| Summary of Significant Accounting Policies | 2.
Summary of Significant Accounting Policies Revenue
Recognition The
Company accounts for revenue using the following steps:
● Identify
the contract, or contracts, with a customer;
● Identify
the performance obligations in the contract;
● Determine
the transaction price;
● Allocate
the transaction price to the identified performance obligations; and
● Recognize
revenue when, or as, the Company satisfies the performance obligations. The
Company combines contracts with the same customer into a single contract for accounting purposes when the contracts are entered into
at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends on the
other contract, or the services are considered a single performance obligation. If an arrangement involves multiple performance obligations,
the items are analyzed to determine whether they are distinct, whether the items have value on a standalone basis, and whether there
is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified
performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price
is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using
a cost-plus margin approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements
by determining the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects
to provide and the contractual pricing based on those quantities. The Company only includes a portion of variable consideration in the
transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when
the uncertainty associated with the variable consideration is subsequently resolved. The Company considers the sensitivity of the estimate,
its relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the
magnitude of the variable consideration to the overall arrangement. As
discussed in more detail below, revenue is recognized when a customer obtains control of promised goods or services under the terms of
a contract and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing
services. The Company typically does not have any material extended payment terms, as payment is due at or shortly after the time of
the sale. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue. The
Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced
to the clients. Unbilled receivables are recorded as accounts receivable when the Company has an unconditional right to contract consideration.
A contract liability is recognized as deferred revenue when the Company invoices clients, or receives cash, in advance of performing
the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related
performance obligation. The
Company defers costs to acquire contracts, including commissions, incentives and payroll taxes, if they are incremental and recoverable
costs of obtaining a customer contract with a term exceeding one year. Deferred contract costs are reported within other assets and amortized
to selling expense over the contract term, which generally ranges from one to five years. The Company has elected to recognize the incremental
costs of obtaining a contract with a term of less than one year as a selling expense when incurred. The Company did not have any deferred
contract costs as of December 31, 2021 or December 31, 2020. Screen
system sales The
Company typically recognizes revenue on the sale of its screen systems when control of the screen is transferred to the customer, usually
at time of shipment. However, revenue is recognized upon delivery for certain international shipments with longer shipping transit times
because control transfers upon customer delivery. The cost of freight and shipping to the customer is recognized in cost of sales at
the time of transfer of control to the customer. For contracts that are long-term in nature, the Company believes that the use of the
percentage-of-completion method is appropriate as the Company has the ability to make reasonably dependable estimates of the extent of
progress towards completion, contract revenues, and contract costs. Under the percentage-of-completion method, revenue is recorded based
on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract. Digital
equipment sales The
Company recognizes revenue on sales of digital equipment when the control of the equipment is transferred, which typically occurs at
the time of shipment from the Company’s warehouse or drop-shipment from a third party. The cost of freight and shipping to the
customer is recognized in cost of sales at the time of transfer of control to the customer. Field
maintenance and monitoring services The
Company sells service contracts that provide maintenance and monitoring services to its Strong Entertainment customers. These contracts
are generally 12 months in length. Revenue related to service contracts is recognized ratably over the term of the agreement. In
addition to selling service contracts, the Company also performs discrete time and materials-based maintenance and repair work for customers
in the Strong Entertainment segment. Revenue related to time and materials-based maintenance and repair work is recognized at the point
in time when the performance obligation has been fully satisfied. Installation
services The
Company performs installation services for its Strong Entertainment customers and recognizes revenue upon completion of the installations. Extended
warranty sales The
Company sells extended warranties to its Strong Entertainment customers. Typically, the Company is the primary obligor, and revenue is
recognized on a gross basis ratably over the term of the extended warranty. Cash
and Cash Equivalents All
short-term, highly liquid financial instruments are classified as cash equivalents in the consolidated balance sheets and statements
of cash flows. Generally, these instruments have maturities of three months or less from date of purchase. As of December 31, 2021, $ 2.4 8.7 Restricted
Cash Restricted
cash represents amounts held in a collateral account for the Company’s corporate travel and purchasing credit card program. Equity
Holdings The
Company applies the equity method of accounting to its holdings when it has significant influence, but not controlling interest,
in the entity. Judgment regarding the level of influence over each equity method holding includes considering key factors
such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany
transactions. The Company’s proportionate share of the net income (loss) resulting from these equity holdings is reported
under the line item captioned “equity method holding income (loss)” in our consolidated statements of operations.
The Company’s equity method holdings are reported at cost and adjusted each period for the Company’s share of the
entity’s income or loss and dividends paid, if any. The Company’s share of the entity’s income
or loss is recorded on a one quarter lag for all equity method holdings. The Company classifies distributions received from equity
method holdings using the cumulative earnings approach on the condensed consolidated statements of cash flows. Changes in fair
value of holdings in marketable equity securities of unconsolidated entities in which the Company is not able to exercise significant
influence (“Fair Value Holdings”) are recognized on the consolidated statement of operations. Equity holdings
in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence (“Cost Method Holdings”)
are accounted for at the Company’s initial cost, minus any impairment (if any), plus or minus changes resulting from observable
price changes in orderly transactions for the identical or a similar holding or security of the same issuer. Dividends on fair
value holdings and cost method holdings received are recorded as income. The
Company assesses its equity holdings for impairment whenever events or changes in circumstances indicate that the carrying value
of an equity holding may not be recoverable. Management reviewed the underlying net assets of the Company’s equity method
holding as of December 31, 2021 and determined that the Company’s proportionate economic interest in the entity indicates
that the equity holding was not impaired. There were no observable price changes in orderly transactions for identical or a similar
holding or security of the Company’s Cost Method Holding during the year ended December 31, 2021. The carrying value
of our equity method, fair value method and cost method holdings is reported as “equity holdings” on the consolidated
balance sheets. Notes 3 and 7 contain additional information on our equity method, fair value method and cost method holdings. Accounts
Receivable Trade
accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful accounts
based on several factors, including overall customer credit quality, historical write-off experience and a specific analysis that projects
the ultimate collectability of the account. As such, these factors may change over time causing the allowance level and bad debt expense
to be adjusted accordingly. The accounts receivable balances on the consolidated balance sheets are net of an allowance for doubtful
accounts of $ 0.6 1.0 Past
due accounts are written off when our efforts have been unsuccessful in collecting amounts due. Inventories Inventories
are stated at the lower of cost (first-in, first-out) or net realizable value. Inventories include appropriate elements of material,
labor and manufacturing overhead. Inventory balances are net of reserves on slow moving or obsolete inventory based on management’s
review of inventories on hand compared to estimated future usage and sales, technological changes and product pricing. The
following table details a roll-forward of the inventory reserve during 2021 (in thousands): Schedule
of Inventory Reserve
Inventory reserve balance at December 31, 2020 $ 387
Inventory write-offs during 2021 (15 )
Provision for inventory reserve during 2021 95
Inventory reserve balance at December 31, 2021 $ 467 Business
Combinations The
Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the financial statements reflect
the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are
recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated
fair values of the identifiable net assets acquired is recorded as goodwill. Significant judgment is often required in estimating the
fair value of assets acquired, particularly intangible assets. As a result, in the case of significant acquisitions, the Company normally
obtains the assistance of third-party valuation specialists in estimating fair values of tangible and intangible assets. The fair value
estimates are based on available historical information and on expectations and assumptions about the future, considering the perspective
of marketplace participants. While management believes those expectations and assumptions are reasonable, they are inherently uncertain.
Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates
and assumptions. Intangible
Assets The
Company’s intangible assets consist primarily of costs incurred to develop or obtain software, as well as costs incurred for upgrades
and enhancements resulting in new or enhanced functionality. The Company evaluates its intangible assets for impairment when events or
circumstances indicate that the carrying amount of these assets may not be recoverable. Intangible assets with definite lives are amortized
over their respective estimated useful lives to their estimated residual values. Significant judgments and assumptions are required in
the impairment evaluations. Goodwill Goodwill
is not amortized and is tested for impairment at least annually, or whenever events or changes in circumstances indicate the carrying
amount of the asset may be impaired. The annual impairment test is performed as of December 31 each year. Significant judgment is involved
in determining if an indicator of impairment has occurred. The Company may consider indicators such as deterioration in general economic
conditions, adverse changes in the markets in which the reporting unit operates, increases in input costs that have negative effects
on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could
be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill. The
Company may first review for goodwill impairment by assessing qualitative factors to determine whether any impairment may exist. For
a reporting unit in which the Company concludes, based on the qualitative assessment, that it is more likely than not that the fair value
of the reporting unit is less than its carrying amount (or if the Company elects to skip the optional qualitative assessment), the Company
is required to perform a quantitative impairment test, which includes measuring the fair value of the reporting unit and comparing it
to the reporting unit’s carrying amount. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the
reporting unit is not impaired. If the carrying value of a reporting unit exceeds its fair value, the Company must record an impairment
loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. Goodwill
was recorded in connection with the acquisition of Peintures Elite, Inc. in 2013. A qualitative assessment was performed for the year
ended December 31, 2021 and it was determined that no events had occurred since the acquisition that would indicate an impairment was
more likely than not. Property,
Plant and Equipment Significant
expenditures for the replacement or expansion of property, plant and equipment are capitalized. Depreciation of property, plant and equipment
is provided over the estimated useful lives of the respective assets using the straight-line method. For financial reporting purposes,
assets are depreciated over the estimated useful lives of 20 the lesser of the lease term or the
estimated useful life 3 10 7 3 The
Company incurs maintenance costs on all of its major equipment. Repair and maintenance costs are expensed as incurred. Income
Taxes Income
taxes are accounted for under the asset and liability method. The Company uses an estimate of its annual effective rate at each interim
period based on the facts and circumstances at the time while the actual effective rate is calculated at year-end. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. In assessing whether the deferred tax assets are realizable, management considers
whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The
Company’s uncertain tax positions are evaluated in a two-step process, whereby 1) the Company determines whether it is more likely
than not that the tax positions will be sustained based on the technical merits of the position and 2) for those tax positions that meet
the more likely than not recognition threshold, the Company would recognize the largest amount of tax benefit that is greater than fifty
percent likely to be realized upon ultimate settlement with the related tax authority. The Company accrues interest and penalties related
to uncertain tax positions in the consolidated statements of operations as income tax expense. Other
Taxes Sales
taxes assessed by governmental authorities, including sales, use and excise taxes, are recorded on a net basis. Such taxes are excluded
from revenues and are shown as a liability on the balance sheet until remitted to the appropriate taxing authorities. Research
and Development Research
and development related costs are charged to operations in the period incurred. Such costs amounted to $ 0.2 0.3 Advertising
Costs Advertising
and promotional costs are expensed as incurred and amounted to approximately $ 0.1 50 Fair
Value of Financial and Derivative Instruments Assets
and liabilities measured at fair value are categorized into a fair value hierarchy based upon the observability of inputs to the valuation
of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing
the asset or liability, including assumptions about risk. The categorization within the valuation hierarchy is based upon the lowest
level of input that is significant to the fair value measurement. Financial assets and liabilities carried at fair value are classified
and disclosed in one of the following three categories:
● Level
1 – inputs
to the valuation techniques are quoted prices in active markets for identical assets or liabilities
● Level
2 – inputs
to the valuation techniques are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly
● Level
3 – inputs
to the valuation techniques are unobservable for the assets or liabilities The
following tables present the Company’s financial assets and liabilities measured at fair value based upon the level within the
fair value hierarchy in which the fair value measurements fall, as of December 31, 2021 and 2020. Fair
values measured on a recurring basis at December 31, 2021 (in thousands): Schedule of Fair Value Measured Financial Assets and Liabilities
Level 1 Level 2 Level 3 Total
Cash and cash equivalents $ 8,731 $ - $ - $ 8,731
Restricted cash 150 - - 150
Fair value method holding 22,467 - - 22,467
Total $ 31,348 $ - $ - $ 31,348 Fair
values measured on a recurring basis at December 31, 2020 (in thousands):
Level 1 Level 2 Level 3 Total
Cash and cash equivalents $ 4,435 $ - $ - $ 4,435
Restricted cash 352 - - 352
Total $ 4,787 $ - $ - $ 4,787 The
carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable, accrued expenses, short-term
debt and long-term debt reported in the consolidated balance sheets equal or approximate their fair values due to the short-term nature
of these instruments. Based on quoted market prices, the fair value of the Company’s equity method and fair value method holdings
was $ 28.6 million
at December 31, 2021 (see Note 7). All
non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which include
non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). Income
(Loss) Per Common Share Basic
income (loss) per share has been computed on the basis of the weighted average number of shares of common stock outstanding. In periods
when the Company reported net income from continuing operations, diluted net income 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 restricted stock units. In periods when the Company reported a net loss from continuing operations, there were no differences
between average shares used to compute basic and diluted loss per share as inclusion of stock options and restricted stock units would
have been anti-dilutive in those periods. A
total of 73,868 In
addition, options to purchase 339,500
and 884,500
shares of common stock were outstanding as of
December 31, 2021 and December 31, 2020, respectively, but were not included in the computation of diluted income (loss) per share
as the options’ exercise prices were greater than the average market price of the common shares for each year. Stock
Compensation Plans The
Company recognizes compensation expense for all stock-based payment awards based on estimated fair values on the date of grant. The Company
uses the straight-line amortization method over the vesting period of the awards. The Company has historically issued shares upon exercise
of stock options or vesting of restricted stock from new stock issuances. The Company estimates the fair value of restricted stock awards
based upon the market price of the underlying common stock on the date of grant. The fair value of stock options granted is calculated
using the Black-Scholes option pricing model. No Post-Retirement
Benefits The
Company recognizes the overfunded or underfunded position of a defined benefit postretirement plan as an asset or liability in the balance
sheet, measures the plan’s assets and its obligations that determine its funded status as of each balance sheet date and recognizes
the changes in the funded status through comprehensive income (loss) in the year in which the changes occur. Foreign
Currency Translation For
the Company’s foreign subsidiary, the environment in which the business conducts operations is considered the functional currency,
generally the local currency. The assets and liabilities of the foreign subsidiary are translated into the United States dollar at the
foreign exchange rates in effect at the end of the period. Revenue and expenses of the Company’s foreign subsidiary are translated
using an average of the foreign exchange rates in effect during the period. Translation adjustments are not included in determining net
earnings but are presented in comprehensive loss within the consolidated statements of comprehensive income. Transaction gains and losses
that arise from foreign exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included
in the consolidated statements of operations as incurred. If the Company disposes of its holding in a foreign entity, any gain
or loss on currency translation balance recorded in accumulated other comprehensive income would be recognized as part of the gain or
loss on disposition. Warranty
Reserves In
most instances, digital products are covered by the manufacturing firm’s warranty; however, for certain customers, the Company
may grant warranties in excess of the manufacturer’s warranty. In addition, the Company provides warranty coverage on screens it
manufactures. The Company accrues for these costs at the time of sale. The following table summarizes warranty activity for the years
ended December 31 (in thousands): Schedule of Product Warranty Liability
2021 2020
Warranty accrual at beginning of year $ 79 $ 169
Charged to expense 141 (28 )
Claims paid, net of recoveries (85 ) (62 )
Foreign currency adjustment 1 -
Warranty accrual at end of year $ 136 $ 79 Contingencies The
Company accrues for contingencies when its assessments indicate that it is probable that a liability has been incurred and an amount
can be reasonably estimated. The Company’s estimates are based on currently available facts and its estimates of the ultimate outcome
or resolution. Actual results may differ from the Company’s estimates, resulting in an impact, positive or negative, on earnings. Recently
Adopted Accounting Pronouncements In
December 2019, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12,
“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions for investments,
intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. The effective
date of the standard is annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in the
standard are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. The Company
early adopted this ASU effective January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial
statements. In
January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815.” This
ASU clarifies the interaction between accounting standards related to equity securities, equity method holdings and certain derivatives.
The effective date of the standard is annual periods beginning after December 15, 2020, and interim periods within those fiscal years.
The adoption did not have a material impact on the Company’s consolidated financial statements. In
April 2020, the FASB issued a question-and-answer document to address stakeholder questions on the application of the lease accounting
guidance for lease concessions related to the effects of the COVID-19 pandemic. The guidance allows concessions related to the timing
of payments, where the total consideration has not changed, to not be accounted for as lease modifications. Instead, any such concessions
can be accounted for as if no change was made to the contract or as variable lease payments. As a result of the COVID-19 pandemic, the
Company received certain lease concessions in the form of rent deferrals during 2020. The Company chose to implement the policy election
provided by the FASB to record rent concessions as if no modifications to leases contracts were made, and thus no changes to the lease
obligations were recorded in respect to these concessions. As of December 31, 2021, the Company did not have any deferred rent outstanding. Recently
Issued Accounting Pronouncements In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments.” This ASU will require the measurement of all expected credit losses for financial assets, including
trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.
The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019 and interim periods
within those fiscal years. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326),
Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective
date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission
to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company
believes the adoption of this ASU will not significantly impact its results of operations and financial position. |
