SecProbe.io

CORRESP
1
filename1.htm

   787 Seventh Avenue

                                                                                New York, NY 10019-6099

                                                                                Tel: 212 728 8000

                                                                                Fax: 212 728 8111

May 4, 2023

VIA EDGAR

Division of Corporation Finance

U.S. Securities & Exchange Commission

100 F Street, NE

Washington, D.C. 20549

    Attention:
    Nicholas Nalbantian

    Dietrich King

    Blaise Rhodes

    Angela Lumley

    Re:
    The Chosen, Inc.

    Amendment No.1 to Registration Statement on Form 10-12G

    Filed April 3, 2023

    File No. 000-56519

Dear Mr. Nalbantian:

On behalf of The Chosen, Inc. (the “Company”),
we are hereby responding to the letter, dated April 17, 2023 (the “Comment Letter”), from the staff (the “Staff”)
of the U.S. Securities and Exchange Commission (the “Commission”), regarding the Company’s Amendment No.1
to the Registration Statement on Form 10-12G, filed on April 3, 2023 (the “Registration Statement”).

The Company has responded to all of the Staff’s
comments by providing an explanation of the Company’s disclosures and by providing supplemental information as requested. The Staff’s
comments are repeated below in bold and followed by the Company’s response. Terms used but not otherwise defined herein have the
meanings set forth in the Registration Statement.

Amendment No. 1 to Registration Statement
on Form 10-12G filed April 3, 2023

Item 1. Business.

Recent Transactions, page 5

    1.
    We note that on November 29, 2022, you entered into a Contribution Funding and Production Agreement. an Intellectual Property Assignment and Limited Assumption Agreement and a License Agreement for financial contributions in the aggregate amount of $150,000,000, of which $4,500,000 was to be allocated as the purchase price for the intellectual property rights and assets associated with the Chosen Series along with an exclusive license to the commercial rights related to the development, production, distribution and licensing of the Chosen Series. Please provide us with a detailed discussion of how you accounted for these agreements and site the specific authoritative literature to support you accounting treatment.

Response: We acknowledge
the Staff’s comment and respectfully advise the Staff that the Company considered ASC 815, Derivatives and Hedging (“ASC
815”), ASC 835, Interest (“ASC 835”), ASC 470, Debt (“ASC 470”), ASC 606, Revenue from
Contracts with Customers (“ASC 606”) and ASC 958-605, Not-for-Profit Entities—Revenue Recognition
(“ASC 958-605”) to support its accounting treatment of the Contribution Funding and Production Agreement, Intellectual
Property Assignment and Limited Assumption Agreement and License Agreement.

BRUSSELS
   CHICAGO   FRANKFURT   HOUSTON   LONDON   LOS ANGELES   MILAN

NEW YORK   PALO ALTO   PARIS   ROME   SAN FRANCISCO   WASHINGTON

Page 2

May 4, 2023

Summary

The Company determined, under the Contribution
Funding and Production Agreement (the “Contribution Funding Agreement”), the financial contribution to the Company in the
aggregate amount of $145,500,000 (the “Contribution Funding”) should be treated as 1) a liability pursuant to ASC 470-10-25-1
and 25-2, 2) initially measured at $145,500,000 in accordance with ASC 835-30-25-4, and 3) subsequently measured applying an effective
interest rate based on the future cash flows in accordance with ASC 470-20-35-3.

The Company determined, under the Intellectual
Property Assignment and Limited Assumption Agreement and License Agreement, that the Company grants Come and See Foundation, Inc. (“CAS”)
a right to use license of functional IP, in accordance with ASC 606-10-55-59, for the completed and unproduced seasons of the Chosen Series
in exchange for fixed consideration of $4,500,000. This unit of accounting is accounted for under ASC 606 as CAS is a customer that is
receiving a good or service that is part of the Company’s ordinary operations. The $4,500,000 represents the commensurate value
received in exchange for Assigned Rights (as defined below) to use the license in not-for-profit markets, which is allocated on a relative
standalone selling price basis to the multiple performance obligations, the completed and future unproduced seasons, in accordance with
ASC 606-10-32-32 through 32-33.

The Company determined, under the License
Agreement, the donation proceeds received from CAS represent 1) a nonexchange transaction to be accounted for as contributions received
in accordance with under ASC 958-605, and 2) should be recognized as contribution revenues pursuant to ASC 958-605-25-2 as the donations
are part of the Company’s ongoing major or central activities.

The Company reached the above determinations
based upon the following.

Pursuant to ASC 606-10-25-9, the Company
determined the agreements between the Company and CAS should be combined and viewed in conjunction with one another that form a singular
transaction, principally as the agreements were negotiated as a package to achieve a collective commercial objective, which is for CAS
to provide financing to fund, the Chosen Series and create a tax-deductible model for donors to contribute to the Chosen Series, while
providing CAS the Assigned Rights to spread the mission through distribution of the Chosen Series in non-profit markets. The Company then
determined the units of account in the agreements as the (1) Contribution Funding, and (2) the licensing rights granted for the intellectual
property (the “IP Licensing Rights”).

Contribution Funding

The substance of the Contribution Funding
is a financing arrangement, whereby  CAS is acting as a lender and receives a first-priority continuing senior security interest and
lien in and to the intellectual property (“IP”) of the Chosen Series. While the IP legally transfers to CAS through the Intellectual
Property Assignment and Limited Assumption Agreement, the intent of this legal transfer was to collateralize the financing provided to
the Company and to ensure that the Series does not deviate from its historical plot and message. The intent of the transaction from CAS’
perspective is not to monetize its use of the Chosen Series, but rather to secure the right to the existing and contemplated, yet unproduced
seasons and spread the mission of the Chosen Series in non-profit markets.

Page 3

May 4, 2023

The Company first assessed the Contribution
Funding in accordance with ASC 815-10-15-83 and determined it does not meet the definition of a derivative. The Contribution Funding meets
criteria (a) and (c) in paragraph ASC 815-10-15-83 as the Contribution Funding has 1) an underlying based on the Company’s revenues
and Liquidity Events and a payment provision as a payment would occur upon such trigger events, and 2) a net settlement involving a one-way
payment of cash, respectively. However, the Contribution Funding does not meet criterion (b) in paragraph ASC 815-10-15-83 because the
Contribution Funding Agreement requires CAS to provide a significant initial net investment of $145,500,000 to the Company; such amount
is the principal amount that will be returned to CAS if certain defined Liquidity Events occur. CAS has the right to a royalty payment
(discussed and defined below as the CAS Gross Royalty) after the return of the initial capital ($145,500,000) which is akin to indexed
interest payments after the holder (CAS) receives par (i.e., the original invested amount). That is, the Contribution Funding liability
is carried at par at inception (discussed below) such that the initial investment is equivalent to or more than a contract that would
have a similar response to changes in market factors (i.e., an indexed return based on revenues generated from the Company’s IP).

The Company also considered whether
the Contribution Funding was in the scope of sale of future revenues, as the Company received cash from CAS and is subsequently repaying
CAS based on a specified percentage of revenue from the Chosen Series (discussed and defined below as the CAS Gross Royalty). In accordance
with ASC 470-10-25-1 and 25-2, the Company determined the Contribution Funding should be accounted for as debt and should not be recorded
as deferred income because 1) the substance of the Contribution Funding is a financing arrangement, 2) the Company has significant continuing
involvement in the generation of the cash flows due to CAS as the Company is responsible for all commercial activities which give rise
to repayment under the Contribution Funding Agreement, and 3) the repayment of the Contribution Funding is accelerated upon the defined
Liquidity Events of the Company.

As it relates to recognition of the
Contribution Funding, in accordance with ASC 835-30-25-4, it was initially measured at $145,500,000 because there were no other rights
or privileges exchanged in connection with the Contribution Funding, outside of the IP Licensing Rights discussed below, for which consideration
could be ascribed. Therefore, interest is not required to be imputed pursuant to ASC 835-30-25-4 such that the carrying value of the debt
would be the value of cash proceeds exchanged of $145,500,000.

As defined in the License Agreement,
the Company will pay CAS a 5% royalty (“CAS Gross Royalty”) on revenue received from its use and exploitation of the commercial
rights in and to the Chosen Series (discussed below) which acts as principal repayment of the Contribution Funding. The Company determined
that, in accordance with ASC 470-20-35-3, an effective interest rate was calculated based on the future CAS Gross Royalty expected to
be paid to CAS and the expected timing and amount of the defined Liquidity Payment. Subsequent changes in estimates of future CAS Gross
Royalty amounts to be paid and/or the timing of the Liquidity Payment will be accounted for prospectively.

The Company also considered whether
the Liquidity Event or the CAS Gross Royalty could potentially be a redemption feature that would require bifurcation as embedded derivatives,
determining the criteria of bifurcation in ASC 815-15-25-1 were not met.

IP Licensing Rights

The Company first assessed each party’s
rights to determine the treatment of the license pursuant to the Intellectual Property Assignment and Limited Assumption Agreement and
License Agreement.

The Company’s Rights

Pursuant to the License Agreement, the
Company has certain rights which allow the Company to maintain nearly complete discretion over the production and commercialization of
the Series. The Company’s rights include but are not limited to (1) the exclusive rights to develop, produce, distribute, market
and exploit the Series in commercial markets, (2) the exclusive rights in and to all distribution, exhibition, exploitation, performance
and transmission rights with respect to the Series, (3) the rights to sub-license and sub-distribute the Series in commercial markets,
and (4) access to all foreign language dubbed and subtitled versions of the Series created by CAS. The Company also retains certain approval
rights, including but not limited to, (1) approval of CAS’ creation and distribution of any dubbed, subtitled and/or foreign and
local-language versions of the Series, (2) approval of any sublicensing rights granted by CAS, (3) approval over any marketing or promotion
of the Series by CAS in the NFP sector to ensure consistent messaging and marketing efforts. The Company’s rights are referred to
collectively as the “Commercial Licensing Rights”.

Page 4

May 4, 2023

Assigned Rights

Pursuant to the Contribution Funding
Agreement, CAS has the right to ownership over the intellectual property rights of the Chosen Series provided through the Intellectual
Property Assignment and Limited Assumption Agreement, which represented the collateral for which CAS receives a first-priority continuing
senior security interest and lien in and to for the purpose of the Contribution Funding.

Additionally, pursuant to the License
Agreement, CAS has certain rights including, but not limited to (1) exclusive rights to distribute the Series (in all languages) to not-for-profit
(“NFP”) entities and institutions, (2) exclusive rights to solicit charitable donations in connection with such non-profit
sector distribution of, and in support of the further distribution of, the Series, (3) non-exclusive rights to stream the Series on CAS’
non-profit video-on-demand (“VOD”) app (the “Chosen App”) and other related non-profit VOD media, and (4) certain
approval and other administrative rights respecting the production and distribution of the Chosen Series, collectively the “Assigned
Rights”.

However, many of these rights are
subject to the Company’s approval process and other rights, such as (1) CAS’ rights to create a foreign version of the
Chosen Series and sublicensing to other NFP entities and (2) the Company’s ability to exploit and have free access in the
commercialization of any foreign subtitled or foreign CAS versions. Thus, CAS’ use of the Assigned Rights to the IP are subject to the Company’s rights and approval processes.

Further, the Company retains 95% of
proceeds from the Commercial Licensing Rights and 90% of the Chosen App donations (the “NP App Donations”, further described
below). This indicates the primary intent of the transaction from CAS’ perspective is not to monetize its use of the Series through
the Assigned Rights (primarily because the entity is a non-profit entity), but rather to spread the message, and support the mission,
of the Series.

Licensing of the Assigned Rights

The Company determined the arrangement
represents the granting of a license of the Assigned Rights to CAS for consideration of $4,500,000, which represents an upfront fixed
payment commensurate with the fair value received in exchange for Assigned Rights that should be assessed in accordance with ASC 606.
The Company determined that CAS is a customer pursuant to ASC 606 because the production of the Series is a normal output from the Company’s
ordinary business activities and the transfer of this output in exchange for consideration is consistent with the Company’s historical
revenue generating activities.

The Company has multiple performance
obligations in accordance with ASC 606-10-25-19, which are 1) a right to use license of functional IP to the existing seasons of the Chosen
Series, and 2) a right to use license of functional IP to each of the contemplated, yet unproduced seasons of the Chosen Series. In accordance
with ASC 606-10-55-59, the Company determined the IP is functional IP due to its significant standalone functionality.

In accordance with ASC 606-10-32-32
through 32-33, the Company allocated the transaction price of $4,500,000 to the performance obligations on a relative standalone selling
price basis. The Company recognizes revenue at the point in time it fulfills its performance obligation, which is evidenced when each
season of the Chosen Series is made available to CAS. As of December 31, 2022, the Company recognized revenue for the license granted
for the completed seasons of the Chosen Series, and recorded deferred revenue for the contemplated, yet uncompleted seasons of the Chosen
Series.

Page 5

May 4, 2023

The Company considered if the NP App
Donations received from CAS should be considered as a component of the transaction price for the Assigned Rights and determined, as discussed
below, the NP App Donations received are not within the scope of ASC 606 and the upfront fixed payment was commensurate value for the
exchange.

NP App Donations

The Company determined the NP App Donations,
which are recorded as contribution revenues, should be assessed under ASC 958-605 Not-for-Profit Entities — Revenue Recognition
(“ASC 958-605”) because they represent contributions received in a nonreciprocal or nonexchange