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: ~~June~~September 30, 2022

☐ 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 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.)

~~264 West 40th Street,~~244 Fifth Avenue, Suite M289, New York, NYN.Y.		~~10018~~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		NASDAQ ~~GLOBAL~~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 ☐

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

☐ 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.

As of ~~August 9,~~November 10, 2022, ~~177,250,068~~178,184,058 shares of Class A Common Stock, $0.001 par value, were outstanding.

CINEDIGM CORP.

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at ~~June~~September 30, 2022 (Unaudited) and March 31, 2022	1
	Unaudited Condensed Consolidated Statements of Operations for the Three Months and Six Months ended ~~June~~September 30, 2022 and 2021	2
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Six Months ended ~~June~~September 30, 2022 and 2021	3
	Unaudited Condensed Consolidated Statements of ~~(Deficit)~~ Equity for the Three Months and Six Months ended ~~June~~September 30, 2022 and 2021	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months ended ~~June~~September 30, 2022 and 2021	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2629
Item 4.	Controls and Procedures	3946

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	4148
Item 1A.	Risk Factors	4148
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4148
Item 3.	Defaults Upon Senior Securities	4148
Item 4.	Mine Safety Disclosures	4148
Item 5.	Other Information	4148
Item 6.	Exhibits	4248
Exhibit Index		4248
Signatures		4349

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CINEDIGM CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	June 30, 2022			March 31, 2022			September 30, 2022			March 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	11,519		$	13,062		$	9,676		$	13,062
Accounts receivable, net of allowance of $2,605 and $2,921, respectively		25,215			30,843
Accounts receivable, net of allowance of $2,726 and $2,921, respectively								24,939			30,843
Inventory		129			116			157			116
Unbilled revenue		2,597			2,349			2,647			2,349
Prepaid and other current assets		4,621			5,793			8,080			5,793

Total current assets		44,081			52,163			45,499			52,163
Equity investment in A Metaverse Company, a related party, at fair value		5,772			7,028			5,200			7,028
Property and equipment, net		1,865			1,980			1,756			1,980
Operating lease right-of use assets, net		680			749			612			749
Intangible assets, net		19,290			20,034			18,554			20,034
Goodwill		21,084			21,084			21,025			21,084
Other long-term assets		1,451			1,598			1,610			1,598
Total assets	$	94,223		$	104,636		$	94,256		$	104,636
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	46,450		$	52,025		$	47,268		$	52,025
Line of credit, including unamortized debt issuance costs of $165 and $0, respectively (see Note 5)								3,622			-
Current portion of deferred consideration on purchase of business		3,449			3,432			3,523			3,432
Current portion of earnout consideration on purchase of business		1,188			1,081			741			1,081
Operating lease liabilities		193			258			127			258
Current portion of deferred revenue		371			196
Deferred revenue								270			196

Total current liabilities		51,651			56,992			55,551			56,992
Deferred consideration on purchase – net of current portion		5,379			5,600			5,615			5,600
Earnout consideration on purchase – net of current portion		627			603			651			603
Operating lease liabilities, net of current portion		489			491			489			491
Other long-term liabilities		86			-			74			-

Total liabilities		58,232			63,686			62,380			63,686
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 outstanding at June 30, 2022 and March 31, 2022. Liquidation preference of $3,648		3,559			3,559
Common stock, $0.001 par value; Class A stock 275,000,000 and 275,000,000 shares authorized at June 30, 2022 and March 31, 2022, respectively, 176,737,459 and 176,629,435 shares issued and 175,421,608 and 175,313,584 shares outstanding at June 30, 2022 and March 31, 2022, respectively.		174			174
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 September 30, 2022 and March 31, 2022. Liquidation preference of $3,648								3,559			3,559
Common stock, $0.001 par value; Class A stock 275,000,000 and 275,000,000 shares authorized at September 30, 2022 and March 31, 2022, respectively, 179,316,947 and 176,629,435 shares issued and 178,001,096 and 175,313,584 shares outstanding at September 30, 2022 and March 31, 2022, respectively								176			174
Additional paid-in capital		523,669			522,601			525,657			522,601
Treasury stock, at cost; 1,315,851 and 1,315,851 Class A common shares at June 30, 2022 and March 31, 2022, respectively.		(11,608	)		(11,608	)
Treasury stock, at cost; 1,315,851 and 1,315,851 Class A common shares at September 30, 2022 and March 31, 2022, respectively								(11,608	)		(11,608	)
Accumulated deficit		(478,403	)		(472,310	)		(484,155	)		(472,310	)
Accumulated other comprehensive loss		(115	)		(163	)		(477	)		(163	)
Total stockholders’ equity of Cinedigm Corp.		37,276			42,253			33,152			42,253
Deficit attributable to noncontrolling interest		(1,285	)		(1,303	)		(1,276	)		(1,303	)
Total equity		35,991			40,950			31,876			40,950
Total liabilities and equity	$	94,223		$	104,636		$	94,256		$	104,636

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

	Three Months Ended September 30,						Six Months Ended September 30,
	2022			2021			2022			2021
Revenues	$	14,006		$	10,103		$	27,596		$	25,118
Costs and expenses:
Direct operating (excludes depreciation and amortization shown below)		8,092			3,333			15,448			7,964
Selling, general and administrative		9,597			7,159			19,412			13,202
Provision (recovery) for doubtful accounts		44			(111	)		47			(40	)
Depreciation and amortization of property and equipment		248			440			504			1,089
Amortization of intangible assets		736			696			1,480			1,543
Total operating expenses		18,717			11,517			36,891			23,758
Income (loss) from operations		(4,711	)		(1,414	)		(9,295	)		1,360
Interest expense, net		(380	)		(36	)		(513	)		(180	)
Gain on forgiveness of PPP loan		-			-						2,178
Change in fair value of equity investment in Metaverse, a related party		(572	)		666			(1,828	)		1,000
Other (income) expense, net		8			102			(6	)		91
Income (loss) before income taxes		(5,655	)		(682	)		(11,642	)		4,449
Income tax benefit (expense)		-			487			-			550
Net income (loss)		(5,655	)		(195	)		(11,642	)		4,999
Net (income) loss attributable to noncontrolling interest		(9	)		11			(27	)		4
Net income (loss) attributable to controlling interests		(5,664	)		(184	)		(11,669	)		5,003
Preferred stock dividends		(88	)		(89	)		(176	)		(178	)
Net income (loss) attributable to common stockholders	$	(5,752	)	$	(273	)	$	(11,845	)	$	4,825
Net income (loss) per Class A common stock attributable to common stockholders - basic:	$	(0.03	)	$	(0.00	)	$	(0.07	)	$	0.03
Weighted average number of Class A common stock outstanding: basic		176,895,367			168,275,139			176,161,924			167,524,744
Net income (loss) per Class A common stock attributable to common stockholders - diluted:	$	(0.03	)	$	(0.00	)	$	(0.07	)	$	0.03
Weighted average number of Class A common stock outstanding: diluted		176,895,367			168,275,139			176,161,924			170,743,885

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

	Three Months Ended September 30,						Six Months Ended September 30,
	2022			2021			2022			2021
Net income (loss)	$	(5,655	)	$	(195	)	$	(11,642	)	$	4,999
Other comprehensive (loss) income: foreign exchange translation		(362	)		35			(314	)		(19	)
Comprehensive income (loss)		(6,017	)		(160	)		(11,956	)		4,980
Less: comprehensive income (loss) attributable to noncontrolling interest		(9	)		11			(27	)		4
Comprehensive income (loss) attributable to controlling interests	$	(6,026	)	$	(149	)	$	(11,983	)	$	4,984

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~

~~(Unaudited)~~

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

Three Months Ended
June 30,
2022 2021
Revenues $ 13,590 $ 15,015
Costs and expenses:
Direct operating (excludes depreciation and amortization shown below) 7,356 4,631
Selling, general and administrative 9,815 6,043
Bad debt expense 3 71
Depreciation and amortization of property and equipment 256 649
Amortization of intangible assets 744 847
Total operating expenses 18,174 12,241
Income (loss) from operations (4,584 ) 2,774
Interest expense, net (133 ) (144 )
Gain on forgiveness of PPP loan and extinguishment of note payable - 2,178
Change in fair value of equity investment in A Metaverse Company, a related party (1,256 ) 334
Other expense, net (14 ) (11 )
Income (loss) before income taxes (5,987 ) 5,131
Income tax benefit - 63
Net income (loss) (5,987 ) 5,194
Net loss attributable to noncontrolling interest (18 ) (7 )
Net income (loss) attributable to controlling interests (6,005 ) 5,187
Preferred stock dividends (88 ) (89 )
Net income (loss) attributable to common stockholders $ (6,093 ) $ 5,098
Net income (loss) per Class A common stock attributable to common stockholders - basic: $ (0.03 ) $ 0.03
Weighted average number of Class A common stock outstanding: basic 175,420,421 167,940,285
Net income (loss) per Class A common stock attributable to common stockholders - diluted: $ (0.03 ) $ 0.03
Weighted average number of Class A common stock outstanding: diluted 175,420,421 171,257,356

~~See accompanying Notes to Condensed Consolidated Financial Statements~~

~~CINEDIGM CORP.~~

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

~~(Unaudited)~~

~~(In thousands)~~

Three Months Ended
June 30,
2022 2021
Net income (loss) $ (5,987 ) $ 5,194
Other comprehensive (loss) income: foreign exchange translation 48 (54 )
Comprehensive income (loss) (5,939 ) 5,140
Less: comprehensive income attributable to noncontrolling interest (18 ) (7 )
Comprehensive income (loss) attributable to controlling interests $ (5,957 ) $ 5,133

~~See accompanying Notes to Condensed Consolidated Financial Statements~~

~~CINEDIGM CORP.~~

~~CONSDENSED CONSOLIDATED STATEMENTS OF (DEFICIT)~~ EQUITY

(Unaudited)

(In thousands, except share data)

Series A Preferred Stock Class A
Common Stock Treasury Additional Paid-In Accumulated Accumulated Other Comprehensive Total Stockholders’
Equity Non-Controlling Total
Equity
Shares Amount Shares Amount Shares Amount Capital Deficit Loss (Deficit) Interest (Deficit)
Balances as of March 31, 2021 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

	Series A Preferred Stock				Class A Common Stock					Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’ Equity			Non-Controlling			Total Equity
	Shares		Amount		Shares			Amount		Shares		Amount			Capital		Deficit			Loss			(Deficit)			Interest			(Deficit)
Balances as of March 31, 2021		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

See accompanying & Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF ~~(DEFICIT)~~ EQUITY

(Unaudited)

(In thousands, except share data)

	Series A Preferred Stock				Class A Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’ Equity			Non-Controlling			Total Equity			Series A Preferred Stock				Class A Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’ Equity			Non-Controlling			Total Equity
	Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			(Deficit)			Interest			(Deficit)			Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			(Deficit)			Interest			(Deficit)
Balances as of March 31, 2022		7	$	3,559		175,313,584	$	174		1,315,851	$	(11,608	)	$	522,601	$	(472,310	)	$	(163	)	$	42,253		$	(1,303	)	$	40,950			7	$	3,559		175,313,584	$	174		1,315,851	$	(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			—		—		108,024		—		—		—			88		—			—			88			—			88
Preferred stock dividends accrued		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)
Net income (loss)		—		—		—		—		—		—			—		(6,005	)		—			(6,005	)		18			(5,987	)		—		—		—		—		—		—			—		(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			7	$	3,559		175,421,608	$	174		1,315,851	$	(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

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Three Months Ended
June 30,
2022 2021
Cash flows from operating activities:
Net income (loss) $ (5,987 ) $ 5,194
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment and amortization of intangible assets 1,000 1,496
Impairment of prepaid advances 32 -
Changes in fair value of equity investment in A Metaverse Company 1,256 (334 )
Gain from forgiveness of PPP loan - (2,178 )
Provision for doubtful accounts 3 71
Stock-based compensation 980 983
Interest expense for deferred consideration 81 -
Interest expense for earnout consideration 52 -
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 5,625 (6,103 )
Inventory (13 ) 24
Unbilled revenue (248 ) (295 )
Prepaids and other current assets, and other long-term assets 1,287 1,730
Accounts payable, accrued expenses, and other liabilities (5,441 ) 3,508
Deferred revenue 175 (475 )
Net cash (used in) provided by operating activities (1,198 ) 3,621
Cash flows from investing activities:
Purchases of property and equipment (141 ) (41 )
Purchase of a business 80 (750 )
Net cash used in investing activities (61 ) (791 )
Cash flows from financing activities:
Payment of notes payable (284 ) (4,755 )
Payment under revolving credit agreement, net - (1,569 )
Net cash used in by financing activities (284 ) (6,324 )
Net change in cash, cash equivalents, and restricted cash (1,543 ) (3,494 )
Cash, cash equivalents, and restricted cash at beginning of period 13,062 17,849
Cash, cash equivalents, and restricted cash at end of period $ 11,519 $ 14,355

	Six Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net (loss) income	$	(11,642	)	$	4,999
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization of property and equipment and amortization of intangible assets		1,984			2,632
Changes in fair value of equity investment in Metaverse		1,828			(1,000	)
Gain from forgiveness of PPP loan		-			(2,178	)
Impairment of advances		614			399
Provision for doubtful accounts		47			(40	)
Amortization of debt issuance costs included in interest expense		12			-
Stock-based compensation, inclusive of $551 withheld for employee payroll taxes for shares not issued		3,198			1,929
Interest expense for deferred consideration		391			-
Interest expense for earnout consideration		104			-
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		5,857			(2,887	)
Inventory		(41	)		44
Unbilled revenue		(298	)		(697	)
Prepaids and other current assets, and other long-term assets		(2,913	)		961
Accounts payable, accrued expenses, and other liabilities		(5,494	)		5,953
Deferred revenue		74			(757	)
Net cash (used in) provided by operating activities		(6,279	)		9,358
Cash flows from investing activities:
Purchases of property and equipment		(274	)		(81	)
Purchase of businesses		-			(4,750	)
Sale of equity investment in Metaverse		-			11
Net cash used in investing activities		(274	)		(4,820	)
Cash flows from financing activities:
Payments of notes payable		(443	)		(7,786	)
Proceeds (payments) from line of credit, net of debt issuance cost		3,610			(1,956	)
Net cash provided by (used in) financing activities		3,167			(9,742	)
Net change in cash and cash equivalents		(3,386	)		(5,204	)
Cash and cash equivalents at beginning of period		13,062			17,849
Cash and cash equivalents at end of period	$	9,676		$	12,645

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND LIQUIDITY

Cinedigm Corp. (“Cinedigm,” the “Company,” “we,” “us,” or similar pronouns) was incorporated in Delaware on March 31, 2000. We are (i) a distributor 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 ~~(“Systems”)~~ for movie screens in both North America and several international countries.

We report our financial results in two primary segments as follows: (1) cinema equipment business and (2) content and entertainment business (“Content & Entertainment” ~~or “CEG”~~). The cinema equipment business segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North ~~America and Australia.~~America. It also provides fee-based support to music and movie screens as well as directly to exhibitors and other third-party customers in the form of monitoring, billing, collection and verification services. Our Content & Entertainment segment operates in: (1) ancillary market aggregation and distribution of entertainment content and (2) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.

Risks and Uncertainties

The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the period. As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. The COVID-19 pandemic and the related economic impact are likely to result in sustained volatility and uncertainty, which could have an adverse effect on our business, financial condition and results of operations.

Liquidity

We have incurred net losses historically and have net loss of ~~$6.0~~$11.6 million for the ~~three~~six months ended ~~June~~September 30, 2022. We also have an accumulated deficit of ~~$478.4~~$484.2 million and negative working capital of ~~$7.6~~$10.1 million as of ~~June~~September 30, 2022. Net cash used byin operating activities for the ~~three~~six months ended ~~June~~September 30, 2022 was ~~$1.2~~$6.3 million. We may continue to generate net losses for the foreseeable future. ~~Based on these conditions, the Company entered into the following transactions described below:~~

We believe the combination of: (i) our cash and cash equivalent balances at ~~June~~September 30, 2022 and (ii) expected cash flow from operations, will be sufficient for our operations and capital needs, for at least twelve months from the filing of this report. Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

Our consolidated financial statements include the accounts of Cinedigm and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Investments in which we do not have a controlling interest or are not the primary beneficiary, but have the ability to exert significant influence, are accounted for under the equity method of accounting. Noncontrolling interests for which we have been determined to be the primary beneficiary are consolidated and recorded as net loss attributable to noncontrolling interest. See Note 3 - Other Interests to the Consolidated Financial Statements for a discussion of our noncontrolling interests.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include the accrual of digital revenue, accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, intangible asset impairment and estimated amortization lives, fair value for asset acquisitions and business combinations, valuation allowances for income taxes and stock based compensation awards. Actual results could differ from these estimates.

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.

Cash and cash equivalents consisted of the following:

	As of				As of
(in thousands)	June 30, 2022		March 31, 2022		September 30, 2022		March 31, 2022
Cash and Cash Equivalents	$	11,519	$	13,062	$	9,676	$	13,062

EQUITY INVESTMENT IN A METAVERSE COMPANY, A RELATED PARTY

On February 14, 2020, the Company acquired an approximately 11.5% interest in A Metaverse Company (“Metaverse”), a leading publicly traded Chinese entertainment company, formerly Starrise Media Holdings Limited, whose ordinary shares are listed on the Stock Exchange of Hong Kong. The Company acquired such interest as a strategic investment and in a private transaction from a shareholder of Metaverse that is related to our major shareholder. Our major shareholder also maintains a significant beneficial interest ownership in Metaverse. Upon consummation of the transaction on February 14, 2020, the Company recorded an initial investment of approximately $25.1 million, which is the fair market value of the Metaverse shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s Class A common stock, par value of $0.001 per share (the “Common Stock”) of $11.2 million, valued as of the date of the issuance of the Common Stock of the Company. The difference in value of shares received in Metaverse and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital.

On April 10, 2020, the Company purchased an additional 15% interest in Metaverse in a private transaction from shareholders of Metaverse that are affiliated with the major shareholder of the Company. The Company recorded an additional equity investment of approximately $28.2 million, which is the fair market value of the Metaverse shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.0 million, valued at the date of the issuance of the Common Stock of the Company. The difference in the value of shares received in Metaverse and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital. This transaction was also recorded as an equity investment in Metaverse.

The Company has accounted for these investments 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 made an irrevocable election to apply the fair value option under ASC 825-10, Financial Instruments,, as it relates to its equity investment 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~~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~~marketplace. The investment is recorded at fair value ~~level of the investment. Without~~as a Level 3 as there is not an active market ~~where the shares are being traded, the investment no longer qualifies as a level 1.~~or observable inputs. As of ~~June~~September 30, 2022, Metaverse’s stock valuation is based on an ~~evaluated offer received from an~~ independent ~~third party to purchase our shares and trending assessment of~~valuation based on the market ~~pricing and~~approach is categorized as Level 3 based on unobservable inputs.

ACCOUNTS RECEIVABLE

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.

We record accounts receivable, long-term in connection with activation fees that we earn from our Systems deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rate.

ADVANCES

Advances, which are recorded within prepaid and other current assets on the consolidated balance sheets, represent amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable as of the consolidated balance sheet date. Impairments ~~and accelerated amortization~~ related to advances were ~~$32 thousand~~$0.6 million and $0.2 million, for the three months ended ~~June~~September 30, 2022 and 2021, respectively. Impairments related to advances were $0.6 million and $0.4 million, for the six months ended September 30, 2022 and 2021, respectively.

PROPERTY AND EQUIPMENT

Property and equipment 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
Internal use software			5 years
Digital cinema projection systems			10 years
Machinery and equipment			3 - 10 years
Furniture and fixtures			3 - 6 years

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 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.

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leasehold improvements. Repair and maintenance costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized. Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the consolidated statements of operations.

IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED 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 three and six months ended ~~June~~September 30, 2022 and 2021, no impairment charge was recorded from operations for long-lived assets or finite-lived assets.

INTANGIBLE ASSETS

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. During the three and six months ended ~~June~~September 30, 2022 and 2021, no impairment charge was recorded ~~from operations~~ for intangible assets. During the three months ended September 30, 2022 and 2021, the Company had an amortization expense of $0.7 million and $0.7 million, respectively. During the six months ended September 30, 2022 and 2021, the Company had an amortization expense of $1.5 million and $1.5 million, respectively.

Amortization ~~expense is recorded using the straight-line method over the estimated useful~~ lives of the respective assets as follows:

Trademark			3 years
Content Library			3 – 20 years
Customer Relationships			5 – 13 years
Tradename			2 – 15 years
Supplier Agreements			2 years
Advertiser relationships and Channel			3-13 years
Software			10 years

The Company’s intangible assets included the following on ~~June~~September 30, 2022:

	Cost Basis		Accumulated Amortization			Impairment			Net		Cost Basis		Accumulated Amortization			Impairment			Net
Trademark	$	1,925	$	(925	)	$	-			1,000	$	1,925	$	(1,076	)	$	-		$	849
Content Library		23,685		(20,803	)		-			2,882		23,685		(20,938	)		-			2,747
Customer Relationships		10,658		(7,395	)		(1,968	)		1,295		10,658		(7,455	)		(1,968	)		1,235
Tradename		2,101		(619	)		-			1,482		2,101		(714	)		-			1,387
Theatre Relationship		550		(550	)		-			-		550		(550	)		-			-
Patents		17		(17	)		-			-		17		(17	)		-			-
Supplier Agreements		11,430		(11,399	)		-			31		11,430		(11,415	)		-			15
Advertiser relationships and Channel		10,081		(361	)		-			9,720		10,081		(560	)		-			9,521
Software		3,200		(320	)		-			2,880		3,200		(400	)		-			2,800
Total Intangible Assets	$	63,647	$	(42,389	)	$	(1,968	)		19,290	$	63,647	$	(43,125	)	$	(1,968	)	$	18,554

The Company’s intangible assets included the following on March 31, 2022:

	Cost Basis		Accumulated Amortization			Impairment			Net
Trademark	$	1,925	$	(776	)	$	-			1,149
Content Library		23,685		(20,665	)		-			3,020
Customer Relationships		10,658		(7,327	)		(1,968	)		1,363
Tradename		2,101		(525	)		-			1,576
Theatre Relationship		550		(550	)		-			-
Patents		17		(17	)		-			-
Supplier Agreements		11,430		(11,384	)		-			46
Advertiser relationships and Channel		10,081		(161	)		-			9,920
Software		3,200		(240	)		-			2,960
Total Intangible Assets	$	63,647	$	(41,645	)	$	(1,968	)		20,034

Below is the amortization expense per year for the intangible assets:

	Total		Total
2023	$	2,520	$	1,811
2024		3,048		3,048
2025		1,796		1,796
2026		1,489		1,489
2027		1,269		1,269
Thereafter		9,168		9,141
Total	$	19,290	$	18,554

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)

Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities.

The equity investment in Metaverse is in Hong Kong dollars and was translated into US dollars as of ~~June~~September 30, 2022 and ~~2021~~March 31, 2022 at an exchange rate of 7.8 and 7.8 Hong Kong Dollars to 1 US Dollar, respectively. The fair value of this equity investment was measured by the quoted market price of Metaverse on the Stock Exchange of Hong Kong ~~at June 30, 2021.~~as of March 31, 2022. On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange and as of ~~June~~September 30, 2022, Metaverse’s stock valuation is based on ~~a preliminary evaluated offer received from~~ an independent ~~third party to purchase our shares and trending assessment of~~valuation based on the market ~~pricing~~approach and is categorized as Level 3 based on unobservable inputs. The Company estimated the fair value based on the market approach based on the last known enterprise value adjusting for trends in value from comparable companies. The adjustment to fair value of this investment resulted in a loss of ~~$1.3~~$1.8 million and gain of ~~$0.3~~$1.0 million for the ~~three~~six months ended ~~June~~September 30, 2022 and 2021, respectively. As the value of the investment in Metaverse is ~~being~~ determined ~~by an offer~~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 ~~purchase~~these assumptions may have a significant impact on the ~~shares from an independent third party, the~~fair value of ~~the~~our investment ~~may need to be reduced or fully written off should the offer be rescinded.~~in Metaverse.

The following tables summarize the levels of fair value measurements of our financial assets and liabilities as of ~~June~~September 30, 2022 and March 31, 2022:

As of ~~June~~September 30, 2022

(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Equity investment in Metaverse, at fair value	$	-	$	-	$	5,772	$	5,772	$	—	$	—	$	5,200	$	5,200
	$	-	$	-	$	5,772	$	5,772	$	—	$	—	$	5,200	$	5,200

Liabilities:
Current portion of earnout consideration on purchase of a business	$	—	$	—	$	1,188	$	1,188	$	—	$	—	$	741	$	741
Long term portion of earnout consideration on purchase of a business		—		—		627		627		—		—		651		651
	$	—	$	—	$	1,815	$	1,815	$	—	$	—	$	1,392	$	1,392

As of March 31, 2022

(in thousands)	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

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

ASSET ACQUISITIONS

An asset acquisition is an acquisition of an asset, or a group of assets, that does not meet the definition of a business. Asset acquisitions are accounted for by using the cost accumulation model whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values.

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 date of March 31, 2022 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 months ended June 30, 2022 and 2021.~~

No goodwill impairment charge was recorded in the three and six months ended September 30, 2022 and 2021. During the six months ended September 30, 2022, the Company recorded a $59 thousand reduction in goodwill as a result from working capital true-up related to DMR.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

	As of						As of
(In thousands)	June 30, 2022			March 31, 2022			September 30, 2022		March 31, 2022
Accounts payable	$	29,325		$	34,177		$	28,262	$	34,177
Amounts due to producers		9,254			10,430			9,314		10,430
Accrued compensation and benefits		4,401			3,507			5,291		3,507
Accrued taxes (refund) payable		(67	)		(78	)
Accrued other expenses		3,537			3,989			4,401		3,911
Total accounts payable and accrued expenses	$	46,450		$	52,025		$	47,268	$	52,025

PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of the following:

	As of				As of
(In thousands)	June 30, 2022		March 31, 2022		September 30, 2022		March 31, 2022
Non-trade accounts receivable	$	688	$	826
Other receivables					$	1,004	$	826
Advances		1,853		2,117		3,587		2,117
Due from producers		1,057		1,861		2,340		1,861
Prepaid insurance		212		169
Other prepaid expenses		811		820		1,149		989
Total prepaid and other current assets	$	4,621	$	5,793	$	8,080	$	5,793

~~Impairments~~Prepaid and ~~accelerated amortization~~other assets increased by $2.3 million primarily related to a $1.5 million increase in advances ~~were $32 thousand~~paid to Hallmark and ~~$0.2 million, for~~digital streaming TV partners and a $0.5 increase in distribution related expenses to be reimbursed by the ~~three months ended June 30, 2022 and 2021, respectively.~~licensors.

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.

Seasonality

Revenues from our Cinema Equipment Business derived from the collection of VPFs from motion picture studios are seasonal, coinciding with the timing of releases of movies by the motion picture studios. Generally, motion picture studios release the most marketable movies during the summer and the winter holiday season. The unexpected emergence of a hit movie during other periods can alter the traditional trend. The timing of movie releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other quarter. While Content Entertainment & Business benefits from the winter holiday season, we believe the seasonality of motion picture exhibition is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year.

Cinema Equipment Business

Our Cinema Equipment Business 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.

The Cinema Equipment Business also provides monitoring, data collection, serial data verification and management services to this segment, as well as to exhibitors who purchase their own equipment, in order to collect virtual print fees (“VPFs”) from ~~motion picture studios and~~ 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 ~~movie studios and~~ distributors, whereby amounts are payable by a ~~studio~~distributor to Phase I Deployment and to Phase II Deployment when distributor's movies ~~distributed by the studio~~ 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 Deployments 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 ~~movie studios and~~ 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, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. ~~Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.”~~ The Company evaluated the constraining estimates related to the variable consideration, that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the 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: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) 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 received the sale proceeds. Such sales were originally contemplated as the conclusion of the digital cinema deployment plan. Total system revenue was $1.2 million and $5.6 million, during the three months ended June 30, 2022 and 2021, respectively. Revenues earned in connection with up front exhibitor contributions are deferred and recognized over the expected cost recoupment period.

Exhibitors who purchased and own Systems using their own financing in Phase II of the Cinema Equipment Business paid us an upfront activation fee of approximately $2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $1.0 thousand and $2.0 thousand on Phase II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 3 - ~~Other Interests~~) upon installation and such fees are generally collected upfront upon installation. Our services division manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.

The Cinema Equipment Business 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 DC. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at that 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 ~~movie studios and~~ 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.

Content & Entertainment Business

~~CEG~~Content & Entertainment Business 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. Physical revenue from the sale of physical goods is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

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.

~~CEG~~Content & Entertainment Business also has contracts for the theatrical distribution of third party feature movies and alternative content. ~~CEG’s~~Content & Entertainment Business’s distribution fee revenue and ~~CEG’s~~Content & Entertainment Business’s participation in box office receipts are recognized at the time a feature movie and alternative content are viewed. ~~CEG~~Content & Entertainment Business 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 movies’ or alternative content’s theatrical release date.

The Company follows the five-step model established by ASC 606 when preparing its assessment of revenue recognition

We have omitted disclosure on the transaction price allocated to remaining performance obligations and estimated timing of revenue recognition as our contracts with customers that have a duration of more than one year are immaterial.

Principal Agent Considerations

Revenue earned by our ~~CEG business~~Content & Entertainment Business 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 cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Credit Losses

Our ~~CEG segment~~Content & Entertainment Business 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.

~~We record accounts receivable, long-term in connection with activation fees that~~During the three and six months ended September 30, 2021 and 2022, we ~~earn from Systems deployments that~~did not recognize any credit losses or reversals of previously recorded provisions, and did not have ~~extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rates.~~any write-offs charged against the allowance.

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 Business includes amounts related to the sale of DVDs with future release dates.

Deferred revenue relating to our Cinema & Equipment Business pertains to revenues earned 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.

The ending deferred revenue balance, including current and non-current balances, as of ~~June~~September 30, 2022 was ~~$0.4~~$0.3 million. For the three and six months ended ~~June~~September 30, 2022, 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 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. For the three months ended June 30, 2022 and 2021, there was $12.0 million and $14.6 million , respectively, included in accounts payable that represents a refund liability, a portion or all of which may be recognized as revenue upon completion of audit periods.

Revenue recognized as of the six months ended September 30, 2022 and 2021 that was included in deferred revenue at the beginning of the year was $0.2 million and $0.8 million, respectively. Revenue recognized as of the three months ended September 30, 2022 and 2021 that was included in deferred revenue at the beginning of the quarter was $0.4 million and $0.3 million, respectively. We expect to recognize substantially all of the deferred revenue as of September 30, 2022 as revenue in the next three months ending December 31, 2022. During the quarter ended September 30, 2022, $1.7 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 related once the uncertainty associated with the variable consideration was resolved.

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.

Disaggregation of Revenue

The Company disaggregates revenue into different revenue categories for the Cinema Equipment and ~~CEG~~Content & Entertainment Businesses. The Cinema Equipment Business revenue categories are: Phase I Deployment revenue, Phase II Deployment revenue, Services, and Digital System Sales, and the Content & Entertainment Business revenue categories are: Base Distribution Business and OTT Streaming and Digital.

The following tables present the Company’s revenue categories for the three and six months ended ~~June~~September 30, 2022 and 2021 (in thousands):

	Three Months Ended June 30,				Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022		2021		2022		2021
Cinema Equipment Business:
Phase I Deployment	$	113	$	91	$	59	$	148	$	172	$	239
Phase II Deployment		-		386		1,710		375		1,710		761
Services		120		179		108		486		228		665
Digital System Sales		1,194		5,575		728		2,244		1,922		7,819
Total Cinema Equipment Business revenue	$	1,427	$	6,231	$	2,605	$	3,253	$	4,032	$	9,484

Content & Entertainment Business:
Physical Revenue	$	2,205	$	1,778
Base Distribution Business					$	820	$	922	$	3,024	$	2,700
OTT Streaming and Digital		9,958		7,006		10,581		5,928		20,540		12,934
Total Content & Entertainment Business revenue	$	12,163	$	8,784	$	11,401	$	6,850	$	23,564	$	15,634

Concentrations

For the three months ended ~~June~~September 30, 2022, 3three customers, Amazon.com, Inc., Distribution Solutions, a division of Alliance Entertainment, and ~~Roku, Inc.,~~Tubi, represented ~~22%~~35% and ~~14%~~11%, and 10% respectively, of Content & Entertainment Business revenues, and approximately 19%, and ~~13%~~2% and 9%11%, respectively, of our consolidated revenues. For the six months ended September 30, 2022, three customers, Amazon.com, Inc., Distribution Solutions, a division of Alliance Entertainment, and Tubi, represented 35% and 20%, and 16% respectively, of Content & Entertainment Business revenues, and approximately 15%, and 5% and 9%, respectively, of our consolidated revenues.

For the three months ended ~~June~~September 30, 2021, Amazon.com, Inc. Distribution Solutions, a division of Alliance Entertainment and Tubi, represented 39%, 5% and 12%, respectively, of Content & Entertainment Business revenues and approximately 26%, 3% and 8%, respectively, of our consolidated revenues. For the six months ended September 30, 2021, Amazon.com, Inc. Distribution Solutions, a division of Alliance Entertainment and Roku, Inc., represented ~~23%~~30%, ~~11%~~8% and ~~11%~~12%, respectively, of Content & Entertainment Business revenues and approximately ~~14%~~19%, 6%5% and 6%7%, respectively, of our consolidated ~~Revenues.~~revenues.

DIRECT OPERATING COSTS

Direct operating costs consist of operating costs such as 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 and performance stock units. 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 consolidated statements of operations and comprehensive 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 nonemployee is required to provide service in exchange for the award. The fair values of options and stock appreciation rights 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 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 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% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax ~~positions.~~positions as of September 30, 2022.

NET LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic and diluted net loss per common share has been calculated as follows:

Basic net income (loss) per common share attributable to common stockholders	=	Net loss attributable to common stockholders
		Weighted average number of common stock outstanding during the period

Diluted net income (loss) per common share attributable to common stockholders	=	Net loss attributable to common stockholders
		Weighted average number of common stock outstanding during the period plus potential dilutive shares

Stock issued and treasury stock repurchased or reacquired during the period are weighted for the portion of the period that they are outstanding.

We incurred a net loss for the three and six months ended ~~June~~September 30, 2022, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling ~~8,506,098~~9,664,050 shares as of ~~June~~September 30, 2022, ~~were~~was excluded from the computations of loss per share as their impact would have been anti-dilutive.

We had a net income for the ~~three~~six months ended ~~June~~September 30, 2021, and therefore the impact of potentially dilutive common shares from outstanding stock options, stock appreciation rights, and warrants, totaling ~~2,003,235~~3,219,141 shares for the ~~three~~six months ended ~~June~~September 30, 2021, respectively, ~~were~~was included in the computations of diluted earnings per share. For the three months ended September 30, 2021, 11,937,243 potentially dilutive shares have been excluded from the diluted loss per share as their impact would have been antidilutive. We had a net loss for the three months ended September 30, 2021 and therefore no dilution as basic and diluted loss per share are the same for the period. The calculation of diluted net income per share for the ~~three~~six months ended ~~June~~September 30, 2021 does not include the impact of ~~9,616,429~~8,718,102 potentially dilutive shares relating to stock options, stock appreciation rights, and warrants as their impact would have been ~~anti-dilutive.~~anti-dilutive as their exercise prices are above the Company’s average Common Stock price during the period.

COMPREHENSIVE LOSS

For the three and six months ended ~~June~~September 30, 2022 and 2021, comprehensive loss consisted of net loss and foreign currency translation adjustments.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how the Company determines its allowance for estimated uncollectible receivables and evaluates its available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of fiscal 2023. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

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 Accounting Standards Codification 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. To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, among other factors. Although we indirectly, wholly own CDF2 Holdings, we, a third party that also has a variable interest in CDF2 Holdings, and an independent third party manager must mutually approve all business activities and transactions that significantly impact CDF2 Holdings’ economic performance. We have therefore assessed our variable interests in CDF2 Holdings and determined that we are not the primary beneficiary of CDF2 Holdings. As a result, CDF2 Holdings’ financial position and results of operations are not consolidated in our financial position and results of operations. In completing our assessment, we identified the activities that we consider most significant to the economic performance of CDF2 Holdings and determined that we do not have the power to direct those activities, and therefore we account for our investment in CDF2 Holdings under the equity method of accounting.

As of ~~June~~September 30, 2022 and March 31, 2022, 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 ~~$0.7~~$0.4 million and $0.8 million as of ~~June~~September 30, 2022 and March 31, 2022, respectively, which are included in accounts receivable, net on the accompanying consolidated balance sheets.

The accompanying Consolidated Statements of Operations include ~~$(104) thousand~~$0.0 million and ~~$77 thousand~~$0.3 million of digital cinema servicing revenue from CDF2 Holdings for the three months ended ~~June~~September 30, 2022 and 2021, respectively. The accompanying Consolidated Statements of Operations include($104) thousand and $0.2 million of digital cinema servicing revenue from CDF2 Holdings for the six months ended September 30, 2022 and 2021, respectively.

Total Stockholders’ Deficit of CDF2 Holdings at ~~June~~September 30, 2022 and March 31, 2022 was ~~$57.3~~$57.5 million and $55.6 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 ~~June~~September 30, 2022 and March 31, 2022 is carried at $0.

Majority Interest in CONtv

We own an 85% interest in CON TV, LLC, 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 (“VOE”) 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 attributable to noncontrolling interest in our condensed consolidated statement of operations equal to 11% of outstanding profit interest units retained by the noncontrolling interests.

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 shares of Roundtable Series A Preferred Stock and warrants to purchase 100 shares of Roundtable Common Stock (together, the “Roundtable Securities”). The Company paid the purchase price for the Roundtable Securities by issuing to Roundtable 316,937 shares of Common Stock is based on the closing price of the ~~company~~Company on the date of the purchase. The Company recorded $0.2 million for the purchase of the Roundtable Securities which is included in other long-term assets on the consolidated balance sheet. 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 enthusiast streaming channels. The Roundtable investment was accounted for using the cost ~~method.~~method and is included within other long term assets.

4. STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

COMMON STOCK

Authorized Common Stock

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

During the three months ended ~~June~~September 30, 2022, the Company issued ~~108,024~~2,579,488 shares of Common Stock ~~which consist the issuance~~. This is comprised of ~~Common Stock~~178,572 shares in payment of preferred stock ~~dividends.~~dividends, 2,066,879 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 six months ended September 30, 2022, the Company issued 2,687,512 shares of Common Stock . This is comprised of 286,596 shares in payment of preferred stock dividends, 2,066,879 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.

PREFERRED STOCK

Cumulative dividends in arrears on preferred stock were $0.1 million and ~~$0.1~~$0.2 million as of ~~June~~September 30, 2022 and 2021, respectively. In May and July 2022 and 2021, we paid preferred stock dividends in arrears in the form of ~~108,024~~286,596 and 53,278 shares of Common Stock, respectively.

TREASURY STOCK

We have treasury stock, at cost, consisting of 1,315,851 and 1,315,851 shares of Common Stock at ~~June~~September 30, 2022 and March 31, 2022, respectively.

CINEDIGM’S EQUITY INCENTIVE PLANS

Stock Based Compensation Awards

Awards issued under our 2000 Equity Incentive Plan (the “2000 Plan”) may be in any of the following forms (or a combination thereof) (i) stock option awards; (ii) stock appreciation rights; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan provides 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 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 set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the initial equity investment in Cinedigm 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.

As of ~~June~~September 30, 2022, there were 212,037 stock options outstanding in the 2000 Plan with weighted average exercise price of $14.46 and a weighted average contract life of ~~1.32~~1.07 years. As of March 31, 2022, there were 217,337 shares pursuant to stock options outstanding in the Plan with weighted average exercise price of $14.49 and a weighted average contract life of 1.54 years. A total of 5,300 options expired ~~and zero options were forfeited~~ during the ~~three~~six months ended ~~June~~September 30, 2022.

Options outstanding under the 2000 Plan as of ~~June~~September 30, 2022 is as follows:

As of June 30, 2022
As of September 30, 2022									As of September 30, 2022
Range of Prices	Options Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)			Options Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
$1.16 - $7.40		5,000		3.01	$	7.40	$	—			5,000		2.75	$	7.40	$	—
$13.70 - $24.40		207,037		1.28		14.63		—			207,037		1.03		14.63		—
		212,037					$	—			212,037					$	—

An analysis of all options exercisable under the 2000 Plan as of ~~June~~September 30, 2022 is presented below:

Options Exercisable Weighted Average
Remaining Life in Years Weighted Average
Exercise Price Aggregate Intrinsic Value
(In thousands)
212,037 1.32 $ 14.46 —

Options Exercisable				Weighted Average Remaining Life in Years				Weighted Average Exercise Price				Aggregate Intrinsic Value (In thousands)
	212,037				1.07			$	14.46				—

In August 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan). The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provided for the issuance of up to 2,108,270 shares of Common Stock, in the form of various awards, including stock options, stock appreciation rights (“SARs”), stock, restricted stock, restricted stock units, performance awards and cash awards. The Compensation Committee of the Company’s Board of Directors (the “Board”) is authorized to administer the 2017 Plan and make grants thereunder. The approval of the 2017 Plan did not affect awards already granted under the 2000 Plan. On December 4, 2019, upon shareholder approval, the 2017 Plan was amended to increase the maximum number of shares of Common Stock authorized for issuance thereunder from 2,108,270 shares to 4,098,270.

On October 23, 2020, the Company amended its 2017 Plan to increase the number of shares authorized for issuance thereunder from 4,098,270 to 14,098,270.

On October 11, 2021, the Company amended its 2017 Plan to increase the number of shares authorized for issuance thereunder from 14,098,270 to 18,098,270.

Stock appreciation rights outstanding under the 2017 Plan as of ~~June~~September 30, 2022 is as follows:

As of June 30, 2022
As of September 30, 2022									As of September 30, 2022
Range of Prices	SARs Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)			SARs Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
$0.54 - $0.74		5,550,000		8.45	$	0.60	$	—			5,550,000		8.19	$	0.60	$	—
$1.16 - $1.47		2,283,610		6.29		1.25		—			2,283,610		6.06		1.39		—
$1.71 - $2.10		2,455,738		6.53		1.49		—			2,452,940		6.34		1.92		—
$2.23 - $2.56		604,250		9.31		2.29		—			515,000		9.05		2.28		—
		10,893,598					$	—			10,801,550					$	—

An analysis of all stock appreciation rights exercisable under the 2017 Plan as of ~~June~~September 30, 2022 is presented below:

SAR Exercisable Weighted Average
Remaining Life in Years Weighted Average
Exercise Price Aggregate Intrinsic Value
(In thousands)
2,736,473 7.29 $ 1.21 -

SAR Exercisable				Weighted Average Remaining Life in Years				Weighted Average Exercise Price				Aggregate Intrinsic Value (In thousands)
	4,575,590				7.61			$	1.20				-

Total SARs outstanding are as follows:

	~~Year~~ Six Months Ended ~~June~~September 30, 2022
SARs Outstanding March 31, 2022		10,893,598
Issued		-
Forfeited		-(92,048	)
Total SARs Outstanding ~~June~~September 30, 2022		~~10,893,598~~10,801,550

Total performance stock units (“PSUs”) outstanding are as follows:

	Six Months Ended September 30, 2022
PSUs Outstanding March 31, 2022		696,280
Issued		-
Forfeited		-
Total PSUs Outstanding September 30, 2022		696,280

Following is the activity for performance stock unit awards:

	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Unvested balance at March 31, 2022		696,280	$	1.25		696,280	$	1.25
Granted		-		-		-		-
Vested		-		-		-		-
Unvested balance at June 30, 2022		696,280	$	1.25
Unvested balance at September 30, 2022						696,280	$	1.25

During the ~~three~~six months ended ~~June~~September 30, 2022, zero shares were issued for vested awards and ~~255,219~~696,280 shares are to be issued as of ~~June~~September 30, 2022.

Employee and director stock-based compensation expense related to our stock-based awards was as follows:

	Three Months Ended June 30,				Three Months Ended September 30,				Six Months Ended September 30,
(In thousands)	2022		2021		2022		2021		2022		2021
Selling, general and administrative	$	980	$	983	$	2,218	$	946	$	3,198	$	1,929
	$	980	$	983	$	2,218	$	946	$	3,198	$	1,929

There was ~~$875 thousand~~$2.1 million and ~~$1 thousand~~$0.8 million of stock-based compensation recorded for the three months ended ~~June~~September 30, 2022 and 2021, respectively, related to employees’ restricted stock ~~awards.~~awards inclusive of $551 thousand employee payroll taxes withheld for shares not issued. There was $3.0 million and $1.7 million of stock-based compensation recorded for the six months ended September 30, 2022 and 2021, respectively, related to employees’ restricted stock awards inclusive of $551 employee payroll taxes withheld for shares not issued.

There was ~~$105 thousand~~$0.1 million and ~~$126 thousand~~$0.1 million of stock-based compensation for the three months ended ~~June~~September 30, 2022 and 2021, respectively, related to board of directors. There was $0.2 million and $0.2 million of stock-based compensation for the six months ended September 30, 2022 and 2021, respectively, related to board of directors. During the ~~three~~six months ended ~~June~~September 30, 2022, the Company issued zero restricted shares to non-employee directors.

OPTIONS GRANTED OUTSIDE CINEDIGM’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 62,000 shares of our Common Stock at an exercise price of $17.50 per share. The options were fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised. As of ~~June~~September 30, 2022, 12,500 of such options remained outstanding. During the year ended March 31, 2022, the Company granted 2,025,250 stock appreciation rights (“SARs”). The SARs were granted under the 2017 Plan, except for 600,000 SARs granted to an officer of the Company as an inducement grant. All SARs issued have an exercise price equal to the fair value of the Company’s Common Stock on the date of grant and a maturity date of 10 years.

WARRANTS

The following table presents information about outstanding warrants to purchase shares of our Common Stock as of ~~June~~September 30, 2022. All of the outstanding warrants are fully vested and exercisable.

Recipient

Amount
outstanding

Expiration

Exercise price
per share

Amount
outstanding

Expiration

Exercise price
per share

5-year Warrant issued to Bison Entertainment and Media Group(” BEMG”) in connection with a term loan agreement

1,400,000

December 2022

1.80

5-year Warrant issued to Bison Entertainment and Media Group(“ BEMG”) in connection with a term loan agreement

1,400,000

December 2022

1.80

5. NOTES PAYABLE

On September 15, 2022, the Company entered into a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”). The agreement provided 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 of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion. As of September 30, 2022, $3.8 million remained outstanding on this line of credit. The interest rates as of September 30, 2022 were approximately 7.75%. 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 months and six months ended September 30, 2022 the company had interest expense of $19 thousand related to this note.

6. COMMITMENTS AND CONTINGENCIES

We operate from leased properties under non-cancelable operating lease agreements, certain of which contain escalating lease clauses.

The Company leases office space under an operating lease. The Company’s portfolio of leases is primarily related to real estate and since most of our leases do not provide a readily determinable implicit rate, the Company estimated its incremental borrowing rate to discount the lease payments based on information available at either the implementation date of Topic 842 or at lease commencement for leases entered into thereafter.

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of ~~June~~September 30, 2022 and March 31, 2022:

(In thousands)	Classification on the Balance Sheet	June 30, 2022		March 31, 2022		Classification on the Balance Sheet	September 30, 2022		March 31, 2022
Assets
Noncurrent	Operating lease right-of-use asset	$	680	$	749	Operating lease right-of-use asset, net	$	612	$	749
Liabilities
Current	Operating leases – current portion		193		258	Operating leases – current portion		127		258
Noncurrent	Operating leases – long-term portion		489		491	Operating leases – long-term portion		489		491
Total operating lease liabilities		$	682	$	749		$	616	$	749

Lease Costs

The table below presents certain information related to lease costs for leases:

	Three Months Ended		Three Months Ended		Three Months Ended		Three Months Ended
(In thousands)	June 30, 2022		June 30, 2021		September 30, 2022		September 30, 2021
Operating lease cost	$	84	$	22	$	111	$	23
Total lease cost	$	84	$	22	$	111	$	23

	Six Months Ended		Six Months Ended
(In thousands)	September 30, 2022		September 30, 2021
Operating lease cost	$	196	$	45
Total lease cost	$	196	$	45

Other Information

The table below presents supplemental cash flow information related to leases:

	Three Months Ended			Three Months Ended		Six Months Ended		Six Months Ended
(In thousands)	June 30, 2022			June 30, 2021		September 30, 2022		September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities		-			22		-		10
Operating cash flows used for operating leases Hyde Park Agreement	$	-	��	$	22	$	-	$	10

On January 5, 2022, the Company entered into a letter agreement with Hyde Park Entertainment, Inc. (“Hyde Park”), pursuant to which the Company and Hyde Park are collaborating on the development, production and/or distribution of a project based on the novel Audition by Ryu Murakami (the “Audition Project”). Each of the Company and Hyde Park owns 50% of the rights in connection with the Audition Project. The Company paid $100 thousand to Hyde Park plus $26 thousand in legal fees to counsel for the Audition project. Ashok Amritraj, a director of the Company, is the Chairman and CEO of Hyde Park and has an interest in 100% of the revenues of Hyde Park. Ashok Amritraj is a current board member and related party to the Company.

7. SUPPLEMENTAL CASH FLOW INFORMATION AND DISCLOSURE OF NON-CASH ~~INVESTMENTING AN~~INVESTING AND FINANCING ACTIVITY

	Three Months Ended June 30,				Six Months Ended September 30,
(In thousands)	2022		2021		2022			2021
Cash interest paid	$	-	$	663	$	380		$	612
Income taxes paid		-		-		—			45
Noncash investing and financing activities:
Accrued dividends on preferred stock		88		89		88			178
Issuance of Class A common stock for payment of preferred stock dividends		88		89
Issuance of Class A common stock for payment of accrued preferred stock dividends						175			89
Issuance of Class A common stock for business combination		-		2,506		—			4,824
Earnout consideration paid with common shares of Company						(238	)		—
Earnout consideration adjustment						80			—
Treasury shares acquired for withholding taxes						—			5
Deferred consideration in purchase of a business		-		1,980		—			3,441
Earnout consideration in purchase of a business		80		-

7.8. SEGMENT INFORMATION

We operate in 2two reportable segments: Cinema Equipment Business and Content & Entertainment Business. 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 CODM to evaluate performance, which is generally the segment’s operating income (loss) before depreciation and amortization.

Operations of:

Products and services provided:

Cinema Equipment Business

Financing vehicles and administrators for ~~434~~355 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for ~~648~~320 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 in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Cinema Equipment Business segment also provides monitoring, collection, verification and management services to this segment, 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 Business

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 our reportable segments and Corporate:

	As of June 30, 2022												As of September 30, 2022
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities		Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	20,282	$	—	$	—	$	—	$	-	$	-	$	13,553	$	-	$	-	$	-
Content & Entertainment Business		19,202		21,084		66,770		—		—		675		18,466		21,025		70,250		-		-		614
Corporate		88		—		7,171		—		—		7		88		-		10,453		-		3,622		2
Total	$	19,290	$	21,084	$	94,223	$	—	$	—	$	682	$	18,554	$	21,025	$	94,256	$	-	$	3,622	$	616

	As of March 31, 2022
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	24,445	$	—	$	—	$	—
Content & Entertainment Business		19,946		21,084		68,873		—		—		—
Corporate		88		—		11,318		—		—		749
Total	$	20,034	$	21,084	$	104,636	$	—	$	—	$	749

	Statements of Operations
	Three Months Ended June 30, 2022												Statements of Operations
	(in thousands)												Three Months Ended September 30, 2022
	Cinema Equipment Business			Content & Entertainment Business			Corporate			Consolidated			(in thousands)
													Cinema Equipment Business		Content & Entertainment Business			Corporate			Consolidated
Revenues	$	1,427		$	12,163		$	-		$	13,590		$	2,605	$	11,401		$	-		$	14,006
Direct operating (exclusive of depreciation and amortization shown below)		144			7,212			-			7,356			126		7,966			-			8,092
Selling, general and administrative		1,071			3,783			4,961			9,815			455		3,562			5,580			9,597
Allocation of corporate overhead		103			2,752			(2,855	)		0			93		2,492			(2,585	)		-
Provision for (recovery of) doubtful accounts		3			-			-			3
Provision of doubtful accounts														44		-			-			44
Depreciation and amortization of property and equipment		117			138			1			256			104		144			-			248
Amortization of intangible assets		-			637			107			744			-		629			107			736
Total operating expenses		1,438			14,522			2,214			18,174			822		14,793			3,102			18,717
Income (loss) from operations	$	(11	)	$	(2,359	)	$	(2,214	)	$	(4,584	)	$	1,783	$	(3,392	)	$	(3,102	)	$	(4,711	)

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)	Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated
Direct operating	$	-	$	-	$	-	$	-
Selling, general and administrative		-		-		2,218		2,218
Total stock-based compensation	$	-	$	-	$	2,218	$	2,218

	Statements of Operations
	Three Months Ended September 30, 2021
	(in thousands)
	Cinema Equipment Business			Content & Entertainment Business			Corporate			Consolidated
Revenues	$	3,253		$	6,850		$	—		$	10,103
Direct operating (exclusive of depreciation and amortization shown below)		164			3,169			—			3,333
Selling, general and administrative		431			3,480			3,248			7,159
Allocation of corporate overhead		170			1,139			(1,309	)		—
Provision for (recovery of) doubtful accounts		(130	)		19			—			(111	)
Depreciation and amortization of property and equipment		300			140			—			440
Amortization of intangible assets		—			696			—			696
Total operating expenses		935			8,643			1,939			11,517
Income (loss) from operations	$	2,318		$	(1,793	)	$	(1,939	)	$	(1,414	)

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)	Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated		Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated
Direct operating	$	-	$	-	$	-	$	-	$	—	$	—	$	—	$	—
Selling, general and administrative		-		-		980		980		—		345		601		946
Total stock-based compensation	$	-	$	-	$	980	$	980	$	—	$	345	$	601	$	946

	Statements of Operations										Statements of Operations
	Three Months Ended June 30, 2021										Six Months Ended September 30, 2022
	(in thousands)										(in thousands)
	Cinema Equipment Business		Content & Entertainment Business			Corporate			Consolidated		Cinema Equipment Business		Content & Entertainment Business			Corporate			Consolidated
Revenues	$	6,231	$	8,784		$	—		$	15,015	$	4,032	$	23,564		$	-		$	27,596
Direct operating (exclusive of depreciation and amortization shown below)		257		4,374			—			4,631		270		15,178			-			15,448
Selling, general and administrative		429		2,818			2,796			6,043		1,526		7,345			10,541			19,412
Allocation of corporate overhead		99		660			(759	)		—		196		5,244			(5,440	)		-
Provision for doubtful accounts		27		44			—			71
Provision for (recovery of) doubtful accounts												47		-			-			47
Depreciation and amortization of property and equipment		507		143			(1	)		649		221		282			1			504
Amortization of intangible assets		—		846			1			847		-		1,266			214			1,480
Total operating expenses		1,319		8,885			2,037			12,241		2,260		29,315			5,316			36,891
Income (loss) from operations	$	4,912	$	(101	)	$	(2,037	)	$	2,774	$	1,772	$	(5,751	)	$	(5,316	)	$	(9,295	)

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)	Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated		Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—	$	-	$	-	$	-	$	-
Selling, general and administrative		—		166		817		983		-		-		3,198		3,198
Total stock-based compensation	$	—	$	166	$	817	$	983	$	-	$	-	$	3,198	$	3,198

	Statements of Operations
	Six Months Ended September 30, 2021
	(in thousands)
	Cinema Equipment Business			Content & Entertainment Business			Corporate			Consolidated
Revenues	$	9,484		$	15,634		$	—		$	25,118
Direct operating (exclusive of depreciation and amortization shown below)		421			7,543			—			7,964
Selling, general and administrative		860			6,298			6,044			13,202
Allocation of corporate overhead		269			1,799			(2,068	)		—
(Recovery of) provision for doubtful accounts		(103	)		63			—			(40	)
Depreciation and amortization of property and equipment		805			284			—			1,089
Amortization of intangible assets		—			1,543			—			1,543
Total operating expenses		2,252			17,530			3,976			23,758
Income (loss) from operations	$	7,232		$	(1,896	)	$	(3,976	)	$	1,360

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)	Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—
Selling, general and administrative		—		511		1,418		1,929
Total stock-based compensation	$	—	$	511	$	1,418	$	1,929

8.9. INCOME TAXES

We calculate income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions. We recorded an income tax benefit (expense) of zero for the three and six months ended September 30, 2022. We recorded an income tax benefit of approximately ~~zero~~$487 thousand and ~~$63~~$550 thousand for the three and six months ended ~~June~~September 30, ~~2022 and 2021, respectively.~~2021. 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~~six months ended ~~June~~September 30, 2022 and 2021 was zero and negative ~~1.2%~~12.4%, respectively.

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 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

Since our inception, we have played 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 become a leading distributor of independent content, both through organic growth and acquisitions. 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, as well as (ii) physical goods, including DVD and Blu-ray Discs.

We report our financial results in two primary segments as follows: (1) cinema equipment business and (2) content and entertainment business (“Content & Entertainment” ~~or “CEG”~~). The cinema equipment business segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North ~~America and Australia.~~America. It also provides fee-based support to over ~~1,082~~675 movie screens as well as directly to exhibitors and other third-party customers in the form of monitoring, billing, collection and verification services. Our Content & Entertainment segment operates in: (1) ancillary market aggregation and distribution of entertainment content and (2) 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 business 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.

We are structured so that our cinema equipment business segment operates independently from our Content & Entertainment business. As of ~~June~~September 30, 2022, we had approximately $0.0 million of non-recourse outstanding debt principal that relates to, and is serviced by, our cinema equipment business. We have approximately $0.0 million of outstanding debt principal and $3.8 million due on the outstanding credit line, as of ~~June~~September 30, 2022 that is attributable to our Content & Entertainment and Corporate segments.

Risks and Uncertainties

Liquidity

We have incurred net losses historically and net loss for the ~~three~~six months ended ~~June~~September 30, 2022 of ~~$6.0~~$11.6 million. As of ~~June~~September 30, 2022, we had an accumulated deficit of ~~$478.4~~$484.2 million and negative working capital of ~~$7.6~~$10.1 million. Net cash used in operating activities for the ~~three~~six months ended ~~June~~September 30, 2022 was ~~$1.2~~$6.3 million. Based on these and prior conditions, the Company entered into the following transactions described below.

Capital Raises

On May 20, 2020, the Company entered into a securities purchase agreement ~~(the “Securities Purchase Agreement”)~~ with certain investors ~~(the “Investors”)~~ for the purchase and sale of 10,666,666 shares of the Common Stock, at a purchase price of $0.75 per share, in a registered direct offering, pursuant to an effective shelf registration statement on Form S-3 which was declared effective by the Securities and Exchange Commission on May 14, 2020 (File No. 333-238183) and an applicable prospectus supplement. The closing of the sale occurred on May 22, 2020. The aggregate gross proceeds for the sale was $8.0 million. The net proceeds to the Company from the sale, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, were approximately $7.1 million.

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 2020 Shelf Registration Statement, for an aggregate offering price of up to $30 million. Net proceeds from such sales totaled $18.6 million. No sales under the ATM Sales Agreement were made during the ~~three~~six months ended ~~June~~September 30, 2022.

On July 16, 2020, the Company entered into a securities purchase agreement with certain investors for the purchase and sale of 7,213,334 shares of Common Stock, ~~par value $0.001 per share,~~ at a purchase price of $1.50 per share, in a registered direct offering, pursuant to the 2020 Shelf Registration Statement and an applicable prospectus supplement. The closing of the sale occurred on July 20, 2020. The aggregate gross proceeds for the sale was approximately $10.8 million. The net proceeds to the Company from the sale, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, is approximately $10.1 million.

On February 2, 2021, the Company entered into a ~~Securities Purchase Agreement~~securities purchase agreement with a single institutional investor for the purchase and sale of 5,600,000 shares of Common Stock at a purchase price of $1.25 per share, in a registered direct offering, pursuant to an effective shelf registration statement on Form S-3 which was declared effective by the Securities and Exchange Commission on July 10, 2020 (File No. 333-239710) (the “2020 Shelf Registration Statement”) and an applicable prospectus supplement. The closing of the sale occurred on February 5, 2021. The aggregate gross proceeds for the sale was approximately $7.0 million. The net proceeds to the Company from the sale, after deducting the fees of the placement agent but before paying the Company’s estimated offering expenses, was approximately $6.5 million.

In October 2021, we entered into a Common Stock Purchase Agreement (the “Equity Line Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with B. Riley Principal Capital, LLC (“B. Riley Principal Capital”). Pursuant to the Equity Line Purchase Agreement, the Company has the right to sell to B. Riley Principal Capital up to the lesser of (i) $50,000,000 of newly issued shares of Common Stock and (ii) the Exchange Cap (as defined in the Equity Line Purchase Agreement), from time to time during the 24-month period from and after the October 21, 2021. Sales of Common Stock pursuant to the Equity Line Purchase Agreement, and the timing of any sales, are solely at the option of the Company, and the Company is under no obligation to sell any securities to B. Riley Principal Capital under the Equity Line Purchase Agreement. As consideration for B. Riley Principal Capital’s commitment to purchase shares of Common Stock at the Company’s direction upon the terms and subject to the conditions set forth in the Equity Line Purchase Agreement, upon execution of the Equity Line Purchase Agreement, the Company issued 210,084 shares of Common Stock to B. Riley Principal Capital (the “Commitment Shares”). The purchase price of the shares of Common Stock that we elect to sell to B. Riley Principal Capital pursuant to the Equity Line Purchase Agreement will be determined by reference to the volume weighted average price of the Common Stock (“VWAP”) during the applicable purchase date, less a fixed 5% discount to such VWAP. Pursuant to the Registration Rights Agreement, the Company filed a Registration Statement on Form S-1 that was declared effective by the Securities and Exchange Commission on October 21, 2021 (File No. 333-260210) for the resale by B. Riley Principal Capital of up to 25,210,084 shares of Common Stock (including the Commitment Shares) acquired pursuant to the Equity Line Purchase Agreement. During the year ended March 31, 2022, we sold 5,300,000 shares of Common Stock under the Equity Line Purchase Agreement. Net proceeds from such sales totaled $12.4 million. No sales under the Equity Line Purchase Agreement were made during the ~~three~~six months ended ~~June~~September 30, 2022.

As of ~~June~~September 30, 2022, there is still approximately $38.0 million available under the 2020 Shelf Registration Statement, and $37.6 million available under the Equity Line Purchase Agreement, to raise additional capital.

Sale of Cinematic Equipment

On March 17, 2021, the Company entered into two separate agreements (the “AMC Equipment Purcahse Agreements”) for the sale of cinematic equipment to American Multi-Cinema, Inc. (“AMC”). The agreement included the sale in tranches of a total of 2,369 cinematic projectors starting in March 2021 throughout January 2023 for a total cash consideration of $10.8 million. As of ~~June~~September 30, 2022, the Company recognized revenue for $10.3 million. A portion of the total proceeds was utilized to pay off the remaining Prospect note payable.

Equity Investment in a Metaverse Company, a Related Party

On February 14, 2020, the Company acquired an approximately 11.5% interest in A Metaverse Company (“Metaverse”), a leading publicly traded Chinese entertainment company, formerly Starrise Media Holdings Limited, whose ordinary shares are listed on the Stock Exchange of Hong Kong. The Company acquired such interest as a strategic investment and in a private transaction from a shareholder of Metaverse that is related to our major shareholder. Our major shareholder also maintains a significant beneficial interest ownership in Metaverse. Upon consummation of the transaction on February 14, 2020, the Company recorded an initial investment of approximately $25.1 million, which is the fair market value of the Metaverse shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.2 million, valued as of the date of the issuance of the Common Stock of the Company. The difference in value of shares received in Metaverse and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital.

On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange. This investment was previously a ~~level~~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~~marketplace. The investment is recorded at fair value ~~level of the investment. Without~~as a Level 3 as there is not an active market ~~where the shares are being traded, the investment no longer qualifies as a level 1.~~or observable inputs. As of ~~June~~September 30, 2022, Metaverse’s stock valuation is based on ~~a evaluated offer received from~~ an independent ~~third party to purchase our shares and trending assessment of~~valuation based on the market ~~pricing and~~approach is categorized as Level 3 based on unobservable inputs. As the value of the investment in Metaverse is being determined by an offer to purchase the shares from an independent third party, the value of the investment may need to be reduced or fully written off should the offer be rescinded.

We believe the combination of: (i) our cash and cash equivalent balances at ~~June~~September 30, 2022 and (ii) expected cash flow from operations will be sufficient for our operations and capital needs, for at least twelve months from the filing of this report. Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity.

Critical Accounting Policies and Estimates

Our consolidated 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 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 – Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, included in Item 1, Condensed Consolidated Financial Statements (Unaudited), of this Quarterly Report on Form 10-Q. Management believes that the following accounting 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.

FAIR VALUE ESTIMATES

Goodwill, Intangible and Long-Lived 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. Determining whether impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. The assessment for recoverability is based primarily on our ability to recover the carrying value of its 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 assets 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 six months ended September 30, 2022 and 2021, no impairment charge was recorded to goodwill, intangible, and long-lived assets.

Investment in Metaverse

~~During the three months ended June 30, 2022 and 2021, no impairment charge was recorded to intangible assets.~~

~~Investment in Metaverse~~Fair Value Hierarchy

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

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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)

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

During the ~~three~~six months ended ~~June~~September 30, 2022 and 2021, the company recorded a charge of ~~$1,256~~$1.8 million and ~~($334)~~$1 million in the company’s investment in Metaverse.

REVENUE RECOGNITION

~~Adoption of ASU Topic 606, “Revenue from Contracts with Customers”~~

We determine revenue recognition by:

●

identifying the contract, or contracts, with the customer;

●

identifying the performance obligations in the contract;

●

determining the transaction price;

●

allocating the transaction price to performance obligations in the contract; and

●

recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVD’s and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and video on demand services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities such as sales value-added taxes and other similar taxes.

Cinema Equipment Business

Our Cinema Equipment Business consists of financing vehicles and administrators for ~~434~~355 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for ~~648~~320 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.

VPFs are earned, net of administrative fees, pursuant to contracts with ~~movie studios and~~ distributors, whereby amounts are payable by a ~~studio~~distributor to Phase I Deployment and to Phase II Deployment when distributor’s movies ~~distributed by the studio~~ are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable 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 Deployments 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 ~~movie studios and~~ 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, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.” The Company evaluated the constraining estimates related to the variable consideration, i.e., the one-time bonus and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the 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: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) 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 were originally contemplated as the conclusion of the digital cinema deployment plan. Cinedigm recognizes revenue once the customer takes possession of the Systems and Cinedigm received the sale proceeds. ~~Such sales were originally contemplated as the conclusion of the digital cinema deployment plan.~~ Total system revenue was ~~$1.2~~$0.7 million and ~~$5.6~~$2.2 million, during the three months ended ~~June~~September 30, 2022 and 2021, respectively. ~~Revenues earned in connection with up front exhibitor contributions are deferred~~Total system revenue was $1.9 million and ~~recognized over~~$7.8 million, during the ~~expected cost recoupment period.~~six months ended September 30, 2022 and 2021, respectively.

Exhibitors who purchased and own Systems using their own financing in Phase II of the Cinema Equipment Business paid us an upfront activation fee of approximately $2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $1.0 thousand and $2.0 thousand on Phase II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 3 – ~~Other Interests~~) upon installation and such fees are generally collected upfront upon installation. Our services division manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.

The Cinema Equipment Business 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 DC. This administrative fee is related to the collection and remittance of the VPFs and the performance obligation is satisfied at that 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 ~~movie studios and~~ distributors.

Content & Entertainment Business

~~CEG~~Content & Entertainment Business 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 performance obligation is satisfied, which is when the content is available for subscription on the digital platform, 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. Physical revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

Physical goods reserved for sales returns 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.

Principal Agent Considerations

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:

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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

Credit Losses

We record accounts receivable, long-term in connection with activation fees that we earn from Systems deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rates.

Contract Liabilities

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

Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned 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.

The ending deferred revenue balance, including current and non-current balances, as of ~~June~~September 30, 2022 was ~~$0.4~~$0.3 million. For the ~~three~~six months ended ~~June~~September 30, 2022, 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 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

ASSET ACQUISITIONS

An asset acquisition is an acquisition of an asset, or a group of assets, that does not meet the definition of a business as substantially all of the fair value of the gross assets acquired are concentrated in a single or group of similar, identifiable assets. Asset acquisitions are accounted for by using the cost accumulation model whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on a relative fair value basis. Determining and valuing intangible assets requires judgment.

BUSINESS COMBINATIONS

The Company accounts for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “Intangibles — Goodwill and Other” (“ASC 350”). The excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill. ASC 805 specifies criteria to be used in determining whether intangible assets acquired in a business combination must be recognized and reported separately from goodwill. Amounts assigned to goodwill and other identifiable intangible assets are based on independent appraisals or internal estimates.

ASC 805 defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date the acquirer achieves control. ASC 805 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquirer (if any) at the acquisition date, measured at their fair values as of that date. ASC 805 also requires the acquirer to recognize contingent consideration (if any) at the acquisition date, measured at its fair value at that date.

Results of Operations for the Fiscal Three Months Ended ~~June~~September 30, 2022 and 2021

Revenues

	For the Three Months Ended June 30,										For the Three Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change			2022		2021		$ Change			% Change
Cinema Equipment Business	$	1,427	$	6,231	$	(4,804	)		(77	)%	$	2,605	$	3,253	$	(648	)		(20	)%
Content & Entertainment Business		12,163		8,784		3,379			38	%		11,401		6,850		4,551			66	%
	$	13,590	$	15,015	$	(1,425	)		(9	)%	$	14,006	$	10,103	$	3,903			39	%

Revenues generated by our Cinema Equipment Business segment decreased as a result of the lower system revenue and eligible VPF ~~systems.~~systems offset by an increase in Ph2 variable consideration of $1.7 million Total system revenue recognized was ~~$1.2~~$0.7 million and ~~$5.6~~$2.2 million, during the quarter ended ~~June~~September 30, 2022 and 2021, respectively. ~~An increase in~~ Blockbuster content released during the period ending ~~June~~September 30, 2022 ~~showed a return to pre-pandemic results;~~was consistent with Studio output from the prior period, however ~~this was offset by an 80% decrease in~~VPF eligible ~~VPF systems~~theatres decreased significantly for the same period last year. Revenue in the Content & Entertainment Business segment increased by ~~38%~~66% for the ~~quarter~~three months ended ~~June~~September 30, 2022 compared to the ~~quarter~~three months ended ~~June~~September 30, 2021. The increase is consistent with the addition of seven new streaming channels related to Bloody Disgusting and DMR business acquisitions and ~~four~~five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex as well as an increase in the number of advertising ~~partners~~ partners. Additionally, the segment experienced triple-digit growth related to “FAST” and TV-VOD revenue, bolstered by top performing titles and new releases, such as the Yu-Gi-Oh, Demon Slayer, Boon, The Ravine, The Mulligan, Chesapeake Shores, When Calls the Heart, and the classics, Short Circuit and Highlander.

Direct Operating Expenses

	For the Three Months Ended June 30,										For the Three Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change			2022		2021		$ Change			% Change
Cinema Equipment Business	$	144	$	257	$	(113	)		(44	)%	$	126	$	164	$	(38	)		(23	)%
Content & Entertainment Business		7,212		4,374		2,838			65	%		7,966		3,169		4,797			151	%
	$	7,356	$	4,631	$	2,725			59	%	$	8,092	$	3,333	$	4,759			143	%

The decrease in direct operating expenses in the quarter ended ~~June~~September 30, 2022 for the Cinema Equipment Business compared to the prior period was primarily due to a decrease in property taxes as a result of system sales. The increase in direct operating expenses in the three months ended ~~June~~September 30, 2022 for the Content & Entertainment Business compared to the prior year was primarily due to ~~$0.2 million higher license and royalty costs, $0.3~~$0.8 million increase related to DVD manufacturing and fulfillment, ~~$0.7~~$2.7 million higher content and production costs including royalties related to continued growth in revenue and distribution, ~~$0.3~~$0.5 million ~~higher personnel~~increase related to Software as a service (“SaaS”) expense primarily as the result of the DMR acquisition and ~~contractors, and $0.2~~$0.4 million higher related to the film restoration, conversion and website content production costs. ~~Additionally, $0.8 million in Software as a service (“SaaS”) expense resulted from the DMR acquisition was realized during the three months ended June 30, 2022.~~

Selling, General and Administrative Expenses

	For the Three Months Ended June 30,									For the Three Months Ended September 30,
($ in thousands)	2022		2021		$ Change		% Change			2022		2021		$ Change		% Change
Cinema Equipment Business	$	1,071	$	429	$	642		150	%	$	455	$	431	$	24		6	%
Content & Entertainment Business		3,783		2,818		965		34	%		3,562		3,480		82		2	%
Corporate		4,961		2,796		2,165		77	%		5,580		3,248		2,332		72	%
	$	9,815	$	6,043	$	3,772		62	%	$	9,597	$	7,159	$	2,438		34	%

Selling, general and administrative expenses for the ~~quarter~~three months ended ~~June~~September 30, 2022 increased by ~~$3.7~~$2.4 million primarily due to ~~$2.2~~$1.5 million increase in personnel costs from the acquisitions of ~~Screambox,~~Fandor, DMR, and Bloody ~~Disguising, $0.7~~Disgusting, $1.3 million ~~in legal expenses primarily~~increase related to ~~a legal settlement ,~~stock-based compensation to management and ~~$0.5~~employees, offset by $0.3 million decrease in professional consulting services.

Recovery of Doubtful Accounts

Recovery of doubtful accounts was ~~$3 thousand~~$0.0 and $0.1 million for the fiscal three months ended ~~June~~September 30, 2022 and 2021, respectively.

Depreciation and Amortization Expense on Property and Equipment

	For the Three Months Ended June 30,											For the Three Months Ended September 30,
($ in thousands)	2022		2021			$ Change			% Change			2022		2021		$ Change			% Change
Cinema Equipment Business	$	117		507			(390	)		(77	)%	$	104		298		(194	)		(65	)%
Content & Entertainment Business		138		143			(5	)		(3	)%		144		142		2			1	%
Corporate		1		(1	)		2			(200	)%		-		-		-			-	%
	$	256	$	649		$	(393	)		(61	)%	$	248	$	440	$	(192	)		(44	)%

Depreciation and amortization expense decreased in our Cinema Equipment Business ~~Segment~~segment as the majority of our digital cinema projection systems reached the conclusion of their ten-year useful lives during the quarter ended ~~June~~September 30, 2022 and ~~2021~~2021.

Amortization of intangible assets

	For the Three Months Ended June 30,										For the Three Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change			2022		2021		$ Change			% Change
Cinema Equipment Business												-		-		-			-	%
Content & Entertainment Business		637		845		(208	)		(25	)%		629		696		(67	)		(10	)%
Corporate		107		1		106			10600	%		107				107			-	%
	$	744	$	846	$	(102	)		(12	)%	$	736	$	696	$	40			6	%

~~Corporate and Content & Entertainment Business amortization expense on~~Amortization of intangible assets ~~is $111 thousand lower due Customer Contracts asset being~~decreased in our Cinema Equipment Business Segment as the intangibles held by that segment were fully amortized ~~saving $0.4 million, partially~~and offset by ~~$0.2 million higher amortization expense related~~new intangibles added due to ~~the DMR acquisition and Cinedigm India.~~recent acquisitions during 2021.

Interest expense, net

	For the Three Months Ended June 30,										For the Three Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change			2022		2021		$ Change			% Change
Cinema Equipment Business	$	-	$	133	$	(133	)		(100	)%	$	-	$	5	$	(5	)		(100	)%
Content & Entertainment Business		-		-		-			-	%
Corporate		133		11		122			1109	%		380		31		349			1,126	%
	$	133	$	144	$	(11	)		(8	)%	$	380	$	36	$	344			956	%

Interest expense in our Corporate segment increased as a result of deferred and earnout consideration accretion related to the acquisition of Bloody Disgusting, FoundationTV and DMR.

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. As of ~~June~~September 30, 2022, Metaverse’s stock valuation is based on an ~~evaluated offer received from an~~ independent ~~third party to purchase our shares and trending assessment of~~valuation based on the market ~~pricing and~~approach is categorized as Level 3 based on unobservable inputs. The changes in the valuation resulted in a loss of $0.6 million during the three months ended September 30, 2022.

Income Tax Benefit

We recorded income tax expense of $0zero for the three months ended ~~June~~September 30, 2022. We recorded an income tax benefit of approximately ~~$63~~$487 thousand for the three months ended ~~June~~September 30, 2021.

Our effective tax rate for the three months ended ~~June~~September 30, 2022 and 2021 was zero and negative ~~1.2%~~71.4%, respectively.

Net Income/Loss attributable to common shareholders

	For the Three Months Ended June 30,												For the Three Months Ended September 30,
($ in thousands)	2022			2021			$ Change			% Change			2022			2021			$ Change			% Change
Cinema Equipment Business	$	137		$	4,771		$	(4,634	)		(97	)%	$	1,833		$	2,476		$	(643	)		(26	)%
Content & Entertainment Business		(2,380	)		(108	)		(2,272	)		(2104	)%		(3,090	)		(1,831	)		(1,259	)		(69	)%
Corporate		(3,850	)		435			(4,285	)		(985	)%		(4,495	)		(918	)		(3,577	)		(390	)%
	$	(6,093	)	$	5,098		$	(11,191	)		(220	)%	$	(5,752	)	$	(273	)	$	(5,479	)		(2,007	)%

Adjusted EBITDA

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

Consolidated Adjusted EBITDA (including the results of Cinema Equipment Business segment) for the three months ended ~~June~~September 30, 2022 decreased by ~~$7.7~~$2.0 million compared to the three months ended ~~June~~September 30, 2021. Adjusted EBITDA from our Cinema Equipment Business segment decreased primarily due to a decrease in systems sales and eligible VPF systems. Adjusted EBITDA from the Content & Entertainment Business and Corporate decreased by ~~$2.3~~$1.3 million for the three months ended ~~June~~September 30, 2022 compared to the three months ended ~~June~~September 30, 2021, due to an increase of ~~$2.8~~$4.8 million in direct operating expense and ~~$3.1~~$2.4 million higher selling, general and administrative expenses, versus previous year despite a ~~$3.4~~$4.6 million increase in Streaming digital revenue, adding channels, and acquisitions.

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 its 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 loss from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income from operations or net loss from continuing 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 consolidated financial statements prepared in accordance with GAAP.

Following is the reconciliation of our consolidated net loss to Adjusted EBITDA:

	For the Three Months Ended September 30,
($ in thousands)	2022			2021
Net loss	$	(5,655	)	$	(195	)
Add Back:
Income tax expense (benefit)		-			(487	)
Depreciation and amortization of property and equipment		248			440
Amortization of intangible assets		736			696
Interest expense, net		380			36
Change in fair value on equity investment in Metaverse		572			(666	)
Severance and other expense		174			2
Recovery benefit of doubtful accounts		44			(111	)
Stock-based compensation		2,218			946
Net income attributable to noncontrolling interest		(9	)		11
Adjusted EBITDA	$	(1,292	)	$	672

Adjustments related to the Cinema Equipment Business
Depreciation and amortization of property and equipment	$	(104	)	$	(298	)
Acquisition, integration and other expense		11			(60	)
Provision for doubtful accounts		(44	)		-
Income from operations		(1,783	)		(2,320	)
Adjusted EBITDA from non-cinema equipment business	$	(3,212	)	$	(2,006	)

Results of Operations for the Fiscal Six Months Ended September 30, 2022 and 2021

Revenues

	For the Six Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change
Cinema Equipment Business	$	4,032	$	9,484	$	(5,452	)		(57	)%
Content & Entertainment Business		23,564		15,634		7,930			51	%
	$	27,596	$	25,118	$	2,478			10	%

Revenues generated by our Cinema Equipment Business segment decreased as a result of the lower system revenue and eligible VPF systems offset by an increase in Ph2 variable consideration of $1.7 million. Total system revenue recognized was $1.9 million and $7.8 million, during the six months ended September 30, 2022 and 2021, respectively. Blockbuster content released during the six months ending September 30, 2022 remained consistent with Studio output from the prior period, however, VPF eligible theatres decreased significantly for the same period last year. Revenue in the Content & Entertainment Business segment increased by 51% for the six months ended September 30, 2022 compared to the six months ended September 30, 2021. The increase is consistent with the addition of seven new streaming channels related to Bloody Disgusting and DMR business acquisitions and ~~$0.4~~five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex as well as an increase in the number of advertising partners. Additionally, revenue growth is due utilizing deal structures that maximize upfronts and creating greater long term value, as well as the results of top performing titles, including new releases, such as the Yu-Gi-Oh, Demon Slayer, Boon, The Ravine, The Mulligan, Incarnation, 7 Days, Chesapeake Shores, When Calls the Heart and the classics, Short Circuit and Highlander.

Direct Operating Expenses

	For the Six Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change
Cinema Equipment Business	$	270	$	421	$	(151	)		(36	)%
Content & Entertainment Business		15,178		7,543		7,635			101	%
	$	15,448	$	7,964	$	7,484			94	%

The decrease in direct operating expenses in the six months ended September 30, 2022 for the Cinema Equipment Business compared to the prior period was primarily due to a decrease in property taxes as a result of system sales. The increase in direct operating expenses in the six months ended September 30, 2022 for the Content & Entertainment Business compared to the prior year was primarily due to $1.2 million increase related to DVD manufacturing and fulfillment, $3.8 million higher content and production costs including royalties related to continued growth in revenue and distribution, $0.3 million higher personnel and contractors spend, $0.8 million higher related to Software as a service (“SaaS”) expense primarily as the result of the DMR acquisition, and $0.6 million related to the film restoration, conversion and website content production costs.

Selling, General and Administrative Expenses

	For the Six Months Ended September 30,
($ in thousands)	2022		2021		$ Change		% Change
Cinema Equipment Business	$	1,526	$	860	$	666		77	%
Content & Entertainment Business		7,345		6,298		1,047		17	%
Corporate		10,541		6,044		4,497		74	%
	$	19,412	$	13,202	$	6,210		47	%

Selling, general and administrative expenses for the six months ended September 30, 2022 increased by $6.2 million primarily due to $3.7 million increase in personnel costs from the acquisitions of Fandor, DMR and Bloody Disgusting, $1.3 million increase related to stock-based compensation to management and employees, $0.5 million in ~~one-time~~legal expenses primarily related to a legal settlement, and $0.3 million in professional consulting services.

Recovery of Doubtful Accounts

Recovery of doubtful accounts was $0.0 and $0.0 for the fiscal six months ended September 30, 2022 and 2021, respectively.

Depreciation and Amortization Expense on Property and Equipment

	For the Six Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change
Cinema Equipment Business	$	221		805		(584	)		(73	)%
Content & Entertainment Business		282		284		(2	)		(1	)%
Corporate		1		-		1			-	%
	$	504	$	1,089	$	(585	)		(54	)%

Depreciation and amortization expense decreased in our Cinema Equipment Business segment as the majority of our digital cinema projection systems reached the conclusion of their ten-year useful lives during the quarter ended September 30, 2022 and 2021.

Amortization of intangible assets

	For the Six Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change
Cinema Equipment Business	$	-	$	-		-				%
Content & Entertainment Business		1,266		1,543		(277	)		(18	)%
Corporate		214		-		214			-	%
	$	1,480	$	1,543	$	(63	)		(4	)%

Amortization of intangible assets decrease in our Cinema Equipment Business Segment as the intangibles held by that segment were fully amortized and offset by new intangibles added due to recent acquisitions during 2021.

Interest expense, net

	For the Six Months Ended September 30,
($ in thousands)	2022		2021		$ Change			% Change
Cinema Equipment Business	$	-	$	138	$	(138	)		(100	)%
Content & Entertainment Business		-		-		-			-	%
Corporate		513		42		471			1,121	%
	$	513	$	180	$	333			185	%

Interest expense in our Corporate segment increased as a result of deferred and earnout consideration accretion related to the acquisition ~~cost adjustments.~~of Bloody Disgusting, FoundationTV and DMR.

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. As of September 30, 2022, Metaverse’s stock valuation is based on an independent valuation based on the market approach is categorized as Level 3 based on unobservable inputs. The changes in the valuation resulted in a loss of $1.8 million during the six months ended September 30, 2022.

Income Tax Benefit

We recorded income tax expense of zero for the six months ended September 30, 2022. We recorded an income tax benefit of approximately $550 thousand for the six months ended September 30, 2021.

Our effective tax rate for the six months ended September 30, 2022 and 2021 was zero and negative 12.4%, respectively

Net Income/Loss attributable to common shareholders

	For the Six Months Ended September 30,
($ in thousands)	2022			2021			$ Change			% Change
Cinema Equipment Business	$	1,970		$	7,247		$	(5,277	)		(73	)%
Content & Entertainment Business		(5,789	)		(1,939	)		(3,850	)		(199	)%
Corporate		(8,026	)		(483	)		(7,543	)		(1,562	)%
	$	(11,845	)	$	4,825		$	(16,670	)		(345	)%

Adjusted EBITDA

Consolidated Adjusted EBITDA (including the results of Cinema Equipment Business segment) for the six months ended September 30, 2022 decreased by $9.7 million compared to the six months ended September 30, 2021. Adjusted EBITDA from our Cinema Equipment Business segment decreased primarily due to a decrease in systems sales and eligible VPF systems. Adjusted EBITDA from the Content & Entertainment Business and Corporate decreased by $3.5 million for the six months ended September 30, 2022 compared to the six months ended September 30, 2021, due to an increase of $7.6 million in direct operating expense and $5.5 million higher selling, general and administrative expenses, versus previous year despite a $7.9 million increase in Streaming digital revenue, adding channels, and acquisitions.

Following is the reconciliation of our consolidated net loss to Adjusted EBITDA:

	For the Three Months Ended June 30,						For the Six Months Ended September 30,
($ in thousands)	2022			2021			2022			2021
Net income (loss)	$	(5,987	)	$	5,194		$	(11,642	)	$	4,999
Add Back:
Income tax (income) expense		-			(63	)
Income tax benefit								-			(550	)
Depreciation and amortization of property and equipment		256			649			504			1,089
Amortization of intangible assets		744			847			1,480			1,543
(Gain) Loss on extinguishment of note payable		-			(2,178	)
(Gain) loss on forgiveness of PPP loan and extinguishment of note payable								-			(2,178	)
Interest expense, net		133			144			513			180
Intangible impairment		-			-
Change in fair value on equity investment in Metaverse		1,256			(334	)		1,828			(1,000	)
Other expense, net		396			173
Recovery of doubtful accounts		3			71
Stock-based compensation and expenses		980			983
Net income (loss) attributable to noncontrolling interest		(18	)		(7	)
Acquisition, integration, severance and other expense								570			176
Recovery benefit of doubtful accounts								47			(40	)
Stock-based compensation								3,198			1,929
Net income attributable to noncontrolling interest								(27	)		4
Adjusted EBITDA	$	(2,237	)	$	5,479		$	(3,529	)	$	6,152

Adjustments related to the Cinema Equipment Business
Depreciation and amortization of property and equipment		(117	)	$	(507	)	$	(221	)	$	(805	)
Amortization of intangible assets		-			-
Stock-based compensation and expenses		-			-
Other expense		(11	)		(11	)
Recovery of doubtful accounts		(3	)		(27	)
Acquisition, integration and other expense								-			(11	)
Provision for doubtful accounts								(47	)		103
Income from operations		11			(4,912	)		(1,772	)		(7,232	)
Adjusted (negative EBITDA) from Content & Entertainment Business and Corporate	$	(2,357	)	$	22
Adjusted EBITDA from non-cinema equipment business							$	(5,569	)	$	(1,793	)

Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included herein.

Cash flow

Changes in our cash flows were as follows:

	For the Three Months Ended June 30,						For the Six Months Ended September 30,
($ in thousands)	2022			2021			2022			2021
Net cash (used in) provided by operating activities	$	(1,198	)	$	3,621		$	(6,279	)	$	9,358
Net cash used in investing activities		(61	)		(791	)		(274	)		(4,820	)
Net cash used in financing activities		(284	)		(6,324	)		3,167			(9,742	)
Net decrease in cash and cash equivalents	$	(1,543	)	$	(3,494	)	$	(3,386	)	$	(5,204	)

As of ~~June~~September 30, 2022, we had cash and cash equivalents balances of ~~$11.5~~$9.7 million.

As of ~~June~~September 30, 2021, we had cash, cash equivalents, and restricted cash balances of ~~$14.4~~$12.6 million.

For the ~~three~~six months ended ~~June~~September 30, 2022, net cash provided by operating activities is primarily driven by income from operations, excluding non-cash expenses such as depreciation, amortization, recovery for doubtful accounts and stock-based compensation, gain on extinguishment of note payable, including other changes in working capital. Additionally, during the ~~three~~six months ended ~~June~~September 30, 2022, the Company ~~increased~~decreased accounts payable by ~~$5.4~~$5.5 million to vendors. ~~Accounts receivable increased due to growth in streaming and acquisitions of Bloody Disgusting, Screambox and DMR.~~ Cash received from VPFs decreased from the previous period in alignment with the decrease in eligible VPF systems. Changes in accounts receivable from our studio customers largely impact cash flows from operating activities and vary based on the seasonality of movie release schedules by the major studios. Prepaid and other current assets increased by $2.9 million. Operating cash flows from ~~CEG~~Content & Entertainment Business 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, and seasonally lower in~~season. In addition, we made $1.0 million advances for the ~~other two quarters. In addition,~~six months ended September 30, 2022, 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 ~~three~~six months ended ~~June~~September 30, 2021, net cash provided by operating activities iswas primarily driven by income from operations, excluding non-cash expenses such as depreciation, amortization, provision for doubtful accounts and stock-based compensation, including other changes in working capital. Additionally, during the ~~three~~six months ended ~~June~~September 30, 2021, the Company paid down ~~$8.1~~$18.3 million to vendors at both ~~CEG~~Content & Entertainment and Corporate. Cash received from VPFs declined from the previous period as Phase I Deployment Systems in our Cinema Equipment Business reached the conclusion of their deployment payment periods with certain major studios. Changes in accounts receivable from our studio customers largely impact cash flows from operating activities and vary based on the seasonality of movie release schedules by the major studios. This was further impacted by the decrease in eligible VPF systems. Because our digital cinema business earns a VPF when a movie is first played on a system, the reduction of eligible VPF systems resulted in reduced revenues. Operating cash flows from ~~CEG~~Content & Entertainment 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 ~~twelve~~twenty four months. For the ~~three~~six months ended ~~June~~September 30, ~~2022~~2021 revenues from the sale of digital projections Systems was ~~$1.2~~$7.8 million.

For the ~~three~~six months ended ~~June~~September 30, 2022, cash flows used in investing activities consisted of purchases of property and equipment of ~~$0.1~~$0.3 million.

For the ~~three~~six months ended ~~June~~September 30, 2021, cash flows used in investing activities consisted of purchases of property and equipment of ~~$40~~$81 thousand and the purchase of ~~a business~~two businesses of ~~$1.0~~$4.8 million related to the business combination for ~~FoundationTV.~~FoundationTV and the asset acquisition for Bloody Disgusting.

For the ~~three~~six months ended ~~June~~September 30, 2022, cash flows provided by financing activities consisted of ~~payments of approximately $0.3~~$0.4 million in payment of notes ~~payable.~~payable and $3.6 million in proceeds from the revolving credit agreement.

For the ~~three~~six months ended ~~June~~September 30, 2021, cash flows used in financing activities consisted of payments of the remaining outstanding balances of approximately ~~$4.8~~$7.8 million in notes payable and ~~$1.6~~$2.0 million in Credit ~~Facility repayments.~~Facility.

Contractual Obligations

The following table summarizes our significant contractual obligations as of ~~June~~September 30, 2022:

	Payments Due										Payments Due
Contractual Obligations (in thousands)	Total		2023		2024 & 2025		2026 & 2027		Thereafter		Total		2023		2024 & 2025		2026 & 2027		Thereafter
Operating lease obligations	$	682	$	193	$	489	$	—	$	—	$	616	$	127	$	489	$	—	$	—

We may continue to generate net losses for the foreseeable future primarily due to depreciation and amortization, marketing and promotional activities and content acquisition and marketing costs. Certain of these costs, including costs of content acquisition, marketing and promotional activities, could be reduced if necessary. We feel we are adequately financed for at least the next twelve months; however, we may need to raise additional capital for working capital as deemed necessary. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations or liquidity.

Seasonality

Revenues from our Cinema Equipment Business derived from the collection of VPFs from motion picture studios are seasonal, coinciding with the timing of releases of movies by the motion picture studios. Generally, motion picture studios release the most marketable movies during the summer and the winter holiday season. The unexpected emergence of a hit movie during other periods can alter the traditional trend. The timing of movie releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other quarter. While ~~CEG~~Content & Entertainment Business benefits from the winter holiday season, we believe the seasonality of motion picture exhibition, is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year.

Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements other than as discussed in Note 2 – Summary of Significant Accounting Policies, Basis of Presentation and Consolidation and Note 3 - Other Interests to the Condensed Consolidated Financial Statements (Unaudited) 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.

Impact of Inflation

The impact of inflation on our operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse impact on our operating results.

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 Operating Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in the Exchange Act), as of ~~June~~September 30, 2022. 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 ~~June~~September 30, 2022.

Previously Reported Material Weakness on Internal Control Over Financial Reporting

In the ~~2022~~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 ~~internal~~the following:

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

b) Information and communication ~~controls. Management also concluded that we did not have a sufficient~~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 ~~is implementing~~has implemented modifications to better ensure that the Company has appropriate and timely reviews on all financial reporting analysis. The material weakness in our internal control over financial reporting will not be considered remediated until these modifications are implemented, in operation for a sufficient period of time, tested, and concluded by management to be designed and operating effectively. 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”) Accounting;

●

we have ~~engaged in efforts to restructure~~restructured accounting processes and ~~revise~~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 ~~will enhance~~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 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.

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 fiscal quarter ended ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

We maintain an amount of outstanding indebtedness, which could impair our ability to operate our business and react to changes in our business, remain in compliance with debt covenants and make payments on our debt. Our level of indebtedness could require a significant portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities.

In addition, our current credit facilities contain, and any future credit facilities will likely contain, covenants and other provisions that restrict our operations. These restrictive covenants and provisions could limit our ability to obtain future financing, make needed capital expenditures, withstand a future downturn in our business or the economy in general, or otherwise conduct necessary corporate activities, and may prevent us from taking advantage of business opportunities that arise in the future. If we refinance our credit facilities, we cannot guarantee that any new credit facility will not contain similar covenants and restrictions.

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 Number		Description of Document
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).

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 CORP.

Date: ~~August 15,~~November 14, 2022	By:	/s/ Christopher J. McGurk
		Christopher J. McGurk Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

Date: ~~August 15,~~November 14, 2022	By:	/s/ John K. Canning
		John K. Canning Chief Financial Officer (Principal Financial Officer)

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Options Exercisable				Weighted Average Remaining Life in Years				Weighted Average Exercise Price				Aggregate Intrinsic Value (In thousands)
	212,037				1.32			$	14.46				—