Based on the provided financial report articles, I generated the title for the article: **"Financial Report for Fiscal Year 2024: Form 10-K for Fiscal Year Ended December 31, 2024"** Please note that the title may not be exact, as the provided text appears to be a financial report in a machine-readable format, and the title may not be explicitly stated. However, based on the content and structure of the report, I inferred the title to be the above-mentioned one.
The financial report presents the financial statements of the company for the fiscal year ended December 31, 2024, as well as the comparative financial statements for the fiscal year ended December 31, 2023, and the six months ended June 28, 2024. The company reported total assets of $[amount], total liabilities of $[amount], and total stockholders’ equity of $[amount]. The company’s net income for the fiscal year ended December 31, 2024, was $[amount], compared to a net loss of $[amount] for the fiscal year ended December 31, 2023. The company’s diluted earnings per share for the fiscal year ended December 31, 2024, was $[amount], compared to a diluted loss per share of $[amount] for the fiscal year ended December 31, 2023. The company’s cash and cash equivalents at the end of the fiscal year ended December 31, 2024, were $[amount], compared to $[amount] at the end of the fiscal year ended December 31, 2023.
Recent Developments
In February 2024, FGF and FG Group Holdings, Inc. (FGH) completed a merger, with FGH common stockholders receiving one share of FGF common stock for each share held. The combined company was renamed Fundamental Global.
In May 2024, Strong Global Entertainment entered an agreement to sell its subsidiary Strong/MDI Screen Systems to FG Acquisition Corp. (FGAC), which was renamed Saltire Holdings. Strong Global Entertainment then combined with Fundamental Global in an all-stock transaction in September 2024.
The company also effected a 1-for-25 reverse stock split in October 2024.
Overview
Fundamental Global is a holding company with two main business segments: merchant banking and managed services. The merchant banking group provides advisory services, facilitates capital formation, and allocates capital to equity holdings. The managed services business, Strong Technical Services, provides products and services to the entertainment industry.
The company sold its Strong Studios and Strong/MDI subsidiaries in 2024 and plans to sell its reinsurance operations in 2025. The results of these discontinued operations are excluded from the company’s continuing operations discussed in this report.
Critical Accounting Estimates
The company’s critical accounting estimates include:
- Valuation of equity holdings, which involves assumptions about volatility and lack of marketability
- Allowance for expected credit losses on trade receivables
- Valuation of net deferred income taxes
- Revenue recognition, which requires identifying performance obligations and allocating the transaction price
Results of Operations
2024 vs. 2023
| ($ in thousands) | 2024 | 2023 | $ Change | % Change |
|---|---|---|---|---|
| Net loss on equity securities | (14,675) | (9,437) | (5,238) | 55.5% |
| Revenue from products and services | 32,023 | 26,530 | 5,493 | 20.7% |
| Total revenue | 17,348 | 17,093 | 255 | 1.5% |
| Expenses | 42,224 | 33,379 | 8,845 | 26.5% |
| Loss from operations | (24,876) | (16,286) | (8,590) | 52.7% |
| Net loss from continuing operations | (22,859) | (12,307) | (10,552) | 85.7% |
Revenue increased 1.5% in 2024, driven by 20.7% growth in the managed services business, offset by higher losses from the company’s equity holdings. Expenses increased 26.5%, primarily due to the addition of the FGF business operations and higher costs from operating Strong Entertainment as a separate public company for part of the year. This resulted in an 85.7% increase in net loss from continuing operations.
Revenue
The increase in revenue from managed services was partially offset by higher losses from the company’s equity and other holdings. The managed services business benefited from increasing demand and the acquisition of Innovative Cinema Solutions.
Expenses
The increase in expenses was mainly due to the addition of FGF operations and higher costs from operating Strong Entertainment as a separate public company. The company also recognized a $1.4 million impairment related to the sale of the Digital Ignition building.
Loss from Operations
The 52.7% increase in loss from operations was driven by higher losses from equity holdings, increased general and administrative costs, and the impairment charge, partially offset by improved gross profit in managed services.
Net Loss from Continuing Operations
The 85.7% increase in net loss from continuing operations was due to the same factors impacting loss from operations, as well as a $2.3 million gain related to the FGF merger transaction.
Liquidity and Capital Resources
The company believes it has sufficient liquidity through operations, holdings, access to credit, and other sources to meet its operating requirements for the next 12 months.
Cash Flows
| ($ in thousands) | 2024 | 2023 |
|---|---|---|
| Cash from continuing operations - beginning | 5,995 | 3,063 |
| Net cash (used in) provided by operating activities | (4,049) | 1,579 |
| Net cash provided by investing activities | 13,242 | 92 |
| Net cash (used in) provided by financing activities | (7,383) | 1,240 |
| Cash from continuing operations - ending | 7,794 | 5,995 |
Cash used in operating activities increased in 2024 due to higher overhead expenses from the FGF merger and operating Strong Entertainment as a separate public company. Investing activities provided $13.2 million in 2024, including $1.9 million from the FGF merger and $6.1 million from the sale of the Digital Ignition building. Financing activities used $7.4 million, primarily for debt payments and preferred stock dividends.
Analysis
The key takeaways from Fundamental Global’s financial performance in 2024 are:
Continued Losses from Equity Holdings: The company’s non-cash losses from its equity method and other holdings increased significantly, offsetting growth in the managed services business. This highlights the volatility and risk inherent in the company’s investment portfolio.
Increased Expenses from Mergers and Acquisitions: The addition of the FGF business and operating Strong Entertainment as a separate public company for part of the year led to a 26.5% increase in expenses. This suggests the company may need to focus on integrating and streamlining operations to improve profitability.
Liquidity Remains Adequate: Despite the net losses, the company appears to have sufficient cash and access to capital to fund its operations in the near-term. However, the company’s long-term viability will depend on its ability to stem losses and generate sustainable profits.
Discontinued Operations Reshape the Business: The sale of Strong/MDI and planned exit from the reinsurance business indicate the company is refocusing on its core managed services and merchant banking activities. This could improve the company’s financial performance if the discontinued operations were dragging down profitability.
Overall, Fundamental Global faces challenges in managing its diverse portfolio of investments and operations. The company will need to find ways to reduce losses from its equity holdings, control costs from mergers and acquisitions, and leverage its core managed services business to drive sustainable profitability. Investors will be closely watching the company’s progress in these areas in the coming years.
