Impacts On Our Business Due To The Covid-19 Pandemic, The 2023 Hollywood Strikes, The Dramatic Interest Rate Rise And Increased Operating Costs, Together With Our Company’s Resources	3 Months Ended
Mar. 31, 2024
Impacts On Our Business Due To The Covid-19 Pandemic, The 2023 Hollywood Strikes, The Dramatic Interest Rate Rise And Increased Operating Costs, Together With Our Company’s Resources [Abstract]
Impacts On Our Business Due To The Covid-19 Pandemic, The 2023 Hollywood Strikes, The Dramatic Interest Rate Rise And Increased Operating Costs, Together With Our Company’s Resources	Note 3 – Impacts on our Business Due to the COVID-19 Pandemic, the 2023 Hollywood Strikes, the Dramatic Interest Rate Rise and Increased Operating Costs, together with our Company’s Resources General COVID-19 has materially impacted our business since the declaration of a global pandemic in March 2020. Having navigated mandated global closures during the pandemic, our cinema operations were, again, materially disrupted and materially adversely impacted by the 2023 strikes by the Writers Guild of America (WGA) and the American actors’ union SAG-AFTRA (Screen Actors Guild-American Federation of Television and Radio Artists) (SAG) over labor disputes with the Alliance of Motion Picture and Television Producers (AMPTP). Also, between March 2022 and July 2023, the Federal Reserve increased the Federal Funds rate from 0.25% to 5.5%, which represented the fastest interest rate tightening in U.S. history. Due to these and other factors, we are experiencing, among other things, soft cinema revenues, increasing costs related to inventory, labor and utilities, and many of our U.S. cinemas are obligated to repay rent deferrals to our landlords as negotiated in 2020-2024. In addition, some of our cinemas are facing automatic rent increases. Cost-reduction efforts in our cinema operating segment continue, including, but not limited to, restricting essential operating expenditures to the minimum levels necessary, reducing employment and utilities costs, and minimizing capital outlays. We continue to work with our landlords to manage our rent obligations. We believe that our film revenues have been adversely impacted by decisions by major film distributors to delay the release of major motion pictures during the 2023 Hollywood Strikes and by the unavailability of actors to promote those pictures that were released during this period. These adverse impacts have carried over into our first quarter. Our Real Estate operating segment has been less impacted by the COVID-19 pandemic and is generating the expected cash flows. Going Concern We continue to evaluate the going concern assertion required by ASC 205-40 Going Concern as it relates to our Company. The evaluation of the going concern assertion involves firstly considering whether it is probable that our Company has sufficient resources, as at the issue date of the financial statements, to meet its obligations as they fall due for twelve months following the issue date. Should it be probable that there are not sufficient resources, we must determine whether it is probable that our plans will mitigate the consequential going concern substantial doubt. Our evaluation is informed by current liquidity positions, debt obligations, cash flow estimates, known capital and other expenditure requirements and commitments and our current business plan and strategies. Our Company’s business plan - two businesses (real estate and cinema) in three countries (Australia, New Zealand and the U.S.) - has served us well since the onset of COVID-19 and is key to management’s overall evaluation of ASC 205-40 Going Concern. As of the end of the first quarter, 2024, we have $41.9 million of debt due in twelve months. At March 31, 2024, we have cash of $7.5 million and negative working capital of $114.6 million. In order to alleviate doubt that our Company will be able to generate sufficient cash flows for the coming twelve-months, these loans need to be refinanced and our revenues and net income need to improve through improved operations and asset monetization. In April 2024, we exercised our first option to extend our Union Square financing facility, extending the maturity date of that loan ($47.1 million at March 31, 2024) to May 6, 2025. We also obtained an extension of our NAB facility ($65.2 million at March 31, 2024), extending the maturity date of that loan to July 31, 2026. This extension also includes a bridge loan in the amount of AU$20.0 million, maturing on March 31, 2025, subject to prepayment obligations from the net sales proceeds of certain assets. We are in discussions with and believe that we will be able to reach mutually acceptable terms with respect to our Santander ($8.0 million, due second quarter of 2024), Cinemas 123 ($20.9 million, due third quarter of 2024) and our Westpac ($8.3 million, due first quarter of 2025) credit facilities. We believe that the global cinema industry will continue to improve in the last half of 2024 and 2025. This belief underpins our forecasts and cash flow projections. Our forecasts rely upon, among other things, the market reception to current films such as Inside Out 2, Deadpool and Wolverine Despicable Me 4, the current industry movie release schedule, which demonstrates an increased number of movies to be released from the major studios and other distributors and an improvement in the quality of the movie titles, and the public’s demonstrable desire to attend movies in a theatrical environment. These named factors are both out of Management’s control and are material, individually and in the aggregate, to the realization of Management’s forecasts and expectations. In the event that our forecasts and cash flow estimates, and our reasonable refinancing expectations, do not come to fruition to the extent needed to provide sufficient funding, we are willing and able to pursue additional asset monetizations. Since 2021, we have demonstrated our ability to complete such real estate transactions. In conclusion, as of the date of issuance of these financial statements, based on our evaluation of ASC 205-40 Going Concern and the current conditions and events, considered in the aggregate, and our various plans for enhancing liquidity and the extent to which those plans are progressing, we conclude that our plans are probable of being implemented and that they alleviate the substantial doubt about our Company’s ability to continue as a going concern. Impairment Considerations Our Company considers that the events and factors described above constitute impairment indicators under ASC 360 Property, Plant and Equipment. At December 31, 2023, our Company performed a quantitative recoverability test of the carrying values of all its asset groups. Our Company estimated the undiscounted future cash flows expected to result from the use of these asset groups and found that no impairment charge was necessary. As noted above, the financial performance of our cinemas has been improving. This improved performance at an asset group level, and the impact of this performance on our impairment modelling, resulted in no impairment charges being recognized for the first three months of 2024. Actual performance against our forecasts is dependent on several variables and conditions, many of which are subject to the uncertainties associated with among other things, the factors presented above, and as a result, actual results may materially differ from management’s estimates. Our Company also considers that the events and factors described above continue to constitute impairment indicators under ASC 350 Intangibles – Goodwill and Other. Our Company performed a quantitative goodwill impairment test and determined that our goodwill was not impaired as of December 31, 2023. The test was performed at a reporting unit level by comparing each reporting unit’s carrying value, including goodwill, to its fair value. The fair value of each reporting unit was assessed using a discounted cash flow model based on the budgetary revisions performed by management in response to COVID-19 and the developing market conditions. Given the continuing improvements in trading conditions, no impairment charges were recorded in the first three months of 2024. Actual performance against our forecasts is dependent on several variables and conditions, including among other things, the factors presented above, and as a result, actual results may materially differ from management’s estimates.

Note 3 – Impacts on our Business Due to the COVID-19 Pandemic, the 2023 Hollywood Strikes, the Dramatic Interest Rate Rise and Increased Operating Costs, together with our Company’s Resources

General

COVID-19 has materially impacted our business since the declaration of a global pandemic in March 2020. Having navigated mandated global closures during the pandemic, our cinema operations were, again, materially disrupted and materially adversely impacted by the 2023 strikes by the Writers Guild of America (WGA) and the American actors’ union SAG-AFTRA (Screen Actors Guild-American Federation of Television and Radio Artists) (SAG) over labor disputes with the Alliance of Motion Picture and Television Producers (AMPTP). Also, between March 2022 and July 2023, the Federal Reserve increased the Federal Funds rate from 0.25% to 5.5%, which represented the fastest interest rate tightening in U.S. history.

Due to these and other factors, we are experiencing, among other things, soft cinema revenues, increasing costs related to inventory, labor and utilities, and many of our U.S. cinemas are obligated to repay rent deferrals to our landlords as negotiated in 2020-2024. In addition, some of our cinemas are facing automatic rent increases. Cost-reduction efforts in our cinema operating segment continue, including, but not limited to, restricting essential operating expenditures to the minimum levels necessary, reducing employment and utilities costs, and minimizing capital outlays. We continue to work with our landlords to manage our rent obligations. We believe that our film revenues have been adversely impacted by decisions by major film distributors to delay the release of major motion pictures during the 2023 Hollywood Strikes and by the unavailability of actors to promote those pictures that were released during this period. These adverse impacts have carried over into our first quarter.

Our Real Estate operating segment has been less impacted by the COVID-19 pandemic and is generating the expected cash flows.

Going Concern

We continue to evaluate the going concern assertion required by ASC 205-40 Going Concern as it relates to our Company. The evaluation of the going concern assertion involves firstly considering whether it is probable that our Company has sufficient resources, as at the issue date of the financial statements, to meet its obligations as they fall due for twelve months following the issue date. Should it be probable that there are not sufficient resources, we must determine whether it is probable that our plans will mitigate the consequential going concern substantial doubt. Our evaluation is informed by current liquidity positions, debt obligations, cash flow estimates, known capital and other expenditure requirements and commitments and our current business plan and strategies. Our Company’s business plan - two businesses (real estate and cinema) in three countries (Australia, New Zealand and the U.S.) - has served us well since the onset of COVID-19 and is key to management’s overall evaluation of ASC 205-40 Going Concern.

As of the end of the first quarter, 2024, we have $41.9 million of debt due in twelve months. At March 31, 2024, we have cash of $7.5 million and negative working capital of $114.6 million. In order to alleviate doubt that our Company will be able to generate sufficient cash flows for the coming twelve-months, these loans need to be refinanced and our revenues and net income need to improve through improved operations and asset monetization.

In April 2024, we exercised our first option to extend our Union Square financing facility, extending the maturity date of that loan ($47.1 million at March 31, 2024) to May 6, 2025. We also obtained an extension of our NAB facility ($65.2 million at March 31, 2024), extending the maturity date of that loan to July 31, 2026. This extension also includes a bridge loan in the amount of AU$20.0 million, maturing on March 31, 2025, subject to prepayment obligations from the net sales proceeds of certain assets. We are in discussions with and believe that we will be able to reach mutually acceptable terms with respect to our Santander ($8.0 million, due second quarter of 2024), Cinemas 123 ($20.9 million, due third quarter of 2024) and our Westpac ($8.3 million, due first quarter of 2025) credit facilities.

We believe that the global cinema industry will continue to improve in the last half of 2024 and 2025. This belief underpins our forecasts and cash flow projections. Our forecasts rely upon, among other things, the market reception to current films such as Inside Out 2, Deadpool and Wolverine Despicable Me 4, the current industry movie release schedule, which demonstrates an increased number of movies to be released from the major studios and other distributors and an improvement in the quality of the movie titles, and the public’s demonstrable desire to attend movies in a theatrical environment. These named factors are both out of Management’s control and are material, individually and in the aggregate, to the realization of Management’s forecasts and expectations. In the event that our forecasts and cash flow estimates, and our reasonable refinancing expectations, do not come to fruition to the extent needed to provide sufficient funding, we are willing and able to pursue additional asset monetizations. Since 2021, we have demonstrated our ability to complete such real estate transactions.

In conclusion, as of the date of issuance of these financial statements, based on our evaluation of ASC 205-40 Going Concern and the current conditions and events, considered in the aggregate, and our various plans for enhancing liquidity and the extent to which those plans are progressing, we conclude that our plans are probable of being implemented and that they alleviate the substantial doubt about our Company’s ability to continue as a going concern.

Our Company considers that the events and factors described above constitute impairment indicators under ASC 360 Property, Plant and Equipment. At December 31, 2023, our Company performed a quantitative recoverability test of the carrying values of all its asset groups. Our Company estimated the undiscounted future cash flows expected to result from the use of these asset groups and found that no impairment charge was necessary. As noted above, the financial performance of our cinemas has been improving. This improved performance at an asset group level, and the impact of this performance on our impairment modelling, resulted in no impairment charges being recognized for the first three months of 2024. Actual performance against our forecasts is dependent on several variables and conditions, many of which are subject to the uncertainties associated with among other things, the factors presented above, and as a result, actual results may materially differ from management’s estimates.