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 ☒ 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 ☒ No ☐

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

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:

	June 30, 2014			December 31, 2013			June 30, 2015			December 31, 2014
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	26,903		$	28,791		$	24,661		$	22,491
Accounts receivable (net of allowance for doubtful accounts of $642 and $703, respectively)		14,785			20,047
Accounts receivable (net of allowance for doubtful accounts of $690 and $679, respectively)								13,323			20,266
Inventories:
Finished goods, net		11,995			10,949			10,590			11,195
Work in process		611			345			534			632
Raw materials and components, net		1,721			3,891			1,330			2,281
Total inventories, net		14,327			15,185			12,454			14,108
Recoverable income taxes		4,175			2,207			162			1,255
Deferred income taxes								963			3,541
Other current assets		4,965			5,873			3,253			2,956
Total current assets		65,155			72,103			54,816			64,617
Property, plant and equipment (net of accumulated depreciation of $5,472 and $4,781, respectively)		14,366			14,721
Note receivable		2,730			2,497
Property, plant and equipment (net of accumulated depreciation of $6,088 and $5,834, respectively)								13,151			13,914
Intangible assets, net		937			895			941			1,168
Goodwill		1,119			1,123			956			1,029
Notes receivable								3,264			2,985
Deferred income taxes								—			4,910
Other assets		4,396			4,105			876			1,447
Total assets	$	88,703		$	95,444		$	74,004		$	90,070

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,030		$	12,844		$	6,881		$	9,039
Accrued expenses		4,445			6,236			5,389			4,366
Customer deposits/deferred revenue		3,525			3,474			5,034			5,473
Income tax payable		458			888			640			1,009
Total current liabilities		17,458			23,442			17,944			19,887
Deferred revenue		2,602			3,008			1,766			2,230
Deferred income taxes		815			790			1,633			715
Other accrued expenses, net of current portion		1,746			1,748			1,100			1,776
Total liabilities		22,621			28,988			22,443			24,608
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 16,912 and 16,869 shares at June 30, 2014 and December 31, 2013, respectively; 14,181 and 14,138 shares outstanding at June 30, 2014 and December 31, 2013, respectively		167			167
Common stock, par value $.01 per share; Authorized 25,000 shares; issued 16,869 and 16,809 shares at June 30, 2015 and December 31, 2014, respectively; 14,138 and 14,078 shares outstanding at June 30, 2015 and December 31, 2014, respectively								168			168
Additional paid-in capital		38,431			38,231			38,809			38,657
Accumulated other comprehensive income:
Foreign currency translation		(1,362	)		(959	)		(3,293	)		(2,325	)
Postretirement benefit obligations		190			190			139			139
Retained earnings		46,895			47,066			33,977			47,062
		84,321			84,695			69,800			83,701
Less 2,731 of common shares in treasury, at cost at June 30, 2014 and December 31, 2013		(18,239	)		(18,239	)
Less 2,731 of common shares in treasury, at cost at June 30, 2015 and December 31, 2014								(18,239	)		(18,239	)
Total stockholders’ equity		66,082			66,456			51,561			65,462
Total liabilities and stockholders’ equity	$	88,703		$	95,444		$	74,004		$	90,070

	Three Months EndedJune 30,						Six Months EndedJune 30,						Three Months EndedJune 30,						Six Months EndedJune 30,
	2014			2013			2014			2013			2015			2014			2015			2014
Net product sales	$	16,202		$	21,411		$	31,037		$	46,608		$	15,114		$	16,202		$	32,249		$	31,037
Net service revenues		5,825			2,984			13,011			5,408			4,609			5,825			9,938			13,011
Total net revenues		22,027			24,395			44,048			52,016			19,723			22,027			42,187			44,048
Cost of products sold		14,184			17,555			26,634			39,149			12,759			14,184			27,554			26,634
Cost of services		3,596			2,160			8,951			4,274			3,288			3,596			6,702			8,951
Total cost of revenues		17,780			19,715			35,585			43,423			16,047			17,780			34,256			35,585
Gross profit		4,247			4,680			8,463			8,593			3,676			4,247			7,931			8,463
Selling and administrative expenses:
Selling		1,559			870			3,104			1,736			1,442			1,559			3,120			3,104
Administrative		2,822			2,453			6,715			4,954			4,062			2,822			7,861			6,715
Total selling and administrative expenses		4,381			3,323			9,819			6,690			5,504			4,381			10,981			9,819
Gain on the sale/disposal/transfer of assets		2			3			8			4
Income (loss) from operations		(132	)		1,360			(1,348	)		1,907
Equity income (loss) of joint venture		—			(12	)		95			(118	)
Gain (loss) on the sale or disposal of assets														(381	)		2			(379	)		8
Loss from operations														(2,209	)		(132	)		(3,429	)		(1,348	)
Equity income of joint venture														94			—			94			95
Other income (expense):
Interest income		182			13			359			35			167			182			331			359
Interest expense		(18	)		(12	)		(27	)		(19	)		(11	)		(18	)		(24	)		(27	)
Other income (expense), net		(123	)		247			86			496			(65	)		(123	)		580			86
Total other income (expense)		41			248			418			512
Earnings (loss) before income taxes		(91	)		1,596			(835	)		2,301
Total other income														91			41			887			418
Loss before income taxes														(2,024	)		(91	)		(2,448	)		(835	)
Income tax benefit (expense)		472			(319	)		622			(460	)		(895	)		472			(10,636	)		622
Net earnings (loss)	$	381		$	1,277		$	(213	)	$	1,841		$	(2,919	)	$	381		$	(13,084	)	$	(213	)
Basic earnings (loss) per share	$	0.03		$	0.09		$	(0.02	)	$	0.13		$	(0.21	)	$	0.03		$	(0.93	)	$	(0.02	)
Diluted earnings (loss) per share	$	0.03		$	0.09		$	(0.02	)	$	0.13		$	(0.21	)	$	0.03		$	(0.93	)	$	(0.02	)


Weighted average shares outstanding:
Basic		14,060			13,997			14,043			13,988			14,121			14,060			14,106			14,043
Diluted		14,106			14,045			14,043			14,035			14,121			14,106			14,106			14,043

	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013			2015			2014		2015			2014
Net earnings (losses)	$	381	$	1,277		$	(213	)	$	1,841		$	(2,919	)	$	381	$	(13,084	)	$	(213	)
Currency translation adjustment:
Unrealized net change arising during period		627		(690	)		(403	)		(1,091	)		153			627		(968	)		(403	)
Other comprehensive gain (loss)		627		(690	)		(403	)		(1,091	)		153			627		(968	)		(403	)
Comprehensive income (loss)	$	1,008	$	587		$	(616	)	$	750		$	(2,766	)	$	1,008	$	(14,052	)	$	(616	)

	Six Months EndedJune 30,						Six Months EndedJune 30,
	2014			2013			2015			2014

Cash flows from operating activities:
Net earnings (loss)	$	(213	)	$	1,841
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net loss							$	(13,084	)	$	(213	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Provision for doubtful accounts		(17	)		211			24			(17	)
Provision for obsolete inventory		(39	)		10			957			(39	)
Provision for warranty		(195	)		260			324			(195	)
Depreciation and amortization		813			681			1,264			813
Equity in (income) loss of joint venture		(95	)		118
Equity in income of joint venture								(94	)		(95	)
Loss on forward contracts		145			188			—			145
(Gain) loss on disposal or transfer of assets		(8	)		5			379			(8	)
Deferred income taxes		(400	)		197			8,813			(400	)
Share-based compensation expense		200			220			151			200
Changes in operating assets and liabilities:
Accounts, unbilled and notes receivable		5,977			12,540			7,081			5,977
Inventories		818			(2,339	)		440			818
Other current assets		98			1,508			(392	)		98
Accounts payable		(3,781	)		(7,778	)		(2,129	)		(3,781	)
Accrued expenses		(1,618	)		(1,095	)		(569	)		(1,618	)
Customer deposits/deferred revenue		(353	)		(1,283	)		(904	)		(353	)
Current income taxes		(2,382	)		331			778			(2,382	)
Other assets		(90	)		56			(126	)		(90	)
Net cash (used in) provided by operating activities		(1,140	)		5,671
Net cash provided by (used in) operating activities								2,913			(1,140	)

Cash Flows from investing activities:
Cash flows from investing activities:
Capital expenditures		(536	)		(197	)		(240	)		(536	)
Proceeds from sale of assets		56			2			5			56
Net cash used in investing activities		(480	)		(195	)		(235	)		(480	)

Cash flows from financing activities:
Payments on capital lease obligations								(14	)		—
Excess tax benefits from share-based arrangements		(6	)		(11	)		11			(6	)
Proceeds from employee stock purchase plan		—			3
Net cash used in financing activities		(6	)		(8	)		(3	)		(6	)
Effect of exchange rate changes on cash and cash equivalents		(262	)		(515	)		(505	)		(262	)
Net increase (decrease) in cash and cash equivalents		(1,888	)		4,953			2,170			(1,888	)
Cash and cash equivalents at beginning of period		28,791			40,168			22,491			28,791
Cash and cash equivalents at end of period	$	26,903		$	45,121		$	24,661		$	26,903
Supplemental disclosure of non-cash investing and financing activities:
Capital lease obligations for property and equipment							$	226		$	—

Ballantyne Strong, Inc. (“Ballantyne” or the “Company”), a Delaware corporation, and its wholly owned subsidiaries Strong Westrex, Inc., Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc.~~, Peintures Elite, Inc. (“Peintures”)~~, Strong Westrex (Beijing) Trading Inc., Convergent Corporation and Convergent Media Systems Corporation (“CMS”) designs, integrates, and installs technology solutions for a broad range of applications; develops and delivers out-of-home messaging, advertising and communications; manufactures projection screens and lighting products; and provides managed services including monitoring of networked equipment to our customers. ~~As of January 1, 2014 the legal entity Peintures Elite, Inc. was dissolved and consolidated into Strong/MDI Screen Systems, Inc.~~

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

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. 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, ~~2013.~~2014.

The condensed consolidated balance sheet as of December 31, ~~2013~~2014 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.

The condensed consolidated financial statements as of December 31, 2013, June 30, 2014 and for the three and six month periods ended June 30, 2014, include amounts acquired from, as well as the results of operations of Peintures and CMS. Peintures is included in the systems integration segment and CMS is included in the managed services segment.

Certain prior year amounts presented in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. These reclassifications did not impact the Company’s net income (loss) for 2014 or 2013.

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

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 ~~will be~~are classified and disclosed in one of the following three categories:

The following table presents the Company’s financial assets and liabilities measured at fair value based upon the level within the fair value hierarchy in which the fair value measurements fall.

	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	$in thousands								$in thousands
Cash and cash equivalents	$	26,903	$	—	$	—	$	26,903	$	24,661	$	—	$	—	$	24,661
Note Receivable	$	—	$	—	$	2,730	$	2,730	$	—	$	—	$	3,264	$	3,264
Foreign exchange forward contract asset	$	—	$	—	$	—	$	—
Foreign exchange forward contract liability	$	—	$	—	$	—	$	—

	Level 1		Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total
	$in thousands										$in thousands
Cash and cash equivalents	$	28,791	$	—		$	—	$	28,791		$	22,491	$	—	$	—	$	22,491
Note Receivable	$	—	$	—		$	2,497	$	2,497		$	—	$	—	$	2,985	$	2,985
Foreign exchange forward contract asset	$	—	$	10,934		$	—	$	10,934
Foreign exchange forward contract liability	$	—	$	(11,000	)	$	—	$	(11,000	)

The notes receivable accrues interest at a rate of 15% per annum which is paid in accordance with an agreed-upon cash flow schedule.

Quantitative information about the Company’s level 3 fair value measurements at June 30, ~~2014~~2015 is set forth below:

$ in thousands	Fair Value at 6/30/2014		Valuation Technique	Unobservable input	Range		Fair Value at 6/30/2015		Valuation Technique	Unobservable input	Range
Note Receivable	$	2,730	Discounted cash flow	Probability of default Prepayment rates Loss severity	0 0 0	% % %	$	3,264	Discounted cash flow	Probability of default		0	%
										Prepayment rates		0	%
										Loss severity		0	%

The significant unobservable inputs used in the fair value measurement of the Company’s note receivable are prepayment rates, probability of default and loss severity in the event of default. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and directionally opposite change in the assumption used for prepayment rates.

The following table reconciles the beginning and ending balance of the Company’s Note Receivable fair value:

		Six months endedJune 30				Six monthsended June 30,
		2014		2013		2015		2014
		$ in thousands				$ in thousands
Note Receivable balance, beginning of period	Note Receivable balance, beginning of period	$	2,497	$	2,232	$	2,985	$	2,497
	Interest income accrued		233		—
Interest income accrued							279		233
Note Receivable balance, end of period	Note Receivable balance, end of period	$	2,730	$	2,232	$	3,264	$	2,730

The carrying values of all other financial assets and liabilities including accounts receivable, accounts payable and accrued expenses reported in the 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, ~~2014 we~~2015 the Company did not have any significant non-recurring measurements of non-financial assets or liabilities.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). 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 iswas originally effective for the Company beginning January 1, ~~2017 and~~2017. However, in July 2015, the FASB approved a one year deferral of the update, resulting in an effective date of January 1, 2018 for the Company. An entity may ~~be adopted using~~adopt this ASU either retrospectively or through a ~~full retrospective or a modified~~ cumulative effect ~~approach.~~adjustment as of the start of the first period for which it applies the ASU. Early adoption is not permitted. The Company is currently evaluating the potential impact of adopting this guidance and has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires an entity utilizing the FIFO inventory method to change their measurement principle for inventory changes from the lower of cost or market to lower of cost and net realizable value. The guidance is effective for the Company beginning January 1, 2017. An entity must adopt this ASU prospectively and early adoption is permitted. The Company is currently evaluating the potential impact of adopting this guidance and has not determined the effect of the standard on its ongoing financial reporting.

Basic earnings (loss) per share have been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted earnings (loss) 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 basic and diluted earnings (loss) per share:

For the three and six month periods ended June 30, 2015, options to purchase 151,700 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. For the three and six month periods ended June 30, 2015, restricted stock units of 66,694 and 72,179, respectively were excluded as their inclusion would be anti-dilutive, thereby decreasing the net loss per share. For the three and six month periods ended June 30, 2014, options to purchase 211,500 shares of common stock 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 64,553 ~~options~~restricted stock units were excluded from the six month period ended June 30, 2014 as their inclusion would be anti-dilutive, thereby decreasing the net loss per share. For the three and six month periods ended June 30, 2013, options to purchase 253,500 and 255,700 shares of common stock 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.

Historically, the Company has generally granted a warranty to its customers for a one-year period following the sale of manufactured ~~film projection~~ equipment and on selected repaired equipment for a one-year period. In most instances, the digital products are covered by the manufacturing firm’s OEM warranty; however, there are certain customers where the Company may grant warranties in excess of the manufacturer’s warranty for digital products. The Company accrues for these costs at the time of sale or repair. The following table summarizes warranty activity for the three and six months ended June 30, ~~2014~~2015 and ~~2013:~~2014:

On March 6, 2007, the Company entered into an agreement with RealD to form an operating entity Digital Link II, LLC (the “LLC”). Under the agreement, the LLC was formed with the Company and RealD as the only two members with membership interests of 44.4% and 55.6%, respectively. The LLC was formed for purposes of commercializing certain 3D technology and to fund the deployment of digital projector systems and servers to exhibitors.

The Company accounts for its investment by the equity method. Under this method, the Company recorded its proportionate share of LLC net income or loss based on the LLC’s financial statements as of June 30, 2014 and June 21, 2013, respectively. The LLC uses four 13-week periods for a total of 52 weeks to align its fiscal year-end with that of its majority interest holder, RealD. The Company’s portion of income of the LLC was $0 and $0.1 million for the three and six months ended June 30, 2014. The Company’s portion of income (loss) of the LLC was ($0.01) million and ($0.1) million for the three and six months ended June 30, 2013, respectively.

In the past, the Company sold digital theatre projection equipment, in the normal course of business, to the LLC. The LLC in turn provides and sells the digital projection equipment to third party customers under system use agreements or through sales agreements. Revenue recognized by the Company on the sale transaction to the LLC is limited by its 44.4% ownership in the joint venture which will be recognized upon sale of the equipment to the third parties. There were no sales to the LLC during the three and six months ended June 30, 2014 and 2013. The total receivable balance due from the LLC was insignificant at June 30, 2014 and December 31, 2013.

~~The Company received no distributions from the LLC in six months ended June 30, 2014 or June 30, 2013.~~

	Useful life		Gross		Accumulated amortization			Net		Useful life			Gross		Accumulated amortization			Net
	(Years)		( in thousands)							(Years)			(in thousands)
Intangible assets subject to amortization:
Customer relationships		4-9	$	1,662	$	(1,622	)	$	40	4	-	9	$	1,473	$	(1,473	)	$	—
Trademarks		3		229		(229	)		—		3			195		(195	)		—
Software		3		234		(70	)		164		3			925		(287	)		638
Software in development		3		266		—			266
Product Formulation		10		572		(105	)		467		10			488		(185	)		303
Total			$	2,963	$	(2,026	)	$	937				$	3,081	$	(2,140	)	$	941

	Useful life		Gross		Accumulated amortization			Net		Useful life			Gross		Accumulated amortization			Net
	(Years)		( in thousands)							(Years)			(in thousands)
Intangible assets subject to amortization:
Customer relationships		4-9	$	1,662	$	(1,600	)	$	62	4	-	9	$	1,556	$	(1,538	)	$	18
Trademarks		3		229		(229	)		—		3			210		(210	)		—
Software		3		234		(24	)		210		3			905		(144	)		761
Software in development		3		92		—			92		3			16		—			16
Product Formulation		10		573		(42	)		531		10			526		(153	)		373
Total			$	2,790	$	(1,895	)	$	895				$	3,213	$	(2,045	)	$	1,168

The Company recorded amortization expense relating to other identifiable intangible assets of ~~$0.1~~$0.2 million and ~~$0.02~~$0.1 million for the six months ended June 30, ~~2014~~2015 and ~~2013,~~2014, respectively.

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

The following represents a summary of changes in the Company’s carrying amount of goodwill for the quarter ended June 30, ~~2014:~~2015:

In connection with the integration of the 2013 CMS acquisition, as well as the Company’s ongoing plans to improve efficiency and effectiveness of its operations, the Company initiated plans in the fourth quarter of 2013 to reduce headcount and move the Company’s warehouse from Omaha, Nebraska to Georgia. ~~The~~In 2013, the Company recorded ~~$1.4~~$1.5 million in severance costs it ~~expects~~expected to incur ~~in relation to~~as part of the ~~integration. Additionally, $0.06 million in costs were recorded~~integration of CMS and for site closure of the Omaha warehouse. The restructuring initiative ~~is expected to be~~was completed byin the first quarter of 2015.

In connection with its strategic planning process, as well as the Company’s ongoing plans to improve efficiency and effectiveness of its operations, the Company initiated plans in the second quarter of 2015 to reduce headcount and more efficiently utilize real estate assets. Included in administrative expenses in the second quarter of 2015, are $0.7 million and $0.3 million of severance and lease termination costs the Company expects to incur as part of this restructuring plan.

The following table reconciles the beginning and ending restructuring balance for the six months ended June 30, ~~2014,~~2015, which is included in accrued expenses:

				2015 Strategic Initiative			2013 Convergent Related Severance			Total Restructuring
	(in thousands)						( in thousands)
Accrued liability at beginning of period	$	896		$	-		$	187		$	187
Lease termination expense					313			-			313
Severance expense					695			-			695
Severance paid		(257	)		(302	)		(129	)		(431	)
Site closure costs paid		(58	)
Accrued liability at end of period	$	581		$	706		$	58		$	764

The Company ~~is a~~was party to a $20 million Revolving Credit Agreement and Note (collectively, the “Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”). The ~~Company may request an increase in the~~ Credit Agreement of up to an additional $5 million; however, any advances on the additional $5 million are subject to approval of Wells Fargo. The borrowings from the Credit Agreement are to be used for working capital purposes and for other general corporate purposes. The Company’s accounts receivable, general intangibles and inventory secure the Credit Agreement.

The Credit Agreement contains certain covenants, including those relating to our financial condition. The primary financial condition covenants pertain to maintaining a ratio of total liabilities to tangible net worth of less than 2 to 1, working capital of $20 million and beginning December 31, 2014 net income before taxes of $1 on a rolling 4-quarter basis, as defined in the Credit Agreement. Other covenants pertain to items such as certain limits on incurring additional debt or lease obligations, certain limits on issuing guarantees and certain limits on loans, advances and investments with third parties. Upon the occurrence of any event of default specified in the Credit Agreement, including a change in control of the Company (as defined in the Credit Agreement), all amounts due there under may be declared to be immediately due and payable.

~~The Credit Agreement expires~~expired June 30, ~~2015 at which time all unpaid principal and interest is due.~~2015. Since inception of the agreement, no amounts ~~have~~had been borrowed on the Credit Agreement. ~~At June 30, 2014, the Company had availability of $20 million.~~

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 of $9.2 million should be recorded against the Company’s U.S. tax jurisdiction deferred tax assets as of June 30, 2015. During the second quarter the valuation allowance increased $1.5 million.

The effective tax rate (calculated as a ratio of income tax expense/benefit to pretax earnings, inclusive of equity method investment losses) was approximately 44.2% and 434.5% for the three and six months ended June 30, 2015, respectively as compared to 518.7% and 74.5% for the three and six months ended June 30, 2014, ~~respectively as compared to 20.0% for the three and six months ended June 30, 2013,~~ respectively. The effective tax rate differs from the statutory rates for the three month periods ended June 30, 2015 and 2014 primarily as a result of the increase to the valuation allowance recorded against the Company’s U.S. tax jurisdiction deferred tax assets in 2015 and differing foreign and U.S. tax rates applied to respective pre-tax earnings by tax jurisdiction. The Company’s annual effective rate was higher in the ~~three and~~ six ~~months~~month period ended June 30, ~~2014~~2015 compared to the comparable ~~periods of 2013~~period for 2014 primarily due to the ~~generated~~valuation allowance recorded against the Company’s U.S. tax ~~benefits from U.S. operating losses at significantly higher rates more than offsetting the~~jurisdiction deferred tax ~~expense related to our Canadian operations, Strong/MDI Screen Systems, Inc., which has a lower tax rate.~~assets.

The ~~Company’s uncertain tax positions are related to tax years that remain subject to examination by~~Company currently has an exam initiated for Federal purposes for the ~~relevant taxable authorities.~~2011 fiscal year. The Company has examinations not yet initiated for Federal purposes for fiscal years ~~2009 through 2010~~2012 and ~~2012.~~2013. In most cases, the Company has examinations open for State or local jurisdictions based on the particular jurisdiction’s statute of limitations. ~~The Company does not currently have any state or local examinations in process. As of June 30, 2014, total unrecognized tax benefits amounted to approximately $0.03 million.~~

The Company recognizes compensation expense for all share-based payment awards made to employees and directors based on their estimated fair values. Share-based compensation expense included in selling and administrative expenses approximated $0.1 million and $0.2 million for the three and six months, respectively ended June 30, ~~2014~~2015 and ~~2013, respectively.~~2014.

The Company’s 2010 Long-Term Incentive Plan (“2010 Plan”) 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, or performance units. Vesting terms vary with each grant and may be subject to vesting upon a “change in control” of the Company. ~~On May 14, 2014, the Company’s stockholders approved an amendment to the 2010 Plan to increase the~~The total number of shares ~~of common stock that are available~~reserved for issuance under the 2010 Plan ~~from 600,000 to~~is 1,600,000 shares. During the three month and six months ended June 30, 2015, the Company granted zero and 27,500 restricted stock units, respectively, under the 2010 Plan.

The following table summarizes the Company’s activities with respect to its stock options for the six months ended June 30, ~~2014~~2015 as follows:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)		Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2013		213,700	$	5.42		7.84	$	26
Outstanding at December 31, 2014										181,500		$	5.56		6.77	$	13
Granted		—		—						—			—
Exercised		—		—						—			—
Forfeited		—		—						(99,000	)		6.53
Outstanding at June 30, 2014		213,700	$	5.42		7.34	$	14
Exercisable at June 30, 2014		129,200	$	6.02		7.10	$	5
Outstanding at June 30, 2015										82,500		$	4.39		6.80	$	26
Exercisable at June 30, 2015										60,000		$	4.41		6.77	$	9

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, ~~2014.~~2015.

As of June 30, ~~2014,~~2015, the total unrecognized compensation cost related to stock option awards was approximately ~~$0.2 million~~$29,000 which is expected to be recognized over a weighted average period of ~~1.5~~0.6 years.

The following table summarizes information about stock options outstanding and exercisable at June 30, ~~2014:~~2015:

	Options Outstanding at June 30, 2014						Options Exercisable at June 30, 2014								Options Outstanding at June 30, 2015						Options Exercisable at June 30, 2015
Range of option exercise price	Number of options		Weighted average remaining contractual life		Weighted average exercise price per option		Number of options		Weighted average remaining contractual life		Weighted average exercise price per option		Range of option exercise price		Number of options		Weighted average remaining contractual life		Weighted average exercise price per option		Number of options		Weighted average remaining contractual life		Weighted average exercise price per option
$3.55 to 8.32		213,700		7.34	$	5.42		129,200		7.10	$	6.02
$3.55													to	4.70		82,500		6.80	$	4.39		60,000		6.77	$	4.41

The Ballantyne Strong, Inc. 2014 Non-Employee Directors’ Restricted Stock Plan (the “Non-Employee Plan”) provides for the award of restricted shares to outside directors. A total of 200,000 shares are reserved for issuance under the Non-Employee Plan. During the six months ended June 30, ~~2014,~~2015, the Company granted ~~41,760~~53,208 restricted shares under the Non-Employee Plan to the Board of Directors. These shares will vest the day preceding the Company’s ~~2015~~2016 Annual Meeting of Stockholders.

In connection with the restricted stock granted to certain employees and non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected to be issued utilizing the most current information available to the Company at the date of the financial statements. 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, ~~2014,~~2015, the total unrecognized compensation cost related to non-vested restricted stock awards was approximately ~~$0.4~~$0.6 million which is expected to be recognized over a weighted average period of ~~1.5~~2.14 years.

The following table summarizes restricted stock activity for the six months ended June 30, ~~2014:~~2015:

	Number of Restricted Stock Shares			Weighted Average Grant Price Fair Value		Number of Restricted Stock Shares			Weighted Average Grant Price Fair Value
Non-vested at December 31, 2013		129,500		$	4.42
Non-vested at December 31, 2014							264,793		$	3.93
Granted		41,760			4.31		80,708			4.42
Shares vested		(68,167	)		4.54		(60,066	)		4.25
Shares forfeited		—			—		(110,027	)		3.84
Non-vested at June 30, 2014		103,093		$	4.29
Non-vested at June 30, 2015							175,408		$	4.10

The Company’s primary exposure to foreign currency fluctuations pertains to its subsidiaries in Canada and China. In certain instances the Company may enter into foreign exchange forward contracts to manage a portion of this risk. The Company has not designated its foreign exchange forward contracts as hedges.

~~The following table presents the gross fair value of derivative instruments, all of which are not designated as hedging instruments:~~

All cash flows related to our foreign currency exchange contracts are classified as operating cash flows. WeThe Company recognized in other income, the following realized and unrealized gains from foreign currency forward exchange contracts:

		Three Months Ended June 30,					Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	Classification	2014		2013			2014			2013			Classification	2015		2014		2015		2014
Foreign exchange forward contracts	Other Income (Loss)	$	203	$	(188	)	$	(145	)	$	(188	)	Other Income (Loss)	$	—	$	203	$	—	$	(145	)

The Company’s top ten customers accounted for approximately ~~45.5%~~43.5% and ~~43.1%~~41.3% of total consolidated net revenues for the three and six months ended June 30, ~~2014,~~2015, respectively. Trade accounts receivable from these customers represented approximately ~~33.7%~~50.8% of net consolidated receivables at June 30, ~~2014.~~2015. 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 and services.

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.

The Company and its subsidiaries lease plant and office facilities, furniture, autos and equipment under operating leases expiring through 2023. 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 ~~operating~~ leases at June 30, 2015 are as follows:

During the fourth quarter of 2013, the Company revised its operating segments, which are organized based on the business leadership views operating the business after the integration of the acquired entities. All prior year segment data has been restated to conform to the new segments. As of June 30, ~~2014,~~2015, the Company’s operations were conducted principally through two business segments: Systems Integration and Managed Services. Systems Integration operations include the sale of digital projection equipment, screens, sound systems in addition to the design, assembly and sale of followspots and other lighting products. Managed Services 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~~intercompany sales at ~~costs approximating market~~cost and has eliminated all significant intercompany sales in consolidation.

													Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,						2015			2014			2015			2014
	2014			2013			2014			2013

Net revenue
Systems Integration	$	14,755		$	21,495		$	28,775		$	46,992		$	12,194		$	14,755		$	27,941		$	28,775
Managed Services		7,575			3,276			15,973			5,762			7,798			7,575			14,844			15,973
Total segment revenue		22,330			24,771			44,748			52,754			19,992			22,330			42,785			44,748
Eliminations		(303	)		(376	)		(700	)		(738	)		(269	)		(303	)		(598	)		(700	)
Total net revenue	$	22,027		$	24,395		$	44,048		$	52,016		$	19,723		$	22,027		$	42,187		$	44,048

Operating Income (Loss)
Systems Integration	$	1,676		$	2,101		$	2,506		$	4,225		$	1,065		$	1,676		$	2,858		$	2,506
Managed Services		(70	)		719			403			743			(120	)		(70	)		(598	)		403
Total segment operating income		1,606			2,820			2,909			4,968			945			1,606			2,260			2,909
Unallocated general and administrative expenses		(1,740	)		(1,463	)		(4,265	)		(3,065	)		(2,773	)		(1,740	)		(5,310	)		(4,265	)
Interest, net		164			1			332			16			156			164			307			332
Gain on sale of assets		2			3			8			4
Equity income (loss) of joint venture		—			(12	)		95			(118	)
Gain (loss) on sale of assets														(381	)		2			(379	)		8
Equity income of joint venture														94			—			94			95
Other income (loss)		(123	)		247			86			496			(65	)		(123	)		580			86
Income (loss) before income taxes	$	(91	)	$	1,596		$	(835	)	$	2,301
Loss before income taxes													$	(2,024	)	$	(91	)	$	(2,448	)	$	(835	)

	Three Months EndedJune 30,				Six Months EndedJune 30,				Three Months EndedJune 30,				Six Months EndedJune 30,
(In thousands)	2014		2013		2014		2013		2015		2014		2015		2014
Net revenue
United States	$	15,031	$	18,649	$	30,199	$	36,224	$	14,095	$	15,031	$	27,978	$	30,199
China		2,685		3,264		6,011		6,447		2,830		2,685		6,936		6,011
Latin America		1,583		483		3,133		6,450		509		1,583		2,445		3,133
Canada		1,432		1,000		2,890		1,506		1,062		1,432		2,312		2,890
Mexico		970		318		1,282		436		797		970		1,379		1,282
Europe		162		249		343		322		173		162		771		343
Asia (excluding China)		132		202		157		366		20		132		65		157
Other		32		230		33		265		237		32		301		33
Total	$	22,027	$	24,395	$	44,048	$	52,016	$	19,723	$	22,027	$	42,187	$	44,048

(In thousands)	June 30, 2014		December 31, 2013		June 30, 2015		December 31, 2014

Identifiable assets
United States	$	61,283	$	51,882	$	42,177	$	61,159
Canada		16,084		28,463		21,775		18,849
China		7,331		5,526		7,464		7,002
Asia (excluding China)		4,005		9,573		2,588		3,060
Total	$	88,703	$	95,444	$	74,004	$	90,070

Intersegment sales have been recorded at amounts approximating market. Identifiable assets by geographical area are based on location of facilities. Net sales by geographical area are based on destination of sales.

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

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2013.~~2014. 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.

The Company designs, integrates, and installs technology solutions for a broad range of applications; develops and delivers out-of-home messaging, advertising and communications; manufactures projection screens and lighting products; and provides managed services including monitoring of networked equipment to our customers. We add value through our design, engineering, manufacturing excellence and customer service. We focus on the retail, financial, government and cinema markets. We have two primary operating segments: Systems Integration and Managed Services. The Systems Integration Segment provides a full range of product solutions primarily for the theatre 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, and audio systems. We also sell lighting solutions for the architectural and entertainment lighting industry. The Managed Service Segment delivers solutions and services across two primary markets: digital out-of-home and cinema. These markets are served through the capabilities the Company has gained from the acquisition of Convergent in 2013 and from Strong Technical Services (“STS”) respectively. While there is digital signage 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 65% of revenues for the first six months of ~~2014~~2015 were from systems integration and approximately 35% were from managed services. Additional information related to our reporting segments can be found in the notes to the consolidated financial statements.

On September 13, 2013, the Company acquired Peintures Elite, Inc., a manufacturer of paint and lacquer products and the primary provider of paint used in the Company’s screen manufacturing. On October 1, 2013, the Company acquired CMS to provide digital technologies for out-of-home messaging, advertising and communication (the DOOH market) and EVS, which provides enterprises with the infrastructure necessary for communications, collaboration, training and education of employees. The condensed consolidated financial statements as of December 31, 2013, June 30, 2014, and for the three-month period ended June 30, 2014, include amounts acquired from, as well as the results of operations of Peintures and CMS. Peintures is included in the systems integration segment and CMS is included in the managed services segment.

Three Months EndedJune 30, ~~2014~~2015 Compared to the Three Months EndedJune 30,~~2013~~2014

Net revenues during the three months ended June 30, ~~2014~~2015 decreased ~~9.7%~~10.5% to ~~$22.0~~$19.7 million from ~~$24.4~~$22.0 million during the three months ended June 30, ~~2013.~~2014.

Sales of systems integration products and services decreased ~~31.4%~~17.4% to $12.2 million in 2015 from $14.8 million in ~~2014 from $21.5 million in 2013.~~2014. Sales of digital and analog cinema products and services decreased by ~~$4.5~~$2.6 million as the industry ~~changes~~change to digital projection equipment continues to wind down as expected. ~~In addition sales of lighting products decreased by $2.5 million. This decrease was driven by the completion of the World Trade Center project in 2013.~~

Sales of managed services products and services increased ~~131.2%~~2.9% to $7.8 million in 2015 from $7.6 million in ~~2014 from $3.3 million in 2013.~~2014. Sales of products and services related to digital signage ~~were $4.1 million in 2014 resulting from the October 2013 acquisition of Convergent. These sales were driven through the distribution of digital signage equipment~~ as well as content creation, management and ~~distribution. This was in addition to a $0.7 million increase in digital cinema service driven by non-recurring demand revenue and~~distribution increased ~~Network Operations Center (“NOC”) contracts.~~$0.3 million.

Sales outside the United States (mainly systems integration sales) ~~increased~~decreased to ~~$7.0~~$5.6 million in the second quarter of ~~2014~~2015 from ~~$5.7~~$7.0 million a year ago resulting primarily from ~~increased~~decreases sales in Latin America, Canada, and Mexico partially offset by ~~decreased~~increased sales in China. Export sales are sensitive to the timing of the digital cinema conversions in these countries and normal replacement cycles. 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.

Consolidated gross profit decreased ~~9.3%~~13.4% to ~~$4.2~~$3.7 million in the second quarter of ~~2014~~2015 from ~~$4.7~~$4.2 million a year-ago, ~~but increased~~and decreased as a percent of total revenue to 18.6% from 19.3% ~~from 19.2%~~ in ~~2013.~~2014. Gross profit in the systems integration segment decreased to ~~$3.0~~$2.3 million in the second quarter of ~~2014~~2015 from ~~$3.6~~$3.0 million in ~~2013~~2014 and ~~increased~~decreased as a percentage of sales to 18.4% in 2015 from 20.2% in ~~2014 from 16.7% a year-ago.~~2014. The decrease in gross margin dollars was driven by lower volume ~~but~~and increased reserves for lighting inventory, and the ~~increase~~decrease in gross margin as a percentage of sales was driven by product mix.

The gross profit in the managed services segment amounted to $1.4 million or 18.2% as a percentage of revenues in the second quarter of 2015 compared to $1.3 million or 16.7% as a percentage of revenues in ~~the second quarter of 2014 compared to $1.1 million or 33.3% as a percentage of revenues a year ago.~~2014. The increase ~~in gross margin was driven by higher revenues through the acquisition of CMS, but the decrease~~ in gross margin as a percentage of sales was driven by ~~product mix and lower~~increased revenues allowing for better utilization of ~~field technicians.~~the fixed cost structure.

Selling expenses ~~increased 79.2%~~decreased 7.5% to ~~$1.6~~$1.4 million in the second quarter of ~~2014~~2015 compared to ~~$0.9~~$1.6 million a year-ago and as a percentage of revenues increased to 7.3% from 7.1% ~~from 3.6% a year-ago.~~in 2014. The ~~increase~~decrease in selling expenses was ~~primarily~~ due to ~~additional sales staff added as part of the Convergent acquisition.~~lower employee related costs.

Administrative expenses increased ~~15.0%~~43.9% to ~~$2.8~~$4.1 million in second quarter of ~~2014~~2015 from ~~$2.5~~$2.8 million a year ago and as a percent of total revenue increased to 20.6% in 2015 from 12.8% in ~~2014 from 10.1% in 2013.~~2014. The increase in expenses is primarily due to ~~additional administrative expenses related to~~$1.1 million of restructuring charges recorded during the ~~acquisition~~second quarter of ~~Convergent partially offset by lower compensation related costs.~~2015.

Our results for the second quarter of 2014 reflect no gains or losses pertaining to our 44.4% share of equity in the loss from Digital Link II, LLC, compared to a minimal loss in the second quarter of 2013.

The second ~~quarter~~quarters of 2015 and 2014 ~~includes~~each include other ~~expense~~loss of $0.1 million ~~compared to other income of $0.2 million in the second quarter of 2013~~ primarily related to net ~~gains~~losses on foreign currency ~~transactions.~~transaction.

WeIn 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 of $9.2 million should be recorded ~~income~~against the Company’s U.S. tax ~~benefit~~jurisdiction deferred tax assets as of ~~approximately $0.5 million in~~June 30, 2015. During the second quarter ~~of 2014 compared to income tax expense of $0.3 million in~~ the ~~second quarter of 2013.~~ valuation allowance increased $1.5 million.

The effective tax rate (calculated as a ratio of income tax ~~expense~~expense/benefit to pretax earnings, inclusive of equity method investment ~~earnings)~~losses) was approximately 44.2% and 518.7% ~~and 20.0% in the quarters ending June 30, 2014 and 2013, respectively. The Company’s effective rate was higher in~~for the three ~~months~~month periods ended June 30, 2015 and 2014, ~~compared~~respectively. 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 ~~the comparable period of 2013 due to the generated~~respective pre-tax earnings by tax ~~benefits from U.S. operating losses at significantly higher rates more than offsetting the tax expense related to our Canadian operations, Strong/MDI Screen Systems, Inc., which has a lower tax rate.~~jurisdiction.

As a result of the items outlined above, we generated ~~earnings~~losses of approximately ~~$0.4~~$2.9 million and ~~$0.03~~$0.21 basic and diluted ~~earnings~~losses per share in the three months ended June 30, ~~2014~~2015 compared to ~~$1.3~~earnings of $0.4 million in ~~2013~~2014 and basic and diluted earnings per share of ~~$0.09~~$0.03 a year-ago, respectively.

Six Months EndedJune 30, ~~2014~~2015 Compared to theSix Months EndedJune 30,~~2013~~2014

Net revenues during the six months ended June 30, ~~2014~~2015 decreased ~~15.3%~~4.2% to ~~$44.0~~$42.2 million from ~~$52.0~~$44.0 million during the six months ended June 30, ~~2013.~~2014.

	Six Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2015			2014
	(In thousands)						(In thousands)
Systems Integration	$	28,775		$	46,992		$	27,941		$	28,775
Managed Services		15,973			5,762			14,844			15,973
Total segment revenues		44,748			52,754			42,785			44,748
Eliminations		(700	)		(738	)		(598	)		(700	)
Total net revenues	$	44,048		$	52,016		$	42,187		$	44,048

Sales of systems integration products and services decreased ~~38.8%~~2.9% to $28.0 million in 2015 from $28.8 million in ~~2014 from $47.0 million in 2013.~~2014. Sales of digital and analog cinema products and services decreased by ~~$15.6~~$1.0 million as the industry ~~changes~~change to digital projection equipment continues to wind down as expected. ~~In addition sales of lighting products decreased by $3.0 million. This decrease was driven by the completion of the World Trade Center project in 2013.~~

Sales of managed services products and services ~~increased 177.2%~~decreased 7.1% to $14.8 million in 2015 from $16.0 million in 2014 from $5.8 million in 2013. Sales of products and services related to digital signage were $8.2 million in 2014 resulting from the October 2013 acquisition of Convergent. These sales were driven through the distribution of digital signage equipment as well as content creation, management and distribution.2014. This was ~~in addition~~due to a ~~$2.4~~$1.0 million ~~increase~~decrease in digital cinema service driven by non-recurring demand revenue and ~~increased~~decreased NOC contracts.

Sales outside the United States (mainly systems integration sales) ~~decreased~~increased to ~~$13.8~~$14.2 million in ~~2014~~2015 from ~~$15.8~~$13.8 million a year ago resulting primarily from increased sales in China, Europe, and Mexico, partially offset by decreased sales in Latin America ~~partially offset by increased sales in Canada~~ and ~~Mexico.~~Canada. Export sales are sensitive to the timing of the digital cinema conversions in these countries and normal replacement cycles. 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.

Consolidated gross profit decreased ~~1.5%~~6.3% to ~~$8.5~~$7.9 million in ~~2014~~2015 from ~~$8.6~~$8.5 million a year-ago, ~~but increased~~and decreased as a percent of total revenue to 18.8% from 19.2% ~~from 16.5%~~ in ~~2013.~~2014. Gross profit in the systems integration segment ~~decreased~~increased to $5.4 million in 2015 from $5.2 million in 2014, ~~from $7.0 million in 2013, but~~and increased as a percentage of sales to ~~17.9%~~19.3% in ~~2014~~2015 from ~~15.0%~~17.9% a year-ago. The ~~decrease~~increase in gross margin dollars was driven by ~~lower~~higher volume, ~~but~~and the increase in gross margin as a percentage of sales was driven by product mix.

The gross profit in the managed services segment amounted to $2.5 million or 17.1% as a percentage of revenues in 2015 compared to $3.3 million or 20.7% as a percentage of revenues in ~~2014 compared to $1.5 million or 26.4%~~2014. The decrease in gross margin dollars and gross margin as a percentage of ~~revenues in 2013. The increase in gross margin~~sales was driven by ~~higher revenues through the acquisition of CMS~~product mix and ~~increase in digital cinema services which allowed for greater~~lower utilization of field technicians.

Selling expenses ~~increased 78.9% to~~were $3.1 million in 2015 and 2014 ~~compared to $1.7 million a year-ago~~ and as a percentage of revenues increased to 7.4% in 2015 from 7.0% ~~from 3.3% a year-ago. The increase~~ in ~~selling expenses was primarily due to additional sales staff added as part of the Convergent acquisition partially offset by lower compensation related costs.~~2014.

Administrative expenses increased ~~35.5%~~17.1% to $7.9 million in 2015 from $6.7 million in 2014 ~~from $5.0 million in 2013~~ and as a percent of total revenue increased to 18.6% in 2015 from 15.2% in ~~2014 from 9.5% in 2013.~~2014. The increase in expenses is primarily due to ~~additional administrative expenses related to~~restructuring charges during the ~~acquisition~~second quarter of ~~Convergent.~~2015.

Our results for ~~2014 reflect a gain of approximately $0.1 million pertaining to our 44.4% share of equity in the loss from Digital Link II, LLC, compared to a loss of approximately $0.1 million in 2013.~~

~~Our results for 2014~~2015 include other income of ~~$0.1~~$0.6 million primarily related to net gains on foreign currency transactions, compared to ~~$0.5~~$0.1 million in ~~2013.~~2014.

~~We recorded income tax benefit of approximately $0.6 million in 2014 compared to income tax expense of $0.5 million in 2013.~~ The effective tax rate (calculated as a ratio of income tax ~~expense~~expense/benefit to pretax earnings, inclusive of equity method investment ~~earnings)~~losses) was approximately 434.5% and 74.5% ~~and 20.0% in~~for the six months ~~ending~~ended June 30, ~~2014~~2015 and ~~2013,~~2014, respectively. 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. The Company’s annual effective rate was higher in the six ~~months~~month period ended June 30, ~~2014~~2015 compared to the comparable period ~~of 2013~~for 2014 due to the ~~generated~~$9.2 million valuation allowance recorded against the Company’s U.S. tax ~~benefits from U.S. operating losses at significantly higher rates more than offsetting the~~jurisdiction deferred tax ~~expense related to our Canadian operations, Strong/MDI Screen Systems, Inc., which has a lower tax rate.~~assets discussed above.

As a result of the items outlined above, we generated net losses of approximately ~~$0.2~~$13.1 million and basic and diluted losses per share of ~~$0.02~~$0.93 in the six months ended June 30, ~~2014~~2015 compared to ~~earnings~~losses of ~~$1.8~~$0.2 million in ~~2013~~2014 and basic and diluted ~~earnings~~losses per share of ~~$0.13~~$0.02 a year-ago, respectively.

During the past several years, we have met our working capital and capital resource needs from either our operating or investing cash flows or a combination of both. We ended the second quarter with total cash and cash equivalents of ~~$26.9~~$24.7 million compared to ~~$28.8~~$22.5 million at December 31, ~~2013.~~2014. The Company believes cash and cash equivalents and its expected cash flows from operations will be sufficient to fund operations for at least the next twelve months.

~~We are party to a $20 million Revolving~~The Credit Agreement ~~and Note (collectively, the “Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”) which was renewed on~~expired June 20, 2014. The borrowings from the Credit Agreement will primarily be used for working capital purposes and for other general corporate purposes. The Company’s accounts receivable, general intangibles and inventory secure the Credit Agreement.30, 2015. Since inception of the agreement, no amounts ~~have~~had been borrowed on the Credit Agreement. ~~At June 30, 2014, the Company had availability of $20 million.~~

As of June 30, ~~2014, $6.9~~$13.8 million of the ~~$26.9~~$24.7 million ofin cash and cash equivalents was held by our foreign subsidiaries. During the 4th quarter of 2013 the Company determined that it would no longer indefinitely reinvest $12.0 million of accumulated earnings in Canada and accrued the taxes due upon repatriation which was completed during the second quarter. The Company believes the remaining accumulated earnings in its foreign subsidiaries will be indefinitely reinvested in those subsidiaries and has not accrued U.S. taxes on those earnings. If these funds are needed for our operations in the U.S., we would be required to accrue and pay U.S. income taxes and foreign withholding taxes on a portion of these funds when repatriated back to the U.S.

Net cash provided by operating activities was $2.9 million in the first six months of 2015, which included a net loss of $13.1 million, offset by non-cash charges (benefits) deferred tax expense, depreciation and amortization, reserve provisions and non-cash stock compensation totaling $11.8 million. Changes in working capital benefitted cash from operating activities of $4.2 million, primarily due to decreases in accounts receivable, partially offset by decreases in accounts payable and customer deposits and deferred revenue. Accounts receivable decreased $7.1 million due to decreased sales in the second quarter of 2015 compared to the last quarter of 2014 and due to improved accounts receivable collection results. Accounts payable balances decreased $2.1 million due to payments made to vendors during the quarter for purchases made to fulfill orders during the fourth quarter of 2014. Customer deposits and deferred revenue decreased $0.9 million as revenue was recognized related to customer deposits and deferred revenue.

Net cash used by operating activities was $1.1 million in the first six months of 2014, which included a net loss of $0.2 million, offset by non-cash charges (benefits) deferred tax expense, depreciation and amortization, reserve provisions and non-cash stock compensation totaling $0.4 million. Changes in working capital used cash from operating activities of $1.3 million, primarily due to decreases in accounts payables, accrued expenses and income taxes, partially offset by a decrease in accounts receivable. Accounts receivable decreased $6.0 million due to collections of the higher sales volume of the ~~prior~~last quarter of 2013 ~~quarter~~ compared to the second quarter of 2014. Accounts payable balances decreased $3.8 million due to payments made to vendors during the quarter for purchases made to fulfill orders during the fourth quarter of 2013.

Net cash provided by operating activities was $5.7 million in the first six months of 2013, which included net income of $1.8 million, plus non-cash charges (benefits) for gain on assets, deferred tax expense, depreciation and amortization, reserve provisions and non-cash stock compensation totaling $1.9 million. Changes in working capital provided cash from operating activities of $1.9 million. This is primarily due to a decrease in accounts receivable and other current assets, partially offset by increases in inventories and decreases in accounts payable and customer deposits. Accounts receivable balances decreased $12.5 million due to collections of the higher sales volume of the prior quarter 2013 as compared to the second quarter of 2013. Accounts payable decreased $7.8 million as the Company paid for fourth quarter 2013 inventory purchases.

Net cash used in investing activities amounted to ~~$0.5~~$0.2 million in ~~2014~~2015 compared to net cash ~~provided by~~used in investing activities of ~~$0.2~~$0.5 million in ~~2013.~~2014. The cash used in investing activities in ~~2014~~2015 and ~~2013~~2014 were primarily for capital expenditures.

Our primary exposure to foreign currency fluctuations ~~pertain~~pertains to our subsidiaries in Canada and China. In certain instances, wethe Company may enter into a foreign exchange contract to manage a portion of this risk. The Company’s foreign exchange forward contracts expired in 2014. For the six months ended June 30, 2014 we recorded $0.1 million in realized and unrealized losses associated with these contracts in our condensed consolidated statement of income. ~~This compares to losses of $0.2 million in the comparative period of 2013.~~

We do not have any trading activities that include non-exchange traded contracts at fair value.

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

●We have accrued approximately $0.03 million of unrecognized tax benefits in the financial statements as tax liability, including interest and penalties, in accordance with FIN 48 as of June 30, 2014. Amounts for which the year of settlement occurs cannot be reasonably estimated.

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

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 period ended June 30, ~~2014~~2015 are not necessarily indicative of the results that may be expected for an entire fiscal year.

From time to time we may be involved in various claims and legal actions which are routine litigation matters incidental to the business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our financial condition, results of operations or liquidity.

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

Our accounting policies and estimates that are most critical to the presentation of our results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as our critical accounting policies. See further discussion of our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our year ended December 31, ~~2013.~~2014. 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, ~~2014.~~2015.

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 — We have a variable interest rate credit facility, however, we have no outstanding balances as of June 30, 2014. If we would borrow up to the maximum amount available under these facilities, a one percent increase in the interest rate would increase interest expense by $0.2 million per annum. Interest rate risks from our ~~other~~ interest related accounts such as our postretirement obligations are not deemed significant. We currently have long-term notes receivables bearing interest ~~rates~~ of 15% ~~and~~which are recorded at fair market 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 a currency other than the entity’s functional currency are primarily related to our China and Canadian subsidiaries. From time to time, as market conditions indicate, we will enter into foreign currency contracts to manage the risks associated with forecasted transactions. ~~At June 30, 2014, we had no outstanding foreign currency forward contracts.~~

A portion of our cash in the China and Canadian subsidiaries 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 balances by approximately ~~$0.3~~$0.4 million.

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~~President 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~~President and Chief Financial Officer concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective at ensuring that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (as amended) is (1) accumulated and communicated to management, including the Company’s ~~Chief Executive Officer~~President and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter for the period covered by this report that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.

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” in our Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014 includes a detailed discussion of the Company’s risk factors. There have been no material changes to the risk factors previously disclosed.

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.

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

13710 FNB Parkway, Suite 400, Omaha, Nebraska		68154
(Address of Principal Executive Offices)		(Zip Code)

Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Smaller reporting company ☐
(Do not check if a smaller reporting company)

Class		Outstanding as of August ~~5, 201~~43, 2015
Common Stock, $.01, par value		~~14,181,222~~14,137,896 shares

		Page No.

	PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets, June 30, ~~2014~~2015 and December 31, ~~2013~~2014	3

	Condensed Consolidated Statements of ~~Income~~Operations for the Three and Six Months Ended June 30, ~~2014~~2015 and ~~2013~~2014	4

	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, ~~2014~~2015 and ~~2013~~2014	5

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2014~~2015 and ~~2013~~2014	6

	Notes to the Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20

Item 4.	Controls and Procedures	20

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2120

Item 1A.	Risk Factors	2120


Item 6.	Exhibits	21

	Signatures	21

Contractual Obligations	Total		Remaining in 2014		One to Three Years		Three to Five Years		Thereafter

Postretirement benefits		133		8		38		31		56
Operating leases		4,272		467		1,192		933		1,680
Contractual cash obligations	$	4,405	$	475	$	1,230	$	964	$	1,736

	Three Months EndedJune 30,				Six Months Ended June30,
	2014		2013		2014			2013
(In thousands, except per share data)
Basic earnings per share:
Earnings (loss) applicable to common stock	$	381	$	1,277	$	(213	)	$	1,841
Basic weighted average common shares outstanding		14,060		13,997		14,043			13,988
Basic earnings (loss) per share	$	0.03	$	0.09	$	(0.02	)	$	0.13
Diluted earnings per share:
Earnings (loss) applicable to common stock	$	381	$	1,277	$	(213	)	$	1,841
Basic weighted average common shares outstanding		14,060		13,997		14,043			13,988
Dilutive effect of stock options and restricted stock awards		46		48		—			47
Dilutive weighted average common shares outstanding		14,106		14,045		14,043			14,035
Diluted earnings (loss) per share	$	0.03	$	0.09	$	(0.02	)	$	0.13

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(In thousands)
Warranty accrual at beginning of period	$	322		$	544		$	423		$	662
Charged to expense		226			51			338			87
Amounts written off, net of recoveries		(246	)		(139	)		(452	)		(288	)
Foreign currency adjustment		8			—			1			(5	)
Warranty accrual at end of period	$	310		$	456		$	310		$	456

	Amount
	(in thousands)
2014	$	118
2015		169
2016		113
2017		91
2018		72
2019		106

	Amount
	(in thousands)
Remainder 2015	$	181
2016		331
2017		275
2018		64
2019		33
Thereafter		57

	(in thousands)
Balance as of December 31, 2013	$	1,123
Foreign currency translation		(4	)
Balance as of June 30, 2014	$	1,119

	(in thousands)
Balance as of December 31, 2014	$	1,029
Foreign currency translation		(73	)
Balance as of June 30, 2015	$	956

		Asset Derivatives
(in thousands)	Classification	June 30, 2014		December 31, 2013
Foreign exchange forward contracts	Other current assets	$	—	$	10,934

		Liability Derivatives
(in thousands)	Classification	June 30, 2014		December 31, 2013
Foreign exchange forward contracts	Other current liabilities	$	—	$	11,000

	Capital Leases		Operating Leases
	(In thousands)
Remainder 2015	$	61	$	373
2016		123		607
2017		94		507
2018		52		450
2019		—		447
Thereafter		—		1,308
Total minimum lease payments		330	$	3,692
Less: Amount representing interest		24
Present value of minimum lease payments		306
Less: Current maturities		118
Capital lease obligations, net of current portion	$	188

	Three Months Ended June 30,
	2014			2013
	(In thousands)
Systems Integration	$	14,755		$	21,495
Managed Services		7,575			3,276
Total segment revenues		22,330			24,771
Eliminations		(303	)		(376	)
Total net revenues	$	22,027		$	24,395

Contractual Obligations	Total		Remaining in 2015		One to Three Years		Three to Five Years		Thereafter

Postretirement benefits		135		17		39		21		58
Capital leases		330		61		217		52		—
Operating leases		3,692		373		1,114		897		1,308
Contractual cash obligations	$	4,157	$	451	$	1,370	$	970	$	1,366

BALLANTYNE STRONG, INC.

By:	/s/ ~~GARY L. CAVEY~~CHRISTOPHER D. STARK	By:	/s/ ~~MARY A. CARSTENS~~NATHAN D. LEGBAND
	~~Gary L. Cavey,~~Christopher D. Stark, President			~~Mary A. Carstens,~~
	~~Chief Executive Officer and Director~~		Nathan D. Legband, Chief Financial Officer


Date:	August ~~8, 2014~~6, 2015	Date:	August ~~8, 2014~~6, 2015

		Incorporated by Reference
Exhibit Number	Document Description	Form	Exhibit	Filing Date	Filed Herewith

3.1	Certificate of Incorporation of Ballantyne of Omaha, Inc.	S-8	3.1	12/7/06

3.2	Certificate of Amendment of Certificate of Incorporation	S-8	3.1.1	12/7/06

3.3	Certificate of Amendment of Certificate of Incorporation	S-8	3.1.2	12/7/06

3.4	Certificate of Amendment of Certificate of Incorporation	S-8	3.1.3	12/7/06

3.5	Certificate of Amendment of Certificate of Incorporation	S-8	3.1.4	12/7/06

3.6	Ballantyne of Omaha, Inc. Bylaws	10-K	3.2	4/1/08

3.7	First Amendment to Bylaws of Ballantyne of Omaha, Inc.	10-K	3.2.1	4/1/08

3.8	Second Amendment to Bylaws of Ballantyne of Omaha, Inc.	10-K	3.2.2	4/1/08

3.9	Third Amendment to Bylaws of Ballantyne of Omaha, Inc.	10-K	3.2.3	4/1/08

3.10	Fourth Amendment to Bylaws of Ballantyne of Omaha, Inc.	10-K	3.2.4	4/1/08

3.11	Fifth Amendment to Bylaws of Ballantyne of Omaha, Inc.			5/2/12

10.1	Third Amendment to Credit Agreement, dated June 20, 2014, by and between the company and Wells Fargo Bank, N.A.	8-K	4.1	6/25/14

10.2	$20,000,000 Revoloving Line of Credit Note, dated June 20, 2014, delivered by the Company to Wells Fargo Bank, N.A.	8-K	4.2	6/25/14

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’s, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, 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 Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.				X