Bank Indebtedness and Production Facilities |
9 Months Ended |
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Sep. 30, 2023 | |
| Debt Instruments [Abstract] | |
| Bank Indebtedness and Production Facilities | Bank Indebtedness and Production Facilities Upon the acquisition of Wow, the Company assumed certain credit facilities (together the “Facilities”). The Facilities are comprised of the following:
Revolving Demand Facility
On December 15, 2022, the Company amended the revolving demand facility. Draws of up to $8.0 million CAD under the revolving demand facility can be made in Canadian or US dollars at the option of the Company by way of bank prime rate loans, Canadian Bankers’ Acceptances, Secured Overnight Financing Rate (“SOFR”) loans or letters of credit. Canadian or US dollar bank prime borrowings bear interest at a rate equal to bank prime plus 2.00% per annum.
For other draws under the revolving facility, the respective loans bear interest at a rate equal to Canadian Bankers’ Acceptances or SOFR plus 3.75% per annum.
As of September 30, 2023 and December 31, 2022, the Company had an outstanding balance of $2.3 million USD ($3.1 million CAD) and $1.7 million USD ($2.4 million CAD), respectively, on the revolving demand facility by way of bank prime rate loan draws, included as Bank Indebtedness within current liabilities on the Company’s condensed consolidated balance sheets.
Equipment Lease Line
On March 17, 2023, the Company amended the terms of its equipment lease line. Under the equipment lease line, the Company may borrow up to $4.0 million CAD (previously $4.3 million CAD).
Each transaction under the equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms. The finance rates for these equipment leases range from 3.94% to 7.18% with remaining lease terms of 2 - 34 months.
As of September 30, 2023 and December 31, 2022, the Company has drawn down a total of $1.5 million USD ($2.0 million CAD) and $2.4 million USD ($3.3 million CAD), respectively, under the equipment lease line. As of September 30, 2023 and December 31, 2022, the outstanding balances, net of repayments, were included within current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.
Treasury Risk Management Facility
Advances of up to $500,000 CAD available under the treasury risk management facility are subject to market rates as determined by the lender’s treasury department or derivatives group at the time of the drawdown request. The maximum
term for foreign exchange forward contracts and interest rate swaps is one year. The treasury risk management facility is payable on demand at any time.
As of September 30, 2023 and December 31, 2022, there were no outstanding amounts drawn under the treasury risk management facility.
Production Facilities
The production facilities are used for financing specific productions. The Company’s production facilities bear interest at rates ranging from bank prime plus 1.00% - 1.25% per annum. The production facilities are generally repayable on demand and are guaranteed and secured by the Company with no limitations for maximum potential future payments. The security reflects substantially all of the Company's tangible and intangible assets including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements.
As of September 30, 2023 and December 31, 2022, the Company had an outstanding balance of $21.1 million USD ($28.5 million CAD), including $1.3 million USD ($1.7 million CAD) of interest and $18.3 million USD ($24.8 million CAD), including $1.1 million USD ($1.5 million CAD) of interest, respectively, recorded as Production Facilities, net within current liabilities on the Company’s condensed consolidated balance sheets.
Equipment Lease Facility
Separate from the equipment lease line described above, the Company entered into an equipment lease agreement with a Canadian bank. This additional equipment lease facility allows the Company to finance equipment purchases of up to $1.4 million CAD in total. Each equipment lease is for a term of three years and will have specific financing terms such as finance amount and the bank’s lease base rate.
As of September 30, 2023 and December 31, 2022, the Company had drawn $0.6 million USD ($0.9 million CAD) and $0.5 million USD ($0.7 million CAD), respectively, under the equipment lease facility. As of September 30, 2023 and December 31, 2022, the outstanding balances, net of repayments, were included within current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.
Loan Covenants, Violations and Waiver
The Company is subject to financial and customary affirmative and negative non-financial covenants on the revolving demand facility, revolving equipment lease line and treasury risk management facility that have an aggregate total outstanding balance of $3.8 million USD ($5.2 million CAD). The Company was in technical violation of two financial covenants requiring a minimum fixed charge ratio and a maximum senior funded debt to EBITDA ratio as of September 30, 2023. The Company has continued to make its regular principal and interest payments in a timely basis since the effective borrowing date.
The revolving demand facility and the treasury risk management facility can be called at any time by the lender as per the original terms of the facilities. The risk of the lender demanding repayment can be deemed greater due to the breach of covenants. As of November 17, 2023, there has been no demands for repayment.
As of December 31, 2022, the Company met all required financial and non-financial covenants.
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