Financial Performance - Net revenues for Q3 2023 were $11.1 million, an increase of 8.0% from $10.3 million in Q3 2022[138] - Strong Entertainment segment revenue increased by 10.3% to $10.9 million in Q3 2023, driven by a $0.3 million rise in product sales and a $0.7 million increase in service revenue[141] - For the nine months ended September 30, 2023, net revenues were $39.2 million, a 33.2% increase from $29.4 million in the same period of 2022[138] - Revenue from Strong Entertainment increased 36.1% to $38.7 million in the first nine months of 2023, driven by $1.5 million in product sales and an $8.7 million increase in service revenue[160] - Consolidated gross profit for the nine months ended September 30, 2023, was $13.0 million, or 33.2% of revenue, compared to $7.7 million, or 26.1% in the same period of 2022[165] - The company reported a net income of $156,000 for the nine months ended September 30, 2023, compared to a net loss of $12.705 million for the same period in 2022[190] Profitability and Losses - Gross profit for Q3 2023 was $3.1 million, representing a gross profit margin of 28.0%, up from 26.7% in Q3 2022[145] - The company reported a net loss of $3.3 million for Q3 2023, compared to a net loss of $2.2 million in Q3 2022, marking a 51.2% increase in losses[138] - Consolidated loss from operations was $0.7 million in Q3 2023, compared to a loss of $0.3 million in Q3 2022, representing a 154.1% increase in losses[150] - Total other expense for the nine months of 2023 was $6.1 million, primarily due to a $5.5 million unrealized loss on equity holdings[175] Expenses - Selling and administrative expenses rose by 26.9% to $3.8 million in Q3 2023, compared to $3.0 million in Q3 2022[138] - Gross profit from service revenue was $0.6 million or 21.8% of revenues for Q3 2023, up from $0.2 million or 10.0% in Q3 2022[148] - Gross profit from service revenue was $6.3 million or 41.9% of revenues for the first nine months of 2023, compared to $0.8 million or 13.1% in the same period of 2022[169] - The Strong Entertainment segment generated operating income of $1.1 million in the first nine months of 2023, down from $1.5 million in the same period of 2022, reflecting increased costs associated with the IPO[173] Cash Flow and Liquidity - As of September 30, 2023, the company had total cash and cash equivalents of $3.5 million, down from $3.8 million at the end of 2022[178] - Net cash used in operating activities increased to $3.4 million for the nine months ended September 30, 2023, compared to $2.8 million for the same period in 2022, primarily due to higher working capital utilization[181] - Net cash provided by investing activities was $0.6 million during the nine months ended September 30, 2023, consisting of $0.2 million from equity securities sales and $0.5 million outflow for film and television programming rights[182] - Net cash provided by financing activities was $3.6 million during the nine months ended September 30, 2023, mainly from $2.4 million in net proceeds from the Strong Global Entertainment IPO[183] - The company expects existing liquidity sources to meet projected capital needs for at least the next twelve months, but future cash requirements depend on revenue levels and operational performance[180] Acquisitions and Investments - The company completed the acquisition of Unbounded Media Corporation in September 2023, marking the first step in a strategy to build a portfolio of content and services companies[133] - The company continues to evaluate capital allocation opportunities for investments in public or private companies and potential acquisitions[135] - The company may engage in additional public or private offerings of equity or debt securities to increase capital resources, depending on market conditions[180] Debt and Credit Agreements - Strong/MDI entered into a 2023 Credit Agreement with CIBC, consisting of a revolving line of credit for up to CAD$5.0 million and a 20-year installment loan for up to CAD$3.1 million[179] - As of September 30, 2023, total borrowings under the 2023 Credit Agreement amounted to CAD$4.5 million, with the lender not indicating any plans to demand repayment[179] - The 2023 Credit Agreement requires maintaining a liabilities to effective equity ratio not exceeding 2.5 to 1 and a fixed charge coverage ratio of at least 1.1 times[179] Accounting and Reporting - No significant changes in critical accounting policies during the three months ended September 30, 2023[195] - The company is classified as a "smaller reporting company" under Regulation S-K, thus not applicable for certain market risk disclosures[196]
FG (FGH) - 2023 Q3 - Quarterly Report