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Table of Contents

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 June, 30, 2021

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
9.75% Series A Cumulative Redeemable Perpetual Preferred Stock

 

CSSE
CSSEP

 

The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC

9.50% Notes Due 2025

CSSEN

The Nasdaq Stock Market LLC

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 August 11, 2021 totaled 16,240,198 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

8,585,692

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.

Table of Contents

Chicken Soup for the Soul Entertainment, Inc.

Table of Contents

 

Page

    

Number

 

 

PART 1 - FINANCIAL INFORMATION

ITEM 1.

Financial Statements (unaudited)

3

Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020

3

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020

4

Condensed Consolidated Statements of Stockholders' Equity for the six months ended June 30, 2021 and 2020

5

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020

6

Notes to Condensed Consolidated Financial Statements

7

ITEM 2.

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

26

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

41

ITEM 4.

Controls and Procedures

41

PART II - OTHER INFORMATION

ITEM 1.

Legal Proceedings

42

ITEM 1A.

Risk Factors

42

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

ITEM 3.

Defaults Upon Senior Securities

42

ITEM 4.

Mine Safety Disclosures

42

ITEM 5.

Other Information

42

ITEM 6.

Exhibits

43

SIGNATURES

44

2

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Balance Sheets

    

June 30, 

    

December 31, 

2021

2020

(unaudited)

ASSETS

 

  

 

  

Cash and cash equivalents

$

18,404,254

$

14,732,726

Accounts receivable, net of allowance for doubtful accounts of $778,861, and $1,035,643, respectively

 

44,866,479

 

25,996,947

Prepaid expenses and other current assets

 

2,008,231

 

1,382,502

Goodwill

 

41,269,946

 

21,448,106

Indefinite lived intangible assets

 

12,163,943

 

12,163,943

Intangible assets, net

 

20,459,587

 

19,370,490

Film library, net

 

72,403,995

 

35,239,135

Due from affiliated companies

 

705,499

 

5,648,652

Programming costs and rights, net

 

16,916,653

 

15,781,183

Other assets, net

 

5,019,737

 

4,517,102

Total assets

$

234,218,324

$

156,280,786

LIABILITIES AND EQUITY

 

  

 

  

9.50% Notes due 2025, net of deferred issuance costs of $1,600,656 and $1,798,433, respectively

$

31,295,244

$

31,097,467

Notes payable under revolving credit facility

 

 

2,500,000

Revolving loan

17,585,699

Film acquisition advance

6,130,245

8,659,136

Accounts payable and accrued other expenses

 

45,500,596

 

21,394,957

Film library acquisition obligations

 

20,776,600

 

8,616,562

Programming obligations

1,849,375

4,697,316

Accrued participation costs

 

24,740,388

 

12,535,651

Put option obligation

11,400,000

Other liabilities

 

2,345,494

 

1,677,906

Total liabilities

 

161,623,641

 

91,178,995

Commitments and contingencies (Note 15)

 

  

 

  

Equity

Stockholders' Equity:

 

  

 

  

Series A cumulative redeemable perpetual preferred stock, $.0001 par value, liquidation preference of $25.00 per share, 10,000,000 shares authorized; 3,698,318 and 2,098,318 shares issued and outstanding, respectively; redemption value of $92,457,950 and $52,457,950, respectively

 

370

 

210

Class A common stock, $.0001 par value, 70,000,000 shares authorized; 6,775,816 and 5,157,053 shares issued, 6,701,581 and 5,082,818 shares outstanding, respectively

 

678

 

516

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

 

170,440,677

 

106,425,548

Deficit

 

(97,315,079)

 

(77,247,982)

Class A common stock held in treasury, at cost (74,235 shares)

 

(632,729)

 

(632,729)

Total stockholders’ equity

 

72,494,683

 

28,546,329

Subsidiary convertible preferred stock

36,350,000

Noncontrolling interests

100,000

205,462

Total equity

72,594,683

65,101,791

Total liabilities and equity

$

234,218,324

$

156,280,786

See accompanying notes to unaudited condensed consolidated financial statements.

3

Table of Contents

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Net revenue

22,134,934

13,520,540

 

45,331,776

 

26,764,613

Cost of revenue

 

15,433,719

 

12,933,545

 

31,676,653

 

22,843,935

Gross profit

 

6,701,215

 

586,995

 

13,655,123

 

3,920,678

Operating expenses:

 

 

  

 

 

  

Selling, general and administrative

 

10,964,362

 

7,052,776

 

20,199,181

 

13,892,673

Amortization and depreciation

 

1,337,678

 

5,241,415

 

2,575,705

 

10,446,143

Management and license fees

 

2,213,493

 

1,352,054

 

4,533,177

 

2,676,461

Total operating expenses

 

14,515,533

 

13,646,245

 

27,308,063

 

27,015,277

Operating loss

 

(7,814,318)

 

(13,059,250)

 

(13,652,940)

 

(23,094,599)

Interest expense

 

1,141,044

 

333,903

 

2,228,988

 

663,028

Acquisition-related costs

 

 

 

98,926

Other non-operating income, net

 

(144,569)

 

(4,331,409)

 

(145,139)

 

(4,337,847)

Loss before income taxes and preferred dividends

 

(8,810,793)

 

(9,061,744)

 

(15,736,789)

 

(19,518,706)

Provision for income taxes

 

15,000

 

18,000

 

29,000

 

67,000

Net loss before noncontrolling interests and preferred dividends

 

(8,825,793)

 

(9,079,744)

 

(15,765,789)

 

(19,585,706)

Net loss attributable to noncontrolling interests

(43,889)

(96,743)

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

(8,825,793)

(9,035,855)

(15,765,789)

(19,488,963)

Less: preferred dividends

 

2,253,385

 

974,272

 

4,506,770

 

1,948,544

Net loss available to common stockholders

$

(11,079,178)

$

(10,010,127)

$

(20,272,559)

$

(21,437,507)

Net loss per common share:

 

  

 

  

 

  

 

  

Basic and diluted

$

(0.79)

$

(0.83)

$

(1.46)

$

(1.79)

Weighted-average common shares outstanding:

Basic and diluted

 

14,059,211

 

12,007,428

 

13,848,655

 

12,006,013

See accompanying notes to unaudited condensed consolidated financial statements.

4

Table of Contents

Chicken Soup for the Soul Entertainment, Inc

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

Preferred Stock

Common Stock

Subsidiary

Class A

Class B

Additional

convertible

Par

Par

Par

Paid-In

Treasury

Preferred

Noncontrolling

    

Shares

    

Value

    

Shares

    

Value

    

Shares

    

Value

    

Capital

    

Deficit

    

Stock

    

Stock

    

Interests

    

Total

Balance, December 31, 2020 (audited)

2,098,318

$

210

5,157,053

$

516

7,654,506

$

766

$

106,425,548

$

(77,247,982)

$

(632,729)

$

36,350,000

$

205,462

$

65,101,791

Share based compensation - stock options

 

200,594

200,594

Share based compensation - common stock

31,250

31,250

Issuance of common stock

 

1,122,727

112

23,858,435

23,858,547

Stock options exercised

 

77,415

8

(8)

Warrant exercises - Class W and Z

43,571

4

(4)

Issuance of preferred stock, net

1,600,000

160

36,349,840

(36,350,000)

Dividends on preferred stock

(2,253,385)

(2,253,385)

Elimination of noncontrolling interests

205,462

(205,462)

Net loss

 

(6,939,996)

(6,939,996)

Balance, March 31, 2021

 

3,698,318

$

370

 

6,400,766

$

640

 

7,654,506

$

766

$

166,865,655

$

(86,235,901)

$

(632,729)

$

$

$

79,998,801

Share based compensation - stock options

200,594

200,594

Share based compensation - common stock

31,250

31,250

Issuance of common stock

26,000

3

952,263

952,266

Stock options exercised

282,360

28

2,123,757

2,123,785

Warrant exercises - Class W and Z

64,400

6

267,159

267,165

Shares issued to directors

2,290

1

(1)

Sonar business combination

100,000

100,000

Dividends on preferred stock

(2,253,385)

(2,253,385)

Net loss

(8,825,793)

(8,825,793)

Balance, June 30, 2021

 

3,698,318

$

370

 

6,775,816

$

678

 

7,654,506

$

766

$

170,440,677

$

(97,315,079)

$

(632,729)

$

$

100,000

$

72,594,683

Preferred Stock

Common Stock

Subsidiary

Class A

Class B

Additional

convertible

Par

Par

Par

Paid-In

Treasury

Preferred

Noncontrolling

    

Shares

    

Value

    

Shares

    

Value

    

Shares

    

Value

    

Capital

    

Deficit

    

Stock

    

Stock

Interests

Total

Balance, December 31, 2019 (audited)

1,599,002

$

160

4,259,920

$

425

7,813,938

$

782

$

87,610,030

$

(32,695,629)

$

(632,729)

$

36,350,000

$

387,663

$

91,020,702

Share based compensation - stock options

 

 

 

  

 

  

 

  

 

  

 

213,585

 

  

 

213,585

Share based compensation - common stock

31,250

31,250

Shares issued to directors

 

7,805

 

1

 

  

 

  

 

(1)

Dividends on preferred stock

(974,272)

(974,272)

Net loss attributable to noncontrolling interest

 

 

 

 

 

  

 

  

 

 

  

(52,854)

 

(52,854)

Net loss

 

 

 

  

 

  

 

  

 

  

 

(10,453,108)

 

  

 

(10,453,108)

Balance, March 31, 2020

 

1,599,002

$

160

 

4,267,725

$

426

 

7,813,938

$

782

$

87,854,864

$

(44,123,009)

$

(632,729)

$

36,350,000

$

334,809

$

79,785,303

Share based compensation - stock options

 

198,023

 

198,023

Share based compensation - common stock

31,250

31,250

Dividends

(974,272)

(974,272)

Net loss attributable to noncontrolling interest

(43,889)

(43,889)

Net loss

(9,035,855)

(9,035,855)

Balance, June 30, 2020

 

1,599,002

$

160

 

4,267,725

$

426

 

7,813,938

$

782

$

88,084,137

$

(54,133,136)

$

(632,729)

$

36,350,000

$

290,920

$

69,960,560

See accompanying notes to unaudited condensed consolidated financial statements.

5

Table of Contents

Chicken Soup for the Soul Entertainment, Inc

Condensed Consolidated Statements of Cash Flows

(unaudited)

Six months ended June 30, 

    

2021

    

2020

Cash flows from Operating Activities:

  

  

Net loss

$

(15,765,789)

$

(19,585,706)

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

 

 

  

Share-based compensation

 

463,688

 

474,108

Programming amortization

 

2,943,995

 

165,393

Film library amortization

 

13,743,925

 

8,800,473

Amortization of deferred financing costs

 

212,122

 

20,306

Amortization and depreciation of intangibles, property and equipment

 

3,342,371

 

10,701,700

Bad debt and video return expense

 

1,602,049

 

2,534,336

Realized losses on marketable securities

 

 

100,607

Other non-operating income

(5,404,482)

Changes in operating assets and liabilities:

 

  

 

Trade accounts receivable

 

(3,075,796)

 

9,553,351

Prepaid expenses and other assets

 

(602,516)

 

(1,092,921)

Programming costs and rights

 

(4,079,465)

 

(1,470,127)

Film library

 

(37,908,785)

 

(16,655,794)

Accounts payable, accrued expenses and other payables

 

41,219

 

280,672

Film library acquisition and programming obligations

 

9,312,097

 

2,430,151

Accrued participation costs

 

12,204,737

 

6,997,561

Other liabilities

 

667,588

 

1,313,944

    Net cash used in operating activities

 

(16,898,560)

 

(836,428)

Cash flows from Investing Activities:

 

  

 

  

Expenditures for property and equipment

 

(527,752)

 

(387,386)

Sales of marketable securities

334,595

Business Combination

(1,143,518)

Decrease in due from affiliated companies, net

 

4,943,153

 

2,645,678

    Net cash provided by investing activities

 

3,271,883

 

2,592,887

Cash flows from Financing Activities:

  

  

     Repayments of commercial loan

 

 

(1,600,000)

     Repayments of revolving credit facility

(2,500,000)

     Repayment of film acquisition advance

(2,528,891)

     Repayment of Revolving Loan

(687,232)

Proceeds from issuance of Class A common stock

24,810,813

Proceeds from exercise of stock options and warrants

 

2,385,325

 

Dividends paid to preferred stockholders

(4,181,810)

(1,948,544)

    Net cash provided by (used in) financing activities

 

17,298,205

 

(3,548,544)

Net increase in cash and cash equivalents

 

3,671,528

 

(1,792,085)

Cash and cash equivalents at beginning of period

 

14,732,726

 

6,447,402

Cash and cash equivalents at end of the period

$

18,404,254

$

4,655,317

Supplemental data: