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Impact Of COVID-19 Pandemic And Liquidity | 6 Months Ended
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Jun. 30, 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 our cinemas are open, COVID-19 and its legacy impacts continue to adversely impact cinema operations. 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 both disposable income and operating costs. Consequently, our Company’s revenues and earnings for the quarter ended June 30, 2022, are lower than those of pre-COVID-19 operations. Such effects will likely continue, to varying degrees at least for the near term. Higher film rents and competition from streaming simply may be part of the competitive landscape going forward and will become, for us and our competitors, simply a cost of doing business and it may be that it will take a while for the public generally to feel comfortable in a cinema environment. While our revenues and earnings as compared to the quarter ended June 30, 2021, have increased as all of our cinemas closed by COVID 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 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. Regardless, 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. 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 for the year ending December 31, 2021. For the quarter and six months ended June 30, 2022, while our financial performance has been improving, certain sites have not improved commensurate with the wider group performance, and as such are no longer expected to be able to recover their asset group values. As a result, we have reassessed these sites under our impairment testing methodology and determined that a $1.5 million impairment charge against these sites was necessary. 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 six months of 2022, no impairment of goodwill has been recognized for the quarter ended June 30, 2022. The causes of the impairment of certain cinema assets does not materially impact our goodwill assessment. 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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