UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2023

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

For the transition period from to

Commission File Number: 1-13906

FG GROUP HOLDINGS INC.

(Exact Name of Registrant as Specified in Its Charter)

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

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

(704) 994-8279

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

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

Class		Outstanding as of May 12, 2023
Common Stock, $0.01 par value		19,469,649 shares

TABLE OF CONTENTS

		Page No.

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets, March 31, 2023 and December 31, 2022 (Unaudited)	3

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 20221 (Unaudited)	7

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	34

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 6.	Exhibits	36

	Signatures	37

PART I. Financial Information

Item 1. Financial Statements

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(Unaudited)

	March 31, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	4,349		$	3,789
Accounts receivable (net of allowance for credit losses of $273 and $409, respectively)		5,552			6,167
Inventories, net		3,660			3,389
Other current assets		5,387			4,871
Total current assets		18,948			18,216
Property, plant and equipment, net		12,493			12,649
Operating lease right-of-use assets		285			310
Finance lease right-of-use asset		633			666
Equity holdings		33,756			37,522
Film and television programming rights, net		1,584			1,501
Intangible assets, net		4			5
Goodwill		882			882
Other assets		2			2
Total assets	$	68,587		$	71,753

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,964		$	4,375
Accrued expenses		4,743			5,167
Short-term debt		4,088			2,510
Current portion of long-term debt		217			216
Current portion of operating lease obligations		118			116
Current portion of finance lease obligations		125			117
Deferred revenue and customer deposits		2,402			1,787
Total current liabilities		15,657			14,288
Operating lease obligations, net of current portion		227			257
Finance lease obligations, net of current portion		514			550
Long-term debt, net of current portion and deferred debt issuance costs, net		4,951			5,004
Deferred income taxes		4,400			4,851
Other long-term liabilities		103			105
Total liabilities		25,852			25,055

Commitments, contingencies and concentrations (Note 14)		-			-

Stockholders’ equity:
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding		-			-
Common stock, par value $.01 per share; authorized 50,000 shares; issued 22,264 shares; outstanding 19,470		223			223
Additional paid-in capital		54,009			53,882
Retained earnings		12,424			16,437
Treasury stock, 2,794 shares at cost		(18,586	)		(18,586	)
Accumulated other comprehensive loss		(5,335	)		(5,258	)
Total stockholders’ equity		42,735			46,698
Total liabilities and stockholders’ equity	$	68,587		$	71,753

See accompanying notes to unaudited condensed consolidated financial statements.

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2023 and 2022

(In thousands, except per share data)

(Unaudited)

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

Net loss per share
Basic	$	(0.20	)	$	(0.04	)
Diluted	$	(0.20	)	$	(0.04	)

Weighted-average shares used in computing net loss per share:
Basic		19,470			18,990
Diluted		19,470			18,990

See accompanying notes to unaudited condensed consolidated financial statements.

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended March 31, 2023 and 2022

(In thousands)

(Unaudited)

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

See accompanying notes to unaudited condensed consolidated financial statements.

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2023 and 2022

(In thousands)

(Unaudited)

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

FG Group Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2023 and 2022

(In thousands)

(Unaudited)

	2023			2022
	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(3,989	)	$	(802	)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Recovery of doubtful accounts		(18	)		(15	)
Provision for obsolete inventory		14			13
Provision for warranty		44			11
Depreciation and amortization		266			366
Amortization and accretion of operating leases		29			97
Equity method holding loss		651			820
Adjustment to SageNet promissory note in connection with prepayment		-			202
Unrealized loss (gain) on equity holdings		2,891			(1,728	)
Deferred income taxes		(443	)		239
Stock-based compensation expense		127			194
Changes in operating assets and liabilities:
Accounts receivable		612			(407	)
Inventories		(284	)		426
Current income taxes		(186	)		(185	)
Other assets		2			(246	)
Accounts payable and accrued expenses		(827	)		149
Deferred revenue and customer deposits		615			(728	)
Operating lease obligations		(32	)		(89	)
Net cash used in operating activities		(528	)		(1,683	)

Cash flows from investing activities:
Capital expenditures		(75	)		(763	)
Acquisition of programming rights		(83	)		(395	)
Sale of equity holdings		198			-
Receipt of SageNet promissory note		-			2,300
Net cash provided by investing activities		40			1,142

Cash flows from financing activities:
Principal payments on short-term debt		(250	)		(79	)
Principal payments on long-term debt		(51	)		(18	)
Borrowings under credit facility		1,596
Repayments under credit facility		(225	)		-
Payments on finance lease obligations		(28	)		-
Net cash provided by (used in) financing activities		1,042			(97	)

Effect of exchange rate changes on cash and cash equivalents		6			40
Net increase (decrease) in cash and cash equivalents and restricted cash		560			(598	)
Cash and cash equivalents and restricted cash at beginning of period		3,789			8,881
Cash and cash equivalents and restricted cash at end of period	$	4,349		$	8,283

Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	4,349		$	8,133
Restricted cash		-			150
Total cash and cash equivalents and restricted cash	$	4,349		$	8,283

Supplemental disclosure of non-cash investing and financing activities:
Short-term borrowings to finance insurance	$	453		$	392
Issuance of debt, common shares, and warrants in connection with purchase of Digital Ignition building	$	-		$	7,609
Amount payable to Landmark Studio Group in connection with aquistion of projects (Note 8)	$	-		$	1,345

See accompanying notes to unaudited condensed consolidated financial statements.

FG Group Holdings Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

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

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

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

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America (also referred to as “GAAP”) for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

The condensed consolidated balance sheet as of December 31, 2022, was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary to present a fair statement of the financial position and the results of operations and cash flows for the respective interim periods. Certain prior period balances have been reclassified to conform to current period presentation. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

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

Use of Management Estimates

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

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

Cash and Cash Equivalents

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

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for credit losses based on several factors, including overall customer credit quality, historical write-off experience and a specific analysis that projects the ultimate collectability of the account. As such, these factors may change over time causing the allowance level and bad debt expense to be adjusted accordingly. Past due accounts are written off when our efforts have been unsuccessful in collecting amounts due.

Equity Holdings

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

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

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

Film and Television Programming Rights

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

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

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

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

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

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

Fair Value of Financial Instruments

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

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

The following tables present the Company’s financial assets measured at fair value based upon the level within the fair value hierarchy in which the fair value measurements are classified, as of March 31, 2023 and December 31, 2022.

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

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

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

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

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

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The Company adopted this ASU effective January 1, 2023. Upon adoption the Company recorded a cumulative effect adjustment decreasing retained earnings by $24 thousand.

3. Revenue

The Company accounts for revenue using the following steps:

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

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

As discussed in more detail below, revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company typically does not have any material extended payment terms, as payment is due at or shortly after the time of the sale. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.

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

The Company defers costs to acquire contracts, including commissions, incentives and payroll taxes, if they are incremental and recoverable costs of obtaining a customer contract with a term exceeding one year. Deferred contract costs are reported within other assets and amortized to selling expense over the contract term, which generally ranges from one to five years. The Company has elected to recognize the incremental costs of obtaining a contract with a term of less than one year as a selling expense when incurred. The Company did not have any deferred contract costs as of March 31, 2023 or December 31, 2022.

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

Schedule of Disaggregation of Revenue

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

Screen system sales

The Company typically recognizes revenue on the sale of its screen systems when control of the screen is transferred to the customer, usually at time of shipment. However, revenue is recognized upon delivery for certain international shipments with longer shipping transit times because control transfers upon customer delivery. The cost of freight and shipping to the customer is recognized in cost of sales at the time of transfer of control to the customer. For contracts that are long-term in nature, the Company believes that the use of the percentage-of-completion method is appropriate as the Company has the ability to make reasonably dependable estimates of the extent of progress towards completion, contract revenues, and contract costs. Under the percentage-of-completion method, revenue is recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract.

Digital equipment sales

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

Field maintenance and monitoring services

The Company sells service contracts that provide maintenance and monitoring services to its Strong Entertainment customers. These contracts are generally 12 months in length. Revenue related to service contracts is recognized ratably over the term of the agreement.

In addition to selling service contracts, the Company also performs discrete time and materials-based maintenance and repair work for customers in the Strong Entertainment segment. Revenue related to time and materials-based maintenance and repair work is recognized at the point in time when the performance obligation has been fully satisfied.

Installation services

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

Extended warranty sales

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

Timing of revenue recognition

The following tables disaggregate the Company’s revenue by the timing of transfer of goods or services to the customer for the three months ended March 31, 2023 and 2022 (in thousands):

Schedule of Disaggregation of Revenue

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

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

SEC Form 10-Q filed by Ballantyne Strong Inc.