angelstudios_1sa
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-SA
SEMIANNUAL REPORT
PURSUANT TO REGULATION A
OF THE SECURITIES ACT OF 1933
For the fiscal semiannual period ended June 30, 2021
Angel Studios, Inc.
|
(Exact
name of registrant as specified in its charter)
|
Delaware
|
|
46-5217451
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
295 W Center St.
Provo, Utah
|
|
84601
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(760) 933-8437
Registrant’s telephone number, including area
code
Item 1.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
You should read the following
discussion and analysis of our financial condition and results of
our operations together with our 2020 audited financial statements
appearing at the end of our Form 1-K, filed April 30, 2021, and the
financial statements and related notes appearing at the
end of this Semiannual Report. This discussion contains
forward-looking statements reflecting our current expectations that
involve risks and uncertainties. Actual results and the timing of
events may differ materially from those contained in these
forward-looking statements. The use
of the words “we,” “us,” “the
Company,”
“Angel
Studios,” or
“our” refers to Angel Studios, Inc., except
where the context otherwise requires.
Overview
We
are not your typical media and entertainment company. We are guided
by our “North Star” principle, which is to share
stories with the world that amplify light. We do this by aligning
our interests with those of the creators and the audience,
utilizing the wisdom of crowds to help guide decisions on the
content that gets created. In times of stress and worry, our
original content has already helped hundreds of millions of people
laugh out loud more than a billion times and provided tens of
millions with hope during a dark, and uncertain season of history.
We believe there has never been a better time to build a different
media and entertainment company that allows You to “Be part
of stories that matter.”
History
The Company was founded by four brothers, Neal,
Daniel, Jeffrey, and Jordan Harmon, in 2013. As fathers of children
aged newborn to ten, they were searching for a better way to watch
quality content with their kids. The Company was originally founded
as a way to give viewers greater personal control over the movies
and television programs they watched at home. In 2016, we launched
Angel Studios, a new studio concept that gives the audience more
control over what content is ultimately funded and produced. The
first project launched under the new studio concept was Dry Bar
Comedy. Several hundred episodes later, Dry Bar Comedy is now one
of the largest collections of clean comedy in the world and can be
enjoyed by audiences of all ages. Shortly thereafter, we partnered
with The Chosen, LLC, or The Chosen, to produce a new type of television series where
each season is funded by the audience. The Chosen went on to become
the largest crowdfunded media project of all
time.
Building
on our early successes, we have launched several new initiatives
that focus on content in markets currently underserved by the
traditional studio system. We are regularly testing, introducing,
and building new and exciting community-based features to help us
achieve the goal of sharing stories with the world that amplify
light.
Bankruptcy Reorganization
The
Company recently reorganized under Chapter 11 of the Bankruptcy
Code. Our reorganization plan became effective on September 30,
2020. More information on this can be found in the section entitled
“Bankruptcy
Proceedings” under Item 1, of our Form 1-K filed April
30, 2021.
General Corporate Matters
On
February 22, 2021, the Company amended its certificate of
incorporation to change the current allocation of Class A and Class
B Common Stock from 23,000,000 shares and 12,000,000 shares to
24,000,000 shares and 11,000,000 shares, respectively. Further, the
Company also amended its stock incentive plan to increase the
number of Class A common stock available to grant from 3,500,000
shares to 5,775,000 shares.
On August 4, 2021, the Board of Directors (the
“Board”) of the Company adopted resolutions by
unanimous written consent recommending that the Stockholders
Agreement, dated as of October 20, 2016, between the Company and
the holders of the Company’s Class B Common Stock (the
“Class B Stockholders”) (the “Original
Agreement”) be amended
and restated. On August 16, 2021, certain Class B Stockholders
party to the Original Agreement, acting by written consent in
accordance with Section 12 of the Original Agreement, adopted
resolutions approving and adopting the Amended and Restated
Stockholders Agreement (the “Amended
Agreement”) in order to
make certain amendments to
the Original Agreement, as recommended by the Board.
A copy of
the Amended Agreement was filed as Exhibit 3.1, of our Form 1-U
filed on August 18, 2021, and is incorporated by reference into
this Semi-Annual Report on Form 1-SA.
Regulation Crowdfunding Offering
Pursuant
to the filing of our Form C on March 18, 2021, the Company sold
561,797 shares of our Class B Common Stock, at a price of $8.90 per
share, through a crowdfunding financing transaction under
Regulation Crowdfunding of the Securities act of 1933 (the
“Regulation CF Transaction”). The Regulation CF
Transaction was conducted through VAS Portal, LLC (the
“Intermediary”). The Intermediary received 5% of the
total amount raised in the transaction (the “Intermediary
Fee”). Net of the Intermediary Fee and other associated fees,
the Company received $4,611,328 of net proceeds from the
offering.
Material Transactions
We entered into an asset purchase agreement,
selling substantially all of the assets and certain liabilities of
our content filtering service, which operated the website know as
VidAngel.com. More information on this can be found in the section
entitled “Material Agreements Entered
into during the First Quarter of Fiscal Year
2021” under Item 1, of
our Form 1-K filed April 30, 2021.
On
April 8, 2021, we purchased the domain name angel.com, for
$2,000,000. With our recent name change to Angel Studios, Inc., and
the sale of substantially all of the assets of our content
filtering service, this purchase allows us to organize our
intellectual property and associated products and services under a
top-level domain name that aligns with our guiding principles and
honors the tens of thousands of investors who have backed our
Company and the media projects that we are distributing, our
“Angel” investors.
Results of Operations
The
following represents our performance highlights:
|
For The Period Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
Revenues
|
$46,169,403
|
$21,686,071
|
$24,483,332
|
113%
|
Operating Expenses
|
|
|
|
|
Cost
of Revenues
|
$27,799,610
|
$11,112,950
|
$16,686,660
|
150%
|
Sales
and Marketing
|
7,496,141
|
4,094,382
|
3,401,759
|
83%
|
General
and Administrative
|
2,933,798
|
1,090,342
|
1,843,456
|
169%
|
Legal
|
301,566
|
551,191
|
(249,625)
|
-45%
|
Research
and Development
|
1,275,641
|
864,271
|
411,370
|
48%
|
Settlement
Expense
|
-
|
5,297,359
|
(5,297,359)
|
|
Total Operating Expenses:
|
$39,806,756
|
$23,010,495
|
$16,796,261
|
73%
|
Period ended June 30, 2021, as compared to the period ended June
30, 2020
Revenues for the
period ended June 30, 2021, increased 113% compared to the same
period in 2020. This increase was largely related to the increase
in sales of licensed content related to The Chosen.
The
increase in our cost of revenues was directly attributed to our
increased revenues which resulted in greater licensing and royalty
costs, higher website hosting and server related expenses, and
higher transaction processing costs for The Chosen.
The
increase in sales and marketing expense was due to additional
advertisement and promotional expense related to The
Chosen.
The
increase in the general and administration expense was due to
increased headcount and third-party consulting costs necessary to
manage our growth and increase in revenues.
The
decrease in legal expenses was largely due to no additional costs
related to our defense in the Copyright Litigation that was
finalized in 2020.
The
increase in research and development expense was due to the hiring
of additional personnel to manage the growth of our
business.
The
decrease in settlement expense was a result of the resolution of
litigation as part of the Reorganization Plan in 2020.
Liquidity and Capital Resources
Operating and Capital Expenditure Requirements
|
|
|
|
|
Cash,
and cash equivalents
|
$20,987,206
|
$11,022,292
|
Long-term
debt
|
4,962,618
|
5,064,231
|
Cash
and cash equivalents increased $9.96 million in the six months
ended June 30, 2021, primarily due to the increase in sales, and
from the sale of our Class B Common Stock. We raised $4,999,531 by
selling 561,745 shares of our Class B Common Stock, under the
exemption provided by Regulation Crowdfunding, or Regulation
CF.
To
date, we have funded our operations through private and public
offerings of common stock. As of June 30, 2021, we had cash on hand
of $20,987,206. We have an outstanding, non-interest-bearing
promissory note in the amount of $9,369,643.16, payable over
fifty-three (53) remaining equal quarterly installments of
$176,786. The expense was recorded at the present value of the
obligation with an imputed interest rate of 10%. The short-term
obligation related to this note as of June 30, 2021, was $198,332,
and the long-term obligation is $4,962,618. We project that our
existing capital resources will be sufficient to meet our operating
requirements for at least the next 12 months.
We may
need to raise additional funds to invest in growth opportunities,
product development, sales and marketing, and other purposes. Our
future capital requirements will depend on many factors, including
our growth rate; the level of investments we make in product
development, sales and marketing activities, and other investments
to support the growth of our business, and may increase materially
from those currently planned.
We may
seek to raise additional funds through equity financing. Any
additional equity financing likely would be dilutive to existing
stockholders. At this time, we have commitments for additional
capital funds.
COVID-19 Pandemic
The
COVID-19 pandemic and resulting global disruptions have affected
our business in various ways.
●
We restarted the
filming of our Dry Bar Comedy Live performances at the end of 2020.
We are following all local government and health department rules
and regulations to increase the level of safety for both our
employees and customers. As we typically film shows up to 6-months
in advance of release, incurring expenses related to their
production up-front, the cancellations related to the pandemic are
not expected to impact our ability to deliver new episodes of Dry
Bar Comedy moving forward.
●
Season 2 of The
Chosen was released in April 2021. The number of people who have
viewed an episode continues to increase significantly, with the
majority of all episodes watched having occurred after the outbreak
was officially characterized a pandemic by the World Health
Organization. Initially, we believe that a combination of
quarantine measures and lower digital advertising costs, helped
lead to a significant increase in sales, but these effects were
short lived, and we don’t expect the end of the pandemic to
have an effect on sales in the future.
The
full extent of the impact of the COVID-19 pandemic on our business,
operations and financial results will depend on a number of factors
that we do not control and may not be able to accurately predict.
We will continue to assess the situation as it progresses and take
any action required by federal, state, or local authorities under
the law, or that we determine is in the best interests of our
employees, customers, and stockholders.
Trends and Key Factors Affecting Our Performance
None
Item 2.
Other Information
Item 3. Financial Statements
Index to Financial Statements
Balance
Sheet
|
F-3
|
Statement
of Operations
|
F-4
|
Statement
of Stockholder’s Equity
|
F-5
|
Statement
of Cash Flows
|
F-6
|
Notes
to Financial Statements
|
F-7 to F-10
|
ANGEL STUDIOS, INC.
Unaudited Consolidated Financial Statements
For the Six Months Ended June 30, 2021 and 2020
Notice to Reader
Our auditors have not reviewed the unaudited financial statements
for the six months ended June 30, 2021 and 2020. These financial
statements and the notes thereto have been prepared by the
Company’s management in accordance with accounting principles
generally accepted in the United States of America using
management’s best judgments, consistent with prior periods,
and should be read in conjunction with the audited financial
statements for the years ended December 31, 2020 and
2019.
Consolidated Balance
Sheets
As of June 30, 2021 and December 31, 2020
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$20,987,206
|
$11,022,292
|
Accounts
receivable
|
2,359,153
|
1,205,520
|
Physical
Media Inventory
|
981,332
|
785,888
|
Movie
asset, current
|
-
|
40,000
|
Note
receivable, current
|
368,016
|
80,000
|
Prepaid
expenses and other
|
1,106,715
|
582,399
|
|
|
|
Total
current assets
|
25,802,422
|
13,716,099
|
|
|
|
Deposits
|
-
|
57,415
|
Property
and equipment, net
|
319,114
|
165,412
|
Digital
Content, net
|
353,608
|
-
|
Intangibles,
net
|
2,169,564
|
-
|
Certificate
of deposit
|
151,890
|
151,134
|
Note
receivable, long-term
|
5,160,950
|
131,818
|
|
|
|
|
|
|
Total
assets
|
$33,957,548
|
$14,221,878
|
|
|
|
Liabilities and Stockholders' Equity (Deficit)
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$7,469,896
|
$4,203,585
|
Accrued
expenses
|
1,726,876
|
1,039,112
|
Deferred
revenue
|
1,971,363
|
5,481,762
|
Current
portion of notes payable
|
198,332
|
188,776
|
|
|
|
Total
current liabilities
|
11,366,467
|
10,913,235
|
|
|
|
Notes
Payable, net of current portion
|
4,962,618
|
5,064,231
|
|
|
|
Total
liabilities
|
16,329,085
|
15,977,466
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
Stockholders'
equity (deficit):
|
|
|
Common
stock, $0.001 par value, 35,000,000 shares
|
|
|
authorized;
22,711,888 and 21,569,331 shares issued
|
|
|
and
outstanding, respectively
|
22,739
|
21,569
|
Additional
paid-in capital
|
18,357,869
|
13,563,758
|
Accumulated
deficit
|
(752,145)
|
(15,340,915)
|
|
|
|
Total
stockholders' deficit
|
17,628,463
|
(1,755,588)
|
|
|
|
Total
liabilities and stockholders' equity (deficit)
|
$33,957,548
|
$14,221,878
|
See
accompanying notes to financial
statements.
Consolidated Statements of
Operations
For the Six Months Ended June 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
Revenues,
net
|
$46,169,403
|
$21,686,071
|
|
|
|
Operating
expenses:
|
|
|
Cost
of revenues
|
27,799,610
|
11,112,950
|
General
and administrative
|
2,933,798
|
1,090,342
|
Research
and development
|
1,275,641
|
864,271
|
Selling
and marketing
|
7,496,141
|
4,094,382
|
Legal
|
301,566
|
551,191
|
Settlement
expense
|
-
|
5,297,359
|
|
|
|
Total
operating expenses
|
39,806,756
|
23,010,495
|
|
|
|
Operating
income (loss)
|
6,362,647
|
(1,324,424)
|
|
|
|
Other
income (expense):
|
|
|
Gain
on disposal of business
|
8,262,489
|
-
|
Interest
income
|
221,792
|
960
|
Interest
expense
|
(258,158)
|
(83)
|
|
|
|
Total
other income, net
|
8,226,123
|
877
|
|
|
|
Income
(loss) before income taxes
|
14,588,770
|
(1,323,547)
|
|
|
|
Provision
for income taxes
|
-
|
-
|
|
|
|
Net
income (loss)
|
$14,588,770
|
$(1,323,547)
|
|
|
|
Basic
gain (loss) per common share
|
$0.66
|
$(0.06)
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
21,959,122
|
21,564,957
|
|
|
|
See accompanying notes to financial
statements.
Consolidated Statements of Stockholders’ Equity
For the Six Months Ended June 30, 2021 (Unaudited) and the Year
Ended December 31, 2020
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
Additional Paid-in Capital
|
|
Total Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
Balance
as of January 1, 2020
|
18,246,831
|
3,313,355
|
$21,560
|
$13,466,838
|
$(15,356,525)
|
$(1,868,127)
|
|
|
|
|
|
|
|
Stock
options excercised
|
9,145
|
-
|
9
|
2,917
|
-
|
2,926
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
-
|
94,003
|
-
|
94,003
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
15,610
|
15,610
|
|
|
|
|
|
|
|
Balance
as of December 31, 2020
|
18,255,976
|
3,313,355
|
21,569
|
13,563,758
|
(15,340,915)
|
(1,755,588)
|
|
|
|
|
|
|
|
Issurance
of common stock, net of issuance
|
|
|
|
|
|
|
costs
of $388,665
|
-
|
561,725
|
562
|
4,610,304
|
-
|
4,610,866
|
|
|
|
|
|
|
|
Treasury
stock repurchases
|
(27,027)
|
-
|
-
|
(240,527)
|
-
|
(240,527)
|
|
|
|
|
|
|
|
Stock
options excercised
|
607,859
|
-
|
608
|
268,407
|
-
|
269,015
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
-
|
155,927
|
-
|
155,927
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
14,588,770
|
14,588,770
|
|
|
|
|
|
|
|
Balance
as of June 30, 2021
|
18,836,808
|
3,875,080
|
$22,739
|
$18,357,869
|
$(752,145)
|
$17,628,463
|
See accompanying
notes to financial statements.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
Net
income (loss)
|
$14,588,770
|
$(1,323,547)
|
Adjustments
to reconcile net income (loss) to net cash
|
|
|
provided
by operating activities:
|
|
|
Depreciation
and amortization
|
108,984
|
23,152
|
Stock-based
compensation expense
|
155,927
|
-
|
Settlement
from litigation
|
-
|
5,297,359
|
Gain
on disposal of business
|
(8,262,489)
|
-
|
Decrease
(increase) in:
|
|
|
Restricted
cash
|
-
|
-
|
Accounts
receivable
|
(1,153,633)
|
(1,306,844)
|
Holdback
Receivable
|
-
|
445,000
|
Physical
Media Inventory
|
(195,444)
|
(142,176)
|
Digital
Content
|
(353,608)
|
-
|
Prepaid
expenses and other assets
|
(524,316)
|
(4,832)
|
Deposits
|
24,500
|
500
|
Note
receivable
|
-
|
5,684
|
Certificate
of deposits
|
(756)
|
(74,207)
|
Increase
(decrease) in:
|
|
|
Accounts
payable and accrued expenses
|
3,954,075
|
4,086,374
|
Deferred
revenue
|
431,240
|
(207,739)
|
|
|
|
Net
cash provided by operating activities
|
8,773,250
|
6,798,724
|
|
|
|
Cash flows from investing activities:
|
|
|
Purchase
of property and equipment
|
(249,771)
|
(94,738)
|
Purchase
of intangible assets
|
(2,188,489)
|
-
|
Issurance
of notes receivable
|
(413,623)
|
-
|
Repayments
of notes receivable
|
389,819
|
-
|
Disposition
of business
|
(893,570)
|
-
|
|
|
|
Net
cash used in investing activities
|
(3,355,634)
|
(94,738)
|
|
|
|
Cash flows from financing activities:
|
|
|
Repayment
of notes payable
|
(92,057)
|
-
|
Issuance
of class A shares
|
4,999,531
|
-
|
Exercise
of stock options
|
269,011
|
1,533
|
Treasury
share repurchases
|
(240,522)
|
-
|
Note
discount
|
-
|
-
|
Equity
financing fees
|
(388,665)
|
-
|
|
|
|
Net
cash provided by financing activities
|
4,547,298
|
1,533
|
|
|
|
Net
change in cash and cash equivalents
|
9,964,914
|
6,705,519
|
|
|
|
Cash
and cash equivalents at beginning of period
|
11,022,292
|
1,584,455
|
|
|
|
Cash
and cash equivalents at end of period
|
$20,987,206
|
$8,289,974
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Cash
paid for interest
|
$217,821
|
$83
|
See accompanying notes to financial
statements.
ANGEL STUDIOS, INC.
Notes to Financial Statements
For the Six Months Ended June 30, 2021 (Unaudited)
The
financial information presented in these unaudited financial
statements should be read in conjunction with the entity’s
latest annual audited financial statements.
Note 1 – Basis of Presentation
The
accompanying financial statements have been prepared by the
Company, without audit, and reflect all adjustments that are, in
the opinion of management, necessary for a fair statement of the
results for the periods presented. The financial statements
havebeen prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP) for
interim financial reporting. Certain information and footnote
disclosures normally included in financial statements prepared in
accordancewith GAAP have been condensed or omitted pursuant to such
rules and regulations. It is the opinion of management that the
financial statements reflect all adjustments necessary for a fair
presentation of the financial position, results of operations, and
cash flows for the periods presented. The results of operations for
the six months ended June 30, 2021, are not indicative of the
results expected for the entire fiscal year.
Recently Adopted Accounting Pronouncements
In
March 2019, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 2019-2, Improvements to Accounting for Costs of Films
and License Agreements for Program Materials which adjusts
the way companies account for the production costs of films and
episodic content. The Company adopted ASU 2019-2 in the first
quarter of 2021 and began capitalizing certain production costs for
streaming content which will be amortized over its estimated
economic life of 10 years.
Note 2 – Description of Organization and Summary of
Significant Accounting Policies
Organization
The Company comprises Angel Studios, Inc. and its wholly owned
subsidiaries Dry Bar Comedy, LLC (a Utah limited liability company
organized on January 20, 2017), Angel Studios Licensing, LLC (a
Utah limited liability company organized on September 15, 2020),
and Studio Brokerage, LLC (a Utah limited liability company
organized on October 8, 2019). Angel Studios, Inc, was originally
organized as a Utah limited liability company on November 13, 2013.
On February 7, 2014, the Company converted to a Delaware
corporation. The Company’s mission is to share stories with
the world that amplify light. This is done by aligning the
Company’s interests with those of the creators and the
audience and utilizing the wisdom of crowds to help guide decisions
on the content that gets created.
Use of Estimates
The
preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of
America (US GAAP) requires management to make estimates and
assumptions that affect reported amounts and disclosures.
Accordingly, actual results could differ from those estimates. Key
management estimates include the estimated economic useful lives of
property and equipment, estimated useful lives of the movie asset
based on the estimated economic useful life to the estimated
salvage value, estimated imputed interest rate on accrued
settlement costs, valuation allowances for net deferred income tax
assets, and valuation of stock-based compensation.
ANGEL STUDIOS, INC.
Notes to Financial Statements
Continued
For the Six Months Ended June 30, 2021 (Unaudited)
Cash and Cash Equivalents
The
Company considers all highly liquid investments with original
maturities to the Company of three months or less to be cash
equivalents. As of June 30, 2021, these cash equivalents consisted
of certificate of deposit accounts.
Accounts Receivable
Accounts
receivable is recorded at the invoiced amounts, net of
write‑offs
and an allowance for doubtful accounts. The Company estimates the
allowance for doubtful accounts based upon a variety of factors
that affect the collectability of the receivables, including the
length of time receivables are past due, significant
one‑time
events, the financial health of the customers and historical
experience. Given the historical payment history of the customers,
the Company has not deemed it necessary to maintain an allowance
for doubtful accounts. There was no allowance for doubtful accounts
as of June 30, 2021.
Merchandise Inventory
Merchandise
inventory consists of discs, books, CD’s, apparel, and other
inventory purchased for resale, for The Chosen TV series.
Merchandise Inventory is recorded at average cost. The Company
periodically reviews the merchandise inventory for excess supply,
obsolesce, and valuations above estimated realization amounts, and
provides a reserve to cover these items. Management determined that
no allowance for merchandize inventory was necessary as of June 30,
2021.
Movie Asset
Movie
asset includes DVD and Blu‐Ray discs purchased by
the Company for resale, not in excess of realizable value. The
Company sold the movie asset during 2021 as part of the asset
purchase agreement related to the filtering business, and thus
wrote down the inventory as of December 31, 2020, to the amount
that was movie asset was purchased for which was $40,000. The write
down was $930,372 and is included in operating expenses in the
statement of operations as of December 31, 2020.
Property and Equipment
Property
and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are calculated using
the straight-line method over the estimated economic useful lives
of the assets or over the related lease terms (if shorter) as
follows:
Office
and computer equipment
|
3
years
|
Production
equipment
|
1
year
|
Leasehold
improvements
|
1
– 3 years
|
Furniture
and fixtures
|
3
years
|
Warehouse
equipment
|
3
– 5 years
|
Computer
software
|
2
– 3 years
|
ANGEL STUDIOS, INC.
Notes to Financial Statements
Continued
For the Six Months Ended June 30, 2021 (Unaudited)
Property and Equipment (continued)
Expenditures
that materially increase values or capacities or extend useful
lives of property and equipment are capitalized. Routine
maintenance, repairs, and renewal costs are expensed as incurred.
Upon sale or other retirement of depreciable property, the cost and
accumulated depreciation and amortization are removed from the
related accounts and any gain or loss is reflected in the statement
of operations.
Intangible Assets
Intangible
assets consist of domain names the company has acquired and is
stated at cost less accumulated amortization. Amortization is
calculated using the straight-line method over the estimated
economic useful lives of the domain names of approximately 30
years.
Impairment of Long-Lived Assets
The
Company reviews its property and equipment, and other long-lived
assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may be impaired. If
it is determined that the estimated undiscounted future cash flows
are not sufficient to recover the carrying value of the asset, an
impairment loss is recognized in the statements of operations for
the difference between the carrying value and the fair value of the
asset. During the December 31, 2020 period, the Company recorded an
impairment loss to its Movie Asset of $930,372 due to a
one‐time
write down to the estimated liquidation value of the asset. No
other significant write-downs have occurred during
2021.
Revenue Recognition
The
Company recognizes revenue when a customer obtains control of
promised products or services. The amount of revenue recognized
reflects the consideration that the Company expects to be entitled
to receive in exchange for these products or services. The
following components represent the most significant portions of
revenue being recognized:
Digital and Physical Media Revenue
The
Company partnered with The Chosen, LLC, or The Chosen, an
independent filmmaker, to distribute The Chosen’s licensed
original content and related merchandise. Digital delivery
represents streaming-based delivery of The Chosen’s content
via the Company’s service. Physical media represents Blu-Ray,
DVD discs, various books, and other intellectual property related
to The Chosen’s content. Revenue is recognized as products
are delivered upon streaming, or upon shipment of physical media.
Digital and physical media revenue is recognized at a point in time
– when streamed digitally, or when physically
shipped.
ANGEL STUDIOS, INC.
Notes to Financial Statements
Continued
For the Six Months Ended June 30, 2021 (Unaudited)
Revenue Recognition
(continued)
Content Licensing
The
Company receives content licensing revenue by publishing its
content on third-party platforms. The Company grants the
third-party platforms a license to display the Company’s
content to the customers of the third-party platforms. The
third-party platforms are interested in increasing traffic on their
platforms, and the third-party platforms pay the Company based on
impressions delivered, or the number of actions, such as clicks,
taken by users viewing the Company’s content via the
third-party platforms. The Company recognizes revenue in the period
in which the impressions or actions occur, at a point in time. The
third-party platforms provide the Company monthly reports of the
Company’s revenue.
Note 3 – Disposition of Business
On
March 1, 2021, the Company entered into an agreement selling
substantially all the assets and liabilities of the Company’s
content filtering service. As part of this transaction, the buyer
entered into a note with the Company and is required to pay a
$9,900,000 over 14 years, or $7,800,000 if paid within 5 years. If
the buyer defaults under any of its obligation under the agreement,
it will be required to transfer and assign all assets and
liabilities back to the Company for no consideration. As of June
30, 2021, the present value of this note is $5,253,007 which is
recorded in note receivable, current and note receivable, long-term
on the balance sheets.
Note 4 – Notes Payable
In
September 2020, the Company recorded an expense on the Statement of
Operations and Note Payable on the balance sheets for $5,297,359 as
a result of a settlement from a litigation claim. The total amount
of the damages awarded in the litigation was $9,900,000, payable
over 14 years without interest, which was recorded as an expense of
$5,297,359 in during the year ended December 31, 2020. The Company
recorded the present value of the $9,900,000 with an imputed
interest rate of 10%, which is represented in the accrued
settlement costs total of $5,253,007 on the consolidated balance
sheet as of December 31, 2020. Payments of $176,786 are due
quarterly.
INDEX OF EXHIBITS
The following exhibits are filed as part of this Form
1-SA.
Exhibit Number
|
|
Description
|
|
|
|
|
|
Certificate of Incorporation of Angel Studios, Inc. as amended on
March 8, 2021
|
|
|
Bylaws
of Angel Studios, Inc. incorporated by reference to Exhibit 2.2 of
our Form 1-A filed on September 16, 2016
|
|
|
Investor Rights and Voting Agreement between Angel Studios, Inc.
and certain investors, incorporated by reference to Exhibit 3.1 of
our Form 1-A filed on September 22, 2016
|
|
|
Amended and Restated Class B Stockholders Agreement between Angel
Studios, Inc. and the Class B Common Stockholders, incorporated by
reference to Exhibit 3.1 of our Form 1-U filed on August 18,
2021
|
|
|
Form of Subscription Agreement, incorporated by reference to
Exhibit 4.1 of our Form 1-A filed on
September 16, 2016
|
|
|
Joint Plan of Reorganization of Trustee and Studios Under Chapter
11 of the Bankruptcy Code, incorporated by reference to Exhibit 1.3
of our Form 1-U filed on September 15, 2020
|
|
|
Settlement Agreement between VidAngel, Inc. and the Studios,
incorporated by reference to Exhibit 1.3 of our Form 1-U filed on
September 15, 2020
|
|
|
Promissory Note between VidAngel, Inc. and Studios, incorporated by
reference to Exhibit 1.3a of our Form 1-U filed on September 15,
2020
|
|
|
Asset Purchase Agreement between Angel Studios, Inc. and VidAngel
Entertainment, LLC, incorporated by reference to Exhibit 1.1 of our
Form 1-U filed on March 5, 2021
|
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly
caused this Semiannual Report on Form 1-SA to be signed on its
behalf by the undersigned, thereunto duly authorized, in Provo,
Utah on September 28, 2021.
|
Angel Studios, Inc.
|
|
|
|
|
|
|
By:
|
/s/
Neal S. Harmon
|
|
|
Name:
|
Neal
S. Harmon
|
|
|
Title:
|
Chief
Executive Officer
|
|
Pursuant to the requirements of Regulation A, this report has been
signed below by the following persons on behalf of the issuer in
the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Neal S. Harmon
|
|
Chief
Executive Officer and Director
|
|
September 28, 2021
|
Neal S.
Harmon
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/
Patrick Reilly
|
|
Chief Financial
Officer
|
|
September
28, 2021
|
Patrick Reilly
|
|
(Principal Financial and Accounting Officer)
|
|
|