UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For~~FORM ~~the quarterly period ended September 30, 2021~~10-Q

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39741

~~Commission~~Redbox ~~File~~Entertainment NoInc. ~~001-39741~~

REDBOX ENTERTAINMENT INC.

(Exact name of registrant as specified in its charter)


Delaware	85-2157010

(State or other jurisdiction ofincorporation or organization)	(I.R.S. EmployerIdentification Number)
Delaware		85-2157010
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Tower Lane


1 Tower Lane, Suite 800 Oakbrook Terrace, Illinois 60181
(Address of Principal Executive Offices, including zip code)

Suite 800

Oakbrook Terrace, IL 60181

(Address of Principal Executive Offices)

(630) 756-8000 ~~(Registrant’s telephone number, including area code)~~

(Registrant’s telephone number)


SEAPORT GLOBAL ACQUISITION CORP.360 Madison Avenue, 20th FloorNew York, NY 10017
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	TradingSymbol(s)	Name of each exchange on which registered
Shares of Class A common stock, $0.0001 par value	RDBX	Nasdaq Stock Market, LLC
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50	RDBXW	Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐ Large accelerated filer ☐◻ Accelerated filer ☒◻ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒



Title of Each Class	Trading symbol	Name of Exchange on which registered
Class A common stock, $0.0001 Par Value per Share Warrants to purchase Class A common stock	RDBX RDBXW	The Nasdaq Stock Market LLC The Nasdaq Stock Market LLC

As of ~~November~~March 1031, ~~2021~~2022, there were 12,618,516 shares of ~~Class~~the registrant’s class A common stock, $0.0001 par value per share, and 32,770,000 shares of ~~Class~~the registrant’s class B common stock, $0.0001 par value per share, were issued and outstanding.

Table of Contents

REDBOX ENTERTAINMENT INC. (F/K/A SEAPORT GLOBAL ACQUISITION CORP.)

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

		Page
Explanatory Note		2
Cautionary Statement Regarding Forward-Looking Statements		3
PART 1 - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	4
	Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2021 (unaudited)	5
	Condensed Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 (unaudited)	6
	Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2021 (unaudited)	7
	Notes to Unaudited Condensed Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Control and Procedures	21
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
SIGNATURES		25


		Page

Part I	Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021	3

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited)	5

	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2022 and 2021 (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4.	Controls and Procedures	42

Part II	Other Information	42

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3.	Defaults Upon Senior Securities	43

Item 5.	Other Information	43

Item 6.	Exhibits	43

Exhibit Index		44

Signatures		45

~~EXPLANATORY NOTE~~2

On October 22, 2021, subsequent to the fiscal quarter ended September 30, 2021, Seaport Global Acquisition Corp., our predecessor and a Delaware corporation (“SGAC”), consummated the previously announced business combination pursuant to the business combination agreement entered into as of May 16, 2021 (as amended, the “Business Combination Agreement”), by and among SGAC, Seaport Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of SGAC (“Merger Sub”), Redwood Holdco, LP, a Delaware limited partnership (“Parent”), and Redwood Intermediate, LLC, a Delaware limited liability company (“Redbox”). Pursuant to the Business Combination Agreement, SGAC acquired certain equity interests of Redbox from Parent, its sole member, by way of Merger Sub merging with and into Redbox, and Redbox becoming a direct subsidiary of SGAC as a result thereof (the “Business Combination”).

On October 20, 2021, SGAC held a special meeting of stockholders (the “Special Meeting”), at which the SGAC stockholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in the Proxy Statement.

Pursuant to the terms and subject to the conditions set forth in the Business Combination Agreement, on October 22, 2021 (the “Closing Date”), the Business Combination was consummated (the “Closing”).

On the business day following the Closing Date, the Company’s Class A common stock and warrants began trading on Nasdaq under the symbols “RDBX” and “RDBXW”. SGAC’s public units automatically separated into their component securities upon consummation of the Business Combination and, as a result, no longer trade as a separate security and were delisted from Nasdaq.

Unless stated otherwise, this report contains information about SGAC before the Business Combination. References to the “Company” in this report refer to SGAC before the consummation of the Business Combination or Redbox after the Business Combination, as the context suggests.

Table of Contents

~~CAUTIONARY~~PART ~~STATEMENT~~I ~~REGARDING~~—FINANCIAL ~~FORWARD-LOOKING STATEMENTS~~INFORMATION

~~Certain~~Item ~~statements in this Quarterly Report may constitute “forward-looking statements~~1.” ~~Our~~Financial forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:Statements

●REDBOX ~~our~~ENTERTAINMENT ~~expectations~~INC. ~~around the performance of Redbox, including competitive prospects of the business following the Business Combination;~~

●CONDENSED ~~the~~CONSOLIDATED ~~impacts~~BALANCE ~~and uncertainty resulting from the ongoing COVID-19 pandemic, and the effects of the ongoing pandemic on the economy;~~SHEETS

●(in ~~our~~thousands, ~~public~~except ~~securities’~~share ~~potential~~and ~~liquidity~~per ~~and~~share ~~trading;~~data)

~~● the lack of a market for our securities; and~~

● our financial performance.


	(unaudited)
	March 31,		December 31,
	2022		2021
Assets
Current Assets:
Cash, cash equivalents and restricted cash	$	13,658	$	18,478
Accounts receivable, net of allowances of $202 at March 31, 2022 and $259 at December 31, 2021		14,109		10,856
Due from related parties, net (Note 15)		4,370		3,813
Content library		23,214		25,201
Prepaid expenses and other current assets		6,662		6,667
Total current assets		62,013		65,015
Property and equipment, net (Note 2)		36,743		40,624
Goodwill (Note 4)		147,523		147,523
Intangible assets, net (Note 4)		106,349		124,207
Operating lease right-of-use assets (Note 3)		8,274		—
Other long-term assets		612		663
Total assets	$	361,514	$	378,032
Liabilities and Shareholders’ Equity
Current Liabilities:
Trade payables	$	38,704	$	32,266
Due to related parties, net (Note 15)		74		74
Operating lease liabilities, current portion (Note 4)		2,958		—
Accrued and other current liabilities (Note 5)		58,566		57,755
Current portion of long-term debt (Note 6)		41,539		34,211
Total current liabilities		141,841		124,306
Long-term debt, net (Note 6)		301,371		287,355
Warrant liability (Note 11)		4,056		17,821
Operating lease liabilities, non-current portion (Note 4)		5,599		—
Other long-term liabilities		10,664		11,501
Total liabilities		463,531		440,983
Commitments and contingencies (Note 13)
Shareholders’ Equity
Class A common stock, $0.0001 par value, 500,000,000 shares authorized; 12,618,516 shares issued and outstanding as of March 31, 2022 and December 31, 2021		1		1
Class B common stock, $0.0001 par value, 100,000,000 shares authorized; 32,770,000 issued and outstanding as of March 31, 2022 and December 31, 2021		3		3
Additional paid-in-capital		302,958		302,455
Non-controlling interest		(70,581)		(32,456)
Accumulated deficit		(334,398)		(332,954)
Total equity		(102,017)		(62,951)
Total liabilities and shareholders’ equity	$	361,514	$	378,032

The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the sections of our Annual Report entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

See accompanying Notes to Condensed Consolidated Financial Statements

~~Table of Contents~~3

~~PART I~~Table -of ~~FINANCIAL INFORMATION~~Contents

REDBOX ENTERTAINMENT INC.

~~ITEM 1.~~CONDENSED ~~FINANCIAL~~CONSOLIDATED STATEMENTS OF OPERATIONS

~~REDBOX~~(in ~~ENTERTAINMENT~~thousands, ~~INC.~~except ~~(F/K/A~~share ~~SEAPORT~~and ~~GLOBAL~~per ~~ACQUISITION~~share ~~CORP.~~data)

~~CONDENSED BALANCE SHEETS~~(unaudited)


	~~September~~Three ~~30,~~Months Ended
	~~2021~~March 31,		~~December 31,~~
	~~(unaudited)~~2022		~~2020~~2021
ASSETS
Net revenue	$	63,227	$	76,730
Current assets
Operating expenses:
Cash	$	61,743	$	948,584
Product cost		27,290		28,248
Prepaid expenses		177,159		308,515
Direct operating		30,005		33,024
Total current assets		238,902		1,257,099
Marketing		4,022		3,284
Investments held in Trust Account		145,218,069		145,194,202
Stock-based compensation expense		1,808		566
Other Assets		3,116		—
General and administrative		23,203		13,309
Total Assets	$	145,460,087	$	146,451,301
Depreciation and amortization		25,090		27,526

Total operating expenses		111,418		105,957
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Operating loss		(48,191)		(29,227)
Current liabilities
Interest and other income (expense), net:
Accrued expenses	$	530,044	$	118,844
Interest and other income (expense), net		7,343		(7,247)
Due to related party		—		10,000
Total interest and other income (expense), net		7,343		(7,247)
Total current liabilities		530,044		128,844
Loss before income taxes		(40,848)		(36,474)
Warrant liability		16,467,107		17,322,751
Income tax expense (benefit)		26		(9,279)
Deferred underwriting fee payable		5,031,250		5,031,250
Net loss		(40,874)	$	(27,195)
Total Liabilities		22,028,401		22,482,845
Net loss attributable to non-controlling interest		(39,430)		N/A

Net loss attributable to Class A common stockholders	$	(1,444)		N/A
Commitments and contingencies

Class A common stock subject to possible redemption, 14,375,000 shares at redemption value at September 30, 2021 and December 31, 2020, respectively		145,218,069		145,194,202
Loss per share of Class A common stock:

Basic and diluted loss per share (Note 9)	$	(0.11)		N/A
Stockholders’ Equity (Deficit)

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding		—		—
Weighted average shares of Class A common stock outstanding:
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; none issued and outstanding (excluding 14,375,000 shares subject to possible redemption) as of September 30, 2021 and December 31, 2020, respectively		—		—
Basic and diluted		12,618,516		N/A
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 3,593,750 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		359		359
Additional paid-in capital		—		—
Accumulated deficit		(21,786,742)		(21,226,105)
Total Stockholders’ Equity (Deficit)		(21,786,383)		(21,225,746)
Total Liabilities and Stockholders’ Equity (Deficit)	$	145,460,087	$	146,451,301

~~The~~See accompanying Notes to ~~notes~~Condensed ~~are~~Consolidated anFinancial ~~integral part of these financial statements.~~Statements

4Table of Contents

~~Table~~REDBOX ofENTERTAINMENT ~~Contents~~INC.

~~REDBOX~~CONDENSED ~~ENTERTAINMENT~~CONSOLIDATED ~~INC.~~STATEMENTS ~~(F/K/A~~OF ~~SEAPORT~~CASH ~~GLOBAL ACQUISITION CORP.)~~FLOWS

~~CONDENSED~~(in ~~STATEMENT OF OPERATIONS~~thousands)

(unaudited)


	Three Months		Nine Months
	Ended		Ended
	September 30, 2021		September 30, 2021
	(unaudited)		(unaudited)
Operating and formation costs	$	500,559	$	1,416,280
Loss from operations		(500,559)		(1,416,280)

Other income (expense):
Interest earned on investments held in Trust Account		1,869		23,867
Change in fair value of warrant liability		(1,344,965)		855,644
Total other income (expense)		(1,343,096)		879,511

Net loss	$	(1,843,655)	$	(536,769)

Weighted average shares outstanding, Class A redeemable common stock		14,375,000		14,375,000
Basic and diluted income per share, Class A redeemable common stock	$	(0.10)	$	(0.03)

Weighted average shares outstanding, Class B non-redeemable common stock		3,593,750		3,593,750
Basic and diluted net loss per share, Class B non-redeemable common stock	$	(0.10)	$	(0.03)


	Three Months Ended
	March 31,
	2022		2021
Operating activities:
Net loss	$	(40,874)	$	(27,195)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation		7,363		9,791
Amortization of intangible assets		17,857		17,858
Gain on sale/disposal of assets		(132)		(123)
Stock-based compensation expense		1,808		566
Deferred income taxes		—		(6,303)
Amortization of deferred financing costs		410		(831)
PIK interest added to Senior Facilities		7,328		—
Change in fair value of warrant liability		(13,765)		—
Non-cash rent, interest and other		(2)		7,060
Cash flows from changes in net operating assets and liabilities:
Accounts receivable		(3,242)		(2,463)
Content library		1,977		398
Income tax receivable		—		(3,130)
Prepaid expenses and other current assets		5		227
Other assets		50		217
Trade payables		5,998		(7,179)
Change in due to/from related parties		(557)		2,626
Accrued and other liabilities		953		(5,629)
Net cash flows used in operating activities		(14,823)		(14,110)
Investing Activities:
Purchases of property and equipment		(3,003)		(3,631)
Proceeds from disposition of property and equipment		171		113
Net cash flows used in investing activities		(2,832)		(3,518)
Financing Activities:
Proceeds from Redbox’s borrowings		14,103		26,750
Repayments of Redbox’s debt obligations		(497)		—
Dividends paid		—		(90)
Principal payments on finance lease obligations		(771)		(817)
Net cash flows provided by financing activities		12,835		25,843
Change in cash, cash equivalents and restricted cash		(4,820)		8,215
Cash, cash equivalents and restricted cash:
Beginning of period		18,478		8,927
End of period	$	13,658	$	17,142

~~The accompanying notes are an integral part of these financial statements.~~

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

REDBOX ENTERTAINMENT INC. ~~(F/K/A SEAPORT GLOBAL ACQUISITION CORP.)~~

CONDENSED ~~STATEMENT~~CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’~~ EQUITY (DEFICIT)

~~THREE~~(in ~~AND NINE MONTHS ENDED SEPTEMBER 30, 2021~~thousands)

(unaudited)


	Class A			Class B			Additional				Total
	Common Stock			Common Stock			Paid-in		Accumulated		Stockholder's
	Shares	Amount		Shares	Amount		Capital		Income (Deficit)		Equity (Deficit)
Balance as of January 1, 2021	—	$	—	3,593,750	$	359	$	—	$	(21,226,105)	$	(21,225,746)
Net income	—		—	—		—		—		5,128,710		5,128,710
Change in value of Class A common stock subject to possible redemption	—		—	—		—		—		(17,259)		(17,259)
Balance as of March 31, 2021	—	$	—	3,593,750	$	359	$	—	$	(16,114,654)	$	(16,114,295)
Net loss	—		—	—		—		—		(3,821,824)		(3,821,824)
Change in value of Class A common stock subject to possible redemption	—		—	—		—		—		(4,740)		(4,740)
Balance as of June 30, 2021	—	$	—	3,593,750	$	359	$	—	$	(19,941,218)	$	(19,940,859)
Net loss	—		—	—		—		—		(1,843,655)		(1,843,655)
Change in value of Class A common stock subject to possible redemption	—		—	—		—		—		(1,869)		(1,869)
Balance as of September 30, 2021	—	$	—	3,593,750	$	359	$	—	$	(21,786,742)	$	(21,786,383)

~~The accompanying notes are an integral part of these financial statements.~~


										Additional
	Common Units			Class A Common Stock			Class B Common Stock			Paid-in		Accumulated		Non-controlling		Total
	Shares	Amount		Shares		Amount	Shares		Amount	Capital		Deficit		Interest		Equity
Balance at December 31, 2020	27,799,748	$	3	—	$	—	—	$	—	$	223,085	$	(221,626)	$	—	$	1,462
Dividends	—		—	—		—	—		—		—		—		—		—
Stock-based compensation plans and related activity	3,193,549		—	—		—	—		—		566		—		—		566
Net loss	—		—	—		—	—		—		—		(27,195)		—		(27,195)
Balance at March 31, 2021	30,993,297	$	3	—	$	—	—	$	—	$	223,651	$	(248,821)	$	—	$	(25,167)

Balance at December 31, 2021	—	$	—	12,618,516	$	1	32,770,000	$	3	$	302,455	$	(332,954)	$	(32,456)	$	(62,951)
Dividends	—		—	—		—	—		—		—		—		—		—
Stock-based compensation plans and related activity	—		—	—		—	—		—		503		—		1,305		1,808
Net loss	—		—	—		—	—		—		—		(1,444)		(39,430)		(40,874)
Balance at March 31, 2022	—	$	—	12,618,516	$	1	32,770,000	$	3	$	302,958	$	(334,398)	$	(70,581)	$	(102,017)

6See accompanying Notes to Condensed Consolidated Financial Statements

~~Table of Contents~~

~~REDBOX ENTERTAINMENT INC. (F/K/A SEAPORT GLOBAL ACQUISITION CORP.)~~6

~~CONDENSED~~Table ~~STATEMENT~~of ~~OF CASH FLOWS~~Contents

~~NINE~~REDBOX ~~MONTHS~~ENTERTAINMENT ~~ENDED~~INC. ~~SEPTEMBER 30, 2021~~

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Cash Flows from Operating Activities:
Net income (loss)	$	(536,769)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Interest earned on marketable securities held in Trust Account		(23,867)
Change in fair value of warrant liability		(855,644)
Changes in operating assets and liabilities:
Prepaid assets		131,356
Other assets		(3,116)
Accrued expenses		411,199
Due to related party		(10,000)
Net cash used in operating activities		(886,841)

Net Change in Cash		(886,841)
Cash - Beginning of period		948,584
Cash - End of period	$	61,743

Non-cash financing activities:
Change in value of Class A common stock subject to possible redemption	$	(23,867)

Note 1: Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared under accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) and in conformity with rules applicable to quarterly financial information. The Condensed Consolidated Financial Statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are unaudited. All adjustments, consisting of normal recurring adjustments, except as otherwise noted, considered necessary for a fair presentation of the unaudited interim Condensed Consolidated Financial Statements for these interim periods have been included.

~~The~~Readers ~~accompanying~~of this unaudited interim Condensed Consolidated quarterly financial information should refer to the audited Consolidated Financial Statements and notes thereto of Redbox Entertainment Inc. and its subsidiaries (“Redbox,” the “Company,” “we,” “our” and “us”) for the year ended December 31, 2021 included in our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) and also available on our website (www.redbox.com). Certain footnote disclosures that would substantially duplicate those contained in such audited financial statements or which are annot ~~integral~~required ~~part~~by the rules and regulations of ~~these~~the SEC for interim financial ~~statements~~reporting have been condensed or omitted.

Refer to Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2021 Annual Report on Form 10-K for further discussion of the Company’s accounting policies and estimates. Such Annual Report also contains a discussion of the Company’s critical accounting policies and estimates.

Business Update, Going Concern and Strategic Alternatives

7Historically, rentals have been correlated with the number and quality of new theatrical titles released in a quarter. During 2021 and for the first three months of 2022, Redbox’s business was negatively impacted by the effects of the ongoing COVID-19 pandemic, which resulted in fewer than expected theatrical releases. In addition, the significant increase in impacts from the Omicron variant caused further disruption to the business. As such, Redbox rentals have not recovered to the extent expected and, notwithstanding the year-over-year increase in new theatrical releases, were lower than pre-COVID-19 levels. As part of an effort to expand its business and transform into a multi-faceted entertainment company, during the fourth quarter of 2021 and into the first three months of 2022, Redbox increased its marketing and on-demand expenditures. Costs also increased as Redbox purchased more content, which were not offset by an increase in revenues.

~~Table~~Redbox has been exploring a number of ~~Contents~~potential strategic alternatives with respect to the Company’s corporate or capital structure and seeking financing to fund operations and one-time restructuring costs. In March 2022, the Company’s Board of Directors established a Strategic Review Committee to, among other things, consider and oversee strategic alternatives or transactions that may be available to the Company with respect to its corporate or capital structure. Redbox is also executing on a previously announced series of restructuring actions and initiatives to improve its efficiency and reduce its cost structure, including, but not limited to, (i) optimizing its kiosk network and (ii) executing a workforce reduction across its supply chain and corporate teams. However, the risks and uncertainties related to the ongoing adverse effects of the COVID-19 pandemic on the Company’s operating results, together with the Company’s recurring operating losses, accumulated deficit and negative working capital, raise substantial doubt about our ability to continue as a going concern, after consideration of the strategic initiatives outlined below, within one year after the date that the condensed consolidated interim financial statements are issued.

~~REDBOX~~The ~~ENTERTAINMENT~~accompanying ~~INC~~consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For ~~(F/K/A~~the ~~SEAPORT~~three ~~GLOBAL~~months ~~ACQUISITION~~ended ~~CORP~~March 31, 2022, the Company generated negative cash flows from operations of $14.)8 million, had an accumulated deficit of $334.4 million and negative working capital of $79.8 million. The Company evaluated the impact of the additional financing and restructuring actions and initiatives further described below on its ability to continue as a going concern.

~~NOTES TO~~On ~~UNAUDITED~~March ~~CONDENSED~~29, 2022, the Company completed a reduction in force of 150 employees. One-time restructuring charges of $3.8 million were incurred, the substantial amount of which related to severance. The Company estimates that the workforce reduction will decrease its annual operating costs by approximately $13.1 million.

~~FINANCIAL STATEMENTS~~ 7

~~NOTE~~Table 1.of ~~DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS~~Contents

~~Redbox~~As ~~Entertainment~~a ~~Inc.~~further (condition of the ~~“Company”)~~Sixth ~~was~~Amendment, ~~incorporated~~the inCompany ~~Delaware~~issued onto ~~July~~HPS 24Investment Partners, ~~2020~~LLC ~~under~~ (the ~~name~~administrative ~~“Seaport~~agent ~~Global~~and ~~Acquisition~~collateral ~~Corp.”~~agent ~~The~~to ~~Company was formed for~~ the ~~purpose~~Credit ofAgreement) ~~entering~~and ~~into~~certain aaffiliates ~~merger,~~(as ~~capital~~defined ~~stock~~in ~~exchange,~~the ~~asset~~Credit ~~acquisition,~~Agreement) ~~stock purchase~~warrants, ~~reorganization~~with oran ~~similar~~exercise ~~business~~price ~~combination~~of ~~with~~$0.0001 ~~one~~per orshare ~~more businesses~~ (anthe “~~initial~~HPS ~~business combination~~Warrants”)., ~~The~~to ~~Company~~purchase ~~is an early stage and emerging growth company and~~11, ~~as such~~416,700 ~~the~~shares ~~Company~~of isClass ~~subject~~A tocommon ~~all~~stock of the ~~risks~~Company ~~associated~~(“Common ~~with~~Stock”) ~~early~~in ~~stage~~the ~~and~~event ~~emerging~~certain ~~growth~~milestones ~~companies.~~were Innot ~~conjunction~~met ~~with~~under the ~~Business~~Amended ~~Combination~~Credit ~~with~~Agreement. Upon ~~Redbox,~~signing of the ~~Company~~Merger ~~formed~~Agreement a(as ~~wholly-owned~~defined ~~subsidiary~~below), ~~Seaport~~the ~~Merger~~HPS ~~Sub,~~Warrants ~~LLC,~~became avoid ~~Delaware~~and ~~limited~~all ~~liability~~rights ~~company~~of ~~(“Merger~~the ~~Sub”). Merger~~warrant ~~Sub~~holders ~~did~~thereunder ~~not~~to ~~have~~exercise ~~any~~the ~~activity~~HPS asWarrants ~~of September 30, 2021~~ceased.

AsIn ofconnection ~~September~~with 30the Sixth Amendment, ~~2021~~on April 15, 2022, the Company ~~had~~entered ~~not~~into ~~commenced~~a ~~any~~Voting ~~operations~~and Support Agreement with AP VIII Aspen Holdings, L.P. ~~All~~(“Aspen”), ~~activity~~Seaport ~~through~~Global ~~September~~SPAC, 30LLC and Redwood Holdco, ~~2021~~LP ~~relates~~(“Redwood”), (collectively the “Stockholders”), whereby the Stockholders agreed to vote their shares of the Company’s ~~formation~~(i) in favor of any strategic transaction approved and ~~initial~~recommended ~~public~~by ~~offering~~the Company’s Board of Directors (the “~~Initial Public Offering~~Board”), or any committee to which isthe ~~described~~Board ~~below~~delegates authority, subject to certain terms and ~~working~~conditions ~~capital~~(each, ~~related~~a “Transaction”), (ii) in opposition to any transaction involving the ~~consummation~~Company that has not been approved and recommend by the Board, and (iii) in favor of anany ~~initial~~directors ~~business~~that ~~combination~~are proposed or nominated to the Board by the Company at any annual meeting of the Company.

The ~~registration~~Company ~~statement~~further ~~for~~agreed, ~~the~~pursuant ~~Company’s~~to ~~Initial~~the ~~Public~~Voting ~~Offering~~and ~~was~~Support ~~declared~~Agreement, ~~effective~~to on(i) ~~November 27,~~permanently ~~2020.~~reduce Ona ~~December 2,~~portion ~~2020,~~of the ~~Company~~Union ~~consummated~~Revolving ~~the~~Credit ~~Initial~~Facility ~~Public~~in ~~Offering~~an ofamount ~~14,375,000~~equal ~~units~~to ~~(the~~$10.6 ~~“Units”~~million (and, ~~with respect to~~ the ~~shares~~Company ofmade ~~Class A~~such ~~common~~reduction) ~~stock~~and ~~included~~(ii) inamong ~~the~~other ~~Units sold~~agreements, ~~the~~refrain ~~“Public~~from ~~Shares”),~~borrowing ~~which~~under ~~included~~ the ~~full~~Union ~~exercise~~Revolving byCredit Facility without the ~~underwriter~~consent of ~~the~~Aspen ~~overallotment~~and ~~option~~Redwood toHoldco, ~~purchase~~LP an(other ~~additional~~than ~~1,875,000~~with ~~Units~~respect atto ~~$10.00~~certain ~~per~~scheduled ~~Unit,~~borrowings ~~generating~~and ~~gross~~borrowings ~~proceeds~~to ofcover ~~$143~~interest,~~750,000,~~ ~~which~~fees isand ~~described in Note 4~~expenses).

~~Simultaneously~~In connection with the ~~closing~~execution of the ~~Initial~~Sixth ~~Public Offering~~Amendment, the Company ~~consummated~~also ~~the~~implemented ~~sale~~certain ofchanges ~~6,062,500~~to ~~warrants~~the ~~(each,~~composition ~~a “Private Placement Warrant”~~ and ~~collectively,~~size ~~the~~of ~~“Private~~its ~~Placement~~Board ~~Warrants”) at a price~~ of ~~$1.00~~Directors ~~per~~as ~~Private~~further ~~Placement~~described ~~Warrant~~ in athe ~~private~~Company’s ~~placement~~Current toReport ~~Seaport~~on ~~Global~~Form ~~SPAC,~~8-K ~~LLC~~filed (with the ~~“Sponsor”)~~SEC ~~generating~~on ~~gross~~April ~~proceeds of $6~~19,~~062,500,~~ ~~which is described in Note 5~~2022. The ~~Transaction~~Strategic ~~costs~~Review ~~amounted~~Committee ~~to $8,361,625, consisting~~ of ~~$2,875,000~~the ofBoard ~~underwriting~~was ~~fees,~~also ~~$5,031,250~~dissolved ofin ~~deferred~~connection ~~underwriting~~with ~~fees~~these ~~and $455,375 of other offering costs~~changes.

~~Following~~In ~~the~~connection ~~closing~~with of the ~~Initial~~Company’s ~~Public~~entry ~~Offering~~into ~~on December 2, 2020, an amount of $145,187,500 ($10.10 per Unit) from~~ the ~~net~~Voting ~~proceeds of the sale of the Units in the Initial Public Offering~~ and ~~the~~Support ~~sale~~Agreement, ofRedwood ~~the~~permanently ~~Private~~waived ~~Placement Warrants was placed in a trust account (~~the “~~Trust~~Early ~~Account~~Termination Payment”) ~~and~~by ~~invested in U.S. government securities, within~~ the ~~meaning set forth in Section 2(a)(16) of the Investment~~ Company ~~Act of 1940, as amended~~ (~~the~~or ~~“Investment~~an ~~Company Act”~~affiliate), ~~with~~to aRedwood ~~maturity~~that ofcould ~~185~~have ~~days~~resulted orfrom ~~less,~~a orprovision in ~~any~~that ~~open-ended~~certain ~~investment~~Tax ~~company~~Receivable ~~that~~Agreement ~~holds~~dated ~~itself out~~ as ~~a money market fund meeting the conditions~~ of ~~Rule 2a-7~~October ~~of the Investment Company Act~~22, as2021 ~~determined by the Company, until the earlier of:~~ (i“TRA”) ~~the~~, ~~consummation~~which ofwould anhave ~~initial~~been ~~business~~triggered ~~combination~~upon ~~or (ii)~~ the ~~distribution~~change ~~of the funds in the Trust Account~~ to the ~~Company~~Board’s ~~stockholders, as described below~~composition.

~~Risks~~Additionally, under the Voting and ~~Uncertainties~~Support Agreement, the Company and Redwood agreed, in connection with the consummation of a Transaction, to (a) terminate the TRA upon the consummation of a Transaction and (b) waive all claims under the TRA with such waiver being effective upon the consummation of such Transaction.

~~Management~~On isMay ~~continuing~~10, to2022, ~~evaluate~~ the ~~impact~~Company ofentered ~~the~~into ~~COVID-19~~a ~~pandemic~~merger ~~and~~agreement ~~has~~with ~~concluded~~Chicken ~~that~~Soup ~~while~~for itthe isSoul ~~reasonably~~Entertainment ~~possible~~(“CSSE”), ~~that~~pursuant ~~COVID-19~~to ~~could~~which, ~~have~~the Company will become a ~~negative~~wholly ~~effect~~owned onsubsidiary ~~identifying~~of CSSE (the “Merger Agreement”). As a ~~target~~result, ~~company~~additional ~~for~~borrowings anunder ~~initial~~the ~~business~~Sixth ~~combination,~~Amendment Incremental Revolving Facility became available upon the ~~specific~~Company’s ~~impact~~entry isinto ~~not~~the ~~readily~~merger ~~determinable~~agreement aswith ofCSSE provided, that the ~~date~~Company, ofunder ~~these~~the ~~financial~~Sixth ~~statements~~Amendment Incremental Revolving Facility, restricts its borrowings to $45.0 ~~The~~million. See ~~financial~~Note ~~statements~~17: doSubsequent ~~not~~Events ~~include~~and ~~any~~the ~~adjustments~~Company’s ~~that~~Current ~~might~~Report ~~result~~on ~~from~~Form 8-K filed with the ~~outcome~~SEC ofon ~~this~~May ~~uncertainty~~11, 2022 for additional information regarding the CSSE merger.

~~Business~~Our ~~Combination~~unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. If the Company is unable to implement one or more of the contemplated strategic alternatives, an event of default will occur under the Credit Agreement, and the Company could continue to experience adverse pressures on its relationships with counterparties who are critical to its business, its ability to access the capital markets, its ability to execute on its operational and strategic goals and its business, prospects, results of operations and liquidity generally. There can be no assurance as to when or whether the implementation of one or more of the Company’s strategic initiatives will be successful, or as to the effects the failure to take action may have on the Company’s business, its ability to achieve its operational and strategic goals or its ability to finance its

On May 16, 2021, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among the Company, Merger Sub, Redwood Holdco, LP (“Parent”), and Redwood Intermediate, LLC (“Redbox”).8

8Table of Contents

~~Table~~business or refinance its indebtedness. A failure to address these matters, will have a material adverse effect on the Company’s business, prospects, results of ~~Contents~~operations, liquidity and financial condition, and its ability to service or refinance its corporate debt as it becomes due.

On October 22, 2021, SGAC, Parent and Redbox consummated the business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement. Immediately upon the completion of the Business Combination, Merger Sub merged with and into Redbox. In connection with the consummation of the Business Combination, SGAC changed its name to “Redbox Entertainment Inc.”

InNote 2: Property connection with the Business Combination, the Company provided the holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Business Combination in connection with a stockholder meeting called to approve the Business Combination. The Business Combination Agreement and the Business Combination were approved by the Company’s stockholders at a special meeting of the Company’s stockholders held on October 20, 2021 (the “Special Meeting”). On October 22, 2021, the parties to the Business Combination Agreement consummated the Business Combination and the other transactions contemplated thereby. At the Special Meeting, holders of 12,346,223 shares of the Company’s Class A Common Stock, sold in its Initial Public Offering, exercised their right to redeem those shares for cash at a price of approximately $10.10 per share, for an aggregate of approximately $124,723,926. The per share redemption price of $10.10 for public stockholders electing redemption was paid out of the Company’s Trust Account, which after taking into account the redemption and backstop, had a balance immediately prior to the Closing of approximately $20,495,097.Equipment

In connection with the Business Combination, on October 12, 2021, SGAC entered into backstop subscription agreements (the “Backstop Agreements”) with certain subscribers (the “Backstop Subscribers”), including affiliates of Apollo Global Management, Inc. and the Sponsor, pursuant to which the Backstop Subscribers agreed, subject to certain conditions in the Backstop Agreements, to subscribe for and purchase up to an aggregate of 3,564,356 shares of SGAC Class A common stock in the event that more than 10,810,644 public shares of SGAC Class A common stock were submitted for redemption in connection with the Business Combination, for a purchase price of $10.10 per share. In accordance with the Backstop Agreements, on October 20, 2021, the Backstop Subscribers funded the approximately $20.2 million aggregate purchase price. Immediately prior to the Closing on October 22, 2021, SGAC issued an aggregate of 1,995,989 shares of Class A common stock to the Backstop Subscribers pursuant to the Backstop Agreements.

PIPE Investment


	March 31,		December 31,
Dollars in thousands	2022		2021
Kiosks and components	$	190,661	$	190,496
Computers, servers, and software		101,912		99,123
Leasehold improvements		4,152		4,129
Office furniture and equipment		676		676
Leased Vehicles		11,178		11,380
Property and equipment, at cost	$	308,579	$	305,804
Accumulated depreciation		(271,836)		(265,180)
Property and equipment, net	$	36,743	$	40,624

Concurrently with the execution of the Business Combination Agreement, SGAC entered into subscription agreements (the “Subscription Agreements”) with certain investors pursuant to which the Company agreed to issue and sell, in private placements to close immediately prior to the Closing, an aggregate of up to 5,000,000 shares of SGAC Class A common stock, par value $0.0001 per share for a purchase price of $10.00 per share (the “PIPE Investment”). The PIPE Investment closed immediately prior to the Business Combination on October 22, 2021. The shares of SGAC Class A common stock issued to the investors pursuant to the Subscription Agreements became shares of Redbox Entertainment Inc. upon consummation of the Business Combination.

Immediately after giving effect to the Business Combination (including as a result of the redemptions described above, the conversion of all 3,593,750 outstanding founder shares into shares of Class A common stock on a one-for-one basis and the issuance of an additional 5,000,000 shares of Class A common stock in the PIPE Investment and an additional 1,995,989 shares of Class A common stock pursuant to the Backstop Agreements), there were 45,388,516 shares of Common Stock, including 12,618,516 shares of Class A common stock and 32,770,000 shares of Class B common stock, issued and outstanding and warrants to purchase 16,843,750 shares of Class A common stock of the Company issued and outstanding.

~~Liquidity and Going Concern~~

As of September 30, 2021, the Company had $61,743 in its operating bank accounts and working capital of $(291,142). Until the consummation of an initial business combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating an initial business combination. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. In the nine months to September 30, 2021, the Company reported negative net change in cash of $886,841, or an average of approximately $98,538 per month.Note 3: Leases

OnThe ~~October~~Company 22adopted ASC 842 as of January 1, ~~2021~~2022, using the ~~company~~modified ~~successfully~~retrospective ~~consummated~~approach. The ~~its~~modified ~~Business~~retrospective ~~Combination~~approach ~~with~~provides ~~Redbox~~a ~~Entertainment~~method ~~Inc.,~~for ~~generating~~recording ~~cash~~existing ~~proceeds~~leases at adoption and not restated comparative periods; rather the effect of ~~$90.7~~the ~~million~~change ~~before~~is ~~transaction~~recorded ~~fees~~at the beginning of the year of adoption. The AsCompany will elect the package of practical expedients permitted under the ~~Business~~transition ~~Combination~~guidance within the new standard, which allows us to carryforward historical lease classification. In addition, we are electing the ~~Company~~hindsight ~~believes~~practical ~~there~~expedient isto ~~sufficient~~determine ~~cash~~the ~~available~~reasonably certain lease term for existing leases. Lastly, we elect the ~~next~~short-term 12lease ~~months~~recognition exemption for our leases. This ~~For~~means ~~additional~~for ~~information~~short-term leases, ~~please~~we ~~see~~will ~~Note~~not 10recognize ~~Subsequent~~ROU ~~Events~~assets and lease liabilities, and this includes not recognizing ROU asset or lease liabilities for existing short-term leases of those assets in transition. In preparation for adoption of the standard, we have implemented internal controls to enable the preparation of financial information.

9The Company has operating leases primarily for office space, distribution centers, and other equipment. The Company also has finance leases for their fleet. The Company's leases have remaining lease terms of up to approximately 4 years. Most leases are not cancelable prior to their expiration. The expected term of the lease used for computing the lease liability and right-of-use ("ROU") asset and determining the classification of the lease as operating or financing may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present, such as, whether a contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration

~~Table~~Operating Leases. Operating lease ROU assets, representing the Company's right to use the underlying asset for the lease term, are reflected in "Operating lease right-of-use ~~Contents~~assets" in the Company's unaudited condensed consolidated balance sheet. Operating lease liabilities, representing the present value of the Company's obligation to make payments over the lease term, are reflected in “Operating lease liabilities, current portion” and “Operating lease liabilities, non-current portion” in the Company's March 31, 2022 unaudited condensed consolidated balance sheet. The Company has entered into various short-term operating leases which have an initial term of 12 months or less. These short-term leases are not recorded on the Company's unaudited condensed consolidated balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Finance Leases. Finance lease ROU assets are included in "Property and equipment, net" and finance lease liabilities are included in the “Accrued and other current liabilities” and “Other long-term liabilities” line items in the Company's March 31, 2022 unaudited condensed consolidated balance sheet. Finance lease ROU assets are amortized on a straight-line basis over the lease term.

~~Note 2 —~~Our ~~Significant~~lease ~~Accounting~~agreements ~~Policies~~do not contain any material residual value guarantees or material restrictive covenants.

~~Basis of Presentation~~9

~~The~~Table ~~accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States~~ of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Contents

~~The~~Although ~~accompanying~~separation ~~unaudited~~of ~~condensed~~lease ~~financial~~and ~~statements should be read in conjunction with the Company’s Annual Report on Form 10~~non-~~K/A~~lease ~~for~~components ~~the~~is ~~year~~required, ~~ended~~certain ~~December~~practical ~~31,~~expedients ~~2020~~are asavailable ~~filed~~to ~~with~~entities. ~~the~~We ~~SEC~~will onnot ~~November~~elect ~~22,~~to ~~2021,~~take ~~which~~advantage ~~contains~~of the ~~audited~~ability ~~financial~~to ~~statements~~combine lease and ~~notes~~non-lease ~~thereto~~components. ~~The~~We ~~interim~~have ~~results~~lease ~~for~~agreements ~~the~~with ~~three~~lease and ~~nine~~non-lease ~~months ended September 30~~components, ~~2021~~which are ~~not~~generally ~~necessarily~~accounted ~~indicative of the results to be expected~~ for ~~the year ending December 31, 2021 or for any future interim periods~~separately.

~~Emerging~~The ~~Growth~~present value of the lease payments is calculated using a rate implicit in the lease, when readily determinable. However, as most of the Company's ~~Status~~leases do not provide an implicit rate, the Company uses its incremental borrowing rate to determine the present value of the lease payments for the majority of its leases.

~~The~~Variable ~~Company~~lease ispayments an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are ~~applicable~~based toon ~~other~~an ~~public~~index ~~companies~~or ~~that~~rate are ~~not~~included emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in ~~its periodic reports and proxy statements, and exemptions from~~ the ~~requirements~~measurement of ~~holding~~ROU aassets ~~nonbinding advisory vote on executive compensation~~ and ~~stockholder~~lease ~~approval~~liabilities ofat ~~any~~lease ~~golden parachute payments not previously approved~~inception. ~~Further,~~All ~~Section 102(b)(1) of~~other ~~the~~variable ~~JOBS~~lease ~~Act~~payments exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are ~~required~~expensed toas ~~comply~~incurred ~~with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period~~ and ~~comply~~are ~~with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected~~ not toincluded ~~opt~~in ~~out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies,~~ the ~~Company,~~measurement ~~as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison~~ of ~~the~~ROU ~~Company’s~~assets ~~financial~~and ~~statements~~lease with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards usedliabilities.

~~Use~~The components of ~~Estimates~~lease cost were as follows:

The preparation of the financial statement in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement.


	Three Months Ended March 31,
Dollars in thousands	2022
Operating lease cost	$	1,032

Finance lease cost
Amortization of right-of-use assets		709
Interest on lease liabilities		29
Total finance least cost	$	738

Short-term lease cost⁽¹⁾		58
Total lease cost	$	1,828

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

~~Cash~~ ~~and~~ ~~Cash~~ ~~Equivalents~~ (1) Short-term lease cost primarily consists of leases with a lease term of 12 months or less.

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.

~~Cash~~Supplemental ~~and~~cash ~~Securities~~flow ~~held~~information inrelated ~~Trust~~to ~~Account~~leases was as follows:

At December 31, 2020, and September 30, 2021, the assets held in the Trust Account were held in U.S. Treasury securities with a maturity of 185 days or less.


	Three Months Ended March 31,
Dollars in thousands	2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,091
Financing cash flows from financing leases		771

Table of Contents


	March 31, 2022
Weighted average remaining lease term (in years):
Operating leases	3.2
Finance leases	1.2

Weighted average discount rate:
Operating leases	9.25	%
Finance leases	3.51	%

The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.

A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.

~~Premiums~~The ~~and~~expected ~~discounts~~future ~~are~~payments ~~amortized~~relating ~~or accreted over the life of the related held-~~to~~-maturity~~ ~~security as an adjustment to yield using~~ the ~~effective-interest~~Company's ~~method.~~operating ~~Such amortization~~ and ~~accretion~~finance ~~are~~lease ~~included~~liabilities inat ~~the~~March ~~“interest~~31, ~~income”~~2022 ~~line~~are ~~item~~as ~~in the statements of operations. Interest income is recognized when earned.~~follows:

~~Warrant Liabilities~~

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.


Dollars in thousands	Operating Leases		Finance Leases
Nine months ending December 31, 2022	$	2,771	$	1,441
Year ending December 31,
2023		3,073		1,003
2024		2,284		401
2025		1,681		154
2026		—		—
Thereafter		—		—

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.10

~~Class~~Table Aof ~~Common Stock Subject to Possible Redemption~~Contents

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s unaudited condensed balance sheet.

Total lease payments	$	9,809	$	2,999
Less imputed interest		(1,253)		—
Total	$	8,556	$	2,999

~~Fair Value of Financial Instruments~~

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.

~~Table~~Note 4: Goodwill ofand ~~Contents~~Other Intangible Assets

~~Income~~Goodwill ~~Taxes~~is evaluated for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that could more likely than not reduce the fair value of a reporting unit below its carrying value.

~~The~~During ~~Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires~~ the ~~recognition~~first ofquarter ~~deferred tax assets and liabilities for both the expected impact~~ of ~~differences~~2022, ~~between~~ the ~~financial~~Company ~~statement~~completed ~~and~~a ~~tax~~quantitative ~~basis~~impairment ofanalysis ~~assets and liabilities and~~ for ~~the~~goodwill ~~expected~~related ~~future tax benefit~~ to beits ~~derived~~Legacy ~~from~~and ~~tax~~Digital ~~loss~~reporting ~~and~~units ~~tax~~due ~~credit~~to ~~carry~~its ~~forwards~~financial performance. ~~ASC~~Based ~~740~~on ~~additionally~~this ~~requires~~analysis, athe ~~valuation~~Company ~~allowance~~concluded tothe befair ~~established~~value ~~when~~of itits isLegacy ~~more~~and ~~likely~~Digital ~~than~~reporting ~~not~~units ~~that~~exceeded ~~all~~its orcarrying avalue ~~portion~~and ofas ~~deferred~~such, ~~tax~~no ~~assets~~impairment ~~will~~charge ~~not~~was ~~be realized~~recorded.

~~ASC~~As ~~740~~part ~~also~~of ~~clarifies~~ the ~~accounting for uncertainty in income taxes recognized in an enterprise~~Company’s ~~financial~~impairment ~~statements~~analysis, ~~and~~the ~~prescribes~~determination aof ~~recognition~~the ~~threshold~~fair ~~and~~value ~~measurement~~of ~~process~~the ~~for~~Company’s ~~financial~~reporting units ~~statement~~requires ~~recognition~~the ~~and~~Company ~~measurement~~to ofmake asignificant ~~tax~~estimates ~~position~~and ~~taken~~assumptions orincluding ~~expected~~the tobusiness beand ~~taken~~financial inperformance aof ~~tax~~the ~~return.~~Company’s ~~For those benefits to be recognized~~reporting units, aas ~~tax~~well ~~position~~as ~~must~~how besuch ~~more-likely-than-not~~performance tomay be ~~sustained~~impacted ~~upon examination~~ by ~~taxing authorities~~COVID-19. ~~ASC~~These ~~740~~estimates ~~also provides guidance on derecognition, classification, interest~~ and ~~penalties,~~assumptions ~~accounting~~primarily ~~in interim period~~include, ~~disclosure~~but ~~and~~are ~~transition.~~not ~~The~~limited ~~Company~~to: ~~recognizes~~the ~~accrued~~selection ~~interest~~of ~~and~~appropriate ~~penalties~~peer ~~related~~group tocompanies, ~~unrecognized~~control ~~tax~~premiums ~~benefits~~appropriate asfor ~~income~~acquisitions ~~tax~~in ~~expense.~~the ~~There~~industries ~~were~~in nowhich ~~unrecognized~~the ~~tax~~Company ~~benefits~~competes, ~~and~~discount norates, ~~amounts~~terminal ~~accrued~~growth ~~for~~rates, ~~interest~~forecasts ~~and penalties as~~ of ~~September 30~~revenue, ~~2021~~operating orincome, ~~December 31~~depreciation, ~~2020.~~amortization ~~The~~and ~~Company~~capital isexpenditures, ~~currently~~including ~~not~~considering ~~aware~~the impact of ~~any~~COVID-19. ~~issues~~Certain ~~under~~events ~~review~~or circumstances that could ~~result~~reasonably inbe ~~significant~~expected ~~payments,~~to ~~accruals~~negatively oraffect ~~material~~the ~~deviation~~underlying ~~from~~key ~~its~~assumptions ~~position.~~and ~~The~~ultimately ~~Company~~affect ~~has identified~~ the ~~United~~estimated ~~States~~fair asvalues ~~its~~of ~~only~~the ~~“major” tax jurisdiction. The~~ Company’s ~~may~~reporting beunits ~~subject~~include tosuch ~~potential~~items ~~examination~~as: by(i) a ~~federal~~decrease ~~and state taxing authorities~~ in ~~the~~expected ~~areas~~future ofnew ~~income~~release ~~taxes.~~movie ~~These~~titles ~~potential~~resulting ~~examinations~~from ~~may include questioning~~ the ~~timing~~prolonged ~~and~~effects ~~amount~~ of ~~deductions,~~ the ~~nexus~~COVID-19 ofpandemic ~~income~~(ii) an ~~among~~increase ~~various~~in ~~tax~~competition ~~jurisdictions~~across ~~and~~streaming ~~compliance~~platforms ~~with~~resulting ~~federal~~in ~~and~~fewer ~~state~~titles ~~tax~~available ~~laws.~~at ~~The~~Redbox ~~Company’s~~or ~~management~~fewer ~~does~~rental ~~not~~transactions ~~expect~~and ~~that~~ (iii) the ~~total~~inability ~~amount~~to ofachieve ~~unrecognized~~cost ~~tax~~savings ~~benefits~~or ~~will~~growth ~~materially~~initiative ~~change~~targets ~~over~~within ~~the~~an ~~next~~expected ~~twelve months~~timeframe.

~~Net~~Although ~~Income~~the ~~(Loss)~~Company ~~Per~~believes ~~Common~~its ~~Share~~estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions, including the impact of COVID- 19, could have a significant impact on either the fair value of the reporting units, the amount of any goodwill impairment charges, or both. These estimates can be affected by a number of factors including, but not limited to, the impact of COVID-19, its severity, duration and its impact on global economies, general economic conditions as well as the Company’s profitability. The Company will continue to monitor these potential impacts, including the impact of COVID-19 and economic, industry and market trends and the impact these may have on its Legacy and Digital reporting units.

~~Net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period.~~ The ~~Company~~following ~~applies~~table ~~the~~summarizes two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at September 30, 2021 and December 31, 2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the ~~calculation~~changes ~~of basic net income per common share since such shares, if redeemed, only participate~~ in ~~their~~goodwill ~~pro~~by ~~rata~~reportable share of the Trust Account earnings. The Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase an aggregate 16,843,750 shares of common stock in the calculation of diluted loss per share, since the exercise of the warrants into shares of common stock is contingent upon the occurrence of future events. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the period presented.segment:

~~Below is a reconciliation of net income (loss) per common share:~~


	Legacy		Digital
Dollars in thousands	Business		Business		Total
Balance as of December 31, 2021	$	144,014	$	3,509	$	147,523
Balance as of March 31, 2022	$	144,014	$	3,509	$	147,523


	Three Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2021		2021
Net Loss per share for Class A common stock:
Net loss	$	(1,843,655)	$	(536,769)
Less: Allocation of loss to Class B common stock		(368,731)		(107,354)
Adjusted net loss	$	(1,474,924)	$	(429,415)

Weighted average shares outstanding of Class A common stock		14,375,000		14,375,000
Basic and diluted net loss per share, Class A common stock	$	(0.10)	$	(0.03)

Net Loss per share for Class B common stock:
Net loss	$	(1,843,655)	$	(536,769)
Less: Allocation of loss to Class A common stock		(1,474,924)		(429,415)
Adjusted net loss	$	(368,731)	$	(107,354)

Weighted average shares outstanding of Class B common stock		3,593,750		3,593,750
Basic and diluted net loss per share, Class B common stock	$	(0.10)	$	(0.03)

The following table summarizes the carrying amounts and accumulated amortization of intangible assets:

Table of Contents


	March 31, 2022							December 31, 2021
		Gross				Net		Gross				Net
	Estimated	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
Dollars in thousands	Useful Life	Amount		Amortization		Amount		Amount		Amortization		Amount
Intangible assets subject to amortization:
Contracts with retailers	7 years	$	370,000	$	(291,301)	$	78,699	$	370,000	$	(278,087)	$	91,913
Trade name	7 years		60,000		(47,238)		12,762		60,000		(45,095)		14,905
Contactable customer list	7 years		40,000		(31,492)		8,508		40,000		(30,063)		9,937
Developed technology	7 years		30,000		(23,620)		6,380		30,000		(22,548)		7,452
Total intangible assets subject to amortization		$	500,000	$	(393,651)	$	106,349	$	500,000	$	(375,793)	$	124,207

~~Concentration of Credit Risk~~

~~Financial~~The ~~instruments that potentially subject the~~ Company torecognized ~~concentrations~~amortization expense of ~~credit~~$17.9 million ~~risk~~for ~~consist~~each of ~~cash accounts in a financial institution, which, at times, may exceed~~ the ~~federal~~three months ~~depository~~ended ~~insurance~~March ~~coverage of $250~~31,~~000.~~ ~~The~~2022 ~~Company has not experienced losses on these accounts~~ and ~~management believes the Company is not exposed to significant risks on such accounts~~2021.

~~Recently Adopted Accounting Standards~~11

InTable August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of ~~the ASU did not impact the Company’s financial position, results of operations or cash flows.~~Contents

~~Recent~~There ~~Accounting~~was ~~Pronouncements~~no impairment of goodwill and other intangible assets for the three months ended March 31, 2022 and 2021.

~~Management~~Certain ~~does~~events ~~not~~or ~~believe~~circumstances that ~~any~~could ~~recently~~reasonably ~~issued,~~be ~~but~~expected ~~not~~to ~~effective,~~negatively ~~accounting~~affect ~~standards,~~the ifunderlying ~~currently~~key ~~adopted,~~assumptions ~~would~~and ~~have~~ultimately aaffect ~~material~~the ~~effect~~estimated onfair values of the Company’s ~~financial~~reporting ~~statements~~units include such items as: (i) a decrease in expected future new release movie titles resulting from the prolonged effects of the COVID-19 pandemic (ii) an increase in competition across streaming platforms resulting in fewer titles available at Redbox or fewer rental transactions and (iii) the inability to achieve cost savings or growth initiative targets within an expected timeframe.

~~Note 3 — Public Offering~~

OnNote 5: Accrued ~~December 2, 2020, the Company sold 14,375,000 Units, at a purchase price of $10.00 per Unit, for aggregate proceeds of $143,750,000. Each Unit consists of one share of Class A common stock,~~ and ~~three-quarters~~Other ofCurrent one redeemable warrant to purchase one share of Class A common stock (the “Public Warrants”). Each whole warrant will entitle the holder to purchase one share of Class A common stock at a price of $11.50 per stock, subject to adjustment (see Note 8).Liabilities

~~Note~~Accrued and other current liabilities as of March 31, 2022 and December ~~4 —~~31, ~~Private~~2021, ~~Placement~~consisted ~~Warrants~~of the following:

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 6,062,500 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, or $6,062,500 in the aggregate. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete an initial business combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.

Note 5 — Related Party Transactions


	March 31,		December 31,
Dollars in thousands	2022		2021
Accrued payroll and other related expenses	$	24,900	$	23,901
Accrued revenue share		9,338		11,786
Deferred revenue		9,401		9,553
Income taxes payable		183		—
Other		14,744		12,515
Total accrued and other current liabilities	$	58,566	$	57,755

~~Founder Shares~~

In July 2020, the Company issued an aggregate of 3,593,750 shares (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $25,000 in cash. The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of an initial business combination or (B) the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after an initial business combination, the Founder Shares will be released from the lock-up.

~~Table of Contents~~Note 6: Debt

~~Related Party Loans~~

In order to finance transaction costs in connection with an initial business combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of an initial business combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of an initial business combination into warrants at a price of $1.00 per warrant. The warrants will be identical to the Private Placement Warrants. In the event that an initial business combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. At September 30, 2021 and December 31, 2020, no Working Capital Loans were outstanding.


	March 31,		December 31,
Dollars in thousands	2022		2021
Term B Facility	$	271,562	$	271,562
Paid-In-Kind Interest related to Term Loan Facility		38,394		31,480
Revolving Credit Facility		29,104		15,000
Paid-In-Kind Interest related to Revolving Credit Facility		3,145		2,731
Union Revolving Credit Facility		4,119		4,616
Total debt outstanding	$	346,324	$	325,389
Less: Unamortized debt issuance costs		(3,414)		(3,823)
Total debt, net	$	342,910	$	321,566
Portion due within one year	$	41,539	$	34,211
Total long-term debt, net	$	301,371	$	287,355

~~Administrative Service Fee~~

~~The~~On ~~Company entered into an agreement~~October 20, ~~commencing on November 30~~2017, ~~2020~~Redbox ~~through~~Automated ~~the earlier of the Company’s consummation of an initial business combination and its liquidation~~Retail, toLLC ~~pay~~(“RAR”) ~~the~~entered ~~Sponsor~~into a ~~total~~credit ofagreement ~~$10,000~~(“Credit ~~per month for office space~~Agreement”), ~~utilities~~which ~~and~~provided ~~secretarial and administrative support.~~for:

~~For~~● ~~the~~a ~~three~~first ~~and~~lien ~~nine~~term ~~months~~loan ~~ended~~facility ~~September 30, 2021,~~ (the ~~Company~~“Term ~~has~~Loan ~~paid $30~~B”),~~000~~ ~~and~~in ~~$90,000,~~an ~~respectively,~~aggregate asprincipal ~~directed~~amount byof ~~the~~$425.0 ~~Sponsor~~million, towith a ~~consultant~~five-year ~~engaged~~maturity; ~~to provide administrative support services.~~and

~~Note 6 —~~● ~~Commitments~~a first lien revolving credit facility (the “Revolving Credit Facility” and, ~~Contingencies~~together with the Term Loan B, the “Senior Facilities”), in an aggregate principal amount of up to $30.0 million, with a five-year maturity.

~~Registration~~The ~~Rights~~Term Loan B was made available to RAR immediately upon closing and was used in part to retire all $280.0 million of the Company’s existing debt and to settle closing costs associated with the new Term Loan B totaling $19.5 million of which $4.6 million was paid to Apollo Global Securities, LLC, an affiliate of Apollo, for services provided in connection with the financing. The balance of the Term Loan B proceeds were used towards a dividend, occurring on the same day, with total dividends of $160.0 million to equity holders of RAR. Additionally, at the execution of the new Credit Agreement, RAR wrote-off unamortized deferred financing costs of $21.7 million related to the extinguishment of the entire debt under the prior credit agreement.

~~Pursuant~~On ~~to a registration rights agreement entered into on November~~September 277, ~~2020~~2018, ~~the~~RAR ~~holders~~entered ofinto ~~the~~an ~~Founder~~Incremental ~~Shares,~~Assumption ~~Private Placement Warrants~~ and ~~any~~Amendment ~~warrants~~Agreement ~~that may be issued upon conversion of the Working Capital Loans~~ (~~and any shares of Class A common stock issuable upon~~ the ~~exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares~~“Amendment”) ~~will be entitled~~ to ~~registration rights, requiring~~ the ~~Company~~Credit ~~to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock)~~Agreement. The ~~holders~~Amendment ofprovided ~~the majority of these securities are entitled to make up to three demands~~for, ~~excluding~~among ~~short~~other ~~form demands~~things, ~~that~~(i) an ~~the~~incremental ~~Company~~Term ~~register~~B-1 ~~such~~Loan ~~securities.~~(“Term InLoan ~~addition, the holders have certain “piggy~~B-~~back~~1”) ~~registration~~in ~~rights~~an ~~with~~original ~~respect~~aggregate toprincipal ~~registration~~amount ~~statements~~of ~~filed~~$85.8 million ~~subsequent~~and to (ii) the ~~consummation~~payment of anone ~~initial~~or ~~business~~more ~~combination~~restricted ~~and~~payments ~~rights~~ to ~~require~~shareholders ~~the~~of ~~Company~~RAR toin ~~register~~an ~~for~~aggregate ~~resale~~amount ~~such~~not ~~securities pursuant~~ to ~~Rule 415~~exceed ~~under the Securities Act~~$115.0 million. The ~~Company~~proceeds ~~will~~received ~~bear~~from the ~~expenses~~Amendment ~~incurred~~along ~~in connection~~ with ~~the~~cash ~~filing~~flow offrom ~~any~~the ~~such registration statements.~~

~~Underwriting Agreement~~12

~~The~~Table ~~underwriter is entitled to a deferred fee~~ of $0.35 per Unit, or $5,031,250 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement.Contents

~~Note~~business were used towards a dividend distribution to equity holders of RAR totaling $115.0 million that was paid within five business days of September 7, 2018, and to pay fees and expenses in connection with the Amendment totaling $3.7 —million. ~~Stockholders’~~The ~~Equity~~additional loan under Term Loan B-1 has terms identical to the original Term Loan B.

~~Preferred~~On ~~Stock~~September —30, ~~The~~2020, ~~Company~~RAR isentered ~~authorized~~into tothe ~~issue~~second ~~1,000,000~~amendment ~~shares~~to ofits ~~$0.0001~~Credit ~~par~~Agreement ~~value~~(the ~~preferred~~“Second ~~stock~~Amendment”) ~~with such designations~~to, ~~voting~~among ~~and~~ other ~~rights~~things, ~~and~~increase ~~preferences~~the astotal ~~may~~net beleverage ~~determined~~covenant ~~from~~during ~~time to time by~~ the ~~Company’s~~remaining ~~board~~term of ~~directors.~~the AtCredit ~~September~~Agreement ~~30, 2021~~ and ~~December~~revise ~~31,~~the ~~2020,~~quarterly ~~there~~amortization ~~were~~payment ~~no shares of preferred stock issued or outstanding~~schedule.

~~Class A~~On ~~Common Stock~~December ~~— The Company is authorized to issue up to 100~~28,~~000,000~~ ~~shares of Class A~~2020, ~~$0.0001~~RAR ~~par~~entered ~~value~~into ~~common~~a ~~stock.~~third ~~Holders~~amendment ~~of the Company’s Class A common stock are entitled~~ to ~~one~~its ~~vote~~Credit ~~for~~Agreement ~~each~~(the ~~share~~“Third Amendment”). AtThe ~~September~~amendment ~~30,~~deferred ~~2021~~the ~~and~~ December ~~31,~~ 2020, amortization ~~there~~payment ~~were no shares issued and outstanding, excluding 14,375,000 shares subject~~ to ~~possible redemption, respectively~~March 2021.

~~Class B~~As ~~Common~~of ~~Stock~~December ~~— The Company is authorized to issue up to 10~~31,~~000,000~~ ~~shares of Class B~~2020, ~~$0.0001 par value common stock. Holders of~~ the Company’s ~~Class B~~Senior ~~common~~Facilities ~~stock~~matured ~~are~~on ~~entitled~~October 20, ~~to one vote for each share. At September 30~~2022, ~~2021~~ and ~~December~~subsequent ~~31,~~to ~~2020~~the Amendment, ~~there~~Second ~~were~~Amendment ~~3,593,750~~and ~~shares~~Third ~~issued~~Amendment ~~and~~consisted ~~outstanding.~~of:

14● the Term Loan B, in an aggregate principal amount of $425.0 million;

~~Table~~● the Term Loan B-1, in an aggregate principal amount of ~~Contents~~$85.8 million; and

~~The~~● ~~shares of Class B common stock will automatically convert into shares of Class A common stock at~~ the ~~time~~Revolving ofCredit ~~an initial business combination on a one-for-one basis~~Facility, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like. In the case that additional shares of Class A common stock, or equity linked securities, are issued or deemed issued in ~~excess of the amounts offered in the Initial Public Offering and related to the closing of~~ an initial business combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, onprincipal anamount ~~as converted basis, 20%~~ of ~~the~~up sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity linked securities issued or deemed issued in connection with an initial business combination (excluding any shares or equity linked securities issued, or to ~~be issued, to any seller in an initial business combination, and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company)~~$30.0 ~~The Company may issue additional common stock or preferred stock to complete its initial business combination or under an employee incentive plan after completion of its initial business combination~~million.

~~Note~~As 8of -March ~~Warrant~~31, ~~Liabilities~~2022 there was no remaining borrowing capacity under the Revolving Credit Facility.

~~Public~~On ~~Warrants~~January 29, 2021, RAR entered into an amendment to its Credit Agreement (the “Fourth Amendment”). The Fourth Amendment provided for, among other things, (i) deferral of principal amortization payments until the maturity date (ii) extension of the maturity date to April 2023, (iii) at RAR’s election, subject to certain liquidity thresholds, payment PIK interest, and, (iv) removal of all financial covenant requirements.

~~Each~~In ~~whole~~addition, ~~warrant~~under ~~will entitle~~ the ~~holder~~Fourth toAmendment, ~~purchase~~RAR ~~one~~incurred ~~share~~an ofincremental ~~Class~~first Alien ~~common~~term ~~stock~~loan atB-2 afacility ~~price~~(“Term ofLoan ~~$11.50~~B-2” ~~per stock~~and, ~~subject~~together towith ~~adjustment.~~Term ~~The~~Loan ~~Public~~B ~~Warrants~~and ~~will~~Term ~~become~~Loan ~~exercisable~~B-1, on the ~~later~~“Term ofLoan (aFacility”) 30 ~~days~~in ~~after the consummation of~~ an ~~initial~~aggregate ~~business~~principal ~~combination~~amount ~~or (b) 12 months from the effective date~~ of ~~the~~$25.0 ~~registration~~million ~~statement~~which ~~relating~~was toprovided ~~the~~by ~~Initial~~New ~~Public~~Outerwall ~~Offering~~Inc. The Noloan ~~Public~~was ~~Warrants~~subsequently ~~will~~assigned be exercisable for cash unless the Company has an effective and current registration statement covering the common shares issuable upon exercise of the Public Warrants and a current prospectus relating to ~~such~~Aspen ~~common~~Parent, ~~shares~~Inc. ~~Notwithstanding the foregoing~~, ifan aaffiliate ~~registration statement covering the Class A common shares issuable upon the exercise~~ of ~~the~~Apollo ~~Public Warrants is not effective within 60 days from the consummation of an initial business combination, the holders may, until such time as there is an effective registration statement~~ and ~~during~~therefore ~~any period when the Company shall have failed to maintain an effective registration statement, exercise the Public Warrants on~~ a ~~cashless~~related ~~basis~~party ~~pursuant~~of ~~to an available exemption from registration under~~ the ~~Securities Act~~Company. ~~If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis.~~ The ~~Public~~proceeds ~~Warrants will expire five years~~ from the ~~consummation~~loan ofwere anused ~~initial~~for ~~business~~general ~~combination~~corporate ~~or earlier upon redemption or liquidation~~purposes.

~~The~~Pursuant ~~Company~~to ~~may~~the ~~call~~Fourth Amendment, interest is payable on the ~~warrants~~Senior Facilities entirely in cash or, for ~~redemption~~a specified period, could be paid by increasing the principal amount of the Senior Facilities (~~except~~PIK interest), or through a combination of cash and PIK interest, subject to certain liquidity thresholds. Borrowings under the ~~Private~~Senior ~~Placement~~Facilities ~~Warrants~~bear interest at a rate at RAR’s option, either (a): a London Interbank Offer Rate (“LIBOR”) determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 1.00% floor in the case of term loans or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the prime rate quoted by the Wall Street Journal (or another national publication selected by the administrative agent) and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case plus an applicable margin. The applicable margin for borrowings under the Senior Facilities is 7.25% with respect to Eurocurrency Borrowings (increasing to 8.25% if PIK interest is paid) and 6.25% with respect to ABR Borrowings (increasing to 7.25% if PIK interest is paid).

●In inaddition ~~whole~~to ~~and~~paying ~~not~~interest on outstanding principal under the Senior Facilities, RAR is required to pay a commitment fee at a rate equal to 0.50% per annum to the lenders in ~~part;~~respect of the unutilized commitments thereunder. RAR is also required to pay customary agency fees.

●In atconnection awith ~~price~~the Business Combination, on May 16, 2021, RAR entered into another amendment to its Credit Agreement (the “Fifth Amendment”). The Fifth Amendment, which became effective upon consummation of the Business Combination, provided consent to the planned Business Combination and among other things, extended the Senior Facilities maturity date to October 2023 and subordinated the Term Loan B-2 to the Term Loan B and the Term Loan B-1. In addition, among other things, concurrently with the consummation of the Business Combination, the Company repaid $50.0 million towards outstanding borrowings under the Senior Facilities including $15.010 ~~per~~million ~~warrant;~~towards outstanding borrowings under the Revolving Credit Facility and $35.0 million towards outstanding borrowings under the Term Loan B and the Term Loan B-1.

~~● upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and~~13

●Table ~~if, and only if, the last sale price~~ of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.Contents

~~The~~On ~~exercise~~October ~~price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend~~11, ~~or recapitalization~~2021, ~~reorganization,~~RAR ~~merger~~entered orinto ~~consolidation. However, except as described below, the warrants will not be adjusted for issuance of common stock at~~ a ~~price~~consent ~~below~~to ~~its exercise price. Additionally, in no event will~~ the ~~Company~~Fifth beAmendment ~~required~~ to ~~net~~make ~~cash~~certain ~~settle~~additional ~~the~~changes ~~Public Warrants. If the Company is unable~~ to ~~complete an initial business combination within~~ the ~~Combination~~Credit ~~Period and the Company liquidates the funds held in the Trust Account~~Agreement, ~~holders~~which ofbecame ~~warrants~~effective ~~will~~upon ~~not~~consummation ~~receive any~~ of ~~such~~the ~~funds~~Business ~~with respect to their warrants~~Combination, ~~nor~~including ~~will~~extending ~~they receive any distribution from~~ the ~~Company’s~~maturity ~~assets~~date ~~held outside~~ of the ~~Trust~~Senior ~~Account~~Facilities ~~with the respect~~ to ~~such warrants. Accordingly~~April, ~~the~~2024 ~~warrants~~and ~~may~~extending ~~expire worthless. If~~ the ~~Company~~PIK ~~calls~~interest ~~the~~option ~~Public~~until ~~Warrants~~December ~~for redemption~~31, ~~management~~2022 ~~will~~(subject ~~have the option~~ to ~~require all holders that wish to exercise the Public Warrants to do so on~~ a ~~“cashless~~minimum ~~basis,”~~pro asforma ~~described in the warrant agreement~~liquidity).

On April 15, 2022, RAR entered into a sixth amendment to its Credit Agreement (the “Sixth Amendment”) (capitalized terms used herein are defined in the Credit Agreement as amended through the Sixth Amendment). Pursuant to the Sixth Amendment, an additional aggregate $50.0 million in financing under the Credit Agreement have been made available to the Company subject to certain conditions, the proceeds of which will be used to make payments in accordance with the Budget Plan and pay certain fees and expenses. From April 15, 2022 until the Signing Deadline Date, borrowings under the Sixth Amendment Incremental Revolving Facility were limited to no more than $15.0 million in the aggregate. Pursuant to the Credit Agreement, additional borrowings of $35.0 million became available on May 10, 2022, as a result of the Company entrance into a merger agreement with Chicken Soup for the Soul Entertainment, Inc. (“CSSE”), pursuant to which, the Company will become a wholly owned subsidiary of CSSE. See Note 17: Subsequent Events in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q for additional information regarding the CSSE merger. Pursuant to the CSSE merger agreement, such merger shall be consummated not later than October 31, 2022.

~~Table~~Changes ofto ~~Contents~~the Credit Agreement effected by the Sixth Amendment included the following:

In● ~~addition,~~Call ifprotection ~~(x) the~~on ~~Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with~~ the ~~closing~~loans ofwas ~~its~~modified ~~initial~~so ~~business~~that ~~combination~~ at anany ~~issue~~time ~~price~~prior orto ~~effective~~maturity, ~~issue~~a ~~price~~make-whole ofpayment ~~less~~will ~~than~~be ~~$9.20~~payable ~~per share of Class A common stock~~ (~~with~~i) ~~such~~on ~~issue price or effective issue price to be determined in good faith by~~ the ~~Company’s~~Sixth ~~board~~Amendment ofIncremental ~~directors~~Revolving ~~and,~~Loans inif ~~the case of any~~ such ~~issuance~~loans toare ~~the~~repaid ~~Sponsor~~ or ~~its~~prepaid ~~affiliates,~~with ~~without~~a ~~taking~~corresponding ~~into~~permanent ~~account~~commitment ~~any~~reduction ~~Founder~~and ~~Shares~~(ii) ~~held~~on by the ~~Sponsor~~existing orTerm ~~such~~B ~~affiliates~~Loans, asTerm ~~applicable,~~B-1 ~~prior to such issuance) (the “Newly Issued Price”)~~Loans, ~~(y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,~~ and ~~interest~~Revolving ~~thereon,~~Facility ~~available~~Loans ~~for~~on the ~~funding~~amount of ~~the~~such ~~Company’s~~loan ~~initial~~repaid ~~business~~or ~~combination~~prepaid. onThe ~~the~~make-whole ~~date~~will ofnot ~~the~~be ~~consummation~~payable ofif such ~~initial~~loans ~~business~~are ~~combination~~prepaid ~~(net~~in offull ~~redemptions),~~upon ~~and (z)~~ the ~~volume~~consummation ~~weighted average trading price~~ of the Company’s ~~common~~Sale ~~stock during the 20 trading day period starting~~ on ~~the~~or ~~trading day~~ prior to the ~~day on which the~~ Company ~~consummates~~Sale ~~its~~Outside ~~initial business combination (such price, the “Market Value”) is below $9~~Date.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.

~~Private~~● ~~Placement~~Events ~~Warrants~~of Default were added including:

~~The~~o ~~Private~~Failure ~~Placement Warrants are identical~~ to ~~the~~meet ~~Public~~Company ~~Warrants~~Sale ~~underlying~~Milestones ~~the~~(including ~~Units~~failure ~~sold~~to inconsummate the ~~Initial~~Company ~~Public~~Sale ~~Offering,~~by ~~except~~October ~~that the Private Placement Warrants and the Class A common shares issuable upon the exercise of the Private Placement Warrants will not be transferable~~31, ~~assignable~~2022 (or ~~salable~~such ~~until~~later 30date days after the completion of an initial business combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and will be non-redeemable so long as ~~they~~agreed ~~are held~~ by the ~~initial~~Administrative ~~purchasers or their permitted transferees~~Agent)). If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

~~Note~~o 9Failure to meet cost-cutting ~~Fair~~milestones, ~~Value~~subject ~~Measurements~~to a 5 day grace period.

~~The~~o ~~fair~~Termination ~~value~~ of ~~the~~an ~~Company’s~~Acceptable ~~financial~~Purchase ~~assets~~Agreement ~~and~~other ~~liabilities~~than ~~reflects management’s estimate of amounts that the Company would have received~~ in connection with the ~~sale~~replacement ofthereof ~~the assets or paid in connection~~ with ~~the~~certain ~~transfer~~replacement ofpurchase ~~the~~agreements ~~liabilities~~acceptable into ~~an orderly transaction between market participants at~~ the ~~measurement~~Administrative ~~date. In connection with measuring the fair value of its assets and liabilities~~Agent, ~~the~~subject ~~Company seeks~~ to ~~maximize~~a ~~the~~5 ~~use~~day ofgrace ~~observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities)~~period. ~~The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:~~

~~Level~~o 1Termination ~~— Valuations based on unadjusted quoted prices in active markets for identical assets~~ or ~~liabilities~~cessation ~~that~~of ~~the~~validity ~~Company~~of ~~has~~Voting ~~the ability to access. Valuation adjustments~~ and ~~block~~Support ~~discounts are not being applied~~Agreement. ~~Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.~~

~~Level~~Union 2Revolving —Credit Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.Facility

~~Level~~On 3December 29, —2020, ~~Valuations~~Redbox ~~based~~Entertainment, onLLC ~~inputs~~entered ~~that~~into ~~are~~a ~~unobservable~~four-year, ~~and~~$20.0 million ~~significant~~revolving credit facility with Union Bank (the “Union Revolving Credit Facility”). The facility is used exclusively to pay for minimum guarantees, license fees and related distribution expenses for original content obtained under the ~~overall~~Company’s ~~fair~~Redbox ~~value~~Entertainment ~~measurement~~label. Borrowings outstanding under the Union Revolving Credit Facility as of March 31, 2022 and December 31, 2021 were $4.1 million and $4.6 million, respectively.

16Borrowings under the Union Revolving Credit Facility will bear interest at either the alternate base rate or LIBOR (based on an interest period selected by the Company of one month, three months or six months) in each case plus a margin. The alternate base rate loans bear interest at a per annum rate equal to the greatest of (i) the base rate in effect on such date, (ii) the federal funds effective rate in effect on such day plus ½ of 1.0%, and (iii) daily one month LIBOR plus 1.0%. The revolving credit facility borrowings that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin of 0.50%. The borrowing interest rate for the Union Revolving Credit Facility was 4.25% as of March 31, 2022 and December 31, 2021, respectively.

~~Table~~On April 15, 2022, the Company agreed, pursuant to the Voting and Support Agreement, to (i) permanently reduce a portion of ~~Contents~~the Union Revolving Credit Facility in an amount equal to $10.6 million (and the Company made such reduction) and (ii) among other agreements, refrain from borrowing under the Union Revolving Credit Facility without the consent of Aspen and Redwood Holdco, LP (other than with respect to certain scheduled borrowings and borrowings to cover interest, fees and expenses). Availability under the Union Revolving Credit Facility as of May 10, 2022 is $2.3 million.

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and at December 31, 2021, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:14

Table of Contents


			Quoted		Significant		Significant
			Prices In		Other		Other
			Active		Observable		Unobservable
	September 30,		Markets		Inputs		Inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. Money Market held in Trust Account	$	—	$	—	$	—	$	—
U.S Treasury Securities held in Trust Account		145,218,068		145,218,068		—		—
	$	145,218,068	$	145,218,068	$	—	$	—
Liabilities:
Public Warrants Liability	$	10,134,375	$	10,134,375	$	—	$	—
Private Warrants Liability		6,332,732		—		—		6,332,732
	$	16,467,107	$	10,134,375	$	—	$	6,332,732

In addition to paying interest on outstanding principal under the Union Revolving Credit Facility, Redbox Entertainment, LLC is required to pay a commitment fee at a rate equal to 0.50% per annum to the lenders in respect of the unutilized commitments thereunder.

Dividend Restrictions


			Quoted		Significant		Significant
			Prices In		Other		Other
			Active		Observable		Unobservable
	December 31,		Markets		Inputs		Inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. Money Market held in Trust Account	$	281	$	281	$	—	$	—
U.S Treasury Securities held in Trust Account		145,193,921		145,193,921		—		—
	$	145,194,202	$	145,194,202	$	—	$	—
Liabilities:
Public Warrants Liability	$	10,975,313	$	10,975,313	$	—	$	—
Private Warrants Liability		6,347,438		—		—		6,347,438
	$	17,322,751	$	10,975,313	$	—	$	6,347,438

The Credit Agreement contains certain customary affirmative covenants and negative covenants, including a limitation on the Company’s ability to pay dividends on or make distributions in respect of its capital stock or make other restricted payments. The covenant prohibiting dividends and other restricted payments has certain limited exceptions, including for customary overhead, legal, accounting and other professional fees and expenses; taxes; customary salary, bonus and other benefits; and up to $1.03 million for dividends that were accrued on equity interests that were unvested as of the payment of the Company’s last dividend in 2018 and have subsequently vested.

Interest Rates and Fees

~~The~~As ~~Warrants~~of ~~are~~March ~~accounted~~31, ~~for~~2022 ~~as liabilities in accordance with ASC 815-40~~ and ~~are~~December ~~presented~~31, ~~within~~2021, ~~warrant liabilities on~~ the ~~Condensed~~borrowing ~~Balance~~interest ~~Sheet.~~rate ~~The~~for ~~warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in~~ the ~~Condensed~~Senior ~~Statement~~Facilities ofwas ~~Operations~~9.25%.

~~The~~Amortization ~~Company established the initial fair value of the Public Warrants~~ and Private Warrants on December 2, 2020, the date of the Company’s Initial Public Offering, and for the Private Warrants as of December 31, 2020 and September 30, 2021, using a Monte Carlo simulation model. For subsequent measurement of the Public Warrants as of December 31, 2020 and September 30, 2021, the Company used observable market quotes for the warrants.Prepayments

~~The~~Required ~~subsequent~~minimum ~~measurement~~principal ofamortization payments under the ~~Public~~Senior ~~Warrants~~Facilities as of ~~December~~March 31, ~~2020 and September 30~~2022, ~~2021~~are ~~is classified~~ as Level 1 due to the use of an observable market quotes in an active market. The Private Warrants were classified as Level 3 at the initial measurement date and subsequent measurement dates due to the use of unobservable inputs.follows:

~~The key inputs into the Monte Carlo simulation used for the Private Warrants as of September 30, 2021 and December 31, 2020 were as follows:~~


	Repayment
Dollars in thousands	Amount
2022	$	38,394
2023		—
2024		271,562
Total	$	309,956


Inputs	September 30, 2021			December 31, 2020
Risk-free interest rate		1.12	%		0.5	%
Expected term remaining (years)		5.82			5.96
Expected volatility		14.4	%		16.2	%
Stock price	$	10.060		$	10.02

In addition, the Senior Facilities require RAR to prepay outstanding term loan borrowings, subject to certain exceptions, with:

● a certain percentage set forth in the Credit Agreement governing the Senior Facilities of RAR’s annual excess cash flow, as defined under the Senior Facilities;

17● a certain percentage of the net cash proceeds of certain non-ordinary course asset sales, other dispositions of property or certain casualty events, in each case subject to certain exceptions and reinvestment rights; and

~~Table~~● the net cash proceeds of ~~Contents~~any issuance or incurrence of debt, other than proceeds from debt permitted under the Senior Facilities.

~~Note 10 —~~RAR ~~Subsequent~~may ~~Events~~voluntarily repay outstanding loans that are funded solely by internally generated cash from business operations under the Senior Facilities at any time, without prepayment premium or penalty, except customary “breakage” costs with respect to LIBOR rate loans.

OnAll ~~July~~obligations 8under the Senior Facilities are unconditionally guaranteed by each of RAR’s existing and future direct and indirect material, ~~2021~~wholly-owned domestic subsidiaries, subject to certain exceptions, and the ~~Company~~direct ~~filed~~parent of RAR. The obligations are secured by a ~~preliminary~~pledge ~~proxy~~of ~~statement/prospectus~~substantially ~~with~~all of RAR’s assets and those of each guarantor, including capital stock of the ~~SEC~~subsidiary ~~related~~guarantors toand 65% of the ~~Business~~capital ~~Combination~~stock ~~Agreement~~of the first-tier foreign subsidiaries that are not subsidiary guarantors, in each case subject to certain exceptions, and its capital stock owned by RAR’s direct parent. Such security interests consist of a first-priority lien with respect to the collateral.

OnAll ~~October~~obligations ~~22,~~under ~~2021,~~ the ~~Company~~Union ~~completed~~Revolving ~~the~~Credit ~~Business~~Facility ~~Combination~~are ~~and~~guaranteed ~~changed~~by ~~its~~all ~~name~~direct toand ~~Redbox~~indirect ~~Entertainment~~wholly ~~Inc.~~owned Insubsidiaries ~~conjunction~~of ~~with~~ the ~~Business Combination, the holders of 12,346,223 shares of SGAC~~Company’s ~~Class~~Redbox ~~A common stock sold in the Initial Public Offering exercised their right to redeem those shares for cash at a price of approximately $10.10 per share~~Entertainment, ~~for~~LLC ~~an aggregate of approximately $124~~entity.7 million, which redemption occurred concurrent with the consummation of the Business Combination. The Company also completed the sale of 5,000,000 shares of Class A common stock for $50.0 million in the PIPE Investment described in Note 1.

~~In accordance with ASC Topic 855 Subsequent Events, no other events require adjustment or disclosure.~~15

Table of Contents

18Letters of Credit

~~Table~~As required under the Senior Facilities, the Company has a letter of ~~Contents~~credit arrangement to provide for the issuance of standby letters of credit. The arrangement supports the collateral requirements for insurance claims and is good for one year to be renewed annually if necessary. The letter of credit is cash-collateralized at 105% in the amount of $3.1 million and $3.4 million as of March 31, 2022 and December 31, 2021, respectively.

~~Item~~In 2.October ~~Management’s~~2021, ~~Discussion~~the ~~and~~Company ~~Analysis~~entered into a letter of ~~Financial~~credit ~~Condition~~arrangement of $0.8 million that serves as a security deposit for leased warehouse space and ~~Results~~is pledged by an equal amount of ~~Operations~~cash pledged as collateral.

~~References to the “Company,” “our,” “us” or “we” refer to Seaport Global Acquisition Corp.~~ The ~~following discussion and analysis of the~~ Company’s ~~financial~~letter ~~condition and results~~ of ~~operations~~credit ~~should~~arrangements beare ~~read~~classified inas ~~conjunction~~restricted ~~with~~cash ~~the unaudited condensed financial statements~~ and ~~the~~reflect ~~notes~~balances ~~thereto~~of ~~contained~~$3.9 ~~elsewhere~~million inand ~~this Quarterly Report on Form 10-Q~~$4.2 ~~Certain~~million ~~information~~as ~~contained~~of inMarch ~~the~~31, ~~discussion~~2022 and ~~analysis~~December ~~set~~31, ~~forth~~2021, ~~below includes forward-looking statements that involve risks and uncertainties~~respectively.

~~Cautionary Note Regarding Forward-Looking Statements~~

~~This Quarterly~~Note ~~Report on Form 10-Q includes forward-looking~~7: Interest ~~statements~~Rate within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.Derivatives

~~Overview~~The Company entered into an interest rate swap on October 22, 2018 to manage its exposure to changes in the interest rates related to its term loan (“Term B Facility”) following the Amendment discussed in Note 5: Debt. The swap is not designated as a hedging instrument and is reported at fair value with changes in fair value reported directly in earnings. The Company’s hedge consists of interest rate swaps, which was used to mitigate interest rate risk.

WeUnder ~~are~~the aterms ~~blank~~of ~~check~~the ~~company~~agreement, ~~formed~~the ~~under~~Company ~~the~~entered ~~laws~~into ofa ~~the~~three-year ~~State~~fixed-for-floating ofinterest ~~Delaware~~rate onswap ~~July~~agreement ~~24,~~with ~~2020~~Nomura Global Financial Products, Inc. for ~~the~~a ~~purpose~~fixed notional amount of ~~effecting~~$200.0 million ato ~~merger,~~swap ~~capital~~the ~~stock~~variable ~~exchange,~~rate ~~asset~~portion ~~acquisition,~~of ~~stock~~interest ~~purchase,~~payments ~~reorganization~~tied orto ~~other~~the ~~similar~~one-month ~~business~~LIBOR ~~combination~~under ~~with~~its ~~one~~term orloans ~~more~~for ~~businesses~~fixed interest payments. WeThe ~~intend~~swap toeffectively ~~effectuate~~locked ~~our~~in ~~initial~~an ~~business~~average ~~combination~~of ~~using~~a ~~cash~~three-year ~~from~~forward curve for the ~~proceeds~~one-month LIBOR at a fixed rate of ~~the~~3.0335%, ~~Initial~~resulting ~~Public~~in ~~Offering~~a ~~and~~total interest rate on the ~~sale~~$200.0 million notional of ~~the~~10.2835%. ~~Private~~The ~~Placement~~interest ~~Warrants,~~rate ~~our~~swap ~~capital~~agreement ~~stock~~expired on October 31, ~~debt~~2021. orSee Note 6: aDebt for ~~combination~~additional ofdisclosures ~~cash,~~about ~~stock~~the ~~and~~Company’s ~~debt~~Term B Facility.

WeThe ~~expect~~following totable ~~continue~~discloses ~~to incur significant costs in~~ the ~~pursuit~~effect of ~~our~~the ~~acquisition~~Company’s ~~plans.~~derivative Weinstrument ~~cannot~~on ~~assure~~the ~~you~~unaudited Condensed ~~that~~Consolidated ~~our~~Statements ~~plans~~of toOperations for ~~raise~~the ~~capital~~three ormonths toended ~~complete~~March ~~our~~31, ~~initial~~2022 ~~business~~and ~~combination will be successful.~~2021:

~~Results of Operations~~

We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from January 1, 2021 through September 30, 2021 were organizational activities in connection with searching for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, an initial business combination.


	For the three months ended
	March 31,
Dollars in thousands	2022		2021
Interest and other income (expense), net	$	—	$	1,432

For the period from January 1, 2021 through September 30, 2021, we had a net loss of $(0.5) million, which included a loss from operations of $(1.4) million, and a gain from the change in fair value of warrant liabilities of $(0.9) million. Our business activities from inception to September 30, 2021 consisted primarily of our formation and completing our Initial Public Offering and, since the completion of our Initial Public Offering, our activity has been limited to identifying and evaluating prospective acquisition targets for an initial business combination.

~~Liquidity and Capital Resources~~

As of September 30, 2021, we had $61,743 in cash. Following the consummation of the Initial Public Offering, our primary source of liquidity is the proceeds from our Initial Public Offering not held in the Trust Account.

~~On December~~Note 2,8: Segment ~~2020,~~Information weand ~~consummated~~Geographic the Initial Public Offering of 14,375,000 Units, at a price of $10.10 per Unit, generating gross proceeds of $143,750,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,062,500 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant generating gross proceeds of $6,062,500.Data

19The Company currently conducts its business through two operating segments: (1) Legacy Business and (2) Digital Business. For all periods presented, the Company did not operate outside the United States and Puerto Rico (collectively the United States). As such, all of the Company’s long-lived assets are located in the United States.

~~Table~~The Company’s Legacy Business operates a network of ~~Contents~~approximately 38,000 self-service kiosks where consumers can rent or purchase new-release DVDs and Blu-ray DiscsTM (“movies”). The Company’s Legacy Business also produces, acquires, and distributes movies exclusively through its Redbox Entertainment label, as well as generating service revenue by providing installation, merchandising and break-fix services to other kiosks businesses. Our Legacy Business also includes corporate general and administrative expenses, which include technology and public company costs, along with corporate overhead expenses related to our Digital Business.

~~Following~~The ~~the~~Company’s ~~Initial~~Digital ~~Public~~Business ~~Offering~~provides both transactional and ~~the~~ad-supported ~~sale~~digital ofstreaming ~~the~~services, ~~Private~~which ~~Placement~~include ~~Warrants~~1) Redbox On Demand, a ~~total~~transactional service which provides digital rental or purchase of ~~$145,187,504~~new ~~($10.10~~release ~~per~~and ~~unit)~~catalog ~~was~~movies ~~placed~~and inTV ~~the~~content, ~~Trust~~2) ~~Account~~Redbox Free On Demand, an ad-supported service providing free movies and weTV ~~had~~shows $1on demand,~~219,936~~ ofand ~~cash~~3) ~~held~~Redbox ~~outside~~Free ofLive ~~the~~TV, ~~Trust~~a ~~Account~~free, ~~after~~ad-supported ~~payment~~television ofservice ~~costs~~giving ~~related~~access to ~~the~~more ~~Initial~~than ~~Public~~145 ~~Offering~~linear channels. Furthermore, ~~and~~the ~~available~~Company ~~for~~monetizes ~~working~~digital ~~capital~~advertising ~~purposes.~~space Asin ofRedbox ~~December 2,~~emails ~~2020~~and apps amongst other platforms, wewhich ~~had~~is anreferred ~~accounts~~to ~~payable~~as ~~liability~~Media ofNetwork. The ~~$228,254,~~Digital ~~primarily~~Business ~~related~~includes expenses directly attributable to ~~offering~~this ~~expenses~~business.

Transaction costs amounted to $8,361,625, consisting of $2,875,000 of underwriting fees, $5,031,250 of deferred underwriting fees and $455,375 of other offering costs. In addition, cash of $1,219,936 was held outside of the Trust Account and is available for the payment of offering costs and for working capital purposes. During the period ended September 30, 2021, we reduced our cash balance held out of trust by approximately $886,841 primarily related to working capital, compliance and legal and due diligence expense related to the Business Combination.16

OnTable ~~October 22, 2021, the Company successfully consummated its Business Combination with Redbox Entertainment Inc., generating cash proceeds~~ of $90.7 million before transaction fees. As of the Business Combination, the Company believes there is sufficient cash available for the next 12 months. For additional information, please see Note 10 Subsequent Events.Contents

~~Off~~Adjusted EBITDA is the profitability metric reported to the chief operating decision maker (“CODM”) for purposes of making decisions about allocation of resources to each segment and assessing performance of each segment. The Company believes this measure is most useful in assessing the underlying performance of its business. Adjusted EBITDA is before integration related costs, efficiency initiatives, and other items. Adjusted EBITDA also excludes the effects of financings, income tax and the non-~~Balance~~cash ~~Sheet~~accounting ~~Financing~~effects ~~Arrangements~~of depreciation and intangible asset amortization.

WeAs ~~had~~segment ~~no obligations,~~ assets orare ~~liabilities, which would be considered off-balance sheet arrangements, as of September 30, 2021. We do~~ not ~~participate~~reported into ~~transactions that create relationships with unconsolidated entities~~ or ~~financial~~used ~~partnerships,~~by ~~often~~the ~~referred~~CODM to asmeasure ~~variable~~business ~~interest~~performance ~~entities,~~or ~~which~~allocate ~~would~~resources, ~~have~~total ~~been~~segment ~~established~~assets ~~for~~and ~~the~~capital ~~purpose~~expenditures ofare ~~facilitating off-balance sheet arrangements. We have~~ not ~~entered~~presented ~~into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets~~below.

~~Contractual~~Summarized ~~Obligations~~financial information by segment is as follows:

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.


	March 31,
Dollars in thousands	2022		2021
Net revenue
Legacy Business	$	48,767	$	67,637
Digital Business		14,460		9,093
Total	$	63,227	$	76,730
Adjusted EBITDA
Legacy Business	$	(15,553)	$	334
Digital Business		2,015		968
Total	$	(13,538)	$	1,302

~~Critical Accounting Policies~~

The ~~preparation~~following ofis ~~condensed~~a ~~financial~~reconciliation ~~statements and related disclosures in conformity with accounting principles generally accepted in the United States~~ of ~~America~~Adjusted ~~requires~~EBITDA ~~management~~ to ~~make~~loss ~~estimates~~before ~~and~~income ~~assumptions~~taxes ~~that~~for ~~affect~~ the ~~reported~~three ~~amounts~~months ofended ~~assets~~March ~~and liabilities~~31, ~~disclosure~~2022 ~~of contingent assets~~ and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. As stated, we have identified critical accounting policies specified below.2021:

Warrant Liabilities


	Three Months Ended
	March 31,
Dollars in thousands	2022		2021
Loss before income taxes	$	(40,848)	$	(36,474)
Add:
Depreciation and amortization		25,090		27,526
Interest and other (income) expense, net		(7,343)		7,247
Business optimization^(a)		—		550
One-time non-recurring^(b)		3,743		364
New business start-up costs^(c)		—		171
Restructuring related^(d)		4,012		1,352
Stock-based compensation expense		1,808		566
Adjusted EBITDA	$	(13,538)	$	1,302

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (~~“FASB”~~a) ~~Accounting~~Business ~~Standards~~optimization ~~Codification~~costs ~~(“ASC”)~~include ~~480,~~employee ~~Distinguishing~~retention ~~Liabilities from Equity (“ASC 480”) and ASC 815~~costs, ~~Derivatives~~IT ~~and~~costs ~~Hedging~~as ~~(“ASC~~well ~~815”).~~as ~~The~~consulting ~~assessment~~costs ~~considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements~~ for ~~equity~~certain classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classificationprojects. ~~This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.~~

~~For~~(b) ~~issued~~Includes orcosts ~~modified~~related ~~warrants~~to ~~that~~project ~~meet~~costs ~~all~~and ~~of the criteria for equity classification~~initiatives, ~~the~~as ~~warrants~~well ~~are required to be recorded~~ as abank, ~~component~~legal ofand ~~additional~~other ~~paid-~~fees in ~~capital~~connection atwith the ~~time~~Company’s ofdebt ~~issuance~~financing activities. ~~For~~During ~~issued~~the orthree ~~modified~~months ~~warrants~~ended ~~that~~March do31, ~~not meet all the criteria for equity classification~~2022, the ~~warrants~~Company ~~are~~incurred ~~required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter~~$3.7 ~~Changes~~million in ~~the~~one-time ~~estimated~~legal ~~fair~~and ~~value~~advisory ofexpenses ~~the warrants are recognized~~ as ~~a non-cash gain or loss on~~ the ~~statements~~Company ofexplores ~~operations~~strategic alternatives.

20(c) Includes costs to support the Company’s On Demand and AVOD offerings, along with costs related to the Company’s service and media network businesses.

~~Table~~(d) Restructuring related costs include such items as employee severance charges and costs incurred related to removing kiosks. During the three months ended March 31, 2022, the Company incurred severance and related costs of ~~Contents~~$3.8 million in connection with a reduction in force, which are reflected in general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations.

~~Class A Common Stock Subject to Possible Redemption~~

~~Fair~~Table ~~Value~~ of ~~Financial Instruments~~Contents

~~The~~Note 9: Earnings ~~fair~~Per value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.Share

~~Net~~Basic ~~Income~~earnings ~~(Loss)~~per ~~Per~~share ~~Common~~of ~~Share~~Class A common stock is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to common stockholders adjusted for the assumed exchange of all potentially dilutive securities by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. Basic and diluted loss per share is computed using the two-class method.

~~Net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period.~~ The Company ~~applies~~analyzed the ~~two-class~~calculation ~~method~~of ~~in calculating~~ earnings per share. ~~Shares~~for ofcomparative ~~common~~periods ~~stock~~presented ~~subject to possible redemption at September 30, 2021~~ and ~~December~~determined ~~31,~~that ~~2020,~~it ~~which~~resulted ~~are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net income per common share since such shares, if redeemed, only participate~~ in ~~their~~values ~~pro~~that ~~rata~~would ~~share of the Trust Account earnings. The Company has~~ not ~~considered~~be ~~the~~meaningful ~~effect of warrants sold in the Initial Public Offering and the private placement~~ to ~~purchase an aggregate 16,843,750 shares of common stock in~~ the ~~calculation~~users of ~~diluted loss per share, since~~ the ~~exercise~~consolidated offinancial ~~the warrants into shares of common stock is contingent upon the occurrence of future events~~statements. ~~As a result~~ Therefore, ~~diluted~~earnings ~~net income (loss)~~ per ~~common~~ share isinformation ~~the~~has ~~same~~not asbeen ~~basic~~presented ~~net~~for ~~income~~periods ~~(loss)~~prior ~~per~~to ~~common share for~~ the ~~period~~Business ~~presented~~Combination.

~~Recent~~The ~~Accounting~~following ~~Pronouncements~~table sets forth the computation of basic and diluted net loss per share of Class A common stock:

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.


Dollars in thousands, except per share amounts	Three Months Ended March 31,
Basic and Diluted EPS	2022		2021

Numerator:
Net loss	$	(40,874)	$	(27,195)
Less: net loss attributable to non-controlling interests		(39,430)		N/A
Net loss attributable to Redbox Entertainment Inc. — Basic and Diluted	$	(1,444)		N/A

Denominator:
Weighted average shares of Class A common stock outstanding — Basic and Diluted		12,618,516		N/A

Earnings per share of Class A common stock outstanding — Basic and Diluted	$	(0.11)		N/A

~~Item 3.Quantitative and Qualitative Disclosures About Market Risk~~

WeShares ~~are~~of athe ~~smaller~~Company’s ~~reporting~~Class ~~company~~B ascommon ~~defined~~stock bydo ~~Rule 12b-2 of~~not share in the ~~Exchange~~earnings ~~Act~~or ~~and~~losses, are not ~~required~~ entitled to ~~provide~~receive dividends, or to receive any portion of assets upon liquidation of the ~~information otherwise~~Company, ~~required~~and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under ~~this~~the ~~item~~two-class method has not been presented.

~~Item 4~~As the Company was in a loss position for the three months ended March 31, 2022 and 2021, the Company has determined all potentially dilutive shares would be anti-dilutive in these periods and therefore are excluded from the calculation of diluted weighted average shares outstanding.~~Controls~~ This results in the calculation of weighted average shares outstanding to be the same for basic and ~~Procedures~~diluted EPS.

~~Evaluation~~The following outstanding potentially dilutive shares have been excluded from the calculation of ~~Disclosure~~diluted ~~Controls~~EPS ~~and~~because ~~Procedures~~their effect would have been anti-dilutive:

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on


	Three Months Ended March 31,
	2022		2021
Public and private placement warrants		16,848,733		N/A

~~Table of Contents~~

this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that during the period covered by this Quarterly Report on Form 10-Q, disclosure controls and procedures were not effective as of September 30, 2021, due to the material weakness in our internal control over financial report described in our recently filed Form 10K/A.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In light of this material weakness, management performed additional analysis as deemed necessary to ensure that our condensed financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the condensed financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

~~Changes in Internal Control over Financial Reporting~~

There was no change in our internal control over financial reporting that occurred during the fiscal quarter through September 30, 2021, covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~Management~~Note 10: Stockholders’ has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Our plans at this time include providing enhanced access to accounting literature, research materials and documents, assigning preparation and review responsibilities to additional personnel for the financial reporting process, and increased communication among our personnel and third-party professionals with whom we consult regarding the application of complex accounting standards. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.Equity

~~PART~~Preferred Stock ~~II –~~— ~~OTHER~~The ~~INFORMATION~~Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2022, there were no shares of preferred stock issued or outstanding

~~Item 1.Legal Proceedings~~18

~~None.~~Table of Contents

~~Item~~Class A 1ACommon Stock — The Company is authorized to issue up to 500,000,000 shares of Class A, $0.0001 ~~Risk~~par ~~Factors~~value common stock. Holders of the Company’s Class A common stock are entitled to one vote for each share. At March 31, 2022, there were 12,618,516 shares issued and outstanding.

~~Except~~Class B asCommon ~~set~~Stock — ~~forth~~The ~~below,~~Company asis ofauthorized ~~the~~to ~~date~~issue ofup ~~this Quarterly Report, there have been no material changes with respect~~ to ~~those risk factors previously disclosed in our Annual Report filed on April 2~~100, ~~2021~~000,000 asshares ~~amended,~~of ~~on May 26, 2021 (First Amendment) and on November~~Class 22B, ~~2021~~$0.0001 ~~(Second~~par ~~Amendment),~~value ~~our~~common ~~Proxy~~stock. ~~Statement~~Holders ~~filed~~of onthe ~~September~~Company’s ~~29,~~Class B ~~2021,~~common ~~and~~stock ~~our~~are ~~Current~~entitled ~~Report~~to onone ~~Form~~vote ~~8-K~~for ~~filed~~each ~~with~~share. ~~the~~From ~~SEC~~time onto ~~October 28~~time, ~~2021.~~holders ~~Any~~ of ~~these~~Class ~~factors~~B ~~could~~common ~~result~~stock inmay aexchange ~~significant~~Class orB ~~material~~common ~~adverse~~stock ~~effect~~ on ~~our~~a ~~results~~one-for-one ofbasis ~~operations~~with orRedwood ~~financial~~Intermediate ~~condition.~~common ~~Additional~~units ~~risk~~held ~~factors~~by ~~not~~such ~~presently~~holders ~~known~~for toClass usA orcommon ~~that~~stock. At weMarch ~~currently~~31, ~~deem~~2022, ~~immaterial~~there ~~may~~were ~~also~~32,770,000 ~~impair~~Class B ~~our~~common ~~business~~stock orissued ~~results~~and ~~of operations~~outstanding.

~~SGAC~~Non-controlling ~~has~~Interest — ~~identified~~Non-controlling ainterest ~~material~~represents ~~weakness~~the equity interest in ~~its~~Redwood ~~internal~~Intermediate ~~control~~LLC ~~over~~held ~~financial~~by ~~reporting~~holders other than the Company. ~~This~~On ~~material~~October ~~weakness~~22, ~~could~~2021, ~~continue~~upon tothe ~~adversely~~close ~~affect~~of ~~SGAC~~the Business Combination, Redwood Holdco, LP’s ~~ability~~equity toownership ~~report~~percentage ~~its~~in Redwood Intermediate LLC was approximately 72.2%. The Company has consolidated the financial position and results of operations ~~and~~of ~~financial~~Redwood ~~condition~~Intermediate ~~accurately~~LLC and reflected the proportionate interest held by Redwood Holdco, LP as non-controlling interest in athe ~~timely~~accompanying ~~manner~~consolidated balance sheet. As of March 31, 2022, Redwood Holdco, LP’s equity ownership percentage in Redwood Intermediate LLC was approximately 72.2%.

As disclosed in the Company’s Form 10K/A filed on November 22, 2021, prior to the issuance of the Company’s condensed financial statements as of and for the three months ended September 30, 2021, the Company identified an error in its previously issued financial statements, that a portion of the public shares were classified as permanent equity to maintain stockholders’ equity greater than $5,000,000 on the basis that the Company will consummate its initial business combination only if the Company has net tangible assets of at least $5,000,001. Thus, the Company can only complete a merger and continue to exist as a public company if there are sufficient public shares that do not redeem at the merger and so it is appropriate to classify the portion of its public shares required to keep its stockholders’ equity above the $5,000,000 threshold as “shares not subject to redemption.”

~~However,~~Note 11: Warrant inLiability light of recent comment letters issued by the Securities & Exchange Commission (“SEC”) to several special purpose acquisition companies, management re- evaluated the Company’s application of ASC 480-10-99 to its accounting classification of public shares. Upon re- evaluation, management determined that the public shares include certain provisions that require classification of the

22At March 31, 2022, there were 10,781,250 Public Warrants and 6,062,500 Private Placement Warrants outstanding. Each whole Public Warrant entitles the registered holder to purchase one whole share of Class A common stock at a price of $11.50 per share. Pursuant to the warrant agreement, a holder of Public Warrants may exercise its warrants only for a whole number of shares of Class A common stock. This means that only a whole warrant may be exercised at any given time by a warrant holder. The Public Warrants expire five years after the completion of the Business Combination, or earlier upon redemption or liquidation.

~~Table~~The ofCompany ~~Contents~~may redeem the Public Warrants under the following conditions:

~~public~~● ~~shares~~In aswhole ~~temporary~~and ~~equity~~not ~~regardless~~in ~~of the minimum net tangible asset required by the Company to complete its initial business combination.~~part;

A● ~~material~~At ~~weakness is~~ a ~~deficiency,~~price ~~or a combination~~ of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis$0.01 ~~Effective~~per internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.warrant;

~~Item 2.Unregistered~~● ~~Sales~~Upon ofnot ~~Equity~~less ~~Securities~~than ~~and~~30 ~~Use~~days’ prior written notice of ~~Proceeds~~redemption ~~from~~(the ~~Registered~~“30-day ~~Securities~~redemption period”) to each warrant holder; and

~~For~~● aif, ~~description~~and ofonly if, the ~~use~~last reported sale price of the ~~proceeds~~Company’s ~~generated~~Class inA ~~our~~common ~~Initial~~stock ~~Public~~equals ~~Offering,~~or ~~see~~exceeds ~~Part~~$18.00 I,per ~~Item~~share 2(as ofadjusted ~~this~~for ~~Form~~stock ~~10-Q.~~splits, ~~There~~stock ~~has~~dividends, ~~been~~reorganizations, norecapitalizations ~~material~~and ~~change~~the inlike) ~~the~~for ~~planned~~any ~~use~~20 oftrading ~~the~~days ~~proceeds~~within ~~from~~a ~~our~~30-trading ~~Initial~~day ~~Public~~period ~~Offering~~ending ~~and~~on ~~private~~the ~~placement~~third astrading isday ~~described~~prior into the date on which the Company’s ~~final~~gives ~~prospectus~~proper ~~related~~notice toof ~~the~~such ~~Initial~~redemption ~~Public~~and ~~Offering~~provided certain other conditions are met.

~~Item 3~~The redemption criteria discussed above prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price.~~Defaults~~ If ~~Upon~~the ~~Senior~~foregoing ~~Securities~~conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Company’s Class A common stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.

~~None~~The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

~~Item~~ As of March 31, 2022 and December 31, 2021, the Company recorded warrant liabilities of $4.~~Mine~~1 ~~Safety~~million ~~Disclosures~~and $17.8 million, respectively, in the condensed consolidated balance sheets. For the three months ended March 31, 2022, the Company recognized a gain of $13.8 million on the change in fair value of the warrant liabilities in Interest and other income (expense), net in the Company’s Condensed Consolidated Statements of Operations.

~~Not applicable.~~

~~Item 5.Other~~Note ~~Information~~12: Fair Value Measurements

~~None~~FASB ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value,

23Table of Contents

~~Table~~the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of ~~Contents~~the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheet. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued expenses, due to related parties are estimated to approximate the carrying values as of March 31, 2022 due to the short maturities of such instruments.

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.


		March 31,		December 31,
Dollars in thousands	Level	2022		2021
Liabilities:
Warrant Liability – Public Warrants	1	$	2,480	$	11,213
Warrant Liability – Private Placement Warrants	3		1,576		6,608
Total Warrant Liability		$	4,056	$	17,821

The Public Warrants and Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity, and are presented within Warrant liabilities on the Company’s Condensed Consolidated Balance Sheets. The warrant liabilities were measured at fair value at the closing of the Business Combination and are measured at fair value on a recurring basis, with changes in fair value presented within Interest and other income (expense), net in the Company’s Condensed Consolidated Statements of Operations.

Measurement

The Public Warrants and Private Placement Warrants are measured at fair value on a recurring basis. The measurement of the Public Warrants as of March 31, 2022 and December 31, 2021 are classified as Level 1 due to the use of an observable market quote in an active market and the subsequent measurement of the Private Placement Warrants as of March 31, 2022 and December 31, 2021 are classified Level 3 due to the use of unobservable inputs.



Input	March 31, 2022			December 31, 2021
Risk-free interest rate		2.40	%		1.20	%
Expected term (years)		4.60			4.80
Expected volatility		55.0	%		31.4	%
Stock price	$	2.36		$	7.41

As of March 31, 2022, the Public Warrants and Private Placement Warrants were determined to be $0.23 and $0.26 per warrant, respectively, for aggregate values of approximately $2.5 million and $1.6 million, respectively.

Table of Contents

As of December 31, 2021, the Public Warrants and Private Placement Warrants were determined to be $1.04 and $1.09 per warrant, respectively, for aggregate values of approximately $11.2 million and $6.6 million, respectively.

The following table presents the changes in the fair value of warrant liabilities for the three months ended March 31, 2022:


			Private		Warrant
Dollars in thousands	Public		Placement		Liabilities
Valuation as of December 31, 2021	$	11,213	$	6,608	$	17,821
Change in valuation inputs or other assumptions		(8,733)		(5,032)		(13,765)
Fair value as of March 31, 2022	$	2,480	$	1,576	$	4,056

Level 3 financial liabilities consist of the Private Placement Warrant liability for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

Note 13: Commitments and Contingencies

The Company leases office facilities and certain equipment necessary to maintain its information technology infrastructure. Rent expense, net of sublease income, under its operating lease agreements was $1.0 million and $1.1 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

The Company also leases automobiles under finance leases expiring at various dates through September, 2025. Management assesses these leases as they come due as to whether it should purchase, enter into new finance leases, or enter into operating leases.

Assets held under finance leases are included in Property and equipment, net on the unaudited Condensed Consolidated Balance Sheets and include the following:


Dollars in thousands	March 31, 2022		December 31, 2021
Gross property and equipment	$	11,178	$	11,380
Accumulated depreciation		(7,727)		(7,285)
Net property and equipment	$	3,451	$	4,095

Content License Agreements

The Company licenses minimum quantities of theatrical and direct-to-video titles under licensing agreements with certain movie content providers.

Total estimated movie content commitments under the terms of the Company’s content license agreements in effect as of March 31, 2022 is presented in the following table:


Dollars in thousands	Total		2022		2023
Minimum estimated movie content commitments	$	49,574	$	40,709	$	8,865

Legal Matters

The Company is involved from time to time in legal proceedings incidental to the conduct of its business. The Company does not believe that any liability that may result from these proceedings will have a material adverse effect on its consolidated financial statements.

Note 14: Income Taxes

The Company’s effective tax rate was (0.1)% and 25.4% for the three months ended March 31, 2022 and 2021, respectively. Due to the full valuation allowance on our deferred tax assets, the tax provision for the three months ended March 31, 2022 does not reflect any material tax expense.

Table of Contents

Tax Years Open for Examination

As of March 31, 2022, the years 2018 through 2021 were open under statutes of limitations for possible examination by the U.S. federal and most state tax authorities. There are currently no active examinations by the U.S. federal or state taxing authorities.

Waiver to Tax Receivable Agreement

As discussed in Note 1: Basis of Presentation, in connection with the Company’s entry into the Voting and Support Agreement, Redwood permanently waived the “Early Termination Payment” by the Company (or an affiliate) to Redwood that could have resulted from a provision in that certain Tax Receivable Agreement dated as of October 22, 2021 (“TRA”), which would have been triggered upon the change to the Board’s composition.

Additionally, under the Voting and Support Agreement, the Company and Redwood agreed, in connection with the consummation of a Transaction, to (a) terminate the TRA upon the consummation of a Transaction and (b) waive all claims under the TRA with such waiver being effective upon the consummation of such Transaction.

Note 15: Related-Party Transactions

The Company receives and provides certain operating support under commercial services agreements with affiliates of Apollo, primarily ecoATM. A summary of the amounts due to/from such related parties is presented below:


	March 31,		December 31,
Dollars in thousands	2022		2021
Due from related parties, net	$	4,370	$	3,813
Due to related parties, net	$	74	$	74

The balance in amounts due to related parties primarily includes the unpaid dividends related to employee and non-employee directors.

Revenues from related parties for the three months ended March 31, 2022 and 2021 were $5.6 million and $3.8 million, respectively.

Note 16: Additional Supplemental Cash Flow Financial Information

Cash, Cash Equivalents and Restricted Cash:



	March 31,		December 31,
Dollars in thousands	2022		2021
Cash and cash equivalents	$	9,763	$	14,320
Restricted cash		3,895		4,158
Cash, cash equivalents and restricted cash	$	13,658	$	18,478

Cash Interest and Taxes:


	Three Months Ended
	March 31,
Dollars in thousands	2022		2021
Cash paid during the period for interest	$	—	$	—
Cash paid during the period for income taxes, net	$	37	$	91

Table of Contents

Non-cash Transactions


	Three Months Ended
	March 31,
Dollars in thousands	2022		2021
Purchases of property and equipment financed by finance lease obligations	$	83	$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	9,102	$	—
Purchases of property and equipment included in ending trade payables or accrued and other current liabilities	$	210	$	213

Note 17: Subsequent Events

We have evaluated subsequent events through May 13, 2022, the date on which the financial statements were issued, and based on our review did not identify any events that would have required recognition or disclosure in these condensed consolidated financial statements, except the following:

Departure and Appointment of Certain Officers

As previously disclosed in our Current Report on Form 8-K filed with the SEC on April 25, 2022, on April 24, 2022, Kavita Suthar notified the Company of her intention to resign from her position as Chief Financial Officer, effective as of May 16, 2022. Ms. Suthar will remain in her position as Chief Financial Officer until the date her resignation becomes effective.

The Company’s Board of Directors appointed Mitchell Cohen, to serve as interim Chief Financial Officer of the Company. Mr. Cohen joined the Company on April 25, 2022, performing transitional services until he assumes the interim Chief Financial Officer position effective May 17, 2022.

Merger Agreement

On May 10, 2022, the Company entered into a Merger Agreement (the “Merger Agreement”) with Chicken Soup for the Soul Entertainment, Inc., a Delaware corporation (“CSSE”), RB First Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of CSSE (“Merger Sub”), RB Second Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of CSSE (“Merger Sub LLC”), Redwood Opco Merger Sub LLC, a Delaware limited liability company and direct wholly owned subsidiary of CSSE (“Opco Merger Sub LLC”) and Redwood Intermediate LLC, a Delaware limited liability company (“Opco LLC”). Pursuant to the Merger Agreement, (i) Merger Sub Inc. will merge with and into Redbox (the “First Company Merger”), with Redbox continuing as the surving entity (the “Surviving Corporation”), (ii) simultaneously with the First Company Merger, Opco Merger Sub LLC will merge with and into Opco LLC (the “Opco Merger”), with Opco LLC continuing as the surviving entity (the “Opco Surviving Company”) and (iii) immediately following the First Company Merger and Opco Merger, the Surviving Corporation will merge with and into Merger Sub LLC, with Merger Sub LLC continuing as the surviving entity (the “Second Company Merger, and together with the First Company Merger and the Opco Merger, the “Mergers”, and together with the other transactions contemplated by the Merger Agreement, the “Merger Transactions”).

As a result of the Mergers, at the closing of the Merger Transactions, the Company will become a wholly owned subsidiary of CSSE. At the effective time of the First Company Merger (the “Effective Time”), each share of the Company’s Class A common stock will be cancelled and represent the right to receive 0.087 shares (the “Exchange Ratio”) of Class A common stock, par value of $0.0001 per share, of CSSE (the “CSSE Class A Common Stock”), each share of the Company’s Class B common stock will be automatically cancelled for no additional consideration and each Opco LLC Unit will be converted into the right to receive a number of shares of CSSE Class A Common Stock equal to the Exchange Ratio. The closing of the Merger Agreement is subject to customary conditions, including expiration or termination of waiting periods under the HSR Act, if applicable, the approval of the Merger Agreement and the Merger Transactions by the Company’s shareholders, the listing of CSSE Class A Common Stock on Nasdaq and the registration statement on Form S-4 registering the CSSE Class A Common Stock to be issued as consideration in the Mergers becoming effective.

Refer to the Company’s Current Report on Form 8-K filed with the SEC on May 11, 2022 for additional information regarding the Merger Agreement and the Merger Transactions.

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (“SEC”).

The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may materially differ from those discussed in such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in “Risk Factors” under Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

Overview

Redbox is an established brand and leading provider in the home entertainment market in the United States. The Company is focused on providing its customers with the best value in entertainment and the most choice in how they consume it, through physical media and/or digital services. Redbox is undergoing a significant business expansion and digital transformation. The Company has transitioned from a pure-play DVD rental company to a multi- faceted entertainment company that provides tremendous value and choice by offering DVD rentals as well as multiple digital products across a variety of content windows including transactional (TVOD), ad-supported (AVOD/FLTV) and being a distributor of feature films with a growing library of original content. Redbox currently conducts its business through two operating segments: (1) Legacy Business and (2) Digital Business.

For its Legacy Business, the Company operates a nationwide network of approximately 38,000 self-service kiosks where consumers can rent or purchase new-release DVDs and Blu-ray Discs^TM (“movies”). The Company also generates service revenue by providing installation, merchandising and break-fix services to other kiosk businesses. Finally, the Company acquires, and distributes movies exclusively through its film distribution label, Redbox Entertainment, LLC, acquiring rights to talent-led films that are distributed across Redbox platforms as well as through third party digital services. For its Digital Business, the Company provides both transactional and ad-supported digital streaming services, which include 1) Redbox On Demand, a transactional service providing digital rental or purchase of new release and catalog movies and TV content, 2) Redbox Free On Demand (AVOD), an ad- supported service providing free movies and TV shows on demand, and 3) Redbox Free Live TV (FLTV), a free, ad-supported television service giving access to over 145 linear channels. The Company also sells third-party display advertising via its mobile app, website, and e-mails, as well as display and digital video advertising at the kiosk.

Due to risks and uncertainties related to the ongoing adverse effects of the COVID-19 pandemic on the Company’s operating results, together with the Company’s recurring operating losses, accumulated deficit and negative working capital, there is substantial doubt as to our ability to continue as a going concern. See “Business Update, Going Concern and Strategic Alternatives.”

Redbox Legacy Business

Redbox’s mission has always been to make it ridiculously cheap and easy for customers to get the home entertainment they want. Redbox provides exceptional customer value with new release movie disc rentals priced at approximately $2.00 a night, about one-third of the cost of a digital rental, which are typically $5.99 or more on digital retail platforms. Customers have the flexibility to rent a movie from one location and return their rental to any kiosk. Kiosks are located primarily in retail centers that experience heavy foot traffic, including grocery stores, mass retailers, drug stores, dollar retailers, and convenience stores. With approximately 32,000 locations and more than 150 retail partners, consumers have convenient access to kiosks as part of their routine shopping experiences. Revenue is generated primarily through the fees charged to rent or purchase a movie at the kiosk. In turn, Redbox pays retailers a percentage of the revenue generated at the Redbox kiosks installed at their locations. The Company obtains content through revenue sharing agreements and license agreements with major studios as well as through direct purchases from independent distributors and other suppliers.

Redbox has built a unique asset in its loyalty and rewards program, Redbox Perks, which currently boasts approximately 40 million members. Customers earn points for their rentals or purchases and can use those points for free rentals in the future. This tiered loyalty program gives the Company the ability to reward its most loyal and valuable customers while providing a currency for incenting increased transaction frequency and other behaviors, such as downloading the Redbox app or trying new products and services. Redbox Perks is a vehicle to provide greater value to customers and is central to its marketing and customer strategy. The

Table of Contents

program is a differentiator in the market and competitive advantage for Redbox. Redbox’s customers are value-conscious, love movies and entertainment, and tend to be late-adopters of new technology. Given the scale of the existing customer base, the Company has built a sizable marketing program that includes approximately 45 million e-mail subscribers, approximately 5 million SMS subscribers, approximately 45 million mobile app downloads, and nearly 400 million weekly impressions at retail.

To drive further engagement with our customers, Redbox established Redbox Entertainment, LLC as a movie distribution label. Through this label, the Company acquires North American rights and distributes feature films through Redbox kiosks, Redbox On Demand, third party digital transactional platforms and other streaming services. Redbox Entertainment acquires rights to finished films and also commits to slate financing deals for films to be produced, giving the Company input on creative direction. The Company generates gross profit from these films through promotional initiatives on its own platform and by selling downstream window rights to subscription streaming services. Moreover, because the Company acquires long term exclusive rights to these films, Redbox is building a content library which can be used on its Free On Demand (AVOD) and Free Live TV (FLTV) services or further licensed to other streaming platforms in future windows.

In addition, Redbox Entertainment benefits from the Company’s robust rental data that has been accumulated over the years, giving the Company proprietary insights into what titles and talent will perform well on its platforms. The Company has released a number of films since 2019 under the Redbox Entertainment label. The Company has already announced a slate deal with Basil Iwanyk, the producer of the blockbuster John Wick franchise, committing to 12 action/thriller films over the next several years.

Finally, Redbox has a service business, which employs a team of best-in-class field workers nationwide to manage kiosk installation, merchandising and break-fix services. In addition to maintaining Redbox’s kiosk network, the Company’s service team also supports other kiosk businesses. The Company has service agreements with multiple companies that have national and regional kiosk networks and since June of 2020, Redbox has been the primary vendor for Amazon to service their expanding Amazon Hub Locker locations. The service business helps mitigate the costs of the field operations for the Legacy DVD business while generating incremental margin dollars.

Redbox Digital Business

Redbox is rapidly expanding its digital product offering, leveraging its customer and marketing scale to transform the brand. The Company is building a digital ecosystem that consumers can use as a one stop shop for their entertainment needs by engaging with a variety of digital video services within the Redbox app in an integrated, easy-to use format. This simplifies the customer experience, drives multi-product adoption, and minimizes customer churn. These services span multiple business models including transactional, ad-supported, and anticipated in the future, subscription. The Company’s digital products are available to stream across web browsers, mobile devices, and almost every major consumer device, including Roku, Apple TV, Samsung, LG, AndroidTV, VIZIO, Xbox and PlayStation.

In December 2017, the Company launched Redbox On Demand, a digital transactional video-on-demand service (TVOD), allowing customers to rent or buy new release and catalog digital movies and television episodes, with new release prices typically ranging from $5.99 to $24.99 and catalog movies from $1.99 to $3.99, not including any discounts. Since 2020, customers have also been able to digitally rent movies that are still in theaters, which is known as Premium Video-On-Demand (PVOD). Customers pay a transactional fee to rent or buy content while earning Redbox Perks loyalty points every time they transact. Redbox On Demand has seen rapid growth and adoption with nearly 4 million customers since launch. That growth has been fueled primarily though leveraging the Company’s own marketing channels including e-mail and SMS and offering rewards points and other promotional activity to drive digital customer acquisition.

In February 2020, the Company launched Redbox Free Live TV (FLTV), an ad-supported digital linear television service, as a complement to the existing transactional On Demand service. With over 145 linear channels and growing, including five Redbox branded and programmed channels, Free Live TV gives customers the opportunity to channel surf and find content that interests them. A variety of these Redbox- branded channels, are currently syndicated to the Roku Channel, LG Channels and Vizio Watchfree services, which drives greater viewership and revenue. The Company has plans to continue syndicating Redbox programmed channels to additional 3^rd party services.

Redbox launched an ad-supported Free On Demand (AVOD) service in December 2020. AVOD gives consumers complete control over when and what they watch, and combined with Redbox’s growing AVOD library, which has more than 10,000 movies and TV episodes, consumers have a broad amount of content to choose from. The ad-supported services (FLTV and AVOD) have seen strong growth in engagement as new channels and titles are added and awareness of the offering grows.

Table of Contents

Finally, Redbox operates a media advertising business which monetizes more than 100 million monthly display and digital video ad-impressions across its mobile app, web, e-mail and kiosk network. The Company drives advertising revenue through a mix of programmatic advertising and direct sales. Direct ad sales for the media above as well as video advertising for Free On Demand and FLTV are driven by both internal sales team and strategic sales partnerships with Screenvision and the Palomino Media Group.

Growth Strategy

Redbox’s transformation into a multi-faceted entertainment company creates multiple areas for future growth. The Company’s expansion into AVOD and our intended eventual expansion into SVOD channels allows Redbox to participate in a very large and rapidly growing market. The Company believes it can create long-term value through its focus on:

Growing multi-product customers. Redbox intends to grow multi-product customers through increasing customer acquisition marketing and spend across streaming device partners, marketing at the kiosk, and other external paid media. To date, the Company has relied primarily on e-mail and SMS channels to drive customer acquisition. Thus, over time, with increased spend and attention via these additional channels, and with more content and services offered, the Company expects to drive greater customer growth. Redbox intends to also drive greater multi-product customer adoption through improved CRM, greater personalization and targeted use of promotions to create more personalized customer funnels to encourage users to trial and adopt other digital services within the Redbox app.

Accelerating AVOD adoption. Redbox projects growth for the Company’s ad-supported service through measured investment to expand the Free Live TV and Free On Demand content offerings. Through increased content volume and improved content quality, the Company expects to drive higher engagement and more hours watched per customer. Further, this improved content is expected to drive an increase in customers, accelerating the business while maintaining a reasonable customer acquisition cost.

Ramping Content Acquisition. Redbox Entertainment drives additional revenue in two ways. First, it provides more content for Redbox kiosks, On Demand and the ad-supported offerings; secondly, it generates revenue from distribution and licensing to other streaming platforms. The Company expects to ramp the number of Redbox Entertainment branded releases to 36 a year over time. The number of releases will naturally ramp as committed titles complete production and are delivered and the pipeline continues to grow.

Launching SVOD channels platform. As part of its long-term growth strategy, the Company’s intended launch of Redbox’s SVOD channels service will become another meaningful revenue stream. Redbox would act as the merchant of record, collecting 100% of the subscription revenue before paying the SVOD channel owner’s revenue share. By providing access to multiple SVOD channel options, customers could easily subscribe to one or more SVOD services all within the Redbox app, and Redbox could merchandise the third party SVOD content and service via the approximately 45 million Redbox app downloads on mobile devices, streaming media players, game consoles, and connected televisions.

Impact of COVID-19 and Emerging Industry Trends

In March 2020, the World Health Organization recognized the novel strain of coronavirus, COVID-19, as a pandemic. Public and private sector policies and initiatives to reduce the transmission of COVID-19 varied significantly across the United States. Throughout 2021, a significant percentage of the U.S. population was subject to meaningful restrictions on activities, which included limitations on the operation of non-essential businesses including retail operations, requirements that individuals remain in or close to their homes, school closures, theater closures, limitations on large gatherings, travel restrictions and other policies to promote or enforce physical distancing. These restrictions not only impacted how the Company’s customers used its products and services but also affected content production, release and distribution. As a result of these restrictions, many consumers subscribed to additional streaming services to satisfy their content needs as the number of new release movies, released theatrically and through home entertainment, decreased by more than 50% in both 2020 and 2021 compared with 2019, which had 140 theatrical titles. During 2020 and 2021, the Company experienced a decline in physical movie rentals, due in part to a significant decline in new movie releases and theater closures along with governmental and retail store restrictions. The Company’s On Demand transactional offering is also dependent on new releases, albeit at a lesser level than the physical business as the On Demand platform has a larger catalog offering. Beginning in the second half of 2020, the growth potential of Redbox On Demand was negatively impacted by fewer new releases and changes in release strategy by studios throughout the pandemic.

Starting late in 2021 and into the first quarter of 2022, the U.S. population experienced a wave of illness brought on by a variant of COVID-19, widely referred to as the Omicron variant. During the peak holiday rental season as content started to release at Redbox, the variant began to spread amongst the population, again impacting customer rental behavior. The disruptions from

Table of Contents

Omicron, including additional delays of productions and movie releases by studios, further drove periods of no new releases and resulted in studios exploring and pursuing alternative release strategies for their films, including straight to streaming services, day-and-date releases, and PVOD releases.

As a result of temporary theater closures during the COVID-19 pandemic, studios and content producers either delayed the release of movies into future periods or experimented with alternative release strategies which altered the typical release strategy for new movies. One alternative release method, was to sell movies directly to subscription services for exclusive release on their respective platforms. As a result, these titles were not available through a traditional transactional On Demand window, thus leading to fewer new release titles available to the Company. However, as studios continue to evolve their window release strategies, more and more studios are retaining their home entertainment distribution rights despite the initial sale of a title to a streaming service. This allows Redbox to make the movie available for rental through the kiosk and possibly On Demand at a later date. The Company expects studios to sell titles directly to streaming services from time to time, but it may be less likely going forward with the reopening of theatrical exhibitors and the opportunity to achieve higher returns for both studios and artists. The Company is further mitigating the impact of titles sold exclusively to subscription services by building out a library of content via its Redbox Entertainment label. Redbox Entertainment titles are available physically and digitally on Redbox platforms and are monetized across other platforms.

The second alternative release strategy that emerged, known as a day-and-date release, is a simultaneous release on a studio’s own digital platform as well as a theatrical release to provide optionality to those customers who are not ready to return to the theater. This shared window strategy can negatively impact the physical rental performance of a title as most of these titles release at a later date at the kiosk and transactionally on Redbox On Demand in a subsequent window. Studios who have previously released titles on streaming services on the same date as in theatres in 2021 have announced plans to return to theatrical windows of 45 to 90 days, before these titles go to home entertainment; however, studios continue to experiment with timing of releases on their owned and operated platforms which may continue to negatively impact Redbox’s ability to monetize future titles.

The third alternative release is known as premium video on demand or “PVOD” which creates an early transactional window for an at-home digital theatrical release at a higher price point, typically $19.99. The PVOD releases provided consumers a way to watch new releases at home while theaters remain shuttered. Redbox On Demand participates in and benefits from PVOD releases as it provides an early window option to Redbox customers at higher price points.

The Company expects studios to return to a more normal release slate as COVID-19 restrictions continue to ease due to the relationship with theatrical exhibitors and the draw of higher margin potential. Nevertheless, a number of titles continue to shift back further in 2022 and into 2023. In the first quarter of 2022, Redbox experienced intermittent periods of no new releases causing inconsistency in titles available at Redbox kiosks and on the Redbox On Demand platform, impacting rental performance. The Company expects new release content to build back up throughout 2022 as the pandemic subsides. This expectation is based on known titles delayed from 2020 and 2021, which are planned for release in 2022 and 2023.

The Company will continue to build out its digital offerings on both linear and on demand ad-supported to provide more options for customers to consume content at varying price points including free with ads. The Company believes that the complement of digital services creates greater utility to its customers and makes the offering more competitive relative to more focused streamers, while also reducing the reliance on content in a single content window.

Business Update, Going Concern and Strategic Alternatives

Historically, rentals have been correlated with the number and quality of new theatrical titles released in a quarter. During 2021 and for the first three months of 2022, Redbox’s business was negatively impacted by the effects of the ongoing COVID-19 pandemic, which resulted in fewer than expected theatrical releases. In addition, the significant increase in impacts from the Omicron variant caused further disruption to the business. As such, Redbox rentals have not recovered to the extent expected and, notwithstanding the year-over-year increase in new theatrical releases, were lower than pre-COVID-19 levels. As part of an effort to expand its business and transform into a multi-faceted entertainment company, during the fourth quarter of 2021 and into the first three months of 2022, Redbox increased its marketing and on-demand expenditures. Costs also increased as Redbox purchased more content, which were not offset by an increase in revenues.

Redbox has been exploring a number of potential strategic alternatives with respect to the Company’s corporate or capital structure and seeking financing to fund operations and one-time restructuring costs. In March 2022, the Company’s Board of Directors established a Strategic Review Committee to, among other things, consider and oversee strategic alternatives or transactions that may be available to the Company with respect to its corporate or capital structure. Redbox is also executing on a previously announced

Table of Contents

series of restructuring actions and initiatives to improve its efficiency and reduce its cost structure, including, but not limited to, (i) optimizing its kiosk network and (ii) executing a workforce reduction across its supply chain and corporate teams. However, the risks and uncertainties related to the ongoing adverse effects of the COVID-19 pandemic on the Company’s operating results, together with the Company’s recurring operating losses, accumulated deficit and negative working capital, raise substantial doubt about our ability to continue as a going concern.

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2022, the Company generated negative cash flows from operations of $14.8 million, had an accumulated deficit of $334.4 million and negative working capital of $79.8 million. The Company evaluated the impact of the additional financing and restructuring actions and initiatives further described below on its ability to continue as a going concern.

On March 29, 2022, the Company completed a reduction in force of 150 employees. One-time restructuring charges of $3.8 million were incurred, the substantial amount of which related to severance. The Company estimates that the workforce reduction will decrease its annual operating costs by approximately $13.1 million.

On April 15, 2022 certain subsidiaries of the Company entered into the Incremental Assumption and Amendment Agreement No. 6, amending its Credit Agreement (the “Sixth Amendment”), pursuant to which the Sixth Amendment Incremental Revolving Lenders (as defined in the Credit Agreement) will make available to certain subsidiaries of the Company Sixth Amendment Incremental Revolving Commitments (as defined in the Credit Agreement) in an aggregate amount equal to $50.0 million subject to certain conditions, the proceeds of which will be used to make payments in accordance with the Budget Plan (as defined in the Credit Agreement) and pay certain fees and expenses. From April 15, 2022 until the Signing Deadline Date, borrowings under the Sixth Amendment Incremental Revolving Facility (as defined in the Credit Agreement) were limited to no more than $15.0 million in the aggregate. During April 2022, the Company borrowed the available $15.0 million under its Sixth Amendment Incremental Revolving Facility. Pursuant to the Sixth Amendment, additional borrowings of $35.0 million under its Sixth Amendment Incremental Facility would become available if, by no later than May 10, 2022 (the “Signing Deadline Date”), the Company entered into a valid and binding definitive purchase agreement for the sale of all or substantially all of the assets, or all of the equity interests of the Company (the “Company Sale”), and which purchase agreement either (i) provided for the payment in full (principal and interest) of the Senior Facilities other than the Term B-2 Loans or (ii) otherwise was in form and substance reasonably acceptable to the Administrative Agent. Pursuant to the Credit Agreement, the Company Sale shall be consummated no later than October 31, 2022. The details of the Sixth Amendment are discussed in further detail in Note 6: Debt in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

As a further condition to the Sixth Amendment, the Company issued to HPS Investment Partners, LLC (administrative agent and collateral agent to the Credit Agreement) and certain affiliates (as defined in the Credit Agreement) warrants with an exercise price of $0.0001 per share (the “HPS Warrants”) to purchase 11,416,700 shares of Class A common stock of the Company (“Common Stock”) in the event certain milestones were not met under the Amended Credit Agreement. Upon signing of the CSSE merger agreement, the HPS Warrants became void and all rights of the warrant holders thereunder to exercise the HPS Warrants ceased. Our unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

In connection with the Sixth Amendment, on April 15, 2022, the Company entered into a Voting and Support Agreement with AP VIII Aspen Holdings, L.P. (“Aspen”), Seaport Global SPAC, LLC and Redwood Holdco, LP (“Redwood”), (collectively the “Stockholders”), whereby the Stockholders agreed to vote their shares of the Company (i) in favor of any strategic transaction approved and recommended by the Company’s Board of Directors (the “Board”), or any committee to which the Board delegates authority, subject to certain terms and conditions (each, a “Transaction”), (ii) in opposition to any transaction involving the Company that has not been approved and recommend by the Board, and (iii) in favor of any directors that are proposed or nominated to the Board by the Company at any annual meeting of the Company.

The Company further agreed, pursuant to the Voting and Support Agreement, to (i) permanently reduce a portion of its revolving commitment under its Union Revolving Credit Facility in an amount equal to $10.6 million (and the Company made such reduction) and (ii) among other agreements, refrain from borrowing under the Union Revolving Credit Facility without the consent of Aspen and Redwood Holdco, LP (other than with respect to certain scheduled borrowings and borrowings to cover interest, fees and expenses).

Table of Contents

In connection with the execution of the Sixth Amendment, the Company agreed to implement certain changes to the composition and size of its Board of Directors, as further described in the Company’s Current Report on Form 8-K filed with the SEC on April 19, 2022. The Strategic Review Committee of the Board was also dissolved in connection with these changes.

In connection with the Company’s entry into the Voting and Support Agreement, Redwood permanently waived the “Early Termination Payment” by the Company (or an affiliate) to Redwood that could have resulted from a provision in that certain Tax Receivable Agreement dated as of October 22, 2021 (“TRA”), which would have been triggered upon the change to the Board’s composition.

On May 10, 2022, the Company entered into a merger agreement with Chicken Soup for the Soul Entertainment, Inc. (“CSE”), pursuant to which, the Company will become a wholly owned subsidiary of CSSE. As a result, additional borrowings under the Sixth Amendment Incremental Revolving Facility became available upon the Company’s entry into the merger agreement with CSSE provided, that the CSSE merger agreement contains an interim covenant that restricts outstanding borrowings by the Company under the Sixth Amendment Incremental Revolving Facility to a maximum of $45.0 million. See Note 17: Subsequent Events in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q for additional information regarding the CSSE merger.

For a further discussion on the Sixth Amendment, refer to Note 6: Debt in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

If the Company is unable to implement one or more of the contemplated strategic alternatives, or if the CSSE merger agreement is terminated (and is not replaced by another Acceptable Purchase Agreement), or consummation of the CSSE merger does not occur on or before October 31, 2022 (or such later date as HPS may agree) an event of default will occur under the Credit Agreement, and the Company could continue to experience adverse pressures on its relationships with counterparties who are critical to its business, its ability to access the capital markets, its ability to execute on its operational and strategic goals and its business, prospects, results of operations and liquidity generally. There can be no assurance as to when or whether the implementation of one or more of the Company’s strategic initiatives will be successful, or as to the effects the failure to take action may have on the Company’s business, its ability to achieve its operational and strategic goals or its ability to finance its business or refinance its indebtedness. A failure to address these matters, will have a material adverse effect on the Company’s business, prospects, results of operations, liquidity and financial condition, and its ability to service or refinance its corporate debt as it becomes due.

Selected Financial Data and Key Metrics

The selected consolidated financial data below should be read in conjunction with the following MD&A and the condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q. All references to rentals and net rental revenue presented within MD&A include physical and On Demand rentals and revenue, unless otherwise noted, respectively.

Management uses these non-GAAP financial measures internally for strategic decision-making, forecasting future results, and evaluating current performance. Management believes that the non-GAAP financial measures (i.e., Adjusted EBITDA) provide a more consistent comparison of its operating results and trends for the periods presented. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP and reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provides a more complete understanding of factors and trends affecting its business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the

Table of Contents

corresponding measures calculated in accordance with GAAP. Refer to “Use of Non-GAAP Measures” below for discussion of this measure and related reconciliation.


Key Financial Measures	March 31,
Dollars in thousands	2022			2021
Total net revenue	$	63,227		$	76,730
Product cost	$	27,290		$	28,248
Gross margin	$	35,937		$	48,482
Gross margin %		56.8	%		63.2	%
Adjusted EBITDA	$	(13,538)		$	1,302
Adjusted EBITDA as a % of net revenue		(21.4)	%		1.7	%
Loss before income taxes	$	(40,848)		$	(36,474)
Net loss	$	(40,874)		$	(27,195)
Retail footprint
Ending number of kiosks		37,791			39,257
Ending number of locations		32,160			33,068
Physical Theatrical Titles Released in Period		22			7

Seasonality

Absent the effects of the COVID-19 pandemic in 2020, 2021 and into 2022, the Company has generally experienced seasonality in its rentals and revenue. Historically, greater demand over the holiday season typically results in higher rentals November through January. April has usually been a low rental month due, in part, to retail release timing in connection with the Academy Awards that historically has provided stronger content and resulted in higher rentals in March. September and October have been low rental months due, in part, to the beginning of the school year and the introduction of the new fall television season. Significant recurring events, such as the Olympics, also have a negative impact on rentals as they compete with customer viewing interest for movie content and affect retail release timing, which aims to avoid such events. The effects of the COVID-19 pandemic in 2020 and 2021 have continued to disrupt the Company’s typical seasonal patterns into 2022.

Components of Results of Operations

Revenue

The Company generates revenue primarily through fees charged to rent or purchase a movie both physically and digitally. Revenue is presented net of promotional offerings provided to its consumers and any subsequent refunds. Revenue also consists of fees the Company earns in its service business for servicing and merchandising other kiosk businesses, digital advertising through its media network business, as well as licensing fees it generates from selling downstream rights to subscription streaming services through its Redbox Entertainment label.

Product Cost

Product Cost primarily represents the amortization of the Company’s physical content library and digital revenue sharing or licensing costs. Amortization of the content library is calculated using rental decay curves based on historical performance of movies over their useful lives. Given the steepness of the rental decay curve, amortization on most of the content library is recorded on an accelerated basis with substantially all of the amortization expense recognized within the first year after a title’s release.

The physical content library costs mainly include (1) the costs paid to studios and other vendors to acquire content including revenue share as applicable, (2) costs incurred to label, sort, and ship content to the Company’s kiosks for merchandising, (3) costs incurred to destroy content after use if required under contractual arrangements with studios and (4) indirect taxes, if applicable. For content the Company expects to sell, it determines an estimated salvage value. Content salvage values are estimated based on the historical sales activity. The cost of each title is capitalized and amortized to its estimated salvage value. The rental decay curves and salvage value of the Company’s content library are periodically reviewed and evaluated.

For movies acquired through the Company’s Redbox Entertainment label, costs include (1) the costs to acquire content, (2) manufacturing costs and (3) supply chain costs. These costs are capitalized as they are incurred and amortized in proportion to the current year’s revenue as a percentage of management’s estimate of total ultimate revenue, not to exceed the life of the acquired rights. Ultimate revenue estimates are periodically reviewed and adjustments, if any, will result in changes to amortization rates.

Table of Contents

The digital content costs mainly include (1) the costs paid to studios and other vendors to acquire or offer digital content, including revenue share or licensing fees, for our ad-supported offerings, and (2) the revenue share costs paid to studios for transactional titles.

Direct Operating

Direct Operating expense accounts primarily for (1) commissions the Company pays to its retailers, (2) credit card fees, (3) operations support to both merchandise and service its kiosks, and (4) consumer electronic device royalties, licensing and digital rights management fees and content delivery network fees for delivery of On Demand content.

Marketing

Marketing expenses represent the cost of online and offline marketing and public relations efforts in national and regional advertising. The Company’s marketing efforts consist of various media programs, such as e-mail, text, mobile applications, social media, the Company’s loyalty program and digital advertising. However, the Company also leverages the visibility provided by its expansive network of approximately 38,000 kiosks and partnership programs with retailers and consumer goods manufacturers to attract and retain new customers.

Stock-Based Compensation Expense

Stock-based compensation expense represents compensation costs in connection with the Redbox Equity Plan and the Redwood Holdco Management Incentive Plan.

General and Administrative

General and administrative expenses consist primarily of executive management, business development, finance, management information systems, human resources, legal, facilities, risk management and administrative support for operations.

Depreciation and Amortization

Depreciation and other expenses consist of depreciation charges on the Company’s installed kiosks as well as on computer equipment, leasehold improvements, and capitalizable costs for automobile leases and internally developed software related primarily to its customer-facing products.

Amortization expenses are related to the amortization of intangible assets. For further information on amortization, see Note 4: Goodwill and Other Intangible Assets in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Table of Contents

Results of Operations for the Three Months Ended March 31, 2022 and 2021


	March 31,						2022 vs 2021 YTD
Dollars in thousands	2022			2021			$		%
Net revenue	$	63,227		$	76,730		$	(13,503)	(17.6)	%
Product cost		27,290			28,248			958	3.4	%
Gross margin	$	35,937		$	48,482		$	(12,545)	(25.9)	%
Gross margin %		56.8	%		63.2	%			(6.4)	%
Operating expenses:
Direct operating		30,005			33,024			3,019	9.1	%
Marketing		4,022			3,284			(738)	(22.5)	%
Stock-based compensation expense		1,808			566			(1,242)	n.m.
General and administrative		23,203			13,309			(9,894)	(74.3)	%
Depreciation and amortization		25,090			27,526			2,436	8.8	%
Operating (loss) income		(48,191)			(29,227)			(18,964)	(64.9)	%
Interest and other income (expense), net:
Interest and other income (expense), net		7,343			(7,247)			14,590	n.m.
Total interest and other income (expense), net		7,343			(7,247)			14,590	n.m.
Loss before income taxes		(40,848)			(36,474)			(4,374)	(12.0)	%
Income tax expense (benefit)		26			(9,279)			(9,305)	(100.3)	%
Net loss	$	(40,874)		$	(27,195)		$	(13,679)	(50.3)	%
Adjusted EBITDA(1)	$	(13,538)		$	1,302		$	(14,840)	n.m.
Ending number of kiosks		37,791			39,257			(1,466)	(3.7)	%
Physical Theatrical Titles Released in Period		22			7			15	n.m.

n.m. not meaningful

(1)	Refer to “Use of Non-GAAP Measures” below for discussion of this measure and related reconciliation.

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

Net Revenue. Net revenue was $63.2 million, a decrease of $13.5 million or 17.6%, compared to net revenues of $76.7 million for the three months ended March 31, 2021. Beginning in March 2020, physical movie rentals were negatively impacted by the COVID-19 global pandemic due to a significant decline in new movie releases available to consumers resulting from broad-based movie theater closures and a material slowdown in new productions. The impacts of 2020 continued into 2021 and the first three months of 2022 as studios continued to either delay the release of new movies into future periods or experimented with alternative release strategies, including selling movies directly to streaming services, which resulted in fewer titles being released at the kiosk. The first quarter of 2022 was further impacted by the Omicron variant, which continued to disrupt customer rental behavior.

The total number of theatrical and Direct-to-Video (DTV) titles released during the three months ended March 31, 2022 were essentially flat with 58 in the first quarter of 2022, down one title from 59 in the first quarter of 2021. Of these totals, theatrical releases were 22 compared to 7 in the same prior year period. Physical units purchased in the quarter were 29.9% lower due to the quality of content released compared to the same quarter in the prior year, and as a result physical rentals declined 36.9%. In addition, the weakness in theatrical releases negatively impacted the performance of the digital transactional business. New and consistent content available for consumers was still well below 2019 (pre-COVID) levels which adversely impacted consumer rental patterns. As a result of temporary theater closures during the COVID-19 pandemic, studios and content producers either delayed the release of movies into future periods or experimented with alternative release strategies, including direct sales to streaming services, day-and-date releases, and PVOD releases, all of which altered the typical window cadence. The Company expects studios to return to a more normal release slate with new release content building throughout 2022 as the pandemic subsides, however, titles may continue to shift as the year progresses. The decrease in physical rentals in the Legacy Business was partially offset by a 3.8% increase in rental revenue per physical revenue. Partially offsetting the decline in revenue was strong growth in the Company’s Digital business, specifically its media network business and ad-supported services (AVOD and FLTV), along with continued strong growth in the Company’s kiosk servicing business.

Product Cost. Product Cost was $27.3 million, a decrease of $1.0 million or 3.4%, compared to $28.3 million for the same period in 2021 due to variable cost savings, partially offset by increased costs for ad-supported (AVOD) content.

Table of Contents

Gross Margin. Gross margin was $35.9 million, a decrease of $12.5 million or 25.9%, compared to gross margin of $48.5 million for the three months ended March 31, 2021 due primarily to lower net revenue as discussed above.

Gross margin as a percentage of net revenue decreased to 56.8% for the three months ended March 31, 2022 as compared to 63.2% for the same period in 2021, reflecting increased upfront costs for certain theatrical titles coupled with lower net revenue.

Direct Operating Expenses. Direct Operating expenses were $30.0 million, a decrease of $3.0 million or 9.1%, compared to the same period in 2021 due to lower variable expenses including credit cards fees and retailer revenue share expenses.

Marketing Expenses. Marketing expenses increased by 22.5% to $4.0 million for the three months ended March 31, 2022 as compared to $3.3 million for the same period in 2021 reflecting increased investments in the Company’s Digital Business.

Stock-Based Compensation Expense. Stock-based compensation expense was $1.8 million for the three months ended March 31, 2022 compared to $0.6 million for the same period in 2021, primarily due to the equity award granted in connection with the Redbox Equity Plan.

General and Administrative Expenses. General and administrative expenses were $23.2 million, an increase of $9.9 million or 74.3%, compared to $13.3 million for the same period in 2021. The $9.9 million increase reflects $3.8 million in severance and related costs in connection with the reduction in force, $3.1 million in legal and advisory expenses incurred as the Company explores strategic alternatives, as well as public company costs, which did not occur in the prior year period, including $1.4 million in directors’ and officers’ liability insurance along with increases in accounting advisory and audit fees.

Depreciation and Amortization. Depreciation and amortization decreased by 8.8% to $25.1 million for the three months ended March 31, 2022 as compared to $27.5 million for the same period in 2021 due to certain kiosks reaching the end of their depreciable useful lives along with reduced capital expenditure spend.

Operating Loss. Operating loss for the three months ended March 31, 2022 was $48.2 million compared to an operating loss of $29.2 million for the same period in 2021. The decrease is primarily driven by the net revenue decrease as described above along with increased general and administrative and marketing expenses.

Net Loss. Net loss was $40.9 million for the three months ended March 31, 2022, as compared to a net loss of $27.2 million for the same period in 2020. The decline is due to the decrease in operating income as discussed above and a lower income tax benefit, partially offset by a $13.8 million pretax gain from the change in fair value on the Company’s warrant liabilities.

Adjusted EBITDA. Adjusted EBITDA was ($13.5) million, a decrease of $14.8 million, compared to Adjusted EBITDA of $1.3 million for the same period in 2021. The decline is due to decreases in net revenue in the Company’s Legacy Business along with increased general and administrative and marketing costs as a public company and from investing in our Digital Business, partially offset by strong growth in the Company’s Digital Business along with a decrease in product and direct operating costs due to variable direct cost savings.

Segment Discussion

Legacy Business

Results


	Three Months Ended						March 31,
	March 31,						2022 vs 2021
Dollars in thousands	2022			2021			$		%
Net revenue	$	48,767		$	67,637		$	(18,870)	(27.9)	%
Adjusted EBITDA		(15,553)			334			(15,887)	n.m
Adjusted EBITDA margin		(31.9)	%		0.5	%			n.m
Physical Theatrical Titles Released		22			7			15	n.m
Physical Rentals (in thousands)		11,195			17,754			(6,559)	(36.9)	%
Net revenue per physical rental	$	3.29		$	3.17		$	0.12	3.8	%

Table of Contents

Net Revenue. Net revenue was $48.8 million, a decrease of $18.9 million or 27.9%, compared to net revenue of $67.6 million for the three months ended March 31, 2021. Physical movie rentals continue to be negatively impacted by the COVID-19 global pandemic due to a material decline in new movie releases available to consumers compared to pre-COVID levels. Redbox is currently in the process of building content available at the kiosk and new content available for consumers adversely impacting consumer rental patterns. Studios either delayed the release of new movies into future periods or experimented with alternative release strategies, including selling movies directly to streaming services, which resulted in fewer titles being released at the kiosk.

As COVID-19 restrictions ease, the Company expects studios to continue to sell titles directly to streaming services from time to time, but may be less likely going forward with the reopening of theatrical exhibitors and the opportunity to achieve higher returns for both studios and artists. The Company expects new release content to build back throughout 2022 if the pandemic subsides; however, title release dates will continue to shift and change as the year progresses and the Company does not have control over title release timing. The Company is offsetting some of the impact from titles sold exclusively to subscription services by building out a library of content via its Redbox Entertainment label. Redbox Entertainment titles are available physically and digitally on Redbox platforms and will also be monetized across other platforms.

Adjusted EBITDA. Adjusted EBITDA was ($15.6) million, a decrease of $15.9 million, compared to Adjusted EBITDA of $0.3 million for the three months ended March 31, 2021. The decrease in Adjusted EBITDA is primarily driven by the decrease in net revenue discussed above along with increased general and administrative expenses, partially offset by a decrease in product costs and direct operating costs. The Company’s Legacy Business includes corporate general and administrative expenses, which includes technology and public company costs, along with corporate overhead expenses related to our Digital Business.

Digital Business

Results


	Three Months Ended						March 31,
	March 31,						2022 vs 2021
Dollars in thousands	2022			2021			$		%
Net revenue	$	14,460		$	9,093		$	5,367	59.0	%
Adjusted EBITDA		2,015			968			1,047	108.2	%
Adjusted EBITDA margin		13.9	%		10.6	%			330 pts

Net Revenue. Net revenue was $14.5 million, an increase of $5.4 million or 59.0%, compared to $9.1 million for the same period in the prior year, reflecting strong growth in the Company’s media network business and ad-supported services (AVOD and FLTV). Redbox transactional On Demand revenue was down slightly for the period compared to the prior year reflecting a decline in transactions, due to fewer high quality tent-pole releases in the quarter as well as studios releasing titles theatrically and on their owned platforms simultaneously. The lower transactions were partially offset by increased revenue per transaction.

Adjusted EBITDA. Adjusted EBITDA was $2.0 million, an increase of $1.0 million, compared to $1.0 million during 2021 reflecting increased revenue, partially offset by increased marketing costs. The Digital Business includes expenses directly attributable to this business.

Use of Non-GAAP Measures

The Company defines EBITDA as net income before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA adjusts EBITDA by excluding the results of business optimization costs, one-time non-recurring costs, new business start-up costs, restructuring related costs and stock-based compensation expense. Neither EBITDA nor Adjusted EBITDA are presented in accordance with GAAP.

Table of Contents

The Company uses EBITDA and Adjusted EBITDA for operational and financial decision-making and believes these measures are useful in eliminating certain items to focus on what it deems to be indicators of operating performance. EBITDA and Adjusted EBITDA are also used by many of the Company’s investors, securities analysts, and other interested parties in evaluating operational and financial performance as well as debt service capabilities. The Company believes that the presentation of EBITDA and Adjusted EBITDA provides useful information to investors by allowing an understanding of key measures that the Company uses internally for operational decision-making, budgeting, and assessing performance.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as a substitute for net income, cash flows from operating activities, or other income or cash flow statement data. These measures have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of the Company’s results as reported under GAAP. Investors should review the Company’s financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

Because non-GAAP financial measures are not standardized, EBITDA and Adjusted EBITDA, as defined by Redbox, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare the Company’s use of these non-GAAP financial measures with those used by other companies.

Adjusted EBITDA is calculated as follows:


	Three Months Ended
	March 31,
Dollars in thousands	2022		2021
Net loss	$	(40,874)	$	(27,195)
Depreciation and amortization		25,090		27,526
Interest and other (income) expense, net		(7,343)		7,247
Income tax expense (benefit)		26		(9,279)
EBITDA		(23,101)		(1,701)
Adjustments to EBITDA:
Business optimization^(a)		—		550
One-time non-recurring^(b)		3,743		364
New business start-up costs^(c)		—		171
Restructuring related^(d)		4,012		1,352
Stock-based compensation expense		1,808		566
Adjusted EBITDA	$	(13,538)	$	1,302

(a)	Business optimization costs include employee retention costs, IT costs as well as consulting costs for certain projects.

(b)

Includes costs related to project costs and initiatives, as well as bank, legal and other fees in connection with the Company’s debt financing activities. During the three months ended March 31, 2022, the Company incurred $3.1 million in one-time legal and advisory expenses as the Company explores strategic alternatives.

(c)	Includes costs to support the Company’s On Demand and AVOD offerings, along with costs related to the Company’s service and media network businesses.

(d)	Restructuring related costs include such items as employee severance charges and costs incurred related to removing kiosks.

Liquidity and Capital Resources

The Company’s primary sources of liquidity are from cash on hand, cash flow generated from operations, and amounts available under its Revolving Credit Facility. Redbox has been exploring a number of potential strategic alternatives with respect to the Company’s corporate or capital structure and seeking financing to fund operations and one-time restructuring costs. The Company is executing on a series of previously announced restructuring actions and initiatives to improve its efficiency and reduce its cost structure, including, but not limited to, (i) optimizing its kiosk network and (ii) executing a workforce reduction across its supply chain and corporate teams. However, the risks and uncertainties related to the ongoing adverse effects of the COVID-19 pandemic on the Company’s operating results, together with the Company’s recurring operating losses, accumulated deficit and negative working capital, raise substantial doubt about our ability to continue as a going concern. There can be no assurance as to when or whether the implementation of one or more of the Company’s strategic initiatives will be successful, or as to the effects the failure to take action

Table of Contents

may have on the Company’s business, its ability to achieve its operational and strategic goals or its ability to finance its business or refinance its indebtedness.

The Company has taken and continues to take actions to reduce expenses and manage working capital to preserve cash on-hand. These actions include, but are not limited to:

●

managing labor hours spent on field and servicing operations based upon inventory levels and demand;

●

extending payment terms with vendors;

●

delaying hiring for non-critical roles;

●

delaying timing on annual pay increases;

●

reducing long-term incentive compensation; and

●

limiting capital expenditures.

As of March 31, 2022, the Company’s cash, cash equivalents and restricted cash decreased $4.8 million to $13.7 million from the December 31, 2021 balance of $18.5 million. As of March 31, 2022, amounts outstanding under the Company’s Term Loan Facility and revolving credit facilities were $310.0 million and $36.4 million, respectively. As of March 31, 2022 there was no remaining availability under the Company’s Senior Revolving Credit Facility. As described more fully below, on April 15, 2022, the Company entered into a Sixth Amendment to its Credit Agreement. For additional information see Note 6: Debt in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Senior Facilities

Redbox Automated Retail, LLC (“RAR”) is party to a credit agreement (as amended, the “Credit Agreement”). The Credit Agreement was first entered into on October 20, 2017, and has subsequently been amended by an Incremental Assumption and Amendment Agreement (the “Amendment”) dated September 7, 2018, a second amendment (the “Second Amendment”) dated September 30, 2020, a third amendment (the “Third Amendment”) dated December 28, 2020, a fourth amendment (the “Fourth Amendment”) dated January 29, 2021, a fifth amendment (the “Fifth Amendment”) dated May 16, 2021, and a consent to the Fifth Amendment dated October 11, 2021, and a sixth amendment (the “Sixth Amendment”), dated as of April 15, 2022. As of March 31, 2022, RAR’s Senior Facilities will mature on April 20, 2024, and subsequent to the Amendment, Second Amendment, Third Amendment, Fourth Amendment, Fifth Amendment, consent thereto and Sixth Amendment consisted of:

●

a first lien term loan B facility (the “Term Loan B”), in an original aggregate principal amount of $425.0 million;

●

a first lien term loan B-1 facility (the “Term Loan B-1”), in an original aggregate principal amount of $85.8 million;

●

a first lien term loan B-2 facility (the “Term Loan B-2”), in an original aggregate principal amount of $25.0 million;

●

a first lien revolving credit facility, in an aggregate principal amount of up to $30.0 million (provided, that the commitments under such revolving facility were terminated in connection with the Sixth Amendment and such amounts, if repaid, may not be reborrowed); and

●

a first lien incremental revolving credit facility, in an aggregate principal amount of up to $50.0 million.

The Term Loan B was made available to RAR immediately upon closing of the Credit Agreement and was used in part to retire all $280.0 million of the Company’s existing debt and to settle closing costs associated with the new Term Loan B totaling $19.5 million of which $4.6 million was paid to Apollo Global Securities, LLC, an affiliate of Apollo, for services provided in connection with the financing. The balance of the Term Loan B proceeds were used towards a dividend, occurring on the same day, with total dividend of $160.0 million to equity holders of RAR. Additionally, at the execution of the new Credit Agreement, RAR wrote-off unamortized deferred financing costs of $21.7 million related to the extinguishment of the entire debt under the prior credit agreement.

Table of Contents

On September 7, 2018, RAR entered into an Incremental Assumption and Amendment Agreement (the “Amendment”) to the Credit Agreement. The Amendment provided for, among other things, (i) an incremental Term B-1 Loan (“Term Loan B-1”) in an original aggregate principal amount of $85.8 million and (ii) the payment of one or more restricted payments to shareholders of RAR in an aggregate amount not to exceed $115.0 million. The proceeds received from the Amendment along with cash flow from the business were used towards a dividend distribution to equity holders of RAR totaling $115.0 million that was paid within five business days of September 7, 2018, and to pay fees and expenses in connection with the Amendment totaling $3.7 million. The additional loan under Term Loan B-1 had terms identical to the original Term Loan B, except to account for the incremental principal amount within the quarterly amortization payment schedule and to reset call protection on the Term Loan B-1.

On September 30, 2020, RAR entered into the second amendment to its Credit Agreement (the “Second Amendment”) to, among other things, to increase the total net leverage covenant during the remaining term of the Credit Agreement and revise the quarterly amortization payment schedule.

On December 28, 2020, RAR entered into a third amendment to its Credit Agreement (the “Third Amendment”). The amendment deferred the December 2020 amortization payment to March 2021.

As of December 31, 2020, RAR’s Senior Facilities matured on October 20, 2022, and subsequent to the Amendment, Second Amendment and Third Amendment consisted of:

●

a first lien term loan B facility, in an original aggregate principal amount of $425.0 million;

●

a first lien term loan B-1 facility, in an original aggregate principal amount of $85.8 million; and

●

a first lien revolving credit facility, in an aggregate principal amount of up to $30.0 million.

In addition, under the Fourth Amendment, RAR incurred an incremental first lien term loan B-2 facility (the “Term Loan B-2”) in an aggregate principal amount of $25.0 million which was provided by New Outerwall, Inc. The loan was subsequently assigned to Aspen Parent, Inc., an affiliate of Apollo and therefore a related party of the Company.

Pursuant to the Fourth Amendment, interest is payable on the Senior Facilities entirely in cash or, for a specified period, could be paid by increasing the principal amount of the Senior Facilities (PIK Interest), or through a combination of cash and PIK interest, subject to certain liquidity thresholds. Borrowings under the Senior Facilities bear interest at a rate at RAR’s option, either (a) a London Interbank Offer Rate (“LIBOR”) determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 1.00% floor in the case of term loans or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the prime rate quoted by The Wall Street Journal (or another national publication selected by the administrative agent) and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case plus an applicable margin. The applicable margin for borrowings under the Senior Facilities is 7.25% with respect to Eurocurrency Borrowings (increasing to 8.25% if PIK Interest is paid) and 6.25% with respect to ABR Borrowings (increasing to 7.25% if PIK Interest is paid).

In addition to paying interest on outstanding principal under the Senior Facilities, RAR is required to pay a commitment fee at a rate equal to 0.50% per annum to the lenders in respect of the unutilized commitments thereunder. RAR is also required to pay customary agency fees.

In connection with the Business Combination, on May 16, 2021, RAR entered into another amendment to its Credit Agreement (the “Fifth Amendment”). The Fifth Amendment, which became effective upon consummation of the Business Combination, provided consent to the planned Business Combination and among other things, extended the Senior Facilities maturity date to October 2023 and subordinated the Term Loan B-2 to the Term Loan B and the Term Loan B-1. In addition, among other things, concurrently with the consummation of the Business Combination, (i) $15.0 million of cash proceeds from the Business Combination were used to pay down outstanding borrowings under the Revolving Credit Facility and (ii) $35.0 million of cash proceeds from the Business Combination were used to pay down outstanding borrowings under the Term Loan B and the Term Loan B-1.

On October 11, 2021, RAR entered into a consent to the Fifth Amendment to make certain additional changes to the Credit Agreement, which became effective upon consummation of the Business Combination, including extending the maturity date of the Senior Facilities to April 20, 2024 and extending the PIK interest option until December 31, 2022 (subject to a minimum pro forma liquidity).

Table of Contents

On April 15, 2022, RAR entered into a sixth amendment to its Credit Agreement (the “Sixth Amendment”) (capitalized terms used herein are defined in the Amended Credit Agreement). Pursuant to the Sixth Amendment, an additional $50.0 million in financing under the Credit Agreement will be made available to the Company subject to certain conditions, the proceeds of which will be used to make payments in accordance with the Budget Plan and pay certain fees and expenses. At entry into the Sixth Amendment, borrowings were limited to no more than $15.0 million in the aggregate. During April 2022, the Company borrowed the available $15.0 million under its Revolving Credit Facility. Pursuant to the Sixth Amendment, additional borrowings would become available if, by no later than May 10, 2022 (the “Signing Deadline Date”), the Company entered into a valid and binding definitive purchase agreement for the sale of all or substantially all of the assets, or all of the equity interests of the Company (the “Company Sale”), and which purchase agreement either (i) provided for the payment in full (principal and interest) of the Senior Facilities other than the Term B-2 Loans or (ii) otherwise was in form and substance reasonably acceptable to the Administrative Agent. Pursuant to the Merger Agreement, the Company Sale shall be consummated not later than October 31, 2022. The details of the Sixth Amendment are discussed in Note 6: Debt in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

On May 10, 2022, the Company entered into a merger agreement with Chicken Soup for the Soul Entertainment, Inc. (“CSSE”), pursuant to which, the Company will become a wholly owned subsidiary of CSSE. As a result, additional borrowings under the Sixth Amendment Incremental Revolving Facility became available upon the Company’s entry into the merger agreement with CSSE. See Note 17: Subsequent Events in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q for additional information regarding the CSSE merger.

As of March 31, 2022 and December 31, 2021, the borrowing interest rate for the Senior Facilities was 9.25%, respectively.

Required minimum principal amortization payments under the Senior Facilities as of March 31, 2022, are as follows:


	Repayment
Dollars in thousands	Amount
2022	$	38,394
2023		—
2024		271,562
Total	$	309,956

In addition, the Senior Facilities require RAR to prepay outstanding term loan borrowings, subject to certain exceptions, with:

●

a certain percentage set forth in the Credit Agreement governing the Senior Facilities of RAR’s annual excess cash flow, as defined under the Senior Facilities;

●

a certain percentage of the net cash proceeds of certain non-ordinary course asset sales, other dispositions of property or certain casualty events, in each case subject to certain exceptions and reinvestment rights; and

●

the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the Senior Facilities.

RAR may voluntarily repay outstanding loans that are funded solely by internally generated cash from business operations under the Senior Facilities at any time, without prepayment premium or penalty, except customary “breakage” costs with respect to LIBOR rate loans.

All obligations under the Senior Facilities are unconditionally guaranteed by each of RAR’s existing and future direct and indirect material, wholly- owned domestic subsidiaries, subject to certain exceptions, and the direct parent of RAR. The obligations are secured by a pledge of substantially all of RAR’s assets and those of each guarantor, including capital stock of the subsidiary guarantors and 65% of the capital stock of the first-tier foreign subsidiaries that are not subsidiary guarantors, in each case subject to certain exceptions, and its capital stock owned by RAR’s direct parent. Such security interests consist of a first-priority lien with respect to the collateral. For additional information regarding the Senior Facilities, see Note 6: Debt in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Table of Contents

Union Revolving Credit Facility

On December 29, 2020, Redbox Entertainment, LLC entered into a four-year, $20.0 million revolving credit facility with Union Bank (the “Union Revolving Credit Facility”). The facility is used exclusively to pay for minimum guarantees, license fees and related distribution expenses for original content obtained under the Company’s Redbox Entertainment label. Borrowings outstanding under the Union Revolving Credit Facility as of March 31, 2022 and December 31, 2021 were $4.1 million and $4.6 million, respectively.

Borrowings under the Union Revolving Credit Facility bear interest at either the alternate base rate or LIBOR (based on an interest period selected by the Company of one month, three months or six months) in each case plus a margin. The alternate base rate loans bear interest at a per annum rate equal to the greatest of (i) the base rate in effect on such day, (ii) the federal funds effective rate in effect on such day plus 1⁄2 of 1.0%, and (iii) daily one month LIBOR plus 1.0%. The revolving credit facility borrowings that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin of 0.50%. The borrowing interest rate for the Union Revolving Credit Facility was 4.25% as of March 31, 2022 and December 31, 2021, respectively.

On April 15, 2022, the Company agreed, pursuant to the Voting and Support Agreement (as more fully described in Note 1: Basis of Presentation in Redbox’s Notes to Condensed Consolidated Financial Statements), to (i) permanently reduce a portion of its revolving commitment under its Union Revolving Credit Facility in an amount equal to $10.6 million (and the Company made such reduction) and (ii) among other agreements, refrain from borrowing under the Union Revolving Credit Facility without the consent of Aspen and Redwood Holdco, LP (other than with respect to certain scheduled borrowings and borrowings to cover interest, fees and expenses).

All obligations under the Union Revolving Credit Facility are guaranteed by all direct and indirect wholly owned subsidiaries of the Company’s Redbox Entertainment, LLC entity.

As of the period ended March 31, 2022, the Company was in compliance with all applicable loan covenants.

Historical Cash Flows


	Three Months Ended
	March 31,
Dollars in thousands	2022		2021
Net cash used in operating activities	$	(14,823)	$	(14,110)
Net cash used in investing activities		(2,832)		(3,518)
Net cash provided by financing activities		12,835		25,843
Total change in cash, cash equivalents and restricted cash	$	(4,820)	$	8,215

Operating Activities

Net cash used in operating activities during the three months ended March 31, 2022 was $14.8 million compared to net cash used in operating activities of $14.1 million for the three months ended March 31, 2021. The $0.7 million decrease in operating cash flows was primarily driven by the following:

●

$13.7 million decrease in net income;

●

$20.1 million increase in net cash inflows from changes in working capital primarily due to an increase in trade payables; and

●

$7.1 million decrease in net non-cash income and expense included in net income primarily reflecting the non-cash pretax gain on the change in fair value on the warrant liabilities.

Table of Contents

Investing Activities

Investing activities reflect a $2.8 million net use of cash during the three months ended March 31, 2022 compared to a $3.5 million net use of cash during the three months ended March 31, 2021. The decrease is due to less capital expenditures in 2022 compared to 2021, primarily on the Company’s kiosk infrastructure.

Financing Activities

Net cash provided by financing activities was $12.8 million during the three months ended March 31, 2022 compared to net cash provided by financing activities of $25.8 million for the three months ended March 31, 2021. The $13.0 million decrease reflects less borrowings on the Company’s Senior Facilities.

Contractual Payment Obligations

The following is a summary of contractual obligations and other commitments as of March 31, 2022. Also see Note 3: Leases in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q for expected future payments relating to the Company’s operating and finance lease liabilities.


									2026 &
Dollars in thousands	2022		2023		2024		2025		Beyond		Total
Long-term debt⁽¹⁾	$	38,394	$	—	$	271,562	$	—	$	—	$	309,956
Contractual interest on long-term debt⁽¹⁾		21,627		25,840		7,932		—		—		55,399
Revolving credit facilities⁽¹⁾		3,145		—		33,223		—		—		36,368
Minimum estimated movie content commitments⁽²⁾		40,709		8,865		—		—		—		49,574
Asset retirement obligations⁽³⁾		—		—		—		—		9,501		9,501
Other⁽⁴⁾		505		67		—		—		—		572
Total⁽⁵⁾	$	104,380	$	34,772	$	312,717	$	—	$	9,501	$	461,370

(1)	See Note 6: Debt in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

(2)	See Note 13: Commitments and Contingencies in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

(3)

Asset retirement obligations represent estimated amounts the Company is obligated to pay to return the space a kiosk occupies to its original condition upon removal of a kiosk and are presented as occurring in 2025 and beyond as the timing of kiosk removals cannot be reasonably determined. The amount is included as a component of Other long term liabilities on the Condensed Consolidated Balance Sheets.

(4)	Balance represents primarily firm commitments for service parts for kiosk maintenance/repairs/upgrades, and expenditures related to information technology.

(5)

Income tax liabilities for uncertain tax positions were excluded as the Company is not able to make a reasonably reliable estimate of the amount and period of related future payments. As of December 31, 2021, the Company had $2.2 million of gross unrecognized tax benefits for uncertain tax positions.

Off-Balance Sheet Arrangements

Other than certain contractual arrangements listed above, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. For additional information see Note 13: Commitments and Contingencies in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Table of Contents

Critical Accounting Policies and Estimates

The Company’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America and include amounts based on management’s prudent judgments and estimates. Actual results may differ from these estimates. Management believes that any reasonable deviation from those judgments and estimates would not have a material impact on the Company’s consolidated financial position or results of operations. To the extent that the estimates used differ from actual results, however, adjustments to the Condensed Consolidated Statements of Operations and corresponding Condensed Consolidated Balance Sheets accounts would be necessary. These adjustments would be made in future periods. Some of the more significant estimates include goodwill, long-lived assets impairment, content library, and income taxes. For a further discussion of our significant accounting policies, refer to the Company’s 2021 Annual Report on Form 10-K.

Recent Accounting Pronouncements

Accounting Guidance Adopted:

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842” or “ASC 842”) related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted ASC 842 as of January 1, 2022, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption and not restated comparative periods; rather the effect of the change is recorded at the beginning of the year of adoption. The Company will elect the package of practical expedients permitted under the transition guidance within the new standard, which allows us to carryforward historical lease classification. In addition, we are electing the hindsight practical expedient to determine the reasonably certain lease term for existing leases. Lastly, we elect the short-term lease recognition exemption for our leases. This means for short-term leases, we will not recognize ROU assets and lease liabilities, and this includes not recognizing ROU asset or lease liabilities for existing short-term leases of those assets in transition. In preparation for adoption of the standard, we have implemented internal controls to enable the preparation of financial information.

The Company recorded ROU assets of $9.1 million and lease liabilities for operating leases of $9.4 million as of January 1, 2022. The standard did not materially impact our consolidated net earnings and had no impact on cash flows. See Note 3: Leases in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) to simplify the accounting for income taxes. This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also clarifies and simplifies other areas of ASC 740. The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risks in the ordinary course of its business. These risks primarily consist of fluctuations in interest rates.

The Company manages these risks primarily by managing the amount, sources, and duration of its debt funding and by using various derivative financial instruments such as interest rate hedges. The Company enters into derivative instruments with trusted and diverse counterparties to reduce credit risk. These derivative instruments are strictly used for risk management purposes and, accordingly, are not used for trading or speculative purposes.

Table of Contents

Interest Rate Risks

The Company is exposed to interest rate volatility with regard to its Senior Facilities. The Company manages this interest rate risk by periodically entering into interest rate derivative agreements to attempt to hedge the variability of future interest payments driven by fluctuations in interest rates.

The Company continually assesses interest rate sensitivity to estimate the impact of rising short-term interest rates on its variable rate debt. The Company’s interest rate risk management strategy is focused on limiting the impact of interest rate changes on earnings and cash flows to lower its overall borrowing cost. Historically, the Company has maintained the majority of its overall interest rate exposure on a fixed-rate basis. In order to achieve this, the Company has entered into derivative financial instruments such as interest rate swap agreements when appropriate and will continue to do so as appropriate. See Note 7: Derivatives, in Redbox’s Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q for additional information about interest rate risks managed through derivative activities and notional amounts of underlying hedged items.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Rule 13a-15 of the Exchange Act requires that we conduct an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report, and we have a disclosure policy in furtherance of the same. This evaluation is designed to ensure that all corporate disclosure is complete and accurate in all material respects. The evaluation is further designed to ensure that all information required to be disclosed in our SEC reports is accumulated and communicated to management to allow timely decisions regarding required disclosures and recorded, processed, summarized and reported within the time periods and in the manner specified in the SEC’s rules and forms. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our Chief Executive Officer and Chief Financial Officer supervise and participate in this evaluation, and they are assisted by other members of our Disclosure Committee.

We conducted the required evaluation, and our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e)) were effective as of March 31, 2022 to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company is party to a number of pending or threatened lawsuits arising out of, or incident to, the ordinary course of our business. See Note 13, Commitments and Contingencies of our Notes to unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report for information regarding legal proceedings, which is incorporated herein by reference in response to this item.

Item 1A. Risk Factors

Except as noted below, there have been no material changes to our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Table of Contents

We may be unable to successfully consummate the CSSE merger, or effectuate the other strategic alternatives we must implement in order to address our capital structure and financing needs.

The COVID-19 pandemic negatively impacted our business in 2021, and continues to have ongoing adverse effects on our business and results of operations and capital structure. The Company is considering and announced a number of strategic alternatives or transactions to address the situation, including the recently-announced merger with CSSE. There can be no assurance that the Company will be able to consummate the CSSE merger and achieve the intended benefits of that transaction, or as to when or whether the Company will implement any action as a result of its other strategic initiatives or whether the implementation of one or more such actions will be successful. Moreover, an event of default under the Amended Credit Agreement will occur if the CSSE merger agreement is terminated (and is not replaced by another Acceptable Purchase Agreement), or consummation of the CSSE merger does not occur on or before October 31, 2022 (or such later date as HPS may agree). If the Company is unable to successfully consummate the CSSE merger, or to otherwise implement one or more of our other strategic alternatives, the Company could continue to experience adverse pressures on its relationships with counterparties, its ability to access the capital markets, its ability to execute on its operational and strategic goals and its business, prospects, results of operations and liquidity generally, and may be forced into bankruptcy or liquidation.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On April 15, 2022, as a further condition of the Sixth Amendment, the Company issued to HPS Investment Partners, LLC (the administrative agent and collateral agent to the Credit Agreement) and certain affiliates (as defined in the Credit Agreement) the HPS Warrants to purchase 11,416,700 shares of Common Stock in the event certain milestones were not met under the Amended Credit Agreement. Upon signing of the Merger Agreement, the HPS Warrants became void and all rights of the warrant holders thereunder to exercise the HPS Warrants ceased. The issuance of the HPS Warrants was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to 4(a)(2) thereof and/or Regulation D promulgated thereunder. The issuances of any shares of Common Stock in connection with the exercise of the HPS Warrants was also expected to be exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof and/or Regulation D promulgated thereunder.

Item 3. Defaults Upon Senior Securities

N/A

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

N/A

Item 6. Exhibits

~~The~~See ~~following~~Exhibit ~~exhibits are filed as part of, or incorporated by reference into, this Quarterly Report~~Index.

No.		Description of Exhibit

3.1		Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 28, 2021).
3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 28, 2021).
31.1**		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document
104**		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

** Filed herewith.

*** Furnished.

Table of Contents

EXHIBIT INDEX


Exhibit No.		Description
31.1†		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2†		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2†		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS†		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH†		XBRL Taxonomy Extension Schema Document

101.CAL†		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†		XBRL Taxonomy Extension Label Linkbase Document

101.PRE†		XBRL Taxonomy Extension Presentation Linkbase Document

104†		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

† Filed herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities ~~Exchange~~ Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REDBOX ENTERTAINMENT INC.
Date: November 22, 2021	By:	/s/ Galen C. Smith
		Name: Galen C. Smith
		Title: Chief Executive Officer(Principal Executive Officer)
Date: November 22, 2021	By:	/s/ Kavita Suthar
		Name: Kavita Suthar
		Title: Chief Financial Officer(Principal Financial and Accounting Officer)


		REDBOX ENTERTAINMENT INC.


Dated: May 13, 2022	By:	/s/ Galen C. Smith
	Name:	Galen C. Smith
	Title:	Chief Executive Officer
		(Principal Executive Officer)

Dated: May 13, 2022	By:	/s/ Kavita Suthar
	Name:	Kavita Suthar
	Title:	Chief Financial Officer and Principal Accounting Officer
		(Principal Financial and Accounting Officer)

Filing Compare · Redbox Entertainment Inc.