Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
1.
Nature of Operations
Ballantyne
Strong, Inc. (“Ballantyne” or the “Company”), a Delaware corporation, is a holding company with diverse
business activities focused on serving the cinema, retail, financial, advertising and government markets. The Company, and its
wholly owned subsidiaries Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc. (“Strong/MDI”), Convergent
Media Systems Corporation and Strong Digital Media, LLC 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.
2.
Discontinued Operations
In
May 2017, the Company sold the operational assets of Strong Westrex, Inc. for total proceeds of $60 thousand.
The
summary financial results of discontinued operations for the three months ended March 31, 2017 were as follows (in thousands):
Total
net revenues
|
|
$
|
12
|
|
Total
cost of revenues
|
|
|
26
|
|
Total
selling and administrative expenses
|
|
|
9
|
|
Loss
from operations of discontinued operations
|
|
|
(23
|
)
|
Loss
before income taxes
|
|
|
(23
|
)
|
Income
tax expense
|
|
|
-
|
|
Net
loss from discontinued operations, net of tax
|
|
$
|
(23
|
)
|
There
was no depreciation and amortization related to discontinued operations recorded for the three month period ended March 31, 2017.
There were no capital expenditures related to discontinued operations during the three month period ended March 31, 2017.
3.
Summary of Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
condensed consolidated financial statements include the accounts of the Company and all majority owned and controlled domestic
and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The
condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form
10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the
United States of America for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K. 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, 2017.
The
condensed consolidated balance sheet as of December 31, 2017 was derived from the Company’s audited consolidated balance
sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and, in the opinion
of management, reflect all adjustments of a normal recurring nature necessary to present a fair statement of the financial position
and the results of operations and cash flows for the respective interim periods. The results for interim periods are not necessarily
indicative of trends or results expected for a full year.
Use
of Management Estimates
The
preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the 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.
Equity
Method Investments
We
apply the equity method of accounting to investments when we have significant influence, but not controlling interest in the investee.
Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership
interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.
The Company’s proportionate share of the net income (loss) resulting from these investments is reported under the line item
captioned “equity method investment (loss) income” in our condensed consolidated statements of operations. The carrying
value of our equity method investments is reported in equity method investments in the condensed consolidated balance sheets.
The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the
investee’s income or loss and dividend paid, if any. The Company’s share of the investee’s income or loss is
recorded on a one quarter lag for all equity method investments. The Company classifies distributions received from equity method
investments using the cumulative earnings approach on the condensed consolidated statements of cash flows. The Company assesses
investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not
be recoverable. The Company did not record any impairments related to its investments during the three months ended March 31,
2018 or 2017. Note 6 contains additional information on our equity method investments, which are held by our Cinema segment.
Fair
Value of Financial Instruments
Assets
and liabilities measured at fair value are categorized into a fair value hierarchy based upon the observability of inputs to the
valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants
would use in pricing the asset or liability, including assumptions about risk. The categorization within the valuation hierarchy
is based upon the lowest level of input that is significant to the fair value measurement. Financial assets and liabilities carried
at fair value are classified and disclosed in one of the following three categories:
|
●
|
Level
1 – inputs to the valuation techniques are quoted prices in active markets for identical assets or liabilities
|
|
●
|
Level
2 – inputs to the valuation techniques are other than quoted prices but are observable for the assets or liabilities,
either directly or indirectly
|
|
●
|
Level
3 – inputs to the valuation techniques are unobservable for the assets or liabilities
|
The
following tables present the Company’s financial assets measured at fair value based upon the level within the fair value
hierarchy in which the fair value measurements fall, as of March 31, 2018 and December 31, 2017.
Fair
values measured on a recurring basis at March 31, 2018 (in thousands):
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Cash
and cash equivalents
|
|
$
|
3,348
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,348
|
|
Notes
receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
2,773
|
|
|
$
|
2,773
|
|
Total
|
|
$
|
3,348
|
|
|
$
|
-
|
|
|
$
|
2,773
|
|
|
$
|
6,121
|
|
Fair
values measured on a recurring basis at December 31, 2017 (in thousands):
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Cash
and cash equivalents
|
|
$
|
4,870
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,870
|
|
Notes
receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
2,815
|
|
|
$
|
2,815
|
|
Total
|
|
$
|
4,870
|
|
|
$
|
-
|
|
|
$
|
2,815
|
|
|
$
|
7,685
|
|
Quantitative
information about the Company’s level 3 fair value measurements at March 31, 2018 is set forth below:
|
|
Fair
value at 3/31/18
(in
thousands)
|
|
|
Valuation
technique
|
|
|
Unobservable
input
|
|
|
Range
|
|
Notes
receivable
|
|
$
|
2,773
|
|
|
|
Discounted
cash flow
|
|
|
|
Default
percentage
|
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
|
|
|
18
|
%
|
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%. The notes receivable are recorded at estimated
fair value. 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 first quarter of 2018, the Company updated its estimated future cash flow assumptions. This
resulted in a decrease to the fair value of the notes receivable of $42 thousand recorded in earnings during the quarter ended
March 31, 2018. There was no adjustment to the estimated fair value of the notes receivable during the quarter ended March 31,
2017.
The
significant unobservable inputs used in the fair value measurement of the Company’s notes receivable are discount rate and
percentage of default. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower
(higher) fair value measurement.
The
Company’s short-term and long-term debt is recorded at historical cost. As of March 31, 2018, the Company’s long-term
debt, including current maturities, had a carrying value of $1.95 million. Based on discounted cash flows using current quoted
interest rates (Level 2 of the fair value hierarchy), the estimated fair value at March 31, 2018 was $1.90 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 6 includes fair value information related to our equity method investments. All non-financial
assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which include non-financial
long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). During
the three months ended March 31, 2018 and 2017, the Company did not have any significant non-recurring measurements of non-financial
assets or liabilities.
Recently
Adopted Accounting Pronouncements
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” “(ASC 606)”. The ASU replaced most existing
revenue recognition guidance in U.S. GAAP. The Company adopted ASC 606 effective January 1, 2018 using the modified retrospective
method. The Company recorded a transition adjustment of approximately $76 thousand increasing the opening balance of retained
earnings, primarily related to the deferral and amortization of direct and incremental costs of obtaining contracts. See Note
4 for further information about the nature and pattern of revenue recognition for the different types of contracts with customers.
In
January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall: Recognition and Measurement of Financial Assets
and Financial Liabilities.” ASU 2016-01 requires equity investments that do not result in consolidation and are not accounted
under the equity method to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment
assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment;
requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a
liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability
at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial
assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying
notes to the financial statements; clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax
asset related to available-for-sale securities in combination with the entity’s other deferred tax assets; and modifies
certain fair value disclosure requirements. The Company adopted ASU 2016-01 prospectively on January 1, 2018. The adoption of
this ASU did not significantly impact the Company’s results of operations and financial position.
In
May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.”
The new guidance describes the types of changes to the terms or conditions of share-based payment awards to which an entity would
be required to apply modification accounting. The Company adopted this ASU effective January 1, 2018. The adoption of this ASU
did not significantly impact the Company’s results of operations and financial position.
Recently
Issued Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires lessees to recognize a lease
liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months, on its
balance sheet. This ASU is effective in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires
a modified retrospective transition method. The Company is evaluating the requirements of ASU 2016-02 and its potential impact
on the Company’s financial statements. The Company has leases primarily for property and equipment and is in the process
of identifying and evaluating these leases for purposes of ASU 2016-02. For each of these leases, the term will be evaluated,
including extension and renewal options as well as the lease payments. While the Company has not yet quantified the impact that
the adoption of ASU 2016-02 will have on its consolidated financial statements, the Company expects to record assets and liabilities
on its balance sheet upon adoption of this standard, which may be material. The Company will continue to provide enhanced disclosures
as it continues its assessment.
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments.” This ASU will require the measurement of all expected credit losses for financial assets,
including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and
supportable forecasts. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods
within those fiscal years. The Company believes its adoption will not significantly impact the Company’s results of operations
and financial position.
In
January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment.” The new guidance eliminates Step 2 of the goodwill impairment testing which requires the fair value of individual
assets and liabilities of a reporting unit to be determined when measuring goodwill impairment. The new guidance may result in
different amounts of impairment that could be recognized compared to existing guidance. In addition, failing step 1 of the impairment
test may not result in impairment under existing guidance. However, under the revised guidance, failing step 1 will always result
in a goodwill impairment. ASU 2017-04 is to be applied prospectively for goodwill impairment testing performed in years beginning
after December 15, 2019. The Company does not believe its adoption will significantly impact the Company’s results of operations
or financial position.
4.
Revenue
On
January 1, 2018, the Company adopted ASC 606 using the modified retrospective method for all contracts not completed as of the
date of adoption. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior
period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.
Under
ASC 606, the Company accounts for revenue using the following steps:
|
●
|
Identify
the contract, or contracts, with a customer
|
|
●
|
Identify
the performance obligations in the contract
|
|
●
|
Determine
the transaction price
|
|
●
|
Allocate
the transaction price to the identified performance obligations
|
|
●
|
Recognize
revenue when, or as, the Company satisfies the performance obligations
|
The
Company combines contracts with the same customer into a single contract for accounting purposes when the contracts are entered
into at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends
on the other contract, or the services are considered a single performance obligation. If an arrangement involves multiple performance
obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone
basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price
is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations.
The standalone selling price is based on an observable price for services sold to other comparable customers, when available,
or an estimated selling price using a cost plus margin approach. The Company estimates the amount of total contract consideration
it expects to receive for variable arrangements by determining the most likely amount it expects to earn from the arrangement
based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The
Company only includes 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 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 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 when one is 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 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.
Deferred
contract acquisition costs are included in other assets. Beginning January 1, 2018, with the adoption of ASC 606, 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.
Prior to 2018, all contract acquisition costs were expensed as incurred. The Company recorded a transition adjustment of approximately
$76 thousand increasing the opening balance of retained earnings, primarily related to the deferral and amortization of direct
and incremental costs of obtaining contracts. The following table summarizes the changes in the Company’s contract asset
balance during the three months ended March 31, 2018 (in thousands):
Deferred
contract acquisition costs as of January 1, 2018
|
|
$
|
76
|
|
Costs
capitalized
|
|
|
10
|
|
Amortization
|
|
|
(14
|
)
|
Impairment
|
|
|
-
|
|
Deferred
contract acquisition costs as of March 31, 2018
|
|
$
|
72
|
|
The
following tables summarize the impact the adoption of ASC 606 had on the Company’s consolidated financial statements (in
thousands, except per share data):
Condensed
Consolidated Balance Sheet:
|
|
As
reported
March 31, 2018
|
|
|
Adjustments
|
|
|
Balances
without
adoption of ASC 606
|
|
Total
current assets
|
|
$
|
20,354
|
|
|
$
|
146
|
|
|
$
|
20,500
|
|
Total
noncurrent assets
|
|
|
36,677
|
|
|
|
(14
|
)
|
|
|
36,663
|
|
Total
assets
|
|
$
|
57,031
|
|
|
$
|
132
|
|
|
$
|
57,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
$
|
10,702
|
|
|
$
|
258
|
|
|
$
|
10,960
|
|
Total
noncurrent liabilities
|
|
|
6,171
|
|
|
|
-
|
|
|
|
6,171
|
|
Total
liabilities
|
|
|
16,873
|
|
|
|
258
|
|
|
|
17,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
21,861
|
|
|
|
(126
|
)
|
|
|
21,735
|
|
Other
stockholders’ equity
|
|
|
18,297
|
|
|
|
-
|
|
|
|
18,297
|
|
Total
stockholders’ equity
|
|
|
40,158
|
|
|
|
(126
|
)
|
|
|
40,032
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
57,031
|
|
|
$
|
132
|
|
|
$
|
57,163
|
|
Condensed
Consolidated Statement of Operations:
|
|
As
reported for
the three
months ended
March 31, 2018
|
|
|
Adjustments
|
|
|
Balances
without
adoption of ASC 606
|
|
Total
net revenues
|
|
$
|
15,828
|
|
|
$
|
(57
|
)
|
|
$
|
15,771
|
|
Total
cost of revenues
|
|
|
12,978
|
|
|
|
(2
|
)
|
|
|
12,976
|
|
Gross
profit
|
|
|
2,850
|
|
|
|
(55
|
)
|
|
|
2,795
|
|
Total
selling and administrative expenses
|
|
|
5,934
|
|
|
|
(5
|
)
|
|
|
5,929
|
|
Loss
from operations
|
|
|
(3,084
|
)
|
|
|
(50
|
)
|
|
|
(3,134
|
)
|
Other
income
|
|
|
7
|
|
|
|
-
|
|
|
|
7
|
|
Loss
before income taxes and equity method investment loss
|
|
|
(3,077
|
)
|
|
|
(50
|
)
|
|
|
(3,127
|
)
|
Income
tax expense
|
|
|
698
|
|
|
|
-
|
|
|
|
698
|
|
Equity
method investment loss
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
(10
|
)
|
Net
loss
|
|
$
|
(3,785
|
)
|
|
$
|
(50
|
)
|
|
$
|
(3,835
|
)
|
Net loss per
share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.26
|
)
|
|
|
(0.00
|
)
|
|
$
|
(0.26
|
)
|
Diluted
|
|
$
|
(0.26
|
)
|
|
|
(0.00
|
)
|
|
$
|
(0.26
|
)
|
The
adoption of ASC 606 did not have any net impact on other comprehensive loss or cash flows.
The
following table disaggregates the Company’s revenue by major source for the three months ended March 31, 2018:
|
|
Cinema
|
|
|
Digital
Media
|
|
|
Other
|
|
|
Eliminations
|
|
|
Total
|
|
Screen
system sales
|
|
$
|
4,005
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,005
|
|
Digital
equipment sales
|
|
|
3,158
|
|
|
|
766
|
|
|
|
-
|
|
|
|
(216
|
)
|
|
|
3,708
|
|
Field
maintenance and monitoring services
|
|
|
2,944
|
|
|
|
2,114
|
|
|
|
-
|
|
|
|
(138
|
)
|
|
|
4,920
|
|
Installation
services
|
|
|
328
|
|
|
|
1,360
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,688
|
|
Extended
warranty sales
|
|
|
342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
342
|
|
Other
|
|
|
672
|
|
|
|
477
|
|
|
|
16
|
|
|
|
-
|
|
|
|
1,165
|
|
Total
|
|
$
|
11,449
|
|
|
$
|
4,717
|
|
|
$
|
16
|
|
|
$
|
(354
|
)
|
|
$
|
15,828
|
|
Screen
system sales
The
Company 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 because control does not transfer to the customer until delivery.
Digital
equipment sales
The
Company recognizes revenue on sales of digital equipment when the control of the equipment is transferred, which occurs at the
time of shipment from the Company’s warehouse or drop-shipment from a third party. The cost of freight and shipping to the
customer is recognized in cost of sales at the time of transfer of control to the customer.
Field
maintenance and monitoring services
The
Company sells service contracts that provide maintenance and monitoring services to Cinema and Digital Media customers. In the
Cinema segment, these contracts are generally 12 months in length, while the term for service contracts in the Digital Media segment
can be for multiple years. Revenue is recognized over the term of the agreement in proportion to the costs incurred in fulfilling
performance obligations under the contract.
The
Company also performs time and materials-based maintenance and repair work for customers in the Cinema and Digital Media segments.
Revenue is recognized at a point in time when the performance obligation has been fully satisfied.
Installation
services
The
Company performs installation services for both its Cinema and Digital Media customers and recognizes revenue upon completion
of the installations.
Extended
warranty sales
The
Company sells extended warranties to its Cinema customers. When the Company is the primary obligor, revenue is recognized on a
gross basis over the term of the extended warranty in proportion to the costs incurred in fulfilling performance obligations under
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.
At
January 1, 2018, $0.8 million of unearned revenue associated with maintenance and monitoring services and extended warranty sales
in which the Company is the primary obligor was reported in deferred revenue and customer deposits. During the three months ended
March 31, 2018, $0.4 million of this balance was earned and recognized as revenue. At March 31, 2018, the unearned revenue amount
was $0.8 million. The Company expects to recognize $0.7 million of unearned revenue amounts throughout the rest of 2018, and immaterial
amounts each year from 2019 through 2023.
The
following table disaggregates the Company’s revenue by the timing of transfer of goods or services to the customer for the
three months ended March 31, 2018 (in thousands):
|
|
Cinema
|
|
|
Digital
Media
|
|
|
Other
|
|
|
Eliminations
|
|
|
Total
|
|
Point
in time
|
|
$
|
9,598
|
|
|
$
|
2,529
|
|
|
$
|
16
|
|
|
$
|
(354
|
)
|
|
$
|
11,789
|
|
Over
time
|
|
|
1,851
|
|
|
|
2,188
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,039
|
|
Total
|
|
$
|
11,449
|
|
|
$
|
4,717
|
|
|
$
|
16
|
|
|
$
|
(354
|
)
|
|
$
|
15,828
|
|
5.
(Loss) Earnings Per Common Share
Basic
(loss) earnings per share has been computed on the basis of the weighted average number of shares of common stock outstanding.
Diluted (loss) earnings per share has been computed on the basis of the weighted average number of shares of common stock outstanding
after giving effect to potential common shares from dilutive stock options and certain non-vested shares of restricted stock and
restricted stock units. The following table provides the reconciliation between average shares used to compute basic and diluted
(loss) earnings per share:
|
|
Three
Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Weighted average
shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
|
|
14,341
|
|
|
|
14,264
|
|
Dilutive
effect of stock options and certain non-vested shares of restricted stock
|
|
|
-
|
|
|
|
156
|
|
Diluted
weighted average shares outstanding
|
|
|
14,341
|
|
|
|
14,420
|
|
For
the three month period ended March 31, 2018, options to purchase 490,000 shares of common stock were outstanding but were not
included in the computation of diluted loss per share as the option’s exercise price was greater than the average market
price of the common shares for each period. An additional 129,525 common stock equivalents related to options and restricted stock
awards were excluded for the three months ended March 31, 2018, respectively, as their inclusion would be anti-dilutive, thereby
decreasing the net losses per share. For the three month period ended March 31, 2017, options to purchase 385,000 shares of common
stock were outstanding but were not included in the computation of diluted earnings per share as the option’s exercise price
was greater than the average market price of the common shares for the respective periods.
6.
Equity Method Investments
The
following summarizes our equity method investments (dollars in thousands):
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Entity
|
|
Carrying
Amount
|
|
|
Economic
Interest
|
|
|
Carrying
Amount
|
|
|
Economic
Interest
|
|
RELM
Wireless Corporation
|
|
$
|
4,102
|
|
|
|
8.3
|
%
|
|
$
|
4,473
|
|
|
|
8.3
|
%
|
Itasca
Capital, Ltd.
|
|
|
5,814
|
|
|
|
32.3
|
%
|
|
|
5,870
|
|
|
|
32.3
|
%
|
1347
Property Insurance Holdings, Inc.
|
|
|
7,917
|
|
|
|
17.4
|
%
|
|
|
7,710
|
|
|
|
17.4
|
%
|
Total
|
|
$
|
17,833
|
|
|
|
|
|
|
$
|
18,053
|
|
|
|
|
|
The
following summarizes the (loss) income of equity method investees reflected in the Statement of Operations (in thousands):
|
|
Three
months ended March 31,
|
|
Entity
|
|
|
2018
|
|
|
|
2017
|
|
RELM
Wireless Corporation
|
|
$
|
(354
|
)
|
|
$
|
8
|
|
Itasca
Capital, Ltd.
|
|
|
103
|
|
|
|
2,461
|
|
1347
Property Insurance Holdings, Inc.
|
|
|
241
|
|
|
|
12
|
|
Total
|
|
$
|
(10
|
)
|
|
$
|
2,481
|
|
RELM
Wireless Corporation (“RELM”) is a publicly traded company that designs, manufactures and markets two-way land mobile
radios, repeaters, base stations and related components and subsystems. The Company’s Chief Executive Officer is chairman
of the board of directors of RELM, and controls entities that, when combined with the Company’s ownership in RELM, own greater
than 20% of RELM, providing the Company with significant influence over RELM, but not controlling interest. The Company received
dividends of $23 thousand and $0.1 million for the three month periods ended March 31, 2018 and 2017, respectively. Based on quoted
market prices, the market value of the Company’s ownership in RELM was $4.5 million at March 31, 2018.
Itasca
Capital, Ltd. (“Itasca”) is a publicly traded Canadian company that is an investment vehicle seeking transformative
strategic investments. The Company’s Chief Executive Officer is a member of the board of directors of Itasca. This board
seat, combined with the Company’s 32.3% ownership of Itasca, provide the Company with significant influence over Itasca,
but not controlling interest. The Company did not receive dividends from Itasca during the three month periods ended March 31,
2018 or 2017. Based on quoted market prices, the market value of the Company’s ownership in Itasca was $3.5 million at March
31, 2018.
1347
Property Insurance Holdings, Inc. (“PIH”) is a publicly traded company that provides property and casualty insurance
in the States of Louisiana, Texas and Florida. The Company’s Chief Executive Officer is a member of the board of directors
of PIH, and controls entities that, when combined with the Company’s ownership in PIH, own greater than 20% of PIH, providing
the Company with significant influence over PIH, but not controlling interest. The Company did not receive dividends from PIH
during the three month periods ended March 31, 2018 and 2017. Based on quoted market prices, the market value of the Company’s
ownership in PIH was $7.4 million at March 31, 2018.
As
of March 31, 2018, the Company’s retained earnings included undistributed earnings from our equity method investees of $1.5
million.
The
summarized financial information presented below reflects the financial information of the Company’s equity method investees
for the three months ended December 31, 2017, consistent with the Company’s recognition of the results of its equity method
investments on a one-quarter lag.
For
the three months ended December 31,
|
|
2017
|
|
|
2016
|
|
|
|
|
(in
thousands)
|
|
Revenue
|
|
$
|
20,576
|
|
|
$
|
15,358
|
|
Operating
loss from continuing operations
|
|
$
|
(2,034
|
)
|
|
$
|
2,590
|
|
Net
income
|
|
$
|
(2,557
|
)
|
|
$
|
9,351
|
|
7.
Intangible Assets
Intangible
assets consisted of the following at March 31, 2018 (dollars in thousands):
|
|
Useful
life
|
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
|
(Years)
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets not yet subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
in development
|
|
|
|
|
|
$
|
877
|
|
|
$
|
-
|
|
|
$
|
877
|
|
Intangible
assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
in service
|
|
|
5
|
|
|
|
3,718
|
|
|
|
(768
|
)
|
|
|
2,950
|
|
Product
formulation
|
|
|
10
|
|
|
|
473
|
|
|
|
(353
|
)
|
|
|
120
|
|
Total
|
|
|
|
|
|
$
|
5,068
|
|
|
$
|
(1,121
|
)
|
|
$
|
3,947
|
|
Intangible
assets consisted of the following at December 31, 2017 (dollars in thousands):
|
|
Useful
life
|
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
|
(Years)
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets not yet subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
in development
|
|
|
|
|
|
$
|
1,243
|
|
|
$
|
-
|
|
|
$
|
1,243
|
|
Intangible
assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
in service
|
|
|
5
|
|
|
|
3,191
|
|
|
|
(597
|
)
|
|
|
2,594
|
|
Product
formulation
|
|
|
10
|
|
|
|
486
|
|
|
|
(351
|
)
|
|
|
135
|
|
Total
|
|
|
|
|
|
$
|
4,920
|
|
|
$
|
(948
|
)
|
|
$
|
3,972
|
|
Amortization
expense relating to intangible assets was $0.2 million and $0.1 million for the three months ended March 31, 2018 and 2017, respectively.
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):
|
|
Amount
|
|
Remainder
2018
|
|
$
|
639
|
|
2019
|
|
|
840
|
|
2020
|
|
|
831
|
|
2021
|
|
|
670
|
|
2022
|
|
|
86
|
|
Thereafter
|
|
|
4
|
|
Total
|
|
$
|
3,070
|
|
8.
Goodwill
The
following represents a summary of changes in the Company’s carrying amount of goodwill for the three months ended March
31, 2018 (in thousands):
Balance
as of December 31, 2017
|
|
$
|
952
|
|
Foreign
currency translation
|
|
|
(26
|
)
|
Balance
as of March 31, 2018
|
|
$
|
926
|
|
9.
Warranty Reserves
In
most instances, the Company’s digital projection products are covered by the manufacturing firm’s original warranty;
however, for certain customers the Company may grant warranties in excess of the manufacturer’s warranty. In addition, the
Company provides warranty coverage on screens it manufactures. The Company accrues for these costs at the time of sale. The following
table summarizes warranty activity for the three months ended March 31, 2018 and 2017 (in thousands):
|
|
Three
Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Warranty
accrual at beginning of period
|
|
$
|
521
|
|
|
$
|
645
|
|
Charged
to expense
|
|
|
84
|
|
|
|
47
|
|
Claims
paid, net of recoveries
|
|
|
(30
|
)
|
|
|
(231
|
)
|
Foreign
currency adjustment
|
|
|
(11
|
)
|
|
|
1
|
|
Warranty
accrual at end of period
|
|
$
|
564
|
|
|
$
|
462
|
|
10.
Debt
The
Company’s debt consists of the following (in thousands):
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Short-term
debt:
|
|
|
|
|
|
|
|
|
Revolving
line of credit
|
|
$
|
500
|
|
|
$
|
500
|
|
Current
portion of long-term debt
|
|
|
65
|
|
|
|
65
|
|
Total
short-term debt
|
|
|
565
|
|
|
|
565
|
|
Long-term
debt:
|
|
|
|
|
|
|
|
|
$2
million term loan
|
|
|
1,951
|
|
|
|
1,968
|
|
Less:
current portion
|
|
|
(65
|
)
|
|
|
(65
|
)
|
Less:
unamortized debt issuance costs
|
|
|
(31
|
)
|
|
|
(33
|
)
|
Total
long-term debt
|
|
|
1,855
|
|
|
|
1,870
|
|
Total
short-term and long-term debt
|
|
$
|
2,420
|
|
|
$
|
2,435
|
|
On
April 27, 2017, the Company entered into a debt agreement with a bank consisting of 1) a $2.0 million five-year term loan secured
by a first lien deed of trust on the Company’s Alpharetta, GA facility, bearing interest at a fixed rate of 4.5% and payable
in equal monthly installments of principal and interest calculated based on a 20-year amortization schedule with a final balloon
payment of approximately $1.7 million due on May 10, 2022 and 2) a line of credit of up to $1.0 million secured by a second lien
deed of trust on the Company’s Alpharetta, GA facility, bearing interest at the Prime Rate published in the Wall Street
Journal plus 0.25% (5.00% at March 31, 2018) and with a term ending May 10, 2018. On April 23, 2018, the Company entered into
a one-year extension of the maturity date of the line of credit through May 10, 2019. The debt agreement requires the Company
to maintain a ratio of total liabilities to tangible net worth not in excess of 3:1 and maintain minimum liquidity of $2.0 million.
The Company was in compliance with its debt covenants as of March 31, 2018. The Company’s Chairman and Chief Executive Officer
is also a member of the bank’s board of directors.
On
September 5, 2017, the Company’s Canadian subsidiary, Strong/MDI, entered into a demand credit agreement 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 installment loan for
up to CDN$6.0 million and a 5-year installment loan for up to CDN$500,000. Amounts outstanding under the line of credit are payable
on demand and will bear interest at the prime rate established by the lender. Amounts outstanding under the installment loans
will bear interest at the 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 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 2 to 1, a current ratio (excluding
amounts due from related parties) of at least 1.5 to 1 and minimum “effective equity” of CDN$8.0 million. There were
no borrowings outstanding at March 31, 2018 on any of the Strong/MDI credit facilities, as Strong/MDI had not yet drawn on the
facilities. On April 24, 2018, the Company borrowed CDN$3.5 million on the 20-year installment loan. Strong/MDI was in compliance
with its debt covenants as of March 31, 2018.
Scheduled
repayments are as follows for the Company’s long-term debt outstanding as of March 31, 2018 (in thousands):
Remainder
of 2018
|
|
$
|
48
|
|
2019
|
|
|
68
|
|
2020
|
|
|
70
|
|
2021
|
|
|
74
|
|
2022
|
|
|
1,691
|
|
Thereafter
|
|
|
-
|
|
Total
|
|
$
|
1,951
|
|
11.
Income Taxes
In
assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected
future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction
in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the
available objective evidence, including recent updates to the taxing jurisdictions generating income, the Company concluded that
a valuation allowance should be recorded against all of the Company’s U.S. tax jurisdiction deferred tax assets as of March
31, 2018 and December 31, 2017.
In
December 2017, the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was signed into law in the United States. The
law includes significant changes to the United States corporate income tax system, including a federal corporate rate reduction
and the transition of the United States from a worldwide tax system to a territorial tax system. As part of the transition to
a territorial tax system, the 2017 Tax Act requires taxpayers to calculate a one-time transition tax based on the deemed repatriation
of undistributed earnings of foreign subsidiaries. The Company is currently analyzing the 2017 Tax Act, and in certain areas,
has made provisional estimates of the effects on our consolidated financial statements and tax disclosures, including the amount
of the repatriation tax and changes to existing deferred tax balances.
The
Company is subject to possible examinations not yet initiated for Federal purposes for fiscal years 2014 through 2017. In most
cases, the Company is subject to possible examinations by state or local jurisdictions based on the particular jurisdiction’s
statute of limitations.
12.
Stock Compensation
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 approximated $0.3 million
and $0.1 million for the three months ended March 31, 2018 and 2017, respectively.
The
Company’s 2017 Omnibus Equity Compensation Plan (“2017 Plan”) was approved by the Company’s stockholders
and provides the Compensation Committee of the Board of Directors with the discretion to grant stock options, stock appreciation
rights, restricted shares, restricted stock units, performance shares, performance units and other stock-based awards and cash-based
awards. Vesting terms vary with each grant and may be subject to vesting upon a “change in control” of the Company.
The total number of shares authorized for issuance under the 2017 Plan is 1,371,189 shares, with 758,354 shares remaining available
for grant at March 31, 2018.
Options
The
Company granted a total of 387,500 and 285,000 options during the three month periods ended March 31, 2018 and 2017, respectively.
Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the
date of grant.
The
weighted average grant date fair value of stock options granted during the three month periods ended March 31, 2018 and 2017 was
$1.82 and $2.41, respectively. The fair value of each stock option granted was estimated on the date of grant using a Black-Scholes
valuation model with the following weighted average assumptions:
|
|
2018
|
|
|
2017
|
|
Expected
dividend yield at date of grant
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Risk-free
interest rate
|
|
|
2.49
|
%
|
|
|
2.04
|
%
|
Expected
stock price volatility
|
|
|
35.65
|
%
|
|
|
34.71
|
%
|
Expected
life of options (in years)
|
|
|
6.0
|
|
|
|
6.0
|
|
The
risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. Expected volatility
is based on historical daily price changes of the Company’s stock for six years prior to the date of grant. The expected
life of options is the average number of years the Company estimates that options will be outstanding.
The
following table summarizes stock option activity for the three months ended March 31, 2018:
|
|
Number
of Options
|
|
|
Weighted
Average Exercise Price Per Share
|
|
|
Weighted
Average Remaining Contractual Term
|
|
|
Aggregate
Intrinsic Value (in thousands)
|
|
Outstanding
at December 31, 2017
|
|
|
930,300
|
|
|
$
|
5.63
|
|
|
|
8.7
|
|
|
$
|
150
|
|
Granted
|
|
|
387,500
|
|
|
|
4.70
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(32,000
|
)
|
|
|
5.59
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(8,000
|
)
|
|
|
5.41
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2018
|
|
|
1,277,800
|
|
|
$
|
5.29
|
|
|
|
8.8
|
|
|
$
|
64
|
|
Exercisable
at March 31, 2018
|
|
|
269,300
|
|
|
$
|
4.88
|
|
|
|
7.9
|
|
|
$
|
31
|
|
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 March 31, 2018, 1,008,500 stock option awards were non-vested. Unrecognized compensation cost related to stock option awards
was approximately $1.9 million, which is expected to be recognized over a weighted average period of 4.0 years.
Restricted
Stock
The
Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the
date of grant. As of March 31, 2018, the total unrecognized compensation cost related to non-vested restricted stock awards was
approximately $1.1 million, which is expected to be recognized over a weighted average period of 2.4 years.
The
following table summarizes restricted stock share activity for the three months ended March 31, 2018:
|
|
Number
of Restricted Stock Shares
|
|
|
Weighted
Average Grant Price Fair Value
|
|
Non-vested
at December 31, 2017
|
|
|
85,000
|
|
|
$
|
6.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Shares
vested
|
|
|
(28,333
|
)
|
|
|
6.50
|
|
Shares
forfeited
|
|
|
-
|
|
|
|
-
|
|
Non-vested
at March 31, 2018
|
|
|
56,667
|
|
|
$
|
6.50
|
|
The
following table summarizes restricted stock unit activity for the three months ended March 31, 2018:
|
|
Number
of Restricted Stock Units
|
|
|
Weighted
Average Grant Price Fair Value
|
|
Non-vested
at December 31, 2017
|
|
|
35,835
|
|
|
$
|
6.45
|
|
Granted
|
|
|
147,500
|
|
|
|
4.70
|
|
Shares
vested
|
|
|
-
|
|
|
|
-
|
|
Shares
forfeited
|
|
|
-
|
|
|
|
-
|
|
Non-vested
at March 31, 2018
|
|
|
183,335
|
|
|
$
|
5.04
|
|
13.
Commitments, Contingencies and Concentrations
Litigation
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.
Concentrations
The
Company’s top ten customers accounted for approximately 56% of total consolidated net revenues for the three months ended
March 31, 2018. Trade accounts receivable from these customers represented approximately 37% of net consolidated receivables at
March 31, 2018. While the Company believes its relationships with such customers are stable, most arrangements are made by purchase
order and are terminable at will by either party. A significant decrease or interruption in business from the Company’s
significant customers could have a material adverse effect on the Company’s business, financial condition and results of
operations. The Company could also be adversely affected by such factors as changes in foreign currency rates and weak economic
and political conditions in each of the countries in which the Company sells its products.
Financial
instruments that potentially expose the Company to a concentration of credit risk principally consist of accounts receivable.
The Company sells product to a large number of customers in many different geographic regions. To minimize credit risk, the Company
performs ongoing credit evaluations of its customers’ financial condition.
Leases
The
Company and its subsidiaries lease plant and office facilities, furniture, autos and equipment under operating leases expiring
through 2022. These leases generally contain renewal options and the Company expects to renew or replace certain of these leases
in the ordinary course of business.
The
Company’s future minimum lease payments for leases at March 31, 2018 are as follows:
|
|
Capital
Leases
|
|
|
Operating
Leases
|
|
|
|
(in
thousands)
|
|
Remainder
2018
|
|
$
|
185
|
|
|
$
|
1,342
|
|
2019
|
|
|
116
|
|
|
|
1,768
|
|
2020
|
|
|
-
|
|
|
|
1,543
|
|
2021
|
|
|
-
|
|
|
|
1,415
|
|
2022
|
|
|
-
|
|
|
|
1,081
|
|
Thereafter
|
|
|
-
|
|
|
|
-
|
|
Total
minimum lease payments
|
|
$
|
301
|
|
|
$
|
7,149
|
|
Less:
Amount representing interest
|
|
|
(10
|
)
|
|
|
|
|
Present
value of minimum lease payments
|
|
|
291
|
|
|
|
|
|
Less:
Current maturities
|
|
|
(226
|
)
|
|
|
|
|
Capital
lease obligations, net of current portion
|
|
$
|
65
|
|
|
|
|
|
14.
Business Segment Information
As
of March 31, 2018, the Company’s operations were conducted principally through two business segments: Cinema and Digital
Media. The Cinema segment provides a full range of product and service solutions primarily for the theater exhibition industry,
including a wide spectrum of premier audio-visual products and accessories such as digital projectors, state of the art projection
screens, servers, library management systems, menu boards, flat panel displays, and sound systems, as well as network monitoring
and on-site service for cinema equipment. The Digital Media segment develops and delivers solutions for out-of-home messaging,
advertising and communication and provides managed services including monitoring of networked equipment. While there is digital
signage equipment sold within this segment, the primary focus of this segment is providing solutions and services to our customers.
Summary
by Business Segments
|
|
Three
Months Ended March 31,
|
|
(In
thousands)
|
|
2018
|
|
|
2017
|
|
Net
revenues
|
|
|
|
|
|
|
|
|
Cinema
|
|
$
|
11,449
|
|
|
$
|
12,689
|
|
Digital
Media
|
|
|
4,717
|
|
|
|
5,345
|
|
Other
|
|
|
16
|
|
|
|
-
|
|
Total
segment net revenues
|
|
|
16,182
|
|
|
|
18,034
|
|
Eliminations
|
|
|
(354
|
)
|
|
|
(108
|
)
|
Total
net revenues
|
|
|
15,828
|
|
|
|
17,926
|
|
|
|
|
|
|
|
|
|
|
Gross
profit (loss)
|
|
|
|
|
|
|
|
|
Cinema
|
|
|
3,385
|
|
|
|
3,616
|
|
Digital
Media
|
|
|
(551
|
)
|
|
|
823
|
|
Other
|
|
|
16
|
|
|
|
-
|
|
Total
gross profit
|
|
|
2,850
|
|
|
|
4,439
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
|
|
|
|
|
|
Cinema
|
|
|
2,325
|
|
|
|
2,679
|
|
Digital
Media
|
|
|
(2,496
|
)
|
|
|
(1,113
|
)
|
Other
|
|
|
(113
|
)
|
|
|
(117
|
)
|
Total
segment operating (loss) income
|
|
|
(284
|
)
|
|
|
1,449
|
|
Unallocated
general and administrative expenses
|
|
|
(2,800
|
)
|
|
|
(2,047
|
)
|
Loss
from operations
|
|
|
(3,084
|
)
|
|
|
(598
|
)
|
Other
income
|
|
|
7
|
|
|
|
20
|
|
Loss
before income taxes and equity method investment (loss) income
|
|
$
|
(3,077
|
)
|
|
$
|
(578
|
)
|
(In
thousands)
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Identifiable
assets
|
|
|
|
|
|
|
|
|
Cinema
|
|
$
|
24,845
|
|
|
$
|
27,358
|
|
Digital
Media
|
|
|
14,353
|
|
|
|
13,603
|
|
Corporate
|
|
|
17,833
|
|
|
|
18,053
|
|
Total
|
|
$
|
57,031
|
|
|
$
|
59,014
|
|
Summary
by Geographical Area
|
|
Three
Months Ended March 31,
|
|
(In
thousands)
|
|
2018
|
|
|
2017
|
|
Net
revenue
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
12,830
|
|
|
$
|
14,393
|
|
Canada
|
|
|
1,400
|
|
|
|
1,220
|
|
Mexico
|
|
|
556
|
|
|
|
356
|
|
China
|
|
|
541
|
|
|
|
1,466
|
|
Latin
America
|
|
|
270
|
|
|
|
284
|
|
Europe
|
|
|
158
|
|
|
|
116
|
|
Asia
(excluding China)
|
|
|
73
|
|
|
|
72
|
|
Other
|
|
|
-
|
|
|
|
19
|
|
Total
|
|
$
|
15,828
|
|
|
$
|
17,926
|
|
(In
thousands)
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Identifiable
assets
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
38,325
|
|
|
$
|
37,230
|
|
Canada
|
|
|
18,706
|
|
|
|
21,784
|
|
Total
|
|
$
|
57,031
|
|
|
$
|
59,014
|
|
Net
revenues by business segment are to unaffiliated customers. Identifiable assets by geographical area are based on location of
facilities. Net sales by geographical area are based on destination of sales.
15.
Subsequent Event
On
April 27, 2018, the Company executed a definitive agreement for a sale-leaseback of its Alpharetta, Georgia office facility. The
Company agreed to sell the Alpharetta facility for $7.0 million in cash and enter into a 10-year leaseback of the facility for
rent in the amount of $600,000 per year, escalating at the rate of 2% per year. In addition, the Company agreed to issue 100,000
warrants to the buyer or its designee to purchase Company stock, consisting of 25,000 warrants at each of $10, $12, $14 and $16
purchase prices per share. The warrants will have a 10-year maturity. The closing of the transaction is expected to occur within
30 days after the completion of a 60-day due diligence period and satisfaction of customary contingencies. Upon closing of the
sale-leaseback transaction, the Company’s term loan and revolving line of credit that are currently secured by the Alpharetta
facility will be repaid and the related debt agreement would be terminated. The Company expects to receive net proceeds of approximately
$4.0 million on the sale-leaseback after repayment of the loans.