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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 September 30, 2023

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 December 20, 2023 totaled 32,215,813 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

24,561,307

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 September 30, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Operations for three and nine months ended September 30, 2023 and 2022

4

Condensed Consolidated Statements of Comprehensive Loss for three and nine months ended September 30, 2023 and 2022

5

Condensed Consolidated Statements of Stockholders' (Deficit) Equity for three and nine months ended September 30, 2023 and 2022

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

8

Notes to Condensed Consolidated Financial Statements

9

ITEM 2.

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

36

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

53

ITEM 4.

Controls and Procedures

53

PART II - OTHER INFORMATION

ITEM 1.

Legal Proceedings

54

ITEM 1A.

Risk Factors

54

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

55

ITEM 3.

Defaults Upon Senior Securities

55

ITEM 4.

Mine Safety Disclosures

55

ITEM 5.

Other Information

55

ITEM 6.

Exhibits

55

SIGNATURES

56

2

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Balance Sheets

    

September 30, 

    

December 31, 

2023

2022

(unaudited)

ASSETS

 

  

 

  

Cash, cash equivalents and restricted cash of $3,657,070 and $3,706,153, respectively

$

4,063,889

$

18,738,395

Accounts receivable, net of allowance for doubtful accounts of $2,097,332 and $1,277,597, respectively

 

157,752,358

 

113,963,425

Prepaid expenses and other current assets

 

9,013,057

 

13,196,180

Operating lease right-of-use assets

13,690,157

16,315,342

Content assets, net

105,320,794

126,090,508

Intangible assets, net

44,521,255

305,425,709

Goodwill

 

120,494,059

 

260,748,057

Other assets, net

 

26,478,411

 

29,401,793

Total assets

$

481,333,980

$

883,879,409

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

 

  

 

  

Accounts payable

$

80,802,578

$

50,960,682

Accrued expenses

74,358,659

87,817,015

Due to affiliated companies

3,222,990

3,778,936

Programming obligations

66,309,363

55,883,788

Film library acquisition obligations

38,009,206

39,750,121

Accrued participation costs

49,799,197

28,695,713

Debt, net

531,352,086

479,653,611

Contingent consideration

6,677,449

7,311,949

Put option obligation

4,100,000

11,400,000

Operating lease liabilities

15,180,113

18,079,469

Other liabilities

 

20,246,439

 

20,800,186

Total liabilities

 

890,058,080

 

804,131,470

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; 6,004,049 and 4,496,345 shares issued and outstanding, respectively; redemption value of $150,101,225 and $112,408,625, respectively

 

600

 

450

Class A common stock, $.0001 par value, 140,000,000 shares authorized; 26,469,201 and 15,621,562 shares issued,  24,036,159 and 13,198,720 shares outstanding, respectively

 

2,635

 

1,559

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

 

403,012,833

 

355,185,280

Deficit

 

(783,416,716)

 

(247,752,446)

Accumulated other comprehensive income

(93,868)

47,528

Class A common stock held in treasury, at cost (2,433,042 and 2,422,842 shares, respectively)

 

(28,165,913)

 

(28,165,913)

Total stockholders’ (deficit) equity

 

(408,659,663)

 

79,317,224

Noncontrolling interests

(64,437)

430,715

Total (deficit) equity

(408,724,100)

79,747,939

Total liabilities and equity

$

481,333,980

$

883,879,409

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 September 30, 

Nine Months Ended September 30, 

  

2023

  

2022

  

2023

  

2022

Net revenues

$

65,723,886

$

72,392,263

$

255,233,242

$

139,235,407

Costs and expenses

Operating

 

65,889,842

 

60,155,906

 

227,481,977

 

114,327,838

Selling, general and administrative

 

25,466,875

 

27,632,865

 

82,786,956

 

55,795,064

Amortization and depreciation

 

10,452,032

 

6,349,026

 

32,630,834

 

9,677,727

Impairment of intangible assets and goodwill

374,706,666

374,706,666

Management and license fees

 

3,886,794

 

4,774,758

 

16,665,284

 

11,459,073

Merger, transaction, and other costs

15,476,452

17,503,791

Total costs and expenses

 

480,402,209

 

114,389,007

 

734,271,717

 

208,763,493

Operating loss

 

(414,678,323)

 

(41,996,744)

 

(479,038,475)

 

(69,528,086)

Interest expense

 

20,924,973

 

7,658,665

 

55,492,331

 

10,991,894

Other non-operating income, net

 

(939,328)

 

(4,551,004)

 

(3,004,513)

 

(5,032,201)

Loss before income taxes and preferred dividends

 

(434,663,968)

 

(45,104,405)

 

(531,526,293)

 

(75,487,779)

Income tax benefit

 

(4,715,748)

 

(27,320,839)

 

(5,400,284)

 

(27,286,839)

Net loss before noncontrolling interests and preferred dividends

 

(429,948,220)

 

(17,783,566)

 

(526,126,009)

 

(48,200,940)

Net loss attributable to noncontrolling interests

(155,074)

(167,289)

(359,678)

(348,024)

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

(429,793,146)

(17,616,277)

(525,766,331)

(47,852,916)

Less: preferred dividends

 

3,561,592

 

2,443,970

 

9,897,939

 

7,117,481

Net loss available to common stockholders

$

(433,354,738)

$

(20,060,247)

$

(535,664,270)

$

(54,970,397)

Net loss per common share:

 

  

 

  

 

  

 

  

Basic and diluted

$

(13.78)

$

(1.13)

$

(19.65)

$

(3.43)

Weighted-average common shares outstanding:

Basic and diluted

 

31,442,984

 

17,802,522

 

27,256,807

 

16,040,097

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 September 30, 

Nine Months Ended September 30, 

    

2023

    

2022

    

2023

    

2022

Net loss

$

(429,948,220)

$

(17,783,566)

$

(526,126,009)

$

(48,200,940)

Other comprehensive income (loss):

 

Foreign currency translation adjustments

 

(44,685)

90,212

 

(276,870)

 

63,600

Comprehensive loss (income) attributable to noncontrolling interests

21,786

(41,941)

135,474

(27,214)

Comprehensive loss

$

(429,971,119)

$

(17,735,295)

$

(526,267,405)

$

(48,164,554)

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

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

Share based compensation - stock options

594,613

594,613

Share based compensation - common stock

63,750

63,750

Issuance of preferred stock, net

443,078

44

6,281,767

6,281,811

Issuance of common stock, net

7,978,888

787

15,099,652

15,100,439

Net loss attributable to noncontrolling interests

(76,942)

(76,942)

Stock issued as payment for management and licensing fees

403,799

40

1,231,547

1,231,587

Other comprehensive loss, net

(57,251)

(57,251)

Comprehensive loss attributable to noncontrolling interests

27,990

(27,990)

Dividends on preferred stock

(3,323,756)

(3,323,756)

Net loss

(40,408,643)

(40,408,643)

Balance, June 30, 2023 (unaudited)

5,556,605

$

555

 

26,003,931

$

2,588

 

7,654,506

$

766

 

$

396,992,231

 

$

(350,061,978)

 

$

(70,969)

 

$

(28,165,913)

 

$

112,423

 

$

18,809,703

Share based compensation - stock options

770,235

 

770,235

Share based compensation - common stock

106,250

106,250

Issuance of common stock, net

35,714

4

149,996

150,000

Issuance of preferred stock, net

447,444

45

3,910,696

3,910,741

Stock issued under ESPP

110,966

11

111,759

 

111,770

Stock issued as payment for management and licensing fees

318,590

32

971,666

971,698

Dividends on preferred stock

(3,561,592)

 

(3,561,592)

Net loss attributable to noncontrolling interests