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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 September 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 November 8, 2021 totaled 16,420,671 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

8,766,165

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 September 30, 2021 and December 31, 2020

3

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

4

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

5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

7

Notes to Condensed Consolidated Financial Statements

8

ITEM 2.

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

28

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

44

ITEM 4.

Controls and Procedures

44

PART II - OTHER INFORMATION

ITEM 1.

Legal Proceedings

45

ITEM 1A.

Risk Factors

45

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

ITEM 3.

Defaults Upon Senior Securities

45

ITEM 4.

Mine Safety Disclosures

46

ITEM 5.

Other Information

46

ITEM 6.

Exhibits

46

SIGNATURES

47

2

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Balance Sheets

    

September 30, 

    

December 31, 

2021

2020

(unaudited)

ASSETS

 

  

 

  

Cash and cash equivalents

$

66,947,955

$

14,732,726

Accounts receivable, net of allowance for doubtful accounts of $795,192, and $1,035,643, respectively

 

48,265,450

 

25,996,947

Prepaid expenses and other current assets

 

2,113,322

 

1,382,502

Goodwill

 

41,286,849

 

21,448,106

Indefinite lived intangible assets

 

12,163,943

 

12,163,943

Intangible assets, net

 

18,976,226

 

19,370,490

Film library, net

 

72,850,313

 

35,239,135

Due from affiliated companies

 

 

5,648,652

Programming costs and rights, net

 

15,440,246

 

15,781,183

Other assets, net

 

4,876,056

 

4,517,102

Total assets

$

282,920,360

$

156,280,786

LIABILITIES AND EQUITY

 

  

 

  

9.50% Notes due 2025, net of deferred issuance costs of $1,501,768 and $1,798,433, respectively

$

31,394,132

$

31,097,467

Notes payable under revolving credit facility

 

 

2,500,000

Revolving loan

17,585,699

Film acquisition advance

6,241,534

8,659,136

Accounts payable and accrued other expenses

 

39,431,948

 

21,394,957

Film library acquisition obligations

 

24,752,229

 

8,616,562

Programming obligations

1,641,250

4,697,316

Accrued participation costs

 

22,864,494

 

12,535,651

Due to affiliated companies

590,383

Put option obligation

11,400,000

Other liabilities

 

2,888,964

 

1,677,906

Total liabilities

 

158,790,633

 

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; 8,797,883 and 5,157,053 shares issued, 8,723,648 and 5,082,818 shares outstanding, respectively

 

881

 

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

 

238,708,111

 

106,425,548

Deficit

 

(114,056,757)

 

(77,247,982)

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

 

(632,729)

 

(632,729)

Total stockholders’ equity

 

124,020,642

 

28,546,329

Subsidiary convertible preferred stock

36,350,000

Noncontrolling interests

109,085

205,462

Total equity

124,129,727

65,101,791

Total liabilities and equity

$

282,920,360

$

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 September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Net revenue

$

29,096,855

$

19,361,751

$

74,428,631

$

46,126,364

Cost of revenue

 

22,856,374

 

14,840,851

 

54,533,027

 

37,684,786

Gross profit

 

6,240,481

 

4,520,900

 

19,895,604

 

8,441,578

Operating expenses:

 

 

  

 

 

  

Selling, general and administrative

 

15,038,299

 

9,301,550

 

35,237,480

 

23,194,223

Amortization and depreciation

 

1,538,650

 

4,576,742

 

4,114,355

 

15,022,885

Management and license fees

 

2,909,686

 

1,936,175

 

7,442,863

 

4,612,636

Total operating expenses

 

19,486,635

 

15,814,467

 

46,794,698

 

42,829,744

Operating loss

 

(13,246,154)

 

(11,293,567)

 

(26,899,094)

 

(34,388,166)

Interest expense

 

1,304,952

 

659,803

 

3,533,940

 

1,322,831

Loss on extinguishment of debt

169,219

169,219

Acquisition-related costs

 

 

 

98,926

Other non-operating income, net

 

(101,898)

 

(43,445)

 

(247,037)

 

(4,381,292)

Loss before income taxes and preferred dividends

 

(14,449,208)

 

(12,079,144)

 

(30,185,997)

 

(31,597,850)

Provision for income taxes

 

30,000

 

26,000

 

59,000

 

93,000

Net loss before noncontrolling interests and preferred dividends

 

(14,479,208)

 

(12,105,144)

 

(30,244,997)

 

(31,690,850)

Net income (loss) attributable to noncontrolling interests

9,085

(73,135)

9,085

(169,878)

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

(14,488,293)

(12,032,009)

(30,254,082)

(31,520,972)

Less: preferred dividends

 

2,253,385

 

1,017,691

 

6,760,155

 

2,966,235

Net loss available to common stockholders

$

(16,741,678)

$

(13,049,700)

$

(37,014,237)

$

(34,487,207)

Net loss per common share:

 

  

 

  

 

  

 

  

Basic and diluted

$

(1.04)

$

(1.04)

$

(2.53)

$

(2.83)

Weighted-average common shares outstanding:

Basic and diluted

 

16,145,808

 

12,508,643

 

14,622,787

 

12,174,779

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

Share based compensation - stock options

 

 

 

1,016,981

1,016,981

Share based compensation - common stock

 

2,457,250

2,457,250

Issuance of common stock

1,875,000

188

70,499,812

70,500,000

Stock options exercised

32,916

3

274,615

274,618

Warrant exercises - Class W and Z

11,306

1

18,787

18,788

Shares issued to directors

 

2,845

1

(1)

Common stock grant

 

100,000

10

(10)

Dividends on preferred stock

(2,253,385)

(2,253,385)

Acquisition of subsidiary noncontrolling interest

(6,000,000)

(6,000,000)

Net income attributable to noncontrolling interest

9,085

9,085

Net loss

 

(14,488,293)

(14,488,293)

Balance, September 30, 2021

3,698,318

$

370

8,797,883

$

881

7,654,506

$

766

$

238,708,111

$

(114,056,757)

$

(632,729)

$

$

109,085

$

124,129,727

See accompanying notes to unaudited condensed consolidated financial statements.

5

Table of Contents

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