Ballantyne Strong, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Ballantyne Strong Incorporated First Quarter 2021 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. I would now like to turn the call over to John Nesbitt of IMS Investor Relations. Thank you. You may begin.

Good afternoon and welcome to Valentine Strong's earnings conference call for the first quarter ended March 31st, 2021. On the call today from Valentine Strong are Mark Robertson, Chief Executive Officer, and Todd Major, Chief Financial Officer. Before we begin, I'd like to remind everyone that some statements made on this call will be forward-looking in nature. These statements are based on management's current view and expectations as of today, and the company is under no obligation and expressly disclaims any obligation to update forward-looking statements except as required by law. These statements are also subject to risk and uncertainty and may cause actual results that differ materially from those described on today's call. Risk and uncertainties are also described in the company's SEC filings. Today's presentation discussion also contained references to non-GAAP financial measures, The definition of non-GAAP terms and reconciliations to GAAP measures are available in the earnings release posted on the Investor Relations section of the website. Our non-GAAP measures may not be comparable to those used by other companies, and we also encourage you to review and understand all of our financial reporting before making any investment decisions. At this time, I will now turn the call over to Mark. Okay, go ahead, Mark.

Good afternoon. Thanks for joining us. We've had a busy first few months. And we'll start on slide two with a brief overview. Valentine Strong is comprised of our wholly owned entertainment operating business, which is an industry leader in cinema screens and managed services in three non-control investments, Green First Forest Products, FG Financial Group, and Firefly Systems. If you turn to slide three, last year at this time, we were at the very beginning of the COVID pandemic, with three operating businesses, but very little visibility into the next 12 months. Over the past year, we've successfully navigated the worst of the global cinema and theme park closures. We sold to our two signage businesses, Strong Outdoor for equity in Firefly and Convergent for cash in a note and assumption of debt. We also completed an equity capital raise, further strengthening the balance sheet. With cash now over 20 million, and stockholders' equity increasing 67% during Q1 to $45 million as of the end of March. Moving on to slide four. As we now look forward into the second half of 2021 and into next year, we're increasingly optimistic about the outlook for entertainment operating business and our investment positions. With vaccination rates in the U.S. improving dramatically over the past several months, in major markets reopening more aggressively and easing restrictions. We're seeing increased bullishness and excitement in our cinema customer base. We're also seeing positive momentum in our investment portfolio, with Green First announcing its definitive agreement to acquire the Forest Products business of Ryanair, FG Financial expanding its SPAC sponsor and reinsurance businesses, and Firefly continuing to position itself for growth post-COVID. Now turning to the cinema business, starting on slide five and six, Strong Entertainment is a market leader in premium large format screens as well as in managed services. In the second half of 2020, we strengthened that position, signing new multi-year exclusive agreements with Cinemark for screens and with Marcus Theatres for services. We continue to have a great relationship with IMAX, and supply all of their screens worldwide on an exclusive basis. Eclipse, which is designed for immersive theme park and simulator applications, also continue to perform despite COVID. Revenues overall in our entertainment business have recovered from the low point in Q2 of last year, but they remain over 30% to 40% below normalized pre-COVID levels. Fortunately, we've been able to manage the business to relatively break even during this period of reduced revenues, and we're better positioned competitively post-COVID. After over a year with very little content for our exhibitors to drive people to the cinema, we expect the pace of blockbuster movie releases to be a positive catalyst for the industry starting in July with the release of Top Gun kicking off things in earnest. We also expect major exhibitors to rely more heavily on outsourcing post-COVID, And we believe our managed services group is well positioned to provide that support as exhibitors prepare for return to the movies. On slide 7 through 10, we'd like to review our equity investments, which are comprised, again, of three positions, Firefly, FG Financial, and Green First. We became an investor in Firefly through our sale of our strong digital media outdoor advertising business. and we currently hold approximately 13 million in preferred equity shares. Firefly is a really interesting venture-backed company with Google Ventures and NFX being the largest shareholders along with us. We met the guys at Firefly a couple of years ago, and we were very impressed with what they were doing in the outdoor advertising market, particularly their ability to adopt and deploy technology in the taxi and rideshare advertising space. As a result, we decided it was better to join forces and go to market together rather than as competitors. As you can see, Firefly is doing some very innovative things to be a true leader, whether it's through their partnership with companies like Drive Sally or cutting edge technology development like their launch of Street IQ this quarter. Turning to slide nine, we own approximately 21% of the outstanding shares of FG Financial. FGF has gone through a repositioning of its business and has an attractive business model focused on reinsurance and allocating capital to SPAC and SPAC sponsor-related businesses. The reinsurance sector is strengthening and seeing increased rates. FGF wrote its first reinsurance contract in 2020, and as a nimble reinsurer led by an experienced management team, they're carefully looking at deploying additional capital in that sector. On the SPAC side, FGF had two recent SPAC investments, FG New America and All Dell Financial. FG New America was backed by Joel Moglia, the former CEO and chairman of TD Ameritrade, and has announced a definitive agreement to acquire Opportunity Financial. OpFi is a leading FinTech platform. The acquisition is expected to close this summer. FG Financial holds approximately 1.4 million FG&A founder shares and approximately 430,000 warrants and an exercise price of $1,150. Alldell is led by Rob Kaufman, the former founder of Fortress. FGF holds approximately 533,000 Alldell founder shares and approximately 321,000 warrants and an exercise price of $15 per share. Turning over to slide 10. Green First, which is formerly Atasca Capital Limited, recently announced the signing of a definitive agreement to acquire all of the forest and paper products and operating assets of Ryanair, which will make Green First one of the top 10 lumber producers in Canada. As I think everyone listening to the call probably is already likely aware, this announcement has been well received, and the market cap of Green First has increased from under 10 million Canadian dollars to well over $200 million Canadian on the planned transaction, with the share price increasing from roughly 40 cents to well over $9 today Canadian. Green First also announced that as part of the financing of the transaction, it will be conducting a rights offering with current shareholders receiving three rights to purchase additional shares at $150 Canadian for every share held. Ballantyne Strong currently has just over 7 million shares representing 30% ownership of Green First and would anticipate receiving approximately 21 million rights based on information leased by Green First. The rights are anticipated to be issued in June, and at that time, we believe there will be a separate and distinct intrinsic value for those rights. We're currently evaluating our options with regards to the rights, and we could be a participant in the rights offering, increasing our investment in green first, or we could also potentially sell some or all of our rights to generate additional investable cash to diversify our holdings. We'll evaluate that course of action in the coming weeks as the rights offering and the transaction proceed to an anticipated closing in Q3. On slide 11, The positive performance of Green First has driven a meaningful increase in the market value of our investments. We currently hold the three investments in our balance sheet at $19 million, and the current market value is approximately $74 million, representing an unrealized gain of over $50 million. Of course, I would caution that the unrealized gain is just that. It's unrealized, and it will continue to fluctuate up and down as Green First proceeds with its transactions and as FGF and FFLA continue to execute on their strategies. With that, I'll turn the call over to Todd for a financial review.

Thanks, Mark. As a reminder to everyone listening, the next few slides will present the operating results of our continuing operations and do not include convergent and strong outdoor now that they have been classified as discontinued operations. Slide 13 contains a summary comparison of Q1 2021 to the prior year. We began to feel the effect of the COVID pandemic late in Q1 2020, and it continues to negatively impact our revenue and operating results. Although both revenue and gross profit were down versus prior year, gross margins during Q1 2021 were relatively flat compared to the same period in 2020. Overall profitability improved during Q1 2021 compared to 2020, primarily due to a 33% decline in SG&A expenses, as we continue to focus on cost management and as a result of lower bad debt expense. Turning to slide 14 now, our MDI production facility in Canada was partially shut down for four weeks during the first quarter of 2021 as a result of a government mandate, which negatively impacted our revenue on a sequential basis from Q4 2020. Our Eclipse screens product line continues to generate strong performance that has helped offset some of the declines in screens and services. Even after the significant impacts of COVID, the loss from operations and adjusted EBITDA during Q1 2021 both improved over the prior year. In addition, our strong entertainment business has held steady throughout the pandemic and has operated on a near break-even basis during the trailing 12-month period. This is a testament to the previously mentioned cost management efforts occurring across the company. Slide 15 is a snapshot of the balance sheet as of the end of March compared to the end of 2020. The sale of convergent and the stock issuance in February were the primary contributors to the nearly $18 million increase in cash since the end of 2020. As a result of the convergent sale, we also significantly reduced our debt and lease obligations as these obligations were assumed by the purchaser. As Mark mentioned earlier, the recent performance of our investments has resulted in market values well in excess of our carrying value. Overall, the health of our balance sheet has improved despite the negative impacts of COVID over the past year or so. Now, let me flip the call back to Mark to conclude our prepared remarks. Thanks, Todd.

To wrap up, we're increasingly bullish on the post-COVID opportunities for both our entertainment operating business as well as our investments. Balance sheet's in the best shape it's been in quite a while. While our entertainment revenues continue to be impacted by COVID, we have maintained margins and decreased SG&A levels to manage that business effectively through the down cycle. We're expecting a significant resurgence in cinema attendance in the U.S. as studio releases accelerate, and we think that bodes well for our customers as well as for our entertainment business, particularly on the services side. Our investments are making progress with their growth strategies, and I think the impact of Green First speaks for itself.

We'll now open up the call to any questions you may have. Thank you.

And if you would like to register a question, please press the 1 followed by the 4 on your telephone keypad right now. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment please for the first question. And the first question comes from the line of Brett Rice with Janie Montgomery Scott. Please proceed with your question.

Hi, Mark. Hi, Todd. Hey, Brad. How are you? Strong Entertainment. You've not seen any concrete orders from the cinema customers yet?

Yeah. We're continuing to receive orders from our cinema customers, albeit certainly at a lower rate than it would have been pre-COVID. Our overall cinema business is running, you know, probably at around 60% of pre-COVID levels from a top-line standpoint. You know, cinemas are open in the U.S., and most of the major jurisdictions are continuing to release or remove restrictions to allow them to operate more effectively. But if you look at reported revenues for most of the large cinema exhibitors, their revenues are still down, you know, 70% and 80% from pre-COVID levels, primarily because there's just a lack of content for them to show at this point still to drive people into the cinemas. You know, we expect that to begin to reverse as we get into the second half, particularly with Top Gun and other, you know, blockbusters starting to be released by the studios and creating, you know, a lot of excitement at the cinemas. But, you know, as of right now, they're still operating with, you know, one hand behind their back due to lack of content. So, you know, I feel pretty good that we're getting the revenue we are given exactly where the cinema industry is today. And, you know, we're becoming more optimistic about looking out post-COVID as the cinemas are able to really ramp up with more content coming out. But, you know, we definitely are receiving orders. You know, we have on the screen side, again, just at a lower rate than we would have normally. And we're continuing to provide service to our exhibitors, both on a contract basis for some and a time and materials basis for others.

Now that the theme parks are opening up, do you anticipate some kind of pent-up demand orders that will benefit Eclipse?

I'm not sure that I would say that Eclipse is more of a longer-term project. project type product. So, you know, it doesn't, you know, it doesn't drop dramatically and it doesn't rise dramatically on a short turnaround. So it's a little more steady, long-term project. You know, I would expect on the cinema service side to see some pent-up demand coming through as cinemas, you know, gear up, you know, to really reopen in earnest once they have a lot more people coming in, you know, but they'll need a lot more service help. And we would expect to see a lot more demand coming through, you know, in the second half of the year.

Okay. Just two more for me, and then I'll drop back in queue. You know, because you did reduce your SG&A, are you at break-even at, you know, you're at 60% of pre-COVID levels. Are you able to break even at that capacity?

So, you know, at the current revenue levels, our entertainment businesses running pretty close to breaking even on an EBITDA basis. It was slightly negative in Q1 by, I think it was 80,000 negative EBITDA in Q1. Our consolidated EBITDA was negative almost 1 million due to corporate overhead on top of the on top of the operating unit. So our operating unit is basically a break-even at these levels. We do have corporate overhead on top of the operating unit. That corporate overhead is down almost 50% from two or three years ago and down close to 30% from a year ago. So we've taken a lot of actions to streamline corporate overhead and corporate costs. And that's the way that I would look at that is currently we've taken the actions that we felt we needed to you know, to minimize, you know, to minimize the burn during this COVID period. As the entertainment business begins to ramp back up, you know, we'll maintain our, you know, streamlined overhead structure. So we'll be able to see more of the EBITDA from the entertainment business drop to the bottom line as it hopefully rebounds back to pre-COVID levels.

Yeah, I noted on the 8K that management, you know, took salary cuts, you know, so you shared the sacrifice. And so I, you know, I applaud you for that. Last question. On the Firefly, you know, one of the key metrics is their ability to continue to add Uber and Lyft cars with the digital platforms. Do you get monthly... reports as to how many cars have the digital ad platforms so that you can see the trajectory and pace with hopefully that is increasing. And can you share with us what those reports show?

Yeah, I mean, Parkline is a private company, so they don't release any of those metrics in a public fashion. So we're really not able to share you know, specific data about Firefly and their installed base.

Okay. Thank you for answering my questions. I'll drop back. Thank you. Thank you, Brett.

And the next question comes from the line of John Old with Long Meadow Investors. Please proceed with your question.

Hey, Mark. Thanks for doing the call. Hey. First of all, on the... Obviously, the green first transaction is transformational. I'm just curious how it might change sort of your calculus as you go forward. And I believe, you know, as we discussed in the last call, you're really trying to transition into owning more operating businesses. So, you know, you had $20 million looking for an acquisition. now you potentially have a completely different set of circumstances with this windfall. How does that change what you might be looking at or doing with respect to making acquisitions of operating businesses given their increased scale?

Well, we're certainly very pleased with the transactions that management has been able to line up and put in place. And we're certainly equally pleased with the market reaction to that transaction. We think it'll be a significant event for Ballantyne, and we're excited about it. And it does significantly increase our capital base going forward. At this time, you know, they still have a couple months to get through the rights offer and get through closing the transaction. So, you know, that burden, that cash is not in the bank today, but we're certainly, you know, it certainly does change the calculus on how much capital, you know, the company might have later this year in order to, you know, proceed with strategies. At this time, you know, we're continuing to evaluate opportunities and look at them, knowing it takes time to get deals done and to really evaluate deals. So, We're continuing to look at opportunities and evaluate opportunities, and we'll let the green first transaction play out over the next month or so, and we're continuing to evaluate exactly what's best for Ballantyne and its shareholders with regards to the rights and what we might do with those as well as with the green first position. In anticipation of this question or a question like this, ask Kyle Semonier, our chairman, to participate in the Q&A as well, given that he's on the board of Green First. He's a little closer to the transaction. So, Kyle, if there's anything you want to add to that answer. Hey, yeah, no, thanks.

I think that we probably shouldn't say too much about the actual Green First rights offering. You know, Green First will be speaking about that separately, so we'll have some communications out of Green First, but as Ballantyne looks at their position in Green First, so putting my Ballantyne hat on, I think that we're going to be in a really nice position with 7 million shares and 21 million rights, and I think those 21 million rights are going to be very valuable. I think I've heard some questions about will those rights be tradable and will they be liquid and, and, you know, will there be a market for those rights? So I can tell you as a, you know, Ballantyne strong advocate, you know, and as the chairman of Green First, we're, we're working very hard to make sure that, you know, we get value for either, you know, value for that as a, as a Ballantyne strong shareholder, you know, for the Ballantyne strong shareholders. You probably saw that Paul Rivette and Larry Sweats, and REC Domain gave up their rights, which I think was very admirable. But, you know, we felt that at Ballantyne Strong, we couldn't do that on behalf of our shareholders. So we, you know, we worked hard to make sure that our, you know, Ballantyne maintained that rights, those rights. And they're going to end up, I think, being very valuable, whether we end up exercising the rights and becoming a larger shareholder of Green First or monetizing those rights in some way. And I do believe that there'll be, you know, a market for them, whether that is through, you know, brokers or through a, you know, an exchange. So we're working very hard to make sure that that happens. And, you know, the board, like, I don't want to, you know, get ahead of ourselves in terms of like what the board's going to do, because that'll be a collaborative board discussion. And I think it would be, you know, premature for me to speak on behalf of the board until we We, you know, we know exactly where the trades are going, you know, where the rights are going to trade and, you know, how much value there's going to be there. But we've committed to exercising a portion of the rights as part of the transaction. The seller wanted Valentine Strong to commit to a portion of that and other parties to commit to that. So we committed to that. And we will evaluate whether, you know, we increase the position if the rights are less valuable, we'll increase it. We do, you know, you've probably seen the price of lumber is very strong. It's increased even since then. And if you go 12 months out, you know, the price of lumbers, you know, the futures 12 months out are quite attractive. We priced this transaction at Green First for, you know, lower lumber prices, much lower lumber prices. So I think that, you know, Green First generally is a very attractive position for Ballantyne to continue to hold. And, you know, particularly at these prices. So, you know, depending on where the stock's trading and where the rides are trading, like, we'll likely be an owner and potentially a buyer of more stocks. So hopefully that's helpful.

Thanks. And then just one quick question on Firefly. Where do you think Firefly is in its sort of journey towards – you know, and exit. Where do you think we are in the continuum there? Is it three years, five years? How do you see that playing out?

You know, I'm also a board member of Firefly. Would not want to say anything outside of the boardroom that I shouldn't, but I guess in looking at, you know, publicly available information, you can see on Crunchbase that, you know, Firefly recently apparently, you know, it made it to crunch base that Firefly raised some additional capital recently. And, you know, we didn't impair our position. So you can assume that since we didn't impair our position, that the value was at least where we hold our position or greater. And so that's a good fact, that they're bringing in additional capital at a value that's at least where we're holding it or greater. And, you know, we, you know, we obviously bring a lot to the board in terms of public company expertise and facts and, and other things. So, you know, we think that there's a good opportunity for them to become public at some point. And, and we're, you know, we're sort of helping them. They, they're very ahead of the curve in terms of, you know, having PCAB audited financials from Deloitte and, you know, they're ready for a public offering at some point. So, That could be, I'm not sure if that's a 2021 event or not, but we'd love for it to be. And if it is, you know, that would make that $13 million on our balance sheet liquid and perhaps worth more than $13 million, hopefully. So that would be, you know, an ideal outcome for Valentine.

Thanks so much.

And the next question comes from the line of Jim Merrick, private investor. Please proceed with your question.

Hi, Mark. What's the current book value of Ballantyne stock now?

We'll get the precise number here for you.

The book value is currently sitting at about $2.50 a share.

Okay.

I'm not sure necessarily – I wouldn't necessarily – assert that book value is a great proxy for anything given the significant unrealized depreciation in the investments. You know, it's not reflected in, you know, in the assets on the books and the cap. But that's what it is today.

Okay, so have you ever thought about bringing the shareholder meeting back to Omaha?

We really haven't thought about that. The company's headquartered in Charlotte at this point, so we would anticipate having our shareholders meeting in Charlotte. Are you based in Omaha?

Yes, I am.

Yeah.

What would you tell the shareholders?

I go to Omaha quite frequently. If you'd like to meet sometime, I'd be happy to meet with you and anyone else out there that would like to have a meeting with the company as well.

How often do you get up here?

Well, it's obviously been less during COVID. It was, you know, two to three times a month a year ago this time. It's been a lot less than that recently, but at least once a month.

Okay. Okay. What would you tell the shareholders that had been like shareholders for like 20 years? I have some friends that are retired now and are sitting on losses. What would you tell them?

Yeah, I mean, I would tell them, you know, that, you know, we appreciate their support. you know, their patience with the company and their long support of the company. You know, the company, you know, has evolved over time and definitely had some ups and downs. And we think that, you know, we think the cinema entertainment business is, you know, obviously had its struggles through COVID, just like every other business, you know, that's impacted by shutdowns. We think it's, you know, got a bright future ahead of it. And we're excited about what's going on, you know, in the cinema space, you know, coming up, you know, in the second half of this year and really really more so even into 2022 as studios begin to really release you know content back to the cinemas and support those those operations which we think will make you know our products and services even more in demand you know going forward and obviously yeah we're excited about you know what you're probably hearing about on this call and the filings about you know the happenings in our investment portfolio and we think you know we're well positioned for for going forward, so we appreciate the support.

Last thing is I listened to the Brookshire Halfway meeting with Warren Buffett last week, and I didn't get the impression that he was really big on SPACs just because it sounds like there's a time limit that you have to put that money to work. So what makes you so confident in this particular SPAC situation?

Well, first of all, Ballantyne is not, Ballantyne as a company is not directly sponsoring SPACs. We own an investment in FG Financial, and FG Financial is an investor in SPAC sponsors. The two SPACs that they have sponsored, FG New America and Alladel, we believe are very high-quality SPACs, and not all SPACs are created equal. FG New America's sponsored back by Joe Mobley, who you're probably familiar with out in Omaha. You know, it's already identified. You know, it's target OPFI, which is proceeding towards, you know, towards that transaction. You know, Alldale, you know, is a high-quality SPAC, you know, backed by the founder of Fortress. You know, we believe that that's a super high-quality SPAC. And, you know, so we're pretty confident in the SPAC strategy and the way that FT Financial and Fundamental Global are going about it. Kyle, I don't know if that's a question that you want to provide any more color on than I did.

Yeah, I heard Warren and Charlie's comments on SPACs as well. I am a big fan of Warren Buffett and Charlie Munger and think very highly of them. I think one of the things I heard them say was that SPACs have created a lot of competition for them in terms of additional m&a teams going after deals that they um uh have looked at but so we we uh we see it differently like we like uh the spec structure uh and uh we think that we can add a lot of value for our shareholders uh you know by doing spec so yeah that's that's our view and and uh you know we we we don't think the uh We don't think SPACs are for everybody. We think that there's a lot of SPACs out there that there's a lot of people out there doing SPACs that shouldn't be. And I think that that was maybe some of the cautionary language you heard from Warren and Charlie, that there's too many SPACs and there's too many people doing SPACs. There's celebrities doing SPACs that probably shouldn't be. But I think for high-quality management teams and sponsors, I think it's a great alternative to an IPO.

Okay, thank you for taking my questions.

Thank you.

And the next question is from the line of Sam Rybatsky with SER Asset Management. Please proceed with your question. Yes. Hi, gentlemen.

Mark, you've done a good job, and your IR firm has – done a super job. Uh, now you have three pieces here. You have the firefly, you have the, the forest and you have, uh, uh, the, the potential of you, of a SPAC and, uh, you, you've raised money and, uh, and, and I, I'm, uh, I'm basically for a SPAC or anything else that will increase the value. And by selling the cinema, this may be a good time. And you just have to find the right purchaser. Good luck. And I'm not sure which comes first. The firefly is the sexy piece and the forest is the dollars and cents. Do you have any thoughts on that or?

Yeah, I appreciate the question, you know. First of all, thanks for all the comments. You know, we like all of our investments. We like Green First. We like Firefly. We like FT Financial. They're all different. You know, they have different business models, and they're all at different stages. But, you know, we're pretty excited about actually all of them. You know, particularly, obviously, Green First has gotten the most attention here recently and, you know, deserve given, you know, the major transformative transaction that that management team has, you know, But, you know, we're equally excited about the prospects for Firefly and supportive of them. And, you know, hopefully they're putting the event in their future as well. And same with FT Financial, who's really driving insurance and SPAC strategies. We think there's a lot of value to be created in actually all three of those investments. You know, our cinema business, you know, you mentioned, you know, should we sell the cinema business? You know, certainly sell at the right price. We actually have at times entertained offers for some of the business pre-COVID. I don't think in the middle of COVID is probably the right time to look to market that business. We think the business is probably at its low point right now and you know, has a lot of upside going forward as opposed to COVID play. And as we, you know, begin to see that business bounce back, you know, we'll continue to evaluate, you know, the future of that business as we go forward. But, you know, it may take a while for that business to really get back to a proper valuation in terms of marketability. But, you know, if at some point it will, and we believe that we believe the entertainment business, you know, pre-COVID again was, you know, a $35 to $40 million business doing, you know, $7 to $8 million of EBITDA. You know, it's currently running about half that in terms of revenue or 60% of that. And, you know, we believe that, you know, if we give it time and give it the right support, you know, over the next year, we'll be able to get back to decent numbers in that business as well.

Well, good luck.

Good luck. Thank you.

And the next question comes from the line of Michael Connon, private investor. Please proceed with your question.

Thank you. Could you discuss the status of the technology incubator, and does that contribute to cash flow?

Yeah, so the digital ignition incubator, is our technology incubator based in Alpharetta. That incubator basically originated from our convergent line of business and actually shared about half the building or a little less than half the building down in Alpharetta with convergent. Now that we've sold the convergent business and they're no longer an occupant of that building, we're opening up the rest of the building to digital ignition so we can expand that incubator. Quite frankly, it's a small part of the business today, you know, from a revenue generation, you know, several million in terms of revenue. So it's not a material contributor to the top line or the bottom line yet. but it does have opportunity to grow. And, you know, it also gives us a view into, you know, some of the companies that are incoming, you know, technology companies in the area that are based in that incubator that, you know, may provide interesting investment opportunities, you know, somewhere down the road. So we like the business, you know, we like, you know, we like the fact we can expand that business, you know, through the rest of the building now that we have it free from convergent, you know, But in terms of top line, bottom line, it's certainly not nearly as much of a contributor to the entertainment business.

I understand. I'm not a fan of debt. Do you have any plans to be debt-free in the future? And then I noticed looking through on the website, there aren't any outside analysts that follow you. Is that good or bad? I don't know.

Yeah, you know, as far as debt, you know, when we sold Convergent, we did eliminate a fair amount of our debt at that time, you know, with the transaction. So, you know, the current debt on the balance sheet is primarily, you know, debt up to our Canadian subsidiary, MDI. We have roughly, you know, three, three and a half million of debt on the balance sheet. So we have very little leverage. We have very little debt. You know, we do... had that debt up there. It's pretty favorable terms, you know, two, three percent interest rates, and you really haven't been in a big hurry to rush to pay off that debt near most of the border.

And what about the outside analysts? Any thoughts on that?

Yeah, I mean, you know, in the microcap industry, you know, analyst coverage has been, you know, challenging to say the least for all small companies. You know, it's, you know, the The population of analysts covering companies sub half a billion dollar market caps and lower has certainly declined over the past few years. As we continue to expand our investment base and our strong entertainment operating business, It's certainly something that, you know, we've talked about and that we'll look at and we've entertained. And it's something we may consider down the road. And, you know, there may be analysts who look at us and want to adopt coverage on us. But, you know, as of today, we don't have coverage. And, you know, that's probably not changing in the next couple months. But it's something that certainly may change as we continue to grow. Thank you.

Yep. Thanks, Michael. You bet.

And I will now turn the conference back over to management for closing remarks.

Okay, thank you, and thanks, everyone, for joining us today. We appreciate all the questions today and the time and attention. If there are other questions or if you'd like to have a follow-up at some point, feel free to reach out. We'd be happy to chat on a one-on-one basis as well. Thanks, and have a good evening.

And that does conclude today's conference. We thank you for your participation and ask that you please disconnect your lines.