Note 14 – Subsequent Events

Commercial Loan

On April 27, 2018, the Company closed on the Commercial Loan. The Commercial Loan provides the Company both a term loan facility and a revolving line of credit facility totaling $7.5 million, to be used for working capital and other purposes. The term loan of $5.0 million was advanced to the Company at closing. The term loan bears interest at a rate of 5.75% per annum and is payable monthly together with principal, over a five-year period.

The revolving line of credit of $2.5 million bears interest at the prime rate plus 1.5% per annum, and interest only is payable monthly over a three-year period, until such time as the loan is renewed or becomes due. Approximately $2.2 million of the revolving line of credit was advanced to the Company at closing. Simultaneously with the closing of the Commercial Loan, the principal balance due under the Credit Facility of $1.7 million was repaid in full and the Credit Facility was terminated by the Company and the Lender.

Repurchase Program

As described in Note 1, Initial Public Offering of Class A Common Stock” and as described below, on August 17, 2017, the Company completed its IPO. On March 27, 2018, the board of directors of the Company approved a stock repurchase program (the “Repurchase Program”) that enables the Company to repurchase up to $5.0 million of its Class A common stock prior to April 30, 2020. All repurchases under the Repurchase Program shall be made in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended (the “Act”).

Under the Repurchase Program, the Company may purchase its shares of Class A common stock through various means, including open market transactions, privately negotiated transactions, tender offers or any combination thereof. The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, stock price, trading volume and general market conditions, along with our working capital requirements, general business conditions and other factors. The Repurchase Program may be modified, suspended or terminated at any time by the Company’s board of directors. Repurchases under the Repurchase Program will be funded from the Company’s existing cash and cash equivalents or future cash flow and equity or debt financings.

As of May 30, 2018, the Company has repurchased, subject to the maximum amounts permitted under the Act, 41,949 shares of its Class A common stock pursuant to the Repurchase Program.

Acquisition of Screen Media

On November 3, 2017, the Company acquired all of the membership interests of Screen Media Ventures, LLC (“Screen Media”) for approximately $4.9 million in cash and the issuance of 35,000 shares of the Company’s Class A common stock and Class Z warrants of the Company exercisable into 50,000 shares of the Company’s Class A common stock at $12 per share (the “Acquisition”). Screen Media operates Popcornflix®, an advertiser-supported direct-to-consumer online video service and distributes television series and films worldwide.

In accordance with ASC 805, “Business Combinations”, the Acquisition was accounted for by applying the acquisition method of accounting, which requires, among other things, that the assets acquired and the liabilities assumed in a business combination be measured at their fair values as of the closing date of the transaction.

Initial Public Offering of Class A Common Stock

As discussed in Note 1, “Initial Public Offering of Class A Common Stock”, on August 17, 2017, the Company completed its IPO of $30 million consisting of 2,500,000 shares of Class A Shares at an offering price of $12.00 per share. In connection with the consummation of the IPO, the Class A Shares were approved for listing on the Nasdaq Global Market under the symbol “CSSE”.

The IPO resulted in gross cash proceeds to the Company of $26.9 million and $24.0 million of net cash proceeds, after deducting cash selling agent discounts and commissions and offering expenses. The net proceeds were used to fully repay $4.1 million of Term Notes and $4.5 million of senior secured notes payable under the Credit Facility. The remaining proceeds are being used for general corporate purposes including working capital, acquisition of video content library and strategic transactions.