Delaware
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27-31646577
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(State or Other Jurisdiction of Incorporation
or Organization)
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(I.R.S. Employer Identification No.)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o (Do not check if a smaller reporting Company)
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Smaller reporting Company x
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PART I --
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FINANCIAL INFORMATION
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Page
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Item 1.
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Financial Statements (Unaudited)
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Condensed Consolidated Balance Sheets at September 30, 2013 (Unaudited) and June 30, 2013
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1
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Unaudited Condensed Consolidated Statements of Operations for the Three
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||
Months ended September 30, 2013 and 2012
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2
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Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended
September 30, 2013 and 2012
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3
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Notes to Unaudited Condensed Consolidated Financial Statements
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4
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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21
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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35
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Item 4.
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Controls and Procedures
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35
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PART II -
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OTHER INFORMATION
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Item 1.
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Legal Proceedings
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35
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds from Sales of Registered Securities
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35
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Item 3.
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Defaults Upon Senior Securities
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35
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Item 4.
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Mine Safety Disclosures
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35
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Item 5.
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Other Information
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35
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Item 6.
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Exhibits
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35
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Signatures
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36
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Exhibit
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36
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Index
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September 30,
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June 30,
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|||||||
2013
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2013
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|||||||
ASSETS
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(Unaudited)
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|||||||
CURRENT ASSETS
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||||||||
Cash and cash equivalents
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$ | 1,337 | $ | 3,607 | ||||
Accounts receivable
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660 | 697 | ||||||
Inventories
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170 | 191 | ||||||
Deferred financing costs, current portion
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357 | 357 | ||||||
Prepaid expenses and other current assets
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1,391 | 1,444 | ||||||
Total current assets
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3,915 | 6,296 | ||||||
Property and equipment, net
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29,163 | 29,171 | ||||||
Goodwill
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3,156 | 3,156 | ||||||
Intangible assets, net
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6,029 | 6,186 | ||||||
Security deposits
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207 | 205 | ||||||
Deferred financing costs, long term portion, net
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1,135 | 1,225 | ||||||
Other assets
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47 | 9 | ||||||
TOTAL ASSETS
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$ | 43,652 | $ | 46,248 | ||||
LIABILITIES AND EQUITY
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||||||||
CURRENT LIABILITIES
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||||||||
Accounts payable
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$ | 1,997 | $ | 2,478 | ||||
Accrued expenses and other current liabilities
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1,957 | 3,964 | ||||||
Notes payable, current portion
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1,746 | 1,373 | ||||||
Capital lease, current portion
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97 | 121 | ||||||
Earn out from theater acquisition
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355 | 296 | ||||||
Deferred revenue
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375 | 305 | ||||||
Total current liabilities
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6,527 | 8,537 | ||||||
NONCURRENT LIABILITIES
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||||||||
Notes payable, long term portion
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8,397 | 8,615 | ||||||
Capital lease, net of current portion
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240 | 239 | ||||||
Unfavorable leasehold liability, long term portion
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150 | 159 | ||||||
Deferred rent expense
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512 | 407 | ||||||
Deferred tax liability
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206 | 199 | ||||||
TOTAL LIABILITIES
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16,032 | 18,156 | ||||||
COMMITMENTS AND CONTINGENCIES
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||||||||
STOCKHOLDERS' EQUITY
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||||||||
Preferred Stock, $.01 par value, 10,000,000 shares authorized as of September 30, 2013 and June 30, 2013, 6 shares of Series B Preferred Stock issued and outstanding as of September 30, 2013 and June 30, 2013 and 2012, respectively
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- | - | ||||||
Class A Common stock, $.01 par value: 20,000,000 shares authorized; and 5,642,208 and 5,511,938 shares issued and outstanding as of September 30, 2013 and June 30, 2013, respectively
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56 | 55 | ||||||
Class B Common stock, $.01 par value, 900,000 shares authorized; 849,000 and 865,000 shares issued and outstanding as of September 30, 2013 and June 30, 2013, respectively
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8 | 9 | ||||||
Additional paid-in capital
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26,418 | 25,816 | ||||||
Accumulated deficit
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(8,100 | ) | (7,049 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY OF DIGITAL CINEMA DESTINATIONS CORP.
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18,382 | 18,831 | ||||||
Noncontrolling interest
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9,238 | 9,261 | ||||||
Total equity
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27,620 | 28,092 | ||||||
TOTAL LIABILITIES AND EQUITY
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$ | 43,652 | $ | 46,248 |
Three Months Ennded
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||||||||
September 30,
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||||||||
2013
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2012
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|||||||
REVENUES
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||||||||
Admissions
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$ | 7,758 | $ | 3,009 | ||||
Concessions
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3,338 | 1,199 | ||||||
Other
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373 | 139 | ||||||
Total revenues
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11,469 | 4,347 | ||||||
COSTS AND EXPENSES
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||||||||
Cost of operations:
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||||||||
Film rent expense
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3,778 | 1,412 | ||||||
Cost of concessions
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602 | 164 | ||||||
Salaries and wages
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1,450 | 513 | ||||||
Facility lease expense
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1,470 | 523 | ||||||
Utilities and other
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2,386 | 768 | ||||||
General and administrative
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1,318 | 737 | ||||||
Change in fair value of earnout
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59 | - | ||||||
Depreciation and amortization
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1,335 | 849 | ||||||
Total costs and expenses
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12,398 | 4,966 | ||||||
OPERATING LOSS
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(929 | ) | (619 | ) | ||||
OTHER EXPENSE
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||||||||
Interest expense
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(351 | ) | (23 | ) | ||||
Non-cash interest expense
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(76 | ) | (2 | ) | ||||
Other expense
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(9 | ) | - | |||||
LOSS BEFORE INCOME TAXES
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(1,365 | ) | (644 | ) | ||||
Income tax expense
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9 | 17 | ||||||
NET LOSS
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$ | (1,374 | ) | $ | (661 | ) | ||
Net loss attributable to non-controlling interest
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323 | - | ||||||
Net loss attributable to Digital Cinema Destinations Corp.
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$ | (1,051 | ) | $ | (661 | ) | ||
Preferred stock dividends
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(5 | ) | (1 | ) | ||||
Net loss attributable to common stockholders
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$ | (1,056 | ) | $ | (662 | ) | ||
Net loss per Class A and Class B common share- basic and diluted attributable to common stockholders
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$ | (0.16 | ) | $ | (0.12 | ) | ||
Weighted average common shares outstanding:
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6,470,484 | 5,419,452 |
Three Months Ended
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||||||||
September 30,
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||||||||
2013
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2012
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|||||||
Cash flows from operating activities
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||||||||
Net loss
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$ | (1,374 | ) | $ | (661 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
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||||||||
Depreciation and amortization
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1,335 | 849 | ||||||
Deferred tax expense
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7 | 10 | ||||||
Change in fair value of earnout liability
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59 | - | ||||||
Stock-based compensation
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239 | 43 | ||||||
Amortization of deferred financing costs included in interest expense
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90 | - | ||||||
Amortization of unfavorable lease liability
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(9 | ) | (5 | ) | ||||
Paid-in-kind interest added to notes payable
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76 | 2 | ||||||
Equity in income of Diginext
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(3 | ) | - | |||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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37 | (421 | ) | |||||
Inventories
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25 | 7 | ||||||
Prepaid expenses and other current assets
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66 | 69 | ||||||
Other assets and security deposits
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(12 | ) | 3 | |||||
Accounts payable and accrued expenses
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(2,488 | ) | (323 | ) | ||||
Payable to vendor for digital systems
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- | (3,334 | ) | |||||
Deferred revenue
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70 | (18 | ) | |||||
Deferred rent expense
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105 | 42 | ||||||
Net cash used in operating activities
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(1,777 | ) | (3,737 | ) | ||||
Investing activities:
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||||||||
Purchases of property and equipment
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(401 | ) | (98 | ) | ||||
Capital contribution from Start Media, LLC to joint venture
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300 | - | ||||||
Investment in Diginext
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(25 | ) | - | |||||
Theater acquisitions
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(221 | ) | (6,014 | ) | ||||
Cash acquired in acquisitions
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4 | 10 | ||||||
Net cash used in investing activities
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(343 | ) | (6,102 | ) | ||||
Financing activities:
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||||||||
Repayment of notes payable
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(99 | ) | (832 | ) | ||||
Proceeds from notes payable
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- | 10,000 | ||||||
Payment under capital lease obligations
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(23 | ) | - | |||||
Payment of financing costs
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- | (311 | ) | |||||
Proceeds from issuance of preferred stock
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- | 450 | ||||||
Dividends paid on preferred stock
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(5 | ) | - | |||||
Costs associated with issuance of stock
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(23 | ) | (56 | ) | ||||
Net cash (used in) provided by financing activities
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(150 | ) | 9,251 | |||||
Net change in cash and cash equivalents
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(2,270 | ) | (588 | ) | ||||
Cash and cash equivalents, beginning of year
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3,607 | 2,037 | ||||||
Cash and cash equivalents, end of period
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$ | 1,337 | $ | 1,449 |
Furniture and fixtures
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5 years
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Leasehold improvements
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Lesser of lease term or estimated asset life
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Building and improvements
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17 years
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Digital systems and related equipment
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10 years
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Equipment and computer software
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3 - 5 years
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•
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Level 1 – quoted prices in active markets for identical investments
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•
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Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)
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•
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Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)
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As of September 30, 2013:
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||||||||||||||||
Level 1
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Level 2
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Level 3
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Total
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|||||||||||||
Earn-out from theater acquisitions
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- | - | 355 | 355 | ||||||||||||
$ | - | $ | - | $ | 355 | $ | 355 | |||||||||
As of June 30, 2013:
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||||||||||||||||
Level 1
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Level 2
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Level 3
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Total
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|||||||||||||
Earn-out from theater acquisitions
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- | - | 296 | 296 | ||||||||||||
$ | - | $ | - | $ | 296 | $ | 296 |
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Total
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|||
Balance as of June 30, 2013
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$ | 296 | ||
Change in fair value of earnout liability for Lisbon acquisition
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59 | |||
Balance as of September 30, 2013
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$ | 355 |
Torrington
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||||
Theater
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||||
ASSETS
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||||
Cash
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$ | 4 | ||
Prepaid expenses
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13 | |||
Inventory
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4 | |||
Property and equipment
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455 | |||
Favorable leasehold interest
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229 | |||
Covenants not to compete
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85 | |||
Total assets acquired
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790 | |||
LIABILITIES AND OTHER
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||||
Notes payable assumed
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178 | |||
Issuance of Class A common stock
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391 | |||
Total purchase price paid in cash
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$ | 221 |
(unaudited)
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||||||||
Three Months ended September 30,
|
||||||||
2013
|
2012
|
|||||||
Revenues
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$ | 11,527 | $ | 4,694 | ||||
Net loss
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(1,372 | ) | $ | (646 | ) |
September 30,
|
June 30,
|
|||||||
2013
|
2013
|
|||||||
VPFs
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$ | 517 | $ | 470 | ||||
Advertising
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113 | 180 | ||||||
Other
|
30 | 47 | ||||||
Total
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$ | 660 | $ | 697 |
September 30,
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June 30,
|
|||||||
2013
|
2013
|
|||||||
Insurance
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$ | 179 | $ | 215 | ||||
Projector and other equipment maintenance
|
252 | 246 | ||||||
Real estate taxes
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128 | 82 | ||||||
Note receivable (1)
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74 | 89 | ||||||
Due from former theater owners
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299 | 299 | ||||||
Due from Start Media
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290 | 290 | ||||||
Other theater operating
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67 | 84 | ||||||
Other expenses
|
102 | 139 | ||||||
Total
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$ | 1,391 | $ | 1,444 |
(1)
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This note receivable from a former theater owner has no stated interest rate, and is due October 1, 2013. However the Company is in the process of finalizing the Lisbon earnout calculation with the sellers and expects to offset the amount of the note receivable against any earnout payable.
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September 30,
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June 30,
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|||||||
2013
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2013
|
|||||||
Furniture and fixtures
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$ | 5,067 | $ | 4,931 | ||||
Leasehold improvements
|
13,069 | 12,820 | ||||||
Building and improvements
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4,629 | 4,627 | ||||||
Digital systems and related equipment
|
6,402 | 6,071 | ||||||
Equipment and computer software
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4,114 | 3,976 | ||||||
33,281 | 32,425 | |||||||
Less: accumulated depreciation and amortization
|
(4,118 | ) | (3,254 | ) | ||||
Total property and equipment, net
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$ | 29,163 | $ | 29,171 |
Gross
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Useful
|
|||||||||||||||
Carrying
|
Accumulated
|
Net
|
Life
|
|||||||||||||
Amount
|
Amortization
|
Amount
|
(years)
|
|||||||||||||
Trade names
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$ | 3,016 | $ | 1,535 | $ | 1,481 | 3-5 | |||||||||
Covenants not to compete
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1,991 | 620 | 1,371 | 3 | ||||||||||||
Favorable leasehold interest
|
3,600 | 423 | 3,177 |
Remaining
lease term
|
||||||||||||
$ | 8,607 | $ | 2,578 | $ | 6,029 |
Gross
|
Useful
|
|||||||||||||||
Carrying
|
Accumulated
|
Net
|
Life
|
|||||||||||||
Amount
|
Amortization
|
Amount
|
(years)
|
|||||||||||||
Trade names
|
$ | 3,016 | $ | 1,302 | $ | 1,714 | 3-5 | |||||||||
Covenants not to compete
|
1,906 | 493 | 1,413 | 3 | ||||||||||||
Favorable leasehold interest
|
3,371 | 312 | 3,059 |
Remaining
lease term
|
||||||||||||
$ | 8,293 | $ | 2,107 | $ | 6,186 |
June 30,
|
Total
|
|||
2014 (remaining nine months)
|
$ | 1,495 | ||
2015
|
1,730 | |||
2016
|
660 | |||
2017
|
324 | |||
2018
|
293 | |||
2019
|
293 |
June 30,
|
Total
|
|||
2014 (remaining nine months)
|
$ | 4,486 | ||
2015
|
6,118 | |||
2016
|
6,002 | |||
2017
|
5,365 | |||
2018
|
4,855 | |||
2019
|
4,582 | |||
Thereafter
|
22,323 | |||
Total
|
$ | 53,731 |
September 30,
|
June 30,
|
|||||||
2013
|
2013
|
|||||||
Equipment
|
$ | 409 | $ | 409 | ||||
Less: accumulated amortization
|
(75 | ) | (54 | ) | ||||
Net
|
$ | 334 | $ | 355 |
September 30,
|
Total
|
|||
2014
|
$ | 121 | ||
2015
|
103 | |||
2016
|
97 | |||
2017
|
64 | |||
2018
|
3 | |||
Total minimum payments
|
388 | |||
Less: amount representing interest
|
(51 | ) | ||
Present value of minimum payments
|
337 | |||
Less: current portion
|
(97 | ) | ||
$ | 240 |
Unvested balance at June 30, 2013
|
91,700 | |||
Issuance of awards
|
107,000 | |||
Vesting of awards
|
(15,500 | ) | ||
Unvested balance at September 30, 2013
|
183,200 |
September 30,
|
Total
|
|||
2014
|
$ | 1,701 | ||
2015
|
1,671 | |||
2016
|
1,671 | |||
2017 (excludes PIK interest accrued to date of $305)
|
4,932 | |||
Total
|
9,975 | |||
Less: current portion
|
(1,701 | ) | ||
$ | 8,274 |
September 30,
|
Total
|
|||
2014
|
$ | 45 | ||
2015
|
48 | |||
2016
|
51 | |||
2017
|
24 | |||
Total
|
168 | |||
Less: current portion
|
(45 | ) | ||
$ | 123 |
Three Months ended September 30,
|
||||||||
2013
|
2012
|
|||||||
Numerator for basic and diluted loss per share
|
||||||||
Net loss attributable to Digital Cinema Destinations Corp.
|
$ | (1,051 | ) | $ | (661 | ) | ||
Preferred dividends
|
(5 | ) | (1 | ) | ||||
Net loss attributable to common stockholders
|
$ | (1,056 | ) | $ | (662 | ) | ||
Denominator
|
||||||||
Weighted average shares of common stock outstanding (1)
|
6,470,484 | 5,419,452 | ||||||
Basic and diluted net loss per share of common stock
|
$ | (0.16 | ) | $ | (0.12 | ) |
Three Months Ended
|
||||||||
September 30,
|
||||||||
2013
|
2012
|
|||||||
Accrued dividends on Series B preferred stock
|
- | 1 | ||||||
Fair value of earnout recorded at acquisition
|
- | 550 | ||||||
Cash paid for interest
|
262 | 24 | ||||||
Amount offset on note repayment
|
- | 168 | ||||||
Common stock issued for acquisition of Torrington theater
|
391 | - | ||||||
Conversion of Class B common stock into Class A
|
1 | - |
Date Acquired
|
City/ State
|
Number of Screens
|
Approximate Number of Seats
|
||
12/31/10
|
Cranford, NJ
|
5
|
642
|
||
12/31/10
|
Westfield, NJ
|
6
|
956
|
||
02/18/11
|
Bloomfield, CT
|
8
|
1,119
|
||
04/20/12
|
Bloomsburg, PA
|
11
|
1,883
|
||
04/20/12
|
Camp Hill, PA
|
12
|
2,403
|
||
04/20/12
|
Reading, PA
|
10
|
2,035
|
||
04/20/12
|
Selinsgrove, PA
|
12
|
2,048
|
||
04/20/12
|
Williamsport, PA
|
9
|
1,721
|
||
09/29/12
|
Lisbon, CT
|
12
|
2,107
|
||
12/14/12
|
Surprise, AZ (1) (2)
|
14
|
2,696
|
||
12/18/12
|
Apple Valley, CA (1)
|
14
|
2,568
|
||
12/18/12
|
San Diego, CA (1)
|
7
|
1,404
|
||
12/18/12
|
Bonsall, CA (1)
|
6
|
867
|
||
12/18/12
|
Poway, CA (1)
|
10
|
2,217
|
||
12/19/12
|
Oceanside, CA (1)
|
13
|
1,659
|
||
12/20/12
|
Temecula, CA (1)
|
10
|
1,775
|
||
01/01/13
|
Sparta, NJ (1)
|
3
|
264
|
||
02/01/13
|
Solon, OH (1)
|
16
|
2,826
|
||
07/19/13
|
Torrington, CT (1)
|
6
|
1,021
|
||
Total
|
184
|
32,211
|
(1) Owned by JV.
|
|||
(2) Includes one IMAX screen with approximately 212 seats.
|
•
|
Acquisitions of existing historically cash flow positive theaters in free zones either directly by Digiplex or through our JV. We intend to selectively pursue multi-screen theater acquisition opportunities that meet our strategic and financial criteria. Our philosophy is to “buy and improve” existing facilities rather than “find and build” new theaters. We believe this approach provides more predictability, speed of execution and lower risk.
|
•
|
Creation of an all-digital theater circuit utilizing our senior management team’s extensive experience in digital cinema and related technologies, alternative programming and movie selection. We will convert the theaters we acquire to digital projection platforms (if not already converted) with an appropriate mix of RealD™ 3D auditoriums in each theater complex. Seven of our locations also offer D-Box™ motion seating available for certain movies.
|
•
|
Offering our customers a program of popular movies and alternative content such as sports, concerts, opera, ballet and video games to increase seat utilization and concession sales during off peak and some peak periods.
|
•
|
Deployment of state of the art integrated software systems for back office accounting and camera surveillance systems for theater management which enable us to manage our business efficiently and to provide maximum scheduling flexibility while reducing operational costs.
|
•
|
Active marketing of the Digiplex brand, and our joint venture, DigiNext, to release specialty movie content, and other programs to consumers using primarily new media tools such as social media, website design and regular electronic communications to our targeted audience.
|
•
|
Enhancing our alternative content programs with themed costuming for our theater personnel, food packages, scripted introductions by theater managers, and the use of selected staff members called “ambassadors” to employ various social media tools before, during and after each event to promote the event and the Digiplex brand.
|
•
|
Creation of strategic relationships to acquire exclusive distribution rights to content which (i) can play at both our own theaters, and at additional non-competing theaters, and (ii) can be the source of additional revenues from non-theatrical revenue streams (such as DVD sales, digital downloads, cable TV, etc.).
|
JV agreement and JV Acquisitions. As noted in Overview, in December 2012 we entered into a joint venture relationship with Start Media and the JV acquired 7 theaters from the Ultrastar Sellers in California and Arizona. The total purchase price for the Ultrastar Acquisitions was $13,131; with $8,108 in cash, of which $8,000 was provided by Start Media, 887,623 shares of Class A common stock with a fair value of $4,714 provided by us, and the assumption of a capital equipment lease. Both the cash and stock elements constitute our respective initial capital contributions to the JV. Certain operating leases for the theater facilities, and certain capital leases and service contracts related to theater equipment were assumed. No other liabilities were assumed from the Ultrastar Sellers. On January 1 and February 1, 2013, JV entered into operating leases for a three screen theater in Sparta, NJ and a 16 screen theater in Solon, Ohio, respectively, and in July 2013 JV acquired one theater in Torrington, Connecticut having six screens. We expect to acquire other theaters through the JV, although this cannot be assured.
|
Management Agreements. We have entered into agreements (the “Management Agreements”) to manage the theaters JV acquires, and we receive 5% of the total revenue of the theaters in each year as management fees in consideration for these management services. Under the Management Agreements, we have full day-to-day authority to operate the theaters owned by JV including: staffing, banking, content selection, vendor selection and all purchasing decisions. We are required to submit an annual operating budget to JV for each fiscal year ending June 30 for approval by the JV board of managers (which is comprised of four seats, two of which are controlled by us, and two by Start Media). In the event of any disagreements regarding the budget, there are dispute resolution procedures contained in the JV operating agreement.
|
Northlight Term Loan. On September 28, 2012, we entered into a loan agreement for $10,000 with Northlight Trust I (“Northlight”). The Northlight loan was used to fund our acquisition of the Lisbon theater for $6,014, pay for previously installed digital systems of $3,334, pay fees associated with the Northlight loan and the Lisbon acquisition, and to provide working capital.
|
Shelf Registration. In May 2013, we filed a $10,500 registration statement (the maximum amount is subject to adjustment), which has been declared effective by the Securities and Exchange Commission, and permits the issuance of a broad range of securities. Any proceeds can be used for a variety of items, including acquisitions, debt repayment and general corporate purposes. In October 2013, we sold 1.1 million shares of our Class A Common Stock to several investors under the registration statement and received net proceeds of approximately $5,200.
|
Digital Projector Installation. At September 30, 2013, all of our 184 screens were equipped with digital projectors and related hardware and software. 120 of the 184 systems had been installed before our acquisition of the theaters, and the remaining 64 systems were installed under our ownership, at a total cost of approximately $6,400. We earn VPFs, described under Components of Operating Results, on 91 systems and do not earn VPFs on 93 digital systems, as these systems are owned by an unrelated digital cinema integrator. However, we have full use of these systems under a master license agreement, and we have the option to purchase these systems at fair market value after the systems have been in use for a ten-year period.
|
Alternative Content Program Launch. Along with the continued display of traditional feature movies, a cornerstone of our business strategy is to exhibit opera, ballet, concerts, and sporting events, children’s programming and other forms of alternative content in our theaters. Using our 184 digital systems (72 of which are equipped to show 3D events), we can show live and pre-recorded 2D and 3D events at off-peak times to increase the utilization of our theaters. Going forward we expect at least 40% of any new screens to be 3D-enabled.
|
Acquisition Strategy. We plan to acquire existing movie theaters in free zones over the next 12 months and beyond. We generally seek to pay a multiple of 4.5 times to 6.0 times Theater Level Cash Flow (“TLCF”) for theaters we acquire. TLCF is calculated as revenues minus theater operating expenses (excluding depreciation and amortization and other non-cash items).
|
Three months ended September 30,
|
||||||||||||||||
(Amounts in thousands, except per patron data)
|
2013
|
2012
|
||||||||||||||
Revenues:
|
$ | % | $ | % | ||||||||||||
Admissions
|
$ | 7,758 | 68 | $ | 3,009 | 69 | ||||||||||
Concessions
|
3,338 | 29 | 1,199 | 28 | ||||||||||||
Other
|
373 | 3 | 139 | 3 | ||||||||||||
Total revenues
|
11,469 | 100 | 4,347 | 100 | ||||||||||||
Cost of operations:
|
||||||||||||||||
Film rent expense (1)
|
3,778 | 49 | 1,412 | 47 | ||||||||||||
Cost of concessions (2)
|
602 | 18 | 164 | 14 | ||||||||||||
Salaries and wages (3)
|
1,450 | 13 | 513 | 12 | ||||||||||||
Facility lease expense (3)
|
1,470 | 13 | 523 | 12 | ||||||||||||
Utilities and other (3)
|
2,386 | 21 | 768 | 18 | ||||||||||||
General and administrative (3)
|
1,318 | 11 | 737 | 17 | ||||||||||||
Change in fair value of earnout (3)
|
59 | 1 | - | - | ||||||||||||
Depreciation and amortization (3)
|
1,335 | 12 | 849 | 20 | ||||||||||||
Total costs and expenses (3)
|
12,398 | 108 | 4,966 | 114 | ||||||||||||
Operating loss (3)
|
(929 | ) | (8 | ) | (619 | ) | (14 | ) | ||||||||
Interest expense
|
(427 | ) | (4 | ) | (25 | ) | (1 | ) | ||||||||
Other
|
(9 | ) | (0 | ) | - | - | ||||||||||
Loss before income taxes (3)
|
(1,365 | ) | (12 | ) | (644 | ) | (15 | ) | ||||||||
Income taxes (4)
|
9 | (1 | ) | 17 | (3 | ) | ||||||||||
Net loss (3)
|
$ | (1,374 | ) | (12 | ) | $ | (661 | ) | (15 | ) | ||||||
Net loss attributable to non-controlling interest (10)
|
323 | 24 | - | - | ||||||||||||
Net loss attributable to Digital Cinema Destinations Corp. (10)
|
$ | (1,051 | ) | 76 | $ | (661 | ) | (3 | ) | |||||||
Preferred stock dividends
|
(5 | ) | 0 | (1 | ) | 0 | ||||||||||
Net loss attributable to common stockholders (10)
|
$ | (1,056 | ) | 77 | $ | (662 | ) | 0 | ||||||||
Other operating data:
|
||||||||||||||||
Consolidated Theatre Level Cash Flow (5)
|
$ | 1,829 | 16 | $ | 1,009 | 23 | ||||||||||
Management fees (9)
|
$ | 286 | 2 | $ | - | - | ||||||||||
Adjusted EBITDA of Digital Cinema Destinations Corp (6)
|
$ | 1,007 | 9 | $ | 358 | 8 | ||||||||||
Attendance
|
1,077,350 | * | 416,132 | * | ||||||||||||
Average ticket price (7)
|
$ | 7.59 | * | $ | 7.23 | * | ||||||||||
Average concession per patron (8)
|
$ | 3.27 | * | $ | 2.88 | * |
*
|
Not meaningful
|
(1)
|
Film rent expense percentage calculated as a percentage of admissions revenues.
|
(2)
|
Cost of concessions percentage calculated as a percentage of concessions revenues.
|
(3)
|
Percentage calculated as a percentage of total revenues.
|
(4)
|
Calculated as a percentage of pre-tax loss.
|
(5)
|
TLCF is a non-GAAP financial measure. TLCF is a common financial metric in the theater industry, used to gauge profitability at the theater level, before the effect of depreciation and amortization, general and administrative expenses, deferred rent, interest, taxes or other income and expense items. While TLCF is not intended to replace any presentation included in our consolidated financial statements under GAAP and should not be considered an alternative to cash flow as a measure of liquidity, we believe that this measure is useful in assessing our cash flow and working capital requirements. This calculation may differ in method of calculation from similarly titled measures used by other companies. See page 30-32 for TLCF reconciliation.
|
(6)
|
Adjusted EBITDA is a non-GAAP financial measure. We use adjusted EBITDA as a supplemental liquidity measure because we find it useful to understand and evaluate our results, excluding the impact of non-cash depreciation and amortization charges, stock based compensation expenses, other non-cash items, and nonrecurring expenses and outlays, prior to our consideration of the impact of other potential sources and uses of cash, such as working capital items. This calculation may differ in method of calculation from similarly titled measures used by other companies. See page 30-31 for Adjusted EBITDA reconciliation.
|
(7)
|
Calculated as admissions revenue/ paid attendance of 1,077,350 in 2013 and 416,132 in 2012, respectively. Paid attendance excludes certain theater rental activity, such as parties and film festivals.
|
(8)
|
Calculated as concessions revenue/ paid attendance of 1,077,350 in 2013 and 416,132 in 2012, respectively. Paid attendance excludes certain theater rental activity, such as parties and film festivals.
|
(9)
|
Management Fees earned by Digiplex to operate the theaters of the JV.
|
(10)
|
Percentage calculated as a percentage of net loss.
|
(000's)
|
Three Months ended September 30,
|
|||||||
Consolidated Statement of Cash Flows Data:
|
2013
|
2012
|
||||||
Net cash (used in) provided by:
|
|
|||||||
Operating activities
|
$ | (1,777 | ) | $ | (3,737 | ) | ||
Investing activities
|
(343 | ) | (6,102 | ) | ||||
Financing activities
|
(150 | ) | 9,251 | |||||
Net decrease in cash and cash equivalents
|
$ | (2,270 | ) | $ | (588 | ) |
(unaudited)
|
%
|
|||||||||||
|
Three months ended September 30,
|
Increase/
|
||||||||||
(000's)
|
2013
|
2012
|
(Decrease) | |||||||||
Net loss
|
$ | (1,374 | ) | $ | (661 | ) | 108% | |||||
Addback:
|
||||||||||||
General and administrative (1)
|
1,318 | 737 | 79% | |||||||||
Depreciation and amortization
|
1,335 | 849 | 57% | |||||||||
Income tax expense
|
9 | 17 | -47% | |||||||||
Interest expense
|
427 | 25 | 1608% | |||||||||
Other expense
|
9 | - | n/a | |||||||||
Deferred rent expense (5)
|
105 | 42 | 150% | |||||||||
Consolidated TLCF
|
$ | 1,829 | $ | 1,009 | 81% |
(unaudited)
|
%
|
|||||||||||
|
Three months ended September 30,
|
Increase/ | ||||||||||
(000's)
|
2013
|
2012
|
(Decrease) | |||||||||
Net loss
|
$ | (1,374 | ) | $ | (661 | ) | 108% | |||||
Add back:
|
||||||||||||
Depreciation and amortization
|
1,335 | 849 | 57% | |||||||||
Interest expense
|
427 | 25 | 1608% | |||||||||
Income tax expense
|
9 | 17 | -47% | |||||||||
Other expense
|
9 | - | 100% | |||||||||
Deferred rent expense (5)
|
105 | 42 | 150% | |||||||||
Stock-based compensation (2)
|
239 | 43 | 456% | |||||||||
Non-recurring organizational and M&A-related professional fees (3)
|
56 | 43 | 30% | |||||||||
Management fees (4)
|
286 | - | 100% | |||||||||
Start Media's share of adjusted EBITDA
|
(85 | ) | - | 100% | ||||||||
Adjusted EBITDA of Digital Cinema Destinations Corp.
|
$ | 1,007 | $ | 358 | -181% |
(1)
|
TLCF is intended to be a measure of theater profitability. Therefore, our corporate general and administrative expenses have been excluded.
|
(2)
|
Represents the fair value of shares of Class A common stock and restricted stock awards issued to employees and non-employees for services rendered. As these are non-cash charges, we believe that it is appropriate to show Adjusted EBITDA excluding this item. The increase from the prior year is due to the magnitude of the Lisbon and Ultrastar acquisitions.
|
(3)
|
Primarily represents professional fees incurred in connection with specific acquisitions. Since the amounts will vary depending on the size and quantity of any acquisition, and are not part of ongoing operations of our theaters, we believe that it is appropriate to exclude these items from Adjusted EBITDA.
|
(4)
|
To add back management fees to Digiplex from JV.
|
(5)
|
Represents non-cash deferred rent expense which is included in facility lease expense in the consolidated statements of operations. As these are non-cash charges, we believe it is appropriate to show TLCF and Adjusted EBITDA excluding this item.
|
(in thousands)
|
||||
Balance at June 30, 2013
|
$ | 4,382 | ||
Digital systems costs
|
240 | |||
Financing costs
|
351 | |||
VPFs earned
|
(290 | ) | ||
Exhibitor contribution
|
(54 | ) | ||
Administrative costs
|
27 | |||
Balance, September 30, 2013
|
$ | 4,656 |
•
|
actual theater level cash flows;
|
•
|
future years budgeted theater level cash flows;
|
•
|
theater property and equipment carrying values;
|
•
|
amortizing intangible asset carrying values;
|
•
|
competitive theaters in the marketplace;
|
•
|
the impact of recent ticket price changes;
|
•
|
available lease renewal options; and
|
•
|
other factors considered relevant in our assessment of impairment of individual theater assets.
|
DIGITAL CINEMA DESTINATIONS CORP.
(Registrant)
|
|||
Date: November 8, 2013
|
By:
|
/s/ Brian D. Pflug
|
|
Name:
|
Brian D. Pflug
|
||
Title:
|
Chief Financial Officer and Principal Accounting Officer
|
Exhibit
Number
|
Description of Document
|
|
31.1
|
Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation
|
|
101.DEF
|
XBRL Taxonomy Extension Definition
|
|
101.LAB
|
XBRL Taxonomy Extension Label
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation
|
Date: November 8, 2013
|
/s/ A. Dale Mayo | |
A. Dale Mayo
Chief Executive Officer and
Chairman
|
Date: November 8, 2013
|
/s/ Brian D. Pflug | |
Brian D. Pflug
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 8, 2013
|
By: /s/ A. Dale Mayo
|
|
A. Dale Mayo
Chief Executive Officer and Chairman
|
By: /s/ Brian D. Pflug
|
||
Brian D. Pflug
Chief Financial Officer and Principal Accounting Officer
|
12. NOTES PAYABLE
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12. NOTES PAYABLE | On September 28, 2012, the Company entered into a loan agreement with Northlight Trust I for $10,000 due September 28, 2017, at an interest rate equal to 30 day LIBOR plus 10.50% per annum, with a 2.5% floor (the Northlight loan). The Company expects the 2.5% floor to be applicable due to the current LIBOR rates. During the first 18 months from the closing date, all interest in excess of 10.00% per annum that would otherwise be paid in cash during the 18-month period may, at the Companys option, may be paid in kind (PIK interest), and thereafter all interest due is payable in cash. PIK interest, if any, will be added to the principal balance of the loan. The Company primarily used the net proceeds from the Northlight loan to acquire certain assets and assume certain liabilities of Lisbon, pay the obligation to a vendor for digital systems, pay fees and expenses associated with the Northlight loan and the Lisbon acquisition, and to provide working capital. Interest and principal payments under the terms of the Northlight loan commenced on October 31, 2012. The Northlight loan is collateralized by, among other things, the Companys membership interest in each of the Companys operating subsidiaries and all of the operating subsidiaries assets, including the theater leases, and requires meeting certain financial covenant ratios. As of September 30, 2013, the Company was in compliance with all financial covenants. For the three months ended September 30, 2013 and 2012, $20 and $0 of amortization of deferred financing costs were included in interest expense on the unaudited condensed consolidated statement of operations.
The principal payments due as of September 30, 2013 over the remainder of the term of the Northlight loan are summarized as follows, in fiscal years:
The Northlight loan is mandatorily pre payable from 25% of the Companys Excess Cash Flow (earnings before interest, taxes, depreciation, as adjusted, as further defined in the Northlight loan agreement) beginning on September 30, 2013 and annually thereafter. As of September 30, 2013, no payment is due under the Excess Cash Flow provision.
In connection with the acquisition of Torrington, the Company assumed a promissory note for certain digital projection equipment, with an outstanding balance as of September 30, 2013 of $168. The note is payable monthly, is due March 2017 and has an interest rate of 7%.
The principal payments due as of September 30, 2013 over the remainder of the term of the Torrington promissory note are summarized as follows, in fiscal years:
|
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Commitments And Contingencies Details Narrative | ||
Compensation Expense | $ 75 | $ 60 |
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