10-Q
RLJ ENTERTAINMENT, INC. filed this Form 10-Q on 11/09/2017
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RLJ Entertainment, Inc.

 

Notes To Consolidated Financial Statements

(Unaudited)

 

 

The following tables include a roll-forward of our warrant and other derivative liabilities classified within Level 3 of the fair-value hierarchy:

 

 

 

Nine Months Ended September 30, 2017

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Stock warrants at December 31, 2016

 

$

 

 

$

 

 

$

9,763

 

 

$

9,763

 

Change in fair value

 

 

 

 

 

 

 

 

3,647

 

 

 

3,647

 

Stock warrants at September 30, 2017

 

$

 

 

$

 

 

$

13,410

 

 

$

13,410

 

 

 

 

 

Nine Months Ended September 30, 2016

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Stock warrants at December 31, 2015

 

$

 

 

$

 

 

$

2,252

 

 

$

2,252

 

Change in fair value

 

 

 

 

 

 

 

 

1,011

 

 

 

1,011

 

Stock warrants at September 30, 2016

 

$

 

 

$

 

 

$

3,263

 

 

$

3,263

 

 

 

 

Nine Months Ended September 30, 2016

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Embedded conversion feature at December 31, 2015

 

$

 

 

$

 

 

$

8,426

 

 

$

8,426

 

Change in fair value

 

 

 

 

 

 

 

 

2,395

 

 

 

2,395

 

Amount reclassified to equity upon conversion

 

 

 

 

 

 

 

 

(296

)

 

 

(296

)

Embedded conversion feature at September 30, 2016

 

$

 

 

$

 

 

$

10,525

 

 

$

10,525

 

 

Investments in Content

When events and circumstances indicate that investments in content are impaired, we determine the fair value of the investment; and if the fair value is less than the carrying amount, we recognize additional amortization expense equal to the excess. The following fair value hierarchy tables present information about our assets and liabilities measured at fair value on a non-recurring basis.

 

 

 

Nine Months Ended September 30, 2017

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Loss

 

Investments in content

 

$

 

 

$

 

 

$

1,702

 

 

$

1,702

 

 

$

1,057

 

 

 

 

Nine Months Ended September 30, 2016

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Loss

 

Investments in content

 

$

 

 

$

 

 

$

598

 

 

$

598

 

 

$

2,062

 

 

During the nine months ended September 30, 2017 and 2016, the investments in content were impaired by $1.1 million and $2.1 million, respectively. In determining the fair value of our investments in content, we employ a discounted cash flow (or DCF) methodology. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement.

 

 

NOTE 11. NET INCOME (LOSS) PER COMMON SHARE

We have outstanding warrants to acquire 28.3 million and 10.1 million shares of common stock as of September 30, 2017 and 2016, respectively, which are not included in the computation of diluted net loss per common share as the effect would be anti-dilutive.

During periods of reported net losses from continuing operations after adjusting for accretion on preferred stock, all reported net losses are allocated to our unrestricted common stock. This has the effect of excluding our outstanding restricted common stock from the computation of our net loss per common share. For the three months ended September 30, 2017 and 2016, we have weighted average unvested shares of 2.7 million and 0.5 million, respectively, of compensatory stock options and restricted share-based awards

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