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Impact Of COVID-19 Pandemic And Liquidity | 3 Months Ended
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Mar. 31, 2022
Impact Of COVID-19 Pandemic And Liquidity [Abstract] |
Impact Of COVID-19 Pandemic On Liquidity | Note 3 – Impact of COVID-19 Pandemic and Liquidity Continuing Operational Impact The novel coronavirus, COVID-19, has progressed through several variants since its emergence in 2019. The current variant affecting the jurisdictions in which we do business is the Omicron variant. Due to the Omicron variant appearing to be less severe than prior variants, and with vaccination programs having advanced, federal, state and local governments throughout the United States, Australia, New Zealand have largely lifted restrictions and returned to pre-COVID activities. There can be no assurances, however, that there will be no further variants of COVID-19 which could reverse the current trend. Liquidity Impact While substantially all of our cinemas are open, COVID-19 and its legacy impacts continue to adversely impact cinema operations, both ours and those of our competitors. Patrons are not yet returning to the cinemas at pre-pandemic levels. This may be due to a variety of factors including reticence to engage in outside the home activities that involve a material number of individuals in an enclosed venue, the lack of compelling film product, competition from alternative forms of “in the home” entertainment, the impact of inflation on disposable income, and/or the impact of increasing gas prices. Consequently, our Company’s revenues and earnings for the quarter ended March 31, 2022, are significantly lower than those of pre-COVID-19 operations. Such effects will likely continue, to varying degrees, until its impact on the cinema going public abates. While our revenues and earnings as compared to the quarter ended March 31, 2021, have increased as our cinemas have remained open for the entire quarter, and as virtually all of our third-party tenants are now open for business on a full rent paying basis, we cannot provide any assurances as to the nature or pace of a return of our cinema operations to prior operating levels. Going Concern We continue to evaluate the going concern assertion required by ASC 205-40 Going Concern as it relates to our Company. Management’s evaluation is informed by current liquidity positions, cashflow estimates, known capital and other expenditure requirements and commitments and management’s current business plan and strategies. Our forecasts and cash flow estimates are based on the current expectation that the global cinema industry will continue to recover in 2022 and 2023. Forecasts are by their nature inherently uncertain, and the effects of COVID-19 and its aftermath (including labor shortages, increased government intervention in business operations and inflation including the increasing prices of gas), continue to cause greater forecasting difficulties than would otherwise exist in more stable economic times. While we are seeing substantial evidence of recovery, our forecasts regarding the cinema portion of our business, rely upon the ability and desire of moviegoers to return to the movie theatres. Many factors influencing this are outside of management’s control, but are, nevertheless, material, individually and in the aggregate, to the realization of management’s forecasts and expectations. The cumulative impact of COVID-19 on our cinema business led to the conclusion in the third quarter of 2020 that there was substantial doubt regarding our Company’s ability to continue as a going concern; however, management’s plans to alleviate such substantial doubt, including the adoption of plans to refinance our 44 Union Square property and the monetization of certain real estate assets whose value was not adversely impacted by the pandemic, and which would have required substantial capital expenditures to achieve any meaningful increase in value, were completed by June 2021. There have been no material business developments in the period since the execution of our plans that have negatively impacted our assessment of our going concern position. We acknowledge the impact of the Omicron variant on the cinema industry, but its impact is proving to be less than those of past variants. We believe that our current financial position, forecasts and cash flow estimates based on our current expectations of industry performance and recovery, mean that our Company has sufficient resources to meet its obligations as they become due within one year after the issuance of this report on Form 10-Q. 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, 2021, 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. No impairment charges were recorded. As noted above, the financial performance of our cinemas has been improving. This improved performance at an asset group level, and the impacts of this performance on our impairment modelling, resulted in no impairment charges being recognized for the quarter ended March 31, 2022. Actual performance against our forecasts is dependent on several variables and conditions, many of which are subject to the uncertainties associated with COVID-19 and as a result, actual results may materially differ from management’s estimates. Our Company also considers that the events and factors described above constitute impairment indicators under ASC 350 Intangibles – Goodwill and Other. Our Company performed a quantitative goodwill impairment test and determined that its goodwill was not impaired as of December 31, 2021. 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 improvements in trading conditions during 2021 and through the first quarter of 2022, no impairment of goodwill has been recognized for the quarter ended March 31, 2022. Actual performance against our forecasts is dependent on several variables and conditions, many of which are subject to the uncertainties associated with COVID-19 and as a result, actual results may materially differ from management’s estimates.

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