Ballantyne
Strong, Inc.
September 30,
2013

Convergent

Corporation

September 30,
2013

Pro Forma

Adjustments

Note
Ref

Pro Forma
Consolidated
September

30, 2013

Assets

Current assets:

Cash and cash equivalents

)

3(a), 3(i)

Accounts receivable, net

Sales type lease receivable

3(b) 

Inventories

Deposit on Convergent acquisition

)

3(e)

Other current assets

)

3(d), 3(h)

Total current assets

)

Property, plant and equipment, net of accumulated depreciation

3(c)

Note receivable

Goodwill

3(f)

Intangibles other than goodwill

3(g)

Sales type lease receivable

Other assets

3(h)

Total assets

)

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

)

3(i)

Accrued expenses

Income taxes payable

Customer deposits/deferred revenue

)

3(j)

Total current liabilities

)

Deferred revenue

Deferred income taxes

Payable to related party

)

3(k)

Other accrued expenses, net of current portion

Total liabilities

)

Commitments and contingencies

Stockholders’ equity:

Preferred stock

Common stock

)

3(l)

Additional paid-in capital

)

3(l)

Accumulated other comprehensive income

)

)

3(l)

)

Retained earnings (deficit)

3(l)

Stockholders’ equity before treasury stock

)

Less common shares in treasury, at cost

)

)

Total stockholders’ equity

)

Total liabilities and stockholders’ equity

)

Ballantyne
Strong, Inc.

Year Ended

December 31, 2012

Convergent

Corporation

Twelve months

Ended
December 31, 2012

Pro Forma

Adjustments

Note
Ref

Pro Forma

Consolidation

Twelve Months

Ended
December 31, 2012

Net revenues

3(m)

Cost of revenues

3(m), 3(n)

Gross profit

)

Selling and administrative expenses:

Selling

3(o)

Administrative

)

3(n), 3(o), 3(q)

Depreciation and amortization

)

3(q)

Total selling and administrative expenses

)

Gain (loss) on the sale/disposal/transfer of assets

Income (loss) from operations

)

)

Interest, net

Equity income of joint venture

Other income, net

Income (loss) before income taxes

)

)

Income tax (expense)benefit

)

3(r)

)

Net earnings (loss)

)

)

Basic earnings per share

Diluted earnings per share

Weighted average shares outstanding

Basic

Diluted

Ballantyne
Strong, Inc.

Nine Months Ended September 30, 2013

Convergent

Corporation Nine

Months Ended

September 30, 2013

Pro Forma

Adjustments

Note
Ref

Pro Forma

Consolidation Nine

Months Ended

September 30, 2013

Net revenues

3(m)

Cost of revenues

3(m), 3(n)

Gross profit

)

Selling and administrative expenses:

Selling

3(o)

Administrative

)

3(n), 3(o), 3(p), 3(q) 

Depreciation and amortization

)

3(q)

Total selling and administrative expenses

)

Gain (loss) on the sale/disposal/transfer of assets

Income (loss) from operations

)

Interest income,net

Equity income of joint venture

)

)

Other income, net

Income (loss) before income taxes

)

Income tax (expense) benefit

)

)

3(r)

)

Net earnings (loss)

)

Basic earnings per share

Diluted earnings per share

Weighted average shares outstanding:

Basic

Diluted

1.

Basis of Presentation

2.

Transaction Summary

(thousands)

Total consideration

Allocated to:

Historical net book value of Convergent

Adjustments to recognize assets and liabilities at acquisition date preliminary estimated fair value, except deferred income taxes:

Sales type lease receivable

)

Deferred revenue

Identifiable intangibles at acquisition date

Property, plant and equipment

Deferred tax impact of preliminary valuation adjustments

Excess of consideration transferred over the net amount of assets and liabilities recognized (goodwill)

3.

Pro Forma Adjustments

Cash and cash equivalents were adjusted for $(103) in acquisition costs Ballantyne incurred after September 30, 2013, including legal, consulting, regulatory, filing and other fees directly related to the acquisition. The tax effect of the acquisition costs is included in the adjustment to deferred income taxes.

b)

Sales Type Lease Receivable

An adjustment of $(237) has been made to adjust Convergent’s sales type lease receivable to preliminary estimated fair value.

c)

Property and Equipment

An adjustment of $462 has been made to record Convergent’s fixed assets to their preliminary estimated fair value of $4,929.

d)

e)

Deposit on Convergent Acquisition

An adjustment of $(17,424) has been made to reflect the application of the deposit paid by Ballantyne on September 30, 2013 to the purchase price for Convergent at closing.

f)

Goodwill

An adjustment of $77 has been made to record goodwill for Convergent to the preliminary estimated fair value, which is nondeductible for tax purposes.

An adjustment of $(909) has been made to remove historical value and $1,167 to record intangibles for Convergent to their preliminary estimated fair value.

 (thousands)

 Fair Value

Estimated Useful Life

Software

$

602

5 years

Non Compete

59

3 years

Tradename

296

5 years

Customer relationships

210

10 years

Total

$

1,167

N/A

h)

Deferred Taxes

An adjustment of $37 has been recorded to record the tax effects of acquisition costs listed in Note 3(a).

An adjustment of $(263) has been made to record deferred tax assets on the adjusted value of property, equipment, software, tradenames, non-compete and customer relationships.

j)

Deferred Revenue

k)

Payable to Related Party

An adjustment of $(11,459) has been recorded to reclassify Convergent borrowings from its former parent, Sony Corporation to equity.

l)

Stockholders’ Equity

A net adjustments of $66 was recorded as described above to record direct incremental acquisition expenses, depreciation and amortization, net of tax. Historical equity accounts of Convergent were eliminated as a result of the acquisition.

m)

Revenue

For purposes of the pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and for the nine months ended September 30, 2013, adjustments of $621 and $466, respectively have been made to reflect Convergent transactions with its former parent company, netted in Cost of Sales.

n)

Cost of Sales

Other expenses, such as warehouse and engineering, among others of $6,198 and $2,803 for the year ended December 31, 2012 and the nine months ended September 30, 2013, respectively have been reclassified from Convergent’s administrative expenses to cost of sales, consistent with Ballantyne’s presentation.

o)

Selling expense

For purposes of the pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and for the nine months ended September 30, 2013, adjustments of $2,745 and $1,094, respectively have been made to reclassify Convergent’s selling expense out of administrative expenses, consistent with Ballantyne’s presentation.

p)

Administrative Expense

For purposes of the pro forma condensed consolidated statement of operations for the nine months ended September 30, 2013 an adjustment of $351 has been made to eliminate direct incremental costs of the acquisition expensed by Ballantyne since they do not represent ongoing costs of the combined entity.

q)

Depreciation and Amortization

For purposes of the pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and for the nine months ended September 30, 2013, adjustments have been made to give effect to Convergent’s depreciation on fixed assets and amortization of intangible assets acquired over their preliminary estimated useful lives.  The depreciation and amortization adjustments were $(75) and $(43) for the year ended December 31, 2012, and for the nine months ended September 30, 2013, respectively. Adjustments of $28 and $16 were recorded to adjust the deferred tax liabilities for the depreciation and amortization of property and equipment and intangible adjustments for the year ended December 31, 2012 and for the nine months ended September 30, 2013, respectively.

r)

Income Tax Expense

For purposes of the pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and for the nine months ended September 30, 2013, net adjustments of $28 and $(144), respectively, have been made to record federal income tax benefits on the foregoing adjustments at Convergent’s effective rate for each period presented.

s)

Convergent historical financial statements

Convergent Corporation Historical

(thousands)

Twelve Months Ended
March 31, 2013
(A)

Three Months Ended
March 31, 2012

(B)

Three Months Ended
March 31, 2013

(C)

Twelve Months Ended
December 31, 2012

(A+B-C)

Net revenues

Cost of revenues

Gross profit

Selling, general and administrative expenses:

Selling and administrative

Depreciation and amortization

Total selling, general and administrative expenses

Gain (loss) on the sale/disposal/transfer of assets

(Loss) income from operations

)

)

Interest income, net

(Loss) income before income taxes

)

)

Income tax benefit (expense)

)

)

Net (loss) earnings

)

)

Convergent Corporation Historical

(thousands)

Twelve Months Ended
March 31, 2013
(A)

Six Months Ended
September 30, 2013

(B)

Nine Months Ended
December 31, 2012

(C)

Nine Months Ended
September 30, 2013

(A+B-C)

Net revenues

Cost of revenues

Gross profit

Selling, general and administrative expenses:

Selling and administrative

Depreciation and amortization

Total selling, general and administrative expenses

Gain on the sale/disposal/transfer of assets

Loss from operations

)

)

)

)

Interest income, net

Loss before income taxes

)

)

)

)

Income tax benefit

Net loss

)

)

)

)