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Impact Of COVID-19 Pandemic On Liquidity | 12 Months Ended
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Dec. 31, 2022
Impact Of COVID-19 Pandemic On Liquidity [Abstract] |
Impact Of COVID-19 Pandemic On Liquidity | NOTE 3 – IMPACT OF COVID-19 PANDEMIC ON LIQUIDI TY General COVID-19 has materially impacted our business since the declaration of a global pandemic in March 2020. Our 2020 global revenues were $77.9 million, compared to $276.8 million in 2019. 2022 saw the first year of trading since 2020 with no cinema closures or operating restrictions on our cinemas or real estate tenants. These improving business conditions contributed to an increase in total revenues to $203.1 million, however, still approximately 27% below the 2019 pre-pandemic level. Cinema Segment Ongoing Impact COVID-19 continues to impact the profitability of our cinema operating segment. Film production backlogs, and competition from streaming platforms contributed to a lower number of major studio movie releases in 2022. Accordingly, our industry is still in its recovery phase. These factors are beyond our control. We are subject to increasing costs related to film licensing, inventory, labor and utilities, and many of our U.S. cinemas are obligated to repay rent deferrals to our landlords as negotiated in 2020-2022. 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 utilities and essential operating expenditures to the minimum levels necessary, reducing employment costs, and minimizing capital outlays. We continue to work with our landlords to manage our rent obligations. We are prepared to terminate cinema leases where their long-term profitability is in sufficient doubt. Our Real Estate operating segment has been less impacted by the COVID-19 pandemic and is generating near-to-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. We have $47.2 million of debt due in the twelve months from the issue of this Form 10-K. $22.5 million of this debt is due on July 3, 2023. As at December 31, 2022, we have cash of $29.9 million and negative working capital of $74.2 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. We believe that is probable that these loans will be extended on terms acceptable to us. Prior to the issuance of the Form 10-K, we extended our Bank of America facility on March 30, 2023 to September 4, 2024. Valley National extended its loan from April 1, 2023 to July 3, 2023 to allow additional time to complete refinancing, for which a term sheet is in place. We believe that we have sufficient time to address our Santander ($8.0 million) and our Westpac ($8.8 million) facilities, due in the fourth quarter of 2023 and the first quarter of 2024 respectively. We believe that the global cinema industry will continue to recover in 2023 and 2024. This belief underpins our forecasts and cash flow projections. Our forecasts rely upon, among other things, the current industry movie release schedule, which demonstrates an increased number of movies 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. In 2021, we 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 continue to constitute impairment indicators under ASC 360 Property, Plant and Equipment. At December 31, 2022, 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 in addition to the $1.5 million impairment charge taken during Q2 2022. This was due to our improved financial performance at the asset group level, and our more favorable expectations for future trading. 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 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, 2022. 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. 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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