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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38125

CHICKEN SOUP FOR THE SOUL ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware

81-2560811

(State or other jurisdiction of incorporation)

(I.R.S. Employer Identification No.)

132 East Putnam Avenue – Floor 2W, Cos Cob, CT

06807

(Address of Principal Executive Offices)

(Zip Code)

855-398-0443

(Registrant’s Telephone Number, including Area Code)

Not Applicable

Former Name or Former Address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s) 

Name of each exchange on which registered

Class A Common Stock
Common Stock Purchase Warrant

 

CSSE
CSSEL

 

The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC

9.75% Series A Cumulative Redeemable Perpetual Preferred Stock

CSSEP

The Nasdaq Stock Market LLC

9.50% Notes Due 2025

CSSEN

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Trading Symbol(s) 

Name of each exchange on which registered

Class Z Warrants

CSSEZ

OTC Markets

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The number of shares of Common Stock outstanding as of May 15, 2024 totaled 32,458,964 as follows:

transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

-2 of the Exchange Act). Yes  No 

12,642,428 as follows:

Title of Each Class

Class A Common Stock, $.0001 par value per share

24,804,458

Class B Common Stock, $.0001 par value per share*

7,654,506

*Each share convertible into one share of Class A Common Stock at the direction of the holder at any time.

Chicken Soup for the Soul Entertainment, Inc.

Table of Contents

 

Page

Number

 

 

PART 1 - FINANCIAL INFORMATION

ITEM 1.

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023

3

Condensed Consolidated Statements of Operations for three months ended March 31, 2024 and 2023

4

Condensed Consolidated Statements of Comprehensive Loss for three months ended March 31, 2024 and 2023

5

Condensed Consolidated Statements of Stockholders' (Deficit) Equity for three months ended March 31, 2024 and 2023

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

7

Notes to Condensed Consolidated Financial Statements

8

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

30

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

45

ITEM 4.

Controls and Procedures

45

PART II - OTHER INFORMATION

ITEM 1.

Legal Proceedings

46

ITEM 1A.

Risk Factors

47

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

ITEM 3.

Defaults Upon Senior Securities

48

ITEM 4.

Mine Safety Disclosures

48

ITEM 5.

Other Information

48

ITEM 6.

Exhibits

48

SIGNATURES

49

2

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Balance Sheets

    

March 31, 

    

December 31, 

2024

2023

(unaudited)

ASSETS

 

  

 

  

Cash, cash equivalents and restricted cash of $4,611,765 and $3,292,737, respectively

$

4,884,381

$

3,316,652

Accounts receivable, net of allowance for doubtful accounts of $8,303,378 and $$7,986,617, respectively

 

138,156,416

 

142,088,225

Prepaid expenses and other current assets

 

8,311,712

 

10,390,282

Operating lease right-of-use assets

10,011,506

10,721,375

Content assets, net

69,293,411

71,614,094

Intangible assets, net

34,203,831

35,937,646

Goodwill

 

120,494,059

 

120,494,059

Other assets, net

 

28,720,528

 

27,738,292

Total assets

$

414,075,844

$

422,300,625

LIABILITIES AND EQUITY

 

  

 

  

Accounts payable

$

102,306,129

$

91,809,542

Accrued expenses

91,582,797

78,779,505

Due to affiliated companies

5,132,562

5,537,842

Programming obligations

67,444,821

67,573,966

Film library acquisition obligations

47,734,651

45,961,877

Accrued participation costs

47,288,927

48,276,487

Debt, net

561,851,006

546,205,200

Contingent consideration

5,050,452

5,245,384

Put option obligation

3,693,337

3,693,337

Operating lease liabilities

12,578,201

13,570,976

Other liabilities

 

25,339,182

 

19,208,394

Total liabilities

$

970,002,065

$

925,862,510

Commitments and contingencies (Note 15)

 

  

 

  

Stockholders' (Deficit) Equity:

 

  

 

  

Series A cumulative redeemable perpetual preferred stock, $.0001 par value, liquidation preference of $25.00 per share, 10,000,000 shares authorized; 6,897,048 shares issued and outstanding, redemption value of  $172,426,200, respectively

 

689

 

689

Class A common stock, $.0001 par value, 140,000,000 shares authorized; 27,237,500 and 27,166,739 shares issued,  24,804,458 and 24,733,697 shares outstanding, respectively

 

2,712

 

2,705

Class B common stock, $.0001 par value, 20,000,000 shares authorized; 7,654,506 shares issued and outstanding, respectively

 

766

 

766

Additional paid-in capital

 

409,661,538

 

409,150,852

Accumulated deficit

 

(937,206,008)

 

(884,303,830)

Accumulated other comprehensive income

(59,756)

(91,657)

Class A common stock held in treasury, at cost (2,433,042 shares, respectively)

 

(28,165,913)

 

(28,165,913)

Total stockholders’ equity

 

(555,765,972)

 

(503,406,388)

Noncontrolling interests

(160,249)

(155,497)

Total (deficit) equity

(555,926,221)

(503,561,885)

Total liabilities and equity

$

414,075,844

$

422,300,625

See accompanying notes to unaudited condensed consolidated financial statements.

3

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended March 31, 

  

2024

  

2023

  

Net revenues

$

27,395,944

$

109,599,293

Costs and expenses

Operating

 

28,386,996

 

96,306,368

Selling, general and administrative

 

21,279,591

 

32,763,551

Amortization and depreciation

 

3,888,532

 

11,183,717

Management and license fees

 

1,211,758

 

7,852,141

Total costs and expenses

 

54,766,877

 

148,105,777

Operating loss

 

(27,370,933)

 

(38,506,484)

Interest expense

 

21,839,172

 

16,666,259

Other non-operating income, net

 

(474,516)

 

(694,690)

Loss before income taxes and preferred dividends

 

(48,735,589)

 

(54,478,053)

Income tax provision

 

 

1,214,151

Net loss before noncontrolling interests and preferred dividends

 

(48,735,589)

 

(55,692,204)

Net loss attributable to noncontrolling interests

(35,782)

(127,662)

Net loss attributable to Chicken Soup for the Soul Entertainment, Inc.

(48,699,807)

(55,564,542)

Less: preferred dividends

 

4,202,371

 

3,012,591

Net loss available to common stockholders

$

(52,902,178)

$

(58,577,133)

Net loss per common share:

 

  

 

  

Basic and diluted

$

(1.63)

$

(2.76)

Weighted-average common shares outstanding:

Basic and diluted

 

32,388,203

 

21,249,105

See accompanying notes to unaudited condensed consolidated financial statements.

4

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

Three Months Ended March 31, 

    

2024

    

2023

    

Net loss

$

(48,735,589)

$

(55,692,204)

Other comprehensive income (loss):

 

Foreign currency translation adjustments

 

62,931

(174,934)

Comprehensive income (loss) attributable to noncontrolling interests

(31,030)

85,698

Comprehensive loss

$

(48,703,688)

$

(55,781,440)

See accompanying notes to unaudited condensed consolidated financial statements.

5

Chicken Soup for the Soul Entertainment, Inc

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(unaudited)

Preferred Stock

Common Stock

Accumulated

Class A

Class B

Additional

Other

Par

Par

Par

Paid-In

Accumulated

Comprehensive

Treasury

Noncontrolling

   

Shares

   

Value

   

Shares

   

Value

   

Shares

   

Value

   

Capital

   

Deficit

   

Income (Loss)

   

Stock

   

Interests

   

    

Total

Balance, December 31, 2023 (audited)

6,897,048

$

689

 

27,166,739

$

2,705

 

7,654,506

$

766

 

$

409,150,852

$

(884,303,830)

$

(91,657)

$

(28,165,913)

$

(155,497)

$

(503,561,885)

Share based compensation - stock options

 

 

 

231,121

 

 

 

 

 

231,121

Share based compensation - common stock

63,750

63,750

Stock issued as payment for management and licensing fees

70,761

7

215,815

215,822

Dividends on preferred stock

(4,202,371)

(4,202,371)

Net loss attributable to noncontrolling interests

Other comprehensive income (loss), net

62,931

(35,782)

27,149

Comprehensive loss attributable to noncontrolling interests

(31,030)

31,030

Net loss

 

 

 

 

(48,699,807)

 

 

 

 

(48,699,807)

Balance, March 31, 2024 (unaudited)

 

6,897,048

$

689

 

27,237,500

$

2,712

 

7,654,506

$

766

 

$

409,661,538

 

$

(937,206,008)

 

$

(59,756)

 

$

(28,165,913)

 

$

(160,249)

 

$

(555,926,221)

Preferred Stock

Common Stock

Accumulated

Class A

Class B

Additional

Other

Par

Par

Par

Paid-In

Accumulated

Comprehensive

Treasury

Noncontrolling

    

Shares

    

Value

    

Shares

    

Value

    

Shares

    

Value

    

Capital

    

Deficit

    

Income (Loss)

Stock

    

Interests

    

Total

Balance, December 31, 2022 (audited)

4,496,345

$

450

15,621,562

$

1,559

7,654,506

$

766

$

355,185,280

$

(247,752,446)

$

47,528

$

(28,165,913)

$

430,715

$

79,747,939

Share based compensation - stock options

 

 

 

850,821

 

 

 

 

 

850,821

Share based compensation - common stock

63,750

63,750

Issuance of common stock, net

359,831

21

1,887,220

1,887,241

Issuance of preferred stock, net

617,182

61

10,657,221

 

10,657,282

Stock issued under ESPP

8,703

18

156,773

156,791

Lincoln Park

500,000

50

1,469,950

1,470,000

Stock issued as payment for management and licensing fees

1,131,148

113

3,449,887

3,450,000

Dividends on preferred stock

(3,012,591)

(3,012,591)

Net loss attributable to noncontrolling interests

(127,662)

(127,662)

Other comprehensive loss, net

(174,934)

(174,934)

Comprehensive loss attributable to noncontrolling interests

85,698

(85,698)

Net loss

 

 

 

 

(55,564,542)

 

 

 

 

(55,564,542)

Balance, March 31, 2023 (unaudited)

 

5,113,527

$

511

 

17,621,244

$

1,761

 

7,654,506

$

766

 

$

373,720,902

 

$

(306,329,579)

 

$

(41,708)

 

$

(28,165,913)

 

$

217,355

 

$

39,404,095

See accompanying notes to unaudited condensed consolidated financial statements.

6

Chicken Soup for the Soul Entertainment, Inc

Condensed Consolidated Statements of Cash Flows

(unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Cash flows from Operating Activities:

  

  

Net loss

$

(48,735,589)

$

(55,692,204)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Share-based compensation

 

294,871

 

914,571

Content asset amortization

 

2,170,763

 

27,250,602

Amortization of deferred financing and debt discount costs

 

1,215,778

 

1,188,451

Amortization and depreciation of intangibles, property and equipment

 

3,888,532

 

11,183,717

Bad debt and video return expense

 

337,743

 

1,157,703

Interest expense added to debt

16,117,861

Non-cash payment of management and licensing fees

215,822

3,450,000

Deferred income taxes

 

 

1,179,597

Changes in operating assets and liabilities:

 

 

Trade accounts receivable

 

6,594,066

 

(37,132,796)

Prepaid expenses and other assets

 

1,495,062

 

2,044,671

Content assets

 

59,920

 

(9,273,675)

Accounts payable, accrued expenses and other payables

 

18,244,518

 

21,676,983

Film library acquisition and programming obligations

 

(1,016,371)

 

(50,920)

Accrued participation costs

 

(987,560)

 

17,215,567

Other liabilities

 

(398,144)

 

(1,179,464)

    Net cash used in operating activities

 

(502,728)

 

(16,067,197)

Cash flows from Investing Activities:

 

  

 

  

Expenditures for property and equipment

 

(702,435)

 

(441,300)

    Net cash used in investing activities

 

(702,435)

 

(441,300)

Cash flows from Financing Activities:

  

  

     Payment of contingent consideration

(194,932)

(245,250)

     Payment of put option obligation

(4,750,000)

     Payments on film acquisition advances

(2,225,985)

(3,817,775)

Proceeds from factoring advances

6,144,125

     Payments on other debt

(607,967)

(572,056)

     Proceeds from issuance of Class A common stock

3,514,032

     Proceeds from issuance of preferred stock

10,657,282

     Increase (decrease) in due to affiliated companies

(405,280)

1,513,681

     Dividends paid to preferred stockholders

(2,887,485)

    Net cash provided (used) by financing activities

 

2,709,961

 

3,412,429

Effect of foreign exchanges on cash, cash equivalents and restricted cash

62,931

(174,934)

Net decrease in cash, cash equivalents and restricted cash

 

1,567,729

 

(13,271,002)

Cash, cash equivalents and restricted cash at beginning of period

 

3,316,652

 

18,738,395

Cash, cash equivalents and restricted cash at end of the period

$

4,884,381

$

5,467,393

Supplemental data:

 

  

 

  

Cash paid for interest

$

2,746,043

$

1,811,376

Non-cash investing activities:

Property and equipment in accounts payable and accrued expenses

$

173,889

$

1,292,717

Non-cash financing activities:

 

 

  

Non-cash film acquisition advance

$

$

9,723,374

Non-cash payment of management and licensing fees

$

215,822

$

3,450,000

PIK interest increase in HPS debt

$

16,117,861

$

13,518,091

See accompanying notes to unaudited condensed consolidated financial statements.

7

Note 1 – Description of the Business

Chicken Soup for the Soul Entertainment, Inc. is a Delaware corporation formed on May 4, 2016, that provides premium content to value conscious consumers. The Company is one of the largest advertising-supported video-on-demand (AVOD) companies in the U.S., with three flagship AVOD streaming services: Redbox, Crackle and Chicken Soup for the Soul. In addition, the Company operates Redbox Free Live TV, a free ad-supported streaming television service (FAST), with nearly 130 channels as well as a transaction video-on-demand (TVOD) service. To provide original and exclusive content to its viewers, the Company creates, acquires and distributes films and TV series through its Screen Media and Chicken Soup for the Soul TV Group subsidiaries. Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul, LLC, which publishes the famous books series and produces super-premium pet food under the Chicken Soup for the Soul (CSS) brand name. References to “CSSE,” the “Company,” “we,” “us” and “our” refer to Chicken Soup for the Soul Entertainment, Inc. and its consolidated subsidiaries, unless the context otherwise requires.

The acquisition of Redbox in August 2022 added another established brand and leading home entertainment provider to the Chicken Soup for the Soul Entertainment portfolio of companies. For over 20 years, Redbox has focused on providing U.S. customers with the best value in entertainment and the most choice in how they consume it, through physical media and/or digital services. Through its physical media business, consumers can rent or purchase new-release DVDs and Blu-ray DiscsTM from its nationwide network of approximately 27,000 self-service kiosks. In the recent past, Redbox transformed from a pure-play DVD rental company to a multi-faceted entertainment company, providing additional value and choice to consumers through multiple digital products across a variety of content windows. The Redbox digital business includes Redbox On Demand, a TVOD service offering digital rental or purchase of new release and catalog movies; Redbox Free On Demand, an AVOD service providing free movies and TV shows on demand; and Redbox Free Live TV, an FLTV service giving access to over nearly 130 linear channels. Redbox also generates service revenue by providing installation, merchandising and break-fix services to other kiosk businesses, and by selling third-party display advertising via its mobile app, website, and e-mails, as well as display and video advertising at the kiosk.

Substantial Doubt Exists Regarding Our Ability To Continue As A Going Concern

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. During the three months ended March 31, 2024, the Company generated negative cash flows from operations of $(0.5) million, a net loss available to common stockholders of $(52.9) million and has an accumulated deficit of $(937.2) million.  Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

CSSE’s merger with Redbox occurred in August 2022. The merger included the assumption of $359.9 million of debt. The ability to service this debt and operate our combined business operations was predicated on a partial return to pre-COVID levels in the number and cadence of theatrical releases that were available to the company for its kiosk network, cost synergies between the companies, and the ability to consummate certain accounts receivable financing. The corresponding rebound in demand for physical kiosk rentals was expected to return to approximately a third of 2019 levels, along with expected synergies from the acquisition, and accounts receivable financing, which would generate sufficient cash flows to cover the cash needs of the combined businesses.

Several factors negatively affected the planned integration of Redbox’s operations into our company, including a) longer than anticipated period of unavailability of sufficient new titles as a result of the on-going impacts of COVID and industries strikes, b) undisclosed preacquisition issues within Redbox, and c) disputes that arose with our lender as described in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2023.

As the flow of theatrical releases began to increase following Covid, we believe that our inability to secure accounts receivable financing for the reasons describe in our most recent 10-Q hampered our ability to pay for and secure new content, which began to strain relationships with the Company’s creditors, including content providers. As a result, the Company was unable to pay for all the movies that were offered to it by its providers, and as a result operating results

8

failed to meet management’s expectations, particularly in Redbox’s kiosk rentals, resulting in insufficient cash flows and a significant working capital deficit hampering our ability to operate the business efficiently.  

In order to partially replace this working capital shortfall, the Company factored its short-dated receivables but was unable to factor its long-term receivables, which prevented us from making up the short-fall. Also, the Company launched initiatives to improve its efficiency and reduce its cost structure, including, but not limited to: (i) optimizing its kiosk network, (ii) evaluating and implementing workforce reductions across its supply chain and corporate teams and (iii) maximizing cost synergies across the combined businesses.

The combination of these factors has resulted in asserted defaults and/or contractual terminations with critical content and service providers, impacting our ability to procure and monetize content efficiently across our distribution platforms. Due to the ongoing impact of the above factors on our current and future results of operations, cash flows and financial condition, there is substantial doubt as to the ability of the Company to continue as a going concern.  As a result of the Company’s diminished capital position, the Company has received an increasing number of termination and/or non-renewal notices from content suppliers and other service providers, including receiving default notices under certain of its leases and certain of its lenders.  These financing partners have the ability to evict us from facilities, repossess vehicles or call their debt, but none have done so to date.

In April 2024, we put in place the framework to allow us to execute the first phase of our broader turnaround plan by amending our credit agreement with HPS, as more fully described in Note 17 Subsequent Events.  Phase 1 of our plan includes completing the first series of strategic financings by raising $175 million of working capital through a (a) $50 million sublicense and a (b) $125 million agreement with a third party comprised of a $65 million line of credit and a $60 million equipment lease to Redbox secured by assets owned by Redbox.  We have begun working on Phase 2 of our plan and are cautiously optimistic based on the indications of interest to date, that we can complete our plan in the required time frame.  While we believe that, if we are able to consummate the series of strategic financing transactions that we believe are available to us in the near term, we will be able to settle material litigations, defend those for which we have a defense, and promptly reinstitute key relationships, including with our key content producers and suppliers, we ultimately may not be able to consummate all such financing transactions in a manner that harms our business and financial performance. If we are unable to consummate these strategic financing transactions in the near term, we likely will be required to seek relief and protections under United States federal bankruptcy laws.

On March 25, 2024, the Company received a staff determination from The Nasdaq Stock Market (“Nasdaq”) to delist the Company’s securities from the Nasdaq Capital Market (the “Staff Determination”).  As disclosed previously, the Company received three separate notices from Nasdaq advising the Company that it is not in compliance with certain Nasdaq listing requirements. The notices include the failure of our Class A common stock to trade at or above the Nasdaq required minimum $1 threshold for 30 consecutive days, maintain a public float above $5 million on its Class A common stock (CSSE) and maintain equity of $10 million.  The Company appealed the Staff Determination on April 1, 2024 and has a hearing on May 21, 2024. The hearing request stays the delisting of the Company’s securities pending the appeal and the Company’s securities will continue to be listed on the Nasdaq Capital Market until a decision is made.  In the meantime, the Company is considering various strategic options to remedy its noncompliance with Nasdaq Listing Rules described above.   If the Company is not be able to cure and meet the listing requirements with Nasdaq its Class A common stock (CSSE), 9.75% Series A Cumulative Redeemable Preferred Perpetual Stock (CSSEP), Common Stock Purchase Warrant (CSSEL) and 9.50% Notes due 2025 (CSSEN) may cease to be publicly traded on the Nasdaq Global Market.  In such event, the Company intends to list such securities on another Nasdaq market, although there can be no assurance the Company will meet the criteria of any other market or will be able to secure listing thereon.

As described in this Quarterly Report on Form 10-Q, we are cautiously optimistic that (1) we will be able to complete Phase 1 of our turnaround plan, (2) that the mutual claims between our Company and our lender will be resolved satisfactorily and (3) such resolution, if resolved, will improve our Company’s capital position, including through a reduction in our indebtedness.

9

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim condensed consolidated financial statements of Chicken Soup for the Soul Entertainment, Inc. and subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on April 19, 2024. These condensed consolidated financial statements are unaudited and have been prepared by the Company following the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted as permitted by such rules and regulations; however, the Company believes the disclosures are adequate to make the information presented not misleading.

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Interim results are not necessarily indicative of the results for a full year.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include revenue recognition, estimated film ultimate revenues, impairment of intangible assets and goodwill, allowance for doubtful accounts, intangible assets, share-based compensation expense, valuation allowance for net deferred tax assets and amortization of programming and film library costs. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On a regular basis, the Company evaluates the assumptions, judgments, and estimates. Actual results may differ from these estimates.

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Reclassifications

Certain amounts have been reclassified to conform to the current period’s presentation. The reclassifications have no effect on the reported net loss.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include restricted cash of $4.6 million and $3.3 million at March 31, 2024 and December 31, 2023, respectively. See Note 11 for additional information.

Sale of Receivables

During the third quarter of 2023, the Company began factoring its accounts receivable on a nonrecourse basis with various finance partners. These agreements contain customary representations and warranties, with certain agreements providing for a specific percentage holdback on an invoice until the earlier of collection by the transferee or 180 days, as well as obligating the Company to provide support to the transferee’s collection efforts in the event of nonpayment by our customer. As the Company does not maintain effective control over the transferred receivables, these transfers are derecognized from our Consolidated Balance Sheet.  During the three months ended March 31, 2024, the Company sold $18.2 million of receivables, received $17.3 million of cash and incurred discount fees of $0.9 million. Transactions not qualifying for sale treatment are accounted for as a cash advance.   The amount receivable from or payable to our factoring partners at March 31, 2024 is negligible and our collection support efforts have been de minimis, therefore, no servicing asset or liability is provided for.

10

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Expenditures that extend the life, increase the capacity, or improve the efficiency of property and equipment are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Depreciation and amortization are recognized using the straight-line method over the following approximate useful lives:

    

Useful Life

Redbox kiosks and components

3 - 5 years

Computers and software

2 - 3 years

Leasehold improvements (shorter of life of asset or remaining lease term)

3 - 6 years

Office furniture and equipment

5 - 7 years

Vehicles

3 - 4 years

The value of the Company’s property and equipment as of March 31, 2024 and December 31, 2023 is included in Other assets, net on the Consolidated Balance Sheets and is as follows:

March 31, 

December 31, 

    

2024

2023

Redbox kiosks and components

$

14,760,206

$

14,926,015

Computers and software

 

19,267,808

 

18,535,824

Leasehold improvements (shorter of life of asset or remaining lease term)

 

5,127,377

 

5,127,377

Office furniture and equipment

 

1,306,881

 

1,306,881

Vehicles