FG Communities Holdings Inc.

Notes to Consolidated Financial Statements

Note 1. Nature of Business

Fundamental Global Inc. (“Fundamental Global”, the “Company”, “we”, or “us”), formerly known as FG Financial Group, Inc. (“FGF”), and its subsidiaries engage in diverse business activities including asset management/merchant banking and managed services.

On February 29, 2024, FGF and FG Group Holdings, Inc. (“FGH”) closed the plan of merger to combine the companies in an all-stock transaction (the “Merger”). In connection with the Merger, FGH common stockholders received one share of FGF common stock for each share of common stock of FGH held by such stockholder. Upon completion of the Merger, the combined company was renamed to Fundamental Global, and the common stock and Series A cumulative preferred stock of the combined company continued to trade on the Nasdaq Stock Market LLC (the “Nasdaq”) under the tickers “FGF” and “FGFPP,” respectively. See Note 4 for additional details.

On May 3, 2024, Strong Global Entertainment, Inc. (“Strong Global Entertainment”) entered into an acquisition agreement (the “Acquisition Agreement”) with FG Acquisition Corp. (“FGAC”), a special purpose acquisition company (“SPAC”), Strong/MDI Screen Systems, Inc. (“Strong/MDI”), FGAC Investors LLC, and CG Investments VII Inc. The transaction closed on September 25, 2024. As part of the closing, FGAC was renamed Saltire Holdings, Ltd (“Saltire”), and Saltire acquired all of the outstanding shares of one of the Company’s wholly-owned subsidiaries, Strong/MDI. As a result of the acquisition, Strong/MDI became a wholly-owned subsidiary of Saltire. See Note 5 for additional details.

On May 30, 2024, the Company and Strong Global Entertainment, an operating company in which we held approximately 76% of the Class A common shares, entered into a definitive arrangement agreement and plan of arrangement to combine the companies in an all-stock transaction (the “Arrangement”). Upon completion of the Arrangement, the stockholders of Strong Global Entertainment received 1.5 common shares of the Company for each share of Strong Global Entertainment. The transaction closed on September 30, 2024. Following the closing, Strong Global Entertainment ceased to exist, and its common shares were delisted from NYSE American LLC (“NYSE American”) and deregistered under the Securities Exchange Act of 1934 (the “Exchange Act”). As the Company was the majority shareholder of Strong Global Entertainment, the financial results of Strong Global Entertainment are presented on a consolidated basis in the Company’s consolidated financial statements. For periods prior to the Arrangement, the Company reported the noncontrolling interest in Strong Global Entertainment as a component of equity separate from the Company’s equity. The Company’s net loss excluded the net loss attributable to the noncontrolling interest.

On October 10, 2024, the Company’s Board of Directors (the “Board”) approved a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock at a ratio of one (1)-for-twenty-five (25) (the “Reverse Stock Split”). The Reverse Stock Split became effective on October 31, 2024, and the Company’s common shares began trading on a split-adjusted basis at the commencement of trading on November 1, 2024. All equity awards outstanding immediately prior to the Reverse Stock Split were adjusted to reflect the Reverse Stock Split. As a result of the Reverse Stock Split, all references to the Company’s common stock in this Annual Report on Form 10-K have been adjusted to reflect the Reverse Stock Split.

During the fourth quarter of 2024, the Board approved a plan to evaluate the potential sale of the Company’s reinsurance business. On March 14, 2025, the Company entered into an agreement for the sale of the entire issued share capital of its FGRE Corporate Member Limited and for the planned commutation of its Lloyds of London reinsurance treaties UHA 251 22, B1868HT2300259, and B1868HT2400259. The total consideration expected to be received from the sale of the corporate member and commutations of the treaties is $5.6 million, comprised of $0.3 million for the purchase of the corporate member and $5.3 million funds held at Lloyds of London supporting the commuted treaties being replaced by the buyer. The transaction is subject to customary closing conditions and approvals and consents and is expected to close in the second quarter of 2025. See Note 5 for additional details.

Business Segments

The Company conducts business through its two reportable segments, consisting of merchant banking and managed services. The operating segments are determined based on the business activities and reflect the manner in which financial information is currently evaluated by management.

Merchant Banking

Our merchant banking group provides advisory services, facilitates capital formation and allocates capital to equity holdings. In our SPAC Platform, this also includes launching, sponsoring and providing strategic, administrative, and regulatory support services to newly formed SPACs.

Managed Services

Our managed services business, Strong Technical Services (“STS”), is a leader in the entertainment industry providing mission critical products and services to cinema exhibitors and entertainment venues for over 90 years. STS provides comprehensive managed service offerings with 24/7/365 support nationwide to ensure solution uptime and availability.

Other

The Company owned and operated its Digital Ignition technology incubator and co-working facility in Alpharetta, Georgia. During the first quarter of 2024, the Board authorized the sale of Digital Ignition, and on April 16, 2024, the Company completed the sale of the Digital Ignition building and wholly owned subsidiary for proceeds of $6.5 million. In April 2024, the Company received approximately $1.3 million in cash, after payment of closing costs and repayment of debt at closing. In connection with the sale of the land and building, the Company recorded a non-cash impairment charge of approximately $1.4 million during the first quarter of 2024 to adjust the carrying value of the assets to the fair market value less costs to sell.

Note 2. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and 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. Unless the context indicates otherwise, references to the “Company” include the Company and its majority-owned and controlled domestic and foreign subsidiaries.

As a result of the reverse merger of FGF and FGH (see Note 4), the consolidated financial statements for the periods prior to the merger represent the results of FGH, as the accounting acquirer. For periods subsequent to the merger, the consolidated financial statements represent the combined results of FGH and FGF. In addition, the current and historical financial results of Strong Studios, Inc. (“Strong Studios”), Strong/MDI and the reinsurance segment are presented as discontinued operations and are excluded from results from continuing operations in the accompanying consolidated financial statements.

Unless otherwise indicated, all references to “dollars” and “$” in this Form 10-K are to, and amounts are presented in, U.S. dollars.

Consolidation Policies

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

The consolidated financial statements include the accounts of the Company and entities in which it is required to consolidate under either the Variable Interest Entity (“VIE”) or Voting Interest Entity (“VOE”) models. Both models require the reporting entity to identify whether it has a controlling financial interest in a legal entity and is therefore required to consolidate the legal entity. Under the VOE model, a reporting entity with ownership of a majority of the voting interest of a legal entity is generally considered to have a controlling financial interest. The VIE model was established for situations in which control may be demonstrated other than by the possession of voting rights in a legal entity and instead focuses on the power to direct the activities that most significantly impact the legal entity’s economic performance, as well as the rights to receive benefits and obligations to absorb losses that could potentially be significant to the legal entity.

The determination of whether a legal entity is consolidated under either model is reassessed where there is a substantive change in the governing documents or contractual arrangements of the entity, to the capital structure of the entity or in the activities of the entity. Management continuously reassesses whether it should consolidate under either model.

The Company holds direct limited liability company interests in FGAC Investors LLC, FG Merger Investors LLC, and GreenFirst Forest Products Holdings, LLC. The Company has determined that each of these entities meets the criteria of a VIE. For each new position, the Company analyzed Accounting Standards Codification (“ASC”) 810 –Consolidation and has determined it is not the primary beneficiary of FGAC Investors LLC, FG Merger Investors LLC or GreenFirst Forest Products Holdings LLC, but does have the ability to exercise significant influence over each of these. Therefore, the Company applies the equity method of accounting for each of these holdings.

In October of 2022, the Company invested $2.0 million into FG Communities Inc. (“FGC”), which management has determined meets the criteria of a VIE. The Company holds the capital allocated to FGC at cost, subject to any adjustment from time to time due to impairment or observable price changes in orderly transactions. Due to its minority interest and inability to govern the financial and operating policies of FGC, the Company has determined it is not the primary beneficiary of FGC, and thus does not consolidate FGC.

The Company’s risk of loss associated with its non-consolidated VIEs is limited. As of December 31, 2024, the carrying value and maximum loss exposure of the Company’s non-consolidated VIEs was $9.4 million.

See Note 6 for further information regarding the Company’s holdings.

The Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined. The significant estimates in the accompanying consolidated financial statements include the valuation of our equity and other holdings and the valuation of net deferred income taxes.

Revenue Recognition for Products and Services

The Company accounts for revenue using the following steps:

The Company combines contracts with the same customer into a single contract for accounting purposes when the contracts are entered into at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends on the other contract, or the services are considered a single performance obligation. If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach. Management estimates the amount of total contract consideration the Company expects to receive for variable arrangements by determining the most likely amount we expect to earn from the arrangement based on the expected quantities of services the Company expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is subsequently resolved. Management considers the sensitivity of the estimate, the Company’s 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 we have an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients, or receive cash, in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when we have 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, 2024 or December 31, 2023.

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, either at the time of shipment or installation. 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.

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. The Company typically records revenue for drop-shipment orders on a gross basis as the Company (i) is responsible for fulfilling the order, (ii) has inventory risk, (iii) would be the recipient of any returned items and (iv) has discretion over pricing. 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 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. 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 customers and recognizes revenue upon completion of the installations.

Extended warranty sales

The Company sells extended warranties to its customers. Typically, the Company is the primary obligor, and revenue is recognized on a gross basis ratably over the term of the extended warranty.

Holdings in Equity Securities and Other Holdings

Other holdings consist, in part, of equity holdings made in privately held companies accounted for under the equity method. We utilize the equity method to account for holdings when we possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the holder possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. We apply the equity method to holdings in common stock and to other holdings when such other holdings possess substantially identical subordinated interests to common stock.

In applying the equity method, we record the holding at cost and subsequently increase or decrease the carrying amount of the holding by our proportionate share of the net earnings or losses and other comprehensive income of the investee. We record dividends or other equity distributions as reductions in the carrying value of the holding. Should net losses of the investee reduce the carrying amount of the holding to zero, additional net losses may be recorded if other holdings in the investee are at-risk, even if we have not committed to provide financial support to the investee. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value.

When we receive distributions from our equity method holdings, we utilize the cumulative earnings approach. When classifying the related cash flows under this approach, the Company compares the cumulative distributions received, less distributions received in prior periods, with the Company’s cumulative equity in earnings. Cumulative distributions that do not exceed cumulative equity in earnings represent returns on holdings and are classified as cash inflows from operating activities. Cumulative distributions in excess of cumulative equity in earnings represent returns on holdings and are classified as cash inflows from investing activities.

In addition to holdings accounted for under the equity method of accounting, other holdings also consist of equity we have purchased in a limited partnership, a limited liability company, and a corporation for which there does not exist a readily determinable fair value. The Company accounts for these holdings at their cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar holdings by the same issuer. When the Company observes an orderly transaction of an investee’s identical or similar equity securities, the Company adjusts the carrying value based on the observable price as of the transaction date. Once the Company records such an adjustment, the holding is considered an asset measured at fair value on a nonrecurring basis. Any profit distributions the Company receives on these holdings are included in net holdings income.

See Note 6 for further information regarding the Company’s holdings in equity securities and other holdings.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less.

Accounts Receivable and Current Expected Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. In the first quarter of 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, as amended, Financial Instruments – Credit Losses (“ASU 2016-13”), which requires an entity to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The Company determines the allowance for credit losses 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 Company updates the model each quarter and adjusts the balance accordingly. The accounts receivable balances on the consolidated balance sheets are net of an allowance for expected credit losses of $0.1 million as of both December 31, 2024 and 2023. Past due accounts are written off when our efforts have been unsuccessful in collecting amounts due.

In the first quarter of 2023, the Company allocated $200,000 into a promissory note. The promissory note is carried at amortized cost on the Company’s consolidated balance sheet under the caption “other equity securities and other holdings.” Due to the promissory note being held at amortized cost, it falls into the scope of ASU 2016-13. Due to immateriality, the Company does not have a current expected credit allowance against the promissory note.

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. The Company reviews its inventory on hand on an item-by-item basis for obsolete or slow moving inventory. The Company’s management considers various factors to estimate each item’s net realizable value including recent sales history, industry trends, customer demand, and technological developments. In instances where net realizable value is deemed to be lower than cost, the Company decreases the value of that inventory to the estimated net realizable value.

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 years for buildings and improvements, the lesser of the lease term or the estimated useful life for leasehold improvements, three toten years for machinery and equipment, seven years for furniture and fixtures andthree years for computers and accessories. The Company generally uses accelerated methods of depreciation for income tax purposes. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of property, plant and equipment is based on management’s estimates of future undiscounted cash flows and these estimates may vary due to a number of factors, some of which may be outside of management’s control. To the extent that the Company is unable to achieve management’s forecasts of future income, it may become necessary to record impairment losses for any excess of the net book value of property, plant and equipment over their fair value.

The Company incurs maintenance costs on all of its major equipment. Repair and maintenance costs are expensed as incurred.

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.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carry-forwards. Deferred income 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 date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit).

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 consolidated balance sheet until remitted to the appropriate taxing authorities.

Advertising Costs

Advertising and promotional costs are expensed as incurred and amounted to approximately $0.1 million for each of the years ended December 31, 2024 and 2023, and are included within selling expenses on the consolidated statements of operations.

Concentration of Credit Risk

Financial instruments which potentially expose the Company to concentrations of credit risk include holdings in equity securities and other holdings, cash, accounts receivable and deposits with reinsured companies. The Company maintains its cash with a major U.S. domestic banking institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250,000. As of December 31, 2024, the Company held funds in excess of these FDIC insured amounts. The terms of these deposits are on demand to mitigate some of the associated risk. The Company has not incurred losses related to these deposits. The Company sells its products to a large number of customers in many different geographic regions. To minimize credit risk related to accounts receivable, the Company performs ongoing credit evaluations of its customers’ financial condition.

The Company’s top ten customers accounted for approximately 41% and 38% of consolidated products and services revenues during the year ended December 31, 2024 and 2023, respectively. Trade accounts receivable from these customers represented approximately 70% of net consolidated trade receivables at December 31, 2024. One of the Company’s customers accounted for more than 10% of both its consolidated products and services net revenues during the year ended December 31, 2024 and its net consolidated trade accounts receivables as of December 31, 2024. None of the Company’s customers accounted for more than 10% of both its consolidated products and service net revenues during the year ended December 31, 2023 and its net consolidated trade accounts receivables as of December 31, 2023. While management 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 and offers its services.

Post-Retirement Benefits

The Company recognizes the overfunded or underfunded position of a defined benefit postretirement plan as an asset or liability in the consolidated balance sheet, measures the plan’s assets and its obligations that determine its funded status as of each consolidated balance sheet date and recognizes the changes in the funded status through comprehensive 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 loss. 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 loss 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):

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.

Stock-Based Compensation

The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – Stock Compensation, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model using assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate along with multiple Monte Carlo simulations to determine a derived service period as the options vest based upon meeting certain performance conditions. The fair value of each stock option award is recorded as compensation expense on a straight-line basis over the requisite service period, which is generally the period in which the stock options vest, with a corresponding increase to additional paid-in capital.

The Company has also issued restricted stock units (“RSUs”) to certain of its employees and directors which have been accounted for as equity-based awards since, upon vesting, they are required to be settled in the Company’s common shares. We have used the fair value of the Company’s common stock on the date the RSUs were issued to estimate the grant date fair value of those RSUs which vest solely based upon the passage of time. The fair value of each RSU is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest.

Based upon the Company’s historical forfeiture rates relating to stock options and RSUs, the Company has not made any adjustment to stock compensation expense for expected forfeitures as of December 31, 2024 or during the years ended December 31, 2024 and 2023.

Fair Value of Financial Instruments

The carrying values of certain financial instruments, including cash, accounts receivable, short-term holdings, deposits held, accounts payable, other accrued expenses, and short-term debt, approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s short-term debt is recorded at historical cost. See Note 6 for further information on the fair value of the Company’s financial instruments.

Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the respective period.

Diluted earnings (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, restricted stock units, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings (loss) per share if their effect is anti-dilutive.

Leases

The Company and its subsidiaries lease warehouse and office facilities and equipment under operating and finance leases expiring through 2027. Management determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.

Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain of the leases contain extension options; however, the Company has not included such options as part of its right-of-use assets and lease liabilities because it does not expect to extend the leases. The Company measures and records a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, the Company measures the right-of-use assets and lease liabilities using a discount rate equal to the Company’s estimated incremental borrowing rate for loans with similar collateral and duration.

The Company elected to not apply the recognition requirements of ASC Topic 842, “Leases,” to leases of all classes of underlying assets that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Instead, lease payments for such short-term leases are recognized in operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

The Company elected, as a lessee, for all classes of underlying assets, to not separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

Note 3. Recently Adopted and Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which adds required disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help investors understand how the chief operating decision maker (“CODM”) evaluates segment expenses and operating results. The new standard also allows disclosure of multiple measures of segment profitability, if those measures are used to allocate resources and assess performance. The amendments are effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this accounting standard update did not have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. ASU 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 will not impact amounts recorded in the Company’s financial statements but, instead, will require more detailed disclosures in the notes to the financial statements. The Company plans to provide the updated disclosures required by ASU 2023-09 in the periods in which they are effective.

Note 4. Merger of FGF and FGH

On February 29, 2024, FGF and FGH completed a merger transaction pursuant to which FGH common stockholders received one share of FGF common stock for each share of common stock of FGH held by such stockholder.

The merger involved a change of control between two businesses and was accounted for as a reverse acquisition in accordance with ASC 805 Business Combinations (“ASC 805”). A reverse acquisition occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes and the entity whose equity interests are acquired (the legal acquiree) is identified as the acquirer for accounting purposes. FGH was determined to be the accounting acquirer.

Per ASC 805, the acquirer measures the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values. The Company determined the fair value of the FGF assets and liabilities as of February 29, 2024 was approximately $17.9 million. In a reverse acquisition, generally the legal acquirer (accounting acquiree) issues consideration in the transaction. As such, the fair value of the consideration transferred is determined based on the number of equity interests the accounting acquirer (legal acquiree) would have had to issue to the owners of the legal acquirer (accounting acquiree) in order to provide the same ratio of ownership of equity interests in the combined entity as a result of the reverse acquisition. Management determined total consideration was $15.6 million, which resulted in a bargain purchase gain of $2.3 million. Management evaluated the bargain purchase gain and revisited the value of the individual assets acquired and liabilities assumed in the merger and determined that no adjustments to reduce the fair value of the assets or increase the fair value of the liabilities assumed were necessary.

The following table summarizes the fair values assigned to the net assets acquired and the liabilities assumed as part of the merger (in thousands):

The value of the net assets acquired exceeded the purchase price by approximately $2.3 million. As a result, the Company recorded a gain on the bargain purchase during 2024, which is recorded within bargain purchase on acquisition and other (expense) income, net on the consolidated statement of operations.

The amounts of revenue and earnings of FGF included in the Company’s consolidated statement of operations from continuing operations from the acquisition date to December 31, 2024 are as follows:

The table below represents the pro forma consolidated income statement as if FGF had been included in the consolidated results of the Company for the years ended December 31, 2024 and December 31, 2023. The revenue amounts below exclude revenue generated by our discontinued operations.

Note 5. Discontinued Operations

Strong/MDI

On May 3, 2024, Strong Global Entertainment entered into the Acquisition Agreement with FGAC, Strong/MDI, FGAC Investors LLC, and CG Investments VII Inc. On September 25, 2024, Strong Global Entertainment completed the transaction. As part of the closing, FGAC was renamed Saltire. Pursuant to the Acquisition Agreement, Strong Global Entertainment received the equivalent of approximately $29.5 million in cash and preferred and common shares of Saltire, consisting of:(i) cash consideration in an amount equal to 25% of the net proceeds of a concurrent private placement (or $0.8 million), (ii) the issuance of preferred shares with an initial preferred share redemption amount of $9.0 million, and (iii) the issuance of $19.7 million of Saltire common shares. In connection with the transaction, and after including the impact of the reclassification of approximately $5.4 million from accumulated other comprehensive income to realized loss on foreign exchange, the Company recorded a net gain on the sale of Strong/MDI of approximately $21.8 million, which is presented as a component of income from discontinued operations in the accompanying consolidated statement of operations.

Upon completion of the transaction, Strong Global Entertainment holds an ownership interest of approximately 37.3% in Saltire.

Management evaluated the classification of Strong/MDI as a discontinued operation and determined Strong/MDI is a component of an entity and represented a discontinued operation. Accordingly, Strong/MDI has been included as part of discontinued operations for all periods presented.

Reinsurance

The Company’s wholly owned reinsurance subsidiary, FG Reinsurance Ltd (“FGRe”), a Cayman Islands limited liability company, provides specialty property and casualty reinsurance. FGRe has been granted a Class B (iii) insurer license in accordance with the terms of The Insurance Act (as revised) of the Cayman Islands and underlying regulations thereto and is subject to regulation by the Cayman Islands Monetary Authority (the “Authority”). The terms of the license require advance approval from the Authority should FGRe wish to enter into any reinsurance agreements which are not fully collateralized.

During the fourth quarter of 2024, the Board approved a plan to evaluate the potential sale of the Company’s reinsurance business. On March 14, 2025, the Company entered into an agreement to for the sale of the entire issued share capital of it’s FG RE Corporate Member Limited and for the planned commutation of its Lloyds of London reinsurance treaties UHA 251 22, B1868HT2300259, and B1868HT2400259. The total consideration expected to be received from the sale of the corporate member and commutations of the treaties is $5.6 million, comprised of $0.3 million for the purchase of the corporate member and $5.3 million funds held at Lloyds of London supporting the commuted treaties being replaced by the buyer. The transaction is subject to customary closing conditions and approvals and consents and is expected to close in the second quarter of 2025.

The Company recorded an impairment charge of approximately $2.1 million to adjust the carrying amount of the disposal group to its fair value less cost to sell. The transactions are expected to close in the second quarter of 2025.

Management evaluated the classification of its reinsurance business as a discontinued operation as of December 31, 2024 and determined the reinsurance business is a component of an entity and represented a discontinued operation. Accordingly, the reinsurance business has been included as part of discontinued operations for all periods presented.

Strong Studios

In March 2022, Strong Studios acquired from Landmark Studio Group LLC (“Landmark”), the rights to original feature films and television series, and was assigned third party rights to content for global multiplatform distribution. The transaction entailed the acquisition of certain projects which are in varying stages of development. During the second quarter of 2022, Safehaven 2022, Inc. (“Safehaven 2022”) was established to manage the production and financing of theSafehaventelevision series, one of the in-process projects acquired from Landmark.

In September 2023, the Company acquired all of the outstanding capital stock of Unbounded Media Corporation (“Unbounded”), an independent media and creative production company. Unbounded developed, created and produced film, advertising, and branded content for a broad range of clients. The Company expected that Unbounded, in partnership with Strong Studios, would also further develop its original IP portfolio, under its Fieldhouse Entertainment division, which included feature films employing Strong Studios’ long form production expertise and industry network.

As of December 31, 2023, the board of directors of Strong Global Entertainment approved the Company’s plan to exit its content business, including Strong Studios and Unbounded and authorized management to proceed with such plan.

Management evaluated the classification of the content business as a discontinued operation as of December 31, 2023. The content business included employees and operations that were dedicated solely to that portion of the overall business. In addition, the Company’s accounting system and bank accounts were set up in a manner that allowed for the cash flows to be clearly distinguished from the rest of the entity. Management determined its content business is a component of an entity and represented a discontinued operation effective December 31, 2023. Accordingly, the content business has been included as part of discontinued operations for all periods presented. As noted above, management began implementing the exit plan in late December 2023. All employees of the content business were notified of the Company’s plans to exit the business in December and management immediately began working to implement the exit plan.

In connection with the plan to exit the content business, the Company shut down the acquired Unbounded operations effective December 31, 2023.

The Company executed a Stock Purchase Agreement effective January 1, 2024 for the sale of the majority of the Strong Studios operations (the “Stock Purchase Agreement”). As a result, the Company classified the assets and liabilities as discontinued operations as of December 31, 2023, and the assets and liabilities were transferred to the purchaser during the first quarter of 2024.

Pursuant to the Stock Purchase Agreement, the Company transferred the Strong Studios legal entity and all assets and liabilities related to Strong Studios, except the assets and liabilities related to Safehaven. The Stock Purchase Agreement included a sales price of $0.6 million in cash, to be paid in installments, and assumption of certain liabilities of Strong Studios. In addition to the $0.6 million purchase price, the Company could recoup its holdings in the underlying projects in the future if the projects are profitably commercialized. The first installment payment was due in February 2024, but the payment has not been received from the purchaser, and management is uncertain if any proceeds will ultimately be received. As a result, the Company has adjusted the carrying value of the net assets related to Strong Studios to $0 as of December 31, 2023.

TheSafehavenseries was not transferred as part of the Stock Purchase Agreement as the Company and the other investors in the series were involved in a dispute relating to the financial management of the project. As a result of the dispute and the impact on the Company’s ability to predict any future revenue participation from the sale/license of the series, the carrying value of the assets and liabilities was adjusted to $0 as of December 31, 2023. In July 2024, the Company resolved the dispute, which did not result in any cash payments or a material impact to its current period financial statements. In addition, the Company maintained a right to receive distributions to recover its investment and to participate in series profits (if any).

The major classes of assets and liabilities included as part of discontinued operations are as follows (in thousands):

The major line items constituting the net income (loss) from discontinued operations are as follows (in thousands):

Note 6. Equity Holdings and Fair Value Disclosures

As of December 31, 2024, the Company held approximately $60.1 million in holdings in equity securities and other holdings. The Company accounts for each of its equity holdings using either the fair value method, the equity method or the cost method as summarized below as of December 31, 2024 (in thousands):

As of December 31, 2023, prior to the merger with FGF, the Company’s only equity holdings consisted of (i) FGH’s equity interests in FGF which was held through its holding in FG Financial Holdings, LLC, which was eliminated in connection with the Merger, (ii) its holding in GreenFirst (as defined below), which was accounted for using the fair value method and (iii) its holding in Firefly Systems, Inc. (“Firefly”) which was accounted for using the cost method.

Fair Value Method Holdings

The carrying value of fair value method holdings is determined based on the security’s trading price multiplied by the number of shares held. The following table summarizes the Company’s fair value method holdings as of December 31, 2024 and December 31, 2023 (in thousands):

GreenFirst Forest Products Inc. (“GreenFirst”) is a publicly-traded Canadian company focused on environmentally sustainable forest management and lumber production. The Company holds shares of GreenFirst directly that are accounted for at fair value of $5.3 million based on observable quoted market prices. The Company also holds approximately $0.5 million of GreenFirst common shares through an equity method holding in GreenFirst Forest Products Holdings LLC (see Equity Method Holdings below).

OppFi Inc. (“OppFi”) is a publicly-traded tech-enabled, mission-driven specialty finance platform that broadens the reach of community banks to extend credit access to everyday Americans. The Company accounts for its common shares and warrants of OppFi using the fair value method based on observable quoted market prices.

Equity Method Holdings

As of December 31, 2023, the Company’s only equity method holding consisted of FGH’s equity interests in FGF which was held through its holding in FG Financial Holdings, LLC, which was eliminated in connection with the Merger.

On January 4, 2021, FGMP was formed as a Delaware limited partnership to co-sponsor newly formed SPACs with their founders or partners, as well as other merchant banking interests. The Company is the sole managing member of the general partner of FGMP and holds a limited partner interest of approximately 50% in FGMP directly and through its subsidiaries. FGMP participates as a co-sponsor of the SPACs launched under our SPAC Platform as well as merchant banking initiatives.

For the year ended December 31, 2024, the Company recorded an equity method loss from FGMP of approximately $2.7 million. The Company made capital contributions of approximately $26,000 to FGMP during the year ended December 31, 2024. Of the $5.5 million carrying value of our holding in FGMP at December 31, 2024, the Company may allocate up to approximately $0.4 million to incentivize and compensate individuals and entities for the successful merger of SPACs launched under our platform.

The Company holds direct limited liability company interests in FGAC Investors LLC, which holds equity interests in FG Acquisition Corp., in FG Merger Investors LLC, which maintains holdings in iCoreConnect Inc. (“iCoreConnect”), and GreenFirst Forest Products Holdings, LLC, which holds equity securities in GreenFirst. Management determined that it has the ability to exercise significant influence over FGAC Investors LLC, FG Merger Investors LLC and GreenFirst Forest Products Holdings LLC, and accounts for each of these holdings under the equity method of accounting.

For the year ended December 31, 2024, the Company recorded an equity method loss on FG Merger Investors LLC of approximately $3.8 million. The Company recorded an equity method loss from GreenFirst Forest Products Holdings LLC of approximately $0.3 million for the year ended December 31, 2024, and a loss of $4.6 million from FGAC Investors LLC for the year ended December 31, 2024.

The summarized financial information presented below reflects the aggregated underlying financial information for our holdings accounted for under the equity method (in thousands):

Certain holdings owned by our equity method investees are valued using Monte-Carlo simulation and option pricing models. Inherent in Monte-Carlo simulation and option pricing models are assumptions related to expected volatility and discount for lack of marketability of the underlying holding. Our investees estimate the volatility of these holdings based on the historical performance of various broad market indices blended with various peer companies which they consider as having similar characteristics to the underlying holding, as well as consideration of price and volatility of relevant publicly traded securities such as SPAC warrants. Our investees also consider the probability of a successful merger when valuing equity for SPACs that have not yet closed. Actual results from those holdings over time could vary significantly from estimates using Monte-Carlo simulation and option pricing models.

Cost Method Holdings without Readily Determinable Fair Value

In addition to our equity method and fair value method holdings, other holdings which do not have a readily determinable fair value are accounted for at their cost, subject to any adjustment from time to time due to impairment or observable price changes in orderly transactions. When the Company observes an orderly transaction of an investee’s identical or similar equity securities, the Company adjusts the carrying value based on the observable price as of the transaction date. Any profit distributions the Company receives on these holdings are included in net holdings income. The Company is not aware of any issuances of identical or similar equities during the year ended December 31, 2024. As a result, the carrying value of holdings without readily determinable fair value did not change during the year ended December 31, 2024.

The Company’s other holdings include a convertible promissory note and a senior unsecured promissory note.

On September 29, 2023, the Company invested $250,000 in a convertible promissory note with ThinkMarkets, of which $202,500 has been repaid through December 31, 2024. The promissory note has an interest rate of 15% annually, with interest payments due monthly, and matures on August 1, 2025. The Company evaluated the convertible promissory note’s settlement provisions and elected the fair value option to value this instrument. Under the fair value election, the convertible promissory note is measured initially and subsequently at fair value. As of December 31, 2024, the fair value was calculated to be $47,500.

On March 16, 2023, the Company invested $200,000 in a senior unsecured loan to Craveworthy. The loan had an interest rate of 13% and a maturity of March 15, 2024. The senior unsecured note was amended to a convertible bridge loan on October 17, 2023, and the maturity date was changed to October 16, 2024. In November 2024, the Company and Craveworthy extended the maturity date to April 16, 2025. The $200,000 principal and any interest accrued may be prepaid voluntarily by Craveworthy but is not required to be paid until the date of maturity. As of December 31, 2024, the entire principal amount of $200,000 as well as approximately $46,000 of accrued interest was outstanding.

Impairment

For equity securities without readily determinable fair values, impairment is determined via a qualitative assessment which considers indicators to evaluate whether the holding is impaired. Some of these indicators include a significant deterioration in the earnings performance or asset quality of the investee, a significant adverse change in regulatory, economic or general market conditions in which the investee operates, or doubt over an investee’s ability to continue as a going concern. If the holding is deemed to be impaired after conducting this analysis, management would estimate the fair value of the holding to determine the amount of impairment loss.

For equity method holdings, evidence of a loss in value might include a series of operating losses of an investee, the absence of an ability to recover the carrying amount of the holding, or a deterioration in the value of the investee’s underlying assets. If these, or other indicators, lead to the conclusion that there is a decrease in the value of the holding that is other than temporary, the Company would recognize that decrease in value even though the decrease may be in excess of what would otherwise be recognized under the equity method of accounting.

The risks and uncertainties inherent in the assessment methodology used to determine impairment include, but may not be limited to, the following:

The Company did not record an impairment on its holdings during the year ended December 31, 2024.

Net holdings loss for the year ended December 31, 2024 is as follows (in thousands):

Fair Value Measurements

The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The FASB has issued guidance that defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal, or most advantageous market in an orderly transaction between market participants. This guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance categorizes assets and liabilities at fair value into one of three different levels depending on the observation of the inputs employed in the measurements, as follows:

The availability of valuation techniques and observable inputs can vary from holding to holding and are affected by a variety of factors, including the type of holding, whether the holding is new and not yet established in the marketplace, the liquidity of markets and other characteristics specific to the individual holding. In some cases, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the hierarchy based on the lowest level input that is significant to the fair value measurement. When determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial instruments measured, on a recurring basis, at fair value as of December 31, 2024 and December 31, 2023 in accordance with the guidance promulgated by the FASB are as follows (in thousands):

Holdings without a readily determinable fair value are measured at fair value on a nonrecurring basis. During the year ended December 31, 2024, the Company did not record any adjustments due to impairment or observable price changes in orderly transactions.

The following table provides a rollforward of nonrecurring Level 3 fair value measurements for the year ended December 31, 2024 (in thousands):

Note 7. Inventories

Inventories consisted of the following (in thousands):

The inventory balances are net of reserves of approximately $0.4 million as of both December 31, 2024 and December 31, 2023. The inventory reserves primarily related to the Company’s finished goods inventory. A rollforward of the inventory reserve for the year ended December 31, 2024, is as follows (in thousands):

Note 8. Property, Plant and Equipment

Property, plant and equipment include the following (in thousands):

As discussed in Note 1, the Company sold the Digital Ignition business during the second quarter of 2024.

Depreciation expense approximated $0.6 million and $0.7 million during the year ended December 31, 2024 and 2023, respectively.

Note 9. Income Taxes

Net loss from continuing operations before income taxes consists of (in thousands):

Income tax benefit from continuing operations consists of (in thousands):

Income tax benefit from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate to pretax loss from continuing operations as follows (in thousands):

Deferred tax assets and liabilities were comprised of the following (in thousands):

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular jurisdiction in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the available objective evidence including recent updates to the taxing jurisdictions generating income, the Company concluded that a valuation allowance of $18.5 million should be recorded against the Company’s U.S. tax jurisdiction deferred tax assets as of December 31, 2024. The overall change in valuation allowance is due to the merger of FGF and FGH; however some changes in valuation allowance were allocated to discontinued operations. The effective tax rate above relates only to continuing operations.

The Company recorded a deferred tax liability related to withholding tax on the repatriation of earnings from its Canadian subsidiary of $2.2 million and $2.8 million at December 31, 2024 and 2023, respectively.

A provision of Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was the implementation of the Global Intangible-Low Taxed Income Tax, or “GILTI.” The Company has elected to account for the impact of GILTI in the period in which the tax actually applies to the Company. During the year ended December 31, 2024, the Company did not incur any additional taxable income as a result of this provision.

As of December 31, 2024, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $49.5 million and $37.1 million respectively. Federal net operating losses of $4.0 million expire in 2037 for Federal losses generated through December 31, 2017. The federal net operating losses generated in 2018 and future years will be carried forward indefinitely. Though the Company incurred a taxable loss for the year ended December 31, 2024, gross net operating loss carryforwards decreased due to the sale of Strong Studios. The Federal and state losses previously allocated to Strong Studios are no longer available to the Company to offset future income. Therefore, the related deferred tax asset and offsetting valuation allowance has been removed. Additionally, the Company has acquired additional net operating losses through the merger of FGF and FGH.

The Company has foreign tax credit carryforwards of approximately $1.7 million on December 31, 2024 that expire if not used on the 2024 tax return. Utilization of these losses may be limited in the event certain changes in ownership occur.

In March of 2020, the CARES Act was enacted and made significant changes to Federal tax laws, including certain changes that were retroactive to the 2019 tax year. Changes in tax laws are accounted for in the period of enactment and the retroactive effects are recognized in these financial statements. There were no material income tax consequences of this enacted legislation on the reporting period of these financial statements.

Due to the events of Hurricane Helene, the Company qualified for IRS relief, which extended the deadline for 2023 returns until May 1, 2025. The Company expects to file its 2023 tax returns by the extended deadline, and this filing will be considered timely. The Company is subject to possible examinations not yet initiated for Federal purposes for the fiscal years 2021, 2022, and 2023. In most cases, the Company has examinations open for state or local jurisdictions based on the particular jurisdiction’s statute of limitations.

Estimated amounts related to underpayment of income taxes, including interest and penalties, were not material for the years ended December 31, 2024, 2023, and 2022. Amounts accrued for estimated underpayment of income taxes were zero as of December 31, 2024 and 2023.

Note 10. Equity Incentive Plans

On December 15, 2021, our shareholders approved the FG Financial Group, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The purpose of the 2021 Plan is to attract and retain directors, consultants, officers and other key employees of the Company and its subsidiaries and to provide to such persons incentives and rewards for superior performance. The 2021 Plan is administered by the Compensation and Management Resources Committee of the Board and has a term of ten years. The 2021 Plan awards may be in the form of stock options (which may be incentive stock options or nonqualified stock options), stock appreciation rights (or “SARs”), restricted shares, restricted share units (“RSUs”), and other share-based awards, and provides for a maximum of 60,000 shares available for issuance. On March 24, 2023, the Board approved an amendment to the 2021 Plan to increase the number of shares available for issuance from 60,000 to 80,000, and on December 19, 2024, our shareholders approved an amendment to the 2021 Plan to increase the number of shares available for issuance from 80,000 to 180,000. As of December 31, 2024, there were approximately 104,000 shares remaining available for future issuance.

In addition, on March 24, 2023, the Board approved an employee stock purchase plan (“FGF ESPP Plan”) whereby qualifying employees can choose each year to have up to 5% of their annual base earnings withheld to purchase the Company’s common shares in the open market. The Company matches 100% of the employee’s contribution amount after thirty days of employment.

Total stock-based compensation expense for each of the years ended December 31, 2024 and December 31, 2023 was approximately $1.6 million. As of December 31, 2024, total unrecognized stock compensation expense of approximately $1.2 million remained, which will be recognized through December 2028. Stock compensation expense has been reflected in the Company’s financial statements as part of general and administrative expense.

As part of the Merger, each restricted stock unit and stock option award granted pursuant to the terms of FGH’s 2017 Omnibus Equity Compensation Plan were converted into options to purchase or receive an equal number of shares of the Company’s common stock. The term, vesting schedule and all of the other terms of each FGH restricted stock unit and stock option award assumed in the Merger were not changed.

As part of the Arrangement with Strong Global Entertainment, each restricted stock unit and stock option award granted pursuant to the terms of Strong Global Entertainment’s 2023 Share Compensation Plan were converted into options to purchase or receive 1.5 shares of the Company’s common stock. The term, vesting schedule and all of the other terms of each FGH restricted stock unit and stock option award assumed in the Arrangement with Strong Global Entertainment were not changed.

Restricted Stock Units

The following table summarizes RSU activity for the year ended December 31, 2024:

The table above includes activity for RSUs for FGH, FGF and Strong Global Entertainment. The Company granted a total of 28,000 RSUs to members of the Company’s management in January 2024, all of which vested in February 2024. In May 2024, Strong Global Entertainment granted a total of 4,000 RSUs to members of its Board of Directors. The vesting of a portion of the RSUs was accelerated in September 2024 in connection with the Company’s merger with Strong Global Entertainment, and the remaining RSUs will vest in May 2025.

Stock Options

The following table summarizes activity for stock options issued for the year ended December 31, 2024:

The table above includes activity for stock options for FGH, FGF and Strong Global Entertainment.

Note 11. Shareholders’ Equity

8.00% Cumulative Preferred Stock, Series A

As of December 31, 2024, the Company had 894,580 Series A Preferred Stock shares outstanding.

Dividends on the Series A Preferred Stock are cumulative from the date of original issue and are payable quarterly on the 15th day of March, June, September and December of each year, when, as and if declared by our Board of Directors or a duly authorized committee thereof. Dividends are payable out of amounts legally available therefore at a rate equal to 8.00% per annum per $25.00 of stated liquidation preference per share, or $2.00 per share of Series A Preferred Stock per year. The Series A Preferred Stock shares trade on the Nasdaq Stock Market under the symbol “FGFPP”.

Common Stock

As discussed in Notes 1 and 4, on February 29, 2024, FGF and FGH closed the plan of merger to combine the companies in an all-stock transaction. In connection with the Merger, FGH common stockholders received one share of FGF common stock for each share of common stock of FGH held by such stockholder. As a result, the Company issued approximately 0.8 million of its common shares to common stockholders of FGH.

As discussed in Note 1, on September 30, 2024, the Company and Strong Global Entertainment completed the Arrangement to combine the companies in an all-stock transaction. In connection with the transaction, stockholders of Strong Global Entertainment received 1.5 common shares of the Company for each share of Strong Global Entertainment. As a result, the Company issued approximately 0.1 million of its common shares to stockholders of Strong Global Entertainment.

The total number of shares of common stock outstanding as of December 31, 2024 was 1,267,904, compared to 900,107 as of December 31, 2023.

Note 12. Related Party Transactions

Related party transactions are carried out in the normal course of operations and are measured in part by the amount of consideration paid or received, as established and agreed by the parties. Management believes that consideration paid for such services in each case approximates fair value. Except where disclosed elsewhere in these consolidated financial statements, the following is a summary of related party transactions.

FG Special Situations Fund

The Company participated as a limited partner in the FG Special Situations Fund (the “Fund”). The general partner of the Fund, and the investment advisor of the Fund, was ultimately controlled by Mr. Cerminara, the Chief Executive Officer and Chairman of the Company’s Board. Portions of the Company’s investment into the Fund were used to sponsor the launch of SPACs affiliated with certain of our officers and directors.

The Fund began the process of winding down in the first quarter of 2023 and completed the process in the second quarter of 2023. As a result of the winddown, the Company now holds direct limited liability company interests in FGAC Investors LLC, FG Merger Investors LLC, and GreenFirst Forest Products Holdings, LLC. Mr. Cerminara and Mr. Swets, the head of the Company’s merchant banking business, serve as managers of FGAC Investors LLC and FG Merger Investors LLC, while Mr. Cerminara ultimately controls GreenFirst Forest Products Holdings, LLC.

FG Merchant Partners

FGMP was formed to co-sponsor newly formed SPACs and other merchant banking clients with their founders or partners. Certain of our directors and officers also hold limited partner interests in FGMP. Mr. Swets holds a limited partner interest through Itasca Financial LLC, an advisory and investment firm for which Mr. Swets is managing member. Mr. Cerminara also holds a limited partner interest through Fundamental Global, LLC (“FG LLC”), a holding company for which Mr. Cerminara is the manager and one of the members.

FGMP has invested in the founder shares and warrants of Aldel Financial Inc., FG Merger Corp, FG Acquisition Corp, Aldel Financial II Inc., FGC and Craveworthy. Certain of our directors and officers are affiliated with these entities.

FG Communities

In October 2022, the Company directly invested $2.0 million into FGC, which is included in other holdings on the consolidated balance sheets. The Company also holds an interest through its ownership in FGMP. FGC is a self-managed real estate company focused on a growing portfolio of manufactured housing communities which are owned and operated by FGC. Mr. Cerminara is the President and a director of FGC.

Craveworthy

On March 16, 2023, the Company invested $200,000 in a senior unsecured loan to Craveworthy. Mr. Swets has an indirect interest in Craveworthy, independent from the interests held by the Company through its ownership in FGMP.

Saltire

In the ordinary course of business, STS purchases certain of the products it sells its customers from Strong/MDI, which is a wholly owned subsidiary of Saltire. The Company’s consolidated balance sheet as of December 31, 2024 includes a $0.2 million payable to Strong/MDI, which was settled during the first quarter of 2025. Mr. Swets serves as the Executive Chair and is a member of the Board of Directors of Saltire. Mr. Cerminara and Richard Govignon, a member of the Company’s Board of Directors, serve as members of the Board of Directors of Saltire.

Shared Services Agreement

On March 31, 2020, the Company entered into a Shared Services Agreement (the “Shared Services Agreement”) with Fundamental Global Management, LLC (“FGM”), an affiliate of FG LLC, pursuant to which FGM provides the Company with certain services related to the day-to-day management of the Company, including assisting with regulatory compliance, evaluating the Company’s financial and operational performance, providing a management team to supplement the executive officers of the Company, and such other services consistent with those customarily performed by executive officers and employees of a public company. In exchange for these services, the Company pays FGM a fee of $456,000 per quarter (the “Shared Services Fee”), plus reimbursement of expenses incurred by FGM in connection with the performance of the services, subject to certain limitations approved by the Board or Compensation Committee from time to time.

The Shared Services Agreement has an initial term of three years, and thereafter renews automatically for successive one-year terms unless terminated in accordance with its terms. The Shared Services Agreement may be terminated by FGM or by the Company, by a vote of the Company’s independent directors, at the end of the initial or automatic renewal term upon 120 days’ notice, subject to payment by the Company of certain costs incurred by FGM to wind down the provision of services and, in the case of a termination by the Company without cause, payment of a termination fee equal to the Shared Services Fee paid for the two quarters preceding termination. In the third quarter of 2022, the Shared Services Agreement was amended to eliminate termination fees and to increase the termination notice from 120 days to 365 days.

The Company paid $1.8 million to FGM under the Shared Services Agreement for each of the years ended December 31, 2024 and 2023, respectively. This amount is included in General and administrative expenses on the consolidated statement of operations.

Note 13. Earnings Per Share

Net earnings per share is computed by dividing net income (loss) by the weighted average number of common shares and common share equivalents outstanding during the periods presented. In calculating diluted earnings per share, those potential common shares that are found to be anti-dilutive are excluded from the calculation. The table below provides a summary of the numerators and denominators used in determining basic and diluted earnings per share for the year ended December 31, 2024 and 2023 (in thousands, except per share amounts).

The following potentially dilutive securities outstanding as of December 31, 2024 and 2023 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive under the treasury stock method.

Note 14. Retirement plans

The Company sponsors a defined contribution 401(k) plan (the “FGH Plan”) for all eligible employees. Pursuant to the provisions of the FGH Plan, employees may defer up to 100% of their compensation. The Company will match 50% of the amount deferred up to 6% of their compensation. The contributions made to the Plan by the Company were approximately $0.2 million for each of the years ended December 31, 2024 and 2023.

The 401(k) Plan (the “FGF Retirement Plan”) was established effective January 1, 2015, as a defined contribution plan. The FGF Retirement Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”); eligible employees of the Company and its subsidiaries may participate in the plan. Employees who have completed one month of service are eligible to participate and are permitted to make annual pre and post-tax salary reduction contributions not to exceed the limits imposed by the Internal Revenue Code of 1986, as amended. Contributions are invested at the direction of the employee participant in various money market and mutual funds. The Company matches 100% of each participant’s initial contributions up to 3% of a participant’s eligible earnings and 50% of each participant’s contributions up to an additional 2% of a participant’s eligible earnings. The Company may also elect to make a profit-sharing contribution to the FGF Retirement Plan based upon discretionary amounts and percentages authorized by the Board. For the year ended December 31, 2024, the Company made matching contributions to the FGF Retirement Plan in the amounts of approximately $24,000, but did not make any profit-sharing contributions to the FGF Retirement Plan in either year. The 401(k) matching contributions are included within general and administrative expenses on the consolidated statement of operations.

As noted above, on March 24, 2023, the Board approved the FGF ESPP Plan whereby qualifying employees can choose each year to have up to 5% of their annual base earnings withheld to purchase the Company’s common shares in the open market. The Company matches 100% of the employee’s contribution amount after thirty days of employment. The Company’s contribution is expensed as paid, and for the year ended December 31, 2024 totaled approximately $32,000. The FGF ESPP Plan matching contributions are included within general and administrative expenses on the consolidated statement of operations.

Note 15. Commitments and Contingencies

The Company is involved, from time to time, in certain legal disputes in the ordinary course of business. No such disputes, individually or in the aggregate, are expected to have a material effect on the Company’s business or financial condition.

A Fundamental Global subsidiary is named as a defendant in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of commercial lighting products containing wiring that may have contained asbestos. Each case names dozens of corporate defendants in addition to Fundamental Global. In the Company’s experience, a large percentage of these types of claims have never been substantiated and have been dismissed by the courts. The Company has not suffered any adverse verdict in a trial court proceeding related to asbestos claims and intends to continue to defend these lawsuits

On July 16, 2024, we received notice that we were named as a defendant, along with over 500 other companies, in a civil action filed for cost recovery and contributions related to the release and/or threatened release of hazardous substances from a facility known as the BKK Class 1 Landfill in Los Angeles County California from periods prior to 1987. The action alleges that FGH is a successor to Pichel Industries, Inc. (“Pichel Industries”) and that Pichel Industries contributed waste to the landfill. We are in the early stages of evaluating the claim and determining our response.

The Company is a guarantor of the obligations of an entity that was previously sold and is no longer part of the consolidated group. The Company has been notified that the primary obligor has not met the obligations for which it is liable, and the third party has requested that the Company satisfy the obligations on behalf of the buyer under the guaranty. The Company is evaluating its obligations and determining its response.

As of December 31, 2024, the Company has a loss contingency reserve of approximately $0.3 million, which represents the Company’s estimate of its potential losses related to the settlement of various open proceedings and claims. Management does not expect the resolution of these proceedings and claims to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

Note 16. Debt

The Company’s short-term and long-term debt consist of the following (in thousands):

Installment Loan and Revolving Credit Facility

In January 2023, Strong/MDI and Canadian Imperial Bank of Commerce (“CIBC”) entered into a demand credit agreement (the “2023 Credit Agreement”), which amended and restated the 2021 Credit Agreement. The 2023 Credit Agreement consists of a revolving line of credit for up to CAD$5.0 million and a 20-year installment loan for up to CAD$3.1 million. Under the 2023 Credit Agreement:(i) the amount outstanding under the line of credit is payable on demand and bears interest at the lender’s prime rate plus 1.0% and (ii) the amount outstanding under the 20-year installment loan bears interest at the lender’s prime rate plus 0.5% and is payable in monthly installments, including interest, over their respective borrowing periods. The lender may also demand repayment of the 20-year installment loan at any time. The 2023 Credit Agreement is secured by a lien on the manufacturing facility in Quebec, Canada that is leased to Strong/MDI. The 2023 Credit Agreement requires our subsidiary in Canada to maintain a ratio of liabilities to “effective equity” (tangible stockholders’ equity, less amounts receivable from affiliates and equity holdings) not exceeding 2.5 to 1 and a fixed charge coverage ratio of not less than 1.1 times earnings before interest, income taxes, depreciation and amortization. In connection with the IPO of Strong Global Entertainment, the 20-year installment note did not transfer to the Company. In May 2023, Strong/MDI and CIBC entered into an amendment to the 2023 Credit Agreement which reduced the amount available under the revolving line of credit to CAD$3.4 million, and CIBC provided an undertaking to Strong/MDI to a release of CIBC’s security interest in certain assets to be transferred to a subsidiary in connection with transactions related to the IPO of Strong Global Entertainment. Also on January 19, 2024, the Company and CIBC entered into a second amendment to the 2023 Credit Agreement. Pursuant to the amendment the credit limit for the revolving line of credit was reduced to CDN$1.4 million. The 20-year installment note bears variable interest at 5.95% as of December 31, 2024. The Company was in compliance with its debt covenants as of December 31, 2024.

Tenant Improvement Loan

During the fourth quarter of 2021, the Company entered into a lease for a combined office and warehouse in Omaha, Nebraska. The Company incurred total costs of approximately $0.4 million to complete the build-out of the new combined office and warehouse facility. The landlord has agreed to fund approximately 50% of the build-out costs, and the Company is required to repay the portion funded by the landlord in equal monthly installments through the end of the initial lease term in February 2027. Through the end of 2021, the Company incurred approximately $0.2 million of total costs to build out the facility, of which approximately $0.1 million was funded by the landlord. The Company completed the build-out during the first quarter of 2022 and incurred an additional $0.2 million of total costs to complete the build-out, of which approximately $0.1 million was funded by the landlord.

ICS Promissory Note

STS issued a $0.5 million promissory note in connection with the acquisition of Innovative Cinema Solutions (“ICS”). The promissory note will be repaid in monthly installments of approximately $20,000 through November 2025 and bears fixed interest of 5%.

Insurance Note

The Company maintains certain commercial insurance policies, including management liability and other policies customarily held by publicly traded companies. The Company elected to finance a portion of the annual premium, which will be repaid in monthly installments through April 2025. The finance agreement bears fixed interest of approximately 9.7%.

Digital Ignition Building Loan

In January 2022, the Company purchased a parcel of land with buildings and improvements in Alpharetta, Georgia. In connection with the purchase of the land and building, the Company entered into a Commercial Loan Agreement (the “Loan Agreement”) with Community First Bank (the “Lender”), dated February 1, 2022. Pursuant to the Loan Agreement, the Lender agreed to lend the Company approximately $5.3 million (the “Loan Amount”), and the Borrower agreed to repay the Loan Amount pursuant to the terms of a promissory note (the “Note”). In April 2024, the Company closed the sale of the Digital Ignition Building and the Digital Ignition Building Loan was repaid in full.

Contractual Principal Payments

Contractual required principal payments on the Company’s long-term debt at December 31, 2024 are as follows (in thousands):

Note 17. Leases

The following tables present the Company’s lease costs and other lease information (dollars in thousands):

The following table presents a maturity analysis of the Company’s operating and finance lease liabilities as of December 31, 2024 (in thousands):

Note 18. Segment Reporting

The Company hastwo operating segments - merchant banking and managed services. The chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer. The measure of profit or loss used by the CODM to identify and measure the Company’s reportable segments is income before income tax. Our merchant banking segment includes our equity and other holdings. Our managed services segment includes STS, which provides comprehensive managed service offerings to cinema operators and entertainment venues nationwide to ensure solution uptime and availability. The “other” category primarily includes rental income and expenses related to the Company’s real estate in Canada and the land and building previously owned and operated by Digital Ignition.

The following tables present the financial information for each segment that is specifically identifiable or based on allocations using internal methodology for the years ended December 31, 2024 and 2023 (in thousands).

The following table presents the Company’s specifically identifiable assets for each of the Company’s segments as of December 31, 2024 (in thousands).

The “other” segment assets includes $34.2 million of assets held for sale, which are primarily related to the Company’s reinsurance business that is expected to be sold during the first half of 2025.

All capital expenditures during 2024 and 2023 related to the Company’s managed services segment.

The following tables disaggregate the Company’s product sales and services revenue by major source for the years ended December 31, 2024 and 2023 (in thousands):

The following tables disaggregate the Company’s revenue by the timing of transfer of goods or services to the customer for the years ended December 31, 2024 and 2023 (in thousands):

At December 31, 2024, the unearned revenue amount associated with maintenance and monitoring services and extended warranty sales in which the Company is the primary obligor was $0.4 million. The Company expects to recognize $0.4 million of unearned revenue amounts during 2025, and immaterial amounts during 2026-2027.

The following tables summarize the Company’s products and services revenue by geographic area for the years ended December 31, 2024 and 2023 (in thousands):

**Note 19. Subsequent Events **

The Company’s management has evaluated subsequent events after the consolidated balance sheet dated as of December 31, 2024, through the date of filing of this Form 10-K. Based on the evaluation, management has determined that, other than as disclosed in the accompanying notes, no subsequent events have occurred that would require recognition in the accompanying consolidated financial statements or disclosure in the notes thereto.