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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

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

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

	September 30, 2013			December 31, 2012			September 30, 2014			December 31, 2013
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	26,333		$	40,168		$	24,016		$	28,791
Accounts receivable (net of allowance for doubtful accounts of $536 and $487, respectively)		12,404			26,227
Accounts receivable (net of allowance for doubtful accounts of $636 and $703, respectively)								15,043			20,047
Inventories:
Finished goods, net		9,667			6,706			13,457			10,949
Work in process		407			1,018			870			345
Raw materials and components, net		3,811			3,247			2,204			3,891
Total inventories, net		13,885			10,971			16,531			15,185
Deposit on Convergent acquisition		17,424			—
Recoverable income taxes								5,021			2,207
Other current assets		4,131			6,741			5,429			5,873
Total current assets		74,177			84,107			66,040			72,103
Property, plant and equipment (net of accumulated depreciation of $4,589 and $3,750, respectively)		10,149			11,105
Property, plant and equipment (net of accumulated depreciation of $5,713 and $4,781, respectively)								14,079			14,721
Note receivable		2,388			2,232			2,855			2,497
Intangible assets, net		635			105			1,074			895
Goodwill		1,163			—			1,066			1,123
Other assets		2,172			1,997			3,977			4,105
Total assets	$	90,684		$	99,546		$	89,091		$	95,444
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,028		$	16,646		$	10,798		$	12,844
Accrued expenses		4,520			5,313			4,174			6,236
Income taxes payable		57			—
Customer deposits/deferred revenue		2,726			5,251			3,142			3,474
Income tax payable								726			888
Total current liabilities		16,331			27,210			18,840			23,442
Deferred revenue		3,081			3,302			2,413			3,008
Deferred income taxes		816			580			766			790
Other accrued expenses, net of current portion		1,821			1,538			1,716			1,748
Total liabilities		22,049			32,630			23,735			28,988
Stockholders’ equity:
Preferred stock, par value $.01 per share; Authorized 1,000 shares, none outstanding		—			—			—			—
Common stock, par value $.01 per share; Authorized 25,000 shares; issued 16,869 and 16,782 shares at September 30, 2013 and December 31, 2012, respectively; 14,138 and 14,051 shares outstanding at September 30, 2013 and December 31, 2012, respectively		167			167
Common stock, par value $.01 per share; Authorized 25,000 shares; issued 17,152 and 16,869 shares at September 30, 2014 and December 31, 2013, respectively; 14,421 and 14,138 shares outstanding at September 30, 2014 and December 31, 2013, respectively								167			167
Additional paid-in capital		38,116			37,770			38,524			38,231
Accumulated other comprehensive income:
Foreign currency translation		(287	)		269			(2,072	)		(959	)
Postretirement benefit obligations		46			46			190			190
Retained earnings		48,832			46,903			46,786			47,066
		86,874			85,155			83,595			84,695
Less 2,731 of common shares in treasury, at cost at September 30, 2013 and December 31, 2012		(18,239	)		(18,239	)
Less 2,731 of common shares in treasury, at cost at September 30, 2014 and December 31, 2013								(18,239	)		(18,239	)
Total stockholders’ equity		68,635			66,916			65,356			66,456
Total liabilities and stockholders’ equity	$	90,684		$	99,546		$	89,091		$	95,444

Three andNine Months EndedSeptember 30, ~~2013~~2014 and ~~2012~~2013

Capital lease obligations for property and equipment originating during the nine months ended September 30, 2014 and 2013 was $158 and $0, respectively.

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

The Company’s products are distributed to ~~movie exhibition companies, sports arenas, auditoriums, amusement parks~~the retail, financial, government and ~~special venues.~~cinema markets throughout the world.

The condensed consolidated financial statements include the accounts of the Company and all majority owned and controlled domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year-ended December 31, ~~2012.~~2013.

The condensed consolidated balance sheet as of December 31, ~~2012~~2013 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary to present a fair statement of the financial position and the results of operations and cash flows for the respective interim periods. The results for interim periods are not necessarily indicative of trends or results expected for a full year.

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

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

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

The following table presents the Company’s financial assets and liabilities measured at fair value based upon the level within the fair value hierarchy in which the fair value measurements ~~fall, as of September 30, 2013:~~fall.

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

Quantitative information about the Company’s level 3 fair value measurements at September 30, ~~2013~~2014 is set forth below:

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

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

The carrying values of all other financial assets and liabilities including accounts receivable, accounts payable and accrued expenses reported in the consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). During the nine months ended September 30, ~~2013~~2014 we did not have any significant non-recurring measurements of non-financial assets or liabilities.

~~There are no recently~~In May 2014, the FASB issued ~~accounting pronouncements~~Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The guidance is effective for the Company ~~believes will materially~~beginning January 1, 2017 and may be adopted using a full retrospective or a modified cumulative effect approach. Early adoption is not permitted. The Company is currently evaluating the potential impact of adopting this guidance and has not yet selected a transition method nor has it determined the effect of the standard on its ~~consolidated~~ongoing financial ~~statements.~~reporting.

On September 13, 2013, the Company acquired Peintures Elite, Inc. for $1.7 million in cash. Elite is a manufacturer of paint and lacquer products and has been the primary provider of paint for our screen manufacturing business. Approximately $1.2 million of the purchase price was allocated to goodwill and $0.6 million was allocated to amortizable other intangibles. This business is included within the Theatre segment. The amounts allocated to goodwill were primarily attributable to anticipated synergies and other intangibles that do not qualify for separate recognition. The fair value of the assets and liabilities related to the acquisition are subject to refinement as the Company completes our analyses of the fair values at the acquisition date. The pro forma effect of the acquisition was not material.

The Company paid a deposit of $17.4 million for the acquisition of Convergent Media Systems, Inc. (“CMS”), which closed on October 1, 2013, subsequent to the end of our third quarter of fiscal 2013. CMS was acquired from Sony Corporation for approximately $17.4 million in cash, which was the purchase price of $16.0 million adjusted for cash on hand in Canada and working capital variance based upon CMS’s targeted working capital. CMS provides digital technologies for out-of-home messaging, advertising and communication (the Digital Out-of-Home or DOOH market) and Enterprise Video Solutions (EVS), which provides enterprises with the infrastructure necessary for communication, collaboration, training and education of employees. CMS operates from its offices in the United States and Canada and has customers in North America. Due to the timing of the acquisition, the Company has not yet completed its purchase allocation and analysis. Therefore, it is impracticable to provide proforma information or further information related to the assets and liabilities acquired at this time. In addition, the Company expects to incur costs attributable to integration and reorganization actions associated with this acquisition in the fourth quarter.

Basic earnings (loss) per share have been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share has been computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to potential common shares from dilutive stock options and certain non-vested shares of restricted stock. The following table provides the reconciliation between basic and diluted earnings (loss) per share:

		Three Months Ended September 30,					Nine Months Ended September 30,			Three Months Ended September 30,					Nine Months Ended September30,
		2013		2012			2013		2012	2014			2013		2014			2013
(In thousands, except per share data)
Basic earnings (loss) per share:
Basic earnings per share:
Earnings (loss) applicable to common stock	$	46	$	(268	)	$	1,887	$	3,982	$	(109	)	$	46	$	(322	)	$	1,887
Basic weighted average common shares outstanding		14,009		13,959			13,995		14,055		14,086			14,009		14,052			13,995
Basic earnings (loss) per share	$	0.00	$	(0.02	)	$	0.13	$	0.28	$	(0.01	)	$	0.00	$	(0.02	)	$	0.13
Diluted earnings (loss) per share:
Diluted earnings per share:
Earnings (loss) applicable to common stock	$	46	$	(268	)	$	1,887	$	3,982	$	(109	)	$	46	$	(322	)	$	1,887
Basic weighted average common shares outstanding		14,009		13,959			13,995		14,055		14,086			14,009		14,052			13,995
Dilutive effect of stock options and restricted stock awards		30		—			30		81		—			30		—			30
Dilutive weighted average common shares outstanding		14,039		13,959			14,025		14,136		14,086			14,039		14,052			14,025
Diluted earnings (loss) per share	$	0.00	$	(0.02	)	$	0.13	$	0.28	$	(0.01	)	$	0.00	$	(0.02	)	$	0.13

For the three and nine month periods ended September 30, 2014, options to purchase 196,500 shares of common stock were outstanding but were not included in the computation of diluted earnings per share as the option’s exercise price was greater than the average market price of the common shares for the respective periods. An additional 198,892 and 222,448 options were excluded from the three and nine month periods ended September 30, 2014 as their inclusion would be anti-dilutive, thereby decreasing the net loss per share. For the three and nine month periods ended September 30, 2013, ~~grants and~~ options to purchase 291,000 and 293,200 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. For the three and nine month periods ended September 30, 2012, options to purchase 50,000 shares of common stock were outstanding but were not included in the computation of diluted earnings (loss) per share as the option’s exercise price was greater than the average market price of the common shares for the respective periods. An additional 79,000 options were excluded from the three month period ended September 30, 2012 as their inclusion would be anti-dilutive, thereby decreasing the net loss per share.

~~The~~ Historically, the Company has generally granted a warranty to its customers for a one-year period following the sale of manufactured film projection equipment and ~~distributed products.~~on selected repaired equipment for a one-year period. In most instances, the ~~distributed~~digital products are covered by the manufacturing firm’s OEM ~~warranty on parts and we cover warranty labor cost when required. However,~~warranty; however, there are certain customers where the Company may grant warranties in excess of the manufacturer’s warranty for ~~distributed~~digital products. The Company accrues for these costs at the time of sale or repair. The following table summarizes warranty activity for the three and nine months ended September 30, ~~2013~~2014 and ~~2012:~~2013:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						NineMonths Ended September 30,
	2013			2012			2013			2012			2014			2013			2014			2013
(In thousands)
Warranty accrual at beginning of period	$	851		$	846		$	770		$	1,028		$	456		$	851		$	662		$	770
Charged to expense		91			98			280			321			78			91			166			280
Amounts written off, net of recoveries		(55	)		(89	)		(171	)		(495	)		(216	)		(55	)		(505	)		(171	)
Foreign currency adjustment		4			13			12			14			(2	)		4			(7	)		12
Warranty accrual at end of period	$	891		$	868		$	891		$	868		$	316		$	891		$	316		$	891

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

The Company accounts for its investment by the equity method. Under this method, the Company recorded its proportionate share of LLC net income or loss based on the LLC’s financial statements as of September ~~20, 2013~~30, 2014 and September ~~21, 2012,~~20, 2013, respectively. The LLC uses four 13-week periods for a total of 52 weeks to align its fiscal year-end with that of its majority interest holder, RealD. The Company’s portion of ~~gain~~income of the LLC was $0 and $0.1 million for the three and nine months ended September 30, 2014. The Company’s portion of income (loss) of the LLC was ~~immaterial and~~ ($0.1) million for the three and nine months ended September 30, 2013. ~~The Company’s portion of income (loss) of the LLC was ($0.1) million and immaterial gain for the three and nine months ended September 30, 2012, respectively.~~

In the past, the Company sold digital theatre projection equipment, in the normal course of business, to the LLC. The LLC in turn provides and sells the digital projection equipment to third party customers under system use agreements or through sales agreements. Revenue recognized by the Company on the sale transaction to the LLC is limited by its 44.4% ownership in the joint venture which will be recognized upon sale of the equipment to the third parties. There were no sales to the LLC during the three and nine months ended September 30, ~~2013. The Company recognized $0~~2014 and ~~$0.2 million of gross margin during the three and nine months ended September 30, 2012, respectively, related to the LLC’s sale of equipment to third parties.~~2013. The total receivable balance due from the LLC was insignificant at September 30, ~~2013~~2014 and December 31, ~~2012.~~2013.

~~During the first quarter of 2012 the Company received a $1.5 million distribution from the LLC. During the third quarter of 2012 the Company received a $1.0 million distribution from the LLC.~~ The Company received no distributions from the LLC in nine months ended September 30, 2014 or September 30, 2013.

The Company recorded amortization expense relating to other identifiable intangible assets of $0.2 million and $0.03 million for the nine months ended September 30, ~~2013.~~2014 and 2013, respectively.

The Company’s estimated future amortization expense related to intangible assets for the next five years is as follows:

Goodwill at September 30, 2014 is related to the Systems Integration segment. The following represents a summary of changes in the Company’s carrying amount of goodwill for the nine months ended September 30, 2014:

In connection with the integration of the 2013 CMS acquisition, as well as the Company’s ongoing plans to improve efficiency and effectiveness of its operations, the Company initiated plans in the fourth quarter of ~~2011,~~2013 to reduce headcount and move the ~~Board of Directors and management~~Company’s warehouse from Omaha, Nebraska to Lawrenceville, Georgia. The Company recorded $1.4 million in severance costs it expects to incur in relation to the integration. Additionally, $0.06 million in costs were recorded for site closure of the Company approved a corporate-wide strategic initiative to refocus its worldwide digital equipment distribution business, services platform and cinema screen manufacturing business and exit the analog projector manufacturing business.Omaha warehouse. The strategic initiative consisted of selling the Company’s Omaha, Nebraska-based analog projector facility and manufacturing equipment and relocating its corporate headquarters to a new, smaller location in Omaha, which also houses its Network Operations Center. Total life to date severance charges for the strategic initiative begun in 2011 are approximately $1.4 million. The strategicrestructuring initiative is expected to be completed by the ~~end~~first quarter of ~~2013.~~2015.

The following table reconciles the beginning and ending restructuring balance for the nine months ended September 30, ~~2013,~~2014, which ~~are~~is included in accrued expenses:

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

The Credit Agreement contains certain covenants, including those relating to our financial condition. The primary financial condition covenants pertain to maintaining a ratio of total liabilities to tangible net worth of less than 2 to 1, working capital of $20 million and beginning December 31, 2014 net income before taxes of $1 on a rolling 4-quarter basis, as defined in the Credit Agreement. Other covenants pertain to items such as certain limits on incurring additional debt or lease obligations, certain limits on issuing guarantees and certain limits on loans, advances and investments with third parties. Upon the occurrence of any event of default specified in the Credit Agreement, including a change in control of the Company (as defined in the Credit Agreement), all amounts due there under may be declared to be immediately due and payable. As of September 30, 2014, the Company is in compliance with these financial covenants.

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

The effective tax rate (calculated as a ratio of income tax ~~expense~~expense/benefit to pretax earnings, inclusive of equity method investment losses) was approximately 74.8% and 74.6% for the three and nine months ended September 30, 2014, respectively as compared to 47.8% and 21.0% for the three and nine months ended September 30, 2013, ~~respectively as compared to 0.1% and 33.7% for the three and nine months ended September 30, 2012,~~ respectively. The effective tax rate differs from the statutory rates primarily as a result of differing foreign and U.S. tax rates applied to respective pre-tax earnings by tax jurisdiction. The Company’s ~~estimated annual~~ effective rate was higher in the three months ended September 30, 2013 compared to the comparable period of 2012 due to higher proportion of earnings before tax being within our US operations, which has a higher tax rate. The Company’s estimated annual effective rate was lower in theand nine months ended September 30, ~~2013~~2014 compared to the comparable ~~period~~periods of ~~2012~~2013 due to the generated tax benefits from U.S. operating losses at significantly higher ~~proportion of earnings before~~rates more than offsetting the tax ~~being within~~expense related to our Canadian operations, Strong/MDI Screen Systems, Inc., which has a lower tax rate. In addition the effective tax rate for the three months and nine months ended September 30, 2013 were impacted as the Company also recorded $0.03 million of additional tax expense due to return to provision adjustments related to filing the 2012 tax returns.

The Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxable authorities. The Company has examinations not yet initiated for Federal purposes for fiscal years ~~2005 through~~2009, 2010 and 2012. In most cases, the Company has examinations open for State or local jurisdictions based on the particular jurisdiction’s statute of limitations. The Company does not currently have any state or local examinations in process. As of September 30, ~~2013,~~2014, total unrecognized tax benefits amounted to approximately ~~$0.2~~$0.03 million.

The Company recognizes compensation expense for all share-based payment awards made to employees and directors based on their estimated fair values. Share-based compensation expense included in selling and administrative expenses approximated ~~the following~~$0.1 million and $0.3 million for thethree and nine months ended September 30, 2014 and 2013, ~~and 2012 (in thousands):~~respectively.

The Company’s 2010 Long-Term Incentive Plan (“2010 Plan”) provides the Compensation Committee of the Board of Directors with the discretion to grant stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, or performance units. Vesting terms vary with each grant and may be subject to vesting upon a “change in control” of the Company. ~~The total~~On May 14, 2014, the Company’s stockholders approved an amendment to the 2010 Plan to increase the number of shares ~~reserved~~of common stock that are available for issuance under the ~~2010~~ Plan ~~was~~from 600,000 to 1,600,000 shares. ~~During the nine months ended September 30, 2013, the Company awarded 22,500 options and 9,000 restricted stock shares under the 2010 Plan.~~

As noted above, under the 2010 Plan, the Company granted options to purchase 22,500 shares of the Company’s common stock during the nine months ended September 30, 2013. 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 and vest over a four-year period. The fair value of stock options granted was estimated using a Black-Scholes valuation model with the following assumptions:

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of the Company’s stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding. The Company considers groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes the Company’s activities with respect to its stock options for the nine months ended September 30, ~~2013~~2014 as follows:

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 September 30, ~~2013.~~2014.

As of September 30, 2014, the total unrecognized compensation cost related to stock option awards was approximately $0.1 million which is expected to be recognized over a weighted average period of 1.3 years.

The following table summarizes information about stock options outstanding and exercisable at September 30, ~~2013:~~2014:

			Options Outstanding at September 30, 2013						Options Exercisable at September 30, 2013								Options Outstanding at September 30, 2014						Options Exercisable at September 30, 2014
Range of option exercise price	Range of option exercise price		Number of options		Weighted average remaining contractual life		Weighted average exercise price per option		Number of options		Weighted average remaining contractual life		Weighted average exercise price per option		Range of option exercise price		Number of options		Weighted average remaining contractual life		Weighted average exercise price per option		Number of options		Weighted average remaining contractual life		Weighted average exercise price per option
$3.55	to	8.32		213,700		8.09	$	5.42		70,283		7.68	$	6.40	to	8.32		198,700		7.09	$	5.47		127,000		6.85	$	6.06

The Company’s 2005 Restricted Stock Plan (the “2005 Plan”) provides for the grant of restricted stock awards. A total of 250,000 shares were reserved for issuance under the 2005 Plan. These shares are subject to such restrictions on transferability and other restrictions, if any, as the Compensation Committee may impose. During the nine months ended September 30, 2013, the Company awarded 41,000 restricted shares under the 2005 Plan, which vest annually over a three year period.

The Ballantyne Strong, Inc. 2014 Non-Employee Directors’ Restricted Stock Plan (the “Non-Employee Plan”) provides for the award of restricted shares to outside directors. A total of ~~250,000~~200,000 shares are reserved for issuance under the Non-Employee Plan. During the nine months ended September 30, ~~2013,~~2014, the Company granted ~~37,500~~41,760 restricted shares under the Non-Employee Plan to the Board of Directors. These shares will vest the day preceding the Company’s ~~2014~~2015 Annual Meeting of Stockholders.

In connection with the restricted stock granted to certain employees and non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected to be issued utilizing the most current information available to the Company at the date of the financial statements. The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant. During the three and nine month periods ended September 30, 2014, the Company awarded 240,000 shares under the 2010 Plan.

As of September 30, ~~2013,~~2014, the total unrecognized compensation cost related to non-vested restricted stock awards was approximately ~~$0.7~~$0.9 million which is expected to be recognized over a weighted average period of ~~2.1~~3.1 years.

The following table summarizes restricted stock activity for the nine months ended September 30, ~~2013:~~2014:

	Number of Restricted Stock Shares			Weighted Average Grant Price Fair Value		Number of Restricted Stock Shares			Weighted Average Grant Price Fair Value
Non-vested at December 31, 2012		84,200		$	5.24
Non-vested at December 31, 2013							129,500		$	4.42
Granted		87,500			4.28		281,760			3.83
Shares vested		(42,200	)		5.78		(68,167	)		4.54
Shares forfeited		—			—		(10,800	)		4.39
Non-vested at September 30, 2013		129,500		$	4.42
Non-vested at September 30, 2014							332,293		$	3.90

The estimated grant date fair value of purchase rights outstanding under the Employee Stock Purchase Plan at September 30, 2013 was $1.57 per share using the Black-Scholes option-pricing model made with the following weighted average assumptions:

The Company recorded insignificant share-based compensation expense pertaining to the stock purchase plan with insignificant associated tax benefits for each of the three and nine months ended September 30, 2013 and 2012. At September 30, 2013, the total unrecognized estimated compensation cost was insignificant.

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

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

		Asset Derivatives					Asset Derivatives
(in thousands)	Classification	September 30, 2013		December 31, 2012		Classification	September 30, 2014		December 31, 2013
Foreign exchange forward contracts	Other current assets	$	9,985	$	—	Other current assets	$	—	$	10,934

~~The above fair value at September 30, 2013 is offset against $10.0 million in other current assets, resulting in a net amount of $0.02 million of net asset.~~ All cash flows related to our foreign currency exchange contracts are classified as operating cash flows. We recognized in other income, the following realized and unrealized gains from foreign currency forward exchange contracts:

The Company’s top ten customers accounted for approximately ~~53.5%~~39.4% and ~~43.3%~~40.3% of total consolidated net revenues for the three and nine months ended September 30, ~~2013, respectively, and were from the theatre segment.~~2014, respectively. Trade accounts receivable from these customers represented approximately ~~33.1%~~22.8% of net consolidated receivables at September 30, ~~2013.~~2014. 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.~~products and services.

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

The Company and its subsidiaries lease plant and office facilities, furniture, autos and equipment under operating leases expiring through 2023. These leases generally contain renewal options and the Company expects to renew or replace certain of these leases in the ordinary course of business. The Company also has capital leases for computer equipment. The capital lease obligations related to accrued expenses is included in accrued expenses on the balance sheet.

The Company’s future minimum lease payments ~~for operating leases~~ are as follows:

During the fourth quarter of 2013, the Company revised its operating segments, which are organized based on the business leadership views operating the business after the integration of the acquired entities. All prior year segment data has been restated to conform to the new segments. As of September 30, ~~2013,~~2014, the Company’s operations were conducted ~~principally~~ through two business segments: ~~Theatre~~Systems Integration and ~~Lighting. Theatre~~Managed Services. Systems Integration operations include the sale ~~and service~~ of digital projection equipment, screens, sound systems ~~xenon lamps, lenses and other accessories. The lighting segment operations include~~in addition to the design, assembly and sale of ~~follow spotlights, stationary searchlights~~followspots and ~~computer operated~~other lighting ~~systems for~~products. Managed Services operations include the ~~motion picture production, television, live entertainment, theme parks~~delivery of end to end digital signage solutions, video communication solutions, content creation and ~~architectural industries.~~management and service of digital signage and digital cinema equipment. The Company allocates resources to business segments and evaluates the performance of these segments based upon reported segment operating profit. ~~All~~The Company records intersegment sales at costs approximating market and has eliminated all significant intercompany sales ~~are eliminated~~ in consolidation.

					Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
(In thousands)		September 30, 2013		December 31, 2012	2014		2013		2014		2013

Identifiable assets
Net revenue
United States	$	50,900	$	65,868	$	14,429	$	11,542	$	44,627	$	47,761
China						3,616		4,374		9,627		10,821
Latin America						1,120		1,055		4,254		7,505
Canada		24,218		21,092		1,415		530		4,305		2,036
Mexico						793		527		2,075		962
Europe						556		654		898		976
Asia (excluding China)		5,961		7,337		677		120		833		486
China		9,605		5,249
Other						58		53		93		318
Total	$	90,684	$	99,546	$	22,664	$	18,855	$	66,712	$	70,865

~~Net revenues by business segment are to unaffiliated customers.~~Intersegment sales have been recorded at amounts approximating market. Identifiable assets by geographical area are based on location of facilities. Net sales by geographical area are based on destination of sales.

Subsequent to the end of the quarter, on October 1, 2013, we acquired Convergent Media Systems, Inc. (CMS) from Sony Corporation for approximately $17.4 million in cash, which was the purchase price of $16.0 million adjusted for cash on hand in Canada and working capital variance based upon CMS’s targeted working capital.

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

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

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2012.~~2013. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except where required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

The Company designs, integrates, and installs technology solutions for a broad range of applications; develops and delivers out-of-home messaging, advertising and communications; manufactures projection screens and lighting products; and provides managed services including monitoring of networked equipment to our customers. We ~~are~~add value through our design, engineering, manufacturing excellence and customer service. We focus on the retail, financial, government and cinema markets. We have two primary operating segments: Systems Integration and Managed Services. The Systems Integration Segment provides a ~~manufacturer, distributor, integrator and service provider~~full range of product solutions primarily for the theatre exhibition industry onincluding a ~~worldwide basis. Through our Strong~~^® ~~branding, we can fully outfit~~wide spectrum of premier audio-visual products and ~~automate all aspects of a cinematic theatre including~~accessories such as digital ~~projection, cinema screens, library management systems, smart digital signage, flat panels and complete~~projectors, state of the art ~~sound~~projection screens, servers, library management systems, and audio systems. We ~~manufacture cinema screens in Joliette, Quebec, Canada, through our Strong/MDI Screens Systems, Inc. subsidiary.~~

~~Through our~~also sell lighting ~~division, we design, develop, manufacture, distribute, install and service lighting systems for premier architectural sites as well as for a full range of needs~~solutions for the architectural and entertainment lighting industry. The Managed Service Segment delivers solutions and various other industries worldwide. This includes followspots and other specialty lighting for event centers, arenas, exhibit halls, places of worship, concert tours, staged theatrical performances, and music, dance and various other venues with theatric lighting needs.

~~We have~~services across two primary ~~reportable core operating segments: theatre~~markets: digital out-of-home and ~~lighting.~~ cinema. These markets are served through the capabilities the Company has gained from the acquisition of Convergent in 2013 and from Strong Technical Services (“STS”) respectively. While there is digital signage equipment sold within this segment, the primary focus of this segment is providing solutions and services to our customers.

Our segments were determined based on the manner in which management organizes segments for making operating decisions and assessing performance. Approximately ~~93.8%~~65% of ~~the sales~~revenues for the first nine months of ~~the year~~2014 were from ~~theatre products~~systems integration and approximately ~~6.2%~~35% were ~~lighting products.~~from managed services. Additional information related to our reporting segments can be found in the notes to the consolidated financial statements.

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

Three Months EndedSeptember 30, ~~2013~~2014 Compared to the Three Months EndedSeptember 30, ~~2012~~2013

Net revenues during the three months ended September 30, ~~2013 decreased 52.0%~~2014 increased 20.2% to ~~$18.9~~$22.7 million from ~~$39.3~~$18.9 million during the three months ended September 30, ~~2012.~~2013.

Sales of ~~theatre~~systems integration products and services decreased ~~52.3%~~3.2% to ~~$18.3~~$15.7 million in ~~2013~~2014 from ~~$38.4~~$16.2 million in ~~2012.~~

2013. Sales of cinema products ~~in the third quarter of 2013~~and services decreased ~~54.3% to $15.6~~by $0.6 million ~~from $34.1 million in 2012~~ as the industry ~~change~~changes to digital projection equipment continues to wind down. Digital equipment and servers accounted for $17.8 million of the $20.0 million decrease in sales when compared to 2012, with sales of film equipment, parts and lamps accounting for the remaining decrease.down as expected. This was partially offset by an increase ~~in screen sales to $3.7 million in 2013 from $3.0 million a year-ago.~~

Service revenues decreased 36.0% in 2013 to $2.7 million from $4.3 million a year-ago due to non-recurring installation revenue related to the digital product sales. This reduction was partially offset by increasing revenue for recurring after-sale maintenance, repairs and NOC (Network Operation Center) services. As expected, revenues generated from servicing film equipment decreased toof $0.1 million in ~~2013 compared to $0.2 million in the third quarter~~sales of ~~2012.~~security products and services.

Sales of ~~lighting~~managed services products ~~decreased 38.3%~~and services increased 167.9% to ~~$0.5~~$7.2 million in 2014 from ~~$0.8~~$2.7 million in 2013. Sales of products and services related to digital signage were $4.2 million in 2014 resulting from the October 2013 acquisition of Convergent. These sales were driven through the distribution of digital signage equipment as well as content creation, management and distribution. This was in addition to a ~~year-ago.~~$0.3 million increase in digital cinema service driven by non-recurring demand revenue and increased Network Operations Center (“NOC”) contracts.

Sales outside the United States (mainly ~~theatre~~systems integration sales) ~~decreased~~increased to ~~$7.3~~$8.2 million in the ~~second~~third quarter of ~~2013~~2014 from ~~$9.2~~$7.3 million a year ~~ago. This was~~ago resulting primarily ~~driven by decreased~~from increased sales in ~~South America~~Canada and Asia. Export sales are sensitive to the timing of the digital cinema ~~rollout~~conversions in these countries ~~in addition to being~~and normal replacement cycles. Export sales are sensitive to worldwide economic and political conditions that lead to volatility. Certain areas of the world ~~have significant pricing pressures from domestic~~are more cost conscious than the U.S. market and there are instances where our products are priced higher than local manufacturers ~~and suppliers.~~making it more difficult to generate sufficient profit to justify selling into these regions. Additionally, foreign exchange rates and excise taxes ~~occasionally~~sometimes make it difficult to market our products overseas at reasonable selling prices.

Consolidated gross profit ~~decreased 10.3%~~increased 21.5% to ~~$3.3~~$4.1 million in the third quarter of ~~2013~~2014 from ~~$3.7~~$3.3 million a year-ago, and increased as a percent of total revenue ~~increased~~ to 17.9% from 17.7% ~~from 9.5%~~ in ~~2012.~~2013. Gross profit in the ~~theatre~~systems integration segment ~~decreased~~increased to ~~$3.3~~$3.1 million in the third quarter of 2014 from $2.8 million in 2013 ~~from $3.4 million in 2012~~ and increased as a percentage of ~~theatre~~ sales ~~increased~~ to ~~18.1%~~19.5% in 2014 from ~~8.9%~~17.3% a year-ago. The ~~decrease~~increase in gross ~~profit~~margin was driven by lower revenues in digital equipment sales. However, gross margin as a percentage of revenue increased as digital equipment sales, which carry lower margins, declined to make up a smaller percentage of total sales.the product mix.

The gross profit in the ~~lighting~~managed services segment ~~was $0.03~~amounted to $1.0 million or ~~4.9%~~13.8% as a percentage of revenues in the third quarter of ~~2013~~2014 compared to ~~$0.3~~$0.5 million or ~~35.9%~~19.7% as a percentage of revenues a year ago. The increase in ~~2012. The~~gross margin was driven by higher revenues through the acquisition of CMS, but the decrease in gross margin as a percentage of sales was ~~due to decreased volumes.~~driven by product mix and lower utilization of field technicians.

Selling expenses ~~decreased 37.0%~~increased 116.8% to ~~$0.9~~$1.8 million in the third quarter of ~~2013~~2014 compared to ~~$1.3~~$0.9 million a year-ago ~~but increased~~and as a percentage of revenues increased to 8.1% from 4.5% ~~in 2013 from 3.4% in 2012.~~a year-ago. The increase in selling expenses ~~as a percentage of revenues is~~was primarily due to ~~decreased revenues. The decrease in selling expenses is due to lower consultant and tradeshow expenses.~~additional sales staff added as part of the Convergent acquisition.

Administrative expenses increased ~~7.6%~~21.5% to ~~$2.5~~$3.1 million in the third quarter of ~~2013~~2014 from ~~$2.3~~$2.5 million ~~in 2012, and~~a year ago, but as a ~~percent~~percentage of total ~~revenue~~revenues were consistent at 13.5% in 2014 compared to 13.4% in ~~2013 from 6.0% in 2012.~~2013. The increase in expenses is primarily due to additional administrative expenses related to the acquisition ~~costs~~ of ~~$0.2 million.~~Convergent partially offset by lower compensation related costs.

Our results for the third quarter of ~~2013~~2014 reflect ~~minimal~~no gains or losses pertaining to our 44.4% share of equity in the ~~income~~loss from Digital Link II, ~~LLC. This compares~~LLC, compared to a minimal loss ~~of approximately $0.1 million during~~in the third quarter of ~~2012.~~2013.

The third quarter of ~~2013~~2014 includes ~~a minimal loss in~~ other income ~~(expense)~~of $0.4 million compared to ~~$0.2~~other income of $0.1 million in ~~2012,~~the third quarter of 2013 primarily related to net gains ~~(losses)~~ on foreign currency ~~transactions.~~transactions and interest income.

We recorded income tax benefit of approximately $0.3 million in the third quarter of 2014 compared to a minimal income tax expense in the third quarter of ~~2013 and 2012.~~2013. The effective tax rate (calculated as a ratio of income tax expense to pretax earnings, inclusive of equity method investment earnings) was approximately ~~47.8%~~74.8% and ~~0.1%~~47.8% in the quarters ending September 30, ~~2013~~2014 and ~~2012,~~2013, respectively. The ~~effective tax rate differs from the statutory rates primarily as a result of differing foreign and U.S. tax rates applied to respective pre-tax earnings by tax jurisdiction. The~~Company’s effective rate ~~increased~~was higher in ~~2013 from 2012 due to a higher proportion of earnings before tax being within our US operations which has a higher rate. In addition the effective tax rate for~~ the three months ended September 30, 2014 compared to the comparable period of 2013 ~~were impacted as~~due to the ~~Company also recorded $0.03 million of additional~~generated tax benefits from U.S. operating losses at significantly higher rates more than offsetting the tax expense ~~due to return to provision adjustments~~ related to ~~filing the 2012~~our Canadian operations, Strong/MDI Screen Systems, Inc., which has a lower tax ~~returns.~~rate.

As a result of the items outlined above, we generated a net loss of $0.1 million, and basic and diluted loss per share of $0.01 in the three months ended September 30, 2014 compared to a minimal net gain and basic and diluted earnings per share ~~in the three months ended September 30, 2013 compared to a loss of $0.3 million in 2012 and basic and diluted loss per share of $0.02~~ a year-ago.

Nine Months EndedSeptember 30, ~~2013~~2014 Compared to theNine Months EndedSeptember 30, ~~2012~~2013

Net revenues during the nine months ended September 30, ~~2013~~2014 decreased ~~45.5%~~5.9% to ~~$70.9~~$66.7 million from ~~$130.0~~$70.9 million during the nine months ended September 30, ~~2012.~~2013.

Sales of ~~theatre~~systems integration products and services decreased ~~48.0%~~29.6% to ~~$66.5~~$44.5 million in ~~2013~~2014 from ~~$127.8~~$63.2 million in ~~2012.~~

2013. Sales of cinema products and services decreased ~~50.1% to $58.1~~by $16.1 million ~~in 2013 from $116.5 million in 2012~~ as the industry ~~change~~changes to digital projection equipment continues to wind ~~down. Digital equipment and servers accounted for $50.8 million~~down as expected. In addition sales of lighting products decreased by $3.0 million. This decrease was driven by the completion of the ~~$58.4 million decrease~~World Trade Center project in sales compared to 2012, with sales of film equipment and lamps accounting for the remaining decrease. This was partially offset by an increase in screen sales to $10.8 million in 2013 from $9.3 million a year-ago.2013.

Service revenues decreased 25.4% to $8.4 million in 2013 from $11.2 million a year-ago due to non-recurring installation revenue related to the digital product sales. This reduction was partially offset by increasing revenue for recurring after-sale maintenance, repairs and NOC (Network Operations Center) services. As expected, revenues generated from servicing film equipment decreased to $0.2 million in 2013 compared to $0.6 million in 2012.

Sales of ~~lighting~~managed services products and services increased ~~98.6%~~174.3% to ~~$4.4~~$23.1 million in 2014 from ~~$2.2~~$8.4 million in 2013. Sales of products and services related to digital signage were $12.4 million in 2014 resulting from the October 2013 acquisition of Convergent. These sales were driven through the distribution of digital signage equipment as well as content creation, management and distribution. This was in addition to a ~~year-ago, primarily due to the completion of the beacon~~$2.7 million increase in digital cinema service driven by non-recurring demand revenue and ~~uplights on the World Trade Center. This project shows our continuing focus on a growing market, architectural accent lighting.~~increased NOC contracts.

Sales outside the United States (mainly ~~theatre~~systems integration sales) ~~increased~~decreased to $22.1 million in 2014 from $23.1 million a year ago resulting primarily from decreased sales in ~~2013 from $22.4 million in 2012. This was driven~~Latin America and China partially offset by increased sales in ~~South America.~~Canada and Mexico. Export sales ~~fluctuations in these markets~~ are ~~reflective of highly competitive environments combined with sensitivity~~sensitive to the timing of the digital cinema ~~rollout~~conversions in these countries ~~as well as diminishing film equipment sales.~~and normal replacement cycles. Export sales are ~~also~~ sensitive to worldwide economic and political conditions that lead to ~~volatility in~~volatility. Certain areas of the ~~market.~~ world are more cost conscious than the U.S. market and there are instances where our products are priced higher than local manufacturers making it more difficult to generate sufficient profit to justify selling into these regions. Additionally, foreign exchange rates and excise taxes sometimes make it difficult to market our products overseas at reasonable selling prices.

Consolidated gross profit ~~decreased 27.3%~~increased 4.9% to ~~$11.9~~$12.5 million in ~~2013~~2014 from ~~$16.4~~$11.9 million a year-ago, and increased as a ~~percent~~percentage of total ~~revenue increased~~revenues to 18.8% from 16.8% ~~from 12.6%~~ in ~~2012.~~2013. Gross profit in the ~~theatre~~systems integration segment decreased to ~~$11.1~~$8.2 million in 2014 from $9.8 million in 2013, ~~from $15.9 million in 2012 and~~but increased as a percentage of ~~theatre~~ sales ~~increased~~ to ~~16.6%~~18.5% in 2014 from ~~12.4%~~15.6% a year-ago. The decrease in gross ~~profit~~margin dollars was driven by lower ~~revenues~~volume, but the increase in ~~digital equipment sales. However,~~ gross margin as a percentage of ~~revenue increased as digital equipment~~ sales ~~which carry lower margins, declined to make up a smaller percentage of total sales.~~was driven by product mix.

The gross profit in the ~~lighting~~managed services segment amounted to ~~$0.9~~$4.3 million or ~~19.8%~~18.5% as a percentage of revenues in ~~2013~~2014 compared to ~~$0.5~~$2.0 million or ~~24.2%~~24.3% as a percentage of revenues in ~~2012.~~2013. The increase in gross margin was ~~due to~~driven by higher revenues through the ~~completion~~acquisition of CMS, but the ~~World Trade Center.~~decrease in gross margin as a percentage of sales was driven by product mix and lower utilization of field technicians.

Selling expenses ~~decreased 24.1%~~increased 91.3% to ~~$2.6~~$4.9 million ~~during 2013~~in 2014 compared to ~~$3.4~~$2.6 million a year-ago and as a percentage of revenues increased to ~~3.6%~~7.4% from ~~2.6%~~3.6% a year-ago. The increase in selling expenses was primarily due to additional sales staff added as part of the Convergent acquisition partially offset by lower compensation related costs.

Administrative expenses increased 30.8% to $9.8 million in 2014 from $7.5 million in 2013 and as a ~~percentage~~percent of ~~revenues~~total revenue increased to 14.7% in 2014 from 10.6% in 2013. The increase in expenses is primarily due to ~~decreased revenues. The decrease in selling expenses is due to lower travel, consultant and tradeshow expenses.~~

~~General and~~additional administrative expenses ~~decreased 12.5%~~related to ~~$7.5 million in 2013 from $8.5 million in 2012 and amounted to 10.6% and 6.6%~~the acquisition of ~~revenues in 2013 and 2012, respectively. The decrease in expense is primarily due to salaries, travel expenses and lower professional fees.~~Convergent.

The gain on sale of assets in 2012 is the result of selling the analog projector manufacturing machinery and equipment previously identified as held for sale in connection with our corporate-wide restructuring initiative we began in 2011.

Our results for ~~2013~~2014 reflect ~~losses~~a gain of approximately $0.1 million pertaining to our 44.4% share of equity in the ~~income~~loss from Digital Link II, ~~LLC. This~~LLC, compared to a loss ~~compares to minimal income during the nine months ended September 30, 2012.~~of approximately $0.1 million in 2013.

~~Other~~Our results for 2014 include other income of ~~$0.5~~$0.8 million ~~in 2013, compared to $0.2 million in 2012,~~ primarily related to net gains on foreign currency ~~transactions.~~transactions and interest income, compared to $0.6 million in 2013.

We recorded income tax benefit of approximately $0.9 million in 2014 compared to income tax expense of ~~approximately~~ $0.5 million in ~~2013 compared to $2.0 million in 2012.~~2013. The effective tax rate (calculated as a ratio of income tax expense to pretax earnings, inclusive of equity method investment earnings) was approximately ~~21.0%~~74.6% and ~~33.7%~~21.0% in the nine months ending September 30, ~~2013~~2014 and ~~2012,~~2013, respectively. The ~~effective tax rate differs from the statutory rates primarily as a result of differing foreign and U.S. tax rates applied to respective pre-tax earnings by tax jurisdiction. The~~Company’s effective rate ~~decreased~~was higher in the nine months ended September 30, 2014 compared to the comparable period of 2013 ~~from 2012~~ due to athe generated tax benefits from U.S. operating losses at significantly higher ~~proportion of earnings before~~rates more than offsetting the tax ~~being within~~expense related to our Canadian operations, Strong/MDI Screen Systems, Inc., which has a lower tax rate.

As a result of the items outlined above, we generated net losses of approximately $0.3 million and basic and diluted losses per share of $0.02 in the nine months ended September 30, 2014 compared to earnings of ~~approximately~~ $1.9 million in 2013 and basic and diluted earnings per share of $0.13 ~~in 2013 compared to earnings of $4.0 million during 2012 and basic and diluted earnings per share of $0.28~~ a ~~year-ago.~~year-ago, respectively.

During the past several years, we have met our working capital and capital resource needs from either our operating or investing cash flows or a combination of both. We ended the third quarter with total cash and cash equivalents of ~~$26.3~~$24.0 million compared to ~~$40.2~~$28.8 million at December 31, ~~2012.~~2013.

We are party to a $20 million Revolving Credit Agreement and Note (collectively, the ~~“Revolving Credit~~“Credit Agreement”) with Wells Fargo Bank, N.A. (“Wells Fargo”). which was renewed on June 20, 2014. The borrowings from the ~~Revolving~~ Credit Agreement will primarily be used for working capital purposes and for other general corporate purposes. The Company’s accounts receivable, general intangibles and inventory secure the ~~Revolving~~ Credit Agreement. Since inception of the agreement, no amounts have been borrowed on the ~~Revolving~~ Credit Agreement. At September 30, ~~2013,~~2014, the Company had availability of $20 million.

During the 4th quarter of 2013 the Company determined that it would no longer indefinitely reinvest $12.0 million of accumulated earnings in Canada. The Company repatriated that $12 million during the second quarter. As of September 30, 2014, $7.5 million of the $24.0 million of cash and cash equivalents was held by our foreign subsidiaries. The Company intends to indefinitely reinvest the remaining accumulated earnings in its foreign subsidiaries and has not accrued U.S. taxes on those earnings. If these funds are needed for our operations in the U.S. we would be required to accrue and pay U.S. income taxes and foreign taxes on a portion of these funds when repatriated back to the U.S.

~~Cash flows~~Net cash used by operating activities was $3.3 million in the first nine months of 2014, which included a net loss of $0.3 million, offset by non-cash charges (benefits) deferred tax expense, depreciation and amortization, reserve provisions and non-cash stock compensation totaling $0.5 million. Changes in working capital used cash from operating activities ~~consist~~ of ~~net~~$3.5 million, primarily due to decreases in accounts payables, accrued expenses and income ~~adjusted~~taxes, partially offset by a decrease in accounts receivable. Accounts receivable decreased $6.0 million due to collections of the higher sales volume of the prior 2013 quarter compared to the third quarter of 2014. Accounts payable balances decreased $2.0 million due to payments made to vendors during the quarter for ~~non-cash items including depreciation and amortization, deferred~~purchases made to fulfill orders during the fourth quarter of 2013. The balance of current income taxes ~~and~~recoverable decreased cash provided by operating activities by $2.9 million due to the ~~effect of working capital changes.~~tax benefits generated from 2014 U.S. operating losses.

Net cash provided by operating activities was $5.8 million in the first nine months of 2013, which included net income of $1.9 million, plus non-cash charges (benefits) for gain on assets, deferred tax expense, depreciation and amortization, reserve provisions and non-cash stock compensation totaling $2.4 million. Changes in working capital provided cash from operating activities of $1.5 million. Additional changes in working capital was driven by a decrease in accounts receivable, partially offset by increases in inventories and decreases in accounts payable and customer deposits. Accounts receivable balances decreased $13.6 million due to collections of the higher sales volume of the prior quarter 2012 as compared to the third quarter of 2013. Accounts payable decreased $7.7 million as the Company paid for fourth quarter 2012 inventory purchases.

Net cash used in operating activities was $5.3 million in the first nine months of 2012, which included net income of $4.0 million, plus non-cash charges (benefits) for gain on assets, deferred tax expense, depreciation and amortization, reserve provisions and non-cash stock compensation totaling $2.0 million. Changes in working capital used cash from operating activities of $11.3 million. This is primarily due to a decrease in accounts payable, as well as accruals and timing of tax deposits, partially offset by a decrease in the balance of accounts receivables and other current assets. Accounts payable decreased $12.7 million as the Company paid for fourth quarter 2011 inventory purchases. Accounts receivable balances decreased $6.5 million due to collections of the higher sales volume of the prior fourth quarter 2011 as compared to the third quarter of 2012.

Net cash used in investing activities amounted to $1.0 million in 2014 compared to $19.4 million in ~~2013 compared to net~~2013. The cash ~~provided by~~used in investing activities ~~of $4.7 million~~ in ~~2012. This is~~2014 was primarily ~~due to the~~for capital expenditures. The cash used in investing activities in 2013 included a deposit of $17.4 million for the acquisition of Convergent, ~~prior to quarter end. The acquisition’s effective date was October 1, 2013. The remaining cash used in investing activities in 2013 was~~$1.7 million for ~~capital expenditures of $0.2 million and~~ the acquisition of Elite ~~of $1.7 million. Cash was provided by a $1.5 million distribution from our joint venture investment in Digital Link II~~ and ~~$3.0 million from the sale of the analog facility and equipment in 2012, which was partially offset by~~ $0.2 million of capital expenditures.

Net cash used in financing was minimal in 2014 and 2013. ~~Cash of $2.7 million was used in 2012 to purchase treasury stock.~~

Our primary exposure to foreign currency fluctuations pertain to our subsidiaries in Canada and China. In certain instances, we may enter into a foreign exchange contract to manage a portion of this risk. For the nine months ended September 30, ~~2013~~2014 we recorded ~~minimal~~$0.1 million in realized and unrealized ~~gains~~losses associated with these contracts in our condensed consolidated statement of income. This compares to minimal gains ~~$0.2 million~~ in the comparative period of ~~2012.~~2013.

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

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

Contractual Obligations	Total		Remaining in 2013		One to Three Years		Three to Five Years		Thereafter
											Total		Remaining in 2014		One to ThreeYears		Three to Five Years		Thereafter
											(in thousands)
Postretirement benefits		178		5		42		46		85	$	129	$	4	$	38	$	31	$	56
Capital leases												157		14		114		29		—
Operating leases		3,767		158		924		714		1,971		4,176		246		1,279		963		1,688
Contractual cash obligations	$	3,945	$	163	$	966	$	760	$	2,056	$	4,462	$	264	$	1,431	$	1,023	$	1,744

●We have accrued approximately $0.2 million of unrecognized tax benefits in the financial statements as tax liability, including interest and penalties, in accordance with FIN 48 as of September 30, 2013. Amounts for which the year of settlement occurs cannot be reasonably estimated.

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

Generally, our quarterly revenue and earnings fluctuate moderately from quarter to quarter. As we increase our sales in our current markets, and as we expand into new markets in different geographies, it is possible we may experience different seasonality patterns in our business. As a result, the results of operations for the period ended September 30, ~~2013~~2014 are not necessarily indicative of the results that may be expected for an entire fiscal year.

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

~~There are no recently~~In May 2014, the FASB issued ~~accounting pronouncements~~Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the amount of revenue to which ~~we believe~~it expects to be entitled for the transfer of promised goods or services to customers. The ASU will ~~materially~~replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The guidance is effective for the Company beginning January 1, 2017 and may be adopted using a full retrospective or a modified cumulative effect approach. Early adoption is not permitted. The Company is currently evaluating the potential impact of adopting this guidance and has not yet selected a transition method nor has it determined the effect of the standard on its ~~consolidated~~ongoing financial ~~statements.~~reporting.

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

Our accounting policies and estimates that are most critical to the presentation of our results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as our critical accounting policies. See further discussion of our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our year ended December 31, ~~2012.~~2013. We periodically re-evaluate and adjust our critical accounting policies as circumstances change. There were no significant changes in our critical accounting policies during the nine months ended September 30, ~~2013.~~2014.

The principal market risks affecting us are exposure to interest rates and foreign currency exchange rates. We market our products throughout the United States and the world. As a result, we could be adversely affected by such factors as changes in foreign currency rates and weak economic conditions. As a majority of our sales are currently denominated in U.S. dollars, a strengthening of the dollar can and sometimes has made our products less competitive in foreign markets.

Interest Rates — We have a variable interest rate credit facility, however, we have no outstanding balances as of September 30, ~~2013.~~2014. If we would borrow up to the maximum amount available under these facilities, a one percent increase in the interest rate would increase interest expense by $0.2 million per annum. Interest rate risks from our other interest related accounts such as our postretirement obligations are not deemed significant. We currently have long-term notes receivables bearing interest rates of 15% and are recorded at fair market value. A change in long-term interest rates for comparable types of instruments would have the effect of us recording changes in fair value through our statement of operations.

Foreign Exchange — Exposures to transactions denominated in a currency other than the entity’s functional currency are primarily related to our China and Canadian subsidiaries. From time to time, as market conditions indicate, we will enter into foreign currency contracts to manage the risks associated with forecasted transactions. At September 30, ~~2013,~~2014, we had no outstanding ~~Canadian~~ foreign currency forward ~~contracts to sell $10.3 million Canadian at fixed prices which will settle during the fourth quarter of 2013.~~contracts.

A portion of our cash in the China and Canadian subsidiaries is denominated in foreign currencies, where fluctuations in exchange rates will impact our cash balances in U.S. dollar terms. A hypothetical 10% change in the value of the U.S. dollar would impact our reported cash balances by approximately ~~$0.4~~$0.5 million.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective at ensuring that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (as amended) is (1) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter for the period covered by this report that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.

In the ordinary course of business operations, we are involved, from time to time, in certain legal disputes. No such disputes, individually or in the aggregate, are expected to have a material effect on our business or financial condition.

Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2012~~2013 includes a detailed discussion of the Company’s risk factors. There have been no material changes to the risk factors previously disclosed.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Incorporated by Reference

Exhibit
Number

Document Description

Form

Exhibit

Filing
Date

Filed
Herewith

Document Description

Form

Exhibit

Filing
Date

Filed
Herewith

2.1

Stock Purchase Agreement, dated as of October 1, 2013, by and between Ballantyne Strong, Inc. and Sony Electronics Inc.

8-K

2.1

October 3, 2013

3.1

Certificate of Incorporation of Ballantyne of Omaha, Inc.

S-8

3.1

12/7/06

3.2

Certificate of Amendment of Certificate of Incorporation

S-8

3.1.1

12/7/06

3.3

Certificate of Amendment of Certificate of Incorporation

S-8

3.1.2

12/7/06

3.4

Certificate of Amendment of Certificate of Incorporation

S-8

3.1.3

12/7/06

3.5

Certificate of Amendment of Certificate of Incorporation

S-8

3.1.4

12/7/06

3.6

Ballantyne of Omaha, Inc. Bylaws

10-K

3.2

4/1/08

3.7

First Amendment to Bylaws of Ballantyne of Omaha, Inc.

10-K

3.2.1

4/1/08

3.8

Second Amendment to Bylaws of Ballantyne of Omaha, Inc.

10-K

3.2.2

4/1/08

3.9

Third Amendment to Bylaws of Ballantyne of Omaha, Inc.

10-K

3.2.3

4/1/08

3.10

Fourth Amendment to Bylaws of Ballantyne of Omaha, Inc.

10-K

3.2.4

4/1/08

3.11

Fifth Amendment to Bylaws of Ballantyne of Omaha, Inc.

5/2/12

10.1

Third Amendment to Credit Agreement, dated June 20, 2014, by and between the company and Wells Fargo Bank, N.A.

8-K

4.1

6/25/14

10.2

$20,000,000 Revoloving Line of Credit Note, dated June 20, 2014, delivered by the Company to Wells Fargo Bank, N.A.

8-K

4.2

6/25/14

31.1

Rule 13a-14(a) Certification of Chief Executive Officer

31.2

Rule 13a-14(a) Certification of Chief Financial Officer

32.1

18 U.S.C. Section 1350 Certification of Chief Executive Officer

32.2

18 U.S.C. Section 1350 Certification of Chief Financial Officer

101

The following materials from Ballantyne Strong’s, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.

The following materials from Ballantyne Strong Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.

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

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

Large accelerated filer ☐		Accelerated filer ☒

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

Class		Outstanding as of November ~~1, 2013~~ 3, 2014
Common Stock, $.01, par value		~~14,139,462~~14,421,222 shares

		Page No.

	PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets, September 30, ~~2013~~2014 and December 31, ~~2012~~2013	3

	Condensed Consolidated Statements of ~~Operations~~Income for the Three and Nine Months Ended September 30, ~~2013~~2014 and ~~2012~~2013	4

	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2013~~2014 and ~~2012~~2013	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2013~~2014 and ~~2012~~2013	6

	Notes to the Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1516

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2021

Item 4.	Controls and Procedures	2022

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2122

Item 1A.	Risk Factors	2122


Item 6.	Exhibits	2122

	Signatures	2122

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net revenues	$	18,855		$	39,260		$	70,865		$	129,987
Cost of revenues		15,517			35,539			58,934			113,569
Gross profit		3,338			3,721			11,931			16,418
Selling and administrative expenses:
Selling		850			1,349			2,586			3,405
Administrative		2,524			2,345			7,478			8,547
Total selling and administrative expenses		3,374			3,694			10,064			11,952
Gain (loss) on the sale/disposal/transfer of assets		3			(17	)		7			1,361
Income (loss) from operations		(33	)		10			1,874			5,827
Net interest income (expense)		152			(8	)		169			(30	)
Equity income (loss) of joint venture		2			(65	)		(117	)		1
Other income (expense), net		(33	)		(205	)		463			208
Income (loss) before income taxes		88			(268	)		2,389			6,006
Income tax expense		(42	)		—			(502	)		(2,024	)
Net earnings (loss)	$	46		$	(268	)	$	1,887		$	3,982
Basic earnings (loss) per share	$	0.00		$	(0.02	)	$	0.13		$	0.28
Diluted earnings (loss) per share	$	0.00		$	(0.02	)	$	0.13		$	0.28


Weighted average shares outstanding:
Basic		14,009			13,959			13,995			14,055
Diluted		14,039			13,959			14,025			14,136

	Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014			2013
Net earnings (losses)	$	(109	)	$	46	$	(322	)	$	1,887
Currency translation adjustment:
Unrealized net change arising during period		(710	)		535		(1,113	)		(556	)
Other comprehensive gain (loss)		(710	)		535		(1,113	)		(556	)
Comprehensive income (loss)	$	(819	)	$	581	$	(1,435	)	$	1,331

	Nine Months EndedSeptember 30,
	2014			2013

Cash flows from operating activities:
Net earnings (loss)	$	(322	)	$	1,887
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for doubtful accounts		9			194
Provision for obsolete inventory		(117	)		(13	)
Provision for warranty		(191	)		321
Depreciation and amortization		1,374			1,022
Equity in (income) loss of joint venture		(95	)		117
Loss on forward contracts		145			(9	)
(Gain) loss on disposal or transfer of assets		(12	)		(7	)
Deferred income taxes		(916	)		376
Share-based compensation expense		292			345
Changes in operating assets and liabilities:
Accounts, unbilled and notes receivable		5,976			13,441
Inventories		(1,348	)		(2,912	)
Other current assets		(8	)		1,563
Accounts payable		(2,094	)		(7,665	)
Accrued expenses		(2,050	)		(1,048	)
Customer deposits/deferred revenue		(917	)		(2,771	)
Current income taxes		(2,938	)		813
Other assets		(83	)		121
Net cash (used in) provided by operating activities		(3,295	)		5,775

Cash Flows from investing activities:
Purchase of Peintures Elite, Inc.		—			(1,747	)
Deposit on Convergent acquisition		—			(17,424	)
Capital expenditures		(1,057	)		(231	)
Proceeds from sale of assets		58			6
Net cash used in investing activities		(999	)		(19,396	)

Cash flows from financing activities:
Excess tax benefits from share-based arrangements		(7	)		(11	)
Payments on capital lease obligations		(14	)		—
Proceeds from employee stock purchase plan		—			4
Net cash used in financing activities		(21	)		(7	)
Effect of exchange rate changes on cash and cash equivalents		(460	)		(207	)
Net decrease in cash and cash equivalents		(4,775	)		(13,835	)
Cash and cash equivalents at beginning of period		28,791			40,168
Cash and cash equivalents at end of period	$	24,016		$	26,333

	Level 1		Level 2		Level 3		Total
	$ in thousands
Cash and cash equivalents	$	26,333	$	—	$	—	$	26,333
Foreign currency forward contracts	$	—	$	9,985	$	—	$	9,985
Notes Receivable	$	—	$	—	$	2,388	$	2,388

	Level 1		Level 2		Level 3		Total
	$in thousands
Cash and cash equivalents	$	24,016	$	—	$	—	$	24,016
Note Receivable	$	—	$	—	$	2,855	$	2,855

$ in thousands	Fair Value at 9/30/2013		Valuation Technique	Unobservable input	Range
Notes Receivable	$	2,388	Discounted cash flow	Probability of default		0	%
				Prepayment rates		0	%
				Loss severity		0	%

$in thousands	Fair Value at 9/30/2014		Valuation Technique	Unobservable input	Range
Note Receivable	$	2,855	Discounted cash flow	Probability of default		0	%
				Prepayment rates		0	%
				Loss severity		0	%

	Nine months ended September 30
	2013		2012
	$ in thousands
Notes Receivable balance, beginning of period	$	2,232	$	2,062
Interest Income		156		—
Issuances of new notes		—		155
Notes Receivable balance, end of period	$	2,388	$	2,217

	Nine months endedSeptember 30
	2014		2013
	$ in thousands
Note Receivable balance, beginning of period	$	2,497	$	2,232
Interest income accrued		358		156
Note Receivable balance, end of period	$	2,855	$	2,388

	Useful life		Gross		Accumulated amortization			Net
	(Years)		( in thousands)
Intangible assets subject to amortization:
Customer relationships		4-9	$	1,598	$	(1,569	)	$	29
Trademarks		3		217		(217	)		—
Software		3		234		(94	)		140
Software in development		3		489		—			489
Product Formulation		10		545		(129	)		416
Total			$	3,083	$	(2,009	)	$	1,074

	Amount
	(in thousands)
Remainder 2014	$	54
2015		164
2016		109
2017		88
2018		69
2019		37

~~Expected dividend yield at date of grant~~	0	%
~~Expected stock price volatility~~	~~58.5~~	%
~~Risk-free interest rate~~	~~0.9~~	%
~~Expected life of options (in years)~~	~~5.5~~

~~Expected dividend yield at date of grant~~	0	%
~~Expected stock price volatility~~	~~29.89~~	%
~~Risk-free interest rate~~	~~0.14~~	%
~~Expected term (in years)~~	1

	(in thousands)
Balance as of December 31, 2013	$	1,123
Foreign currency translation		(57	)
Balance as of September 30, 2014	$	1,066

	(in thousands)
Accrued severance at beginning of period	$	88
Severance paid		(66	)
Accrued severance at end of period	$	22

	(in thousands)
Accrued liability at beginning of period	$	896
Severance paid		(424	)
Site closure costs paid		(58	)
Accrued liability at end of period	$	414

	Three Months EndedSeptember 30,					Nine Months EndedSeptember 30,
(In Thousands)(	2014		2013			2014		2013
Share based compensation expense	$	93	$	125	)	$	292	$	345

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2012		191,200	$	5.64		8.69	$	—
Granted		22,500		3.55
Exercised		—		—
Forfeited		—		—
Outstanding at September 30, 2013		213,700	$	5.42		8.09	$	16,393
Exercisable at September 30, 2013		70,283	$	6.40		7.68	$	418

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

		Three Months EndedSeptember 30,				NineMonths EndedSeptember 30,
(in thousands)	Classification	2014		2013		2014			2013
Foreign exchange forward contracts	Other Income (Loss)	$	—	$	197	$	(145	)	$	9	)

			Payments due by period ($ in thousands)

	Total		Remainder 2013		2014		2015		2016		2017		Thereafter
Operating leases	$	3,767	$	158	$	579	$	345	$	355	$	359	$	1,971

Year Ending December 31,	Capital Leases		Operating Leases
	(In thousands)
Remainder 2014	$	14	$	246
2015		57		733
2016		57		546
2017		29		499
2018		--		464
Thereafter		--		1,688
Total minimum lease payments		157
Less: Amount representing interest		11
Present value of minimum lease payments		146
Less: Current maturities		51
Capital lease obligations, net of current portion	$	95

(In thousands)	September 30, 2014		December 31, 2013

Identifiable assets
Systems Integration	$	65,470	$	67,839
Managed Services		23,621		27,605
Total	$	89,091	$	95,444

	Three Months Ended September 30,
	2014			2013
	(In thousands)
Systems Integration	$	15,725		$	16,249
Managed Services		7,170			2,676
Total segment revenues		22,895			18,925
Eliminations		(231	)		(70	)
Total net revenues	$	22,664		$	18,855

BALLANTYNE STRONG, INC.

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

Date:	November ~~12, 2013~~7, 2014	Date:	November ~~12, 2013~~7, 2014