Market Newsdesk

RUTHERFORD, N.J., Nov. 12, 2020 (GLOBE NEWSWIRE) — Cancer Genetics, Inc. (the “Company”) (Nasdaq: CGIX), a leader in drug discovery and preclinical oncology and immuno-oncology services, announced today financial and operating results for the quarter ended September 30, 2020.

RECENT STRATEGIC AND OPERATIONAL HIGHLIGHTS

	●	Entered into a definitive agreement to merge with StemoniX, a leader in powering the discovery of new medicines through the convergence of novel human biology and software technologies
	●	Continued stability and customer loyalty from biopharma partners in vivoPharm’s drug discovery business
	●	Commenced a joint proof-of-concept program with StemoniX to confirm a best-in-class drug discovery platform converging in-vivo, in-vitro and in-silico innovations
	●	Closed on $3 million of financing in October 2020 to meet cash requirements pending the proposed upcoming merger with StemoniX

John A. Roberts, Chief Executive Officer of Cancer Genetics stated, “During Q3 2020, we continued to make advances to enhance value for our shareholders and customers. The key event of the quarter was signing a definitive agreement to merge with StemoniX. Based on our lengthy search for a merger partner since last year, StemoniX proved to be the most attractive opportunity for our shareholders by extracting meaningful value from synergies with our vivoPharm drug discovery business and the continued transformation of our business model.”

Mr. Roberts continued, “To illustrate the relationship more fully, we have announced a joint proof-of-concept program between StemoniX and vivoPharm^®, a subsidiary of Cancer Genetics. The initial program will assess CNS (central nervous system) safety and toxicity of novel compounds, and will set the stage for future partnership collaborations with drug developers. We are also exceptionally encouraged with their recent announcement related to the publication of a new research paper, “Screening for modulators of neural network activity in 3D human iPSC-derived cortical spheroids,” in the journal PLOS ONE. The research describes how the StemoniX microBrain 3D platform can be used in functional high-throughput screens to identify potentially new therapeutics for central nervous system (CNS) indications, further supporting our belief in the increasing value this merger will bring to our combined shareholders.”

Cancer Genetics continued to service customers through the company’s Discovery Services business, vivoPharm. We experienced a delay in new contract signings in Q3 while many of our customers diverted their resources to COVID-19 initiatives and oriented their scientific and discovery teams to remote working environments.

The Company filed its quarterly report for Q3 2020 on Form 10-Q today with the Securities and Exchange Commission.

THIRD QUARTER 2020 FINANCIAL RESULTS

The Company reported total revenue from continuing operations of $1.6 million for the third quarter of 2020 compared to revenue of $2.1 million in the third quarter of 2019, a decrease of approximately $0.5 million or 24% principally due to delays in drug discovery programs impacting our customer’s preclinical projects teams as customers diverted their resources to COVID-19 initiatives and oriented their scientific and discovery teams to remote working environments.

Gross profit margin in the third quarter 2020 was 41.8% or $0.7 million as compared to gross profit margin from continuing operations of 52.0% or $1.1 million in the third quarter of 2019. The Discovery Services business unit gross margin decreased in the third quarter of 2020 compared to 2019 principally due to the change in revenue in the comparable periods.

Total operating expenses for the third quarter of 2020 were approximately $2.0 million (including approximately $0.5 million of one-time non-recurring expenses related to merger and financing costs). This represents a decrease of 57.0% compared to total operating expenses from continuing operations for the third quarter of 2019 which were approximately $4.7 million. The decrease in total operating expenses was due to a $2.9 million goodwill impairment charge recorded in the third quarter of 2019.

Net loss from continuing operations was $1.4 million or ($0.58) per share for the third quarter of 2020. Net Loss from continuing operations was $4.8 million in the third quarter of 2019 or ($2.38) per share.

Cash and cash equivalents totaled approximately $1.1 million as of September 30, 2020.

ABOUT CANCER GENETICS

Through its vivoPharm subsidiary, the Cancer Genetics offers proprietary preclinical test systems supporting clinical diagnostic offerings at early stages, valued by the pharmaceutical industry, biotechnology companies and academic research centers. The Company is focused on precision and translational medicine to drive drug discovery and novel therapies. vivoPharm specializes in conducting studies tailored to guide drug development, starting from compound libraries and ending with a comprehensive set of in vitro and in vivo data and reports, as needed for Investigational New Drug filings. vivoPharm operates in The Association for Assessment and Accreditation of Laboratory Animal Care International (AAALAC) accredited and GLP compliant audited facilities. For more information, please visit www.cancergenetics.com.

For more information, please visit or follow CGI at:

Internet:

www.cancergenetics.com

Twitter: @Cancer_Genetics

Additional Information about the Proposed Merger and Where to Find It

In connection with the proposed merger between CGI and StemoniX, Inc. (“StemoniX”), CGI has filed relevant materials with the Securities and Exchange Commission (the “SEC”), including a registration statement on Form S-4 that contains a proxy statement/prospectus/information statement. INVESTORS AND SECURITY HOLDERS OF CGI AND STEMONIX ARE URGED TO READ THESE MATERIALS (AS WELL AS AMENDMENTS AND SUPPLEMENTS THERETO AND ANY DOCUMENTS INCORPORATED BY REFERENCE THEREIN) WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CGI, STEMONIX AND THE PROPOSED MERGER. The proxy statement/prospectus/information statement and other relevant materials (when they become available), and any other documents filed by CGI with the SEC, may be obtained free of charge at the SEC website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by CGI by directing a written request to: Cancer Genetics, Inc., c/o John A. Roberts, Chief Executive Officer, 201 Route 17 North 2nd Floor, Rutherford, NJ 07070. Investors and security holders are urged to read the Registration Statement and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed merger.

This report shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities in connection with the proposed merger shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Participants in the Solicitation

CGI and its directors and executive officers and StemoniX and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of CGI in connection with the proposed transaction under the rules of the SEC. Information about the directors and executive officers of CGI and their ownership of shares of CGI’s common stock is set forth in its Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on May 29, 2020, and in subsequent documents filed and to be filed with the SEC, including the Registration Statement referred to above. Additional information regarding the persons who may be deemed participants in the proxy solicitations and a description of their direct and indirect interests in the proposed merger, by security holdings or otherwise, are included in the Registration Statement and other relevant materials to be filed with the SEC when they become available. These documents are available free of charge at the SEC web site (www.sec.gov) and from the Chief Executive Officer at CGI at the address described above.

Forward Looking Statements:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to Cancer Genetics, Inc.’s expectations regarding future financial and/or operating results, the proposed merger with StemoniX, Inc., the potential for our tests and services and future revenues or growth in this press release constitute forward-looking statements.

Any statements that are not historical fact (including, but not limited to, statements that contain words such as “will,” “believes,” “plans,” “anticipates,” “expects,” “estimates”) should also be considered to be forward-looking statements. Forward-looking statements involve risks and uncertainties, including, without limitation, risks inherent in our ability to satisfy all closing conditions to the merger with StemoniX, Inc. and realize the expected benefits therefrom, our attempts to adapt to the global coronavirus pandemic, our attempts to achieve profitability by increasing sales of our pre-clinical services, maintain our existing customer base and avoid cancellation of customer contracts or discontinuance of trials, our attempts to raise capital to meet our liquidity needs, market and other conditions, and other risks discussed in the Cancer Genetics, Inc. Form 10-K for the year ended December 31, 2019 and Form 10-Q for the quarter ended June 30, 2020, along with other filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. Cancer Genetics, Inc. disclaims any obligation to update these forward-looking statements.

Investor Contacts:

Jennifer K. Zimmons. Ph.D.
Investor Relations
Zimmons International Communications, Inc
Email: [email protected]
Phone: +1.917.214.3514

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value)

		September 30,				December 31,
		2020				2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	1,133			$	3,880
Restricted cash			–				350
Accounts receivable			773				696
Earn-Out from siParadigm, net, current portion			141				747
Excess Consideration Note			–				888
Other current assets			754				546
Current assets of discontinuing operations			–				71
Total current assets			2,801				7,178
FIXED ASSETS, net of accumulated depreciation			488				558
OTHER ASSETS
Operating lease right-of-use assets, net of accumulated amortization			47				94
Earn-Out from siParadigm, less current portion			–				356
Patents and other intangible assets, net of accumulated amortization			2,563				2,895
Investment in joint venture			56				92
Goodwill			3,090				3,090
Other			645				641
Total other assets			6,401				7,168
Total Assets		$	9,690			$	14,904
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	2,863			$	2,072
Obligations under operating leases, current portion			38				193
Obligations under finance leases, current portion			53				68
Deferred revenue			798				1,217
Note payable, net			–				1,277
Advance from NovellusDx, Ltd., net			–				350
Advance from siParadigm, current portion			–				566
Due to Interpace Biosciences, Inc.			421				–
Current liabilities of discontinuing operations			578				1,229
Total current liabilities			4,751				6,972
Obligations under operating leases, less current portion			10				10
Obligation under finance leases, less current portion			79				107
Advance from siParadigm, less current portion			–				252
Warrant liability			45				178
Total Liabilities			4,885				7,519
STOCKHOLDERS’ EQUITY
Preferred stock, authorized 9,764 shares, $0.0001 par value, none issued			–				–
Common stock, authorized 100,000 shares, $0.0001 par value, 2,506 and 2,104 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively			–				–
Additional paid-in capital			173,517				171,783
Accumulated other comprehensive income (loss)			(56	)			26
Accumulated deficit			(168,656	)			(164,424	)
Total Stockholders’ Equity			4,805				7,385
Total Liabilities and Stockholders’ Equity		$	9,690			$	14,904

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Loss (Unaudited)

(in thousands, except per share amounts)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Revenue		$	1,568			$	2,069			$	4,440			$	5,416
Cost of revenues			912				993				2,366				2,729
Gross profit			656				1,076				2,074				2,687
Operating expenses:
General and administrative			1,217				1,239				4,982				4,205
Sales and marketing			354				322				979				824
Impairment of goodwill			–				2,873				–				2,873
Merger costs			454				284				454				284
Total operating expenses			2,025				4,718				6,415				8,186
Loss from operations			(1,369	)			(3,642	)			(4,341	)			(5,499	)
Other income (expense):
Interest expense			(108	)			(200	)			(283	)			(1,327	)
Interest income			–				–				4				–
Change in fair value of acquisition note payable			–				5				4				12
Change in fair value of other derivatives			–				–				–				86
Change in fair value of warrant liability			(19	)			34				133				233
Change in fair value of siParadigm Earn-Out			(1	)			(982	)			(66	)			(982	)
Other income (expense)			146				–				251				(11	)
Total other income (expense)			18				(1,143	)			43				(1,989	)
Loss from continuing operations before income taxes			(1,351	)			(4,785	)			(4,298	)			(7,488	)
Income tax expense (benefit)			2				–				8				(512	)
Loss from continuing operations			(1,353	)			(4,785	)			(4,306	)			(6,976	)
Income from discontinuing operations			–				6,760				74				561
Net income (loss)			(1,353	)			1,975				(4,232	)			(6,415	)
Foreign currency translation gain (loss)			(29	)			(120	)			(82	)			(161	)
Comprehensive income (loss)		$	(1,382	)		$	1,855			$	(4,314	)		$	(6,576	)
Basic and diluted net loss per share from continuing operations		$	(0.58	)		$	(2.38	)		$	(1.96	)		$	(3.77	)
Basic and diluted net income per share from discontinuing operations			–				3.36				0.03				0.30
Basic and diluted net income (loss) per share		$	(0.58	)		$	0.98			$	(1.93	)		$	(3.47	)
Basic and diluted weighted-average shares outstanding			2,328				2,014				2,193				1,850

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(in thousands)

					Three and Nine Months Ended September 30, 2020
																					Additional								Accumulated Other
					Common Stock																Paid-in								Comprehensive							Accumulated
					Shares								Amount								Capital								Income (Loss)							Deficit						Total
Balance, January 1, 2020						2,104							$	–							$	171,783							$	26						$		(164,424	)			$		7,385
Stock based compensation—employees						–								–								58								–								–						58
Issuance of common stock—VenturEast settlement						3								–								12								–								–						12
Unrealized gain on foreign currency translation						–								–								–								104								–						104
Net loss						–								–								–								–								(1,179	)					(1,179			)
Balance, March 31, 2020						2,107								–								171,853								130								(165,603	)					6,380
Stock based compensation—employees						–								–								47								–								–						47
Fair value of common stock exchanged to settle Note Payable						153								–								531								–								–						531
Unrealized loss on foreign currency translation						–								–								–								(157	)							–						(157			)
Net loss						–								–								–								–								(1,700	)					(1,700			)
Balance, June 30, 2020						2,260								–								172,431								(27	)							(167,303	)					5,101
Stock based compensation—employees						–								–								39								–								–						39
Fair value of common stock exchanged to settle Note Payable						246								–								1,047								–								–						1,047
Unrealized loss on foreign currency translation						–								–								–								(29	)							–						(29			)
Net loss						–								–								–								–								(1,353	)					(1,353			)
Balance, September 30, 2020						2,506							$	–							$	173,517							$	(56	)					$		(168,656	)			$		4,805
			Three and Nine Months Ended September 30, 2019
																	Additional								Accumulated Other
			Common Stock														Paid-in								Comprehensive										Accumulated
			Shares						Amount								Capital								Income (Loss)										Deficit										Total
Balance, January 1, 2019				924					$		–						$	164,458							$	60									$		(157,716				)				$	6,802
Stock based compensation—employees				–							–							158								–											–									158
Issuance of common stock – 2019 Offerings, net				952							–							5,412								–											–									5,412
Unrealized loss on foreign currency translation				–							–							–								(76						)					–									(76		)
Net loss				–							–							–								–											(4,617				)					(4,617		)
Balance, March 31, 2019				1,876							–							170,028								(16						)					(162,333				)					7,679
Stock based compensation—employees				–							–							102								–											–									102
Issuance of common stock – Iliad conversions				51							–							350								–											–									350
Increase in fair value of embedded conversion option				–							–							547								–											–									547
Unrealized gain on foreign currency translation				–							–							–								35											–									35
Net loss				–							–							–								–											(3,773				)					(3,773		)
Balance, June 30, 2019				1,927							–							171,027								19											(166,106				)					4,940
Stock based compensation—employees				–							–							57								–											–									57
Issuance of common stock – Iliad exchanges				174							–							612								–											–									612
Unrealized gain on foreign currency translation				–							–							–								(120						)					–									(120		)
Net loss				–							–							–								–											1,975									1,975
Balance, September 30, 2019				2,101					$		–						$	171,696							$	(101						)			$		(164,131				)				$	7,464

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

		Nine Months Ended September 30,
		2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(4,232	)		$	(6,415	)
Income from discontinuing operations			(74	)			(561	)
Net loss from continuing operations			(4,306	)			(6,976	)
Adjustments to reconcile net loss to net cash used in operating activities, continuing operations:
Depreciation			130				53
Amortization			332				328
Stock-based compensation			152				226
Impairment of goodwill			–				2,873
Change in fair value of warrant liability, acquisition note payable and other derivatives			(137	)			(331	)
Amortization of operating lease right-of-use assets			154				123
Change in fair value of siParadigm Earn-Out			66				982
Amortization of discount on debt and debt issuance costs			71				470
Loss on extinguishment of debt			120				256
Interest added to Convertible Note			–				268
Changes in:
Accounts receivable			(72	)			(36	)
Other current assets			(203	)			(422	)
Other non-current assets			(3	)			(2	)
Accounts payable, accrued expenses and deferred revenue			400				1,516
Due to Interpace Biosciences, Inc.			421				–
Obligations under operating leases			(183	)			(156	)
Net cash used in operating activities, continuing operations			(3,058	)			(828	)
Net cash used in operating activities, discontinuing operations			(514	)			(5,309	)
Net cash used in operating activities			(3,572	)			(6,137	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets			(39	)			(21	)
Distribution from Joint Venture			36				–
Receipts from Excess Consideration Note			888				–
Net cash received in disposal of Clinical Business			885				(21	)
Net cash received in disposal of BioPharma Business			78				3,044
Net cash provided by (used in) investing activities, continuing operations			963				3,023
Net cash provided by investing activities, discontinuing operations
Net cash provided by investing activities			(66	)			(36	)
CASH FLOWS FROM FINANCING ACTIVITIES			–				5,412
Principal payments on obligations under finance leases			(350	)			–
Proceeds from offerings of common stock, net of certain offering costs			(416	)			5,376
Payments on Advance from NovellusDx, Ltd.			–				(115	)
Net cash provided by (used in) financing activities, continuing operations			(416	)			5,261
Net cash used in financing activities, discontinuing operations			(72	)			(161	)
Net cash provided by (used in) financing activities			(3,097	)			1,986
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Beginning			4,230				511
Ending		$	1,133			$	2,497
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents		$	1,133			$	2,147
Restricted cash			–				350
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		$	1,133			$	2,497
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for interest		$	11			$	1,185
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock issued in VentureEast settlement		$	12			$	–
Fair value of common stock exchanged to settle Note Payable			1,578				–
Right of use assets obtained through operating leases			27				–
Fixed assets obtained through finance leases			17				145
Conversion of debt and accrued interest into common stock			–				350
Increase in fair value of conversion option							547
Exchanges of principal on Convertible Note for common stock							612
Disposal of Clinical Business:
Goodwill		$	–			$	1,188
Accounts payable and accrued expenses			–				(287	)
Gain on disposal of Clinical Business			–				1,222
Earn-Out from siParadigm			–				(2,269	)
Advance from siParadigm, net of repayments			–				974
Net cash received in disposal of Clinical Business		$	–			$	828
Disposal of BioPharma Business:
Accounts receivable		$	–			$	4,145
Other current assets			–				1,142
Fixed assets			–				2,998
Operating lease right-of-use assets			–				1,969
Patents and other intangible assets			–				42
Goodwill			–				10,106
Accounts payable and accrued expenses			–				(6,351	)
Obligations under operating leases			–				(2,110	)
Obligations under finance leases			–				(451	)
Deferred revenue			–				(1,046	)
Line of credit			–				(2,665	)
Term note			–				(6,000	)
Gain on disposal of BioPharma Business			–				7,274
Note receivable from IDXG			–				(6,795	)
Net cash received in disposal of BioPharma Business		$	–			$	2,258

Charlotte, NC, Nov. 12, 2020 (GLOBE NEWSWIRE) —
Ballantyne Strong, Inc. (NYSE American: BTN) (the “Company”) today announced financial results for the third quarter and nine months ended September 30, 2020.

Financial and Operational Highlights

          ●     Convergent profitability improved with continued growth in recurring revenue

                        ○     Year-over-year segment gross margins increased to 47.9% from 32.4%, segment operating income improved by 169% and segment Adjusted EBITDA grew 88% to $1.7 million

          ●     Strong Entertainment began to see meaningful signs of recovery as cinema exhibitors and other entertainment operators began reopening worldwide

                        ○     Revenue decreased year over year due to COVID-19 impact on cinema operators
                                 
                        ○     Sequential revenue grew 113% from the second quarter 2020 to the third quarter as exhibitors resumed operations
                                 
                        ○     Settled business interruption claim, resulting in a gain of $2.7 million
                                 
                        ○     Signed multi-year exclusive agreements with Cinemark and Marcus Theatres

          ●     Completed sale of Strong Outdoor in early August

                        ○     Investment in Firefly increased to $13 million
                                 
                        ○     $5.3 million primarily non-cash gain recognized upon divestiture

          ●     Cash flows from operating activities from continuing operations for the first nine months of 2020 improved to $8.2 million from negative $1.0 million the same period in the prior year

“This was a busy quarter for Ballantyne Strong,” commented Mark Roberson, Chief Executive Officer. “We continued to grow our recurring revenue and profitability at Convergent; began to see a strengthening recovery in Strong Entertainment as operators began reopening worldwide; and we completed the sale of Strong Outdoor, exiting the outdoor advertising business.

“The sale of Strong Outdoor was a significant transaction providing us the flexibility to more fully participate in the upside potential of the Firefly business. We now hold a $13 million investment stake in Firefly and are one of their largest shareholders behind Google Ventures and NFX.

“Our continuing businesses, Convergent and Strong Entertainment, both gained momentum as we progressed through the quarter, and we’re excited to continue building on this progress. Convergent posted a 169% increase in operating profit as compared to the prior year as a result of the growth in DSAAS. While Strong Entertainment was down compared with the prior year due to the impact of COVID-19, we achieved substantial sequential growth compared to the second quarter of 2020. It is encouraging to see customer orders and overall business levels strengthening since operators began reopening their facilities in August. We expect those trends to continue as we progress through the fourth quarter and look ahead to 2021. Furthermore, Strong Entertainment has recently signed new partnerships with leading cinema operators, enhancing our leading position in the industry. We entered a multi-year nationwide managed services agreement with Marcus Theatres, the fourth largest cinema operator in the United States, and in October we signed a five-year exclusive worldwide screen supply agreement with Cinemark Theatres, the third largest exhibitor in the United States.”

Third Quarter 2020 Financial Review – (comparison of continuing operations to prior year quarter)

	●	Revenue decreased 36.3% to $9.9 million from $15.6 million. The decrease was primarily due to the impact of COVID-19 on customer demand for screen products and technical services at Strong Entertainment. At Convergent, growth in services revenue was offset by the effect of large non-recurring installation projects in the prior year period.
	●	Gross profit decreased 37.6% to $3.2 million from $5.2 million for the quarter and gross profit margins decreased to 32.8% as compared to 33.4%. Gross profit decreased as cost reduction actions and the expansion of margins at Convergent were offset by the impact of COVID-19 on business at Strong Entertainment.
	●	Net income from continuing operations was $1.0 million, or $0.07 per basic and diluted share, in the third quarter of 2020, compared to a net loss from continuing operations of $1.7 million, or ($0.11) per basic and diluted share, in the third quarter of 2019. Net income includes a gain of $2.7 million from the settlement of the business interruption insurance claim in the third quarter of 2020.
	●	Adjusted EBITDA was $0.8 million compared to $1.3 million in the prior year. Growth in Adjusted EBITDA at Convergent and reductions in corporate overhead were offset by lower contribution from Strong Entertainment due to COVID-19.

Conference Call

A conference call to discuss the 2020 third-quarter financial results will be held on Thursday, November 12, 2020 at 5:00 pm Eastern Time. Investors and analysts are invited to access the conference call by dialing 855-327-6837 (domestic) or 631-891-4304 (international) and providing the operator with conference ID number: 10011742. Please dial in at least five minutes before the start of the call to register. A replay will be available approximately three hours after the conclusion of the conference call until Saturday, December 12, 2020 by dialing 844-512-2921 in the U.S. and Canada and 412-317-6671 internationally and entering the conference ID number: 10011742.

The Company’s financial results and an accompanying slide presentation will also be available on the Investor Relations page of the Company’s website at ballantynestrong.com/investors.

Use of Non-GAAP Measures

Ballantyne Strong, Inc. prepares its 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 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), fair value adjustments, severance, foreign currency transaction gains (losses), transactional expenses 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 operating performance. Accordingly, management believes that disclosure of these metrics offers investors, bankers and other stakeholders an additional view of the Company’s operations that, when coupled with the GAAP results, provides a more complete understanding of the Company’s financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net loss or to net cash used in 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 performance. A reconciliation of GAAP net loss to EBITDA and Adjusted EBITDA is included in the accompanying financial schedules.

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.

For further information, please refer to Ballantyne Strong, Inc.’s Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on or about November 12, 2020, available online at www.sec.gov.

About Ballantyne Strong, Inc.

Ballantyne Strong (www.ballantynestrong.com) and its subsidiaries engage in diverse business activities including the design, integration and installation of technology solutions for a broad range of applications; development and delivery of out-of-home messaging, advertising and communications; manufacturing of projection screens; and providing managed services including monitoring of networked equipment. The Company focuses on serving the entertainment and retail markets.

Forward-Looking Statements

Except for the historical information in this press release, it includes forward-looking statements which 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 year ended December 31, 2019, Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 and the Company’s subsequent filings with the SEC, 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, 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 ability to successfully execute its capital allocation strategy, the Company’s ability to maintain its brand and reputation and retain or replace its significant 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 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, cybersecurity risks and risks of damage and interruptions of information technology systems, the Company’s ability to retain key members of management and successfully integrate new 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, 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, the impact of having a controlling 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 further be, exacerbated by the COVID-19 pandemic, 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 the Company’s 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, withdraw or revise any forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

For Investor Relations Inquiries:

Mark Roberson	John Nesbett / Jennifer Belodeau
Ballantyne Strong, Inc. – Chief Executive Officer	IMS Investor Relations
704-994-8279	203-972-9200
[email protected]	[email protected]

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par values)

		September 30, 2020				December 31, 2019
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	7,026			$	4,951
Restricted cash			352				351
Accounts receivable (net of allowance for doubtful accounts of $783 and $1,291, respectively)			6,115				12,898
Inventories, net			2,816				2,879
Current assets of discontinued operations			–				320
Other current assets			1,735				1,624
Total current assets			18,044				23,023
Property, plant and equipment (net of accumulated depreciation of $11,363 and $10,030, respectively)			9,028				10,069
Operating lease right-of-use assets			4,705				5,581
Finance lease right-of-use assets			2,465				2,563
Investments			22,006				13,311
Intangible assets, net			1,214				1,534
Goodwill			895				919
Long-term assets of discontinued operations			–				585
Other assets			31				48
Total assets		$	58,388			$	57,633
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	3,448			$	2,969
Accrued expenses			3,464				4,416
Short-term debt			2,972				3,080
Current portion of long-term debt			1,055				998
Current portion of operating lease obligations			743				846
Current portion of finance lease obligations			1,820				1,586
Deferred revenue and customer deposits			4,198				2,706
Current liabilities of discontinued operations			–				704
Total current liabilities			17,700				17,305
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
Finance lease obligations, net of current portion			3,111				3,988
Deferred income taxes			3,053				2,649
Long-term liabilities of discontinued operations			–				147
Other long-term liabilities			120				154
Total liabilities			30,708				31,924
Commitments, contingencies and concentrations
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
Additional paid-in capital			43,311				42,589
Retained earnings			7,472				6,001
Less 2,794 of common shares in treasury, at cost			(18,586	)			(18,586	)
Accumulated other comprehensive loss			(4,693	)			(4,469	)
Total stockholders’ equity			27,680				25,709
Total liabilities and stockholders’ equity		$	58,388			$	57,633

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net product sales		$	4,460			$	9,192			$	13,095			$	20,840
Net service revenues			5,447				6,358				15,393				21,057
Total net revenues			9,907				15,550				28,488				41,897
Cost of products sold			3,564				5,603				10,119				17,526
Cost of services			3,096				4,746				9,520				11,435
Total cost of revenues			6,660				10,349				19,639				28,961
Gross profit			3,247				5,201				8,849				12,936
Selling and administrative expenses:
Selling			678				956				2,234				2,986
Administrative			2,914				4,055				10,119				11,709
Total selling and administrative expenses			3,592				5,011				12,353				14,695
Loss on disposal of assets			(18	)			(3	)			(18	)			(67	)
(Loss) income from operations			(363	)			187				(3,522	)			(1,826	)
Other income (expense):
Interest income			–				1				–				3
Interest expense			(254	)			(263	)			(794	)			(568	)
Fair value adjustment to notes receivable			–				(845	)			–				(2,153	)
Foreign currency transaction (loss) gain			(173	)			66				12				(154	)
Other income, net			2,749				416				2,873				650
Total other income (expense)			2,322				(625	)			2,091				(2,222	)
Income (loss) from continuing operations before income taxes and equity method investment loss			1,959				(438	)			(1,431	)			(4,048	)
Income tax expense			(526	)			(731	)			(1,022	)			(1,295	)
Equity method investment loss			(460	)			(496	)			(580	)			(1,223	)
Net income (loss) from continuing operations			973				(1,665	)			(3,033	)			(6,566	)
Net income (loss) from discontinued operations			4,673				(123	)			4,504				(2,790	)
Net income (loss)		$	5,646			$	(1,788	)		$	1,471			$	(9,356	)
Basic net income (loss) per share
Continuing operations		$	0.07			$	(0.11	)		$	(0.21	)		$	(0.46	)
Discontinued operations			0.31				(0.01	)			0.31				(0.19	)
Basic net income (loss) per share		$	0.38			$	(0.12	)		$	0.10			$	(0.65	)
Diluted net income (loss) per share
Continuing operations		$	0.07			$	(0.11	)		$	(0.21	)		$	(0.46	)
Discontinued operations			0.31				(0.01	)			0.31				(0.19	)
Diluted net income (loss) per share		$	0.38			$	(0.12	)		$	0.10			$	(0.65	)

Ballantyne Strong, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

		Nine Months Ended September 30,
		2020				2019
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	)
Provision for obsolete inventory			41				245
Provision for warranty			14				24
Depreciation and amortization			2,634				2,214
Amortization and accretion of operating leases			814				788
Fair value adjustment to notes receivable			–				2,153
Equity method investment loss			580				1,223
Loss on disposal of assets			–				67
Gain on business interruption claim settlement			(789	)			–
Gain on Firefly transaction (Note 3)			–				–
Deferred income taxes			72				(129	)
Stock-based compensation expense			724				798
Changes in operating assets and liabilities:
Accounts receivable			4,793				776
Inventories			(28	)			(96	)
Current income taxes			269				229
Other assets			35				(130	)
Accounts payable and accrued expenses			1,024				(2,000	)
Deferred revenue and customer deposits			1,469				797
Operating lease obligations			(857	)			(875	)
Net cash provided by (used in) operating activities from continuing operations			8,159				(991	)
Net cash provided by operating activities from discontinued operations			598				1,407
Net cash provided by operating activities			8,757				416
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment		$	–			$	121
Investment in Firefly Systems, Inc.			(4,000	)			–
Capital expenditures			(729	)			(1,717	)
Net cash used in investing activities from continuing operations			(4,729	)			(1,596	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			–				237
Principal payments on short-term debt			(450	)			(323	)
Principal payments on long-term debt			(427	)			(725	)
Proceeds from borrowing under credit facility			5,040				–
Repayments of borrowings under credit facility			(5,040	)			–
Proceeds from Paycheck Protection Program Loan			3,174				–
Repayment of Paycheck Protection Program Loan			(3,174	)			–
Payments on capital lease obligations			(1,195	)			(420	)
Net cash used in financing activities from continuing operations			(2,072	)			(1,231	)
Effect of exchange rate changes on cash and cash equivalents			120				46
Net increase (decrease) in cash and cash equivalents and restricted cash from continuing operations			1,478				(3,772	)
Net increase in cash and cash equivalents and restricted cash from discontinued operations			598				1,407
Net increase (decrease) in cash and cash equivalents and restricted cash			2,076				(2,365	)
Cash and cash equivalents and restricted cash at beginning of period			5,302				7,048
Cash and cash equivalents and restricted cash at end of period		$	7,378			$	4,683

Ballantyne Strong, Inc. and Subsidiaries

Summary by Business Segments

(In thousands)

(Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Strong Entertainment
Revenue		$	5,260			$	10,928			$	15,041			$	26,405
Gross profit			889				3,669				2,769				8,621
Operating (loss) income			(79	)			2,230				(894	)			4,646
Adjusted EBITDA			133				2,444				(137	)			5,367
Convergent
Revenue		$	4,346			$	4,532			$	12,954			$	15,204
Gross profit			2,083				1,469				5,668				4,622
Operating income			1,059				394				2,508				1,467
Adjusted EBITDA			1,672				890				4,332				2,859
Corporate and Other
Revenue		$	301			$	90			$	493			$	288
Gross profit			275				63				412				(307	)
Operating loss			(1,343	)			(2,437	)			(5,136	)			(7,939	)
Adjusted EBITDA			(1,013	)			(2,030	)			(4,217	)			(6,957	)
Consolidated
Revenue		$	9,907			$	15,550			$	28,488			$	41,897
Gross profit			3,247				5,201				8,849				12,936
Operating (loss) income			(363	)			187				(3,522	)			(1,826	)
Adjusted EBITDA			792				1,304				(22	)			1,269

Ballantyne Strong, Inc. and Subsidiaries

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(In thousands)

(Unaudited)

		Three Months Ended September 30,
		2020																				2019
		Strong Entertainment				Convergent				Corporate and Other				Discontinued Operations				Consolidated				Strong Entertainment				Convergent				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	)
Net income (loss) from discontinued operations			–				–				–				(4,673	)			(4,673	)			–				–				–				123				123
Net income (loss) from continuing operations			1,939				1,000				(1,966	)			–				973				1,265				386				(3,316	)			–				(1,665	)
Interest expense, net			24				146				84				–				254				35				120				107				–				262
Income tax expense (benefit)			488				(88	)			126				–				526				827				(96	)			–				–				731
Depreciation and amortization			226				613				46				–				885				226				492				54				–				772
EBITDA			2,677				1,671				(1,710	)			–				2,638				2,353				902				(3,155	)			–				100
Stock-based compensation expense			–				–				239				–				239				–				–				334				–				334
Fair value adjustment to notes receivable			–				–				–				–				–				845				–				–				–				845
Equity method investment loss (income)			20				–				440				–				460				(287	)			–				783				–				496
Loss on disposal of assets and impairment charges			–				–				18				–				18				3				–				–				–				3
Foreign currency transaction loss (gain)			172				1				–				–				173				(50	)			(16	)			–				–				(66	)
Gain on property and casualty insurance recoveries			(2,736	)			–				–				–				(2,736	)			(420	)			–				–				–				(420	)
Severance and other			–				–				–				–				–				–				4				8				–				12
Adjusted EBITDA		$	133			$	1,672			$	(1,013	)		$	–			$	792			$	2,444			$	890			$	(2,030	)		$	–			$	1,304

		Nine Months Ended September 30,
		2020																				2019
		Strong Entertainment				Convergent				Corporate and Other				Discontinued Operations				Consolidated				Strong Entertainment				Convergent				Corporate and Other				Discontinued Operations				Consolidated
Net income (loss)		$	918			$	2,018			$	(5,969	)		$	4,504			$	1,471			$	1,120			$	1,085			$	(8,771	)		$	(2,790	)		$	(9,356	)
Net income (loss) from discontinued operations			–				–				–				(4,504	)			(4,504	)			–				–				–				2,790				2,790
Net income (loss) from continuing operations			918				2,018				(5,969	)			–				(3,033	)			1,120				1,085				(8,771	)			–				(6,566	)
Interest expense, net			90				429				275				–				794				105				322				138				–				565
Income tax expense			853				26				143				–				1,022				1,137				72				86				–				1,295
Depreciation and amortization			688				1,804				142				–				2,634				665				1,387				162				–				2,214
EBITDA			2,549				4,277				(5,409	)			–				1,417				3,027				2,866				(8,385	)			–				(2,492	)
Stock-based compensation expense			–				–				724				–				724				–				–				798				–				798
Fair value adjustment to notes receivable			–				–				–				–				–				2,153				–				–				–				2,153
Equity method investment loss (income)			137				–				443				–				580				601				–				622				–				1,223
Loss on disposal of assets and impairment charges			–				–				18				–				18				66				1				–				–				67
Foreign currency transaction (gain) loss			(51	)			39				–				–				(12	)			166				(12	)			–				–				154
Gain on property and casualty insurance recoveries			(2,850	)			–				–				–				(2,850	)			(646	)			–				–				–				(646	)
Severance and other			78				16				7				–				101				–				4				8				–				12
Adjusted EBITDA		$	(137	)		$	4,332			$	(4,217	)		$	–			$	(22	)		$	5,367			$	2,859			$	(6,957	)		$	–			$	1,269