida. The Company’s Chief Executive Officer was named to the board of directors of PIH in December 2016. This board seat and the Chief Executive Officer’s control of other entities that own shares of PIH, combined with the Company’s 17.4% ownership of PIH, provide the Company with significant influence over PIH, but not controlling interest. The Company did not receive dividends from PIH during the three and six month periods ended June 30, 2017 or 2016. Based on quoted market prices, the market value of the Company’s ownership in PIH was $8.3 million at June 30, 2017.

 

As of June 30, 2017, our retained earnings included undistributed earnings from our equity method investees of $1.9 million.

 

The summarized financial information presented below reflects the financial information of the Company’s significant equity method investee, Itasca, for the six months ended March 31, 2017, consistent with the Company’s recognition of the results of its equity method investments on a one-quarter lag. The summarized financial information is presented only for the periods when the Company owned its investment.

 

For the six months ended March 31,   2017  
    (in thousands)  
Revenue   $  
Gross profit   $  
Operating loss from continuing operations   $ (114 )
Net income   $ 7,207 (1)

 

(1) Net income primarily related to unrealized gains on investments.  

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
Intangible Assets
6 Months Ended
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

6. Intangible Assets

 

Intangible assets consisted of the following at June 30, 2017:

 

   

Useful

life

    Gross     Accumulated
amortization
    Net  
    (Years)     (in thousands)  
Intangible assets not yet subject to amortization:                                
Software in development           $ 1,273     $     $ 1,273  
Intangible assets subject to amortization:                                
Software in service     5       2,496       (285 )     2,211  
Product formulation     10       470       (313 )     157  
Total           $ 4,239     $ (598 )   $ 3,641  

 

Intangible assets consisted of the following at December 31, 2016:

 

   

Useful

life

    Gross     Accumulated
amortization
    Net  
    (Years)     (in thousands)  
Intangible assets not yet subject to amortization:                                
Software in development           $ 508     $     $ 508  
Intangible assets subject to amortization:                                
Software in service     5       1,764       (93 )     1,671  
Product formulation     10       454       (276 )     178  
Total           $ 2,726     $ (369 )   $ 2,357  

 

Amortization expense relating to intangible assets was $0.2 million and insignificant, respectively, for the six months ended June 30, 2017 and 2016.

 

The following table shows the Company’s estimated future amortization expense related to intangible assets currently subject to amortization for the next five years.

 

    Amount  
      (in thousands)  
Remainder 2017   $ 286  
2018     561  
2019     550  
2020     541  
2021     405  
Thereafter     25  
Total   $ 2,368  

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Goodwill
6 Months Ended
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill

7. Goodwill

 

The following represents a summary of changes in the Company’s carrying amount of goodwill for the six months ended June 30, 2017 (in thousands):

 

Balance as of December 31, 2016   $ 889  
Foreign currency translation     31  
Balance as of June 30, 2017   $ 920  

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Warranty Reserves
6 Months Ended
Jun. 30, 2017
Guarantees and Product Warranties [Abstract]  
Warranty Reserves

8. Warranty Reserves

 

In most instances, the Company’s digital projection products are covered by the manufacturing firm’s original warranty; however, for certain customers the Company may grant warranties in excess of the manufacturer’s warranty for digital products. In addition, the Company provides warranty coverage on screens it manufactures. The Company accrues for these costs at the time of sale. The following table summarizes warranty activity for the three and six months ended June 30, 2017 and 2016:

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2017     2016     2017     2016  
    (in thousands)  
Warranty accrual at beginning of period   $ 462     $ 314     $ 645     $ 310  
Charged to expense     128       191       175       348  
Claims paid, net of recoveries     (142 )     (123 )     (373 )     (281 )
Foreign currency adjustment     9       (2 )     10       3  
Warranty accrual at end of period   $ 457     $ 380     $ 457     $ 380  

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Debt
6 Months Ended
Jun. 30, 2017
Debt Disclosure [Abstract]  
Debt

9. Debt

 

Long-term debt

 

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

 

    June 30, 2017     December 31, 2016  
$2 million term loan   $ 1,998     $  
Less: current portion     (63 )      
Less: unamortized debt issuance costs     (37 )      
Long-term debt   $ 1,899     $  

 

On April 27, 2017, the Company entered into a debt agreement with a bank consisting of 1) a $2 million five-year term loan secured by a first lien deed of trust on the Company’s Alpharetta, GA facility, bearing interest at a fixed rate of 4.5% and payable in equal monthly installments of principal and interest calculated based on a 20-year amortization schedule with a final balloon payment of approximately $1.7 million due on May 10, 2022, and 2) a line of credit of up to $1 million secured by a second lien deed of trust on the Company’s Alpharetta, GA facility, bearing interest at the Prime Rate published in the Wall Street Journal plus 0.25% and with a term ending May 10, 2018. The debt agreement requires the Company to maintain a ratio of total liabilities to tangible net worth not in excess of 3:1 and maintain minimum liquidity of $2 million. The Company was in compliance with its debt covenants as of June 30, 2017. There were no borrowings outstanding on the line of credit as of June 30, 2017. The Company’s Chairman and Chief Executive Officer is also a member of the bank’s board of directors.

 

Scheduled long-term debt repayments are as follows (in thousands):

 

  Remainder of 2017     $ 31  
  2018       64  
  2019       68  
  2020       70  
  2021       74  
  Thereafter       1,691  
  Total     $ 1,998  

 

Short-term Debt

 

Short-term debt at June 30, 2017 consists of a $2.5 million progress payment note to facilitate the lessor’s purchase of equipment to be leased by the Company. The total purchase price for the equipment is expected to be approximately $5.6 million. The lessor made a progress payment of $2.5 million to the seller of the equipment on June 26, 2017, which represents the principal amount under the note and was recorded as a deposit on equipment to be leased on the condensed consolidated balance sheet. The note bears interest at a rate of 3.25% and will be considered repaid when the lessor pays the remaining balance of the purchase price to the seller of the equipment and the Company executes a lease for the equipment under a master lease agreement. Any outstanding principal balance on the note not considered repaid on or before August 31, 2017 will become due and payable on demand.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes
6 Months Ended
Jun. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

 

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the available objective evidence, including recent updates to the taxing jurisdictions generating income, the Company concluded that a valuation allowance should be recorded against all of the Company’s U.S. tax jurisdiction deferred tax assets as of June 30, 2017 and December 31, 2016.

 

The Company has completed the examination for Federal purposes for the 2011 fiscal year with no changes. The Company is subject to examination for Federal purposes for fiscal years 2013, 2014, 2015, and 2016. In most cases, the Company is subject to examinations by state or local jurisdictions based on the particular jurisdiction’s statute of limitations.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Compensation
6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Compensation

11. Stock Compensation

 

The Company recognizes compensation expense for all stock-based payment awards made to employees and directors based on their estimated grant date fair values. Stock-based compensation expense included in selling and administrative expenses approximated $0.2 million and $0.1 million for the three months ended June 30, 2017 and 2016, respectively, and $0.3 million and $0.2 million, respectively, for the six months ended June 30, 2017 and 2016, respectively.

 

Equity Compensation Plans

 

The Company’s 2010 Long-Term Incentive Plan (“2010 Plan”) provided 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, and performance units. Vesting terms varied with each grant and could be subject to vesting upon a “change in control” of the Company.

 

The Ballantyne Strong, Inc. 2014 Non-Employee Directors’ Restricted Stock Plan (the “2014 Non-Employee Plan”) provided for the award of restricted shares to outside directors. Shares issued under the 2014 Non-Employee Plan vested the day preceding the Company’s Annual Meeting of Stockholders in the year following issuance. The 2010 Plan and the 2014 Non-Employee Plan were replaced during the second quarter of 2017 by the 2017 Omnibus Equity Compensation Plan (“2017 Plan”), and therefore, no additional awards will be granted under the 2010 Plan or the 2014 Non-Employee Plan.

 

The 2017 Plan was approved by the Company’s shareholders at the annual meeting on June 15, 2017, 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 share-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. The total number of shares reserved for issuance under the 2017 Plan is 1,371,189 shares.

 

Options

 

The Company granted a total of 395,000 and 100,000 options during the six month periods ended June 30, 2017 and 2016, respectively. 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 grant.

 

The weighted average grant date fair value of stock options granted during the six month periods ended June 30, 2017 and 2016 was $2.42 and $1.42, respectively. The fair value of each stock option granted was estimated on the date of grant using a Black-Scholes valuation model with the following weighted average assumptions:

  

    2017     2016  
Expected dividend yield at date of grant     0.00 %     0.00 %
Risk-free interest rate     2.01 %     1.35 %
Expected stock price volatility     34.77 %     32.26 %
Expected life of options (in years)     6.0       6.0  

 

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. During 2017, the expected volatility was based on historical daily price changes of the Company’s stock for six years prior to the date of grant. During 2016, the Company used a one year period to calculate volatility, but updated this assumption in the current year to align the expected volatility with the expected life of the options. The expected life of options is the average number of years the Company estimates that options will be outstanding.

 

The following table summarizes stock option activity for the six months ended June 30, 2017:

 

   

Number of

Options

   

Weighted
Average
Exercise Price

Per Share

    Weighted
Average
Remaining
Contractual
Term
   

Aggregate
Intrinsic Value

(in thousands)

 
Outstanding at December 31, 2016     545,300     $ 4.78       9.68     $ 1,757  
Granted     395,000       6.53                  
Exercised     (7,000 )     4.70                  
Forfeited     (10,000 )     6.87                  
Outstanding at June 30, 2017     923,300     $ 5.54       9.14     $ 1,124  
Exercisable at June 30, 2017     141,300     $ 4.33       8.10     $ 335  

 

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 June 30, 2017.

 

As of June 30, 2017, 782,000 stock option awards were non-vested. Unrecognized compensation cost related to stock option awards was approximately $1.5 million, which is expected to be recognized over a weighted average period of 4.3 years.

 

Restricted Stock

 

The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant. As of June 30, 2017, the total unrecognized compensation cost related to non-vested restricted stock awards was approximately $0.8 million, which is expected to be recognized over a weighted average period of 2.1 years.

 

The following table summarizes restricted share activity for the six months ended June 30, 2017:

 

   

Number of Restricted

Stock Shares

    Weighted Average Grant
Price Fair Value
 
Non-vested at December 31, 2016     58,295     $ 4.77  
Granted     85,000       6.50  
Shares vested     (43,295 )     4.92  
Shares forfeited            
Non-vested at June 30, 2017     100,000     $ 6.17  

 

The following table summarizes restricted stock unit activity for the six months ended June 30, 2017:

 

   

Number of Restricted

Stock Units

   

Weighted Average Grant

Price Fair Value

 
Non-vested at December 31, 2016     13,750     $ 4.24  
Granted     30,835       6.81  
Shares vested            
Shares forfeited            
Non-vested at June 30, 2017     44,585     $ 6.02  

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments, Contingencies and Concentrations
6 Months Ended
Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments, Contingencies and Concentrations

12. Commitments, Contingencies and Concentrations

 

Litigation

 

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

 

Concentrations

 

The Company’s top ten customers accounted for approximately 53.3% and 50.7% of total consolidated net revenues for the three and six months ended June 30, 2017, respectively. Trade accounts receivable from these customers represented approximately 42.7% of net consolidated receivables at June 30, 2017. 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 concentration risk, the Company performs ongoing credit evaluations of its customers’ financial condition.

 

Leases

The Company and its subsidiaries lease plant and office facilities, furniture, autos and equipment under operating leases expiring through 2021. These leases generally contain renewal options and the Company expects to renew or replace certain of these leases in the ordinary course of business.

 

The Company’s future minimum lease payments for leases at June 30, 2017 are as follows:

 

    Capital
Leases
    Operating
Leases
 
    (In thousands)  
Remainder 2017   $ 131     $ 248  
2018     246       469  
2019     132       442  
2020           264  
2021           152  
Thereafter            
Total minimum lease payments   $ 509     $ 1,575  
Less: Amount representing interest     (25 )        
Present value of minimum lease payments     484          
Less: Current maturities     (240 )        
Capital lease obligations, net of current portion   $ 244          

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information
6 Months Ended
Jun. 30, 2017
Segment Reporting [Abstract]  
Business Segment Information

13. Business Segment Information

 

As of June 30, 2017, the Company’s operations were conducted principally through two business segments: Cinema and Digital Media. Cinema operations include the sale of digital projection equipment, screens, and sound systems. Digital Media operations include the delivery of end to end digital signage solutions, video communication solutions, content creation and management and service of digital signage and digital cinema equipment. The Company allocates resources to business segments and evaluates the performance of these segments based upon reported segment operating profit. The Company records intersegment sales at cost and has eliminated all significant intersegment sales in consolidation. The results of discontinued operations are excluded from the Cinema segment information below.

 

Summary by Business Segments

 

   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
(In thousands)   2017     2016     2017     2016  
                         
Net revenue                                
Cinema   $ 9,633     $ 11,288     $ 18,934     $ 21,015  
Digital Media     9,777       9,753       18,430       17,499  
Total segment net revenue     19,410       21,041       37,364       38,514  
Eliminations     (10 )     (483 )     (39 )     (842 )
Total net revenue   $ 19,400     $ 20,558     $ 37,325     $ 37,672  
                                 
Operating income (loss)                                
Cinema   $ 2,235     $ 3,066     $ 4,276     $ 6,113  
Digital Media     (238 )     831       (712 )     945  
Total segment operating income     1,997       3,897       3,564       7,058  
Unallocated general and administrative expenses     (2,830 )     (1,934 )     (4,994 )     (3,982 )
Other (expense) income                                
Interest, net     (28)             (16 )      
Cinema – foreign currency transaction loss     (137 )     (154 )     (222 )     (1,039 )
Digital Media – foreign currency transaction (loss) gain     30       (26 )     118       34  
Cinema - excess distribution from joint venture           502             502  
Cinema     7       9       10       50  
Digital Media           (3 )           (7 )
Change in value of marketable securities – Corporate asset           116             (366 )
Total other (expense) income     (128 )     444       (110 )     (826 )
(Loss) earnings before income taxes and equity method investment (loss) income   $ (961 )   $ 2,407     $ (1,540 )   $ 2,250  

 

(In thousands)   June 30, 2017     December 31, 2016  
Identifiable assets, excluding assets held for sale                
Cinema   $ 25,953     $ 29,881  
Digital Media     23,873       19,272  
Corporate assets     18,134       13,098  
Total   $ 67,960     $ 62,251  

 

Summary by Geographical Area

 

    Three Months Ended June 30,     Six Months Ended June 30,  
(In thousands)   2017     2016     2017     2016  
Net revenue                                
United States   $ 14,884     $ 16,309     $ 29,218     $ 29,541  
China     1,431       1,843       2,896       2,798  
Latin America     520       593       804       975  
Canada     1,787       1,172       3,007       2,277  
Mexico     383       447       739       1,344  
Europe     79       119       195       592  
Asia (excluding China)     212       17       278       25  
Other     104       58       188       120  
Total   $ 19,400     $ 20,558     $ 37,325     $ 37,672  

 

(In thousands)   June 30, 2017     December 31, 2016  
Identifiable assets, excluding assets held for sale                
United States   $ 46,003     $ 40,255  
Canada     21,957       21,996  
Total   $ 67,960     $ 62,251  

 

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

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2017
Accounting Policies [Abstract]  
Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

 

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

 

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K/A. 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/A for the fiscal year ended December 31, 2016.

 

The condensed consolidated balance sheet as of December 31, 2016 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. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

 

During the second quarter of 2017, the Company began classifying software in development as an intangible asset rather than property, plant and equipment, to be consistent with its classification of software assets in service. Accordingly, approximately $0.5 million of software in development at December 31, 2016 was reclassified to intangible assets from property, plant and equipment on the condensed consolidated balance sheet to conform to the current period presentation. This reclassification had no effect on the Company’s reported results of operations, comprehensive income, or cash flows.

Use of Management Estimates

Use of Management Estimates

 

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. 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 condensed 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.

Marketable Securities

Marketable Securities

 

For the six months ended June 30, 2016, the Company’s marketable securities were comprised of investments in the common stock of a publicly traded company. Changes in fair value, based on the market price of the investee’s stock, were recognized in other income in the condensed consolidated statement of operations. The Company used the fair value option to account for the investment to more appropriately recognize the value of this investment in our condensed consolidated financial statements since the Company did not exert significant influence over the investment, in which case the equity method of accounting would have been applied. None of the Company’s investments were classified as marketable securities or accounted for using the fair value option during the six months ended June 30, 2017.

Equity Method Investments

Equity Method Investments

 

We apply the equity method of accounting to investments when we have significant influence, but not controlling interest in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net (loss) income resulting from these investments is reported under the line item captioned “equity method investment (loss) income” in our condensed consolidated statements of operations. The carrying value of our equity method investments is reported in equity method investments in the condensed consolidated balance sheets. The Company’s equity method investments are reported initially at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. The Company did not record any impairments related to its investments during the three and six month periods ended June 30, 2017 or 2016. Note 5 contains additional information on our equity method investments, which are held by the Company’s Cinema segment.

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 fall, as of June 30, 2017 and December 31, 2016.

 

Fair values measured on a recurring basis at June 30, 2017 (in thousands):

 

    Level 1     Level 2     Level 3     Total  
Cash and cash equivalents   $ 2,800     $     $     $ 2,800  
Notes receivable                 1,669       1,669  
Total   $ 2,800     $     $ 1,669     $ 4,469  

 

Fair values measured on a recurring basis at December 31, 2016 (in thousands):

 

    Level 1     Level 2     Level 3     Total  
Cash and cash equivalents   $ 7,596     $     $     $ 7,596  
Notes receivable                 1,669       1,669  
Total   $ 7,596     $     $ 1,669     $ 9,265  

 

Quantitative information about the Company’s level 3 fair value measurements at June 30, 2017 is set forth below:

 

   

Fair Value at
6/30/2017

(in thousands)

    Valuation Technique   Unobservable input   Range  
Notes receivable   $ 1,669     Discounted cash flow   Probability of default     53 %  
                Discount rate     18 %  

 

The notes receivable are recorded at estimated fair value at June 30, 2017.

 

The significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are discount rate and probability of default. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement. There were no changes in the fair value of the Company’s notes receivable recorded during the three and six months ended June 30, 2017 or 2016.

 

The Company’s short-term and long-term debt are recorded at historical cost. As of June 30, 2017, the Company’s long-term debt, including current maturities, had a carrying value of $2.0 million. Based on discounted cash flows using current quoted interest rates (Level 2 of the fair value hierarchy), the estimated fair value at June 30, 2017 was $2.0 million.

 

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses, and short-term debt, reported in the condensed consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). During the six months ended June 30, 2017, the Company did not have any significant non-recurring measurements of non-financial assets or liabilities.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The guidance is effective for the Company beginning January 1, 2018. An entity may adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the ASU. The Company has obtained an understanding of ASU 2014-09 and has begun to analyze the impact of the new standard on its financial results. The Company has completed a high-level assessment of the attributes within its contracts for its major products and services, and has started assessing potential impacts to its internal processes, control environment, and disclosures. The Company expects to adopt this ASU through a cumulative effect adjustment as of January 1, 2018. While the Company has not yet quantified the impact that the adoption of ASU 2014-09 will have on the consolidated financial statements, the Company is continuing to evaluate the impact of the new standard on our financial results and other possible impacts. The Company will continue to provide enhanced disclosures as we continue our assessment.

 

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 requires an entity utilizing the first in-first out inventory method to change their measurement principle for inventory changes from the lower of cost or market to lower of cost or net realizable value. The Company prospectively adopted the guidance effective January 1, 2017. The adoption of ASU 2015-11 did not have a material effect on the Company’s consolidated financial statements.

 

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU 2016-01 requires equity investments that do not result in consolidation and are not accounted under the equity method to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets; and modifies certain fair value disclosure requirements. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is not permitted. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. ASU 2016-02 requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases with a term greater than twelve months, on its balance sheet. This ASU is effective in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is evaluating the requirements of ASU 2016-02 and its potential impact on the Company’s financial statements. The Company has leases primarily for property and equipment and is in the process of identifying and evaluating these leases for purposes of ASU 2016-02. For each of these leases, the term will be evaluated, including extension and renewal options as well as the lease payments. While the Company has not yet quantified the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements, the Company expects to record assets and liabilities on its balance sheet upon adoption of this standard, which may be material. The Company will continue to provide enhanced disclosures as it continues its assessment.

 

In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 simplifies accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, and certain classifications on the statement of cash flows. The Company adopted the guidance effective January 1, 2017 on a prospective basis. Additionally, as required by ASU 2016-09, when calculating diluted earnings per share, excess tax benefits were excluded from the calculation of assumed proceeds since such amounts are recognized in the income statement. The Company applied the cash flow presentation requirements prospectively, and the 2016 statement of cash flows was not adjusted. ASU 2016-09 also allows an entity to elect as an accounting policy either to estimate the total number of awards for which the requisite service period will not be rendered or to account for forfeitures for service-based awards as they occur. The Company has elected to account for forfeitures as they occur.

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. The Company believes its adoption will not significantly impact the Company’s results of operations and financial position.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which eliminates the diversity in practice related to eight cash flow classification issues. The Company adopted this ASU in the first quarter of 2017 on a prospective basis. Adoption affected the classification of dividends received from equity method investees on the statement of cash flows, but did not have any other impact.

 

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The new guidance eliminates Step 2 of the goodwill impairment testing which requires the fair value of individual assets and liabilities of a reporting unit to be determined when measuring goodwill impairment. The new guidance may result in different amounts of impairment that could be recognized compared to existing guidance. In addition, failing step 1 of the impairment test, where the carrying value of a reporting unit is compared to its fair value, may not result in impairment under existing guidance. However, under the revised guidance, failing step 1 will always result in a goodwill impairment. ASU 2017-04 is to be applied prospectively for goodwill impairment testing performed in years beginning after December 15, 2019. The Company does not believe the adoption will significantly impact the Company’s results of operations or financial position.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Discontinued Operations (Tables)
6 Months Ended
Jun. 30, 2017
Discontinued Operations and Disposal Groups [Abstract]  
Schedule of Comparative Financial Results of Discontinued Operations

The summary comparative financial results of discontinued operations were as follows (in thousands):

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
Total net revenues   $ 12     $ 2,435     $ 24     $ 5,857  
Total cost of revenues     22       2,899       48       5,791  
Total selling and administrative expenses     43       346       53       706  
Loss from operations of discontinued operations     (53 )     (810 )     (77 )     (640 )
Loss before income taxes     (26 )     (807 )     (49 )     (620 )
Income tax expense           (114 )           (114 )
Net loss from discontinued operations, net of tax   $ (26 )   $ (921 )   $ (49 )   $ (734 )

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2017
Accounting Policies [Abstract]  
Schedule of Fair Value Measured Financial Assets and Liabilities

Fair values measured on a recurring basis at June 30, 2017 (in thousands):

 

    Level 1     Level 2     Level 3     Total  
Cash and cash equivalents   $ 2,800     $     $     $ 2,800  
Notes receivable                 1,669       1,669  
Total   $ 2,800     $     $ 1,669     $ 4,469  

 

Fair values measured on a recurring basis at December 31, 2016 (in thousands):

 

    Level 1     Level 2     Level 3     Total  
Cash and cash equivalents   $ 7,596     $     $     $ 7,596  
Notes receivable                 1,669       1,669  
Total   $ 7,596     $     $ 1,669     $ 9,265  

Summary of Quantitative Information About Company's Level 3 Fair Value Measurements

Quantitative information about the Company’s level 3 fair value measurements at June 30, 2017 is set forth below:

 

   

Fair Value at
6/30/2017

(in thousands)

    Valuation Technique   Unobservable input   Range  
Notes receivable   $ 1,669     Discounted cash flow   Probability of default     53 %  
                Discount rate     18 %  

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
(Loss) Earnings Per Common Share (Tables)
6 Months Ended
Jun. 30, 2017
Earnings Per Share [Abstract]  
Schedule of Reconciliation Between Basic and Diluted Earnings Per Share

The following table provides the reconciliation between average shares used to compute basic and diluted (loss) earnings per share:

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
Weighted average shares outstanding (in thousands):                                
Basic weighted average shares outstanding     14,263       14,213       14,264       14,208  
Dilutive effect of stock options and certain non-vested shares of restricted stock           80             87  
Diluted weighted average shares outstanding     14,263       14,293       14,264       14,295  

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Equity Method Investments (Tables)
6 Months Ended
Jun. 30, 2017
Equity Method Investments and Joint Ventures [Abstract]  
Summary of Equity Method Investments

The following summarizes our equity method investments:

 

    June 30, 2017     December 31, 2016  
    (dollars in thousands)  
Entity     Carrying
Amount
      Economic
Interest
      Carrying
Amount
      Economic
Interest
 
RELM Wireless Corporation   $ 4,328       8.3 %   $ 4,382       8.3 %
Itasca Capital, Ltd.     5,870       32.3 %     3,368       32.3 %
1347 Property Insurance Holdings, Inc.     7,936       17.4 %     5,348       12.1 %
Total   $ 18,134             $ 13,098          

Summary of Income (Loss) of Equity Method Investees

The following summarizes the (loss) income of equity method investees reflected in the Statement of Operations:

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
Entity   (in thousands)  
RELM Wireless Corporation   $ (105 )   $     $ (97 )   $ 41  
Itasca Capital, Ltd.     (150 )           2,311        
1347 Property Insurance Holdings, Inc.     43             55        
Total (loss) income   $ (212 )   $     $ 2,269     $ 41  

Summarized Financial Information

The summarized financial information is presented only for the periods when the Company owned its investment.

 

For the six months ended March 31,   2017  
    (in thousands)  
Revenue   $  
Gross profit   $  
Operating loss from continuing operations   $ (114 )
Net income   $ 7,207 (1)

 

(1) Net income primarily related to unrealized gains on investments.  

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Intangible Assets

Intangible assets consisted of the following at June 30, 2017:

 

   

Useful

life

    Gross     Accumulated
amortization
    Net  
    (Years)     (in thousands)  
Intangible assets not yet subject to amortization:                                
Software in development           $ 1,273     $     $ 1,273  
Intangible assets subject to amortization:                                
Software in service     5       2,496       (285 )     2,211  
Product formulation     10       470       (313 )     157  
Total           $ 4,239     $ (598 )   $ 3,641  

 

Intangible assets consisted of the following at December 31, 2016:

 

   

Useful

life

    Gross     Accumulated
amortization
    Net  
    (Years)     (in thousands)  
Intangible assets not yet subject to amortization:                                
Software in development           $ 508     $     $ 508  
Intangible assets subject to amortization:                                
Software in service     5       1,764       (93 )     1,671  
Product formulation     10       454       (276 )     178  
Total           $ 2,726     $ (369 )   $ 2,357  

Schedule of Intangible Assets Future Amortization Expense

The following table shows the Company’s estimated future amortization expense related to intangible assets currently subject to amortization for the next five years.

 

    Amount  
      (in thousands)  
Remainder 2017   $ 286  
2018     561  
2019     550  
2020     541  
2021     405  
Thereafter     25  
Total   $ 2,368  

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Goodwill (Tables)
6 Months Ended
Jun. 30, 2017
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, 2017 (in thousands):

 

Balance as of December 31, 2016   $ 889  
Foreign currency translation     31  
Balance as of June 30, 2017   $ 920  

XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Warranty Reserves (Tables)
6 Months Ended
Jun. 30, 2017
Product Warranties Disclosures [Abstract]  
Schedule of Product Warranty Liability

The following table summarizes warranty activity for the three and six months ended June 30, 2017 and 2016:

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2017     2016     2017     2016  
    (in thousands)  
Warranty accrual at beginning of period   $ 462     $ 314     $ 645     $ 310  
Charged to expense     128       191       175       348  
Claims paid, net of recoveries     (142 )     (123 )     (373 )     (281 )
Foreign currency adjustment     9       (2 )     10       3  
Warranty accrual at end of period   $ 457     $ 380     $ 457     $ 380  

XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Debt (Tables)
6 Months Ended
Jun. 30, 2017
Debt Disclosure [Abstract]  
Schedule of Long-term Debt

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

 

    June 30, 2017     December 31, 2016  
$2 million term loan   $ 1,998     $  
Less: current portion     (63 )      
Less: unamortized debt issuance costs     (37 )      
Long-term debt   $ 1,899     $  

Schedule of Long-term Debt Maturities

Scheduled long-term debt repayments are as follows (in thousands):

 

  Remainder of 2017     $ 31  
  2018       64  
  2019       68  
  2020       70  
  2021       74  
  Thereafter       1,691  
  Total     $ 1,998  

XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Compensation (Tables)
6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Weighted Average Assumptions for Fair Value of Stock Options Granted During the Period

The fair value of each stock option granted was estimated on the date of grant using a Black-Scholes valuation model with the following weighted average assumptions:

  

    2017     2016  
Expected dividend yield at date of grant     0.00 %     0.00 %
Risk-free interest rate     2.01 %     1.35 %
Expected stock price volatility     34.77 %     32.26 %
Expected life of options (in years)     6.0       6.0  

Summary of Stock Options Activities

The following table summarizes stock option activity for the six months ended June 30, 2017:

 

   

Number of

Options

   

Weighted
Average
Exercise Price

Per Share

    Weighted
Average
Remaining
Contractual
Term
   

Aggregate
Intrinsic Value

(in thousands)

 
Outstanding at December 31, 2016     545,300     $ 4.78       9.68     $ 1,757  
Granted     395,000       6.53                  
Exercised     (7,000 )     4.70                  
Forfeited     (10,000 )     6.87                  
Outstanding at June 30, 2017     923,300     $ 5.54       9.14     $ 1,124  
Exercisable at June 30, 2017     141,300     $ 4.33       8.10     $ 335  

Summary of Restricted Stock Activity

The following table summarizes restricted share activity for the six months ended June 30, 2017:

 

   

Number of Restricted

Stock Shares

    Weighted Average Grant
Price Fair Value
 
Non-vested at December 31, 2016     58,295     $ 4.77  
Granted     85,000       6.50  
Shares vested     (43,295 )     4.92  
Shares forfeited            
Non-vested at June 30, 2017     100,000     $ 6.17  

Schedule of Nonvested Restricted Stock Units Activity

The following table summarizes restricted stock unit activity for the six months ended June 30, 2017:

 

   

Number of Restricted

Stock Units

   

Weighted Average Grant

Price Fair Value

 
Non-vested at December 31, 2016     13,750     $ 4.24  
Granted     30,835       6.81  
Shares vested            
Shares forfeited            
Non-vested at June 30, 2017     44,585     $ 6.02  

XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments, Contingencies and Concentrations (Tables)
6 Months Ended
Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Leases Future Minimum Lease Payments

The Company’s future minimum lease payments for leases at June 30, 2017 are as follows:

 

    Capital
Leases
    Operating
Leases
 
    (In thousands)  
Remainder 2017   $ 131     $ 248  
2018     246       469  
2019     132       442  
2020           264  
2021           152  
Thereafter            
Total minimum lease payments   $ 509     $ 1,575  
Less: Amount representing interest     (25 )        
Present value of minimum lease payments     484          
Less: Current maturities     (240 )        
Capital lease obligations, net of current portion   $ 244          

XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information (Tables)
6 Months Ended
Jun. 30, 2017
Segment Reporting [Abstract]  
Schedule of Segment Reporting Information by Segment

Summary by Business Segments

 

   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
(In thousands)   2017     2016     2017     2016  
                         
Net revenue                                
Cinema   $ 9,633     $ 11,288     $ 18,934     $ 21,015  
Digital Media     9,777       9,753       18,430       17,499  
Total segment net revenue     19,410       21,041       37,364       38,514  
Eliminations     (10 )     (483 )     (39 )     (842 )
Total net revenue   $ 19,400     $ 20,558     $ 37,325     $ 37,672  
                                 
Operating income (loss)                                
Cinema   $ 2,235     $ 3,066     $ 4,276     $ 6,113  
Digital Media     (238 )     831       (712 )     945  
Total segment operating income     1,997       3,897       3,564       7,058  
Unallocated general and administrative expenses     (2,830 )     (1,934 )     (4,994 )     (3,982 )
Other (expense) income                                
Interest, net     (28)             (16 )      
Cinema – foreign currency transaction loss     (137 )     (154 )     (222 )     (1,039 )
Digital Media – foreign currency transaction (loss) gain     30       (26 )     118       34  
Cinema - excess distribution from joint venture           502             502  
Cinema     7       9       10       50  
Digital Media           (3 )           (7 )
Change in value of marketable securities – Corporate asset           116             (366 )
Total other (expense) income     (128 )     444       (110 )     (826 )
(Loss) earnings before income taxes and equity method investment (loss) income   $ (961 )   $ 2,407     $ (1,540 )   $ 2,250  

Reconciliation of Assets from Segment to Consolidated

(In thousands)   June 30, 2017     December 31, 2016  
Identifiable assets, excluding assets held for sale                
Cinema   $ 25,953     $ 29,881  
Digital Media     23,873       19,272  
Corporate assets     18,134       13,098  
Total   $ 67,960     $ 62,251  

Schedule of Segment Reporting Information by Geographic Area

Summary by Geographical Area

 

    Three Months Ended June 30,     Six Months Ended June 30,  
(In thousands)   2017     2016     2017     2016  
Net revenue                                
United States   $ 14,884     $ 16,309     $ 29,218     $ 29,541  
China     1,431       1,843       2,896       2,798  
Latin America     520       593       804       975  
Canada     1,787       1,172       3,007       2,277  
Mexico     383       447       739       1,344  
Europe     79       119       195       592  
Asia (excluding China)     212       17       278       25  
Other     104       58       188       120  
Total   $ 19,400     $ 20,558     $ 37,325     $ 37,672  

Summary of Identifiable Assets by Geographical Area

(In thousands)   June 30, 2017     December 31, 2016  
Identifiable assets, excluding assets held for sale                
United States   $ 46,003     $ 40,255  
Canada     21,957       21,996  
Total   $ 67,960     $ 62,251  

XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
Discontinued Operations (Details Narrative) - USD ($)
$ in Thousands
May 17, 2017
Nov. 04, 2016
SWBTI [Member]    
Proceeds from sale of subsidiaries   $ 400
Strong Westrex, Inc. [Member]    
Proceeds from sale of subsidiaries $ 100  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
Discontinued Operations - Schedule of Comparative Financial Results of Discontinued Operations (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Discontinued Operations and Disposal Groups [Abstract]        
Total net revenues $ 12 $ 2,435 $ 24 $ 5,857
Total cost of revenues 22 2,899 48 5,791
Total selling and administrative expenses 43 346 53 706
Loss from operations of discontinued operations (53) (810) (77) (640)
Loss before income taxes (26) (807) (49) (620)
Income tax expense (114) (114)
Net loss from discontinued operations, net of tax $ (26) $ (921) $ (49) $ (734)
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2016
Jun. 30, 2017
Long-term debt $ 1,998
Long-term debt fair value   $ 2,000
Software in Development [Member]    
Amount reclassification made $ 500  
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Fair Value Measured Financial Assets and Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Cash and cash equivalents $ 2,800 $ 7,596
Notes receivable 1,669 1,669
Total 4,469 9,265
Level 1 [Member]    
Cash and cash equivalents 2,800 7,596
Notes receivable
Total 2,800 7,596
Level 2 [Member]    
Cash and cash equivalents
Notes receivable
Total
Level 3 [Member]    
Cash and cash equivalents
Notes receivable 1,669 1,669
Total $ 1,669 $ 1,669
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Summary of Quantitative Information About Company's Level 3 Fair Value Measurements (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Accounting Policies [Abstract]    
Note receivable $ 1,669 $ 1,669
Valuation Technique Discounted cash flow  
Probability of default 53.00%  
Discount rate 18.00%  
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
(Loss) Earnings Per Common Share (Details Narrative) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Stock Option in Which Exercise Price Exceeds the Average Market Price of Common Shares [Member]        
Anti dilutive securities excluded from computation of earnings per share 445,000 350,000 445,000 430,000
Restricted Stock Awards and Stock Options in Which Exercise Price is Less Than the Average Market Price of Common Shares [Member]        
Anti dilutive securities excluded from computation of earnings per share 156,606 79,167 176,479 87,387
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
(Loss) Earnings Per Common Share - Schedule of Reconciliation Between Basic and Diluted Earnings Per Share (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Earnings Per Share [Abstract]        
Basic weighted average shares outstanding 14,263,000 14,213,000 14,264,000 14,208,000
Dilutive effect of stock options and certain non-vested shares of restricted stock 80,000 87,000
Diluted weighted average shares outstanding 14,263,000 14,293,000 14,264,000 14,295,000
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
Equity Method Investments (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Addional cost during the period     $ 2,525 $ 3,764  
Retained earnings undistributed earnings from our equity method investees $ 1,900   1,900    
Relm Wireless Corporation [Member]          
Dividend received 100 $ 0 200 $ 0  
Quoted market value of the company's ownership $ 4,300   $ 4,300    
Equity method ownership percentage 8.30%   8.30%   8.30%
Relm Wireless Corporation [Member] | Chief Executive Officer [Member] | Minimum [Member]          
Combined equity ownership percentage 20.00%   20.00%    
Itasca Capital, Ltd. [Member]          
Quoted market value of the company's ownership $ 3,800   $ 3,800    
Equity method ownership percentage 32.30%   32.30%   32.30%
1347 Property Insurance Holdings, Inc. [Member]          
Quoted market value of the company's ownership $ 8,300   $ 8,300    
Equity method ownership percentage 17.40%   17.40%   12.10%
Addional cost during the period     $ 2,500    
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.7.0.1
Equity Method Investments - Summary of Equity Method Investments (Details) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Equity investment, Carrying Amount $ 18,134 $ 13,098
Relm Wireless Corporation [Member]    
Equity investment, Carrying Amount $ 4,328 $ 4,382
Equity investment, Economic Interest 8.30% 8.30%
Itasca Capital, Ltd. [Member]    
Equity investment, Carrying Amount $ 5,870 $ 3,368
Equity investment, Economic Interest 32.30% 32.30%
1347 Property Insurance Holdings, Inc. [Member]    
Equity investment, Carrying Amount $ 7,936 $ 5,348
Equity investment, Economic Interest 17.40% 12.10%
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.7.0.1
Equity Method Investments - Summary of Income (Loss) of Equity Method Investees (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Equity method investment income $ (212) $ 2,269 $ 41
Equity Method Investments [Member]        
Equity method investment income (212) 2,269 41
Relm Wireless Corporation [Member] | Equity Method Investments [Member]        
Equity method investment income (105) (97) 41
Itasca Capital, Ltd. [Member] | Equity Method Investments [Member]        
Equity method investment income (150) 2,311
1347 Property Insurance Holdings, Inc. [Member] | Equity Method Investments [Member]        
Equity method investment income $ 43 $ 55
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.7.0.1
Equity Method Investments - Summarized Financial Information (Details) - Itasca Capital, Ltd. [Member]
$ in Thousands
6 Months Ended
Mar. 31, 2017
USD ($)
Revenue
Gross profit
Operating income from continuing operations (114)
Net income $ 7,207 [1]
[1] Net income primarily related to unrealized gains on investments.
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.7.0.1
Intangible Assets (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization expense $ 200 $ 200
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.7.0.1
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Intangible assets, Gross $ 4,239 $ 2,726
Intangible assets, Accumulated amortization (598) (369)
Intangible assets, Net $ 2,368 $ 2,357
Software in Service [Member]    
Intangible assets, Useful life 5 years 5 years
Intangible assets, Gross $ 2,496 $ 1,764
Intangible assets, Accumulated amortization (285) (93)
Intangible assets, Net $ 2,211 $ 1,671
Production Formulation [Member]    
Intangible assets, Useful life 10 years 10 years
Intangible assets, Gross $ 470 $ 454
Intangible assets, Accumulated amortization (313) (276)
Intangible assets, Net 157 178
Software in Development [Member]    
Intangible assets, Gross 1,273 508
Intangible assets, Accumulated amortization
Intangible assets, Net $ 1,273 $ 508
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.7.0.1
Intangible Assets - Schedule of Intangible Assets Future Amortization Expense (Details) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]    
Remainder of 2017 $ 286  
2018 561  
2019 550  
2020 541  
2021 405  
Thereafter 25  
Total $ 2,368 $ 2,357
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.7.0.1
Goodwill - Summary of Changes in Carrying Amount of Goodwill (Details)
$ in Thousands
6 Months Ended
Jun. 30, 2017
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
Balance $ 889
Foreign currency translation 31
Balance $ 920
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.7.0.1
Warranty Reserves - Schedule of Product Warranty Liability (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Extended Product Warranty Disclosure [Abstract]        
Warranty accrual at beginning of period $ 462 $ 314 $ 645 $ 310
Charged to expense 128 191 175 348
Claims paid, net of recoveries (142) (123) (373) (281)
Foreign currency adjustment 9 (2) 10 3
Warranty accrual at end of period $ 457 $ 380 $ 457 $ 380
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.7.0.1
Debt (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Apr. 27, 2017
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Short-term debt   $ 2,500  
Total commitment for the equipment purchase   5,600    
Issuance of short-term progress payment note payable (See Note 9)   $ 2,500  
Line of Credit [Member]        
Debt maturity date May 10, 2018      
Line of credit maximum borrowing capacity $ 1,000      
Maximum allowed liabilities to tangible net worth 3      
Minimum liquidity value $ 2,000      
Line of Credit [Member] | Prime Rate [Member]        
Line of credit bearing interest rate 0.25%      
Long-term Debt [Member]        
Secured loan $ 2,000      
Loan term 5 years      
Long term debt bearing interest fixed rate 4.50%      
Debt installment determination period 20 years      
Debt balloon payment amount $ 1,700      
Debt maturity date May 10, 2022      
Short-term Debt [Member]        
Short term debt bearing interest rate   3.25%    
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.7.0.1
Debt - Schedule of Long-term Debt (Details) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Debt Disclosure [Abstract]    
$2 million term loan $ 1,998
Less: current portion (63)
Less: unamortized debt issuance costs (37)  
Long-term debt $ 1,899
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.7.0.1
Debt - Schedule of Long-term Debt (Details) (Parenthetical)
$ in Thousands
Jun. 30, 2017
USD ($)
Debt Disclosure [Abstract]  
Long-term debt fair value $ 2,000
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.7.0.1
Debt - Schedule of Long-term Debt Maturities (Details) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Debt Disclosure [Abstract]    
Remainder of 2017 $ 31  
2018 64  
2019 68  
2020 70  
2021 74  
Thereafter 1,691  
Total $ 1,998
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes (Details Narrative)
6 Months Ended
Jun. 30, 2017
Income Tax Disclosure [Abstract]  
Income tax examination description The Company has completed the examination for Federal purposes for the 2011 fiscal year with no changes. The Company is subject to examination for Federal purposes for fiscal years 2013, 2014, 2015, and 2016. In most cases, the Company is subject to examinations by state or local jurisdictions based on the particular jurisdiction’s statute of limitations.
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Compensation (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Share-based compensation expense     $ 330 $ 244
Number of shares granted     395,000  
Options [Member]        
Number of shares granted     395,000 100,000
Share based compensation arrangement by share based payment award options grants in period weighted average grant date fair value     $ 2.42 $ 1.42
Restricted Stock [Member]        
Compensation cost expected to be recognized, weighted average period     2 years 1 month 6 days  
Unrecognized for restricted stock, value $ 800   $ 800  
Stock Option [Member]        
Share-based compensation arrangement by share-based payment award, options, non-vested, number 782,000   782,000  
Total unrecognized compensation cost related to stock option awards $ 1,500   $ 1,500  
Compensation cost expected to be recognized, weighted average period     4 years 3 months 19 days  
2017 Plan [Member]        
Number of shares reserved for issuance 1,371,189   1,371,189  
Selling, General and Administrative Expenses [Member]        
Share-based compensation expense $ 200 $ 100 $ 300 $ 200
XML 65 R54.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Compensation - Schedule of Weighted Average Assumptions for Fair Value of Stock Options Granted During the Period (Details)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Expected dividend yield at date of grant 0.00% 0.00%
Risk-free interest rate 2.01% 1.35%
Expected stock price volatility 34.77% 32.26%
Expected life of options (in years) 6 years 6 years
XML 66 R55.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Compensation - Summary of Stock Options Activities (Details)
$ / shares in Units, $ in Thousands
6 Months Ended
Jun. 30, 2017
USD ($)
$ / shares
shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Number of Options, Outstanding beginning balance | shares 545,300
Number of Options, Granted | shares 395,000
Number of Options, Exercised | shares (7,000)
Number of Options, Forfeited | shares (10,000)
Number of Options, Outstanding ending balance | shares 923,300
Number of Options, Exercisable | shares 141,300
Weighted Average Exercise Price Per Share, Outstanding beginning balance | $ / shares $ 4.78
Weighted Average Exercise Price Per Share, Granted | $ / shares 6.53
Weighted Average Exercise Price Per Share, Exercised | $ / shares 4.70
Weighted Average Exercise Price Per Share, Forfeited | $ / shares 6.87
Weighted Average Exercise Price Per Share, Outstanding ending balance | $ / shares 5.54
Weighted Average Exercise Price Per Share, Exercisable | $ / shares $ 4.33
Weighted Average Remaining Contractual Term, beginning balance 9 years 8 months 5 days
Weighted Average Remaining Contractual Term, ending balance 9 years 1 month 20 days
Weighted Average Remaining Contractual Term, Exercisable 8 years 1 month 6 days
Aggregate Intrinsic Value, beginning balance | $ $ 1,757
Aggregate Intrinsic Value, ending balance | $ 1,124
Aggregate Intrinsic Value, Exercisable | $ $ 335
XML 67 R56.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Compensation - Summary of Restricted Stock Activity (Details) - Restricted Stock [Member]
6 Months Ended
Jun. 30, 2017
$ / shares
shares
Number of Restricted Stock Shares, Non-vested beginning balance | shares 58,295
Number of Restricted Stock Shares, Granted | shares 85,000
Number of Restricted Stock Shares, vested | shares (43,295)
Number of Restricted Stock Shares, forfeited | shares
Number of Restricted Stock Shares, Non-vested ending balance | shares 100,000
Weighted Average Grant Date Fair Value, Non-vested beginning balance | $ / shares $ 4.77
Weighted Average Grant Date Fair Value, Granted | $ / shares 6.50
Weighted Average Grant Date Fair Value, Vested | $ / shares 4.92
Weighted Average Grant Date Fair Value, Forfeited | $ / shares
Weighted Average Grant Date Fair Value, Non-vested ending balance | $ / shares $ 6.17
XML 68 R57.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Compensation - Schedule of Nonvested Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member]
6 Months Ended
Jun. 30, 2017
$ / shares
shares
Number of Restricted Stock Shares, Non-vested beginning balance | shares 13,750
Number of Restricted Stock Shares, Granted | shares 30,835
Number of Restricted Stock Shares, vested | shares
Number of Restricted Stock Shares, forfeited | shares
Number of Restricted Stock Shares, Non-vested ending balance | shares 44,585
Weighted Average Grant Date Fair Value, Non-vested beginning balance | $ / shares $ 4.24
Weighted Average Grant Date Fair Value, Granted | $ / shares 6.81
Weighted Average Grant Date Fair Value, Vested | $ / shares
Weighted Average Grant Date Fair Value, Forfeited | $ / shares
Weighted Average Grant Date Fair Value, Non-vested ending balance | $ / shares $ 6.02
XML 69 R58.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments, Contingencies and Concentrations (Details Narrative)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Segments
Jun. 30, 2017
Segments
Concentration risk, number of customers 10 10
Operating lease expiration date   expiring through 2021
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]    
Concentration risk, percentage 53.30% 50.70%
Accounts Receivable [Member] | Customer Concentration Risk [Member]    
Concentration risk, percentage   42.70%
XML 70 R59.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments, Contingencies and Concentrations - Schedule of Leases Future Minimum Lease Payments (Details)
$ in Thousands
Jun. 30, 2017
USD ($)
Leases [Abstract]  
Capital Leases, Remainder 2017 $ 131
Capital Leases, 2018 246
Capital Leases, 2019 132
Capital Leases, 2020
Capital Leases, 2021
Capital Leases, Thereafter
Total minimum lease payments 509
Less: Amount representing interest (25)
Present value of minimum lease payments 484
Less: Current maturities (240)
Capital lease obligations, net of current portion 244
Operating Leases, Remainder 2017 248
Operating Leases, 2018 469
Operating Leases, 2019 442
Operating Leases, 2020 264
Operating Leases, 2021 152
Operating Leases, Thereafter
Total minimum Operating lease payments $ 1,575
XML 71 R60.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information (Details Narrative)
6 Months Ended
Jun. 30, 2017
Segments
Segment Reporting [Abstract]  
Number of business segment 2
XML 72 R61.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information - Schedule of Segment Reporting Information by Segment (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Segment Reporting Information [Line Items]        
Total segment revenue $ 19,400 $ 20,558 $ 37,325 $ 37,672
Operating income (Loss) (833) 1,963 (1,430) 3,076
Other (expense) income - foreign currency transaction (loss) gain (107) (180) (104) (1,005)
Cinema - excess distribution from joint venture 502 502
Other (expense) income 7 6 10 43
Change in value of marketable securities - Corporate asset 116 (366)
Total other (expense) income (128) 444 (110) (826)
Business Segments [Member]        
Segment Reporting Information [Line Items]        
Total segment revenue 19,410 21,041 37,364 38,514
Eliminations (10) (483) (39) (842)
Total net revenue 19,400 20,558 37,325 37,672
Operating income (Loss) 1,997 3,897 3,564 7,058
Unallocated general and administrative expenses (2,830) (1,934) (4,994) (3,982)
Other (expense) income Interest, net (28) (16)
Change in value of marketable securities - Corporate asset 116 (366)
Total other (expense) income (128) 444 (110) (826)
(Loss) earnings before income taxes and equity method investment (loss) income (961) 2,407 (1,540) 2,250
Business Segments [Member] | Cinema [Member]        
Segment Reporting Information [Line Items]        
Total segment revenue 9,633 11,288 18,934 21,015
Operating income (Loss) 2,235 3,066 4,276 6,113
Other (expense) income - foreign currency transaction (loss) gain (137) (154) (222) (1,039)
Cinema - excess distribution from joint venture 502 502
Other (expense) income 7 9 10 50
Business Segments [Member] | Digital Media [Member]        
Segment Reporting Information [Line Items]        
Total segment revenue 9,777 9,753 18,430 17,499
Operating income (Loss) (238) 831 (712) 945
Other (expense) income - foreign currency transaction (loss) gain 30 (26) 118 34
Other (expense) income $ (3) $ (7)
XML 73 R62.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information - Reconciliation of Assets from Segment to Consolidated (Details) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Identifiable assets, excluding assets held for sale $ 67,960 $ 62,251
Cinema [Member] | Business Segments [Member]    
Identifiable assets, excluding assets held for sale 25,953 29,881
Digital Media [Member] | Business Segments [Member]    
Identifiable assets, excluding assets held for sale 23,873 19,272
Corporate Assets [Member] | Business Segments [Member]    
Identifiable assets, excluding assets held for sale $ 18,134 $ 13,098
XML 74 R63.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information - Schedule of Segment Reporting Information by Geographic Area (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Net revenue $ 19,400 $ 20,558 $ 37,325 $ 37,672
United States [Member]        
Net revenue 14,884 16,309 29,218 29,541
China [Member]        
Net revenue 1,431 1,843 2,896 2,798
Latin America [Member]        
Net revenue 520 593 804 975
Canada [Member]        
Net revenue 1,787 1,172 3,007 2,277
Mexico [Member]        
Net revenue 383 447 739 1,344
Europe [Member]        
Net revenue 79 119 195 592
Asia (Excluding China) [Member]        
Net revenue 212 17 278 25
Other [Member]        
Net revenue $ 104 $ 58 $ 188 $ 120
XML 75 R64.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment Information - Summary of Identifiable Assets by Geographical Area (Details) - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Identifiable assets, excluding assets held for sale $ 67,960 $ 62,251
United States [Member]    
Identifiable assets, excluding assets held for sale 46,003 40,255
Canada [Member]    
Identifiable assets, excluding assets held for sale $ 21,957 $ 21,996
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