UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the fiscal period ended: ~~December 31, 2022~~June 30, 2023

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

For the transition period from _____ to _____

Commission File Number: 001-31810

~~Cinedigm~~Cineverse Corp.

(Exact name of registrant as specified in its charter)


Delaware		22-3720962
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

244 Fifth Avenue, Suite M289, New York, N.Y.		10001
(Address of principal executive offices)		(Zip Code)

(212) 206-8600

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol	Name of each exchange on which registered
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE	~~CIDM~~CNVS	NASDAQ CAPITAL MARKET

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 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 Act). Yes ☐ No ☒

As of ~~February 10,~~August 7, 2023, ~~179,092,441~~12,286,417 shares of Class A Common Stock, $0.001 par value, were outstanding.

~~CINEDIGM CORP~~Cineverse Corp.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at ~~December 31, 2022 (Unaudited)~~June 30, 2023 and March 31, ~~2022 (Audited)~~2023	1
	Unaudited Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~	2
	Unaudited Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the Three ~~and Nine~~ Months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~	4
	Unaudited Condensed Consolidated Statements of Equity for the Three ~~and Nine~~ Months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2822
Item 4.	Controls and Procedures	3627

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	3828
Item 1A.	Risk Factors	3828
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3828
Item 3.	Defaults Upon Senior Securities	3828
Item 4.	Mine Safety Disclosures	3828
Item 5.	Other Information	3828
Item 6.	Exhibits	3829
Exhibit Index		3829
Signatures		3930

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

~~CINEDIGM CORP.~~Cineverse Corp.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	As of						As of
	December 31, 2022			March 31, 2022			June 30, 2023			March 31, 2023
	(Unaudited)						(Unaudited)
ASSETS
Current assets
Current Assets
Cash and cash equivalents	$	8,796		$	13,062		$	12,129		$	7,152
Accounts receivable, net of allowance of $2,780 and $2,921, respectively		24,993			30,843
Accounts receivable								14,711			20,846
Unbilled revenue		2,681			2,349			2,247			2,036
Employee retention tax credit		2,475			—			1,773			2,085
Prepaid and other current assets		7,303			5,909			7,637			5,458
Total current assets		46,248			52,163			38,497			37,577
Equity investment in Metaverse, a related party, at fair value		5,200			7,028			5,200			5,200
Property and equipment, net		1,695			1,980			2,075			1,833
Intangible assets, net		18,864			20,034			19,188			19,868
Goodwill		21,025			21,084			20,824			20,824
Other long-term assets		1,863			2,347			2,862			2,686
Total assets	$	94,895		$	104,636
Total Assets							$	88,646		$	87,988
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current Liabilities
Accounts payable and accrued expenses	$	40,719		$	52,025		$	29,867		$	34,531
Line of credit, including unamortized debt issuance costs of $133 and $0, respectively		4,867			—
Line of credit, including unamortized debt issuance costs of $32 and $76, respectively								4,968			4,924
Current portion of deferred consideration on purchase of business		4,694			4,513			3,615			3,788
Other current liabilities		467			454
Current portion of earnout consideration on purchase of business								1,526			1,444
Operating lease liabilities								418			418
Current portion of deferred revenue								221			226
Total current liabilities		50,747			56,992			40,615			45,331
Deferred consideration on purchase of business – net of current portion		5,940			6,203			2,868			2,647
Operating lease liabilities - net of current portion								728			863
Other long-term liabilities		564			491			59			74
Total liabilities		57,251			63,686
Total Liabilities								44,270			48,915
Commitments and contingencies (see Note 6)
Stockholders’ Equity
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; 7 shares issued and 7 shares outstanding at December 31, 2022 and March 31, 2022. Liquidation preference of $3,648		3,559			3,559
Class A Common stock, $0.001 par value; 275,000,000 shares authorized at December 31, 2022 and March 31, 2022, 180,225,330 and 176,629,435 shares issued and 178,909,479 and 175,313,584 shares outstanding at December 31, 2022 and March 31, 2022, respectively		177			174
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; 7 shares issued and outstanding, respectively, at June 30, 2023 and March 31, 2023.								3,559			3,559
Common stock, $0.001 par value; Class A stock 275,000,000 shares authorized at June 30, 2023 and March 31, 2023, 11,750,765 and 9,413,597 shares issued and 11,684,973 and 9,347,805 shares outstanding at June 30, 2023 and March 31, 2023, respectively.								191			185
Additional paid-in capital		526,402			522,601			539,997			530,998
Treasury stock, at cost; 1,315,851 shares		(11,608	)		(11,608	)
Treasury stock, at cost; 65,792 shares								(11,608	)		(11,608	)
Accumulated deficit		(479,229	)		(472,310	)		(486,033	)		(482,395	)
Accumulated other comprehensive loss		(389	)		(163	)		(480	)		(402	)
Total stockholders’ equity of Cinedigm Corp.		38,912			42,253
Total stockholders’ equity of Cineverse Corp.								45,626			40,337
Deficit attributable to noncontrolling interest		(1,268	)		(1,303	)		(1,250	)		(1,264	)
Total equity		37,644			40,950			44,376			39,073
Total liabilities and equity	$	94,895		$	104,636
Total Liabilities and Equity							$	88,646		$	87,988

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except ~~share and~~ per share data)


		Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended June 30,
		2022			2021			2022			2021			2023			2022
Revenues		$	27,882		$	14,084		$	55,478		$	39,202		$	12,980		$	13,590
Costs and expenses:
Direct operating			14,411			6,459			29,859			14,423			6,987			7,356
Selling, general and administrative			9,107			7,358			29,016			20,520			7,888			9,818
Depreciation and amortization			924			1,031			2,908			3,663			822			1,000
Total operating expenses			24,442			14,848			61,783			38,606			15,697			18,174
Operating income (loss)			3,440			(764	)		(6,305	)		596
Operating loss															(2,717	)		(4,584	)
Interest expense			(367	)		(97	)		(880	)		(277	)		(295	)		(133	)
Gain on forgiveness of PPP loan			—			—			—			2,178
Change in fair value of equity investment in Metaverse, a related party			—			453			(1,828	)		1,453
Employee retention tax credit			2,025			—			2,475			—
Other income (expense)			(76	)		(22	)		(82	)		69
Income (loss) before income taxes			5,022			(430	)		(6,620	)		4,019
Income tax benefit			—			26			—			576
Net income (loss)			5,022			(404	)		(6,620	)		4,595
Net (income) loss attributable to noncontrolling interest			(8	)		19			(35	)		23
Net income (loss) attributable to controlling interests			5,014			(385	)		(6,655	)		4,618
Decrease in fair value of equity investment in Metaverse, a related party															—			(1,256	)
Other expense, net															(504	)		(14	)
Net loss before income taxes															(3,516	)		(5,987	)
Income tax expense															(20	)		—
Net loss															(3,536	)		(5,987	)
Net income attributable to noncontrolling interest															(14	)		(18	)
Net loss attributable to controlling interests															(3,550	)		(6,005	)
Preferred stock dividends			(88	)		(89	)		(264	)		(267	)		(88	)		(88	)
Net income (loss) attributable to common stockholders		$	4,926		$	(474	)	$	(6,919	)	$	4,351
Net loss attributable to common stockholders														$	(3,638	)	$	(6,093	)

Net income (loss) per share attributable to common stockholders:
Net loss per share attributable to common stockholders:
Basic		$	0.03		$	(0.00	)	$	(0.04	)	$	0.03		$	(0.37	)	$	(0.69	)
Diluted		$	0.03		$	(0.00	)	$	(0.04	)	$	0.03		$	(0.37	)	$	(0.69	)
Weighted average shares of common stock outstanding:	Weighted average shares of common stock outstanding:
Basic			178,899,605			173,167,450			177,077,803			169,413,873			9,879			8,771
Diluted			178,899,605			173,167,450			177,077,803			173,017,364			9,879			8,771

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Unaudited)

(In thousands)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2022

2021

2022

2021

Net income (loss)

5,022

$
(404
)

$
(6,620
)

$
4,595

Other comprehensive income (loss):

Foreign exchange translation

88

(14
)

(226
)

(33
)
Comprehensive income (loss) attributable to noncontrolling interest

(8
)

19

(35
)

23

Comprehensive income (loss)

$
5,102

$
(399
)

$
(6,881
)

$
4,585


	Three Months Ended June 30,
	2023			2022
Net loss	$	(3,536	)	$	(5,987	)
Other comprehensive loss:
Foreign exchange translation		(78	)		48
Comprehensive income attributable to noncontrolling interest		(14	)		(18	)
Comprehensive loss	$	(3,628	)	$	(5,957	)

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended December 31,						Three Months Ended June 30,
	2022			2021			2023			2022
Cash flows from operating activities:
Net (loss) income	$	(6,620	)	$	4,595
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Net loss							$	(3,536	)	$	(5,987	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,908			3,663			822			1,000
Allowance for prepaid advances								173			32
Changes in fair value of equity investment in Metaverse		1,828			(1,464	)		—			1,256
Gain from forgiveness of PPP loan		—			(2,178	)
Impairment of advances		1,636			782
Provision (benefit) for doubtful accounts		54			(397	)
Amortization of debt issuance costs		138			—			44			—
Stock-based compensation		3,906			3,278			409			980
Interest expense for deferred consideration & earnouts		743			97
Non-monetary sale of content licenses		(1,022	)		—
Interest expense for deferred consideration and earnouts								181			133
Other		51			59			263			3
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		5,795			(8,164	)
Accounts receivable								5,656			5,625
Unbilled revenue		(332	)		(1,449	)		(211	)		(248	)
Prepaids and other current and long-term assets		(2,747	)		(1,320	)		(2,688	)		1,274
Employee retention tax credit		(2,475	)		—			312			—
Accounts payable, accrued expenses, and other liabilities		(11,764	)		7,244			(4,685	)		(5,266	)
Net cash (used in) provided by operating activities		(7,901	)		4,746
Net cash used in operating activities							$	(3,260	)		(1,198	)
Cash flows from investing activities:
Purchases of property and equipment		(429	)		(292	)
Expenditures for long-lived assets								(272	)		(141	)
Purchase of businesses		—			(4,750	)		—			80
Sale of investment securities		—			11
Net cash used in investing activities		(429	)		(5,031	)	$	(272	)		(61	)
Cash flows from financing activities:
Payments of notes payable and deferred consideration		(665	)		(7,786	)
Payments of notes payable								—			(284	)
Proceeds from line of credit		19,469			—			8,761			—
Payments on line of credit		(14,469	)		(1,956	)		(8,761	)		—
Debt issuance costs		(271	)		—
Issuance of common stock		—			12,378
Net cash provided by financing activities		4,064			2,636
Issuance of common stock, net of issuance costs								8,509			—
Net cash provided by (used in) financing activities							$	8,509			(284	)
Net change in cash and cash equivalents		(4,266	)		2,351			4,977			(1,543	)
Cash and cash equivalents at beginning of period		13,062			17,849			7,152			13,062
Cash and cash equivalents at end of period	$	8,796		$	20,200		$	12,129		$	11,519

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~Cineverse Corp.

SUPPLEMENTAL CASH FLOW INFORMATION AND DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITY

(Unaudited)

(In thousands)


	Nine Months Ended December 31,					Three Months Ended June 30,
	2022			2021		2023		2022
Cash interest paid	$	58		$	701	$	121	$	-
Income taxes paid		—			79	$	12	$	-
Lease liability related payments						$	109	$	-
Noncash investing and financing activities:
Accrued dividends on preferred stock		88			89	$	88	$	88
Issuance of Class A common stock for payment of accrued preferred stock dividends		264			267	$	88	$	88
Issuance of Class A common stock for business combination		—			4,824
Deferred consideration in purchase of business		—			1,980
Earnout consideration in purchase of a business		—			1,461	$	-	$	80
Earnout consideration paid with common shares of Company		(238	)		—
Earnout consideration adjustment		80			—
Treasury shares acquired for withholding taxes		—			5
Issuance of common stock for Board of Director compensation		3			—

~~CINEDIGM CORP.~~Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In ~~thousands, except share data)~~thousands)

Preferred Stock

Common Stock

Treasury

Additional
Paid-In

Accumulated

Accumulated
Other
Comprehensive

Total
Stockholders’

Non
Controlling

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Loss

Equity

Interest

Total

Balances as of March 31, 2021 (Audited)

7

$
3,559

166,228,568

$
164

1,313,836

$
(11,603
)

$
499,272

$
(474,080
)

$
(68
)

$
17,244

$
(1,362
)

$
15,882

Foreign exchange translation

—

—

—

—

—

—

—

—

(54
)

(54
)

—

(54
)
Stock-based compensation

—

—

35,714

—

—

—

983

—

—

983

—

983

Issuance of common stock in connection with a business combination

—

—

1,483,129

2

—

—

2,504

—

—

2,506

—

2,506

Preferred stock dividends paid with common stock

—

—

53,278

—

—

—

89

(89
)

—

—

—

—

Net income

—

—

—

—

—

—

—

5,187

—

5,187

7

5,194

Balances as of June 30, 2021

7

$
3,559

167,800,689

$
166

1,313,836

$
(11,603
)

$
502,848

$
(468,982
)

$
(122
)

$
25,866

$
(1,355
)

$
24,511

Foreign exchange translation

—

—

—

—

—

—

—

—

35

35

—

35

Stock-based compensation

—

—

132,630

—

—

—

946

—

—

946

—

946

Issuance of common stock in connection with business combinations

—

—

1,179,156

1

—

—

2,317

—

—

2,318

—

2,318

Treasury stock in connection with taxes withheld from employees

—

—

(2,015
)

—

2,015

(5
)

—

—

—

(5
)

—

(5
)
Preferred stock dividends

—

—

—

—

—

—

—

(89
)

—

(89
)

—

(89
)
Net loss

—

—

—

—

—

—

—

(184
)

—

(184
)

(11
)

(195
)
Balances as of September 30, 2021

7

$
3,559

169,110,460

$
167

1,315,851

$
(11,608
)

$
506,111

$
(469,255
)

$
(87
)

$
28,887

$
(1,366
)

$
27,521

Foreign exchange translation

—

—

—

—

—

—

(14
)

(14
)

—

(14
)
Stock-based compensation

—

—

147,712

—

—

—

1,349

—

—

1,349

—

1,349

Issuance of common stock in connection with equity line purchase commitment

—

—

210,084

—

—

—

—

—

—

—

—

—

Preferred stock dividends

—

—

102,697

—

—

—

178

—

—

178

—

178

Issuance of common stock in connection with performance stock units

—

—

263

—

—

—

—

—

—

—

—

—

Issuance of common stock in connection with equity line, net

—

—

5,300,000

7

—

—

12,371

—

—

12,378

—

12,378

Preferred stock dividends accrued

—

—

—

—

—

—

89

(89
)

—

—

—

—

Net income (loss)

—

—

—

—

—

—

—

(385
)

—

(385
)

(19
)

(404
)
Balances as of December 31, 2021

7

$
3,559

174,871,216

$
174

1,315,851

$
(11,608
)

$
520,099

$
(469,729
)

$
(101
)

$
42,394

$
(1,385
)

$
41,009


	Preferred Stock				Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'			Non Controlling
	Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			Equity			Interest			Total
Balances as of March 31, 2023 (Audited)		1	$	3,559		9,348	$	185		66	$	(11,608	)	$	530,998	$	(482,395	)	$	(402	)	$	40,337		$	(1,264	)	$	39,073
Foreign exchange translation		—		—		—		—		—		—			—		—			(78	)		(78	)		—			(78	)
Stock-based compensation		—		—		—		—		—		—			409		—			—			409			—			409
Issuance of common stock in connection with ATM raises, net		—		—		177		4		—		—			1,065		—			—			1,069			—			1,069
Issuance of common stock in connection with direct equity offering		—		—		2,150		2		—		—			7,437		—			—			7,439			—			7,439
Preferred stock dividends paid in stock		—		—		10		—		—		—			88		—			—			88			—			88
Preferred stock dividends accrued		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)
Net loss		—		—		—		—		—		—			—		(3,550	)		—			(3,550	)		14			(3,536	)
Balances as of June 30, 2023		1	$	3,559		11,685	$	191		66	$	(11,608	)	$	539,997	$	(486,033	)	$	(480	)	$	45,626		$	(1,250	)	$	44,376

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In ~~thousands, except share data)~~thousands)


	Preferred Stock				Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'			Non Controlling						Preferred Stock				Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’			Non Controlling			Total
	Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			Equity			Interest			Total			Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			Equity			Interest			Equity
Balances as of March 31, 2022 (Audited)		7	$	3,559		175,313,584	$	174		1,315,851	$	(11,608	)	$	522,601	$	(472,310	)	$	(163	)	$	42,253		$	(1,303	)	$	40,950			1	$	3,559		8,766	$	174		66	$	(11,608	)	$	522,601	$	(472,310	)	$	(163	)	$	42,253		$	(1,303	)	$	40,950
Foreign exchange translation		—		—		—		—		—		—			—		—			48			48			—			48			—		—		—		—		—		—			—		—			48			48			—			48
Stock-based compensation		—		—		—		—		—		—			980		—			—			980			—			980			—		—		—		—		—		—			980		—			—			980			—			980
Preferred stock dividends paid with common stock		—		—		108,024		—		—		—			88		—			—			88			—			88
Preferred stock dividends paid in stock																																—		—		5		—		—		—			88		—			—			88			—			88
Preferred stock dividends accrued		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)
Net income (loss)		—		—		—		—		—		—			—		(6,005	)		—			(6,005	)		18			(5,987	)
Net loss																																—		—		—		—		—		—			—		(6,005	)		—			(6,005	)		18			(5,987	)
Balances as of June 30, 2022		7	$	3,559		175,421,608	$	174		1,315,851	$	(11,608	)	$	523,669	$	(478,403	)	$	(115	)	$	37,276		$	(1,285	)	$	35,991			1	$	3,559		8,771	$	174		66	$	(11,608	)	$	523,669	$	(478,403	)	$	(115	)	$	37,276		$	(1,285	)	$	35,991
Foreign exchange translation		—		—		—		—		—		—			—		—			(362	)		(362	)		—			(362	)
Stock-based compensation		—		—		—		—		—		—			791		—			—			791			—			791
Preferred stock dividends paid with common stock		—		—		178,572		—		—		—			88		—			—			88			—			88
Issuance of common stock in connection with performance stock units and annual incentive awards, net of employee payroll taxes		—		—		2,066,879		2		—		—			871		—			—			873			—			873
Issuance of common stock for BD Earnout commitment		—		—		334,037		—		—		—			238		—			—			238			—			238
Preferred stock dividends accrued		—		—		—		—		—		—					(88	)		—			(88	)		—			(88	)
Net income (loss)		—		—		—		—		—		—			—		(5,664	)		—			(5,664	)		9			(5,655	)
Balances as of September 30, 2022		7	$	3,559		178,001,096	$	176		1,315,851	$	(11,608	)	$	525,657	$	(484,155	)	$	(477	)	$	33,152		$	(1,276	)	$	31,876
Foreign exchange translation		—		—		—		—		—		—			—		—			88			88			—			88
Stock-based compensation		—		—		—		—		—		—			657		—			—			657			—			657
Preferred stock dividends paid with common stock		—		—		224,359		—		—		—			88		—			—			88			—			88
Issuance of common stock for Board of Director compensation		—		—		684,024		1		—		—			—		—			—			1			—			1
Preferred stock dividends accrued		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)
Net income		—		—		—		—		—		—			—		5,014			—			5,014			8			5,022
Balances as of December 31, 2022		7	$	3,559		178,909,479	$	177		1,315,851	$	(11,608	)	$	526,402	$	(479,229	)	$	(389	)	$	38,912		$	(1,268	)	$	37,644

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM~~CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. NATURE OF OPERATIONS AND LIQUIDITY

~~Cinedigm~~Cineverse Corp. (“~~Cinedigm,”~~Cineverse”, “us”, “our”, and “Company” refers to Cineverse Corp. and its subsidiaries unless the ~~“Company,” “we,” “us,” or similar pronouns)~~context otherwise requires) was incorporated in Delaware on March 31, 2000. ~~We are~~ ~~(i)~~On May 22, 2023, the Company changed its corporate name to Cineverse Corp. Since our inception, we have played a ~~distributor~~significant role in the digital distribution revolution that continues to transform the media and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of titles and episodes released across digital, physical, theatrical, home and mobile entertainment ~~platforms (“Streaming”) and (ii) a servicer of digital cinema assets for movie screens in both North America and several international countries.~~landscape.

~~We report our financial results in two reportable segments~~Cineverse is a premier streaming technology and entertainment company with its core business (i) across a portfolio of owned and operated enthusiast streaming channels with enthusiast fan bases; (ii) as ~~follows: (i) Cinema Equipment Business ("Cinema Equipment")~~a large-scale global aggregator and ~~(ii) Content~~full-service distributor of feature films and ~~Entertainment Business (“Content & Entertainment”). The Cinema Equipment segment consists of the non-recourse, financing vehicles~~television programs; and ~~administrators~~(iii) as a proprietary technology software-as-a-service platform for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North America. Our Content & Entertainment segment operates in: (i) ancillary market aggregation and distribution of entertainment content and (ii) branded and curated over-the-top (“OTT”) app development and content distribution through subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts. We distribute products for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, NFL and Scholastic, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital ~~network~~content producers. We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, and Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

We played a significant role in the digital distribution revolution that continues to transform the media landscape, playing a pioneering role in transitioning approximately 12,000 movie screens from traditional analog film prints to digital distribution, and at the end of our fiscal year 2023, the Company's cinema equipment business ~~providing entertainment channels~~concluded its active operations, as its contracts reached maturity. The Company no longer separately manages cinema equipment separately, and ~~applications.~~with the run-off of its operations, no longer presents this part of the business as a separate segment. All prior period reporting within this report reflect this change.

Our Class A common stock, par value $0.001 per share (the "Common Stock") is listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CNVS.” On April 4, 2022, the Company received a letter from the Nasdaq indicating that the Company no longer met the Bid Price Rule.

On June 7, 2023, Cineverse Corp. filed with the Secretary of State of the State of Delaware a Certificate of Amendment to the Company's Fifth Amended and Restated Certificate of Incorporation (the "Reverse Split Charter Amendment"), pursuant to which the Company effected a 1-for-20 reverse stock split of the Class A common stock. The reverse stock split became effective as of 12:01 a.m. Eastern Time on June 9, 2023. All share and price amounts in this report reflect the 1-for-20 reverse stock split effected on June 9, 2023.

On June 30, 2023, Cineverse Corp. was notified by Nasdaq that the Company has regained compliance with the $1.00 bid price requirement for continued listing on The Nasdaq Capital Market. The Company remains subject to a one-year “Panel Monitor” as that term is defined by Nasdaq Listing Rule 5815(d)(4)(A).

Financial Condition and Liquidity

AsWe have a history of ~~December 31, 2022,~~net losses, and for the ~~Company has an accumulated deficit of $479.2~~ ~~million and negative working capital of $4.5~~ ~~million. For the three and nine months~~quarter ended ~~December 31, 2022, the Company~~June 30, 2023, we had a net ~~income (loss)~~loss attributable to common ~~shareholders~~stockholders in the amount of $$(~~4.9~~ ~~million and ($6.9~~3.6) ~~million, respectively. Net cash used in operating activities for the nine months ended December 31, 2022 was $7.9~~ million. We may continue to generate net losses for the foreseeable future. As of June 30, 2023, the Company has an accumulated deficit of $486.0 million and negative working capital of $2.1 million. Net cash used in operating activities for the three months ended June 30, 2023 was $3.3 million.

The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate, ~~9.0~~9.75% as of ~~December 31, 2022.~~June 30, 2023. ~~The Line of Credit Facility expires on~~ ~~September 15, 2023~~ ~~with a~~ ~~one-year~~ ~~extension available at EWB’s discretion.~~ As of ~~December 31, 2022,~~June 30, 2023, $5.0 million was outstanding on the Line of Credit Facility. On August 11, 2023, the maturity date of the Line of Credit Facility was extended one year to September 15, 2024. The outstanding principal balance on the Line of Credit Facility as of August 7, 2023 was $0.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B. Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares. The Company is not obligated to sell any shares under the ATM Sales Agreement. Any sales of shares made under the ATM Sales Agreement will be made pursuant the an effective shelf registration statement, for an aggregate offering price of up to $30 million. During the quarter ended June 30, 2023, the Company sold 177 thousand shares for $1.1 million in net proceeds, after deduction of commissions and fees.

On June 16, 2023, the Company closed on the sale of 2,150 thousand shares of common stock, 517 thousand pre-funded warrants, and warrants to purchase up to 2,667 thousand shares of common stock at a combined public offering price of $3.00 per share and accompanying warrant for aggregate gross proceeds of approximately $7.4 million, after deducting placement agent fees and other offering expenses in the amount of $0.6 million. The warrants had an exercise price of $3.00 per share, were exercisable immediately and will expire five years from the issuance. The Company received $2.999 per share for the pre-funded warrants, with the remaining $0.001 due at the time of exercise. All 516,667 pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand.

In addition, the Company remains authorized to purchase up to an aggregate of 500 thousand shares of its outstanding Common Stock, following the announcement of a stock repurchase program on March 1, 2023.

We believe our cash and cash equivalent balances, and availability under our credit facility ~~as of December 31, 2022~~ will be sufficient to support our operations for at least twelve months from the filing of this report. The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The accompanying interim Condensed Consolidated Financial Statements of ~~Cinedigm~~Cineverse Corp. have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2022~~2023 filed with the Securities and Exchange Commission (the “SEC”) on ~~July 1, 2022.~~June 29, 2023. These Condensed Consolidated Financial Statements are unaudited and have been prepared by the Company following the rules and regulations of the SEC.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations; however, the Company believes the disclosures are adequate to make the information presented not misleading.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2022.~~2023. Interim results are not necessarily indicative of the results for a full year.

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Significant items subject to such estimates and assumptions include revenue recognition, allowance for doubtful accounts, returns and recovery reserves, goodwill and intangible asset impairments, share-based compensation expense, valuation allowance for deferred income taxes and amortization of intangible assets. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On a regular basis, the Company evaluates the assumptions, judgments and estimates. Actual results may differ from these estimates.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We own an 85% interest in CON TV, LLC ("CONtv"), a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets. We evaluated the investment under the voting interest entity model and determined that the entity should be consolidated as we have a controlling financial interest in the entity through our ownership of outstanding voting shares, and that other equity holders do not have substantive voting, participating or liquidation rights. We recorded net ~~loss~~income attributable to noncontrolling interest in our Condensed Consolidated Statements of Operations equal to 11% of outstanding profit interest units retained by the noncontrolling interests.

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2022.~~2023.

Segment Reporting

Beginning in fiscal year 2024, following the run-off of the Company's digital cinema operations, the Company now manages its operations and manages its business in one reporting segment. Earlier periods presented herein have been presented to conform to this reportable segment composition.

Reclassifications

Certain amounts have been reclassified to conform to the current presentation.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits. We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal.

~~Accounts Receivable, Net~~

We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

Employee Retention Tax Credit

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") provided an employee retention credit which was a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act (the "Appropriations Act") extended and expanded the availability of the employee retention credit through December 31, 2021. The Appropriations Act amended the employee retention credit to be equal to 70% of qualified wages paid to employees during the 2021 fiscal year.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

The Company qualified for the employee retention credit beginning in June 2020 for qualified wages through September 2021 and filed a cash refund claim during the ~~three months~~fiscal year ended ~~September 30, 2022 and December~~March 31, ~~2022 for $0.5~~ ~~million and $2.0~~ ~~million, respectively. During~~2023 in the ~~three and nine months ended December 31, 2022, the Company recorded an employee retention credit totaling $2.0~~ ~~million and~~amount of $2.5 million ~~respectively,~~ in the Employee retention tax credit line on the Company’s ~~Condensed~~ Consolidated Statements of Operations. As of ~~December 31, 2022,~~June 30, 2023, the tax credit receivable of $1.8 million has been included in the Employee retention tax credit line on the Company's Condensed Consolidated Balance Sheet.

Property and Equipment, Net

Property and equipment, net are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:


Computer equipment and software		3 -5 ~~years~~	years
~~Digital cinema projection systems~~	Internal use software	105 years
Machinery and equipment		3 - 10 years
Furniture and fixtures		3 - 67 years
~~Internal-Use Software~~		5 ~~years~~

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications. These capitalized costs are included in property and equipment, net and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over the useful life of the software. Post-configuration training and maintenance costs are expensed as incurred. We amortize internal-use software over its estimated useful life on a straight-line basis.

Intangible Assets, Net

Intangible assets are stated at cost less accumulated amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested annually for impairment or sooner if a triggering event occurs.

Amortization lives of intangible assets are as follows:


Content Library			3 – 20 years
Advertiser Relationships and Channel			3 – 13 years
Customer Relationships			5 – 13 years
Software			10 years
Trademarks and Tradenames			2 – 15 years
Supplier Agreements			2 years

The Company’s intangible assets included the following (in thousands):


	As of June 30, 2023
	Cost Basis		Accumulated Amortization			Net
Content Library	$	24,073	$	(21,176	)	$	2,897
Advertiser Relationships and Channel		12,604		(1,348	)		11,256
Supplier Agreements		11,430		(11,430	)		-
Customer Relationships		8,690		(7,668	)		1,022
Software		3,200		(640	)		2,560
Trademark and Tradenames		4,026		(2,573	)		1,453
Total Intangible Assets	$	64,023	$	(44,835	)	$	19,188


	As of March 31, 2023
	Cost Basis		Accumulated Amortization			Net
Content Library	$	23,970	$	(21,126	)	$	2,844
Advertiser Relationships and Channel		12,604		(1,062	)		11,542
Supplier Agreements		11,430		(11,430	)		—
Customer Relationships		8,690		(7,600	)		1,090
Trademark and Tradenames		4,026		(2,274	)		1,752
Software		3,200		(560	)		2,640
Total Intangible Assets	$	63,920	$	(44,052	)	$	19,868

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

During the three months ended June 30, 2023 and 2022, the Company had amortization expense of $0.7 million, respectively.

As of June 30, 2023, amortization expense is expected to be (in thousands):


	Total
In-process intangible assets	$	1,888
Remainder of fiscal year 2024		2,404
2025		2,307
2026		2,040
2027		1,521
2028		1,246
Thereafter		7,782
	$	19,188

Content Assets

The Company capitalizes direct costs incurred in the production of content from which it expects to generate a return over the anticipated useful life and the Company’s predominant monetization strategy informs the method of amortizing these deferred costs. The determination of the predominant monetization strategy is made at commencement of the production or license period and the classification of the monetization strategy as individual or group only changes if there is a significant change to the title’s monetization strategy relative to its initial assessment. The costs are presently capitalized within construction-in-process and will be amortized as a group are included within Depreciation and Amortization within the Condensed Consolidated Statements of Operations.

Impairment of Long-lived and Finite-lived Intangible Assets

We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. ~~During the nine months ended December 31, 2022 and 2021,~~There were no impairment charges ~~were~~ recorded ~~from operations~~ for long-lived ~~assets or~~and finite-lived ~~assets.~~

~~Intangible Assets, Net~~

~~Intangible assets are stated at cost less accumulated amortization. For~~ intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested annually for impairment or sooner if a triggering event occurs.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

~~Amortization lives of intangible assets are as follows:~~


~~Content Library~~			3 – ~~20 years~~
~~Advertiser Relationships and Channel~~			3 – ~~13 years~~
~~Customer Relationships~~			5 – ~~13 years~~
~~Software~~			~~10 years~~
~~Trademarks and Tradenames~~			2 – ~~15 years~~
~~Supplier Agreements~~			~~2 years~~

~~The Company’s intangible assets included the following (in thousands):~~

As of December 31, 2022

Cost Basis

Accumulated
Amortization

Impairment

Net

Content Library

$
23,685

$
(21,038
)

$
—

$
2,647

Advertiser Relationships and Channel

11,104

(759
)

—

10,345

Customer Relationships

10,658

(7,531
)

(1,968
)

1,159

Software

3,200

(480
)

—

2,720

Trademark and Tradenames

4,026

(2,033
)

—

1,993

Total Intangible Assets

$
52,673

$
(31,841
)

$
(1,968
)

$
18,864

As of March 31, 2022

Cost Basis

Accumulated
Amortization

Impairment

Net

Content Library

$
23,685

$
(20,665
)

$
—

$
3,020

Advertiser Relationships and Channel

10,081

(161
)

—

9,920

Customer Relationships

10,658

(7,327
)

(1,968
)

1,363

Software

3,200

(240
)

—

2,960

Trademark and Tradenames

4,026

(1,301
)

—

2,725

Supplier Agreements

11,430

(11,384
)

—

46

Total Intangible Assets

$
63,080

$
(41,078
)

$
(1,968
)

$
20,034

During the nine months ended December 31, 2022 and 2021, no impairment charge was recorded for intangible assets. During the three and nine months ended December 31, 2022, the Company had amortization expense of $~~0.7~~ ~~million and $2.2~~ ~~million, respectively. During the three and nine months ended December 31, 2021, the Company had amortization expense of $0.7~~ ~~million and $2.2~~ ~~million, respectively.~~

~~During~~during the three months ended ~~December 31, 2022, the Company entered into a non-monetary transaction for the purchase~~June 30, 2023 and ~~sale of content licenses with an unrelated third-party. The fair value of the content licenses sold was determined to be $1.0~~ million which is included in Revenues in our Condensed Consolidated Statement of Operations for the three months ended December 31, 2022. The fair value of the content licenses purchased was determined to be $~~1.0~~ ~~million and is recognized in Intangible Assets, Net on our Condensed Consolidated Balance Sheet as of December 31,~~ 2022.

~~As of December 31, 2022, amortization expense is expected to be (in thousands):~~

Total

Remainder of fiscal year 2023

$
1,252

2024

3,343

2025

2,137

2026

1,745

2027

1,269

Thereafter

9,118

$
18,864

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

Goodwill

Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.

Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.

The Company has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or to perform the quantitative impairment test. The Company reassessed goodwill impairment on its annual measurement

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

date of March 31, ~~2022~~2023 by performing a qualitative analysis and determined that it was not more likely than not that the fair value of its reporting unit is less than its carrying amount.

No goodwill impairment charge was recorded in the three ~~and nine~~ months ended ~~December 31, 2022~~June 30, 2023 and ~~2021.~~2022.

Fair Value Measurements

The fair value measurement disclosures are grouped into three levels based on valuation factors:

•

Level 1 – quoted prices in active markets for identical investments

•

Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)

•

Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments)

The following tables summarize the levels of fair value measurements of our financial assets and liabilities (in thousands):


	As of December 31, 2022								As of June 30, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Equity investment in Metaverse, at fair value	$	—	$	—	$	5,200	$	5,200	$	—	$	—	$	5,200	$	5,200
	$	—	$	—	$	5,200	$	5,200	$	—	$	—	$	5,200	$	5,200

Liabilities:
Current portion of earnout consideration on purchase of a business	$	—	$	—	$	768	$	768	$	—	$	—	$	1,526	$	1,526
Long-term portion of earnout consideration on purchase of a business		—		—		676		676
	$	—	$	—	$	1,444	$	1,444	$	—	$	—	$	1,526	$	1,526


	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Equity investment in Metaverse, at fair value			$	—	$	5,200	$	5,200
	$	—	$	—	$	5,200	$	5,200

Liabilities:
Current portion of earnout consideration on purchase of a business	$	—	$	—	$	1,444	$	1,444
	$	—	$	—	$	1,444	$	1,444

12The Company has accounted for its investment in A Metaverse Company ("Metaverse") (SEHK: 1616) under the equity method of accounting as the Company can exert significant influence over Metaverse with its direct ownership and affiliation with the Company’s majority shareholders. The Company has also made an irrevocable election to apply the fair value option under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 825-10, Financial Instruments, as it relates to its equity investment in Metaverse.

The Company previously used quoted trading price of the Stock Exchange of Hong Kong to measure the investment's fair value. Following the halting of Metaverse stock trading on the Stock Exchange of Hong Kong on April 1, 2022, the Company valued our equity investment in Metaverse using a market approach and the investment is categorized as a Level 3 valuation based on unobservable inputs.

~~CINEDIGM~~CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(CONTINUED)~~

(Unaudited)

As of March 31, 2022

Level 1

Level 2

Level 3

Total

Assets:

Equity investment in Metaverse, at fair value

$
7,028

$
—

$
—

$
7,028

$
7,028

$
—

$
—

$
7,028

Liabilities:

Current portion of earnout consideration on purchase of a business

$
—

$
—

$
1,081

$
1,081

Long-term portion of earnout consideration on purchase of a business

—

—

603

603

$
—

$
—

$
1,684

$
1,684

~~The Company's equity investment in A Metaverse Company ("Metaverse") is in Hong Kong dollars and was translated into US dollars as of December 31, 2022 and March 31, 2022 at an exchange rate of~~ ~~7.8~~ ~~Hong Kong Dollars to~~ 1 US Dollar. The fair value of this equity investment was measured by the quoted market price of Metaverse on the Stock Exchange of Hong Kong (SEHK: 1616) as of March 31, 2022. On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange. As of December 31, 2022, Metaverse’s stock valuation is based on an independent valuation based on the market approach and is categorized as Level 3 based on unobservable inputs. The Company estimated the fair value ~~based on the market approach~~of Metaverse based on the last known enterprise value, adjusting for trends in ~~value from~~enterprise valuations and market capitalization for comparable companies. ~~The adjustment to~~As of June 30, 2023 and March 31, 2023, the fair value ~~of this investment resulted in a loss of~~was $~~1.8~~5.2 ~~million and gain of $~~million.~~1.5~~

million for the nine months ended December 31, 2022 and 2021, respectively. As the value of the investment in Metaverse is determined based on unobservable inputs, company and industry fluctuations, as well as general economic, political, regulatory and market conditions such as recessions, interest rate changes or international currency fluctuations, changes to these assumptions may have a significant impact on

The Company estimated the fair value of ~~our investment~~its earnout consideration using contractual inputs from the related business combination, which established specific fiscal year revenue growth, profitability and EBITDA targets. The Company utilizes the most up to date forecast to estimate the outcome against these targets to determine the ultimate estimated payout. During the quarter ended June 30, 2023, the Company accrued interest of $30 thousand and an increase in ~~Metaverse.~~the estimated earnout payments by $52 thousand based on fiscal year 2024 estimated performance.

Our cash and cash equivalents, accounts receivable, unbilled revenue, accounts payable and accrued expenses are financial instruments and are recorded at cost in the Condensed Consolidated Balance Sheets. The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature.

Prepaid and Other Current Assets

Prepaid and other current assets consisted of the following (in thousands):


	As of				As of
	December 31, 2022		March 31, 2022		June 30, 2023		March 31, 2023
Advances	$	3,244	$	2,117
Due from producers		1,549		1,861
Amounts due from producers					$	5,878	$	3,724
Other receivables		1,134		826		125		420
Inventory		209		116		165		207
Other prepaid expenses		1,167		989
Other prepayments						1,469		1,107
Total prepaid and other current assets	$	7,303	$	5,909	$	7,637	$	5,458

~~Advances represent~~Amounts due from producers represents amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record ~~impairment charges~~a provision for amounts that we expect may not be recoverable. ~~Impairments related to~~The provision for advances were $~~1.0~~0.2 million and $~~0.4~~0.03 million for the three months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021, respectively. Impairments related to advances were $1.6~~ ~~million and $0.8~~ ~~million for the nine months ended December 31, 2022 and 2021,~~ respectively.

13Other prepayments generally relate to prepaid operating expenses, short term deposits and prepaid taxes.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following (in thousands):


	As of				As of
	December 31, 2022		March 31, 2022		June 30, 2023		March 31, 2023
Accounts payable	$	17,720	$	34,177	$	10,291	$	15,042
Amounts due to producers		15,967		10,430		14,112		13,114
Accrued compensation and benefits		3,390		3,507		2,330		2,532
Accrued other expenses		3,642		3,911		3,134		3,843
Total accounts payable and accrued expenses	$	40,719	$	52,025	$	29,867	$	34,531

Revenue Recognition

Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less. We have in the past entered into arrangements in connection with activation fees due from our System deployments that had extended payment terms. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables present the Company’s disaggregated revenue by ~~segment and~~ source (in thousands):

Three Months Ended
December 31,

Nine Months Ended
December 31,

2022

2021

2022

2021

Cinema Equipment:

Deployment

$
7,458

$
220

$
9,340

$
1,263

Services

(316
)

506

(88
)

1,171

Digital system sales

44

1,334

1,966

9,110

Total Cinema Equipment revenue

$
7,186

$
2,060

$
11,218

$
11,544

Content & Entertainment:

Base distribution business

$
8,121

$
3,668

$
11,145

$
6,368

OTT streaming and digital

12,575

8,356

33,115

21,290

Total Content & Entertainment revenue

$
20,696

$
12,024

$
44,260

$
27,658

Total revenue

$
27,882

$
14,084

$
55,478

$
39,202


	Three Months Ended June 30,
	2023		2022
Streaming and digital	$	10,114	$	9,503
Base distribution		1,158		2,205
Podcast and other		429		455
Other non-recurring		1,279		1,427
Total revenue	$	12,980	$	13,590

~~Cinema Equipment Segment~~

Our Cinema Equipment segment consists of financing vehicles and administrators for Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

~~We retain ownership of our Systems and the residual cash flows related to the Systems in Phase I Deployment after the end of the~~ ~~10-year~~ ~~deployment payment period.~~

For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

The ~~Cinema Equipment segment also provides monitoring, data collection, serial data verification~~Company's Streaming and ~~management services~~digital revenue pertains to this segment, as well as to exhibitors who purchase their own equipment, in order to collect Virtual Print Fees (“VPFs”) from distributors and Alternative Content Fees (“ACFs”) from alternative content providers, and to distribute those fees to theatrical exhibitors (collectively, “Services”).

VPFs are earned, net of administrative fees, pursuant to contracts with distributors, whereby amounts are payable by a distributor to Phase I Deployment and to Phase II Deployment when distributor's movies are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to us with respect to Phase I Deployment based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period the title first plays for general audience viewing in a digital projector equipped movie theatre. The Phase 1 Deployment’s and Phase 2 Deployment's performance obligations for revenue recognition are met at this time.

Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows,its OTT business, including the ~~purchase price of all Systems, all financing costs, all “overhead~~licensing, service, advertising, and ~~ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. The Company evaluated the constraining estimates~~subscription revenue related to the Company's streaming business and partnerships. Base distribution revenue relates to non-streaming revenue, including Theatrical revenue and the sale of DVD's. Podcast and other revenue primarily relates to the Company's Bloody Disgusting Podcast Network. Other non-recurring revenue relates to the Company's legacy digital cinema operations, whose operations have run-off, still may generate non-recurring revenue from the sale of cinema assets or the recognition of variable consideration ~~and determined that it is not probable to conclude at this point in time that a significant reversal in~~as the ~~amount of cumulative revenue recognized will occur when the~~associated uncertainty associated with the ~~variable consideration is subsequently resolved.~~

Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (i) return the Systems to us; (ii) renew their license agreement for successive one-year terms; or (iii) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the Systems and Cinedigm receives the sale proceeds. Such sales were originally contemplated as the conclusion of the digital cinema deployment plan.

~~The Cinema Equipment segment earns an administrative fee of approximately~~ 5~~% of VPFs collected and, in addition, earns an incentive service fee equal to~~ ~~2.5~~% of the VPFs earned by Phase 1 Deployment. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at the time the related VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the distributors.

A limited number of systems from our Phase I deployment remain eligible for VPFs from certain distributors where Phase I exhibitors have renewed their term on an annual basis. We continue to pursue system sales for these remaining exhibitors. Our Phase II deployment currently consists of a limited number of exhibitors who purchased their own systems and have not yet reached recoupment or the end of their contractual term. We continue to administer VPFs for these limited systems from certain distributors.

~~During the three and nine months ended December 31, 2022, $7.4~~ ~~million and $9.1~~ million of revenue was recognized that was included in the accounts payable balance as constrained variable consideration at the beginning of the year. The Company recognized the revenue once the uncertainty associated with the variable consideration was resolved. As of December 31, 2022, approximately $~~1.0~~ ~~million remains on our balance sheet in accounts payable as constrained variable consideration.~~

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

~~Content & Entertainment Segment~~

Content & Entertainment segment earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”) on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the content is available for subscription on the digital platform (the Company’s digital content is considered functional IP), at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation.

Revenue from the sale of physical goods is recognized after deducting reserves for sales returns and other allowances. Reserves for potential sales returns of physical goods and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

The Content & Entertainment segment also has contracts for the theatrical distribution of third-party feature movies and alternative content. The Content & Entertainment segment’s distribution fee revenue participation in box office receipts are recognized at the time a feature movie and alternative content are viewed. The Content & Entertainment segment has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is ~~deferred until the third-party feature movie's or alternative content’s theatrical release date.~~resolved.

The Company follows the five-step model established by ~~Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"),~~ASC 606, Revenue from contracts with customers ("ASC 606") when preparing its assessment of revenue recognition.

Principal Agent Considerations

Revenue earned ~~by our Content & Entertainment segment~~ from the delivery of digital content and physical goods may be recognized gross or net depending on the terms of the arrangement. We determine whether revenue should be reported on a gross or net basis based on each revenue stream. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:

•

which party is primarily responsible for fulfilling the promise to provide the specified good or service; and

•

which party has discretion in establishing the price for the specified good or service.

Shipping and Handling

Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in direct operating expenses because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Credit Losses

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

~~Our Content & Entertainment segment~~We recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances is variable consideration as part of the transaction price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

During the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021,~~ we did not recognize any credit losses as part of its ongoing operations or reversals of previously recorded provisions, and did not have any write-offs charged against the allowance.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Contract Liabilities

We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, ~~even if amounts are refundable.~~

~~Deferred revenue pertaining to our Content & Entertainment segment includes amounts related to~~such as the sale of DVDs with future release ~~dates.~~

~~Deferred revenue relating to our Cinema & Equipment segment pertains to revenues earned~~dates, even if amounts are refundable. Amounts recorded as contract liabilities are generally not long-term in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms.nature.

The ending deferred revenue balance, including current and non-current balances as of June 30, 2023 and March 31, ~~2022~~2023, was and ~~December 31, 2022 was~~ $0.2 million and $~~0.4~~0.2 million respectively. For the three ~~and nine~~ months ended ~~December 31, 2022,~~June 30, 2023, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions of $0.2 million to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

Participations and royalties payable

When we use third-parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.

Concentrations

For the three months ended ~~December 31, 2022, Iconic, Distribution Solutions, a division of Alliance Entertainment, Amazon.com, Inc., and Tubi~~June 30, 2023, one customer represented 35%, 16%, 1428% ~~and~~ 5~~%, respectively,~~ of ~~Content & Entertainment segment revenues, and approximately~~ 16%, 7%, 14~~% and~~ 6~~%, respectively, of our~~ consolidated revenues.

~~For the nine months ended December 31, 2022, Iconic, Distribution Solutions, a division of Alliance Entertainment, Amazon.com, Inc., and Tubi, represented~~ 27%, 19%, 25~~% and~~ 10~~% respectively, of Content & Entertainment segment revenues, and approximately~~ 8%, 5%, 11~~% and~~ 5~~%, respectively, of our consolidated revenues.~~

For the three months ended ~~December 31, 2021, Amazon.com, Inc., Distribution Solutions, a division of Alliance Entertainment and Tubi,~~June 30, 2022, one customer represented approximately 15%, 1119% and 7~~%, respectively, of Content & Entertainment segment revenues and~~another customer represented approximately 13%, 9~~% and~~ 6~~%, respectively,~~ of ~~our~~ consolidated revenues.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

~~For the nine months ended December 31, 2021, Amazon.com, Inc. Distribution Solutions, a division of Alliance Entertainment and Roku, Inc., represented~~ 24%, 9~~% and~~ 10~~%, respectively, of Content & Entertainment segment revenues and approximately~~ 17%, 6~~% and~~ 7~~%, respectively, of our consolidated revenues.~~

Direct Operating Costs

Direct operating costs consist of cost of revenue, fulfillment expenses, shipping costs, property taxes and insurance on systems, royalty expenses, impairments of advances and marketing and direct personnel costs.

Stock-based Compensation

The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock, restricted stock units, stock appreciation rights ("SARs") and performance stock units ("PSUs"). The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) based on their fair values. The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee ~~and~~or nonemployee is required to provide service in exchange for the award. The fair values of options and SARs are calculated as of the date of grant using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility, risk-free rate and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors. Forfeitures are recognized as they occur.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.

Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized. The Company is primarily subject to income taxes in the United States.

The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than ~~50%~~50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company ~~has~~had no uncertain tax positions as of ~~December~~June 30, 2023 and March 31, ~~2022.~~2023.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

Earnings per Share ("EPS")

Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include stock options and warrants outstanding during the period, using the treasury stock method. Potentially dilutive common shares are excluded from the computations of diluted income (loss) per share if their effect would be anti-dilutive. A net loss available to common stockholders causes all potentially dilutive securities to be anti-dilutive and are not included.

Basic and diluted net ~~income (loss)~~loss per share are computed as follows (in thousands, except share and per share data):

Three Months Ended
December 31,

Nine Months Ended
December 31,

2022

2021

2022

2021

Basic net income (loss) per share:

Net income (loss) attributable to common stockholders

$
4,926

$
(474
)

$
(6,919
)

4,351

Shares used in basic computation:

Weighted-average shares of common stock outstanding

178,899,605

173,167,450

177,077,803

169,413,873

Basic net income (loss) per share

$
0.03

$
(0.00
)

$
(0.04
)

$
0.03

Shares used in diluted computation:

Weighted-average shares of common stock outstanding

178,899,605

173,167,450

177,077,803

169,413,873

Stock options and SARs

—

—

—

3,603,491

Weighted-average number of shares

178,899,605

173,167,450

177,077,803

173,017,364

Diluted net income (loss) per share

$
0.03

$
(0.00
)

$
(0.04
)

$
0.03

~~The following table summarizes the potential shares of common stock excluded from the diluted calculation (in thousands):~~

Three Months Ended
December 31, 2022

Nine Months Ended
December 31, 2022

SARs

13,471,351

12,787,403

Stock options

12,500

12,500

13,483,851

12,799,903


	Three Months Ended June 30,
	2023			2022
Basic net loss per share:
Net loss attributable to common stockholders	$	(3,638	)		(6,093	)
Shares used in basic computation:
Weighted-average shares of common stock outstanding		9,879			8,771
Basic net loss per share	$	(0.37	)	$	(0.69	)

Shares used in diluted computation:
Weighted-average shares of common stock outstanding		9,879			8,771
Stock options and SARs		—			—
Weighted-average number of shares		9,879			8,771
Diluted net loss per share	$	(0.37	)	$	(0.69	)

~~For~~Included in the ~~three~~computation of basic EPS are the 516,667 pre-funded warrants which were issued and ~~nine months~~sold on June 16, 2023.

The calculation of diluted net loss per share for the quarters ended ~~December 31, 2021,~~June 30, 2023 and 2022 does not include the impact of ~~12,088,473~~2,666,667 and ~~8,484,982~~0, warrants, respectively, as well as 934 thousand and 425 thousand potentially dilutive shares, ~~have been excluded from the diluted loss per share~~respectively, relating to equity-based awards, as their impact would have been ~~antidilutive.~~anti-dilutive due to the respective period's net loss.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recently Issued Accounting Pronouncements

The Company evaluates all Accounting Standard Updates ("ASUs") issued but not yet effective by FASB for consideration of their applicability. ASU's not included in the Company's disclosures were assessed and determined to be not applicable and material to the Company's consolidated financial statements or disclosures.

In ~~March 2020, FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848).~~ The amendments in this ASU provide temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The ASU primarily includes relief related to contract modifications and hedging relationships, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity. This guidance is effective immediately and the amendments were originally to be applied prospectively through December 31, 2022. However,July 2023, the FASB issued ASU ~~2022-06, deferring~~No 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718)” pursuant to SEC Staff Accounting Bulletin No. 120, which adds interpretive guidance for public companies to consider when entering into share-based payment transactions while in possession of material non-public information. This update is reflected in the ~~sunset date to December 31, 2024.~~Accounting Standard Codification upon issuance and will be effective in the Company's second quarter of fiscal year 2024, beginning July 1, 2023. The ~~adoption of this ASU is~~Company does not ~~expected~~expect the adoption to have a material impact on ~~the Company's Condensed Consolidated Financial Statements.~~

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

~~In March 2022, the FASB issued ASU 2022-01,~~ ~~Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the guidance on ASC 815 on fair value hedge accounting of interest rate risk for portfolios and~~our consolidated financial assets. Among other things, the amended guidance establishes the "last-of-layer" method for making the fair value hedge accounting for these portfolios more accessible and renames that method the "portfolio layer" method. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our Condensed Consolidated Financial Statements.

~~In March 2022, the FASB issued ASU 2022-02,~~ ~~Financial Instruments - Credit Losses (Topic 326)~~. The amendments in this ASU eliminate the guidance on troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulties. The ASU also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our Condensed Consolidated Financial Statements.statements.

3. OTHER INTERESTS

Investment in CDF2 Holdings

We indirectly own 100% of the common equity of CDF2 Holdings, LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology. CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital technology by providing financing, equipment, installation and related ongoing services.

CDF2 Holdings is a Variable Interest Entity (“VIE”), as defined in ASC Topic 810 (“ASC 810”), Consolidation. ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE.

As of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022,~~2023, our maximum exposure to loss, as it relates to the non-consolidated CDF2 Holdings entity, represents accounts receivable for service fees under a master service agreement with CDF2 Holdings. Such accounts receivable was $~~2.1~~0.0 million and $~~0.8~~0.5 million as of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022,~~2023, respectively, which are included in accounts receivable, net on the accompanying Condensed Consolidated Balance Sheets.

The accompanying Condensed Consolidated Statements of Operations include $~~0.1~~0.0 million and $($~~0.2~~0.1) million of digital cinema servicing revenue from CDF2 Holdings for the three months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021,~~ respectively. ~~The accompanying Condensed Consolidated Statements of Operations include $0.2~~ ~~million and $0.5~~ ~~million of digital cinema servicing revenue from CDF2 Holdings for the nine months ended December 31, 2022 and 2021, respectively.~~

Total Stockholders’ Deficit of CDF2 Holdings at ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022~~2023 was $59.2 million and $~~55.6~~59.2 million, respectively. We have no obligation to fund the operating loss or the stockholders’ deficit beyond our initial investment of $2.0 million and, accordingly, our investment in CDF2 Holdings as of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022~~2023 is carried at $0.

Investment in Roundtable

On March 15, 2022, the Company entered into a stock purchase agreement with Roundtable Entertainment Holdings, Inc. (“Roundtable”) pursuant to which the Company purchased ~~500~~0.5 thousand shares of Roundtable Series A Preferred Stock and warrants to purchase ~~100~~0.1 thousand shares of Roundtable Common Stock (together, the “Roundtable Securities”). The Company ~~funded~~paid the purchase ofprice for the Roundtable Securities by issuing ~~316,937~~16 thousand shares of Common Stock to Roundtable. The Company recorded $0.2 million for the purchase of the Roundtable Securities which is included in other long-term assets on the ~~Condensed~~accompanying Consolidated Balance Sheets. The investment in the Roundtable Securities was made in connection with a proposed collaboration with Roundtable regarding production and distribution of streaming content including the launch of high profile branded

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

enthusiast streaming channels. The Roundtable investment was accounted for using the cost method of accounting as we own less than 20% of Roundtable and do not exert a significant influence over their operations. Our President and Chief Strategy Officer is ~~included within other long-term assets.~~on the Roundtable Board of Directors.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

4. STOCKHOLDERS’ EQUITY

COMMON STOCK

~~Authorized~~On June 7, 2023, the Company amended its Certificate of Incorporation to implement a 1:20 reverse stock split, which became effective on June 9, 2023 (the "Reverse Stock Split"). Proportionate adjustments were made to the exercise prices and the number of shares underlying the Company’s outstanding equity awards, as applicable, as well as to the number of shares issuable under the Company’s equity incentive plans. The Reverse Stock Split did not affect the number of authorized shares of Common Stock or the par value of the Common Stock nor did it change the authorized shares of preferred stock or the relative voting power of such holders of our outstanding Common Stock and preferred stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would have otherwise been entitled to receive fractional shares as a result of the Reverse Stock Split were entitled to a cash payment in lieu thereof after the sale on the open market of the aggregated fractional shares by the exchange agent for the Reverse Stock Split. All share and per share amounts discussed in these condensed consolidated financial statements have been retrospectively adjusted for the Reverse Stock Split. The effects of the Reverse Stock Split have been retrospectively effected throughout this document, including but not limited to earnings per share.

As of ~~December 31, 2022,~~June 30, 2023, the number of shares of Common Stock authorized for issuance was 275,000,000 shares.

During the three months ended ~~December 31, 2022,~~June 30, 2023, the Company issued ~~908,383~~2,337 shares of Common Stock. This is comprised of ~~224,359~~2,150 thousand shares issued through a direct offering, 177 thousand issued in connection with ATM sales, and 10 thousand issued in payment of preferred stock ~~dividends and~~ ~~684,024~~ ~~restricted shares issued in connection with Board of Director compensation.~~dividends.

In addition, the Company sold 517 thousand pre-funded warrants, and issued common warrants to purchase up to 2,667 thousand shares of common stock. All pre-funded and common warrants were issued as immediately exercisable and remained outstanding as of June 30, 2023. All pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand. See Note 1 for further discussion.

During the ~~nine~~three months ended ~~December 31,~~June 30, 2022, the Company issued ~~3,595,895~~5 ~~shares of Common Stock. This is comprised of~~ ~~510,955~~ ~~shares in payment of preferred stock dividends,~~ ~~2,750,903~~ ~~shares issued on August 18, 2022 in connection with the vesting of grants pursuant to the 2017 Equity Incentive Plan, and~~ ~~334,037~~ ~~shares issued in payment of the Bloody Disgusting earnout commitment.~~

~~During the nine months ended December 31, 2021, we issued~~ ~~8,642,648~~thousand shares of Common Stock which ~~consist~~consists of the ~~sale of shares of our Class A common stock,~~ issuance ~~of Common Stock for business combination, the issuances~~ of Common Stock in payment of preferred stock ~~dividends and in payment of Board of Director retainer fees.~~dividends.

PREFERRED STOCK

Cumulative dividends in arrears on ~~preferred stock~~Series A Preferred Stock were $~~0.1~~88 ~~million~~thousand as of ~~December 31,~~June 30, 2023 and 2022. In the first quarter of fiscal year 2023 and 2022, ~~and 2021. In May, June and November 2022, we~~the Company paid preferred stock dividends in arrears for the same amount in the form of shares of Common Stock. The Company also has ~~510,955~~1 share of Series B Preferred Stock with no shares ~~of Class A Common Stock.~~outstanding.

TREASURY STOCK

We have treasury stock, at cost, consisting of ~~1,315,851~~66 thousand shares of Common Stock at ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022.~~2023.

EQUITY INCENTIVE PLANS

Stock Based Compensation Awards

The Company has issued awards under two plans, the 2000 Equity Incentive Plan (the “2000 Plan”) and the 2017 Equity Incentive Plan (the “2017 Plan).

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Awards issued under our 2000 ~~Equity Incentive~~ Plan ~~(the “2000 Plan”) may~~were permitted to be issued to employees, outside directors or consultants in any of the following forms (or a combination thereof) (i) stock option awards; (ii) SARs; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan ~~provides~~provided for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Common Stock on the date of grant. ISOs granted to shareholders having more than 10% of the total combined voting power of the Company must have exercise prices of at least 110% of the fair market value of our Common Stock on the date of grant. ISOs and non-statutory stock options granted under the 2000 Plan ~~are~~were subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options ~~are~~were set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the initial equity investment in ~~Cinedigm~~Cineverse by Bison, as a result of which there was a change of control of the Company, all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable.

In connection with the grants of stock options and shares of restricted stock under the 2000 Plan, we and the participants have executed stock option agreements and notices of restricted stock awards setting forth the terms of the grants. The 2000 Plan provided for the issuance of up to ~~2,380,000~~ ~~shares of Common Stock to employees, outside directors and consultants.~~

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

~~Options outstanding and exercisable under the 2000 Plan are as follows:~~

As of December 31, 2022:

Range of Prices

Options
Outstanding and
Exercisable

Weighted Average
Remaining Life in
Years

Weighted Average
Exercise Price

Aggregate
Intrinsic Value
(In thousands)

$1.16 - $7.40

5,000

2.50

$
7.40

$
—

$13.70 - $24.40

207,037

0.78

14.63

—

212,037

0.82

$
14.46

$
—

As of March 31, 2022:

Range of Prices

Options
Outstanding and
Exercisable

Weighted Average
Remaining Life in
Years

Weighted Average
Exercise Price

Aggregate
Intrinsic Value
(In thousands)

$7.40

5,000

3.25

$
7.40

$
—

$14.00 - $24.40

212,337

1.50

14.65

—

217,337

1.54

$
14.49

$
—

In August 2017, the Company adopted the 2017 ~~Equity Incentive Plan (the “2017 Plan).~~Plan. The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provides for the issuance of up to ~~18,098,270~~905 thousand shares of Common Stock, in the form of various awards, including stock options, SARs, restricted stock, restricted stock units, PSUs and cash awards.

~~SARs outstanding under the 2017 Plan are as follows:~~

As of December 31, 2022:

Range of Prices

SARs Outstanding

Weighted Average
Remaining Life in
Years

Weighted Average
Exercise Price

Aggregate
Intrinsic Value
(In thousands)

$0.33 - $0.74

8,650,000

8.61

$
0.56

$
—

$1.16 - $1.47

2,128,277

6.55

1.39

—

$1.71 - $2.10

2,237,493

8.36

1.92

—

$2.23 - $2.56

455,583

8.81

2.28

—

13,471,353

$
—

As of March 31, 2022:

Range of Prices

SARs Outstanding

Weighted Average
Remaining Life in
Years

Weighted Average
Exercise Price

Aggregate
Intrinsic Value
(In thousands)

$0.54 - $0.74

5,550,000

8.74

$
0.62

$
1,208

$1.16 - $1.47

2,283,610

7.90

1.37

—

$1.71 - $2.10

2,455,738

8.91

1.97

—

$2.23 - $2.56

604,250

9.60

2.32

—

10,893,598

$
1,208

~~An analysis of all SARs exercisable under the 2017 Plan as of December 31, 2022 is presented below:~~

SARs Exercisable

Weighted Average
Remaining Life in
Years

Weighted Average
Exercise Price

Aggregate
Intrinsic Value
(In thousands)

5,448,345

7.75

$
1.13

$
—

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

~~Total SARs outstanding are as follows:~~


	~~Nine Months Ended December 31, 2022~~
~~SARs Outstanding - March 31, 2022~~		~~10,893,598~~
~~Issued~~		~~3,100,000~~
~~Forfeited~~		(~~522,245~~	)
~~Total SARs Outstanding - December 31, 2022~~		~~13,471,353~~

~~The following weighted average assumptions were used to estimate the fair value of SARs granted as follows:~~

Nine Months Ended December 31, 2022

Expected dividend yield

—

Expected equity volatility

111.89
%
Expected term (years)

6.50

Risk-free interest rate

4.49
%
Exercise price

$
0.49

Market price per share

$
0.49

Weighted average fair value per SAR

$
0.43

~~The risk-free rates are based on the implied yield available on U.S. Treasury constant maturities with remaining terms equivalent to the respective expected terms of the options.~~

In addition, the Company has granted PSU awards under the 2017 Plan to employees. These awards vest upon certain performance goals being achieved as of March 31, 2022 and 2023 and can be settled in cash or equity upon vesting. During the three and nine months ended December 31, 2022, the Company issued ~~482,628~~ ~~shares of common stock, net of~~ ~~199,498~~ ~~shares withheld to pay taxes, related to the vesting of~~ ~~682,126~~ ~~of PSU awards. As of December 31, 2022, there were~~ ~~696,280~~ ~~of PSU awards outstanding that vest as of March 31, 2023 subject to achieving certain performance goals.~~ No ~~additional PSU awards were granted during the three and nine months ended December 31, 2022. During the nine months ended December 31, 2022,~~ ~~482,628~~ ~~shares were issued for vested awards.~~

Employee and director stock-based compensation expense related to our stock-based awards ~~was as follows (in thousands):~~of $410 thousand and $980 thousand, for the quarters ended June 30, 2023 and 2022, respectively, were recorded to Selling, General and Administrative expenses.

Three Months Ended
December 31,

Nine Months Ended
December 31,

2022

2021

2022

2021

Selling, general and administrative

$
708

$
1,349

$
3,906

$
3,278

There was $0.1 million of stock-based compensation expense for the three months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021, respectively, related to the Board. There was $0.3~~ ~~million and $0.3~~ ~~million of stock-based compensation for the nine months ended December 31, 2022 and 2021, respectively,~~ related to Board of Directors compensation. ~~During the nine months ended December 31, 2022, the Company issued~~ ~~684,024~~ ~~restricted shares to non-employee directors.~~

Options Granted Outside ~~Cinedigm's~~Cineverse's Equity Incentive Plan

In October 2013, we issued options outside of the 2000 Plan to 10 individuals who became employees as a result of a business combination. The employees received options to purchase an aggregate of 3 thousand shares of our Common Stock at an exercise price of $350 per share. The options were fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised. As of ~~March 31, 2022, there were~~June 30, 2023, ~~12,500~~0.6 thousand of such options ~~and~~ ~~600,000~~ ~~SARs granted to employees outside of Cinedigm's Equity Incentive Plan. During the three months ended December 31, 2022,100,000~~ ~~SARs were granted as an inducement to a new employee.~~remained outstanding.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

5. LINE OF CREDIT FACILITY

~~On September 15, 2022, the~~The Company ~~entered into~~is party to a Loan, Guaranty, and Security Agreement with ~~EWB. The agreement provided~~East West Bank ("EWB") providing for a ~~Line~~revolving line of credit (the "Line of Credit ~~Facility~~Facility") of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such ~~subsidiaries’~~subsidiaries' assets. The Line of Credit ~~Facility~~ bears an interest ~~at a~~ rate equal to 1.5% above the prime rate, and was ~~9.0~~9.75% as of ~~December 31, 2022. The Line of Credit Facility expires on~~ ~~September 15, 2023~~ ~~with a~~ ~~one-year~~ ~~extension available at EWB’s discretion.~~June 30, 2023. As of ~~December~~June 30, 2023 and March 31, ~~2022,~~2023, a balance of $5.0 million was outstanding on the ~~Line~~line of the Credit Facility. Under the Line of Credit Facility, the Company is subject to certain financial and nonfinancial covenants ~~including terms~~ which require the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis. During the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022, the Company had interest expense of $0.1 million and $0related to the Line of Credit ~~Facility.~~Facility, respectively. The outstanding principal balance on the Line of Credit Facility as of August 7, 2023 was $0. On August 11, 2023, EWB extended the maturity date of the Line of Credit Facility one year to September 15, 2024.

6. ~~SEGMENT REPORTING~~COMMITMENTS AND CONTINGENCIES

~~We operate in~~ ~~two~~ reportable segments: Cinema Equipment and Content & Entertainment. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our Chief Operating Decision Maker ("CODM") to evaluate performance, which is generally the segment’s operating income (loss) before depreciation and amortization.LEASES

Cineverse is a virtual company with one domestic operating lease, acquired through the acquisition of Digital Media Rights ("DMR") which is subleased to a third party. The Company has not been relieved of the original lease obligation and therefore recognizes both a lease liability and right-of-use asset as part of the arrangement. The end

2420

~~CINEDIGM~~CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(CONTINUED)~~

(Unaudited)

~~Operations of:~~

of both the original lease and sublease's term is January 2025. In addition, the Company has two operating leases related to its Cineverse India operations, with expiration dates in July 2027. Expenses related to these leases were $115 thousand and $84 thousand during the three months ended June 30, 2023 and 2022, respectively.

~~Products and services provided:~~

~~Cinema Equipment~~

Financing vehicles and administrators for 343 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 54 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

We retain ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements. For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

Provides monitoring, collection, verification and management services as well as to exhibitors who purchase their own equipment, and also collects and disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”).

~~Content & Entertainment~~

The Company has recognized $44 thousand of sublease income related to its subleasing arrangement during the three months ended, June 30, 2023.

Leading independent streaming company of content and channels. We collaborate with producers and other content owners to market, source, curate and distribute independent content to targeted and under-served audiences in theatres and homes, and via mobile and emerging platforms.

The ~~following tables present certain financial information related to~~table below presents the lease-related assets and liabilities recorded on our ~~reportable segments and Corporate~~Consolidated Balance Sheets (in thousands):

As of December 31, 2022

Intangible
Assets, Net

Goodwill

Total
Assets

Line
of Credit,
Net

Cinema Equipment

$
—

$
—

$
7,977

$
—

Content & Entertainment

18,638

21,025

77,118

—

Corporate

226

—

9,800

4,867

Total

$
18,864

$
21,025

$
94,895

$
4,867

As of March 31, 2022

Intangible
Assets, Net

Goodwill

Total
Assets

Line
of Credit,
Net

Cinema Equipment

$
—

$
—

$
24,445

$
—

Content & Entertainment

19,946

21,084

68,873

—

Corporate

88

—

11,318

—

Total

$
20,034

$
21,084

$
104,636

$
—


	Classification on the Balance Sheet	June 30, 2023		March 31, 2023
Assets
Noncurrent	Other long-term assets	$	1,125	$	1,265
Liabilities
Current	Operating leases – current portion		418		418
Noncurrent	Operating leases – long-term portion		728		863
Total operating lease liabilities		$	1,146	$	1,281

Condensed Consolidated Statement of Operations

Three Months Ended December 31, 2022

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Revenues

$
7,186

$
20,696

$
—

$
27,882

Direct operating

89

14,322

—

14,411

Selling, general and administrative

912

3,794

4,401

9,107

Allocation of corporate overhead

88

2,407

(2,495
)

—

Depreciation and amortization

82

734

108

924

Total operating expenses

1,171

21,257

2,014

24,442

Operating income (loss)

$
6,015

$
(561
)

$
(2,014
)

$
3,440

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

The ~~following employee and director stock-based compensation expense~~table below presents the annual gross undiscounted cash flows related to ~~our stock-based awards is included in~~ the ~~above amounts as follows~~Company's operating lease commitments and subleasing arrangements (in thousands):

Three Months Ended December 31, 2022

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Direct operating

$
—

$
—

$
—

$
—

Selling, general and administrative

—

—

708

708

Total stock-based compensation

$
—

$
—

$
708

$
708


Fiscal year ending March 31,	Operating Lease Commitments		Sublease Payments
2024	$	337	$	136
2025		415		154
2026		191		—
2027		201		—
2028		68		—
Thereafter		—		—

Condensed Consolidated Statement of Operations

Three Months Ended December 31, 2021

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Revenues

$
2,060

$
12,024

$
—

$
14,084

Direct operating

139

6,320

—

6,459

Selling, general and administrative

99

3,720

3,539

7,358

Allocation of corporate overhead

143

964

(1,107
)

—

Depreciation and amortization

196

831

4

1,031

Total operating expenses

577

11,835

2,436

14,848

Operating income (loss)

$
1,483

$
189

$
(2,436
)

$
(764
)

~~The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows (in thousands):~~

Three Months Ended December 31, 2021

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Direct operating

$
—

$
—

$
—

$
—

Selling, general and administrative

—

552

797

1,349

Total stock-based compensation

$
—

$
552

$
797

$
1,349

Condensed Consolidated Statement of Operations

Nine Months Ended December 31, 2022

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Revenues

$
11,218

$
44,260

$
—

$
55,478

Direct operating

359

29,500

—

29,859

Selling, general and administrative

2,553

11,452

15,011

29,016

Allocation of corporate overhead

284

7,651

(7,935
)

—

Depreciation and amortization

303

2,282

323

2,908

Total operating expenses

3,499

50,885

7,399

61,783

Operating income (loss)

$
7,719

$
(6,625
)

$
(7,399
)

$
(6,305
)

267.

~~CINEDIGM CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~(Unaudited)~~

INCOME TAXES

~~The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows (in thousands):~~

Nine Months Ended December 31, 2022

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Direct operating

$
—

$
—

$
—

$
—

Selling, general and administrative

—

—

3,906

3,906

Total stock-based compensation

$
—

$
—

$
3,906

$
3,906

Condensed Consolidated Statement of Operations

Nine Months Ended December 31, 2021

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Revenues

$
11,544

$
27,658

$
—

$
39,202

Direct operating

560

13,863

—

14,423

Selling, general and administrative

856

10,081

9,583

20,520

Allocation of corporate overhead

412

2,763

(3,175
)

—

Depreciation and amortization

1,001

2,658

4

3,663

Total operating expenses

2,829

29,365

6,412

38,606

Operating income (loss)

$
8,715

$
(1,707
)

$
(6,412
)

$
596

~~The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows (in thousands):~~

Nine Months Ended December 31, 2021

Cinema
Equipment

Content & Entertainment

Corporate

Consolidated

Direct operating

$
—

$
—

$
—

$
—

Selling, general and administrative

—

1,063

2,215

3,278

Total stock-based compensation

$
—

$
1,063

$
2,215

$
3,278

~~7. INCOME TAXES~~

We calculate income tax expense upon an annual effective tax rate forecast, including estimates and assumptions. We recorded an income tax ~~benefit (expense)~~expense of approximately $~~0.0~~20 ~~million~~thousand and $0 for the three ~~and nine~~ months ended ~~December 31, 2022. We recorded an~~June 30, 2023 and 2022, respectively. Income tax expense is attributable to taxable income ~~tax benefit of approximately $~~earned in India relating to transfer pricing.~~0.0~~

~~million and $~~

~~0.6~~ ~~million for the three and nine months ended December 31, 2021, respectively.~~ We have not recorded tax benefits on our loss before income taxes because we have provided for a full valuation allowance that offsets potential deferred tax assets resulting from net operating loss carry forwards, reflecting our inability to use such loss carry forwards.

Our effective tax rate for the three months ended ~~December 31,~~June 30, 2023 and 2022 was (0.6%) and ~~2021 was~~ 0% ~~and~~ 4~~%, respectively. Our effective tax rate for the nine months ended December 31, 2022 and 2021 was~~ 0~~% and (~~14%), respectively.

2721

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our historical Condensed Consolidated Financial Statements and the related notes included elsewhere in this report.

This report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,” and similar words. Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

~~OVERVIEW~~Business Overview

~~Since our inception, we have played~~Cineverse is a significant role in the digital distribution revolution that continues to transform the media landscape. In addition to our pioneering role in transitioning approximately 12,000 movie screens from traditional analog film prints to digital distribution, we have becomepremier streaming technology and entertainment company with its core business (i) across a ~~leading~~portfolio of owned and operated enthusiast streaming channels with enthusiast fan bases; (ii) as a large-scale global aggregator and full-service distributor of ~~independent~~feature films and television programs; and (iii) as a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content ~~both~~distribution through ~~organic growth~~subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and ~~acquisitions.~~audio podcasts. We distribute products for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, NFL and Scholastic, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital content producers. We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, ~~Tubi~~ and ~~most video-on-demand (“VOD”) and free ad-supported television (“FAST”) streaming platforms,~~Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

We ~~report our financial results~~played a significant role in two reportable segments as follows: (i) Cinema Equipment Business ("Cinema Equipment") and (ii) Content and Entertainment Business (“Content & Entertainment”). The Cinema Equipment segment consists of the ~~non-recourse, financing vehicles and administrators for our~~ digital ~~cinema equipment (the “Systems”) installed~~distribution revolution that continues to transform the media landscape, playing a pioneering role in ~~movie theatres throughout North America. It also provides fee-based support to over 465~~transitioning approximately 12,000 movie screens ~~as well as directly~~from traditional analog film prints to ~~exhibitors~~digital distribution, and other third-party customers in the form of monitoring, billing, collection and verification services. Our Content & Entertainment segment operates in: (i) ancillary market aggregation and distribution of entertainment content and (ii) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.

Beginning in December 2015, certain of our cinema equipment began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, Virtual Print Fee (“VPF”) revenues ceased to be recognized on such Systems, related to such distributors. Furthermore, because the Phase I Deployment installation period ended in November 2007, a majority of the VPF revenue associated with the Phase I Deployment Systems has ended. The reduction in VPF revenue on Cinema Equipment systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017.

~~Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through~~at the end of our fiscal year 2023, the ~~term~~Company's cinema equipment business concluded its active operations, as its contracts reached maturity. The Company no longer separately manages cinema equipment separately, and with the run-off of its operations, no longer presents this part of the licensing agreement, after which time they have the option to: (i) return the Systems to us; (ii) renew their license agreement for successive one-year terms; or (iii) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Such sales werebusiness as ~~originally contemplated as the conclusion of the digital cinema deployment plan.~~a separate segment. All prior period reporting within this report reflect this change.

~~We are structured so that our Cinema Equipment segment operates independently from our Content & Entertainment segment.~~

Financial Condition and Liquidity

As of ~~December 31, 2022,~~June 30, 2023, the Company has an accumulated deficit of ~~$479.2~~$486.0 million and negative working capital of ~~$4.5~~$2.1 million. For the three ~~and nine~~ months ended ~~December 31, 2022,~~June 30, 2023, the Company had a net ~~income (loss)~~loss attributable to common ~~shareholders~~stockholders of ~~$4.9 million and~~ ($~~6.9) million, respectively.~~3.6) million. Net cash used in operating activities for the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 was ~~$7.9~~$3.3 million. We may continue to generate net losses for the foreseeable future.

The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime ~~rate. The Line~~rate, 9.75% as of ~~Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion.~~June 30, 2023. As of ~~December 31, 2022,~~June 30, 2023, $5.0 million was outstanding on the Line of Credit Facility. ~~Under~~The outstanding principal balance on the Line of Credit Facility as of August 7, 2023 was $0. On August 11, 2023, EWB extended the maturity date of the Line of Credit Facility one year to September 15, 2024.

to ~~certain financial and nonfinancial covenants including terms which require~~sell any shares under the ATM Sales Agreement. Any sales of shares made under the ATM Sales Agreement will be made pursuant to an effective shelf registration statement, for an aggregate offering price of up to $30 million. During the quarter ended June 30, 2023, the Company sold 177 thousand shares for $1.1 million in net proceeds, after deduction of commissions and fees.

On June 16, 2023, the Company closed on the sale of 2,150,000 shares of common stock, 516,667 pre-funded warrants, and warrants to ~~maintain certain metrics~~purchase up to 2,666,667 shares of common stock at a combined public offering price of $3.00 per share and ~~ratios, maintain certain minimum cash on hand,~~accompanying warrant for aggregate gross proceeds of approximately $7.4 million, after deducting placement agent fees and ~~to report financial information to our lender on a periodic basis.~~other offering expenses in the amount of $0.6 million. The warrants had an exercise price of $3.00 per share, were exercisable immediately and will expire five years from the issuance. The Company received $2.9990 per share for the pre-funded warrants, with the remaining $0.001 due at the time of exercise. All 516,667 pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand dollars.

We believe our cash and cash equivalent balances, and availability under our credit facility, as of ~~December 31, 2022~~June 30, 2023 will be sufficient to support our operations for at least twelve months from the filing of this report. The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.

Critical Accounting Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our Condensed Consolidated Financial Statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to the Condensed Consolidated Financial Statements, included in Item 1, Condensed Consolidated Financial Statements (Unaudited), of this Quarterly Report on Form 10-Q. Management believes that ~~fair value estimates, revenue recognition, asset acquisitions and business combinations~~these policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

Results of Operations for the Three Months Ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~ (in thousands):

Revenues

For the Three Months Ended December 31,

Change Period over Period

2022

% of Revenue

2021

% of Revenue

$ Change

% Change

Content & Entertainment

Streaming and Digital

$
12,576

45
%

$
8,357

59
%

$
4,219

50
%
Base Distribution

8,120

29
%

3,667

26
%

4,453

121
%
Cinema Equipment

7,186

26
%

2,060

15
%

5,126

249
%

$
27,882

100
%

$
14,084

100
%

$
13,798

98
%


	For the Three Months Ended June 30,
	2023		2022		$ Change			% Change
Streaming and digital	$	10,114	$	9,503	$	611			6	%
Base distribution		1,158		2,205		(1,047	)		(47	)%
Podcast and other		429		455		(26	)		(6	)%
Other non-recurring		1,279		1,427		(148	)		(10	)%
Total Revenue	$	12,980	$	13,590	$	(610	)		(4	)%

The Company's Streaming and Digital ~~experienced 79% growth in “FAST” and TV-VOD~~ revenue due to the addition of six new streaming channels related to the Asian Media Rights, LLC d/b/a Digital Media Rights ("DMR") business acquisition and five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex. Additionally, Subscription revenue grew 38% primarily due to the Screambox platform performance driven by strong content acquisition strategies driving increasing subscriptions and the aforementioned DMR business acquisition. New releases such as Terrifier 2, MK Ultra, Chesapeake Shores, and continued success of Demon Slayer, Highlander and Short Circuit added to overall performance.

~~Revenue in Base Distribution increased by 121%~~ for the three months ended ~~December 31, 2022~~June 30, 2023 increased by 6% as compared to the three months ended ~~December 31, 2021. The increase is driven~~June 30, 2022, as the Company continues to see the benefits from its acquisitions which have contributed value-accretive libraries, distribution platforms and technologies, such as Screambox, whose performance in the first quarter of fiscal 2024 exceeded the first quarter of fiscal 2023 by ~~significant growth in box office theatrical performance bolstered by~~approximately $1.0 million, as it continued to benefit from the success of Terrifier ~~2 release during the three months ended December 31, 2022.~~2.

~~Revenues generated~~23

The Company's $1.0 million decline in Base Distribution revenue for the quarter ended June 30, 2023 as compared to the quarter ended June 30, 2022 was primarily driven by a decline in DVD-related sales.

Other non-recurring revenue relating to the ~~Cinema Equipment business increased~~Company's cinema equipment have materially concluded in line with the design of its underlying contracts. Following the completion of cost recoupment and the expiration of the exhibitor master license agreements applicable to this line of revenue, the digital system sales have continued its anticipated decrease in the amount of $0.9 million as a result of an increase in Phase II variable consideration of $7.4 million during the period offset by lower system revenue and eligible VPF systems. Total system revenue recognized was ($0.3) million and $1.3 million, duringcompared to the three months ended ~~December 31,~~June 30, 2022, ~~and 2021, respectively. Blockbuster content released during~~from $1.2 million in the ~~period ending December 31, 2022 was consistent~~first quarter of fiscal 2023 to $0.3 million in the first quarter of fiscal 2024. During the quarter ended June 30, 2023, the Company also recognized $1 million of variable consideration following the resolution of uncertainty associated with ~~Studio output from~~ the ~~prior period, however VPF eligible theatres decreased significantly for~~underlying revenue related to its cinema equipment, as compared to $0 variable consideration recognized in the ~~same period last year.~~first quarter of fiscal year 2023.

Direct Operating Expenses

For the Three Months Ended December 31,

Change Period over Period

2022

2021

$ Change

% Change

Content & Entertainment

$
14,322

$
6,320

$
8,002

127
%
Cinema Equipment

89

139

(50
)

36
%

$
14,411

$
6,459

$
7,952

123
%


	For the Three Months Ended June 30,
	2023		2022		$ Change			% Change
Direct operating expenses	$	6,987	$	7,356	$	(369	)		(5	)%

The ~~increase~~decrease in ~~direct operating expenses~~Direct Operating Expenses for the three months ended ~~December 31, 2022 for~~June 30, 2023 was indicative of the ~~Content & Entertainment segment compared~~continued integration efforts with respect to the ~~prior~~Company's acquisitions during fiscal year ~~was primarily due to $6.6 million higher content~~2022, such as DMR, FoundationTV, and ~~licensing costs including royalties and distribution expenses related to the continued growth in revenue noted above, coupled with a $1.2 million increase related to DVD manufacturing and fulfillment.~~Bloody Disgusting.

Selling, General and Administrative Expenses


	For the Three Months Ended December 31,				Change Period over Period						For the Three Months Ended June 30,
	2022		2021		$ Change			% Change			2023		2022		$ Change			% Change
Compensation expense	$	5,135	$	3,881	$	1,254			32	%	$	4,406	$	5,515	$	(1,109	)		(20	)%
Public company expenses		1,780		1,560		220			14	%
Corporate expenses												1,701		2,329		(628	)		(27	)%
Share-based compensation		709		1,349		(640	)		(47	)%		409		980		(571	)		(58	)%
Insurance expense		625		391		234			60	%
Other operating expenses		858		177		681			385	%		1,372		994		378			38	%
	$	9,107	$	7,358	$	1,749			24	%
Selling, General and Administrative											$	7,888	$	9,818	$	(1,930	)		(20	)%

Selling, general and administrative expenses for the three months ended ~~December 31, 2022 increased~~June 30, 2023 decreased by ~~$1.7~~$1.9 million.

Compensation expenses decreased by $1.1 million primarily ~~due to~~from a ~~$1.3 million increase in compensation expense primarily from the acquisition of DMR partially offset by a~~26% reduction in ~~payroll taxes~~the number of US-based workforce and an 11% reduction to the Company-wide workforce. Corporate expenses decreased by $0.6 million primarily as a result of cost savings and a decline in ~~the prior year~~legal expenses. Share-based compensation has decreased by $0.5 million, as a result of the ~~CARES Act and $0.7~~US-based workforce reduction. Other operating expenses increased by $0.4 million, primarily as a result of an increase in ~~other operating expenses primarily from rent, direct~~advertising, marketing and ~~subscriptions, offset by $0.6 million decrease~~rent expense related to ~~stock-based compensation to management and employees.~~Cineverse India operations.

~~Public company expenses include accounting, legal, audit, investor relations and other related public company costs.~~

Depreciation and Amortization Expense


	For the Three Months Ended December 31,				Change Period over Period						For the Three Months Ended June 30,
	2022		2021		$ Change			% Change			2023		2022		$ Change			% Change
Amortization of Intangible Assets	$	713	$	695	$	18			3	%	$	698	$	744	$	(46	)		(6	)%
Depreciation of Property and Equipment		211		336		(125	)		(37	)%		124		256		(132	)		(52	)%
	$	924	$	1,031	$	(107	)		(10	)%
Depreciation and Amortization											$	822	$	1,000	$	(178	)		(18	)%

Depreciation expense decreased primarily due to substantially the ~~majority~~remainder of our digital cinema projection systems reaching the conclusion of their ten-year useful lives during the ~~three months~~fiscal year ended ~~December~~March 31, ~~2022.~~2023.

Interest expense, net

Interest expense, net increased by ~~$0.3~~$0.2 million from $0.1 million for the three months ended ~~December 31, 2021~~June 30, 2022 to $0.4 million for the December 31, 2022 as a result of deferred and earnout consideration accretion related to the acquisitions of Bloody Disgusting, FoundationTV and DMR and interest expense associated with our new Line of Credit facility obtained in September 2022.

~~Employee retention tax credit~~

~~Employee retention tax credit was $2.0~~$0.3 million for the three months ended ~~December 31, 2022 compared to no employee retention credit for~~June 30, 2023 as a result of a higher outstanding debt balance and higher interest rates during the three months ended ~~December 31, 2021. The employee retention tax credits were filed pursuant~~June 30, 2023 as compared to the ~~CARES Act.~~prior period.

~~Results of Operations for the Nine Months Ended December 31, 2022 and 2021~~

~~Revenues~~

For the Nine Months Ended December 31,

Change Period over Period

2022

% of Revenue

2021

% of Revenue

$ Change

% Change

Content & Entertainment

Streaming and Digital

$
33,115

60
%

$
21,292

54
%

$
11,823

56
%
Base Distribution

11,145

20
%

6,366

16
%

4,779

75
%
Cinema Equipment

11,218

20
%

11,544

30
%

(326
)

(3
)%

$
55,478

100
%

$
39,202

100
%

$
16,276

42
%

Streaming and Digital experienced 102% growth in “FAST” and TV-VOD revenue due to the addition of six new streaming channels related to the DMR business acquisition and five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex. Additionally, Subscription revenue grew 39% primarily due to the Screambox platform performance driven by strong content acquisition strategies driving increasing subscriptions and the aforementioned DMR business acquisition. Top performing titles, including new releases, such as the Terrifier 2, Demon Slayer, Boon, The Ravine, The Mulligan, Incarnation, 7 Days, Chesapeake Shores, When Calls the Heart and the classics, Short Circuit and Highlander added to overall performance.

Revenue in Base Distribution increased by 75% for the nine months ended December 31, 2022 compared to the nine months ended December 31, 2021. The increase is driven by significant growth in box office theatrical performance bolstered by the Terrifier 2 release during the nine months ended December 31, 2022.

Revenues generated by our Cinema Equipment business decreased slightly despite an increase in Phase II variable consideration of $9.1 million during the period. Total system revenue recognized was $2.0 million and $9.1 million during the nine months ended December 31, 2022 and 2021, respectively. Blockbuster content released during the period ending December 31, 2022 was consistent with Studio output from the prior period, however VPF eligible theatres decreased significantly for the same period last year.

~~Direct Operating Expenses~~

For the Nine Months Ended December 31,

Change Period over Period

2022

2021

$ Change

% Change

Content & Entertainment

$
29,500

$
13,863

$
15,637

113
%
Cinema Equipment

359

560

(201
)

(36
)%

$
29,859

$
14,423

$
15,436

107
%

~~The increase in direct operating~~Other expenses, in the nine months ended December 31, 2022 for the Content & Entertainment segment was primarily due to $11.0 million higher content and licensing costs including royalties and distribution expenses related to the continued growth in revenue noted above, coupled with a $2.4 million increase related to DVD manufacturing and fulfillment, a $1.2 million increase in delivery, platform and Software as a service (“SaaS”) and platform expenses, primarily due to the additive DMR acquisition, $0.7 million related to film restoration and conversion and website content production costs.

The decrease in direct operating expenses in the nine months ended December 31, 2022 for the Equipment business compared to the prior period was primarily due to a decrease in property taxes as a result of system sales.

~~Selling, General and Administrative Expenses~~

For the Nine Months Ended December 31,

Change Period over Period

2022

2021

$ Change

% Change

Compensation expense

$
14,864

$
10,369

$
4,495

43
%
Public company expenses

5,193

4,214

979

23
%
Share-based compensation

3,906

3,277

629

19
%
Insurance expense

2,048

1,181

867

73
%
Other operating expenses

3,005

1,479

1,526

103
%

$
29,016

$
20,520

$
8,496

41
%

Selling, general and administrative expenses for the nine months ended December 31, 2022 increased by $8.5 million primarily due to $2.2 million increase in compensation expense from the acquisitions of Fandor, DMR, and Bloody Disgusting, $1.6 million increase in bonus, severance and insurance expense related to management and employees, $1.0 million increase related to legal expense and $1.1 million increase in other operating expenses primarily from rent, direct marketing and subscriptions.

~~Public company expenses include accounting, legal, audit, investor relations and other related public company costs.~~

~~Depreciation and Amortization Expense~~

For the Nine Months Ended December 31,

Change Period over Period

2022

2021

$ Change

% Change

Amortization of Intangible Assets

2,193

2,238

(45
)

(2
)%
Depreciation of Property and Equipment

715

1,425

(710
)

(50
)%

$
2,908

$
3,663

$
(755
)

(21
)%

Depreciation expense decreased primarily due to the majority of our digital cinema projection systems reaching the conclusion of their ten-year useful lives during the nine months ended December 31, 2022.

~~Interest expense,~~ net

~~Interest expense, net increased by $0.6 million to $0.9 million for~~During the ~~nine~~three months ended ~~December 31, 2022 as a result~~June 30, 2023, the Company recognized $0.5 million of ~~deferred~~other expenses, net, primarily from credit and ~~earnout consideration accretion~~other run-off related ~~to the acquisitions of Bloody Disgusting, FoundationTV and DMR and interest expense~~charges associated with ~~our new Line~~the wind-down of ~~Credit facility obtained in September 2022.~~its legacy digital cinema segment.

~~Employee retention tax credit~~

Employee retention tax credit was $2.5 million for the nine months ended December 31, 2022 compared to no employee retention credit for the nine months ended December 31, 2021. The employee retention tax credits were filed pursuant to the CARES Act.

~~Changes in fair value in Metaverse~~

On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange. This investment was previously a level 1 investment as the shares were being actively traded in a marketplace, but with the trading of the shares being halted the Company needed to reassess the fair value level of the investment. Without an active market where the shares are being traded, the investment no longer qualifies as a level 1. The changes in the valuation resulted in a decrease in fair value of $1.8 million during the nine months ended December 31, 2022.

Adjusted EBITDA

We define Adjusted EBITDA to be earnings before interest, taxes, depreciation and amortization, ~~other income, net,~~ stock-based compensation ~~and expenses,~~expense, merger and acquisition costs, restructuring, transition and acquisitions expense, net, goodwill impairment and certain other items.

Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies. We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, we believe Adjusted EBITDA will also be useful to others, including our stockholders, as a valuable financial metric.

We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net income (loss) from continuing operations as an indicator of operating performance. We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors. We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.

We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net income (loss) from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to net income (loss) from operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with GAAP.

3325

Following is the reconciliation of our consolidated net loss to Adjusted ~~EBITDA:~~EBITDA (in thousands):


	For the Three Months Ended June 30,
	2023			2022
Net Loss	$	(3,536	)	$	(5,987	)
Add Back:
Income tax expense		20			—
Depreciation and amortization		822			1,000
Interest expense		295			133
Stock-based compensation		409			980
Provision for doubtful accounts		—			3
Change in fair value on equity investment in Metaverse		—			1,256
Other expense, net		36			14
Net income attributable to noncontrolling interest		(14	)		(18	)
Adjustments:
Transition-related costs		468			175
Mergers and acquisition costs		—			207
Adjusted EBITDA	$	(1,500	)	$	(2,237	)

For the Three Months Ended
December 31,

2022

2021

Net income (loss)

$
5,022

$
(404
)
Add Back:

Income tax benefit

—

(26
)
Depreciation and amortization

924

1,031

Interest expense

367

97

Change in fair value on equity investment in Metaverse

—

(453
)
Other expense

91

107

Provision (recovery) for doubtful accounts

7

(378
)
Stock-based compensation

708

1,349

Employee retention tax credit

(2,025
)

—

Net (income) loss attributable to noncontrolling interest

(8
)

19

Adjusted EBITDA

$
5,086

$
1,342

Adjustments related to Cinema Equipment

Depreciation and amortization

$
(82
)

$
(196
)
Provision for doubtful accounts

(7
)

—

Income from operations

(5,948
)

(1,483
)
Adjusted EBITDA from non-Cinema Equipment

$
(951
)

$
(337
)

For the Nine Months Ended
December 31,

2022

2021

Net income (loss)

$
(6,620
)

$
4,595

Add Back:

Income tax benefit

—

(576
)
Depreciation and amortization

2,908

3,663

Gain on forgiveness of PPP loan

—

(2,178
)
Interest expense

880

277

Change in fair value on equity investment in Metaverse

1,828

(1,453
)
Other expense

661

283

Provision (recovery) for doubtful accounts

54

(418
)
Stock-based compensation

3,906

3,278

Employee retention tax credit

(2,475
)

—

Net (income) loss attributable to noncontrolling interest

(35
)

23

Adjusted EBITDA

$
1,107

$
7,494

Adjustments related to Cinema Equipment

Depreciation and amortization

$
(303
)

$
(1,001
)
Acquisition, integration and other expense

—

(11
)
Provision (recovery) for doubtful accounts

(54
)

500

Income from operations

(7,720
)

(8,715
)
Adjusted EBITDA from non-Cinema Equipment

$
(6,970
)

$
(1,733
)

~~Recent Accounting Pronouncements~~

~~See Note 2 -~~ ~~Summary of Significant Accounting Policies~~ ~~to our Condensed Consolidated Financial Statements included herein.~~

Cash Flow

Changes in our cash flows were as ~~follows:~~follows (in thousands):

For the Nine Months Ended
December 31,

2022

2021

Net cash (used in) provided by operating activities

$
(7,901
)

$
4,746

Net cash used in investing activities

(429
)

(5,031
)
Net cash provided by financing activities

4,064

2,636

Net increase (decrease) in cash and cash equivalents

$
(4,266
)

$
2,351


	For the Three Months Ended June 30,
	2023			2022
Net used in provided by operating activities	$	(3,260	)	$	(1,198	)
Net cash used in investing activities		(272	)		(61	)
Net cash provided by (used in) financing activities		8,509			(284	)
Net change in cash and cash equivalents	$	4,977		$	(1,543	)

For the ~~nine~~three months ended ~~December 31, 2022,~~June 30, 2023, net cash used in operating activities is primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, recovery for doubtful accounts and stock-based compensation, including capitalized content spend and other changes in working capital. Additionally, during the ~~nine~~three months ended ~~December 31, 2022,~~June 30, 2023, the Company decreased accounts payable by ~~$11.8~~$4.7 million to vendors. ~~Cash received from VPFs decreased from the previous period in alignment with the decrease in eligible VPF systems. Prepaid and other current assets increased by $2.7 million.~~ Operating cash flows ~~from the Content & Entertainment segment~~ are typically seasonally lower during the first two fiscal quarters and higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season. In addition, we made ~~$1.1~~net advances of $2.2 million ~~in advances~~ for the ~~nine~~three months ended ~~December 31, 2022,~~June 30, 2023, as part of the advances we make ~~advances~~ on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twelve months.

For the ~~nine~~three months ended ~~December 31, 2021,~~June 30, 2022, net cash ~~provided by~~used in operating activities was primarily driven by ~~income from operations, excluding~~a net loss, after taking into account the exclusion of non-cash expenses such as depreciation, amortization, ~~provision~~recovery for doubtful accounts and stock-based compensation, ~~gain on extinguishment of note payable,~~ including other changes in working capital. Additionally, during the ~~nine~~three months ended ~~December 31, 2021,~~June 30, 2022, the Company ~~paid down $32.6~~increased accounts payable by $5.6 million to ~~vendors at both~~vendors. Accounts receivable decreased due to a decrease in revenue as a result of the Content & Entertainment segment and Corporate. Operating cash flows from the Content & Entertainment segment are typically higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season, and lower in the other two quarters as we pay royalties on such revenues. In addition, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twenty four months. For the nine months ended December 31, 2021 revenues from the sale of digital ~~projections Systems was $9.1 million.~~cinema amounts due.

Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements other than as discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, Basis of Presentation and Consolidation and Note 3 - Other Interests to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC; however, we are not the primary beneficiary of the VIE.

Item 4. CONTROLS AND PROCEDURES

Definition and Limitations of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in the Exchange Act), as of ~~December 31, 2022.~~June 30, 2023. Based on such evaluation, our principal executive officer and principal financial and accounting officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were ~~not~~ effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, on a timely basis, and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures ~~due to the material weaknesses identified in our internal control over financial reporting~~ as of ~~December 31, 2022.~~

~~Previously Reported Material Weakness on Internal Control Over Financial Reporting~~

In the Annual Report Form 10-K for the fiscal year ended March 31, 2022 filed with the SEC on July 1, 2022, management concluded that our internal control over financial reporting was not effective as of March 31, 2022. In the evaluation, management identified material weaknesses in the following:

~~a) Internal controls related to our financial close and reporting process;~~

~~b) Information and communication controls; and~~

c) Insufficient complement of corporate personnel with appropriate levels of accounting and controls knowledge and experience commensurate with our financial reporting requirements to appropriately analyze, record and disclose accounting matters completely and accurately.

~~As a result of this evaluation, management extensively used outside consultants who possessed the appropriate levels of accounting and controls knowledge.~~

~~Remediation~~. Following identification of this control deficiency, management has implemented modifications to better ensure that the Company has appropriate and timely reviews on all financial reporting analysis. In addition, as we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify our remediation plan. Management will test and evaluate the implementation of these modifications to ascertain whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material misstatement in the Company’s financial statements.

~~The steps we took to address the deficiencies identified included:~~


	●	~~we hired a new Chief Financial Officer;~~


	●	~~we hired a new Executive Vice President (“EVP”) Finance & Accounting;~~


	●	~~we have restructured accounting processes and revised organizational structures to enhance accurate accounting and appropriate financial reporting;~~


	●	~~we have hired additional experienced accounting personnel in the corporate office to enhance the application of accounting standards and our financial closing and reporting process;~~


	●	~~we have engaged external advisors to provide financial accounting and reporting assistance;~~


	●	we have enhanced information and communication processes through information technology solutions to ensure that information needed for financial reporting is accurate, complete, relevant and reliable, and communicated in a timely manner; and


	●	we have engaged external advisors to evaluate and document the design and operating effectiveness of our internal control over financial reporting and assist with the remediation and implementation of our internal control function.

As noted above, we believe that, as a result of management’s in-depth review of its accounting processes, and the additional procedures management has implemented, there are no material inaccuracies or omissions of material fact in this Form 10-Q and, to the best of our knowledge, we believe that the Condensed Consolidated Financial Statements in this Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows in conformity with GAAP.

We and our Board treat the controls surrounding, and the integrity of, our financial statements with the utmost priority. Management is committed to the planning and implementation of remediation efforts to address control deficiencies and any other identified areas of risk. These remediation efforts are intended to both address the identified material weakness and to enhance our overall financial control environment. We are committed to maintaining a strong internal control environment, and we believe the measures described above will strengthen our internal control over financial reporting and remediate the material weakness we have identified. Our remediation efforts have begun, and we will continue to devote significant time and attention to these remedial efforts. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to strengthen controls or to modify the remediation plan described above, which may require additional implementation time.June 30, 2023.

Changes in Internal Control Over Financial Reporting

There have been no changes ~~other than our remediation efforts discussed above,~~ in the Company’s internal control over financial reporting during the three months ended ~~December 31, 2022~~June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

3727

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

~~There have been no material changes to~~The following risk factor supplements the Risk Factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022~~2023.

The Company's share price has decreased since the end of its fiscal year ending March 31, 2023. If this share price decline is sustained, the Company may be required to test for goodwill impairment before the performance of its required annual testing and ~~Item 1A~~if so, may be at risk of ~~our Quarterly Report~~recognizing expenses related to goodwill impairment.

On March 31, 2023, the Company's share price was $8.40 and since has declined to a share price of $1.38 as of August 7, 2023. Under the accounting standard, ASC 350-20,Goodwill a Company is required to test for impairment on ~~Form 10-Q~~an annual basis, but in the presence of a triggering event, may need to test during an interim period. Under ASC 350, Goodwill, a sustained decline in share price represents a triggering event which would require the Company to test for impairment. If the ~~quarter ended September 30, 2022.~~Company is required to perform this analysis, there may be a risk that the Company incurs expenses related to goodwill impairment.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

~~EXHIBIT INDEX~~

EXHIBIT INDEX


Exhibit Number		Description of Document
~~4.1~~		~~Trademark Security Agreement dated as of September 15, 2022 by and between East West Bank and each of Cinedigm Corp. and the Guarantors party thereto.~~
~~4.2~~		~~Copyright Security Agreement dated as of September 15, 2022 by and between East West Bank and each of Cinedigm Corp. and the Guarantors party thereto.~~
~~10.1~~		~~Amended and Restated Loan, Guaranty and Security Agreement dated as of September 15, 2022 by and between Cinedigm Corp., East West Bank and the Guarantors named therein.~~
31.1		Officer’s Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Officer’s Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted 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		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

3829

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	~~CINEDIGM~~CINEVERSE CORP.

Date: ~~February~~August 14, 2023	By:	/s/ Christopher J. McGurk
		Christopher J. McGurk Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

Date: ~~February~~August 14, 2023	By:	/s/ John K. Canning
		John K. Canning Chief Financial Officer (Principal Financial Officer)

3930


As of March 31, 2022	Cost Basis		Accumulated Amortization			Impairment			Net
Content Library	$	23,685	$	(20,665	)	$	—		$	3,020
Advertiser Relationships and Channel		10,081		(161	)		—			9,920
Customer Relationships		10,658		(7,327	)		(1,968	)		1,363
Software		3,200		(240	)		—			2,960
Trademark and Tradenames		4,026		(1,301	)		—			2,725
Supplier Agreements		11,430		(11,384	)		—			46
Total Intangible Assets	$	63,080	$	(41,078	)	$	(1,968	)	$	20,034


	Total
Remainder of fiscal year 2023	$	1,252
2024		3,343
2025		2,137
2026		1,745
2027		1,269
Thereafter		9,118
	$	18,864


	Three Months Ended December 31, 2022		Nine Months Ended December 31, 2022
SARs		13,471,351		12,787,403
Stock options		12,500		12,500
		13,483,851		12,799,903


	As of December 31, 2022:
Range of Prices	Options Outstanding and Exercisable		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
$1.16 - $7.40		5,000		2.50	$	7.40	$	—
$13.70 - $24.40		207,037		0.78		14.63		—
		212,037		0.82	$	14.46	$	—


	As of March 31, 2022:
Range of Prices	Options Outstanding and Exercisable		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
$7.40		5,000		3.25	$	7.40	$	—
$14.00 - $24.40		212,337		1.50		14.65		—
		217,337		1.54	$	14.49	$	—


	As of December 31, 2022:
Range of Prices	SARs Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
$0.33 - $0.74		8,650,000		8.61	$	0.56	$	—
$1.16 - $1.47		2,128,277		6.55		1.39		—
$1.71 - $2.10		2,237,493		8.36		1.92		—
$2.23 - $2.56		455,583		8.81		2.28		—
		13,471,353					$	—


SARs Exercisable		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
	5,448,345		7.75	$	1.13	$	—


	Nine Months Ended December 31, 2022
Expected dividend yield		—
Expected equity volatility		111.89	%
Expected term (years)		6.50
Risk-free interest rate		4.49	%
Exercise price	$	0.49
Market price per share	$	0.49
Weighted average fair value per SAR	$	0.43


	As of December 31, 2022
	Intangible Assets, Net		Goodwill		Total Assets		Line of Credit, Net
Cinema Equipment	$	—	$	—	$	7,977	$	—
Content & Entertainment		18,638		21,025		77,118		—
Corporate		226		—		9,800		4,867
Total	$	18,864	$	21,025	$	94,895	$	4,867


	Condensed Consolidated Statement of Operations
	Three Months Ended December 31, 2022
	Cinema Equipment		Content & Entertainment			Corporate			Consolidated
Revenues	$	7,186	$	20,696		$	—		$	27,882
Direct operating		89		14,322			—			14,411
Selling, general and administrative		912		3,794			4,401			9,107
Allocation of corporate overhead		88		2,407			(2,495	)		—
Depreciation and amortization		82		734			108			924
Total operating expenses		1,171		21,257			2,014			24,442
Operating income (loss)	$	6,015	$	(561	)	$	(2,014	)	$	3,440


	Condensed Consolidated Statement of Operations
	Three Months Ended December 31, 2021
	Cinema Equipment		Content & Entertainment		Corporate			Consolidated
Revenues	$	2,060	$	12,024	$	—		$	14,084
Direct operating		139		6,320		—			6,459
Selling, general and administrative		99		3,720		3,539			7,358
Allocation of corporate overhead		143		964		(1,107	)		—
Depreciation and amortization		196		831		4			1,031
Total operating expenses		577		11,835		2,436			14,848
Operating income (loss)	$	1,483	$	189	$	(2,436	)	$	(764	)


	Condensed Consolidated Statement of Operations
	Nine Months Ended December 31, 2021
	Cinema Equipment		Content & Entertainment			Corporate			Consolidated
Revenues	$	11,544	$	27,658		$	—		$	39,202
Direct operating		560		13,863			—			14,423
Selling, general and administrative		856		10,081			9,583			20,520
Allocation of corporate overhead		412		2,763			(3,175	)		—
Depreciation and amortization		1,001		2,658			4			3,663
Total operating expenses		2,829		29,365			6,412			38,606
Operating income (loss)	$	8,715	$	(1,707	)	$	(6,412	)	$	596


	For the Nine Months Ended December 31,										Change Period over Period
	2022		% of Revenue			2021		% of Revenue			$ Change			% Change
Content & Entertainment
Streaming and Digital	$	33,115		60	%	$	21,292		54	%	$	11,823			56	%
Base Distribution		11,145		20	%		6,366		16	%		4,779			75	%
Cinema Equipment		11,218		20	%		11,544		30	%		(326	)		(3	)%
	$	55,478		100	%	$	39,202		100	%	$	16,276			42	%


	For the Three Months Ended December 31,
	2022			2021
Net income (loss)	$	5,022		$	(404	)
Add Back:
Income tax benefit		—			(26	)
Depreciation and amortization		924			1,031
Interest expense		367			97
Change in fair value on equity investment in Metaverse		—			(453	)
Other expense		91			107
Provision (recovery) for doubtful accounts		7			(378	)
Stock-based compensation		708			1,349
Employee retention tax credit		(2,025	)		—
Net (income) loss attributable to noncontrolling interest		(8	)		19
Adjusted EBITDA	$	5,086		$	1,342

Adjustments related to Cinema Equipment
Depreciation and amortization	$	(82	)	$	(196	)
Provision for doubtful accounts		(7	)		—
Income from operations		(5,948	)		(1,483	)
Adjusted EBITDA from non-Cinema Equipment	$	(951	)	$	(337	)


	For the Nine Months Ended December 31,
	2022			2021
Net income (loss)	$	(6,620	)	$	4,595
Add Back:
Income tax benefit		—			(576	)
Depreciation and amortization		2,908			3,663
Gain on forgiveness of PPP loan		—			(2,178	)
Interest expense		880			277
Change in fair value on equity investment in Metaverse		1,828			(1,453	)
Other expense		661			283
Provision (recovery) for doubtful accounts		54			(418	)
Stock-based compensation		3,906			3,278
Employee retention tax credit		(2,475	)		—
Net (income) loss attributable to noncontrolling interest		(35	)		23
Adjusted EBITDA	$	1,107		$	7,494

Adjustments related to Cinema Equipment
Depreciation and amortization	$	(303	)	$	(1,001	)
Acquisition, integration and other expense		—			(11	)
Provision (recovery) for doubtful accounts		(54	)		500
Income from operations		(7,720	)		(8,715	)
Adjusted EBITDA from non-Cinema Equipment	$	(6,970	)	$	(1,733	)