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| | | | | A-i | | |
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Q: Why am I receiving this Information Statement?
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| | A: Applicable laws and securities regulations require us to provide you with notice of the written consent that was delivered to the Company by the stockholder holding a majority of the outstanding shares of common stock of the Company, even though your vote or consent is neither required nor requested to adopt or authorize the Asset Purchase Agreement or the Asset Sale. The Board is providing this Information Statement to you pursuant to Section 14(c) of the Exchange Act, solely to inform you of, and provide you with information about, the Asset Sale before it is consummated. | |
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Q: Who is entitled to receive this Information Statement?
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| | A: Stockholders of record as of May 11, 2024, the record date, are entitled to receive this Information Statement and the accompanying notice of stockholder action by written consent, which describes the corporate action that has been approved by the written consent of the stockholder who owns approximately 55% of the Company’s outstanding shares of common stock. | |
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Q: Am I being asked to vote on the Asset Sale?
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| | A: No, we are not asking you to vote for approval of the Asset Sale or to provide your written consent to the Asset Sale. Your vote or written consent is not required for approval of the Asset Sale because the Asset Sale has been approved by written consent by the stockholder holding a majority of the Company’s outstanding shares of common stock. Under Delaware corporate law, all the activities requiring stockholder approval may be taken by obtaining the written consent and approval of more than fifty percent (50%) of the holders of voting stock in lieu of a meeting of the stockholders. Therefore, no action by the minority stockholders in connection with the Asset Sale is required. | |
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Q: Did the Board approve and recommend the Asset Purchase Agreement?
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| | A: Yes. After careful consideration, the Board unanimously (i) determined and resolved that the Asset Purchase Agreement and the consummation of the Asset Sale are in the best interests of the Company and its stockholders and (ii) approved and adopted and recommended to the stockholders in all respects the Asset Purchase Agreement and the Asset Sale. | |
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Q: Will there be a stockholder meeting to consider and approve the Asset Sale?
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| | A: No, a stockholder meeting will not be held to consider and approve the Asset Sale. The Asset Sale has already been approved by written consent of the Stockholder holding a majority of the outstanding shares of common stock of the Company. | |
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Q: Will any proceeds be distributed to me as a stockholder?
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| | A: No. The proceeds from the Asset Sale are payable solely to the Company. | |
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Q: Is the Asset Sale subject to the satisfaction of any conditions?
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| | A: Yes. Before the Asset Sale can be consummated, certain closing conditions must be satisfied or waived. These conditions are described in “Description of the Transaction” in this Information Statement. If these conditions are not satisfied or waived, then the Asset Sale will not be consummated even though it has been approved by written consent by the holder of a majority of the outstanding shares of common stock of the Company. | |
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Q: Am I entitled to exercise appraisal
rights? |
| | A: No. Appraisal rights are not available to the Company’s stockholders under Delaware law or the Company’s organizational documents in connection with the Asset Sale. | |
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Q: What are the U.S. federal income tax consequences of the Asset Sale?
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| | A: The Asset Sale is entirely a corporate action. Our U.S. stockholders will not realize any gain or loss for U.S. federal income tax purposes solely as a result of the Asset Sale. The Asset Sale likely will be treated as a taxable sale of corporate assets in exchange for forgiveness of debt and certain cash payments upon achieving certain specified milestones. | |
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Q: What should I do now?
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| | A: No action by you is required. However, we urge you to read this Information Statement carefully. | |
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Q: Who can help answer my questions?
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| | A: If you have questions about the Asset Sale or would like additional copies of this Information Statement, without charge, then you should contact us as follows: | |
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The Chosen, Inc.
Attn: David Stidham 4 S 2600 W, Suite 5 Hurricane, Utah, 84737 Tel: 435-767-1338 |
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(in thousands)
|
| |
Amount
|
| |||
Bridge Loan Promissory Note Forgiveness
|
| | | $ | 11,648 | | |
CAS Loan Forgiveness
|
| | | | 145,500 | | |
Settlement of existing balances, net from arrangements with CAS
|
| | | | 1,236 | | |
Upfront Consideration
|
| | | | 158,421 | | |
Milestone Payments
|
| | | | 85,000 | | |
Total estimated consideration
|
| | | $ | 243,421 | | |
| | |
The Chosen
Historical |
| |
Transaction
Accounting Adjustments |
| |
Notes
|
| |
Pro Forma
|
| ||||||||||||
Assets | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash
|
| | | $ | 65,179 | | | | | $ | 11,684 | | | | | | (a) | | | | | $ | 76,863 | | |
Accounts receivable, net of allowances of $855 as of December 31, 2023
|
| | | | 8,325 | | | | | | (1,335) | | | | | | (b) | | | | | | 6,990 | | |
Inventory
|
| | | | 15,060 | | | | | | — | | | | | | | | | | | | 15,060 | | |
Prepaid assets
|
| | | | 2,867 | | | | | | — | | | | | | | | | | | | 2,867 | | |
Other current assets
|
| | | | 1,259 | | | | | | — | | | | | | | | | | | | 1,259 | | |
Total current assets
|
| | | | 92,690 | | | | | | 10,349 | | | | | | | | | | | | 103,039 | | |
Property and equipment, net
|
| | | | 37,450 | | | | | | — | | | | | | | | | | | | 37,450 | | |
Film costs, net
|
| | | | 67,009 | | | | | | (61,241) | | | | | | (c) | | | | | | 5,768 | | |
Other assets
|
| | | | 1,056 | | | | | | (62) | | | | | | (c) | | | | | | 994 | | |
Total assets
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| | | $ | 198,205 | | | | | $ | (50,954) | | | | | | | | | | | $ | 147,251 | | |
Liabilities and Equity
|
| | | | | | | | | | | | | | | | | | | | | | — | | |
Accounts payable
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| | | $ | 10,843 | | | | | $ | — | | | | | | | | | | | $ | 10,843 | | |
Accrued expenses and other current liabilities
|
| | | | 8,907 | | | | | | 1,516 | | | | | | (d) | | | | | | 10,423 | | |
Current portion of long-term debt and lease liabilities
|
| | | | 359 | | | | | | — | | | | | | | | | | | | 359 | | |
Total current liabilities
|
| | | | 20,109 | | | | | | 1,516 | | | | | | | | | | | | 21,625 | | |
Long-term debt and lease liabilities, net
|
| | | | 138,028 | | | | | | (137,660) | | | | | | (b) | | | | | | 368 | | |
Other noncurrent liabilities
|
| | | | 3,078 | | | | | | 60,806 | | | | | | (e) | | | | | | 63,884 | | |
Deferred tax liability, net
|
| | | | 2,570 | | | | | | — | | | | | | | | | | | | 2,570 | | |
Total liabilities
|
| | | | 163,785 | | | | | | (75,338) | | | | | | | | | | | | 88,447 | | |
Commitments and contingencies | | | | | | | | | | | | | | | | | | | | | | | | | |
Series A Preferred Stock, $0.001 par value; 120% dividend
preference; 8,000 shares authorized; 0 and 4,341 shares issued and outstanding at December 31, 2023 |
| | | | — | | | | | | — | | | | | | | | | | | | — | | |
Series A Common Stock, $0.001 par value; 10,900 shares authorized; 6,950 issued and outstanding at December 31, 2023
|
| | | | 7 | | | | | | — | | | | | | | | | | | | 7 | | |
Series B Common Stock, $0.001 par value; 25,000 shares
authorized; 5,595 and 1,254 shares issued and outstanding at December 31, 2023 |
| | | | 6 | | | | | | — | | | | | | | | | | | | 6 | | |
Additional paid-in capital
|
| | | | 10,237 | | | | | | — | | | | | | | | | | | | 10,237 | | |
Retained earnings
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| | | | 14,435 | | | | | | 24,385 | | | | | | (e) | | | | | | 38,820 | | |
Noncontrolling interest
|
| | | | 9,735 | | | | | | — | | | | | | | | | | | | 9,735 | | |
Total equity
|
| | | | 34,420 | | | | | | 24,385 | | | | | | | | | | | | 58,805 | | |
Total liabilities and equity
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| | | $ | 198,205 | | | | | $ | (50,954) | | | | | | | | | | | $ | 147,251 | | |
| | |
The Chosen
Historical |
| |
Transaction
Accounting Adjustments |
| |
Notes
|
| |
Pro Forma
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| |||||||||
Revenues: | | | | | | | | | | | | | | | | | | | | | | |
Licensed content and merchandise revenues
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| | | $ | 51,944 | | | | | $ | — | | | | | | | | $ | 51,944 | | |
Production services revenues
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| | | | — | | | | | | 74,889 | | | |
(f)
|
| | | | 74,889 | | |
Contribution revenues
|
| | | | 28,985 | | | | | | — | | | | | | | | | 28,985 | | |
Total revenues
|
| | | | 80,929 | | | | | | 74,889 | | | | | | | | | 155,818 | | |
Cost of revenues
|
| | | | 22,056 | | | | | | 52,118 | | | |
(f), (g)
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| | | | 74,174 | | |
Distribution and marketing
|
| | | | 21,778 | | | | | | (15,000) | | | |
(h)
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| | | | 6,778 | | |
Amortization of film costs
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| | | | 13,290 | | | | | | (13,290) | | | |
(i)
|
| | | | — | | |
Depreciation and amortization
|
| | | | 8,897 | | | | | | — | | | | | | | | | 8,897 | | |
General and administrative
|
| | | | 25,330 | | | | | | — | | | | | | | | | 25,330 | | |
Operating expenses
|
| | | | 91,251 | | | | | | 23,828 | | | | | | | | | 115,179 | | |
Gain on sale
|
| | | | — | | | | | | 43,255 | | | |
(j)
|
| | | | 43,255 | | |
Net operating income (loss)
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| | | | (10,422) | | | | | | 94,316 | | | | | | | | | 83,894 | | |
Interest income
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| | | | 2,799 | | | | | | — | | | | | | | | | 2,799 | | |
Interest expense
|
| | | | (3,279) | | | | | | 3,138 | | | |
(k)
|
| | | | (141) | | |
Other income (expense)
|
| | | | (184) | | | | | | — | | | | | | | | | (184) | | |
Net income (loss) before income taxes
|
| | | | (11,086) | | | | | | 97,454 | | | | | | | | | 86,368 | | |
Benefit (provision) for income taxes
|
| | | | 2,129 | | | | | | (23,126) | | | |
(l)
|
| | | | (20,997) | | |
Net income (loss)
|
| | | | (8,957) | | | | | | 74,328 | | | | | | | | | 65,371 | | |
Net loss attributable to noncontrolling interest
|
| | | | 5,388 | | | | | | — | | | | | | | | | 5,388 | | |
Net income (loss) attributable to The Chosen, Inc.
|
| | | $ | (3,569) | | | | | $ | 74,328 | | | | | | | | $ | 70,759 | | |
Earnings (loss) per Common Stock/Common Units, basic and
diluted(1) |
| | | $ | (0.28) | | | | | $ | — | | | | | | | | $ | 5.64 | | |
Weighted Average Common Stock/Common Units outstanding, basic and diluted(1)
|
| | | | 12,545 | | | | | | — | | | | | | | | | 12,545 | | |
Name and Address of Beneficial Owner(1)
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| |
Number of
Shares Beneficially Owned |
| |
Percentage
of Outstanding Shares |
| ||||||
Directors and Officers | | | | | | | | | | | | | |
Derral Eves(2)
|
| | | | 6,950,000 | | | | | | 55% | | |
Dallas Jenkins
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| | | | — | | | | | | —% | | |
JD Larsen
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| | | | — | | | | | | —% | | |
Bradley Pelo
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| | | | — | | | | | | —% | | |
David Stidham
|
| | | | — | | | | | | — | | |
Kyle Young
|
| | | | — | | | | | | — | | |
Cris Doornbos
|
| | | | — | | | | | | — | | |
Matt Rearden
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| | | | — | | | | | | — | | |
Brooke Asiatico
|
| | | | — | | | | | | — | | |
David Bagheri
|
| | | | — | | | | | | — | | |
All officers and directors as a group (14 individuals)
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| | | | 6,950,000 | | | | | | 55% | | |
Greater than 5% Holders | | | | | | | | | | | | | |
The Chosen Productions, LLC(2)(3)
|
| | | | 6,950,000 | | | | | | 55% | | |
| | | | | A-1 | | | |
| | | | | A-8 | | | |
| | | | | A-8 | | | |
| | | | | A-8 | | | |
| | | | | A-9 | | | |
| | | | | A-9 | | | |
| | | | | A-10 | | | |
| | | | | A-11 | | | |
| | | | | A-11 | | | |
| | | | | A-11 | | | |
| | | | | A-13 | | | |
| | | | | A-13 | | | |
| | | | | A-13 | | | |
| | | | | A-13 | | | |
| | | | | A-13 | | | |
| | | | | A-15 | | | |
| | | | | A-15 | | | |
| | | | | A-15 | | | |
| | | | | A-16 | | | |
| | | | | A-16 | | | |
| | | | | A-17 | | | |
| | | | | A-17 | | | |
| | | | | A-17 | | | |
| | | | | A-18 | | | |
| | | | | A-18 | | | |
| | | | | A-20 | | | |
| | | | | A-20 | | | |
| | | | | A-20 | | | |
| | | | | A-20 | | | |
| | | | | A-20 | | | |
| | | | | A-21 | | | |
| | | | | A-21 | | | |
| | | | | A-21 | | | |
| | | | | A-21 | | | |
| | | | | A-21 | | | |
| | | | | A-22 | | | |
| | | | | A-22 | | | |
| | | | | A-22 | | | |
| | | | | A-22 | | | |
| | | | | A-23 | | | |
| | | | | A-23 | | | |
| | | | | A-24 | | | |
| | | | | A-25 | | | |
| | | | | A-27 | | |
| | | | | A-27 | | | |
| | | | | A-27 | | | |
| | | | | A-27 | | | |
| | | | | A-28 | | | |
| | | | | A-28 | | | |
| | | | | A-28 | | | |
| | | | | A-28 | | | |
| | | | | A-28 | | | |
| | | | | A-29 | | | |
| | | | | A-29 | | | |
| | | | | A-29 | | | |
| | | | | A-29 | | | |
| | | | | A-30 | | | |
| | | | | A-31 | | | |
| | | | | A-32 | | | |
| | | | | A-32 | | | |
| | | | | A-32 | | | |
| | | | | A-33 | | | |
| | | | | A-33 | | | |
| | | | | A-33 | | | |
| | | | | A-35 | | | |
| | | | | A-35 | | | |
| | | | | A-35 | | | |
| | | | | A-35 | | | |
| | | | | A-35 | | | |
| | | | | A-35 | | | |
| | | | | A-36 | | | |
| | | | | A-37 | | | |
| | | | | A-37 | | | |
| | | | | A-37 | | | |
| | | | | A-38 | | | |
| | | | | A-38 | | | |
| | | | | A-38 | | | |
| | | | | A-39 | | | |
| | | | | A-39 | | | |
| | | | | A-39 | | | |
| | | | | A-39 | | | |
| | | | | A-39 | | | |
| | | | | A-40 | | | |
| | | | | A-40 | | |
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Exhibit A
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| | Form of Amended and Restated Distribution License and Marketing Services Agreement | |
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Exhibit B
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| | Form of Mutual Consent Under Funding Agreement | |
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Exhibit C
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| | Form of Production Services and Funding Agreement | |
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Exhibit D
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| | Form of Security Agreement | |