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

Indicate by check mark whether the registrant has submitted electronically 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 ~~[X]~~ ☒ 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.

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

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

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

	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,026		$	4,951		$	10,372		$	4,435
Restricted cash		352			351			150			352
Accounts receivable (net of allowance for doubtful accounts of $783 and $1,291, respectively)		6,115			12,898
Accounts receivable (net of allowance for doubtful accounts of $613 and $1,006, respectively)								4,446			5,558
Inventories, net		2,816			2,879			2,986			2,264
Current assets of discontinued operations		-			320			-			3,748
Other current assets		1,735			1,624			5,667			1,452
Total current assets		18,044			23,023			23,621			17,809
Property, plant and equipment (net of accumulated depreciation of $11,363 and $10,030, respectively)		9,028			10,069
Property, plant and equipment, net								6,109			5,524
Operating lease right-of-use assets		4,705			5,581			3,842			4,304
Finance lease right-of-use assets		2,465			2,563			1			4
Note receivable, net of current portion								1,875			-
Investments		22,006			13,311			37,341			20,167
Intangible assets, net		1,214			1,534			132			353
Goodwill		895			919			937			938
Long-term assets of discontinued operations		-			585			-			6,372
Other assets		31			48			19			28
Total assets	$	58,388		$	57,633		$	73,877		$	55,499

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,448		$	2,969		$	2,915		$	2,717
Accrued expenses		3,464			4,416			2,400			2,182
Short-term debt		2,972			3,080			3,201			3,299
Current portion of long-term debt		1,055			998
Current portion of operating lease obligations		743			846			562			619
Current portion of finance lease obligations		1,820			1,586			1			1,015
Deferred revenue and customer deposits		4,198			2,706			3,850			2,404
Current liabilities of discontinued operations		-			704			-			3,901
Total current liabilities		17,700			17,305			12,929			16,137
Long-term debt, net of current portion and debt issuance costs		2,617			3,019
Operating lease obligations, net of current portion		4,107			4,662			3,408			3,817
Finance lease obligations, net of current portion		3,111			3,988			-			1,091
Deferred income taxes		3,053			2,649			5,218			3,099
Long-term liabilities of discontinued operations		-			147			-			4,066
Other long-term liabilities		120			154			229			223
Total liabilities		30,708			31,924			21,784			28,433

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 25,000 shares; issued 17,584 and 17,410 shares at September 30, 2020 and December 31, 2019, respectively; outstanding 14,790 and 14,616 shares at September 30, 2020 and December 31, 2019, respectively		176			174
Preferred stock, par value $.01 per share; authorized 1,000 shares, NaN outstanding								-			-
Common stock, par value $.01 per share; authorized 25,000 shares; issued 21,231 and 17,596 shares at September 30, 2021 and December 31, 2020, respectively; outstanding 18,437 and 14,802 shares at September 30, 2021 and December 31, 2020, respectively								212			176
Additional paid-in capital		43,311			42,589			50,603			43,713
Retained earnings		7,472			6,001			24,123			5,654
Less 2,794 of common shares in treasury, at cost		(18,586	)		(18,586	)
Treasury stock, 2,794 shares at cost								(18,586	)		(18,586	)
Accumulated other comprehensive loss		(4,693	)		(4,469	)		(4,259	)		(3,891	)
Total stockholders’ equity		27,680			25,709			52,093			27,066
Total liabilities and stockholders’ equity	$	58,388		$	57,633		$	73,877		$	55,499

See accompanying notes to unaudited condensed consolidated financial statements.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Net product sales	$	4,460		$	9,192		$	13,095		$	20,840		$	4,086		$	4,138		$	11,811		$	11,370
Net service revenues		5,447			6,358			15,393			21,057			2,030			1,423			5,170			4,164
Total net revenues		9,907			15,550			28,488			41,897			6,116			5,561			16,981			15,534
Cost of products sold		3,564			5,603			10,119			17,526			2,624			3,205			7,831			8,286
Cost of services		3,096			4,746			9,520			11,435			1,044			1,192			3,078			4,067
Total cost of revenues		6,660			10,349			19,639			28,961			3,668			4,397			10,909			12,353
Gross profit		3,247			5,201			8,849			12,936			2,448			1,164			6,072			3,181
Selling and administrative expenses:
Selling		678			956			2,234			2,986			411			382			1,158			1,231
Administrative		2,914			4,055			10,119			11,709			2,155			2,222			6,775			7,923
Total selling and administrative expenses		3,592			5,011			12,353			14,695			2,566			2,604			7,933			9,154
Loss on disposal of assets		(18	)		(3	)		(18	)		(67	)		-			(18	)		-			(18	)
(Loss) income from operations		(363	)		187			(3,522	)		(1,826	)
Loss from operations														(118	)		(1,458	)		(1,861	)		(5,991	)
Other income (expense):
Interest income		-			1			-			3			21			-			54			-
Interest expense		(254	)		(263	)		(794	)		(568	)		(28	)		(109	)		(284	)		(372	)
Fair value adjustment to notes receivable		-			(845	)		-			(2,153	)
Foreign currency transaction (loss) gain		(173	)		66			12			(154	)
Foreign currency transaction gain (loss)														162			(172	)		(56	)		51
Unrealized gain on investments														8,376			-			8,376			-
Other income, net		2,749			416			2,873			650			1,692			2,749			1,847			2,867
Total other income (expense)		2,322			(625	)		2,091			(2,222	)
Total other income														10,223			2,468			9,937			2,546
Income (loss) from continuing operations before income taxes and equity method investment loss		1,959			(438	)		(1,431	)		(4,048	)		10,105			1,010			8,076			(3,445	)
Income tax expense		(526	)		(731	)		(1,022	)		(1,295	)		(2,696	)		(614	)		(2,788	)		(996	)
Equity method investment loss		(460	)		(496	)		(580	)		(1,223	)		(323	)		(460	)		(1,468	)		(580	)
Net income (loss) from continuing operations		973			(1,665	)		(3,033	)		(6,566	)		7,086			(64	)		3,820			(5,021	)
Net income (loss) from discontinued operations (Note 3)		4,673			(123	)		4,504			(2,790	)
Net income (loss)	$	5,646		$	(1,788	)	$	1,471		$	(9,356	)
Net income from discontinued operations (Note 3)														-			5,710			14,649			6,492
Net income													$	7,086		$	5,646		$	18,469		$	1,471

Basic net income (loss) per share
Continuing operations	$	0.07		$	(0.11	)	$	(0.21	)	$	(0.46	)	$	0.38		$	-		$	0.21		$	(0.34	)
Discontinued operations		0.31			(0.01	)		0.31			(0.19	)		-			0.38			0.82			0.44
Basic net income (loss) per share	$	0.38		$	(0.12	)	$	0.10		$	(0.65	)
Basic net income per share													$	0.38		$	0.38		$	1.03		$	0.10

Diluted net income (loss) per share
Continuing operations	$	0.07		$	(0.11	)	$	(0.21	)	$	(0.46	)	$	0.38		$	-		$	0.21		$	(0.34	)
Discontinued operations		0.31			(0.01	)		0.31			(0.19	)		-			0.38			0.81			0.44
Diluted net income (loss) per share	$	0.38		$	(0.12	)	$	0.10		$	(0.65	)
Diluted net income per share													$	0.38		$	0.38		$	1.02		$	0.10

Weighted-average shares used in computing net income (loss) per share:
Basic		14,789			14,494			14,699			14,476			18,437			14,789			17,870			14,699
Diluted		14,906			14,494			14,699			14,476			18,700			14,789			18,042			14,699

See accompanying notes to unaudited condensed consolidated financial statements.

~~The following summarizes the changes in stockholders’ equity for the three and nine months ended September 30, 2020:~~

~~The following summarizes the changes in stockholders’ equity for the three and nine months ended September 30, 2019:~~

See accompanying notes to unaudited condensed consolidated financial statements.


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2021			2020
Cash flows from operating activities:
Net loss from continuing operations	$	(3,033	)	$	(6,566	)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:
Provision for (recovery of) doubtful accounts		397			(509	)
Net income (loss) from continuing operations							$	3,820		$	(5,021	)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
(Recovery of) provision for doubtful accounts								(249	)		453
Provision for obsolete inventory		41			245			69			105
Provision for warranty		14			24			46			14
Depreciation and amortization		2,634			2,214			985			843
Amortization and accretion of operating leases		814			788			620			717
Fair value adjustment to notes receivable		-			2,153
Equity method investment loss		580			1,223			1,468			580
Loss on disposal of assets		-			67
Gain on business interruption claim settlement		(789	)		-
Unrealized gain on investments								(8,376	)		-
Deferred income taxes		72			(129	)		2,124			72
Stock-based compensation expense		724			798			686			724
Changes in operating assets and liabilities:
Accounts receivable		4,793			776			1,287			2,063
Inventories		(28	)		(96	)		(793	)		(248	)
Current income taxes		269			229			(6	)		338
Other assets		35			(130	)		(2,028	)		(11	)
Accounts payable and accrued expenses		1,024			(2,000	)		(1,373	)		2,551
Deferred revenue and customer deposits		1,469			797			2,002			646
Operating lease obligations		(857	)		(875	)		(617	)		(720	)
Net cash provided by (used in) operating activities from continuing operations		8,159			(991	)
Net cash (used in) provided by operating activities from continuing operations								(335	)		3,106
Net cash provided by operating activities from discontinued operations		598			1,407			510			5,651
Net cash provided by operating activities		8,757			416			175			8,757

Cash flows from investing activities:
Capital expenditures							$	(650	)	$	(511	)
Investment in GreenFirst Forest Products, Inc. (Note 6)								(9,977	)		-
Investment in Firefly Systems, Inc. (Note 6)								-			(4,000	)
Investment
Net cash used in investing activities from continuing operations								(10,627	)		(4,511	)
Net cash provided by (used in) investing activities from discontinued operations								12,761			(218	)
Net cash provided by (used in) investing activities								2,134			(4,729	)

Cash flows from financing activities:
Principal payments on short-term debt								(509	)		(450	)
Proceeds from stock issuance, net of costs								6,310			-
Payments of withholding taxes related to net share settlement of equity awards								(80	)		-
Proceeds from borrowing under credit facility								-			5,040
Repayment of borrowing under credit facility								-			(5,040	)
Proceeds from Paycheck Protection Program Loan								-			3,174
Repayment of Paycheck Protection Program Loan								-			(3,174	)
Proceeds from exercise of stock options								9			-
Payments on capital lease obligations								(2,106	)		(658	)
Net cash provided by (used in) financing activities from continuing operations								3,624			(1,108	)
Net cash used in financing activities from discontinued operations								(155	)		(964	)
Net cash provided by (used in) financing activities								3,469			(2,072	)

Effect of exchange rate changes on cash and cash equivalents								(43	)		120
Net (decrease) increase in cash and cash equivalents and restricted cash from continuing operations								(7,381	)		(2,393	)
Net increase in cash and cash equivalents and restricted cash from discontinued operations								13,116			4,469
Net increase in cash and cash equivalents and restricted cash								5,735			2,076
Cash and cash equivalents and restricted cash at beginning of period								4,787			5,302
Cash and cash equivalents and restricted cash at end of period							$	10,522		$	7,378

Components of cash and cash equivalents and restricted cash:
Cash and cash equivalents							$	10,372		$	7,026
Restricted cash								150			352
Total cash and cash equivalents and restricted cash							$	10,522		$	7,378

Supplemental disclosure of non-cash investing and financing activities:
Short-term borrowings to finance insurance							$	140		$	142

See accompanying notes to unaudited condensed consolidated financial statements.

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

Ballantyne Strong, Inc. (“~~Ballantyne”~~Ballantyne Strong” or the “Company”), a Delaware corporation, is a holding company with ~~diverse~~ business ~~activities focused on serving~~operations in the entertainment industry and ~~retail markets.~~holdings in public and privately held companies. The Company conducts 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. The Company also operates its ~~wholly owned subsidiaries Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc. (“Strong/MDI”), Convergent Media Systems Corporation (“Convergent”)~~Digital Ignition technology incubator and ~~Strong Digital Media, LLC (“SDM”) design, integrate~~co-working facility in Alpharetta, Georgia. In addition, the Company holds minority positions in one privately held company and install technology solutions for a broad range of applications; develop and deliver out-of-home messaging and communications; manufacture projection screens; and provide managed services including monitoring of networked equipment to our customers.two publicly traded companies.

In August 2020, the Company completed the sale of its Strong Outdoor business segment, and in February 2021, the Company completed the sale of its Convergent business segment. As a result of ~~the divestiture,~~these divestitures, the Company has presented Strong Outdoor’s and Convergent’s operating results as a discontinued ~~operation~~operations for all periods presented. See Note 3 for additional details.

The condensed consolidated financial statements include the accounts of the Company and all ~~majority owned~~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, ~~2019.~~2020.

The condensed consolidated balance sheet as of December 31, ~~2019~~2020 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.

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.

Significant uncertainty remains surrounding the COVID-19 global pandemic and the extent and duration of the impacts that it may have on the Company, as well as its customers, suppliers, and employees. ~~There is~~While cinema and theme park operators in the United States and other parts of the world are in various stages of returning to “normal”, there continue to be spikes in COVID-19 cases and new variants in various parts of the world that could impact the pace of recovery in our markets. Accordingly, there continues to be a heightened potential for future reserves against trade receivables, inventory write downs, and impairments of long-lived assets, goodwill, intangible assets and investments. In the current environment, assumptions about future financial and operational performance, supply chain pricing and availability and customer creditworthiness have greater variability than normal, which could in the future significantly affect the valuation of the Company’s assets, both financial and non-financial. As an understanding of the longer-term impacts of COVID-19 on the Company’s customers and business develops, there is heightened potential for changes in these views over the remainder of ~~2020,~~2021, and potentially beyond.

All short-term, highly liquid financial instruments are classified as cash equivalents in the consolidated balance sheets and statements of cash flows. Generally, these instruments have maturities of three months or less from date of purchase. As of September 30, 2021, $1.8 million of the $10.5 million in cash and cash equivalents was held by our foreign subsidiary.

Restricted cash represents amounts held in a collateral account for the Company’s corporate travel and purchasing credit card program.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful accounts 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. Since many of Strong Entertainment’s customers have been negatively impacted by COVID-19, the Company recorded $0.5 million of bad debt expense during the first nine months of 2020 as a result of the increased uncertainty related to collection of trade accounts receivable from these customers.

The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net income (loss) resulting from these investments is reported under the line item captioned “equity method investment income (loss)” in our condensed consolidated statements of operations. The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. Changes in fair value of investments in marketable equity securities of unconsolidated entities in which the Company is not able to exercise significant influence (Fair Value Investments) are recognized on the condensed consolidated statement of operations. Investments in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Investments”) 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 investment of the same issuer. Dividends on cost method investments received are recorded as income.

The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Management reviewed the underlying net assets of the ~~investees~~Company’s equity method investee as of September 30, ~~2020~~2021 and determined that the Company’s proportionate economic interest in the ~~investees indicate~~investee indicates that the ~~investments~~investment was not impaired. There were ~~not other than temporarily impaired.~~no observable price changes in orderly transactions for identical or a similar investment of the Company’s cost method investment during the three and nine months ended September 30, 2020. The carrying value of our equity method, fair value method and cost method investments is reported as “investments” on the condensed consolidated balance sheets. Notes 3 and 7 contain additional information on our equity method, fair value method and cost method investments.

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:

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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Fair values measured on a recurring basis at September 30, ~~2020~~2021 (in thousands):

	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	7,026	$	-	$	-	$	7,026	$	10,372	$	-	$	-	$	10,372
Restricted cash		352		-		-		352		150		-		-		150
Notes receivable		-		-		-		-
Fair value method investment										20,192						20,192
Total	$	7,378	$	-	$	-	$	7,378	$	30,714	$	-	$	-	$	30,714

Fair values measured on a recurring basis at December 31, ~~2019~~2020 (in thousands):

	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,951	$	-	$	-	$	4,951	$	4,435	$	-	$	-	$	4,435
Restricted cash		351		-		-		351		352		-		-		352
Notes receivable		-		-		-		-
Total	$	5,302	$	-	$	-	$	5,302	$	4,787	$	-	$	-	$	4,787

~~The following table reconciles the beginning and ending balance of the Company’s notes receivable at fair value (in thousands):~~

During 2011, the Company entered into certain unsecured notes receivable arrangements with CDF2 Holdings, LLC pertaining to the sale and installation of digital projection equipment. The notes receivable accrue interest at a rate of 15% per annum. Interest not paid in any particular year is added to the principal and also accrues interest at 15%. In connection with this transaction, the Company also entered into an agreement with one of its customers, pursuant to which the Company is obligated to provide up to $1.1 million of credits against any amounts due to the Company from the customer based on cash collected on the notes receivable. In the event the Company does not have any outstanding balances due from the customer, the Company would be obligated to remit up to the first $1.1 million collected on the notes receivable directly to the customer.

The notes receivable are recorded at estimated fair value. The significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are the discount rate and percentage of default. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. Adjustments to the fair value of the notes receivable are included in other (expense) income on the Company’s condensed consolidated statements of operations.

In order to estimate the fair value, the Company reviews the financial position and estimated cash flows of the debtor of the notes receivable. During the year ended December 31, 2019, the Company adjusted the carrying value of the notes receivable to $0 based on management’s review of the debtor’s financial statements and changes in the underlying trend of historical and projected cash flows available to service the notes. The related $1.1 million contingent liability was also adjusted during the year ended December 31, 2019, based on the Company’s expectation that cash flow from the notes receivable will not be available. As of September 30, 2020, management estimated the fair value of the notes receivable to be $0.

The Company’s short-term and long-term debt is recorded at historical cost. As of September 30, 2020, the Company’s long-term debt, including current maturities, had a carrying value of $3.7 million. Based on discounted cash flows using current quoted interest rates (Level 2 of the fair value hierarchy), the estimated fair value at September 30, 2020 was $3.4 million.

The carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses and short-term debt reported in the ~~condensed~~ consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. ~~Note 7 includes~~Based on quoted market prices, the fair value ~~information related to our~~of the Company’s equity ~~and cost~~ method ~~investments. All non-financial assets that are not recognized or disclosed at~~and fair value ~~in the financial statements on a recurring basis, which include non-financial long-lived assets, are measured~~method investments was $25.2 million at fair value in certain circumstances (for example, when there is evidence of impairment). The Company did not have any significant non-recurring measurements of non-financial assets or liabilities during the three and nine months ended September 30, ~~2020 or 2019.~~2021 (see Note 7).

In ~~August 2018,~~December 2019, the Financial ~~Accounting~~Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles- Goodwill and Other- Internal Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This ASU requires customers in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal use software guidance in ASC 350-40 to determine which implementation costs to capitalize or expense. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU improves the effectiveness of fair value measurement disclosures by eliminating, adding and modifying certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard on January 1, 2020 did not have an impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company believes the adoption of this ASU will not significantly impact its results of operations and financial position.

~~In December 2019, the FASB issued ASU~~ 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. The effective date of the standard ~~will be for~~is annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in the standard are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. The Company ~~is currently evaluating~~early adopted this ASU effective January 1, 2020. The adoption did not have a material impact on the ~~new guidance to determine the impact it may have on its~~Company’s consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815.” This ASU clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives. The effective date of the standard ~~will be for~~is annual periods beginning after December 15, 2020, and interim periods within those fiscal years. The ~~Company is currently evaluating~~adoption did not have a material impact on the ~~impact of the adoption of the new standard on its condensed~~Company’s consolidated financial ~~statements and related disclosures.~~statements.

In April 2020, the FASB issued a question-and-answer document to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the effects of the COVID-19 pandemic. The guidance ~~will allow~~allows concessions related to the timing of payments, where the total consideration has not changed, to not be accounted for as lease modifications. Instead, any such concessions can be accounted for as if no change was made to the contract or as variable lease payments. As a result of the COVID-19 pandemic, the Company received certain lease concessions in the form of rent deferrals during 2020. The Company chose to implement the policy election provided by the FASB to record rent concessions as if no modifications to leases contracts were made, and thus no changes to the lease obligations were recorded in respect to these concessions. As of September 30, ~~2020,~~2021, the Company ~~had outstanding~~did not have any deferred rent outstanding.

As part of ~~$0.1~~a transaction that closed in February 2021, the Company divested its Convergent business segment. The Company’s Convergent business segment delivered digital signage solutions and related services to large multi-location organizations in the United States and Canada.

On February 1, 2021, the Company entered into an Equity Purchase Agreement (together with the other related documents defined therein, the “Purchase Agreement”), and closed the transactions contemplated by the Purchase Agreement, with SageNet LLC (“SageNet”). Pursuant to the Purchase Agreement, a subsidiary of Ballantyne Strong sold 100% of the issued and outstanding limited liability company membership interests (the “Equity Interests”) in Convergent, LLC (“Convergent”) to SageNet. The purchase price for the Equity Interests (the “Purchase Price”) pursuant to the Purchase Agreement was (i) $15.0 million in cash and (ii) $2.5 million in the ~~majority~~form of a subordinated promissory note delivered by SageNet in favor of the Company (the “SageNet Promissory Note”). Per the terms of the SageNet Promissory Note, the Company will receive twelve consecutive equal quarterly payments of principal, plus accrued interest thereon, commencing on March 31, 2022. The Company has elected to record the SageNet Promissory Note using its historical cost basis. Additionally, a portion of the Purchase Price was placed in escrow by SageNet, the release of which ~~will be paid over~~is contingent upon certain events and conditions specified in the ~~remaining term~~Purchase Agreement. The Purchase Price is also subject to adjustment based on closing working capital of Convergent. As further consideration, SageNet also assumed approximately $5.7 million of third-party debt of Convergent, bringing the ~~leases.~~total enterprise value for Convergent’s equity interests to approximately $23.2 million. The Company recorded a gain of $14.9 million during the first quarter of 2021 related to the sale of Convergent.

As part of transactions in May 2019 and August 2020, the Company divested its Strong Outdoor business segment. The Company’s Strong Outdoor business segment provided outdoor advertising and experiential marketing to advertising agencies and corporate accounts, primarily in New York City.

On May 21, 2019, ~~SDM~~Strong Digital Media, LLC (“SDM”), an indirect subsidiary of Ballantyne Strong, entered into a Taxicab Advertising Collaboration Agreement (the “Commercial Agreement”) and a Unit Purchase Agreement (the “Unit Purchase Agreement”) with Firefly Systems, Inc. (“Firefly”), pursuant to which SDM agreed to make available to Firefly 300 digital taxi ~~tops and~~tops. Additionally, the parties agreed to coordinate the fulfilling of SDM’s agreements with the Metropolitan Taxicab Board of Trade, Inc. (“MTBOT”) and Creative Mobile Media, LLC (“CMM”), each dated February 8, 2018. Firefly agreed to fulfill the digital taxi top advertising obligations under the MTBOT agreement and CMM agreement, and SDM agreed to fulfill the non-digital taxi top advertising obligations under the MTBOT agreement and CMM agreement. ~~The Company~~Ballantyne Strong is a party to the Unit Purchase Agreement and agreed to guarantee the payment obligations of SDM under the Commercial Agreement. As consideration for entering into these agreements, ~~the Company~~Ballantyne Strong received ~~$4.8~~ $4.8 million worth of Firefly’s Series A-2 preferred shares, (“which were subsequently renamed Firefly Series B-1 Shares (the “Firefly Series B-1 Shares”). The Firefly Series B-1 Shares, including those subsequently issued pursuant to an earn-out provision, were subject to a repurchase option for a period of three years to cover SDM’s indemnity obligations and other post-closing covenants under the Commercial Agreement and the Unit Purchase Agreement. As part of the Asset Purchase Agreement (as defined and described below), Firefly no longer has an option to repurchase any of the Firefly Series ~~A-2 preferred shares issued to~~B-1 Shares held by SDM.

The 300 digital tops the Company has made available to Firefly are subject to a master equipment lease agreement which the Company entered into during 2017. Pursuant to the master lease agreement and the Unit Purchase Agreement, the Company will remain the primary obligor until such time as the lease expires. In addition, of the ~~$4.8~~$4.8 million worth of Firefly Series B-1 Shares received, ~~$1.2~~$1.2 million worth of such shares were eligible for repurchase by Firefly if the Company did not exercise the purchase option contained within the master lease agreement. Accordingly, the Company had deferred recognizing an investment related to these Firefly Series B-1 Shares eligible for repurchase until such time it was reasonably certain the Company would exercise the purchase option. The transaction, in effect, transferred control of the underlying asset to Firefly. As additional consideration for the right to use the digital taxi tops, Firefly agreed to pay for certain of Company’s operating expenses associated with the non-digital taxi tops. The Company concluded the payments that Firefly made on its behalf were ~~considered~~ variable payments and were not included in the calculation of the selling profit. Therefore, the Company recorded the benefit and the related operating expenses in the period when the changes in facts and circumstances on which the variable lease payments were based ~~occured.~~occurred. As part of the Asset Purchase Agreement (as defined and described below) the Taxicab Advertising Collaboration Agreement dated May 21, 2019 was terminated, which relieved the Company of its obligation to exercise the purchase option contained within the master lease agreement. As a result, the Company recognized an additional ~~$1.2~~$1.2 million investment ~~at September 30,~~during the year ended December 31, 2020 related to the Firefly Series B-1 Shares that were previously eligible for repurchase by Firefly.

The Unit Purchase Agreement contained an earnout provision pursuant to which SDM obtained additional Firefly Series A-2 Shares. The earnout period was from May 22, 2019 through June 30, 2020. SDM was eligible to earn additional Firefly Series B-1 Shares equivalent to the cash collections under certain digital top contracts that were in place at the closing of the transaction. ~~The Company~~Ballantyne Strong received the shares earned pursuant to the earnout provision on August 3, 2020. In connection with the additional Firefly Series B-1 Shares that were received pursuant to the ~~Company~~earnout, Ballantyne Strong recorded an additional ~~$0.1 million and $0.7~~$0.7 million gain on the Firefly transaction during the ~~three and nine months~~year ended ~~September 30, 2020, respectively.~~December 31, 2020.

On August 3, 2020, SDM entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Firefly, pursuant to which SDM agreed to sell ~~substantially all of the~~certain assets primarily related to its Strong Outdoor operating business to Firefly and continue to make available 300 digital taxi tops to Firefly. SDM retained certain accounts receivable as well as liabilities other than executory obligations under transferred contracts to the extent such liabilities are required to be performed following closing or constitute certain deferred revenue. The transaction closed on the same day.

As consideration for entering into the Asset Purchase Agreement, SDM received approximately ~~$0.6~~$0.6 million in cash consideration and approximately ~~$3.2~~$3.2 million worth of ~~Firefly’s~~Firefly Series A-3 preferred ~~shares.~~shares (the “Firefly Series A-3 Shares”). In connection with the closing of the transactions contemplated by the Asset Purchase Agreement, (i) SDM received approximately ~~$1.1~~$1.1 million worth of Firefly’s Series ~~A-2 preferred shares,~~B-1 Shares, which constituted the remaining shares to be issued pursuant to the Unit Purchase ~~Agreement,~~Agreement; (ii) Firefly no longer ~~has~~had an option to repurchase any of the Series A-2 ~~preferred shares issued to SDM,~~Shares held by SDM; (iii) all accounts payable to Firefly were cancelled and ~~forgiven,~~forgiven; and (iv) the ~~Taxicab Advertising Collaboration~~Commercial Agreement dated May 21, 2019 was terminated, which relieved ~~the Company~~Ballantyne Strong of its obligation to exercise the purchase option contained within the master lease agreement. ~~The Company~~Ballantyne Strong recorded a gain of approximately ~~$5.3~~$5.3 million during the third quarter of 2020 as a result of the transaction. As of September 30, ~~2020,~~2021, SDM held approximately ~~$5.7~~$5.7 million worth of Firefly Series ~~A-2 preferred shares,~~B-1 Shares, which included the shares issued to SDM as part of the May 2019 ~~transaction.~~transaction and $7.4 million worth of Firefly Series B-2 Shares (as defined below).

As contemplated by the Asset Purchase Agreement, ~~the newly issued~~Firefly Series ~~A-2 preferred shares of Firefly will be~~B-1 Shares are held by SDM, and the previously issued Series A-2 preferred shares of Firefly held by Fundamental Global Venture Partners, LP (“FGVP”), an investment fund managed by Fundamental Global Investors, LLC in which SDM is the sole limited partner, were transferred to SDM. The Asset Purchase Agreement includes customary representations and warranties. In connection with the Asset Purchase Agreement, SDM ~~is indemnifying~~agreed to indemnify Firefly for excluded liabilities related to the transferred business.

~~Convergent~~Ballantyne Strong entered into a Master Services Agreement (the “Master Services Agreement”) with Firefly, pursuant to which ~~Convergent~~Ballantyne Strong agreed to provide certain support services to Firefly, including remote equipment monitoring and diagnostics of screens, until no later than December 31, 2022, and to provide transition advertising instruction and integration services, content management services, ad-hoc reporting and analysis, wireless service, advertising content management services, and mapping data until no later than six months from closing. As consideration for entering into the Master Services Agreement, ~~Convergent~~Ballantyne Strong received ~~$2.0~~$2.0 million in cash ~~consideration.~~consideration which the Company is recognizing as revenue ratably through the end of 2022.

~~The components of the gain on the sale of the Strong Outdoor business to Firefly during the three months ended September 30, 2020 are as follows (in thousands):~~

~~The major line items constituting the net income (loss) from discontinued operations are as follows (in thousands):~~

~~Strong Outdoor’s assets and liabilities are reflected as assets and liabilities of discontinued operations for all periods presented.~~ The major classes of assets and liabilities included as part of discontinued operations as of December 31, 2020, are as follows (in thousands):

The major line items constituting the net income from discontinued operations are as follows (in thousands):

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 ~~the separate units of accounting,~~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~~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 ~~some or~~ 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. ~~Observable prices are used to determine the standalone selling price of separate performance obligations, or a cost plus margin approach is used when observable prices are not available.~~ 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 September 30, ~~2020~~2021 or December 31, ~~2019.~~2020.

The following tables disaggregate the Company’s revenue by major source and by operating segment for the three and nine months ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30, 2020								Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
	Strong Entertainment		Convergent		Other		Total		Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Screen system sales	$	1,631	$	-	$	-	$	1,631	$	2,193	$	-	$	2,193	$	1,631	$	-	$	1,631
Digital equipment sales		2,192		322		-		2,514		1,408		-		1,408		2,192		-		2,192
Extended warranty sales		110		-		-		110		44		-		44		110		-		110
Other product sales		205		-		-		205		441		-		441		205		-		205
Total product sales		4,138		322		-		4,460		4,086		-		4,086		4,138		-		4,138
Field maintenance and monitoring services		875		3,808		-		4,683		1,436		-		1,436		875		-		875
Installation services		186		216		-		402		244		-		244		186		-		186
Other service revenues		61		-		301		362		56		294		350		61		301		362
Total service revenues		1,122		4,024		301		5,447		1,736		294		2,030		1,122		301		1,423
Total	$	5,260	$	4,346	$	301	$	9,907	$	5,822	$	294	$	6,116	$	5,260	$	301	$	5,561

	Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Strong Entertainment		Convergent		Other		Total		Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Screen system sales	$	5,566	$	-	$	-	$	5,566	$	6,680	$	-	$	6,680	$	5,566	$	-	$	5,566
Digital equipment sales		4,529		1,725		-		6,254		3,890		-		3,890		4,529		-		4,529
Extended warranty sales		418		-		-		418		105		-		105		418		-		418
Other product sales		857		-		-		857		1,136		-		1,136		857		-		857
Total product sales		11,370		1,725		-		13,095		11,811		-		11,811		11,370		-		11,370
Field maintenance and monitoring services		3,030		10,517		-		13,547		3,545		-		3,545		3,030		-		3,030
Installation services		518		694		-		1,212		674		-		674		518		-		518
Other service revenues		123		18		493		634		91		860		951		123		493		616
Total service revenues		3,671		11,229		493		15,393		4,310		860		5,170		3,671		493		4,164
Total	$	15,041	$	12,954	$	493	$	28,488	$	16,121	$	860	$	16,981	$	15,041	$	493	$	15,534

~~The following tables disaggregate the Company’s revenue by major source and by operating segment for the three and nine months ended September 30, 2019 (in thousands):~~

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 ~~time~~times because control ~~does not transfer~~transfers upon customer delivery. The cost of freight and shipping to the customer ~~until delivery.~~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. ~~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.~~

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.

The Company sells service contracts that provide maintenance and monitoring services to its Strong Entertainment ~~and Convergent~~ customers. ~~In the Strong Entertainment segment, these~~These contracts are generally 12 months in ~~length, while the term for service contracts in the Convergent segment can be for multiple years.~~length. Revenue related to service contracts is recognized ratably over the term of the agreement.

~~The~~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 ~~and Convergent segments.~~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.

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

The Company sells extended warranties to its Strong Entertainment customers. When the Company is the primary obligor, revenue is recognized on a gross basis ratably over the term of the extended warranty. In third party extended warranty sales, the Company is not the primary obligor, and revenue is recognized on a net basis at the time of the sale.

The following tables disaggregate the Company’s revenue by the timing of transfer of goods or services to the customer for the three and nine months ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30, 2020								Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
	Strong Entertainment		Convergent		Other		Total		Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Point in time	$	4,532	$	767	$	-	$	5,299	$	4,795	$	22	$	4,817	$	4,532	$	-	$	4,532
Over time		728		3,579		301		4,608		1,027		272		1,299		728		301		1,029
Total	$	5,260	$	4,346	$	301	$	9,907	$	5,822	$	294	$	6,116	$	5,260	$	301	$	5,561

	Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Strong Entertainment		Convergent		Other		Total		Strong Entertainment		Other		Total		Strong Entertainment		Other		Total
Point in time	$	12,326	$	2,987	$	6	$	15,319	$	13,648	$	32	$	13,680	$	12,326	$	6	$	12,332
Over time		2,715		9,967		487		13,169		2,473		828		3,301		2,715		487		3,202
Total	$	15,041	$	12,954	$	493	$	28,488	$	16,121	$	860	$	16,981	$	15,041	$	493	$	15,534

~~The following tables disaggregate the Company’s revenue by the timing of transfer of goods or services to the customer for the three and nine months ended September 30, 2019 (in thousands):~~

At September 30, ~~2020,~~2021, 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 ~~and advertising services~~ in which the Company is the primary obligor was ~~$2.9~~ $1.8million. The Company expects to recognize ~~$1.4~~ $1.0 million of unearned revenue amounts ~~throughout~~during the ~~rest~~remainder of ~~2020, $0.8 million during~~ 2021 and ~~$0.7~~ $0.8 million during 2022.

Basic net income (loss) per share has been computed on the basis of the weighted average number of shares of common stock outstanding. ~~Diluted~~In periods when the Company reported net income from continuing operations, diluted net income per share has been ~~calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method. Diluted loss per share would be~~ 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 and~~ restricted stock units. ~~However, because~~In periods when the Company reported ~~losses~~a net loss from continuing operations, ~~for the nine months ended September 30, 2020 and the three and nine months ended September 30, 2019,~~ there were no differences between average shares used to compute basic and diluted loss per ~~share.~~share as inclusion of stock options and restricted stock units would have been anti-dilutive in those periods. The following table summarizes the weighted average shares used to compute basic and diluted net income (loss) per share (in thousands):

Schedule of Reconciliation Weighted Average Between Basic and Diluted Earnings Per Share

A total of 117,357 and 72,260 common stock equivalents related to stock options and restricted stock units were excluded for the three and nine months ended September 30, 2020, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share. Options to purchase ~~884,500~~329,500 and ~~772,000~~884,500 shares of common stock were outstanding as of September 30, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively, but were not included in the computation of diluted loss per share as the options’ exercise prices were greater than the average market price of the common shares for each period. An additional 165,206 and 146,461 common stock equivalents related to options and restricted stock awards were excluded for the three and nine months ended September 30, 2019, respectively, as their inclusion would be anti-dilutive, thereby decreasing the net losses per share.

The inventory balances ~~are~~were net of reserves of approximately ~~$0.7 million and $0.9~~$0.4 million as of both September 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020.

The following summarizes the (loss) income of equity method investees reflected in the condensed consolidated statements of operations (in thousands):

FG Financial Group, Inc. (“FGF”) (formerly 1347 Property Insurance Holdings, Inc. ~~(“PIH”~~) is a ~~publicly traded company that is implementing business plans to operate as a diversified holding company of insurance,~~ reinsurance and investment management ~~businesses. On September 15, 2020, PIH entered into an agreement pursuant~~holding company focused on opportunistic collateralized and loss capped reinsurance, while allocating capital to ~~which PIH purchased 1.1 million shares of its outstanding common stock from an existing shareholder. The purchase of the 1.1 million shares decreased the number of outstanding shares of PIH~~special purpose acquisition companies (each, a “SPAC”) and ~~increased the Company’s ownership interest to approximately 21%.~~ SPAC sponsor-related businesses.

The Company’s Chairman, ~~and former Chief Executive Officer~~D. Kyle Cerminara, is the chairman of the board of directors of ~~PIH, and the Company’s Co-Chairman is co-chairman of the board of directors of PIH.~~FGF. As of September 30, ~~2020, they controlled~~2021, Mr. Cerminara was affiliated with entities that, when combined with the Company’s ownership in ~~PIH,~~FGF, own greater than 50% of ~~PIH.~~FGF. Since ~~PIH~~FGF does not depend on the Company for continuing financial support to maintain operations, the Company has determined that ~~PIH~~FGF is not a variable interest entity, and therefore, the Company is not required to ~~consolidate PIH.~~determine the primary beneficiary of FGF for potential consolidation. The ~~equity method loss~~Company did 0t receive dividends from ~~PIH~~FGF during the three and nine months ended September 30, 2020 was primarily the result of PIH’s non-cash losses associated with the change in fair value of its investment in the common stock of FedNat Holding Company (Nasdaq: FNHC). The Company did not receive dividends from PIH during the three and nine months ended September 30, 20202021 or ~~2019.~~2020. Based on quoted market prices, the market value of the Company’s ownership in ~~PIH~~FGF was ~~$4.0~~approximately $5.1 million at September 30, ~~2020.~~2021.

In October 2021, FGF announced the closing of a public offering of common stock of 652,174 shares at a price of $4.00 per share. FGF also announced the commencement of a rights offering to holders of its common stock distributing one right to purchase up to 0.15 shares of common stock for each share outstanding as of October 25, 2021, entitling shareholders to purchase up to 757,720 shares of common stock at $4.00 per share through November 29, 2021. The Company intends to fully exercise its rights to acquire additional common shares of FGF in the rights offering.

GreenFirst Forest Products Inc. (“GreenFirst”) (formerly Itasca Capital Ltd. ~~(“Itasca”~~) is a ~~publicly traded~~publicly-traded Canadian company focused on environmentally sustainable forest management and lumber production. On April 12, 2021, GreenFirst announced that isit had entered into an asset purchase agreement (the “GreenFirst Purchase Agreement”) pursuant to which it would acquire a portfolio of forest and paper product assets (the “Assets”) at a purchase price of approximately US$214 million. GreenFirst filed a prospectus to conduct a backstopped rights offering (the “Rights Offering”) to finance a portion of the purchase price for the Assets. Pursuant to the prospectus, GreenFirst issued three rights (each a “Right”) for each of its outstanding shares of common stock (each a “Common Share”) with each Right being exercisable, at a subscription price of CDN$1.50, to acquire a subscription receipt (each a “Subscription Receipt”). On July 12, 2021, the Company received 21.1 million Rights. During July 2021, the Company sold 12.9 million Rights, which generated proceeds of approximately CDN$2.1 million, or approximately $1.7 million USD. In connection with the sale of the 12.9 million Rights, the Company recorded a $1.7 million realized gain on its investment ~~vehicle seeking transformative strategic investments.~~ in GreenFirst within other income, net on the condensed consolidated statement of operations during the third quarter of 2021. On July 30, 2021, the Company utilized the $1.7 million USD generated from the sale of Rights and approximately $8.3 million USD of cash on hand to exercise the remaining 8.3 million Rights and acquired Subscription Receipts for a total cost of CDN$12.4 million. On August 30, 2021, GreenFirst announced that it had completed the acquisition of the Assets. Upon the closing of the transactions contemplated by the Agreement, and without any further consideration, each Subscription Receipt was automatically exchanged into a Common Share. Following the exchange of the Subscription Receipts for Common Shares and the issuance of approximately 28.7 million Common Shares to the seller of the Assets, GreenFirst had a total of approximately 177.6 million Common Shares issued and outstanding. After the Subscription Receipts were exchanged into Common Shares, the Company holds approximately 15.3 million common shares of GreenFirst.

The Company’s Chairman, ~~and former Chief Executive Officer is chairman of the board of directors of Itasca, and the Company’s Co-Chairman is also~~Mr. Cerminara, served as a member of the board of directors of ~~Itasca. These board seats,~~GreenFirst from June 2016 to October 2021, and was also appointed Chairman of GreenFirst from June 2018 to June 2021. Prior to the closing of the acquisition of the Assets, the Company held a 20.7% ownership position in GreenFirst. The Company’s 20.7% ownership of GreenFirst, combined with ~~the Company’s 32.3% ownership of Itasca, provide~~Mr. Cerminara’s board seat, provided the Company with significant influence over ~~Itasca,~~GreenFirst, but not a controlling interest. ~~The~~Accordingly, the Company ~~did not receive dividends from Itasca~~applied the equity method of accounting to its investment in GreenFirst. Following GreenFirst’s acquisition of the Assets and issuance of additional Common Shares, as described above, the Company’s ownership percentage decreased to 8.6% as of September 30, 2021. As a result, the Company is no longer able to exercise significant influence and the investment in GreenFirst no longer qualifies for equity method accounting. Effective in the third quarter of 2021, the carrying amount of the Company’s investment in GreenFirst is determined using its fair value. As a result of applying the fair value method of accounting, the Company recorded an unrealized gain on investments of approximately $8.4 million during the ~~three and nine months~~quarter ended September 30, ~~2020 or 2019.~~2021. Based on quoted market prices, the market value of the Company’s ownership in ~~Itasca~~GreenFirst was ~~$3.4~~$20.2 million atas of September 30, ~~2020.~~2021.

The Company did0t receive dividends from GreenFirst during the three and nine months ended September 30, 2021 or 2020. As of September 30, ~~2020,~~2021, the Company’s retained earnings included an accumulated deficit from its equity method investees of approximately ~~$1.9~~$5.5 million.

The summarized financial information presented below reflects the financial information of the Company’s equity method investees for the three and nine months ended June 30, ~~2020~~2021 and ~~2019,~~2020, consistent with the Company’s recognition of the results of its equity method investments on a one-quarter lag (in thousands):

~~(1) PIH records realized~~The summarized financial information presented above combines the results of FGF and ~~unrealized gains and losses on investments~~GreenFirst. As noted above, the Company no longer applies the equity method of accounting to its investment in ~~net investment income (loss), which is included in~~GreenFirst. Accordingly, the ~~revenue line above.~~ financial results of GreenFirst will be excluded from future presentation of summarized financial information of equity method investees.

The Company received preferred shares of Firefly in connection with the transactions with Firefly in May 2019 and August 2020. See Note 3 for additional details. In addition, on August 3, 2020, the Company’s Canadian subsidiary, Strong/MDI Screen Systems, Inc. (“Strong/MDI”) entered into a Stock Purchase Agreement ~~(the “Stock Purchase Agreement”)~~ with Firefly, pursuant to which Strong/MDI agreed to purchase ~~$4.0~~$4.0 million worth of ~~Firefly’s~~Firefly Series A-3 ~~preferred shares at the initial closing,~~Shares, which ~~took place on the same day, and the Company or its affiliated entities may purchase an additional $2.0 million of Firefly’s~~were subsequently renamed Firefly Series A-3 preferred shares at a second closing subject to certain conditions. As contemplated by the Stock Purchase Agreement and ancillary investment agreements, the Company and its affiliated entities will have the right to designate a director to be elected to the board of directors of Firefly, subject to holding, together with its affiliates, approximately $7.2 million of Firefly’sB-2 Shares (the “Firefly Series ~~A-3 preferred shares and other conditions.~~B-2 Shares”). The Company and its affiliated entities ~~currently hold $7.2 million of Series A-3 preferred shares and~~ have designated Kyle Cerminara, Chairman of the Company’s board of directors and a principal of the Company’s largest shareholder, to Firefly’s board of directors.

~~Intangible assets~~Property, plant and equipment, net consisted of the following as of September 30, ~~2020 (dollars in thousands):~~

~~Intangible assets consisted of the following as of~~2021 and December 31, ~~2019 (dollars in thousands):~~

~~Amortization expense relating to intangible assets was $0.2 million during each of the three months ended September 30,~~ 2020 ~~and 2019 and $0.6 million during each of the nine months ended September 30, 2020 and 2019.~~

~~The following table shows the Company’s estimated future amortization expense related to intangible assets currently subject to amortization for the next five years~~ (in thousands):

The following represents a summary of changes in the Company’s carrying amount of goodwill for the nine months ended September 30, ~~2020~~2021 (in thousands):

The Company’s short-term debt consisted of the following as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in thousands):

On May 22, 2018, Convergent entered into an installment payment agreement with an equipment financing company in order to purchase media players and related equipment in an aggregate amount of up to approximately $4.4 million. In each of December 2018 and June 2019, Convergent entered into additional installment payment agreements with other financing companies in order to purchase additional media players and related equipment, with each round of financing totaling approximately $0.6 million and $0.2 million, respectively. Installment payments under each contract are due monthly for a period of 60 months. The financing under each of the agreements is secured by the respective equipment. The borrowings under the agreements are recorded as long-term debt on the Company’s consolidated balance sheet. Collectively, the Company had $3.7 million of outstanding borrowings under equipment term loan agreements at September 30, 2020, which bore interest at a weighted-average fixed rate of 7.7%.

On September 5, 2017, the Company’s Canadian subsidiary, Strong/MDI, entered into a demand credit agreement, as amended and restated May 15, 2018, with a bank consisting of a revolving line of credit for up to CDN$3.5 million, subject to a borrowing base requirement, a ~~20-year~~20-year installment loan for up to CDN$6.0 million and a ~~5-year~~5-year installment loan for up to CDN$~~500,000.~~0.5 million. On June 7, 2021, Strong/MDI entered into a demand credit agreement (the “2021 Credit Agreement”), which amended and restated the demand credit agreement dated as of September 5, 2017. The 2021 credit agreement consists of a revolving line of credit for up to CDN$2.0 million subject to a borrowing base requirement, a 20-year installment loan for up to CDN$5.1 million and a 5-year installment loan for up to CDN$0.5 million. Amounts outstanding under the line of credit are payable on demand and bear interest at the prime rate established by the lender. Amounts outstanding under the installment loans bear interest at the lender’s prime rate plus 0.5% and are payable in monthly installments, including interest, over their respective borrowing periods. The lender may also demand repayment of the installment loans at any time. The Strong/MDI credit facilities are secured by a lien on Strong/MDI’s Quebec, Canada facility and substantially all of Strong/MDI’s assets. The ~~credit agreement~~2021 Credit Agreement requires Strong/MDI to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity method investments) not exceeding 22.5 to 1, a current ratio (excluding amounts due from related parties) of at least ~~1.5~~1.3 to 1 and minimum “effective equity” of CDN$~~8.0~~4.0 million. ~~On April 24, 2018, the Company borrowed CDN$3.5 million on the 20-year installment loan. There~~As of September 30, 2021, there was CDN$~~3.8~~3.5 million, or approximately ~~$2.8~~$2.7 million, of principal outstanding on the ~~20-year~~20-year installment loan, ~~as of September 30, 2020,~~ which bears variable interest at 2.95%. ~~There was no balance outstanding on Strong/MDI’s revolving credit facility as~~As of September 30, ~~2020.~~2021, there was CDN$0.4 million, or approximately $0.3 million, of principal outstanding on the 5-year installment loan, which also bears variable interest at 2.95%. Strong/MDI was in compliance with its debt covenants as of September 30, ~~2020.~~2021.

~~Scheduled repayments are as follows for the Company’s long-term debt outstanding as of September 30, 2020 (in thousands):~~11. Leases

On April 14, 2020, the Company entered into a promissory note evidencing a loan of $3.2 million (the “Loan”) under the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) of the CARES Act. The Company intended to use the Loan for qualifying payroll, rent and utility expenses in accordance with the terms of the CARES Act. At the time the Company applied for the Loan, the Company believed it qualified to receive the funds pursuant to the PPP.

On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that created additional uncertainty regarding the qualification requirements for a PPP loan for public companies. The Company has less than 300 employees and continues to be severely impacted by the disruption to the cinema, theme park and advertising industries as a result of COVID-19. However, out of an abundance of caution and in light of the new guidance, the Company repaid the full amount of the Loan plus accrued interest to the lender on May 5, 2020.

The Company and its subsidiaries lease plant and office facilities and equipment under operating and finance leases expiring through 2028. The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.

Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain of the leases contain extension options; however, the Company has not included such options as part of its right-of-use assets and lease liabilities because it does not expect to extend the leases. The Company measures and records a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, the Company measures the right-of-use assets and lease liabilities using a discount rate equal to the Company’s estimated incremental borrowing rate for loans with similar collateral and duration.

The Company elected to not apply the recognition requirements of Accounting Standards Codification Topic 842, “Leases,” to leases of all classes of underlying assets that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Instead, lease payments for such short-term leases are recognized in ~~profit or loss~~operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

The Company elected, as a lessee, for all classes of underlying assets, to not separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

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

									September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Other information									Three Months Ended				Nine Months Ended
	Three Months Ended September 30, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2020		Nine Months Ended September 30, 2019		September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	154	$	142	$	473	$	184	$	-	$	81	$	292	$	265
Operating cash flows from operating leases	$	289	$	333	$	857	$	875	$	203	$	239	$	617	$	720
Financing cash flows from finance leases	$	420	$	282	$	1,195	$	420	$	1	$	227	$	2,106	$	658
Right-of-use assets obtained in exchange for new finance lease liabilities	$	231	$	902	$	553	$	1,613	$	-	$	-	$	-	$	-
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	-	$	109	$	644	$	-	$	-	$	-	$	-
Derecognition of right-of-use asset in connection with Firefly transaction	$	-	$	-	$	-	$	3,394

The following table presents a maturity analysis of the Company’s ~~finance and~~ operating lease liabilities as of September 30, ~~2020~~2021 (in thousands):

On March 2, 2021, the Company received a notice of default and demand (the “Default Notice”) from Huntington Technology Finance, Inc. (“Huntington”). The Default Notice alleged the occurrence of an event of default under the terms of the Master Equipment Lease Agreement dated May 19, 2017 (the “Lease Agreement”), pursuant to which the Company’s subsidiaries lease certain digital taxi top advertising signs. The Company ~~leases certain equipment~~made all required payments to ~~customers as a component~~Huntington during the term of ~~its Digital Signage as a Service (“DSaaS”) offering. Under DSaaS,~~the Lease Agreement. The Default Notice did not allege that the Company ~~provides support, maintenance~~has failed to make any payment or incurred any economic or payment default. Rather, the Default Notice alleged that the Company violated certain technical covenants in the Lease Agreement. Huntington demanded accelerated payment of the outstanding principal balance plus lessor profit and ~~content management services~~a fair market value buyout of the assets under lease within ten days of the receipt of the Default Notice. The Company disputed Huntington’s assertion that an event of default had occurred under the Lease Agreement and believes that many of the assertions made in ~~addition~~the Default Notice are false, and that the claims made in the Default Notice are therefore baseless. Accordingly, on March 3, 2021, the Company provided a written response to Huntington detailing the Company’s position that Huntington’s allegations of an event of default under the Lease Agreement are unfounded, and asserting the Company’s good faith belief that the Company has abided by the terms, conditions, and covenants of the Lease Agreement. In order to resolve the situation and avoid the potential costs of a lengthy legal dispute, on April 2, 2021, the Company entered into an Agreement of Forbearance and Conditional Sale (the “Settlement Agreement”) with Huntington and CCA Financial, LLC. The amounts payable by the Company pursuant to the ~~use of a media player to~~Settlement Agreement include only payments contractually due under the ~~customer.~~Lease Agreement and do not include any additional penalties, interest, or liquidation damages. The Company ~~elected, as a lessor,~~agreed to accelerate payment of the $2.1 million remaining payments contractually due under the Lease Agreement and to exercise its option to purchase the leased assets for ~~all classes~~$1.0 million. The $2.1 million plus sales tax owed under the Lease Agreement was paid upon execution of ~~underlying assets, to not separate nonlease components from lease components and, instead, to account for each separate lease component~~the Settlement Agreement and the ~~nonlease components associated with that~~ lease ~~component as a single component if~~equipment buyout will be paid in twelve monthly installments from June 1, 2021 to May 1, 2022. Upon payment in full, the ~~nonlease components otherwise would be accounted for under Accounting Standards Codification Topic 606 on revenue from contracts with customers,~~Lease Agreement and both of the following conditions are met: 1) the timing and pattern of transfer for the lease component and nonlease components associated with that lease component are the same and 2) the lease component, if accounted for separately, would be classified as an operating lease in accordance with Topic 842. The combined component is accounted for as a single performance obligation under Topic 606 if the nonlease component or components are the predominant component(s) of the combined component. Otherwise, if the lease component is the predominant component, the combined component is accounted for as an operating lease under ASC 842. In the case of the Company’s DSaaS contracts, the nonlease components are predominant; therefore, revenue from DSaaS contracts is accounted for under Topic 606 and is included in net service revenues in the condensed consolidated statements of operations.all obligations thereunder will terminate.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the available objective evidence, including recent updates to the taxing jurisdictions generating income, the Company concluded that a valuation allowance should be recorded against all of the Company’s U.S. tax jurisdiction deferred tax assets as of September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

During the first quarter of 2021, the Company sold its Convergent business segment. As a result, this business segment is categorized as discontinued operations for the periods presented. The Company has sufficient net operating losses to offset Federal taxable income from these discontinued operations as well as the tax effects related to the gain on sale of discontinued operations. State income tax expense related to the operations and sale of this entity has been allocated to discontinued operations.

The Tax Cuts and Jobs Act of 2017 provides for a territorial tax system, which began in 2018. It includes the global intangible low-taxed income (“GILTI”) provision. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. As a result of the GILTI provisions, the Company’s inclusion of taxable income was incorporated into the overall net operating loss and valuation allowance for the three and nine months ended September 30, ~~2020~~2021 and comparative September 30, ~~2019,~~2020, as well as ~~December31, 2019.~~December 31, 2020.

Changes in tax laws may affect recorded deferred tax assets and liabilities and the Company’s effective tax rate in the future. On March 27, 2020, ~~The~~the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES Act made significant changes to Federal tax laws, including certain changes that are retroactive to the ~~prior~~2019 tax year. The effects of these changes relate to deferred tax assets and net operating losses; all of which are offset by valuation allowance. There were no material income tax consequences of this enacted legislation on the reporting period of these condensed consolidated financial statements.

The Company is subject to possible examinations not yet initiated for Federal purposes for fiscal years ~~2016~~2017 through 2019. In most cases, the Company is subject to possible examinations by state or local jurisdictions based on the particular jurisdiction’s statute of limitations.

The Consolidated Appropriations Act extended and expanded the availability of the CARES Act employee retention credit through June 30, 2021. Subsequently, the American Rescue Plan Act of 2021 (“ARP Act”), enacted on March 11, 2021, extended and expanded the availability of the employee retention credit through December 31, 2021, however, certain provisions apply only after December 31, 2020. This new legislation expanded the group of qualifying business to include businesses with fewer than 500 employees and those who previously qualified for the Paycheck Protection Program (the “PPP Loan”). The employee retention credit is calculated to be equal to 70% of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70% credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $7,000 per employee per qualifying calendar quarter of 2021. The Company has determined that the qualifications for the credit were met in the first, second and third quarters of 2021. In July 2021, the Company applied for a refund of $1.5 million of payroll taxes previously paid and recognized a corresponding reduction in compensation expenses during the three months ending June 30, 2021. Of the $1.5 million, $0.8 million was recorded within cost of services, $0.1 million was recorded withing selling expenses, $0.4 million was recorded withing general and administrative expenses and $0.2 million was recorded within discontinued operations on the condensed consolidated statement of operations. In September 2021, the Company applied for a refund of $0.6 million of payroll taxes previously paid and recognized a corresponding reduction in compensation expenses during the three months ending September 30, 2021. Of the $0.6 million, $0.4 million was recorded within cost of services and $0.2 million was recorded within general and administrative expenses.

The Company recognizes compensation expense for all stock-based payment awards ~~made to employees and directors~~ based on estimated grant date fair values. Stock-based compensation expense included in selling and administrative expenses ~~was $0.2~~approximated $0.2 million ~~and $0.3 million~~ for each of the three months ended September 30, 2021 and 2020 and ~~2019, respectively, and $0.7~~$0.7 million ~~and $0.8 million~~ for each of the nine months ended September 30, 2020 and ~~2019, respectively.~~2021.

The Company’s 2017 Omnibus Equity Compensation Plan (“2017 Plan”) was approved by the Company’s stockholders and provides the Compensation Committee of the Board of Directors with the discretion to grant stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, performance units and other ~~stock-based~~stock- based awards and cash-based awards. Vesting terms vary with each grant and may be subject to vesting upon a “change in control” of the Company. On December 17, 2019, the Company’s stockholders approved the amendment and restatement of the 2017 Plan to (i) increase the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by 1,975,000 shares and (ii) extend the expiration date of the 2017 Plan by approximately two years, until October 27, ~~2029.~~2029. As of September 30, ~~2020, 2,589,278~~2021, approximately 2.4 million shares were available for issuance under the amended and restated 2017 Plan.

The following table summarizes stock option activity for the nine months ended September 30, ~~2020:~~2021:

The aggregate intrinsic value in the table above represents the total that would have been received by the option holders if all in-the-money options had been exercised and sold on the date indicated.

As of September 30, ~~2020, 498,500~~2021, 330,000 stock option awards were non-vested. Unrecognized compensation cost related to non-vested stock options was approximately ~~$0.6~~$0.3 million, which is expected to be recognized over a weighted average period of ~~2.7~~2.5 years.

~~The Company granted a total of 200,634 and 417,378 restricted stock units during the nine months ended September 30, 2020 and 2019, respectively.~~ The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant.

~~The following table summarizes restricted stock share activity for the nine months ended September 30, 2020:~~

The following table summarizes restricted stock unit activity for the nine months ended September 30, ~~2020:~~2021:

As of September 30, ~~2020,~~2021, the total unrecognized compensation cost related to non-vested restricted stock unit awards was approximately ~~$1.1~~$0.6 million, which is expected to be recognized over a weighted average period of ~~1.9~~1.2 years.

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

The Company and its subsidiaries are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of commercial lighting products containing wiring that may have contained asbestos. Each case names dozens of corporate defendants in addition to the Company. In the Company’s experience, a large percentage of these types of claims have never been substantiated and have been dismissed by the courts. The Company has not suffered any adverse verdict in a trial court proceeding related to asbestos claims and intends to continue to defend these lawsuits. When appropriate, the Company may settle certain claims. The Company does not expect the resolution of these cases to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The Company’s top ten customers accounted for approximately ~~62%~~39% and ~~57%~~46% of consolidated net revenues during the three and nine months ended September 30, ~~2020,~~2021, respectively. Trade accounts receivable from these customers represented approximately ~~37%~~55% of net consolidated receivables at September 30, ~~2020. In addition,~~2021. None of the ~~Company had one customer account~~Company’s customers accounted for more than 10% of both its consolidated net revenues during the three and nine months ended September 30, ~~2020.~~2021 and its net consolidated receivables as of September 30, 2021. 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 ~~the impact of COVID-19 on its customers,~~ changes in foreign currency rates and weak economic and political conditions in each of the countries in which the Company sells its products.

Financial instruments that potentially expose the Company to a concentration of credit risk principally consist of accounts ~~receivable.~~receivable and the SageNet Promissory Note. The Company sells product to a large number of customers in many different geographic regions. To minimize credit risk, the Company performs ongoing credit evaluations of its customers’ financial condition.

During February 2019, one portion of Strong/MDI’s Quebec, Canada facility sustained damage as a result of inclement weather. The Company has property and casualty and business interruption insurance and has ~~been working with its insurance carrier with regard to the insurance~~made claims for reimbursement of incurred costs of the affected portion of the facility and compensation for the Company’s business interruption losses. During the third quarter of 2020, the Company reached a settlement with its insurance company which resolved all contingencies related to its business interruption ~~claim.~~

Through September 30, 2020, the Company has received insurance proceeds of $5.0 million, which included $2.0 million related to the property and casualty claim and $3.0 million related to our business interruption claim. Any additional future claims payments associated with the Company’s property and casualty losses are at the discretion of the insurance carrier based on its continuing claims analysis.

~~The Company received an additional $1.9 million during the third quarter of 2020 associated with the final settlement of the business interruption~~ claim, which ~~combined with the $0.8 million of proceeds previously received and deferred,~~ resulted in an insurance recovery gain of approximately ~~$2.7~~$2.7 million, ~~during~~which is included within Other income, net on the ~~third quarter~~condensed consolidated statement of ~~2020.~~

On May 19, 2020, the Company entered into a Financial and Consulting Services Agreement (the “Itasca Financial Agreement”) with Itasca Financial LLC (“Itasca Financial”), pursuant to which Itasca Financial agreed to advise the Company on aspects of its strategic direction. In exchange for Itasca Financial’s services, the Company agreed to pay Itasca Financial a retainer fee of $50,000, payable in two installments of $25,000, and a monthly fee of $20,000. The Itasca Financial Agreement may not be terminated for a period of three months from May 19, 2020, after which time it may be terminated by either party at any time with prior written notice of at least 30 calendar days. During the nine months ended September 30, 2020, the Company paid $130,000 to Itasca Financial, and the parties have agreed to suspend the Itasca Financial Agreement indefinitely. Upon termination of the Itasca Financial Agreement by either party, the Company has agreed to pay Itasca Financial a termination fee of $100,000, which can be payable in a combination of cash and stock at the Company’s discretion, and if any such fee is paid in stock, then the Company has agreed to grant Itasca Financial unlimited piggyback registration rights for such stock. The Itasca Financial Agreement also includes expense reimbursement provisions and indemnification provisions in favor of Itasca Financial and its affiliates. This description of the Itasca Financial Agreement is a summary only and is qualified by reference to full text of the Itasca Financial Agreement, which is filed as Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the Commission on August 12, 2020.15. Business Segment Information

Fundamental Global Investors, LLC, with its affiliates (collectively, “Fundamental Global”), is the controlling stockholder of the Company. D. Kyle Cerminara, the Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC, is the Chairman of the Company’s board of directors and former Chief Executive Officer of the Company, and Lewis M. Johnson, the President, Co-Founder and Partner of Fundamental Global Investors, LLC, is Co-Chairman of the Company’s board of directors. Fundamental Global is the controlling stockholder of PIH, and Larry G. Swets, Jr. serves as Interim Chief Executive Officer and principal executive officer of PIH and as a member of PIH’s Board of Directors. In addition, Mr. Swets founded and serves as the managing member of Itasca Financial, which provides services to the Company, as described above, as well as to other companies affiliated with Fundamental Global.

~~Subsequent to the disposal of its Strong Outdoor business segment, the~~The Company conducts its operations primarily through ~~two primary business segments:~~its Strong Entertainment ~~(formerly known as Strong Cinema)~~business segment which manufactures and Convergent. The Strong Entertainment segment name change is to the name only and had no impact on the Company’s historical financial position, results of operations, cash flow or segment level results previously reported. Strong Entertainment is one of the largest manufacturers ofdistributes premium large format projection screens ~~and also manufactures customized screen support systems, distributes other products~~ and provides technical support services and other related products and services to the cinema ~~amusement park~~exhibition industry, theme parks, schools, museums and other entertainment-related markets. ~~Convergent delivers~~Strong Entertainment also distributes and supports third party products, including digital ~~signage solutions~~projectors, servers, library management systems, menu boards and ~~related services to large multi-location organizations in the United States and Canada.~~sound systems. The Company’s operating segments were determined based on the manner in which management organizes segments for making operating decisions and assessing performance.

(In thousands)									2021		2020		2021		2020
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019		2021		2020		2021		2020
Net revenues
United States	$	8,566	$	12,395	$	24,699	$	34,995	$	4,735	$	4,529	$	13,831	$	12,598
Canada		645		1,111		1,708		2,664		524		336		1,101		854
China		507		633		775		1,763		197		507		355		775
Mexico		-		65		78		70		1		-		15		78
Latin America		-		275		328		574		45		-		146		328
Europe		38		521		262		1,058		244		38		442		262
Asia (excluding China)		24		348		337		515		290		24		636		337
Other		127		202		301		258		80		127		455		302
Total	$	9,907	$	15,550	$	28,488	$	41,897	$	6,116	$	5,561	$	16,981	$	15,534

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

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

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report. Management’s discussion and analysis contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect expectations for future Company performance. 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, ~~2019 and Item 1A of this Quarterly Report on Form 10-Q~~2020, and the following risks and uncertainties: the negative impact that the COVID-19 pandemic has already had, and may continue to have, on the Company’s business and financial condition; the Company’s ability to maintain and expand its revenue streams to compensate for the lower demand for the Company’s digital cinema products and installation services; potential interruptions of supplier relationships or higher prices charged by ~~suppliers,~~suppliers; the Company’s ability to successfully compete and introduce enhancements and new features that achieve market acceptance and that keep pace with technological ~~developments, the Company’s access to capital,~~developments; the Company’s ability to successfully execute its capital allocation strategy or achieve the returns it expects from these holdings; the Company’s ability to maintain its brand and reputation and retain or replace its significant ~~customers,~~customers; challenges associated with the Company’s long sales cycles; the impact of a challenging global economic environment or a downturn in the markets (such as the current economic disruption and ~~recession and~~ market volatility generated by the ongoing COVID-19 pandemic),; economic and political risks of selling products in foreign countries (including tariffs),; risks of non-compliance with U.S. and foreign laws and regulations, potential sales tax collections and claims for uncollected ~~amounts,~~amounts; cybersecurity risks and risks of damage and interruptions of information technology ~~systems,~~systems; the Company’s ability to retain key members of management and successfully integrate new ~~executives,~~executives; the Company’s ability to complete acquisitions, strategic investments, entry into new lines of business, divestitures, mergers or other transactions on acceptable terms, or at ~~all,~~all; the impact of the COVID-19 pandemic on the companies in which the Company holds ~~investments,~~ownership positions; the Company’s ability to utilize or assert its intellectual property rights, the impact of natural disasters and other catastrophic events (such as the ongoing COVID-19 pandemic),; the adequacy of ~~insurance and~~insurance; the impact of having a controlling ~~stockholder.~~stockholder and vulnerability to fluctuation in the Company’s stock price. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Many of the risks listed above have been, and may be further be, exacerbated by the COVID-19 pandemic (including variants thereof), its impact on the cinema and entertainment industry, and the worsening economic environment. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except where required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

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

~~Subsequent to the sale of our Strong Outdoor business segment, we conduct our operations through two operating segments: Strong Entertainment (formerly known as Strong Cinema) and Convergent. The~~privately held companies. Our Strong Entertainment segment name change is to the name only and had no impact on our historical financial position, results of operations, cash flow or segment level results previously reported. Our Strong Entertainment business isincludes one of the largest manufacturers of premium projection ~~screens. We also manufacture~~screens and customized screen support systems, and we also distribute other products and provide technical support services to the cinema, amusement park and other markets. ~~Convergent delivers digital signage solutions and related services to large multi-location organizations in the United States and Canada.~~

~~Our segments were determined based on~~We sold the ~~manner in which management organizes segments for making operating decisions and assessing performance. Approximately 53%~~operations of our ~~revenues~~Strong Outdoor business segment during August 2020 and the operations of our Convergent business segment during February 2021. As a result of these divestitures, we have presented Strong Outdoor’s and Convergent’s operating results as discontinued operations for the nine months ended September 30, 2020 were from Strong Entertainment, approximately 45% were from Convergent and approximately 2% were from other revenue sources. Additional information related to our reporting segments can be found inall periods presented. Note ~~15 in the notes~~3 to the condensed consolidated financial ~~statements.~~statements contains additional information regarding these transactions. Accordingly, all comparisons of results of operations exclude results of the discontinued operations unless otherwise stated.

~~On August 3, 2020, SDM entered into an Asset Purchase Agreement~~In connection with ~~Firefly, pursuant to which SDM agreed to sell substantially all~~the sale of ~~the assets primarily related to its~~our Strong Outdoor operating business to Firefly ~~and continue to make available 300 digital taxi tops to~~Systems, Inc. (“Firefly”) in August 2020, we entered into a Master Services Agreement (the “Master Services Agreement”) with Firefly. ~~SDM retained certain accounts receivable as well as liabilities other than executory obligations under transferred contracts~~Pursuant to the ~~extent such liabilities~~Master Services Agreement, we agreed to provide certain support services to Firefly, including remote equipment monitoring and diagnostics of screens until no later than December 31, 2022 and transition advertising instruction and integration services, content management services, ad-hoc reporting and analysis, wireless service, advertising content management services, and mapping data until no later than six months from closing. In addition, we use our facility in Alpharetta, Georgia for our Digital Ignition technology incubator and co-working facility. These business operations are ~~required~~included within “Other” when comparing our results of operations for 2021 to be performed following closing or constitute certain deferred revenue. The transaction closed on the same day. As a result of the divestiture, we have presented Strong Outdoor’s operating results as a discontinued operation for all periods presented. Note 3 contains additional information regarding this transaction.2020.

In December 2019, a novel coronavirus disease (“COVID-19”) was initially reported, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 has had a widespread and detrimental effect on the global economy as a result of the continued increase in the number of cases, particularly in the United States, and actions by public health and governmental authorities, businesses, other organizations and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns. The ultimate impact of the COVID-19 pandemic on our business and results of operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 pandemic, including repeat or cyclical outbreaks, and any additional preventative and protective actions that governments, or we or our customers, may direct, which may result in an extended period of continued business disruption and reduced operations. For instance, some areas of the United States are experiencing new surges in COVID-19 cases, and new variants of COVID-19, which has, in some cases, led to the closure of recently re-opened businesses and further postponed opening other businesses, including movie theaters. Any resulting financial impact cannot be reasonably estimated at this time, but we expect it will continue to have a material impact on our business, financial condition and results of operations.

The repercussions of the COVID-19 global pandemic resulted in a significant impact to our customers, specifically those in the entertainment and advertising industries, and their ability and willingness to spend on our products and services, which continues to negatively impact us. A significant number of our customers temporarily ceased operations during the pandemic, some of which continue to be suspended; as such, we have experienced, and anticipate that we will continue to experience at least until our customers have resumed normal operations, a significant decline in our results of operations. For instance, during this time, many movie theaters and other entertainment centers were forced to close or curtail their hours and, correspondingly, have terminated or deferred their non-essential capital expenditures; many advertisers began to reduce, postpone, or cancel their advertising campaigns as social distancing measures, including closures of schools and non-essential businesses, and restrictions around the free movement of people were implemented; and a number of events during which our experiential marketing services may have been provided, such as Coachella, have been postponed, cancelled or shifted to virtual venues.expenditures. While some movie theaters and chains have begun to re-open, or announced plans to re-open in the near future, theater operators may continue to experience reduced revenues for an extended period due to, among other things, consumer concerns over safety and social distancing, depressed consumer sentiment due to adverse economic conditions, including job losses, capacity restrictions, and postponed release dates, shortened “release windows” between the release of motion pictures in theaters and an alternative delivery method, or the release of motion pictures directly to alternative delivery methods, bypassing the theater entirely, for certain movies, and continued COVID-19 outbreaks could cause these theaters to suspend operations again. The COVID-19 pandemic has also adversely affected film production and may adversely affect the pipeline of feature films available in the short- or long-term. In addition to decreased business spending by our customers and prospective customers and reduced demand for our products, lower renewal rates by our customers, increased customer losses/churn, increased challenges in or cost of acquiring new customers and increased risk in collectability of accounts receivable may have a material adverse effect on our business and results of operations. We have also experienced other negative impacts; among other actions, we were required to temporarily close our screen manufacturing facility in Canada due to the governmental response to COVID-19, which we were able to re-open on May 11, 2020, and have experienced lower revenues from field services and a reduction in non-recurring time and materials-based services. The completion of our outsourced screen finishing facility in China was also delayed by the COVID-19 pandemic, and we are currently evaluating the timing of when we will be able to commence operations at the facility in light of current travel restrictions. We may also experience one or more of the following conditions that could have a material adverse impact on our business operations and financial condition: adverse effects on our strategic partners’ businesses or on the businesses of companies in which we hold investments; impairment charges; extreme currency exchange-rate fluctuations; inability to recover costs from insurance carriers; and business continuity concerns for us, our customers and our third-party vendors.

~~In response~~The Consolidated Appropriations Act extended and expanded the availability of the CARES Act employee retention credit through June 30, 2021. Subsequently, the American Rescue Plan Act of 2021 (‘ARP Act’), enacted on March 11, 2021, extended and expanded the availability of the employee retention credit through December 31, 2021, however, certain provisions apply only after December 31, 2020. This new legislation expanded the group of qualifying business to ~~uncertainties associated~~include businesses with fewer than 500 employees and those who previously qualified for the ~~COVID-19 pandemic, we~~Paycheck Protection Program (the “PPP Loan”). The employee retention credit is calculated to be equal to 70% of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70% credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $7,000 per employee per qualifying calendar quarter of 2021. We have ~~taken, and are continuing to take, significant steps to preserve cash and remain in a strong competitive position when~~determined that the current crisis subsides by eliminating non-essential costs, reducing employee hours and deferring all non-essential capital expenditures to minimum levels. Among other mitigating actions, we implemented targeted furloughs, temporarily curtailed our service and distribution activitiesqualifications for the credit were met in the ~~United States~~first, second and ~~temporarily reduced~~third quarters of 2021. In July 2021, we applied for a refund of $1.5 million of payroll taxes previously paid and recognized a corresponding reduction in compensation expenses during the three months ended June 30, 2021. In September 2021, we applied for a refund of ~~our executive officers~~$0.6 million of payroll taxes previously paid and ~~certain other employees,~~recognized a corresponding reduction in compensation expenses during the three months ended September 30, 2021. Of the $0.6 million, $0.4 million was recorded within cost of services and ~~our board of directors waived its cash compensation for 2020.~~$0.2 million was recorded within general and administrative expenses. We have ~~also implemented remote work policies~~not yet determined whether we will qualify for ~~many employees, and~~additional credits for the resources available to such employees may not enable them to maintain the same level of productivity and efficiency. In addition, these and other employees may face additional demands on their time, such as increased responsibilities resulting from school and childcare closures or illness of family members. Our increased reliance on remote access to our information systems also increases our exposures to potential cybersecurity breaches. We cannot provide any assurance that these actions, or any other mitigating actions we may take, will help mitigate the impact of the COVID-19 pandemic on us.

In addition, we have undertaken new initiatives as a result of the COVID-19 pandemic, including our BrightNight program, which converts movie theater and other parking lots into temporary drive-in theaters, and a Theatre Readiness Program, which includes an auditorium quality assurance service visit in advance of customers returning to movie theaters. While we believe these programs will provide an additional source of revenue during the COVID-19 pandemic, we cannot provide any assurance that these programs will provide the anticipated benefits to our business.

We cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic. As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition. In the secondfourth quarter of 2020, management decided to draw down CDN$2.9 million, or approximately $2.1 million, under Strong/MDI’s credit facility, all of which was repaid prior to September 30, 2020. Furthermore, we have applied for and received wage subsidies, and are in the process of reviewing tax credits and other financial support under the newly enacted COVID-19 relief legislation in the U.S. and Canada. However, the legislation and guidance from the authorities continues to evolve; as such, the amount and timing of support, if any, that we could receive is not determinable at this time, and there can be no guarantees that we will receive financial support through these programs. In addition, certain government benefits that we seek to access have not previously been administered on the present scale or at all. Government or third-party program administrators may be unable to cope with the volume of applications in the near term, and any benefits we receive may not be as extensive as we currently estimate, may impose additional conditions and restrictions on our operations or may otherwise provide less relief than we contemplate. In the event of a sustained market deterioration, and continued declines in net sales, including the impact of such events on the borrowing base under the Strong/MDI credit facility, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions. We cannot provide any assurance that we will be able to obtain additional sources of financing or liquidity on acceptable terms, or at all.2021.

The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, the duration of the pandemic, including repeat or cyclical outbreaks, additional “waves” and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time due to the daily evolution of the COVID-19 pandemic and the global responses to curb its spread. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, we expect that our results of operations, including revenues, in future periods will continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions, which include a global recession, and that, as result of such effects, we may continue to be adversely affected even after the COVID-19 pandemic has subsided.

	Three Months Ended September 30,												Three Months Ended September 30,
	2020			2019			$ Change			% Change			2021			2020			$ Change			% Change
	(dollars in thousands)												(dollars in thousands)
Net revenues	$	9,907		$	15,550		$	(5,643	)		(36.3	)%	$	6,116		$	5,561		$	555			10.0	%
Cost of revenues		6,660			10,349			(3,689	)		(35.6	)%		3,668			4,397			(729	)		(16.6	)%
Gross profit		3,247			5,201			(1,954	)		(37.6	)%		2,448			1,164			1,284			110.3	%
Gross profit percentage		32.8	%		33.4	%								40.0	%		20.9	%
Selling and administrative expenses		3,592			5,011			(1,419	)		(28.3	)%		2,566			2,604			(38	)		(1.5	)%
Loss on disposal of assets		(18	)		(3	)		(15	)		500.0	%		-			(18	)		18			(100.0	)%
(Loss) income from operations		(363	)		187			(550	)		(294.1	)%
Other income (expense)		2,322			(625	)		2,947			(471.5	)%
Income (loss) before income taxes and equity method investment loss		1,959			(438	)		2,397			(547.3	)%
Loss from operations														(118	)		(1,458	)		1,340			(91.9	)%
Other income														10,223			2,468			7,755			314.2	%
Income before income taxes and equity method investment loss														10,105			1,010			9,095			900.5	%
Income tax expense		(526	)		(731	)		205			(28.0	)%		(2,696	)		(614	)		(2,082	)		339.1	%
Equity method investment loss		(460	)		(496	)		36			(7.3	)%		(323	)		(460	)		137			(29.8	)%
Net income (loss) from continuing operations	$	973		$	(1,665	)	$	2,638			(158.4	)%	$	7,086		$	(64	)	$	7,150			n/m
n/m = not meaningful

Three Months Ended September 30, ~~2020~~2021 Compared to the Three Months Ended September 30, ~~2019~~2020

Net revenues during the quarter ended September 30, ~~2020 decreased 36.3%~~2021 increased 10.0% to ~~$9.9~~$6.1 million from ~~$15.6~~$5.6 million during the quarter ended September 30, ~~2019.~~2020. The ~~decrease~~increase in consolidated net revenue was primarily due to the continuing recovery of the Strong Entertainment business from the impact of COVID-19 ~~on our Strong Entertainment business. At Convergent, growth in~~as demand increased for services ~~revenue was~~and screens. Those increases were partially offset by ~~the effect of~~ large ~~non-recurring installation projects~~a projection equipment sale in the prior ~~year period.~~year.

	Three Months Ended September 30,										Three Months Ended September 30,
	2020		2019		$ Change			% Change			2021		2020		$ Change			% Change
	(dollars in thousands)										(dollars in thousands)
Strong Entertainment	$	5,260	$	10,928	$	(5,668	)		(51.9	)%	$	5,822	$	5,260	$	562			10.7	%
Convergent		4,346		4,532		(186	)		(4.1	)%
Other		301		90		211			234.4	%		294		301		(7	)		(2.3	)%
Total net revenues	$	9,907	$	15,550	$	(5,643	)		(36.3	)%	$	6,116	$	5,561	$	555			10.0	%

Revenue from Strong Entertainment ~~decreased 51.9%~~increased 10.7% to $5.8 million in the third quarter of 2021 from $5.3 million in the third quarter of ~~2020 from $10.9 million~~2020. The year-over-year increase in ~~the third quarter of 2019. The decrease~~revenue was primarily due to ~~the impact of the COVID-19 pandemic and lower~~higher revenues from ~~equipment sales~~screens systems, field maintenance and ~~field service~~monitoring services and our Eclipse curvilinear screen projects.

In March 2020, the Quebec government ordered the closure of all non-essential businesses, including our Quebec facility. We reopened our facility on May 11, 2020. In addition, while we originally expected to have our outsourced screen finishing facility in China up and running in the first half of 2020, the outbreak of COVID-19 in China delayed those plans, and we are currently evaluating Those increases were partially offset by the timing of ~~when we will be able to commence operations at the facility in light of current travel restrictions.~~

~~Revenue from Convergent decreased 4.1% to $4.3 million~~a large projection equipment sale in the third quarter of 2020, ~~from $4.5 million~~which skews the quarterly comparison.

While major markets have eased COVID-19-related restrictions, or lifted them entirely, we expect the pace of recovery of our Strong Entertainment revenue will continue to be dependent upon the overall measures in place to control COVID-19 and the ~~third quarter~~pace at which studios release new feature films to market. Studios recently resumed releasing major movies to the cinemas and continue to have a backlog of ~~2019. Convergent’s service revenues increased approximately $0.4 million on growth~~content planned for release in ~~DSaaS customer installations, while revenue from installations~~2022 and equipment sales decreased approximately $0.8 million due to completion of a large non-recurring installation project during 2019. Convergent experienced a moderate negative revenue impact from COVID-19 during the third quarter of 2020 and continues to support its retail customers,2023. In addition, we believe many of ~~whom provide essential services and remain in operation.~~our customers will benefit from government programs such as the Shuttered Venue Operators Grant, which has allocated over $16 billion of assistance to the entertainment industry.

Consolidated gross profit ~~decreased 37.6%~~increased to ~~$3.2~~$2.4 million during the quarter ended September 30, ~~2020~~2021 from ~~$5.2~~$1.2 million during the quarter ended September 30, ~~2019.~~2020. As a percentage of revenue, gross profit was ~~32.8%~~40.0% and ~~33.4%~~20.9% for the quarters ended September 30, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively. ~~Consolidated~~Excluding the impact of employee retention credits in the current period, gross profit for the quarter ended September 30, 2021 would have been 33.1%, as ~~a percentage of revenue decreased as~~compared with 20.9% in the ~~positive impact of the margin expansion at Convergent and cost reductions actions were more than offset by reduced revenue and contribution from~~ prior year.

Gross profit in the Strong Entertainment segment was ~~$0.9~~$2.2 million or ~~16.9%~~37.0% of revenues in the third quarter of ~~2020~~2021, which included a positive impact of $0.4 million as a result of the employee retention credit. Excluding the impact of the employee retention credit, gross profit would have been 29.7% of revenue compared to ~~$3.7 million or 33.6% of revenues~~16.9% in the third quarter of 2019. The decrease in gross profit dollars is primarily due to the decline in screen, equipment and field service revenues related to COVID-19. The impact of significantly lower revenues was somewhat mitigated by actions taken to control costs, including the furlough of production employees and technicians, management salary reductions, payroll subsidies received from the Canadian government and other similar actions taken to manage costs during the quarter.

~~Gross profit in the Convergent segment was $2.1 million or 47.9% of revenues in the third quarter of 2020 compared to $1.5 million or 32.4% of revenues in the third quarter of 2019.~~prior year. The increase in gross profit ~~margins~~dollars was ~~driven~~ primarily byattributable to higher screen and field service revenues and the ~~increase in higher margin DSaaS revenue.~~$0.4 million employee retention credit.

Consolidated ~~operating~~ loss from operations was ~~$0.4~~$0.1 million in the third quarter of ~~2020~~2021 compared to ~~operating income of $0.2~~$1.5 million in the third quarter of ~~2019.~~2020.

Strong Entertainment generated ~~an operating~~income from operations of $1.0 million in the third quarter of 2021 compared to a loss from operations of $0.1 million in the third quarter of ~~2020 compared~~2020. The improvement in income from operations was primarily due to ~~operating income~~the increase in revenue and gross profit described above and $0.1 million of ~~$2.2~~employee retention credits included in selling and administrative expenses.

Unallocated administrative expenses decreased to $1.0 million in the third quarter of 2019. The decrease in operating income was primarily due to the decline in revenues as discussed above, partially offset by actions taken to reduce operating expenses, including furloughs, headcount reductions, temporary salary cuts and wage subsidies, and lower travel and entertainment expenses.

~~Convergent generated operating income of $1.1 million in the third quarter of 2020~~2021 compared to $0.4 million in the third quarter of 2019. Operating income during the third quarter of 2020 increased as a result of our investment to grow the higher margin recurring revenue business lines, as well as lower selling expenses, including costs related to compensation, commissions, travel and entertainment and trade shows.

~~Unallocated administrative expenses decreased~~ to $1.4 million in the third quarter of ~~2020 compared to $2.2 million in the third quarter of 2019.~~2020. The decrease was driven primarily by ~~cost-saving measures implemented in response to COVID-19,~~the recognition of employee retention credits of $0.2 million, lower compensation and benefits, as well as reductions in information technology expenses, costs associated with contractors and consultants and audit and tax expenses, all of which were due to our initiatives to reduce overall administrative expenses.

Total other income of $10.2 million during the third quarter of 2021 primarily consisted of a $8.4 million unrealized gain on investments, $1.7 million realized gain on investments, and $0.2 million of foreign currency transaction adjustments. For the third quarter of 2020, total other income of $2.5 million primarily consisted of a $2.7 million gain on our business interruption claim for the weather-related incident at our production facility in Quebec, partially offset by foreign currency transaction adjustments of $0.2 million and ~~$0.3~~$0.1 million of interest expense. For the third quarter of 2019, total other expense of $0.6 million primarily consisted of a $0.8 million fair value adjustment to notes receivable and $0.3 million of interest expense, partially offset by a $0.4 million gain on our property and insurance claim for the weather-related incident at our production facility in Quebec and $0.1 million of foreign currency transaction adjustments.

Income tax expense was approximately ~~$0.5~~$2.7 million during the third quarter of ~~2020~~2021 compared to ~~$0.7~~$0.6 million during the third quarter of ~~2019.~~2020. Our income tax expense consisted primarily of income tax on foreign ~~earnings.~~earnings and deferred tax expense on the unrealized gain on investments.

We recorded equity method investment loss of $0.3 million during the third quarter of 2021, consisting of $0.4 million loss from GreenFirst, partially offset by a $0.1 million of income from FGF. We recorded an equity method investment loss of $0.5 million in the third quarter of 2020, consisting of $0.4 million from ~~PIH~~GreenFirst and $20 thousand from Itasca. The equity method loss from PIH was primarily the result of PIH’s unrealized holding losses associated with the change in fair value of its investment in the common stock of FedNat Holding Company (Nasdaq: FNHC). The third quarter of 2019 included an equity method investment loss of $0.5 million, which included a $0.8 million loss from PIH, partially offset by 0.3 million of income from Itasca.FGF.

As a result of the items outlined above, we generated a net income from continuing operations of ~~$1.0~~$7.1 million, or ~~$0.07~~$0.38 per basic and diluted share, in the third quarter of ~~2020,~~2021, compared to a net loss from continuing operations of ~~$1.7~~$0.1 million, or ~~$0.11~~$0.00 per basic and diluted share, in the third quarter of ~~2019.~~2020.

Nine Months Ended September 30, ~~2020~~2021 Compared to the Nine Months Ended September 30, ~~2019~~2020

Net revenues during the nine months ended September 30, ~~2020 decreased 32.0%~~2021 increased 9.3% to ~~$28.5~~$17.0 million from ~~$42.9~~$15.5 million during the nine months ended September 30, ~~2019.~~2020. The ~~decrease~~increase in consolidated net revenue was primarily due to the continuing recovery of the Strong Entertainment business from the impact of COVID-19 ~~on our~~ as demand increased for services and screen systems.

Strong Entertainment ~~business. At Convergent, growth in services revenue was offset by the effect of large non-recurring installation projects in the prior year period.~~

Revenue from Strong Entertainment ~~decreased 43.0%~~increased 7.2% to $16.1 million in the first nine months of 2021 from $15.0 million in the first nine months of 2020. We started experiencing the negative effects of the COVID-19 pandemic late in the first quarter of 2020, ~~from $26.4 million in~~which continued into the third quarter of 2020. As restrictions eased during the first nine months of ~~2019. The decrease was primarily due~~2021 and customer demand increased, revenues from screens systems and our Eclipse curvilinear screen projects have increased compared to the ~~impact~~same period in 2020.

While major markets have eased COVID-19 related restrictions, or lifted them entirely, we expect the pace of ~~the COVID-19 pandemic, including the government-mandated temporary closure~~recovery of our screen manufacturing facility in Quebec and lower revenues from equipment sales and field service projects. Revenue during the nine months ended September 30, 2019 was impacted by roof damage that caused the screen facility to temporarily halt operations for a portion of the first nine months of 2019.

In March 2020, the Quebec government ordered the closure of all non-essential businesses, including our Quebec facility. We reopened our facility on May 11, 2020. In addition, while we originally expected to have our outsourced screen finishing facility in China up and running in the first half of 2020, the outbreak of COVID-19 in China delayed those plans, and we are currently evaluating the timing of operations there in light of current travel restrictions.

Some cinemas, theme parks and other entertainment venues re-opened their doors in recent months. We have seen an uptick in customer demand for both screen systems for international markets and services domestically to support those reopening initiatives. WeStrong Entertainment revenue will continue to ~~closely monitor~~be dependent upon the ~~regulatory environment~~overall measures in place to control COVID-19 and ~~the status of our customers’ operations in managing~~ the pace at which studios release new feature films to the market. Studios recently resumed releasing major movies to the cinemas and continue to have a backlog of content planned for release in 2022 and 2023. In addition, we ~~ramp back up~~believe many of our ~~operations.~~customers will benefit from government programs such as the Shuttered Venue Operators Grant, which has allocated over $16 billion of assistance to the entertainment industry.

Consolidated gross profit increased 90.9% to ~~$13.0~~$6.1 million during the nine months ended September 30, ~~2020~~2021 from ~~$15.2~~$3.2 million during the nine months ended September 30, ~~2019. Convergent’s service revenues increased approximately $1.4 million on growth in DSaaS customer installations, while~~2020. As a percentage of revenue, ~~from installations~~gross profit was 35.8% and ~~equipment sales decreased approximately $4.6 million due to~~20.5% for the ~~completion of a large non-recurring installation project during 2019. Convergent experienced a moderate negative revenue impact from COVID-19 during the first~~ nine months ended September 30, 2021 and September 30, 2020, respectively. Excluding the impact of ~~2020 and continues to support its retail customers, many of whom provide essential services and remain in operation.~~

~~Consolidated~~employee retention credits, gross profit ~~decreased 31.6% to $8.8 million~~ during the nine months ended September 30, ~~2020 from $12.9 million during the nine months ended September 30, 2019. As a percentage of revenue, gross profit improved to 31.1% for the nine months ended September 30, 2020~~2021 would have been 25.8%, as compared to 30.9% for the nine months ended September 30, 2019. Consolidated gross profit as a percentage of revenue improved, despite the significant decline in revenue, due to a combination of the margin expansion at Convergent related to the growthwith 20.5% in the ~~DSaaS service business and the cost reduction actions taken to mitigate the impact of COVID-19 during the first nine months of 2020.~~prior year.

	Nine Months Ended September 30,											Nine Months Ended September 30,
	2020		2019			$ Change			% Change			2021		2020		$ Change		% Change
	(dollars in thousands)											(dollars in thousands)
Strong Entertainment	$	2,769	$	8,621		$	(5,852	)		(67.9	)%	$	5,428	$	2,769	$	2,659		96.0	%
Convergent		5,668		4,622			1,046			22.6	%
Other		412		(307	)		719			(234.2	)%		644		412		232		56.3	%
Total gross profit	$	8,849	$	12,936		$	(4,087	)		(31.6	)%	$	6,072	$	3,181	$	2,891		90.9	%

Gross profit in the Strong Entertainment segment was $5.4 million or 33.7% of revenues in the first nine months of 2021 compared to $2.8 million or 18.4% of revenues in the first nine months ~~2020 compared to $8.6 million or 32.6%~~ of ~~revenues in the first~~2020. The nine months ended September 30, 2021 included a positive impact of ~~2019.~~$1.3 million as a result of the employee retention credit. Excluding the impact of the employee retention credit, gross profit for the nine months ended September 30, 2021 would have been 25.8% of revenue. The ~~decrease~~increase in gross profit dollars iswas primarily ~~due~~attributable to the ~~decline in~~higher screen, equipment and field service ~~revenues related to COVID-19~~revenue, and ~~changes in product mix. The impact of significantly lower revenues was somewhat mitigated by~~the $1.3 million employee retention credit as well as actions taken to control ~~costs, including the furlough of production employees and technicians, management salary reductions, payroll subsidies received~~costs.

Consolidated loss from ~~the Canadian government and other similar actions taken to manage costs.~~

~~Gross profit in the Convergent segment~~operations was $5.7 million or 43.8% of revenues in the first nine months of 2020 compared to $4.6 million or 30.4% of revenues in the first nine months of 2019. The increase in gross profit was driven primarily by the increase in higher margin DSaaS revenue.

~~Consolidated operating loss was $3.5~~$1.9 million in the first nine months of ~~2020~~2021 compared to ~~$1.8~~$6.0 million in the first nine months of ~~2019.~~2020.

Strong Entertainment generated ~~an operating loss~~income from operations of $0.9 million during the nine months ended September 30, 2020 compared to operating income of $4.6 million during the nine months ended September 30, 2019. The decrease in operating income was primarily due to the decline in revenues as discussed above, partially offset by actions taken to reduce compensation related expenses, including furloughs, headcount reductions, temporary salary cuts and wage subsidies, as well as lower travel and entertainment expenses. In addition, since many of Strong Entertainment’s customers have been negatively impacted by COVID-19, we recorded $0.4 million of bad debt expense during the nine months ended September 30, 2020 as a result of the increased uncertainty related to collection of trade accounts receivable.

~~Convergent generated operating income of $2.5~~$2.2 million in the first nine months of ~~2020~~2021 compared to ~~$1.5~~a loss from operations of $0.9 million in the first nine months of 2019. Operating income during the first nine months of 2020 increased as a result of our investment to grow the higher margin recurring revenue business lines, as well as lower selling expenses, including costs related to compensation, commissions, travel and entertainment and trade shows.2020. The ~~increased gross margin and higher operating~~improvement in income from ~~recurring~~operations was primarily due to the increase in revenue and gross profit described above and $0.3 million of employee retention credits included in ~~2020 was partially offset by a $0.4 million favorable bad debt recovery during the first nine months of 2019.~~selling and administrative expenses.

Unallocated administrative expenses decreased to ~~$4.9~~$3.4 million ~~during~~in the nine months ended September 30, ~~2020~~2021 compared to ~~$6.7~~$4.6 million ~~during~~in the ~~nine months ended September 30, 2019.~~same period of 2020. The decrease was driven primarily by ~~actions taken to reduce~~the recognition of employee retention credits of $0.3 million, lower compensation ~~expense, board fees, travel,~~and benefits, as well as reductions in information technology expenses, costs associated with contractors and consultants and audit and tax expenses, all of which were due to our initiatives to reduce overall administrative expenses.

Total other income of ~~$2.1~~$9.9 million during the first nine months of 2021 primarily consisted of a $8.4 million unrealized gain on investments, $1.7 million realized gain on investments, a $0.1 million gain on our property and insurance claim for the weather-related incident at our production facility in Quebec, Canada, partially offset by $0.1 million of foreign currency transaction adjustments and $0.2 million of interest expense. Total other income of $2.5 million during the nine months ended September 30, 2020 primarily consisted of a $2.9 million gain on our property and casualty and business interruption claims for the weather-related incident at our production facility in Quebec, Canada, partially offset by ~~$0.8~~$0.4 million of interest expense. For the nine months ended September 30, 2019, total other expense of $2.2 million primarily consisted of a $2.2 million fair value adjustment to notes receivable, $0.2 million of foreign currency transaction adjustments and $0.6 million of interest expense, partially offset by a $0.6 million gain on our property and insurance claim for the weather-related incident at our production facility in Quebec.

Income tax expense during the first nine months of 2021 was ~~approximately~~$2.8 million, which compared to $1.0 million during the first nine months of ~~2020 compared to $1.3 million during the first nine months of 2019.~~2020. Our income tax expense consisted primarily of income tax on foreign ~~earnings.~~earnings and deferred tax expense on the unrealized gain on investments.

We recorded an equity method investment loss of $1.5 million during the first nine months of 2021, consisting of $1.1million from GreenFirst and $0.3 million from FGF. We recorded an equity method investment loss of $0.6 million during the first nine months ~~ended September 30,~~of 2020, consisting of $0.4 million from ~~PIH~~FGF and $0.1 million from ~~Itasca. The nine months ended September 30, 2019 included equity method investment loss of $1.2 million, which consisted of losses from PIH and Itasca of $0.6 million each.~~GreenFirst.

As a result of the items outlined above, we generated a net ~~loss~~income from continuing operations of ~~$3.0~~$3.8 million, or $0.21 per basic and diluted share, ~~during~~in the first nine months ~~ended September 30, 2020,~~of 2021, compared to a net loss from continuing operations of ~~$6.6~~$5.0 million, or ~~$0.46~~$0.34 per basic and diluted share, ~~during~~in the first nine months ~~ended September 30, 2019.~~of 2020.

During the past several years, we have primarily met our working capital and capital resource needs from our operating cash flows and credit facilities. Our primary cash requirements involve operating expenses, working capital, ~~fluctuations,~~ capital expenditures, investments, and other general corporate activities. We incurred operating losses and negative operating cash flow in our Convergent business for the first three quarters of 2018, as we executed our plans to restructure that business to reduce operating costs and invest in higher margin recurring revenue. Convergent’s financial performance has improved significantly as a result of those actions and is now generating positive operating income and cash from operations. The startup of Strong Outdoor negatively impacted our cash flow as we invested in building that business. We expect the sale of our Strong Outdoor business during August 2020 to have a positive impact on future cash flows since Strong Outdoor has generated operating losses since the startup of the business. Cash flow from Strong Entertainment and Convergent during 2019 was used to fund our corporate operating expenses and Strong Outdoor. Our capital expenditures during ~~2019 and the first nine months of~~ 2020 included costs incurred in the construction of the Strong Entertainment production facility in Quebec, Canada that sustained damage as a result of inclement weather. During the third quarter of 2021, we increased our investment in GreenFirst by exercising 8.3 million rights for a total cost of approximately $10.0 million. The ~~purchase~~rights were exchanged into common shares of ~~equipment in connection with~~GreenFirst, and after the ~~expansion~~conversion the Company holds 15.3 million shares of GreenFirst common stock. As of September 30, 2021, the fair value of our ~~Convergent business operations has recently been funded via term loan borrowings and capital leases, and we may continue to do so.~~investment in GreenFirst was approximately $20.2 million.

We ended the third quarter of ~~2020~~2021 with total cash and cash equivalents and restricted cash of ~~$7.4~~$10.5 million compared to ~~$5.3~~$4.8 million as of December 31, ~~2019.~~2020. Of the ~~$7.4~~$10.5 million as of September 30, ~~2020, $3.4~~2021, $1.8 million was held by our Canadian subsidiary, Strong/MDI, and ~~$0.4~~$0.2 million was restricted. Strong/MDI ~~also~~ makes intercompany loans to the U.S. parent company which do not trigger Canadian withholding taxes if they meet certain requirements. As of September 30, ~~2020,~~2021, the parent company had outstanding intercompany loans from Strong/MDI of approximately $34.6 million. In the event those loans are not repaid, or are recharacterized as dividends to the U.S. parent company, we would be required to pay 5% Canadian withholding taxes, which have been fully accrued as of September 30, ~~2020.~~2021.

In response to the COVID-19 pandemic and related closures of cinemas, theme parks and entertainment venues, we ~~have taken steps~~took decisive actions to conserve cash, reduce operating expenditures, delay capital expenditures, and to manage working capital. ~~We have also implemented targeted furloughs, headcount reductions~~On June 7, 2021, Strong/MDI entered into a demand credit agreement (the “2021 Credit Agreement”), which amended and ~~temporary salary cuts~~restated the demand credit agreement dated as of September 5, 2017. The 2021 Credit Agreement consists of a revolving line of credit for up to CDN$2.0 million subject to a borrowing base requirement, a 20-year installment loan for up to CDN$5.1 million and a 5-year installment loan for up to CDN$0.5 million.

In February 2021, we closed two transactions which further strengthened the Company’s balance sheet, increasing the Company’s cash position and reducing the Company’s debt and lease obligation.

On February 1, 2021, we entered into an Equity Purchase Agreement (together with the other related documents defined therein, the “Purchase Agreement”), and closed the transactions contemplated by the Purchase Agreement, with SageNet LLC (“SageNet”). The Purchase Price pursuant to the Purchase Agreement was (i) $15.0 million in cash and (ii) $2.5 million in the form of a subordinated promissory note delivered by SageNet in our ~~executive officers and certain other employees, and our board~~favor (the “SageNet Promissory Note”). Per the terms of ~~directors waived its cash compensation for 2020~~the SageNet Promissory Note, we will receive twelve consecutive equal quarterly payments of principal, plus accrued interest thereon, commencing on March 31, 2022. A portion of the Purchase Price was placed in ~~order to reduce expenses. In~~escrow by SageNet, the ~~second quarter of 2020, management decided to draw down CDN$2.9 million, or approximately $2.1 million, under Strong/MDI’s revolving credit facility, to provide additional liquidity, all~~release of which ~~was repaid prior~~is contingent upon certain events and conditions specified in the Purchase Agreement. The Purchase Price is also subject to ~~September 30, 2020.~~adjustment based on closing working capital of Convergent. As further consideration, SageNet also assumed approximately $5.7 million of third-party debt of Convergent, bringing the total enterprise value for Convergent’s equity interests to approximately $23.2 million.

On February 3, 2021, we entered into an underwriting agreement in connection with a public offering (the “Offering”) pursuant to which we agreed to issue and sell approximately 3.3 million shares of our common stock, at a public offering price of $2.30 per share. The Offering closed on February 8, 2021. The net proceeds from the Offering were approximately $6.7 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

On March 2, 2021, we received a notice of default and demand (the “Default Notice”) from Huntington Technology Finance, Inc. (“Huntington”). The Default Notice alleged the occurrence of an event of default under the terms of the Master Equipment Lease Agreement dated May 19, 2017 (the “Lease Agreement”), pursuant to which our subsidiaries lease certain digital taxi top advertising signs. We have made all required payments to Huntington during the term of the Lease Agreement and expect to continue to make monthly payments on a timely basis. The Default Notice did not allege that we have failed to make any payment or incurred any economic or payment default. Rather, the Default Notice alleged that we violated certain technical covenants in the Lease Agreement. Huntington demanded accelerated payment of the outstanding principal balance plus lessor profit and a fair market value buyout of the assets under lease within ten days of the receipt of the Default Notice. We disputed Huntington’s assertion that an event of default had occurred under the Lease Agreement and believe that many of the assertions made in the Default Notice are false and that the claims made in the Default Notice are therefore baseless. Accordingly, on March 3, 2021, we provided a written response to Huntington detailing our position that Huntington’s allegations of an event of default under the Lease Agreement are unfounded, and asserting our good faith belief that we have abided by the terms, conditions and covenants of the Lease Agreement. In order to resolve the situation and avoid the potential costs of a lengthy legal dispute, on April 2, 2021, we entered into an Agreement of Forbearance and Conditional Sale (the “Settlement Agreement”) with Huntington and CCA Financial, LLC. The amounts payable by us pursuant to the Settlement Agreement include only payments contractually due under the Lease Agreement and do not include any additional penalties, interest, or liquidation damages. We agreed to accelerate payment of the $2.1 million remaining payments contractually due under the Lease Agreement and to exercise our option to purchase the leased assets for $1.0 million. The $2.1 million plus sales tax owed under the Lease Agreement was paid upon execution of the Settlement Agreement and the lease equipment buyout will be paid in twelve monthly installments from June 1, 2021 to May 1, 2022. Upon payment in full, the Lease Agreement and all obligations thereunder will terminate.

We believe that our existing sources of liquidity, including cash and cash equivalents, operating cash flow, credit facilities, equity investments, receivables and other assets will be sufficient to meet our projected capital needs for ~~the~~ at least the next twelve months. However, our ability to continue to meet our cash requirements will depend on, among other things, the duration of COVID-19 related restrictions on cinemas, theme parks and other entertainment venues, our ability to achieve anticipated levels of revenues and cash flow from operations, performance of our investment holdings, our ability to manage costs and working capital successfully and the continued availability of financing, if needed. We cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic. As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition. In the event of a sustained market deterioration, and continued declines in net sales, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions. We may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in additional public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions, including those resulting from the COVID-19 pandemic, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all, and we cannot provide any assurance that we will be able to obtain any additional sources of financing or liquidity on acceptable terms, or at all. See Note 10 to the condensed consolidated financial statements for a description of our debt as of September 30, ~~2020.~~2021.

Net cash used in operating activities from continuing operations was $0.3 million during the nine months ended September 30, 2021 primarily due to cash outflows for selling and administrative expense and reductions in working capital which was primarily a result of the recognition of a receivable of $2.1 million in connection with filing for the employee retention credits, partially offset by the operating income generated by Strong Entertainment. Net cash provided by operating activities from continuing operations was ~~$8.2~~$5.7 million ~~during~~in the first nine months ~~ended September 30, 2020. Cash flows generated by Convergent and changes~~of 2020 primarily due to improvements in working capital, ~~were~~ partially offset by the operating loss generated by Strong Entertainment ~~as well as cash outflows for selling~~ and administrative expenses. Net cash used in operating activities from continuing operations was $1.0 million in the first nine months of 2019. Cash flows generated by Strong Cinema and Convergent and improvements in working capital were offset by the cash outflows for selling and administrative expenses.

Net cash used in investing activities from continuing operations was ~~$4.7~~$10.6 million during the nine months ended September 30, 2021, which consisted of a $10.0 million increase to our investment in GreenFirst and $0.7 million of capital expenditures. Net cash used in investing activities from continuing operations was $4.6 million in the first nine months of 2020, which consisted of a $4.1 million investment in Firefly and capital expenditures of $0.5 million.

Net cash provided by financing activities from continuing operations was $3.6 million during the nine months ended September 30, 2021, which primarily consisted of $6.3 million of net proceeds from the issuance of our common stock, partially offset by $2.6 million of principal payments on finance leases and short-term debt. Net cash used in financing activities from continuing operations was $1.1 million during the nine months ended September 30, 2020, which consisted of a $4.0 million investment in Firefly and capital expenditures of $0.7 million. Net cash used in investing activities was $1.6 million in the first nine months of 2019, consisting of $1.7 million of capital expenditures, partially offset by $0.2 million of proceeds received from the disposal of assets.

~~Net cash used in financing activities was $2.1 million during the nine months ended September 30, 2020, consisting of~~ principal payments on ~~debt~~finance leases and capital lease obligations. Net cash used in financing activities was $1.2 million during the nine months ended September 30, 2019, primarily consisting of $1.5 million of principal payments on debt and capital lease obligations, partially offset by $0.2 million of proceeds from the issuance ofshort-term debt.

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”). In addition to disclosing financial results prepared in accordance with GAAP, ~~the Company discloses~~we disclose information regarding Adjusted EBITDA, which differs from the term EBITDA as it is commonly used. In addition to adjusting net income (loss) to exclude income taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes discontinued operations, share-based compensation, impairment charges, equity method income (loss), unrealized gains (losses) on investments, fair value adjustments, severance, foreign currency transaction gains (losses), transactional gains and expenses, gains on insurance recoveries, certain tax credits and other cash and non-cash charges and gains.

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

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

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

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

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

	Three Months Ended September 30,																														Nine Months Ended September 30,
	2020															2019															2021												2020

	Strong Entertainment			Convergent			Corporate and Other			Discontinued Operations			Consolidated			Strong Entertainment			Convergent			Corporate and Other			Discontinued Operations			Consolidated			Strong Entertainment			Corporate and Other			Discontinued Operations			Consolidated			Strong Entertainment			Corporate and Other			Discontinued Operations			Consolidated
Net income (loss)	$	1,939		$	1,000		$	(1,966	)	$	4,673		$	5,646		$	1,265		$	386		$	(3,316	)	$	(123	)	$	(1,788	)	$	7,719		$	(3,899	)	$	14,649		$	18,469		$	917		$	(5,938	)	$	6,492		$	1,471
Net income (loss) from discontinued operations		-			-			-			(4,673	)		(4,673	)		-			-			-			123			123			-			-			(14,649	)		(14,649	)		-			-			(6,492	)		(6,492	)
Net income (loss) from continuing operations		1,939			1,000			(1,966	)		-			973			1,265			386			(3,316	)		-			(1,665	)		7,719			(3,899	)		-			3,820			917			(5,938	)		-			(5,021	)
Interest expense, net		24			146			84			-			254			35			120			107			-			262			84			146			-			230			91			281			-			372
Income tax expense (benefit)		488			(88	)		126			-			526			827			(96	)		-			-			731
Income tax expense																																2,406			382			-			2,788			853			143			-			996
Depreciation and amortization		226			613			46			-			885			226			492			54			-			772			687			298			-			985			688			155			-			843
EBITDA		2,677			1,671			(1,710	)		-			2,638			2,353			902			(3,155	)		-			100			10,896			(3,073	)		-			7,823			2,549			(5,359	)		-			(2,810	)
Stock-based compensation expense		-			-			239			-			239			-			-			334			-			334			-			686			-			686			-			724			-			724
Fair value adjustment to notes receivable		-			-			-			-			-			845			-			-			-			845
Equity method investment loss (income)		20			-			440			-			460			(287	)		-			783			-			496
Equity method investment loss																																1,150			318			-			1,468			137			443			-			580
Employee retention credit																																(1,576	)		(336	)		-			(1,912	)		-			-			-			-
Realized gain on investments																																(1,689	)		-			-			(1,689	)		-			-			-			-
Unrealized gain on investments																																(7,648	)		(728	)		-			(8,376	)		-			-			-			-
Loss on disposal of assets and impairment charges		-			-			18			-			18			3			-			-			-			3			-			-			-			-			-			18						18
Foreign currency transaction loss (gain)		172			1			-			-			173			(50	)		(16	)		-			-			(66	)
Foreign currency transaction loss (income)																																56			-			-			56			(51	)		-			-			(51	)
Gain on property and casualty insurance recoveries		(2,736	)		-			-			-			(2,736	)		(420	)		-			-			-			(420	)		(148	)		-			-			(148	)		(2,850	)		-			-			(2,850	)
Severance and other		-			-			-			-			-			-			4			8			-			12			15			87			-			102			78			7			-			85
Adjusted EBITDA	$	133		$	1,672		$	(1,013	)	$	-		$	792		$	2,444		$	890		$	(2,030	)	$	-		$	1,304		$	1,056		$	(3,046	)	$	-		$	(1,990	)	$	(137	)	$	(4,167	)	$	-		$	(4,304	)

Our primary exposure to foreign currency fluctuations pertains to our subsidiary in Canada. In certain instances, we may enter into a foreign exchange contract to manage a portion of this risk. We do not have any trading activities that include non-exchange traded contracts at fair value.

Generally, our revenue and earnings fluctuate moderately from quarter to quarter. As we increase our sales in our current markets, and as we expand into new markets in different geographies, it is possible we may experience different seasonality patterns in our business. As a result, the results of operations for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for an entire fiscal year.

See Note 2, Summary of Significant Accounting Policies, to the condensed consolidated financial statements for a description of recently issued accounting pronouncements.

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, ~~2019.~~2020. We periodically re-evaluate and adjust our critical accounting policies as circumstances change. There were no significant changes in our critical accounting policies during the three months ended September 30, ~~2020.~~2021.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective at ensuring that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (as amended) is (1) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting. The Company determined that no material changes to its internal control over financial reporting occurred or were required in response to the measures it has taken related to the COVID-19 pandemic, including remote working arrangements for many of its employees. The Company is continually monitoring and assessing the impact of COVID-19 on its internal controls in an effort to ensure that its internal controls respond to any changes in its operating environment.

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.

We are named as a defendant in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of commercial lighting products containing wiring that may have contained asbestos. Each case names dozens of corporate defendants in addition to Ballantyne Strong. In our experience, a large percentage of these types of claims have never been substantiated and have been dismissed by the courts. We have not suffered any adverse verdict in a trial court proceeding related to asbestos claims and intend to continue to defend these lawsuits. When appropriate, we may settle certain claims. We do not expect the resolution of these cases to have a material adverse effect on our financial condition, results of operations or cash flows.

Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 includes a detailed discussion of the Company’s risk factors. There have been no material changes to the risk factors as previously disclosed, except as set forth below. However, many of the risk factors disclosed in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 have been, and we expect will continue to be further, heightened or exacerbated by the impact of the COVID-19 pandemic.disclosed.

The COVID-19 pandemic and ensuing governmental responses have negatively impacted, and could further materially adversely affect, our business, financial condition, results of operations and cash flows.

In December 2019, COVID-19 was initially reported, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 has had a widespread and detrimental effect on the global economy as a result of the continued increase in the number of cases, particularly in the United States, and actions by public health and governmental authorities, businesses, other organizations and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns. The ultimate impact of the COVID-19 pandemic on our business and results of operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 pandemic, including repeat or cyclical outbreaks, and any additional preventative and protective actions that governments, or we or our customers, may direct, which may result in an extended period of continued business disruption and reduced operations. For instance, some areas of the United States are experiencing new surges in COVID-19 cases, which has, in some cases, led to the closure of recently re-opened businesses and further postponed opening other businesses, including movie theaters. Any resulting financial impact cannot be reasonably estimated at this time, but we expect it will continue to have a material impact on our business, financial condition and results of operations.

The repercussions of the COVID-19 global pandemic resulted in a significant impact to our customers, specifically those in the entertainment and advertising industries, and their ability and willingness to spend on our products and services, which continues to negatively impact us. A significant number of our customers temporarily ceased operations during the pandemic, some of which continue to be suspended; as such, we have experienced, and anticipate that we will continue to experience at least until our customers have resumed normal operations, a significant decline in our results of operations. For instance, during this time, many movie theaters and other entertainment centers were forced to close or curtail their hours and, correspondingly, have terminated or deferred their non-essential capital expenditures; many advertisers began to reduce, postpone, or cancel their advertising campaigns as social distancing measures, including closures of schools and non-essential businesses, and restrictions around the free movement of people were implemented; and a number of events during which our experiential marketing services may have been provided, such as Coachella, have been postponed, cancelled or shifted to virtual venues. While some movie theaters and chains have begun to re-open, or announced plans to re-open in the near future, theater operators may continue to experience reduced revenues for an extended period due to, among other things, consumer concerns over safety and social distancing, depressed consumer sentiment due to adverse economic conditions, including job losses, capacity restrictions, and postponed release dates, shortened “release windows” between the release of motion pictures in theaters and an alternative delivery method, or the release of motion pictures directly to alternative delivery methods, bypassing the theater entirely, for certain movies, and continued COVID-19 outbreaks could cause these theaters to suspend operations again. The COVID-19 pandemic has also adversely affected film production and may adversely affect the pipeline of feature films available in the short- or long-term. In addition to decreased business spending by our customers and prospective customers and reduced demand for our products, lower renewal rates by our customers, increased customer losses/churn, increased challenges in or cost of acquiring new customers and increased risk in collectability of accounts receivable may have a material adverse effect on our business and results of operations. We have also experienced other negative impacts; among other actions, we were required to temporarily close our screen manufacturing facility in Canada due to the governmental response to COVID-19, which we were able to re-open on May 11, 2020, and have experienced lower revenues from field services and a reduction in non-recurring time and materials-based services. The completion of our outsourced screen finishing facility in China was also delayed by the COVID-19 pandemic, and we are currently evaluating the timing of when we will be able to commence operations at the facility in light of current travel restrictions. We may also experience one or more of the following conditions that could have a material adverse impact on our business operations and financial condition: adverse effects on our strategic partners’ businesses or on the businesses of companies in which we hold investments; impairment charges; extreme currency exchange-rate fluctuations; inability to recover costs from insurance carriers; and business continuity concerns for us, our customers and our third-party vendors.

In response to uncertainties associated with the COVID-19 pandemic, we have taken, and are continuing to take, significant steps to preserve cash and remain in a strong competitive position when the current crisis subsides by eliminating non-essential costs, reducing employee hours and deferring all non-essential capital expenditures to minimum levels. Among other mitigating actions, we implemented targeted furloughs, temporarily curtailed our service and distribution activities in the United States and temporarily reduced compensation of our executive officers and certain other employees, and our board of directors waived its cash compensation for 2020. We have also implemented remote work policies for many employees, and the resources available to such employees may not enable them to maintain the same level of productivity and efficiency. In addition, these and other employees may face additional demands on their time, such as increased responsibilities resulting from school and childcare closures or illness of family members. Our increased reliance on remote access to our information systems also increases our exposures to potential cybersecurity breaches. We cannot provide any assurance that these actions, or any other mitigating actions we may take, will help mitigate the impact of the COVID-19 pandemic on us.

We cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic. As a consequence, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition. In the second quarter of 2020, management decided to draw down CDN$2.9 million, or approximately $2.1 million, under Strong/MDI’s credit facility, all of which was repaid prior to September 30, 2020. Furthermore, we have applied for and received wage subsidies, and are in the process of reviewing tax credits and other financial support under the newly enacted COVID-19 relief legislation in the U.S. and Canada. However, the legislation and guidance from the authorities continues to evolve; as such, the amount and timing of support, if any, that we could receive is not determinable at this time, and there can be no guarantees that we will receive financial support through these programs. In addition, certain government benefits that we seek to access have not previously been administered on the present scale or at all. Government or third-party program administrators may be unable to cope with the volume of applications in the near term, and any benefits we receive may not be as extensive as we currently estimate, may impose additional conditions and restrictions on our operations or may otherwise provide less relief than we contemplate. In the event of a sustained market deterioration, and continued declines in net sales, including the impact of such events on the borrowing base under the Strong/MDI credit facility, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions. We cannot provide any assurance that we will be able to obtain additional sources of financing or liquidity on acceptable terms, or at all.

On August 20, 2015, we announced that our Board of Directors adopted a stock repurchase program authorizing the repurchase of up to 700,000 shares of our outstanding Common Stock pursuant to a plan adopted under Rule 10b5-1 of the Securities Exchange Act of 1934 (as amended). The repurchase program has no expiration date. ~~There were no repurchases during~~The following table provides information about purchases made by us of our common stock for each month included in the ~~three months ended September 30, 2020. As~~third quarter of ~~September 30, 2020, there were 636,931 shares that may yet be purchased under the stock repurchase program.~~2021:

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

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

4201 Congress Street, Suite 175 Charlotte, North Carolina		28209
(Address of Principal Executive Offices)		(Zip Code)

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Shares, ~~$.01~~$0.01 par value		BTN		NYSE American

Large accelerated filer	~~[ ]~~☐	Accelerated filer	~~[ ]~~☐
Non-accelerated filer	~~[X]~~☒	Smaller reporting company	~~[X]~~☒
		Emerging growth company	~~[ ]~~☐

Class		Outstanding as of November ~~9, 2020~~5, 2021
Common Stock, ~~$.01~~$0.01 par value		~~14,790,374~~18,475,018 shares

		Page No.

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets, September 30, ~~2020~~2021 (Unaudited) and December 31, ~~2019~~2020	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~ (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three and Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~ (Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~ (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~ (Unaudited)	7

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	98

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3228

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4639

Item 4.	Controls and Procedures	4639

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4640

Item 1A.	Risk Factors	4640

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4840

Item 6.	Exhibits	4941

	Signatures	5042


	Common Stock (Shares)		Common Stock ($)		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at December 31, 2020		17,596	$	176	$	43,713		$	5,654		$	(18,586	)	$	(3,891	)	$	27,066
Net income		-		-		-			11,811			-			-			11,811
Net other comprehensive loss		-		-		-			-			-			(402	)		(402	)
Vesting of restricted stock		209		2		(9	)		-			-			-			(7	)
Stock option exercise
Stock option exercise, shares
Issuance of common stock, net of issuance costs		3,290		33		6,277			-			-			-			6,310
Stock-based compensation expense		-		-		314			-			-			-			314
Balance at March 31, 2021		21,095	$	211	$	50,295		$	17,465		$	(18,586	)	$	(4,293	)	$	45,092
Net loss		-		-		-			(428	)		-			-			(428	)
Net other comprehensive income		-		-		-			-			-			102			102
Vesting of restricted stock		65		1		(73	)		-			-			-			(72	)
Stock option exercise		4		-		9			-			-			-			9
Stock-based compensation expense		-		-		159			-			-			-			159
Balance at June 30, 2021		21,164	$	212	$	50,390		$	17,037		$	(18,586	)	$	(4,191	)	$	44,862
Net income		-		-		-			7,086			-			-			7,086
Net other comprehensive loss		-		-		-			-			-			(68	)		(68	)
Vesting of restricted stock		67		-		-			-			-			-			-
Stock-based compensation expense		-		-		213			-			-			-			213
Balance at September 30, 2021		21,231	$	212	$	50,603		$	24,123		$	(18,586	)	$	(4,259	)	$	52,093

	Common Stock (Shares)		Common Stock ($)		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at December 31, 2019		17,410	$	174	$	42,589		$	6,001		$	(18,586	)	$	(4,469	)	$	25,709
Net loss		-		-		-			(447	)		-			-			(447	)
Net other comprehensive loss		-		-		-			-			-			(1,285	)		(1,285	)
Vesting of restricted stock		35		-		-			-			-			-			-
Stock-based compensation expense		-		-		273			-			-			-			273
Balance at March 31, 2020		17,445		174		42,862			5,554			(18,586	)		(5,754	)		24,250
Net loss		-		-		-			(3,728	)		-			-			(3,728	)
Net other comprehensive income		-		-		-			-			-			690			690
Vesting of restricted stock		107		2		(2	)		-			-			-			-
Stock-based compensation expense		-		-		212			-			-			-			212
Balance at June 30, 2020		17,552		176		43,072			1,826			(18,586	)		(5,064	)		21,424
Net income		-		-		-			5,646			-			-			5,646
Net other comprehensive income		-		-		-			-			-			371			371
Vesting of restricted stock		32		-		-			-			-			-			-
Stock-based compensation expense		-		-		239			-			-			-			239
Balance at September 30, 2020		17,584	$	176	$	43,311		$	7,472		$	(18,586	)	$	(4,693	)	$	27,680

	●	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

Firefly Series A-3 preferred shares received	$	3,200
Cash received		571
Removal of Firefly's share repurchase option related to digital top lease		1,171
Forgiven accounts payable to Firefly		739
Book value of liabilities transferred to Firefly		191
Book value of assets transferred to Firefly		(608	)
Net gain from sale of discontinued operations	$	5,264

	December 31, 2020
	Convergent		Strong Outdoor		Total
Accounts receivable, net	$	3,065	$	-	$	3,065
Inventories, net		312		-		312
Other current assets		371		-		371
Total current assets of discontinued operations		3,748		-		3,748
Property, plant and equipment, net		3,172		-		3,172
Intangible assets, net		753		-		753
Operating lease right-of-use assets		212		-		212
Finance lease right-of-use assets		2,235		-		2,235
Total long-term assets of discontinued operations		6,372		-		6,372
Total assets of discontinued operations	$	10,120	$	-	$	10,120

Accounts payable	$	449	$	-	$	449
Accrued expenses		812		-		812
Current portion of long-term debt		1,075		-		1,075
Current portion of operating lease obligation		108		-		108
Current portion of finance lease obligation		859		-		859
Deferred revenue and customer deposits		598		-		598
Total current liabilities of discontinued operations		3,901		-		3,901
Long-term debt, net of current portion		2,340		-		2,340
Operating lease obligation, net of current portion		107		-		107
Finance lease obligation, net of current portion		1,530		-		1,530
Other long-term liabilities		89		-		89
Total long-term liabilities of discontinued operations		4,066		-		4,066
Total liabilities of discontinued operations	$	7,967	$	-	$	7,967

	September 30,		December 31,
	2020		2019
Accounts receivable	$	-	$	-
Other current assets		-		320
Total current assets of discontinued operations		-		320
Property, plant and equipment		-		491
Other long-term assets		-		94
Total long-term assets of discontinued operations		-		585
Total assets of discontinued operations	$	-	$	905

Accounts payable	$	-	$	304
Current portion of operating lease obligation		-		125
Deferred revenue and customer deposits		-		275
Total current liabilities of discontinued operations		-		704
Operating lease obligation, net of current portion		-		147
Total long-term liabilities of discontinued operations		-		147
Total liabilities of discontinued operations	$	-	$	851

	●	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.

	Three Months Ended September 30, 2019
	Strong Entertainment		Convergent		Other		Total
Screen system sales	$	4,441	$	-	$	-	$	4,441
Digital equipment sales		3,282		757		-		4,039
Extended warranty sales		197		-		-		197
Other product sales		515		-		-		515
Total product sales		8,435		757		-		9,192
Field maintenance and monitoring services		1,972		3,145		-		5,117
Installation services		473		611		-		1,084
Other service revenues		48		19		90		157
Total service revenues		2,493		3,775		90		6,358
Total	$	10,928	$	4,532	$	90	$	15,550

	Nine Months Ended September 30, 2019
	Strong Entertainment		Convergent		Other		Total
Screen system sales	$	10,370	$	-	$	-	$	10,370
Digital equipment sales		6,396		2,248		-		8,644
Extended warranty sales		582		-		-		582
Other product sales		1,238		6		-		1,244
Total product sales		18,586		2,254		-		20,840
Field maintenance and monitoring services		6,060		8,704		-		14,764
Installation services		1,540		4,194		-		5,734
Other service revenues		219		52		288		559
Total service revenues		7,819		12,950		288		21,057
Total	$	26,405	$	15,204	$	288	$	41,897

	September 30, 2020		December 31, 2019
Raw materials and components	$	1,632	$	1,584
Work in process		269		211
Finished goods		915		1,084
	$	2,816	$	2,879

	September 30, 2020					December 31, 2019
	Carrying Amount		Economic Interest			Carrying Amount		Economic Interest
Equity Method Investments
1347 Property Insurance Holdings, Inc.	$	6,379		21.0	%	$	6,897		17.2	%
Itasca Capital Ltd.		2,729		32.3	%		2,800		32.3	%
Total Equity Method Investments		9,108					9,697

Cost Method Investment
Firefly Systems, Inc.		12,898					3,614
Total Investments	$	22,006				$	13,311

For the nine months ended June 30,	2020			2019

Revenue (1)	$	(4,883	)	$	1,086
Operating (loss) income	$	(7,845	)	$	898
Net loss	$	(3,020	)	$	(5,489	)

	Useful life	Gross		Accumulated Amortization			Net
	(Years)
Intangible assets not yet subject to amortization:
Software in development		$	250	$	-		$	250
Intangible assets subject to amortization:
Software in service	5		2,404		(1,478	)		926
Product formulation	10		458		(420	)		38
Total		$	3,112	$	(1,898	)	$	1,214

Remainder of 2020	$	140
2021		523
2022		244
2023		57
2024		-
Thereafter		-
Total	$	964

	September 30, 2021			December 31, 2020
Land	$	50		$	51
Buildings and improvements		6,913			6,824
Machinery and other equipment		5,840			4,635
Office furniture and fixtures		871			946
Construction in progress		147			154
Total properties, cost		13,821			12,610
Less: accumulated depreciation		(7,712	)		(7,086	)
Property, plant and equipment, net	$	6,109		$	5,524

Balance as of December 31, 2019	$	919
Foreign currency translation adjustment		(24	)
Balance as of September 30, 2020	$	895

Balance as of December 31, 2020	$	938
Foreign currency translation adjustment		(1	)
Balance as of September 30, 2021	$	937

	September 30, 2020			December 31, 2019
Short-term debt:
Strong/MDI installment loan	$	2,830		$	3,080
Insurance note payable		142			-
Current portion of long-term debt		1,055			998
Total short-term debt		4,027			4,078
Long-term debt:
Equipment term loans		3,683			4,031
Total principal balance of long-term debt		3,683			4,031
Less: current portion		(1,055	)		(998	)
Less: unamortized debt issuance costs		(11	)		(14	)
Total long-term debt		2,617			3,019
Total short-term and long-term debt	$	6,644		$	7,097

Remainder of 2020	$	257
2021		1,080
2022		1,151
2023		1,165
2024		30
Thereafter		-
Total	$	3,683

Lease cost
	Three Months Ended September 30, 2020			Three Months Ended September 30, 2019			Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
Finance lease cost:
Amortization of right-of-use assets	$	420		$	282		$	1,195		$	420
Interest on lease liabilities		154			142			473			184
Operating lease cost		372			421			1,163			1,751
Short-term lease cost		12			12			42			21
Sublease income		(92	)		(120	)		(297	)		(313	)
Net lease cost	$	866		$	737		$	2,576		$	2,063

	As of September 30, ~~2020~~ 2021
Weighted-average remaining lease term - finance leases (years)		~~2.7~~0.2
Weighted-average remaining lease term - operating leases (years)		~~7.1~~6.6
Weighted-average discount rate - finance leases		~~12.1~~13.2	%
Weighted-average discount rate - operating leases		~~4.9~~5.0	%

	Operating Leases
Remainder of 2021	$	202
2022		706
2023		656
2024		669
2025		682
Thereafter		1,765
Total lease payments		4,680
Less: Amount representing interest		(710	)
Present value of lease payments		3,970
Less: Current maturities		(562	)
Lease obligations, net of current portion	$	3,408

	Operating Leases			Finance Leases
Remainder of 2020	$	253		$	580
2021		944			2,320
2022		812			2,114
2023		660			499
2024		669			235
Thereafter		2,447			75
Total lease payments		5,785			5,823
Less: Amount representing interest		(935	)		(892	)
Present value of lease payments		4,850			4,931
Less: Current maturities		(743	)		(1,820	)
Lease obligations, net of current portion	$	4,107		$	3,111

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2019		1,107,000		$	4.47		7.9	$	148
Granted		-
Exercised		-
Forfeited		(100,500	)		4.76
Expired		(122,000	)		5.27
Outstanding at Spetember 30, 2020		884,500		$	4.33		7.2	$	-
Exercisable at September 30, 2020		386,000		$	4.77		6.6	$	-

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2020		1,009,500		$	3.99		7.3	$	51
Granted		-
Exercised		(4,000	)		2.25				10
Forfeited		(156,000	)		4.10
Expired		(190,000	)		5.03
Outstanding at September 30, 2021		659,500		$	3.68		6.9	$	243
Exercisable at September 30, 2021		329,500		$	4.49		5.9	$	24

	Number of Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		23,334		$	6.50
Granted		-
Shares vested		(23,334	)		6.50
Shares forfeited		-
Non-vested at September 30, 2020		-

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2019		522,379		$	3.14
Granted		200,634			1.57
Shares vested		(174,954	)		2.73
Shares forfeited		(3,334	)		2.89
Non-vested at September 30, 2020		544,725		$	2.51

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2020		604,687		$	2.38
Granted		122,609			3.00
Shares vested		(358,218	)		2.62
Shares forfeited		-
Non-vested at September 30, 2021		369,078		$	2.36

	Quarters Ended September 30,
	2021											2020

	Strong Entertainment			Corporate and Other			Discontinued Operations		Consolidated			Strong Entertainment			Corporate and Other			Discontinued Operations			Consolidated
Net income (loss)	$	7,685		$	(599	)	$	-	$	7,086		$	1,939		$	(2,003	)	$	5,710		$	5,646
Net income from discontinued operations		-			-			-		-			-			-			(5,710	)		(5,710	)
Net income ( loss) from continuing operations		7,685			(599	)		-		7,086			1,939			(2,003	)		-			(64	)
Interest expense (income), net		25			(18	)		-		7			24			85			-			109
Income tax expense		2,327			369			-		2,696			488			126			-			614
Depreciation and amortization		216			129			-		345			226			46			-			272
EBITDA		10,253			(119	)		-		10,134			2,677			(1,746	)		-			931
Stock-based compensation expense		-			213			-		213			-			239			-			239
Equity method investment loss (income)		414			(91	)		-		323			20			440			-			460
Employee retention credit		(527	)		(90	)		-		(617	)		-			-			-			-
Realized gain on investments		(1,689	)		-			-		(1,689	)		-			-			-			-
Unrealized gain on investments		(7,648	)		(728	)		-		(8,376	)		-			-			-			-
Loss on disposal of assets and impairment charges		-			-			-		-			-			18						18
Foreign currency transaction (income) loss		(162	)		-			-		(162	)		172			-			-			172
Gain on property and casualty insurance recoveries		-			-			-		-			(2,736	)		-			-			(2,736	)
Adjusted EBITDA	$	641		$	(815	)	$	-	$	(174	)	$	133		$	(1,049	)	$	-		$	(916	)

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		The Maximum Number of Shares That May Still be Purchased Under the Plans or Programs

July 2021		-	$	-		-		636,931
August 2021		-		-		-		636,931
September 2021		-		-		-		636,931
Quarter Ended September 30, 2021		-	$	-	$	-		636,931