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

As of February ~~12, 2018, 34,947,790~~7, 2024, 13,327,960 shares of Class A Common Stock, $0.001 par value, were outstanding.

~~CINEDIGM CORP.~~

Cineverse Corp.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION
	~~Page~~
~~PART I --~~	~~FINANCIAL INFORMATION~~
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3 1
	Condensed Consolidated Balance Sheets at December 31, ~~2017 (Unaudited)~~2023 and March 31, ~~2017~~2023	3 1
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended December 31, ~~2017~~2023 and ~~2016~~2022	4 2
	Unaudited Condensed Consolidated Statements of Comprehensive ~~Loss~~(Loss) Income for the Three and Nine Months ended December 31, ~~2017~~2023 and ~~2016~~2022	5 3
	~~Statements of Deficit for the fiscal year ended March 31, 2017 and Nine Months ended December 31, 2017 ( Unaudited)~~	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended December 31, ~~2017~~2023 and ~~2016~~2022	8 4
	Unaudited Condensed Consolidated Statements of Equity for the Three and Nine Months ended December 31, 2023 and 2022	6
	Notes to ~~Unaudited~~the Condensed Consolidated Financial Statements (Unaudited)	9 8
Item 2.	~~Management's~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations	27 24
Item 4.	Controls and Procedures	40 31

	PART II --	- OTHER INFORMATION	42
~~Item 1.~~	~~Legal Proceedings~~	42
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42 32
Item 3.	Defaults Upon Senior Securities	42 32
Item 4.	Mine Safety Disclosures	42 32
Item 5.	Other Information	42 32
Item 6.	Exhibits	42 33
Exhibit Index			43 33
Signatures			44
		34

~~CINEDIGM CORP.~~

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Cineverse Corp.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

December 31, 2017 March 31, 2017
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 17,218
$ 12,566
Accounts receivable, net 37,870
53,608
Inventory, net 812
1,137
Unbilled revenue 4,747
5,655
Prepaid and other current assets 10,885
13,484
Total current assets 71,532
86,450
Restricted cash 1,000
1,000
Property and equipment, net 23,479
33,138
Intangible assets, net 16,045
20,227
Goodwill 8,701
8,701
Debt issuance costs 134
260
Other assets 1,336
1,558
Total assets $ 122,227
$ 151,334
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses $ 63,460
$ 73,679
Current portion of notes payable, including unamortized debt discount of $318 and $0 (See Note 5) 16,491
19,599
Current portion of notes payable, non-recourse (see Note 5) 2,954
6,056
Current portion of capital leases —
66
Current portion of deferred revenue 1,855
2,461
Total current liabilities 84,760
101,861
Notes payable, non-recourse, net of current portion and unamortized debt issuance costs and debt discounts of $2,289 and $2,701 respectively (see Note 5) 38,331
55,048
Notes payable, net of current portion and unamortized debt issuance costs and debt discounts of $3,445 and $5,340 respectively (see Note 5) 16,997
59,396
Deferred revenue, net of current portion 4,213
5,324
Other long-term liabilities 331
408
Total liabilities 144,632
222,037
Stockholders’ deficit
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 December 31, 2017 and March 31, 2017, respectively. Liquidation preference of $3,648 3,559
3,559
Common stock, $0.001 par value; Class A and Class B stock; Class A stock 60,000,000 shares and 25,000,000 shares authorized at December 31, 2017 and March 31, 2017 respectively; 36,138,785 and 11,841,983 shares issued and 34,824,949 and 11,841,983 shares outstanding at December 31, 2017 and March 31, 2017, respectively; 1,241,000 Class B stock authorized and issued and zero shares outstanding at March 31, 2017 35
12
Additional paid-in capital 366,092
287,393
Treasury stock, at cost; 1,313,836 Class A common shares at December 31, 2017 (11,603 ) —
Accumulated deficit (379,191 ) (360,415 )
Accumulated other comprehensive loss (51 ) (38 )
Total stockholders’ deficit of Cinedigm Corp. (21,159 ) (69,489 )
Deficit attributable to noncontrolling interest (1,246 ) (1,214 )
Total deficit (22,405 ) (70,703 )
Total liabilities and deficit $ 122,227
$ 151,334


	As of
	December 31, 2023			March 31, 2023
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	5,539		$	7,152
Accounts receivable		16,416			20,846
Unbilled revenue		2,454			2,036
Employee retention tax credit		1,672			2,085
Content advances		8,477			3,724
Other current assets		1,678			1,734
Total current assets		36,236			37,577
Equity investment in Metaverse, a related party, at fair value		1,276			5,200
Property and equipment, net		2,065			1,833
Intangible assets, net		18,727			19,868
Goodwill		20,824			20,824
Content advances, net of current portion		3,153			1,421
Other long-term assets		943			1,265
Total Assets	$	83,224		$	87,988
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	26,987		$	34,531
Line of credit, including unamortized debt issuance costs of $69 and $76, respectively		4,931			4,924
Current portion of deferred consideration on purchase of business		3,954			3,788
Current portion of earnout consideration on purchase of business		110			1,444
Operating lease liabilities		440			418
Current portion of deferred revenue		246			226
Total current liabilities		36,668			45,331
Deferred consideration on purchase of business, net of current portion		2,639			2,647
Operating lease liabilities, net of current portion		531			863
Other long-term liabilities		59			74
Total Liabilities		39,897			48,915
Commitments and contingencies (see Note 6)
Stockholders’ Equity
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; 7 shares issued and 7 shares outstanding at December 31, 2023 and March 31, 2023.		3,559			3,559
Common Stock, $0.001 par value; Class A Stock: 275,000,000 shares authorized as of December 31, 2023, and March 31, 2023; 13,553,767 and 9,413,597 shares issued, with 13,265,214 and 9,347,805 shares outstanding as of December 31, 2023, and March 31, 2023, respectively.		192			185
Additional paid-in capital		542,482			530,998
Treasury stock, at cost; 288,554 and 65,792 shares at December 31, 2023 and March 31, 2023, respectively.		(11,978	)		(11,608	)
Accumulated deficit		(489,341	)		(482,395	)
Accumulated other comprehensive loss		(417	)		(402	)
Total stockholders’ equity of Cineverse Corp.		44,497			40,337
Deficit attributable to noncontrolling interest		(1,170	)		(1,264	)
Total equity		43,327			39,073
Total Liabilities and Equity	$	83,224		$	87,988

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~

Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 2017 2016
Revenues $ 18,492
$ 24,445
$ 50,010
$ 70,800
Costs and expenses:
Direct operating (excludes depreciation and amortization shown below) 6,363
7,287
14,470
17,880
Selling, general and administrative 9,259
6,095
21,824
17,766
Provision for doubtful accounts 631
416
1,580
416
Restructuring expenses, net —
22
—
132
Depreciation and amortization of property and equipment 2,213
6,271
10,215
22,558
Amortization of intangible assets 1,395
1,395
4,185
4,322
Total operating expenses 19,861
21,486
52,274
63,074
Income (loss) from operations (1,369 ) 2,959
(2,264 ) 7,726
Interest expense, net (3,147 ) (4,827 ) (11,163 ) (14,873 )
Debt conversion expense and loss on extinguishment of notes payable (1,299 ) (1,099 ) (4,504 ) (1,099 )
Other (expense) income, net (40 ) (55 ) (242 ) 211
Gain on termination of capital lease —
2,535
—
2,535
Change in fair value of interest rate derivatives 44
39
127
104
Loss from operations before income taxes (5,811 ) (448 ) (18,046 ) (5,396 )
Income tax expense (113 ) (33 ) (495 ) (143 )
Net loss (5,924 ) (481 ) (18,541 ) (5,539 )
Net loss attributable to noncontrolling interest 15
18
32
54
Net loss attributable to controlling interests (5,909 ) (463 ) (18,509 ) (5,485 )
Preferred stock dividends (89 ) (89 ) (267 ) (267 )
Net loss attributable to common stockholders $ (5,998 ) $ (552 ) $ (18,776 ) $ (5,752 )
Net loss per Class A and Class B common stock attributable to common stockholders - basic and diluted:
Net loss attributable to common stockholders $ (0.20 ) $ (0.07 ) $ (1.02 ) $ (0.78 )
Weighted average number of Class A and Class B common stock outstanding: basic and diluted 29,389,017
8,361,807
18,399,597
7,409,746


	Three Months Ended December 31,						Nine Months Ended December 31,
	2023			2022			2023			2022
Revenues	$	13,276		$	27,882		$	39,268		$	55,478
Costs and expenses
Direct operating		5,464			14,411			17,097			29,859
Selling, general and administrative		6,373			9,107			21,088			29,016
Depreciation and amortization		1,012			924			2,787			2,908
Total operating expenses		12,849			24,442			40,972			61,783
Operating income (loss)		427			3,440			(1,704	)		(6,305	)
Interest expense		(291	)		(367	)		(781	)		(880	)
Loss from equity investment in Metaverse, a related party		(3,043	)		—			(3,761	)		(1,828	)
Employee retention tax credit		—			2,025			—			2,475
Other income (expenses), net		147			(76	)		(331	)		(82	)
Net (loss) income before income taxes		(2,760	)		5,022			(6,577	)		(6,620	)
Income tax benefit (expense)		24			—			(12	)		—
Net (loss) income		(2,736	)		5,022			(6,589	)		(6,620	)
Net income attributable to noncontrolling interest		(41	)		(8	)		(94	)		(35	)
Net (loss) income attributable to controlling interests		(2,777	)		5,014			(6,683	)		(6,655	)
Preferred stock dividends		(87	)		(88	)		(263	)		(264	)
Net (loss) income attributable to common stockholders	$	(2,864	)	$	4,926		$	(6,946	)	$	(6,919	)
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.22	)	$	0.55		$	(0.59	)	$	(0.78	)
Diluted	$	(0.22	)	$	0.55		$	(0.59	)	$	(0.78	)
Weighted average shares of Common Stock outstanding:
Basic		12,828			8,945			11,678			8,854
Diluted		12,828			8,945			11,678			8,854

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~

Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~

(LOSS) INCOME

(Unaudited)

(In thousands)

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 2017 2016
Net loss $ (5,924 ) $ (481 ) $ (18,541 ) $ (5,539 )
Other comprehensive income (loss): foreign exchange translation 2
(9 ) (13 ) 9
Comprehensive loss (5,922 ) (490 ) (18,554 ) (5,530 )
Less: comprehensive loss attributable to noncontrolling interest 15
18
32
54
Comprehensive loss attributable to controlling interests $ (5,907 ) $ (472 ) $ (18,522 ) $ (5,476 )


	Three Months Ended December 31,						Nine Months Ended December 31,
	2023			2022			2023			2022
Net (loss) income	$	(2,736	)	$	5,022		$	(6,589	)	$	(6,620	)
Other comprehensive (loss) income:
Foreign exchange translation		(3	)		88			(15	)		(226	)
Net income attributable to noncontrolling interest		(41	)		(8	)		(94	)		(35	)
Comprehensive (loss) income	$	(2,780	)	$	5,102		$	(6,698	)	$	(6,881	)

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM CORP.~~

~~CONSOLIDATED STATEMENT OF DEFICIT~~

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

~~(Unaudited)~~

Series A Preferred Stock Class A and Class B Treasury Stock Additional
Paid-In
Capital Accumulated Deficit Accumulated Other
Comprehensive Loss Total
Stockholders’
Deficit Non-Controlling Interest Total Deficit
Shares Amount Shares Amount Shares Amount
Balances as of March 31, 2016 7
$ 3,559

7,977,861
$ 79

(277,244 ) $ (2,839 )
$ 269,871

$ (342,448 )
$ (64 )
$ (71,842 )
$ (1,185 )
$ (73,027 )
Adjust par value of common stock for 1-for-10 stock split —
—

—
(70 )
—
—

70

—

—

—

—

—
Adjusted balance as of March 31, 2016 7
$ 3,559

7,977,861
$ 9

(277,244 ) $ (2,839 )
$ 269,941

$ (342,448 ) $ (64 )
$ (71,842 ) $ (1,185 ) $ (73,027 )
Foreign exchange translation —
—

—
—

—
—

—

—

26

26

—

26
Issuance of common stock for third-party professional services —
—

419,838
—

—
—

342

—

—

342

—

342
Issuance of shares for CEO retention bonus —
—

125,000
—

—
—

250

—

—

250

—

250
Amortization of stock based compensation issued to Board of Directors —
—

—
—

—
—

272

—

—

272

—

272
Common stock issued in connection with induced conversion of Convertible Notes —
—

1,297,756
1
—
—

14,279

—

—

14,280

—

14,280
Issuance of restricted stock awards —
—

1,054,865
1

—
—

(1 )
—

—

—

—

—
Issuance of common stock in connection with Second Secured Lien Notes —
—

751,450
1
—
—

1,055

—

—

1,056

—

1,056
Issuance of warrants in connection with Second Secured Lien Notes —
—

—
—

—
—

107

—

—

107

—

107
Stock-based compensation —
—

—
—

—
—

804

—

—

804

—

804
Extension of term in connection with Sageview Warrants —
—

—
—

—
—

345

—

—

345

—

345
Preferred stock dividends paid with common stock —
—

215,213
—

—
—

356

(356 )
—

—

—

—
Contributions by noncontrolling interests —
—

—
—

—
—

—

—

—

—

39

39
Re-issuance of treasury stock in connection with convertible notes exchange transaction —
—

—
—

277,244
2,839

(357 )
(2,482 )
—

—

—

—
Net loss —
—

—
—

—
—

—

(15,129 )
—

(15,129 )
(68 )
(15,197 )
Balances as of March 31, 2017 7
$ 3,559

11,841,983
$ 12

—
$ —

$ 287,393

$ (360,415 )
$ (38 )
$ (69,489 )
$ (1,214 )
$ (70,703 )

~~See accompanying Notes to Consolidated Financial Statements~~

~~CINEDIGM CORP.~~

~~CONSOLIDATED STATEMENT OF DEFICIT~~

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

~~(Unaudited)~~

Series A Preferred Stock
Class A and Class B
Treasury Stock
Additional
Paid-In
Capital
Accumulated Deficit
Accumulated Other
Comprehensive Loss
Total
Stockholders’
Deficit
Non-Controlling Interest
Total Deficit

Shares Amount Shares Amount Shares Amount
Balances as of March 31, 2017 7
$ 3,559

11,841,983
$ 12

—
$ —

$ 287,393

$ (360,415 )
$ (38 )
$ (69,489 )
$ (1,214 )
$ (70,703 )
Foreign exchange translation —
—

—
—

—
—

—

—

(13 )
(13 )
—

(13 )
Issuance of common stock for third-party professional services —
—

623,423
1

—
—

875

—

—

876

—

876
Common stock issued in connection with induced conversion of Convertible Notes —
—

3,536,783
3

—
—

34,285

—

—

34,288

—

34,288
Forfeitures of restricted stock awards, net of issuances —
—

(27,673 ) —

—
—

—

—

—

—

—

—
Issuance of common stock in connection with the stock purchase agreement with Bison —
—

19,666,667
20

—
—

28,034

—

—

28,054

—

28,054
Issuance of common stock in connection with debt instruments —
—

333,333
—

—
—

500

—

—

500

—

500
Issuance of warrants in connection with Bison —
—
—
—
—
—
1,084
—
—
1,084
—
1,084
Stock-based compensation —
—

—
—

—
—

2,214

—

—

2,214

—

2,214
Preferred stock dividends paid with common stock —
—

164,269
—

—
—

267

(267 )
—

—

—

—
Issuance of treasury stock in connection with taxes withheld from employees —
—

(134,698 ) —

134,698
(163 )
—

—

—

(163 )
—

(163 )
Issuance of treasury stock in connection with settlement of structured stock repurchase —
—

(1,179,138 ) (1 )
1,179,138
(11,440 )
11,440

—

—

(1 )
—

(1 )
Net loss —
—

—
—

—
—

—

(18,509 )
—

(18,509 )
(32 )
(18,541 )
Balances as of December 31, 2017 7
$ 3,559

34,824,949
$ 35

1,313,836
$ (11,603 )
$ 366,092

$ (379,191 )
$ (51 )
$ (21,159 )
$ (1,246 )
$ (22,405 )

~~See accompanying Notes to Consolidated Financial Statements~~

~~CINEDIGM CORP.~~

Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended December 31,
2017 2016
Cash flows from operating activities:
Net loss $ (18,541 ) $ (5,539 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of property and equipment and amortization of intangible assets 14,400
26,880
Gain on termination of capital lease —
(2,535 )
Loss on disposal of property and equipment 64
—
Amortization of debt issuance costs included in interest expense 1,573
2,158
Provision for doubtful accounts 1,580
416
Provision for inventory reserve 327
299
Stock-based compensation and expenses 2,214
1,364
Change in fair value of interest rate derivatives 127
104
Accretion and PIK interest expense added to note payable 862
681
Debt conversion expense and loss on extinguishment of notes payable 4,504
1,099
Changes in operating assets and liabilities;
     Accounts receivable 14,380
(16,460 )
Inventory (2 ) 484
     Unbilled revenue 908
1,179
     Prepaid expenses and other assets 2,383
631
     Accounts payable and accrued expenses (8,966 ) 15,926
     Deferred revenue (1,717 ) (2,075 )
Net cash provided by operating activities 14,096
24,612
Cash flows from investing activities:
Purchases of property and equipment (531 ) (375 )
Purchases of intangible assets (3 ) (5 )
Net cash used in investing activities (534 ) (380 )
Cash flows from financing activities:
Payment of notes payable (38,375 ) (42,115 )
Net repayments under revolving credit agreement (7,790 ) (2,328 )
Proceeds from issuance of notes payable 10,000
5,525
Repurchase of Class A common stock (163 ) —
Net proceeds from issuance of common stock 28,054
—
Principal payments on capital leases (66 ) (194 )
Payments of debt issuance costs (570 ) (1,792 )
Change in restricted cash balances —
7,983
Capital contributions from noncontrolling interest —
39
Net cash used in financing activities (8,910 ) (32,882 )
Net change in cash and cash equivalents 4,652
(8,650 )
Cash and cash equivalents at beginning of period 12,566
25,481
Cash and cash equivalents at end of period $ 17,218
$ 16,831


	Nine Months Ended December 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(6,589	)	$	(6,620	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,787			2,908
Provision for doubtful accounts		—			54
Changes in fair value of equity investment in Metaverse		3,761			1,828
Amortization of debt issuance costs		103			138
Stock-based compensation		1,092			3,855
Interest expense for deferred consideration and earnouts		381			743
Capitalized content		(1,371	)		—
Change in estimated earnout consideration		(682	)		—
Non-monetary sale of content licenses		—			(1,022	)
Barter-related non-cash expenses		256			—
Other		395			102
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		3,815			5,795
Other current and long-term assets		449			(2,215	)
Content advances		(6,485	)		1,104
Employee retention tax credit		—			(2,475	)
Accounts payable, accrued expenses, and other liabilities		(6,802	)		(11,972	)
Unbilled revenue		(418	)		(332	)
Deferred revenue		20			208
Net cash used in operating activities	$	(9,287	)	$	(7,901	)
Cash flows from investing activities:
Expenditures for long-lived assets		(641	)		(429	)
Sale of equity investment securities		159			—
Net cash used in investing activities	$	(482	)	$	(429	)
Cash flows from financing activities:
Proceeds from line of credit, net of debt issuance costs		28,565			19,469
Payments on line of credit		(28,565	)		(14,469	)
Payment of earnout consideration		(291	)		(665	)
Financing fees for line of credit		(96	)		(271	)
Issuance of Class A common stock, net of issuance costs		8,542			—
Net cash provided by financing activities	$	8,156		$	4,064
Net change in cash and cash equivalents		(1,613	)		(4,266	)
Cash and cash equivalents at beginning of period		7,152			13,062
Cash and cash equivalents at end of period	$	5,539		$	8,796

See accompanying Notes to Condensed Consolidated Financial Statements

Cineverse Corp.

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

(Unaudited)

(In thousands)


	Nine Months Ended December 31,
	2023		2022
Cash interest paid	$	233	$	58
Lease liability related payments	$	333	$	-
Income taxes paid	$	49	$	-
Noncash investing and financing activities:
Issuance of Class A common stock for payment of accrued employee bonuses	$	1,203	$	-
Treasury shares acquired for withholding taxes	$	370	$	-
Earnout liability settled in stock	$	392	$	238
Accrued dividends on preferred stock	$	263	$	88
Issuance of Class A common stock for payment of accrued preferred stock dividends	$	263	$	264
Earnout consideration adjustment	$	-	$	80
Issuance of common stock for Board of Director compensation	$	-	$	3

See accompanying Notes to Condensed Consolidated Financial Statements

Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)


	Preferred Stock				Common Stock					Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'			Non Controlling
	Shares		Amount		Shares			Amount		Shares		Amount			Capital		Deficit			Loss			Equity			Interest			Total
Balances as of March 31, 2023 (Audited)		1	$	3,559		9,348		$	185		66	$	(11,608	)	$	530,998	$	(482,395	)	$	(402	)	$	40,337		$	(1,264	)	$	39,073
Foreign exchange translation		—		—		—			—		—		—			—		—			(78	)		(78	)		—			(78	)
Stock-based compensation		—		—		—			—		—		—			409		—			—			409			—			409
Issuance of Class A common stock in connection with ATM raises, net		—		—		177			4		—		—			1,065		—			—			1,069			—			1,069
Issuance of Class A common stock in connection with direct equity offering		—		—		2,150			2		—		—			7,437		—			—			7,439			—			7,439
Preferred stock dividends paid in stock		—		—		10			—		—		—			88		—			—			88			—			88
Preferred stock dividends accrued		—		—		—			—		—		—			—		(88	)		—			(88	)		—			(88	)
Net loss		—		—		—			—		—		—			—		(3,550	)		—			(3,550	)		14			(3,536	)
Balances as of June 30, 2023		1	$	3,559		11,685		$	191		66	$	(11,608	)	$	539,997	$	(486,033	)	$	(480	)	$	45,626		$	(1,250	)	$	44,376
Foreign exchange translation		—		—		—			—		—		—			—		—			66			66			—			66
Stock-based compensation		—		—		—			—		—		—			499		—			—			499			—			499
Issuance of Class A common stock in connection employee bonuses		—		—		725			1		—		—			1,203		—			—			1,203			—			1,203
Estimated fee decrease associated with equity issuance		—		—		—			—		—		—			33		—			—			33			—			33
Issuance in connection with the exercise of warrants		—		—		517			—		—		—			—		—			—			—			—			—
Issuance of Class A common stock for earnout commitment		—		—		41			—		—		—			392		—			—			392			—			392
Treasury stock in connection with taxes withheld from employees		—		—		(223	)		—	223			(370	)		—		—			—			(370	)		—			(370	)
Preferred stock dividends paid in stock		—		—		46			—		—		—			88		—			—			88			—			88
Preferred stock dividends accrued		—		—		—			—		—		—			—		(87	)		—			(87	)		—			(87	)
Net loss		—		—		—			—		—		—			—		(357	)		—			(357	)		40			(317	)
Balances as of September 30, 2023		1	$	3,559		12,791		$	192		289	$	(11,978	)	$	542,212	$	(486,477	)	$	(414	)	$	47,093		$	(1,210	)	$	45,883
Foreign exchange translation		—		—		—			—		—		—			—		—			(3	)		(3	)		—			(3	)
Stock-based compensation		—		—		—			—		—		—			98		—			—			98			—			98
Issuance of common stock for Board of Director compensation		—		—		400			—		—		—			85		—			—			85			—			85
Preferred stock dividends paid in stock		—		—		74			—		—		—			87		—			—			87			—			87
Preferred stock dividends accrued		—		—		—			—		—		—			—		(87	)		—			(87	)		—			(87	)
Net loss		—		—		—			—		—		—			—		(2,777	)		—			(2,777	)		41			(2,736	)
Balances as of December 31, 2023		1	$	3,559		13,265		$	192		289	$	(11,978	)	$	542,482	$	(489,341	)	$	(417	)	$	44,497		$	(1,170	)	$	43,327

See accompanying Notes to Condensed Consolidated Financial Statements

Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)


	Preferred Stock				Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'			Non Controlling
	Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			Equity			Interest			Total
Balances as of March 31, 2022 (Audited)		1	$	3,559		8,766	$	174		66	$	(11,608	)	$	522,601	$	(472,310	)	$	(163	)	$	42,253		$	(1,303	)	$	40,950
Foreign exchange translation		—		—		—		—		—		—			—		—			48			48			—			48
Stock-based compensation		—		—		—		—		—		—			980		—			—			980			—			980
Preferred stock dividends paid in stock		—		—		5		—		—		—			88		—			—			88			—			88
Preferred stock dividends accrued		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)
Net loss		—		—		—		—		—		—			—		(6,005	)		—			(6,005	)		18			(5,987	)
Balances as of June 30, 2022		1	$	3,559		8,771	$	174		66	$	(11,608	)	$	523,669	$	(478,403	)	$	(115	)	$	37,276		$	(1,285	)	$	35,991
Foreign exchange translation		—		—		—		—		—		—			—		—			(362	)		(362	)		—			(362	)
Stock-based compensation		—		—		—		—		—		—			791		—			—			791			—			791
Preferred stock dividends paid in stock		—		—		9		—		—		—			88		—			—			88			—			88
Issuance of Class A common stock in connection employee bonuses		—		—		103		2		—		—			871		—			—			873			—			873
Issuance of Class A common stock for earnout commitment		—		—		17		—		—		—			238		—			—			238			—			238
Preferred stock dividends accrued		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)
Net loss		—		—		—		—		—		—			—		(5,664	)		—			(5,664	)		9			(5,655	)
Balances as of September 30, 2022		1	$	3,559		8,900	$	176	$	66	$	(11,608	)	$	525,657	$	(484,155	)	$	(477	)	$	33,152		$	(1,276	)	$	31,876
Foreign exchange translation		—		—		—		—		—		—			—		—			88			88			—			88
Stock-based compensation		—		—		—		—		—		—			657		—			—			657			—			657
Preferred stock dividends paid in stock		—		—		11		—		—		—			88		—			—			88			—			88
Issuance of common stock for Board of Director compensation		—		—		34		1		—		—			—		—			—			1			—			1
Preferred stock dividends accrued		—		—		—		—		—		—			—		(88	)		—			(88	)		—			(88	)
Net income		—		—		—		—		—		—			—		5,014			—			5,014			8			5,022
Balances as of December 31, 2022		1	$	3,559		8,945	$	177		66	$	(11,608	)	$	526,402	$	(479,229	)	$	(389	)	$	38,912		$	(1,268	)	$	37,644

See accompanying Notes to Condensed Consolidated Financial Statements

~~CINEDIGM~~

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	~~NATURE OF OPERATIONS AND LIQUIDITY~~

~~Cinedigm~~

1. NATURE OF OPERATIONS AND LIQUIDITY

Cineverse Corp. ~~("Cinedigm,"~~(“Cineverse”, “us”, “our”, and “Company” refers to Cineverse Corp. and its subsidiaries unless the ~~"Company," "we," "us," or similar pronouns)~~context otherwise requires) was incorporated in Delaware on March 31, 2000. ~~We are~~Since our inception, we have played a significant role in the digital distribution revolution that continues to transform the media and entertainment landscape.

Cineverse is a premier streaming technology and entertainment company with its core business operating as (i) a portfolio of owned and operated enthusiast streaming channels with enthusiast fan bases; (ii) a large-scale global aggregator and full-service distributor of feature films and television programs; and (iii) a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content distribution through subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts. We distribute products for major brands such as Hallmark, ITV, Nelvana, ZDF, Konami, NFL and Highlander, as well as leading ~~distributor~~international and ~~aggregator of independent~~domestic content creators, movie producers, television producers and other ~~short form~~short-form digital content ~~managing a library of distribution rights~~producers. We collaborate with producers, major brands and other content owners to ~~thousands of titles~~market, source, curate and ~~episodes released across~~distribute quality content to targeted audiences through (i) existing and emerging digital ~~physical, theatrical,~~ home ~~and mobile~~ entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, and Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

We played a ~~leading servicer of digital cinema assets for over~~pioneering role in transitioning approximately 12,000 movie screens ~~in both North America~~from traditional analog film prints to digital distribution, and ~~several international countries.~~

~~We report~~at the end of our ~~financial results in four primary segments as follows: (1)~~fiscal year 2023, the first digital cinema deployment (“Phase I Deployment”), (2) the second digital cinema deployment (“Phase II Deployment”), (3) digital cinema services (“Services”) and (4) media content and entertainment group (“Content & Entertainment” or "CEG"). The Phase I Deployment and Phase II Deployment segments are the non-recourse, financing vehicles and administrators for our digitalCompany's cinema equipment business concluded its active operations, as its contracts reached maturity. The Company no longer manages cinema equipment separately, and with the run-off of its operations, no longer presents this part of the business as a separate segment. All prior period reporting within this report reflect this change.

Our Class A common stock, par value $0.001 per share (the ~~“Systems”~~"Common Stock") ~~installed in movie theatres throughout~~is listed on The Nasdaq Capital Market (“Nasdaq”) under the ~~United States,~~symbol “CNVS.” The Company has maintained its compliance with the $1.00 bid price requirement for continued listing on The Nasdaq Capital Market and ~~in Australia~~remains subject to a one-year “Panel Monitor” as that term is defined by Nasdaq Listing Rule 5815(d)(4)(A) through June 30, 2024.

Financial Condition and ~~New Zealand. Our Services segment provides fee based support~~Liquidity

We have a history of net losses, and for the nine months ended December 31, 2023, we had a net loss attributable to ~~over 12,000 movie screens in our Phase I Deployment and Phase II Deployment segments, as well as directly to exhibitors and other third party customers,~~common stockholders in the ~~form~~amount of monitoring, billing, collection and verification services. Our Content & Entertainment segment is focused on: (1) ancillary market aggregation and distribution of entertainment content and; (2) a branded and curated over-the-top ("OTT") digital network business, providing entertainment channels and applications.

~~We are structured so that our digital cinema business (collectively, the Phase I Deployment, Phase II Deployment and Services segments) operates independently from our Content & Entertainment segment.~~

~~Liquidity~~

~~We have incurred net losses historically and have an accumulated deficit of $379.2 million as of December 31, 2017.~~$6.9 million. We may continue to generate net losses for the foreseeable future. ~~In addition, we have significant debt related contractual obligations for the fiscal year ended March 31, 2018 and beyond.~~

~~We continue to expect cash flows from our Phase I and II deployment operations will be sufficient to satisfy our liquidity and~~

~~contractual requirements that are linked to these operations.~~ As of December 31, ~~2017, we had approximately $43.6~~2023, the Company has an accumulated deficit of $489.3 million and negative working capital of $0.4 million. Net cash used in operating activities for the nine months ended December 31, 2023 was $9.3 million which included $6.5 million of ~~outstanding debt principal that relates~~incremental investment in our content portfolio via advances or minimum guarantee payouts.

The Company is party to a Loan, Guaranty, and ~~is serviced~~Security Agreement with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $5.0 million, guaranteed by ~~our digital cinema business and is non-recourse to us. We also had approximately $37.3 million of outstanding debt principal that is a part~~substantially all of our ~~Content & Entertainment~~material subsidiaries and ~~Corporate segments~~secured by substantially all of ~~which $2.0~~our and such subsidiaries’ assets. The line of credit expires on September 15, 2024. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate, 10.00% as of December 31, 2023. As of December 31, 2023, $5.0 million was ~~paid subsequent~~outstanding on the Line of Credit Facility, net of unamortized issuance costs of $69 thousand. On February 9, 2024, the Company expanded the Line of Credit Facility to ~~December 31, 2017.~~

~~On November 1, 2017, in connection~~$7.5 million at the same interest rate and with the ~~Stock Purchase Agreement~~same maturity date.

In July 2020, we entered into an At-the-Market sales agreement (the ~~"Stock Purchase Agreement"~~“ATM Sales Agreement”) with ~~Bison Entertainment Investment Limited, an affiliate of Bison Capital Holding Company Limited~~A.G.P./Alliance Global Partners (“~~Bison”~~A.G.P.”) and B. Riley FBR, Inc. (“B. Riley” and, together with A.G.P., the “Sales Agents”), we sold 20,000,000 shares of our Class A Common Stock for an aggregate purchase price of $30.0 million, of which 19,666,667 shares were sold to Bison, and 333,333 shares were sold to the CEO of the Company. In addition, we consummated exchange agreements with holders of our remaining 5.5% Convertible Notes due 2035 ("Convertible Notes"), whereby $46.3 million principal amount of the Convertible Notes were exchanged for a combination of $17.1 million cash and 2,221,457 shares of Class A Common Stock. The Convertible Notes were immediately retired.

~~On November 7, 2017, we repurchased the remaining balance of $0.5 million of Convertible Notes from the holder for cash and the Convertible Notes were immediately retired.~~

As a result of the of the transactions described above, Bison became a majority shareholder of the outstanding Class A Common Stock and designated two (2) members of the Company’s Board of Directors, the size of which is set at seven (7) members.

~~Bison Note Payable~~

In accordance with the Stock Purchase Agreement, on December 29, 2017, the Company entered into a loan agreement with Bison Entertainment and Media Group, another affiliate of Bison Capital Holding Company Limited, pursuant to which the Company ~~borrowed $10,000,000 (the “Loan”). The Loan matures~~may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on ~~June 28, 2021 and bears interest~~Nasdaq at 5% per annum, payable quarterly in cash. The principal is payable upon maturity. The Loan is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties. The proceedsthe time of the ~~Loan~~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 ~~used~~made pursuant to an effective shelf registration statement, for ~~working capital and general corporate purposes. As part~~an aggregate offering price of ~~this loan,~~up to $30 million. For the three months ended December 31, 2023, the Company ~~also issued~~did not sell any shares under this agreement. For the

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

nine months ended December 31, 2023, the Company sold 177 thousand shares for $1.1 million in net proceeds, respectively, after deduction of commissions and fees. The ATM Sales Agreement has expired in accordance with its terms.

On June 16, 2023, the Company closed on the sale of 2,150 thousand shares of Common Stock, 517 thousand pre-funded warrants, and warrants to purchase ~~1,400,000~~up to 2,667 thousand shares of Common Stock at a combined public offering price of $3.00 per share and accompanying warrant for aggregate gross proceeds of approximately $7.4 million, after deducting placement agent fees and other offering expenses in the ~~Company’s Class A common~~amount of $0.6 million. The warrants had an exercise price of $3.00 per share, were exercisable immediately and will expire five years from the issuance. The Company received $2.999 per share for the pre-funded warrants, with the remaining $0.001 due at the time of exercise. All 516,667 pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand.

In addition, the Company remains authorized to purchase up to an aggregate of 500 thousand shares of its outstanding Common Stock, following the announcement of a stock ~~(the “Warrants”). See Note 6 -~~ ~~Stockholders' Deficit~~ ~~for discussion~~repurchase program on March 1, 2023.

The Company will continue to invest in content development and acquisition, from which it believes it will obtain an appropriate return on its investment. As of ~~the Warrants.~~

December 31, 2023 and March 31, 2023, short term content advances were $8.5 million and $3.7 million, respectively, and content advances, net of current portion were, $3.2 million and $1.4 million, respectively.

We believe ~~the combination of: (i)~~ our cash and ~~restricted~~ cash ~~balances at~~equivalents and our credit facility, as of December 31, 2017, which includes the net proceeds received from Bison for the issuance of 19,666,667 shares and from the Loan, (ii) implemented and planned cost reduction initiatives, (iii) retirement of the full outstanding amount of Convertible Notes, and (iv) expected cash flows from operations2023, will be sufficient to ~~satisfy~~support our ~~liquidity and capital requirements~~operations for at least ~~a year after these consolidated interim financial statements are issued. Our~~twelve months from the filing of this report. The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital requirements will depend on many factors, and we may need to develop and formulate operating plans with Bison to use available capital resources and raise additional capital. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity. needs.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~BASIS OF PRESENTATION AND CONSOLIDATION~~

Consolidation

The accompanying interim Condensed Consolidated Financial Statements ~~are unaudited and include the accounts~~ of the Company, its wholly owned and majority owned subsidiaries, and reflect all normal and recurring adjustments necessary for the fair presentation of its consolidated financial position, results of operations and cash flows. All material inter-company accounts and transactionsCineverse Corp. 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 Condensed Consolidated Financial Statements for a discussion of our noncontrolling and majority interests.~~

~~USE OF ESTIMATES~~

~~The preparation of these condensed consolidated financial statements~~prepared in conformity with accounting principles generally accepted in the United States ~~of America ("GAAP"~~(“GAAP”) ~~requires us to make estimates~~ and ~~assumptions that affect~~are consistent in all material respects with those applied in the ~~amounts reported in these~~Company’s Annual Report on Form 10-K for the year ended March 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on June 29, 2023. These Condensed Consolidated Financial Statements are unaudited and ~~accompanying notes. As permitted under GAAP, interim accounting for certain expenses, such as~~have been prepared by the ~~adequacy~~Company following the rules and regulations of accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill and intangible asset impairment and valuation reserve for income taxes, are based on full year assumptions when appropriate. Actual results could differ materially from those estimates.

the SEC.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted ~~pursuant to the~~as permitted by such rules and ~~regulations of~~regulations; however, the ~~Securities and Exchange Commission ("SEC"), although we believe that~~Company believes the disclosures are adequate to make the information presented not misleading. Certain columns and rows may not add due to the use of rounded numbers.

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

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

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We own an 85% interest in CON TV, LLC ("CONtv"), a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets. We evaluated the investment under the voting interest entity model and determined that the entity should be ~~read~~consolidated as we have a controlling financial interest in ~~conjunction with~~the entity through our ~~annual consolidated financial statements~~ownership of outstanding voting shares, and that other equity holders do not have substantive voting, participating or liquidation rights.

Accounting Policies

There have been no material changes in the ~~notes thereto, included~~Company’s significant accounting policies as compared to the significant accounting policies described in ~~our~~the Company’s Annual Report on Form 10-K for the ~~fiscal~~ year ended March 31, ~~2017.~~2023.

Segment Reporting

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

~~CASH AND CASH EQUIVALENTS~~

Reclassifications

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

Cash and Cash Equivalents

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

~~ACCOUNTS RECEIVABLE~~

~~We maintain reserves for potential~~

Employee Retention Tax Credit

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") provided an employee retention tax credit ~~losses on accounts receivable. We review~~("ERTC") which was a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act (the "Appropriations Act") extended and expanded the ~~composition~~availability of ~~accounts receivable and analyze historical bad debts, customer concentrations, customer~~the employee retention credit ~~worthiness, current economic trends and changes in customer payment patterns~~through December 31, 2021. The Appropriations Act amended the employee retention credit to ~~evaluate~~be equal to 70% of qualified wages paid to employees during the ~~adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. We had a provision for doubtful accounts of $0.6 million and $1.6 million~~2021 fiscal year.

The Company qualified for the ~~three~~employee retention credit beginning in June 2020 for qualified wages through September 2021 and ~~nine months~~filed a cash refund claim during the fiscal year ended ~~December~~March 31, ~~2017, respectively. The provision for doubtful accounts was $0.4 million for the three and nine months ended December 31, 2016.~~

Our Content & Entertainment segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. We base2023 in the amount of $2.5 million in the ~~returns allowance and customer chargebacks upon historical experience and future expectations.~~

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.

~~UNBILLED AND DEFERRED REVENUE~~

Unbilled revenue represent amounts recognized as revenue for which invoices have not yet been sent to clients. Deferred revenue represents amounts billed or payments received for which revenue has not yet been earned.

~~ADVANCES~~

~~Advances, which are recorded within prepaid and other current assets~~Employee retention tax credit line on the Company’s Condensed Consolidated ~~Balance Sheets, represent amounts prepaid to studios or content producers for~~Statements of Operations, of 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 $1.1$2.0 million ~~and $0.6 million for~~was recognized during the three months ended December 31, ~~2017 and 2016, respectively. Impairments and accelerated amortization related to advances were $2.2 million and $1.4 million for the nine months ended~~2022. As of December 31, ~~2017~~2023 and ~~2016, respectively.~~

~~INVENTORY~~

~~Inventory consists~~March 31, 2023, the tax credit receivable of ~~finished goods inventory~~$1.7 and $2.1 million, respectively, has been included in the Employee retention tax credit line on the Company's Condensed Consolidated Balance Sheet.

The Company has received notification during the second quarter of ~~Company owned DVD and Blu-ray Disc titles and~~fiscal year 2024 that its ERTC claim is ~~stated at~~under examination with the lower of cost (determined based on weighted average cost) or market. We identify inventory items to be written down for obsolescence based on their sales status and condition. We write down discontinued or slow moving inventories based on an estimateInternal Revenue Service ("IRS"). As of the ~~markdown~~date of this report, the examination is ongoing, and the Company is responding to ~~retail price needed to sell through our current stock level of the inventories.~~audit requests as they arise.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Property and Equipment, Net

~~RESTRICTED CASH~~

~~Our Prospect Loan requires that we maintain specified cash balances that are restricted to repayment of interest thereunder. See Note 5 -~~ ~~Notes Payable~~ ~~for information about our restricted cash balances.~~

~~PROPERTY AND EQUIPMENT~~

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



Computer equipment and software		3 - 5 years
~~Digital cinema projection systems~~ Internal use software	10	3 - 5 years
Machinery and equipment		3 - 10 years
Furniture and fixtures	3	2 - 67 years

~~Leasehold improvements~~

We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications. These capitalized costs are included in property and equipment, net and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over the ~~shorter of the lease term or the estimated~~ useful life of the ~~leasehold improvements. Repair~~software. Post-configuration training and maintenance costs are ~~charged to expense~~expensed 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 condensed consolidated statements of operations.

~~ACCOUNTING FOR DERIVATIVE ACTIVITIES~~

Derivative financial instruments are recorded at fair value. Changes in the fair value of derivative financial instruments are either recognized in accumulated other comprehensive loss (a component of stockholders' deficit) or in the consolidated statements of operations depending on whether the derivative qualifies for hedge accounting. We entered into an interest rate cap transaction to limit our exposure to interest rates on the Prospect Loan, which matures March 31, 2018. We have not sought hedge accounting treatment for the interest rate cap and therefore, changes inamortize internal-use software over its ~~value are recorded in the consolidated statements of operations.~~

~~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~~estimated useful life on a ~~recurring basis use~~straight-line basis.

Intangible Assets, Net

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

Amortization lives of intangible assets are as follows:


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

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


	As of December 31, 2023
	Cost Basis		Accumulated Amortization			Net
Content Library	$	24,096	$	(21,378	)	$	2,718
Advertiser Relationships and Channel		12,604		(2,132	)		10,472
Customer Relationships		8,690		(7,804	)		886
Software		3,200		(800	)		2,400
Trademark and Tradenames		4,026		(3,056	)		970
Capitalized Content		1,371		(90	)		1,281
Total Intangible Assets	$	53,987	$	(35,260	)	$	18,727

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	As of March 31, 2023
	Cost Basis		Accumulated Amortization			Net
Content Library	$	23,970	$	(21,126	)	$	2,844
Advertiser Relationships and Channel		12,604		(1,062	)		11,542
Customer Relationships		8,690		(7,600	)		1,090
Trademark and Tradenames		4,026		(2,274	)		1,752
Software		3,200		(560	)		2,640
Total Intangible Assets	$	52,490	$	(32,622	)	$	19,868

During the three and ~~other relevant information are generated by market transactions involving identical or comparable assets or liabilities.~~

~~The following tables summarize~~nine months ended December 31, 2023, the ~~levels~~Company had amortization expense of ~~fair value measurements~~$879 thousand and $2,381 thousand, respectively. During the three and nine months ended December 31, 2022, the Company had amortization expense of ~~our financial assets~~$712 thousand and ~~liabilities as~~$2,193 thousand, respectively.

As of December 31, ~~2017~~2023, amortization expense is expected to be (in thousands):


	Total
In-process intangible assets	$	411
Remainder of fiscal year 2024		1,254
2025		3,264
2026		3,001
2027		1,772
2028		1,246
Thereafter		7,779
	$	18,727

Capitalized Content

The Company capitalizes direct costs incurred in the production of content from which it expects to generate a return over the anticipated useful life and ~~March 31, 2017:~~

(in thousands) Level 1 Level 2 Level 3 Total
Restricted cash $ 1,000

$ —
—
$ —

$ 1,000

~~Our cash~~the Company’s predominant monetization strategy informs the method of amortizing these deferred costs. The determination of the predominant monetization strategy is made at commencement of the production or license period and ~~cash equivalents, accounts receivable, unbilled revenue and accounts payable and accrued expenses~~the classification of the monetization strategy as individual or group only changes if there is a significant change to the title’s monetization strategy relative to its initial assessment. The costs are ~~financial instruments~~capitalized to the Capitalized Content costs within Intangible Assets and are ~~recorded at cost in~~amortized as a group within Depreciation and Amortization within the Condensed Consolidated ~~Balance Sheets. The estimated fair values~~Statements of ~~these financial instruments approximate their carrying amounts because~~Operations.

Impairment of ~~their short-term nature. At December 31, 2017~~Long-lived and March 31, 2017, the estimated fair value of our fixed rate debt approximated its carrying amounts. We estimated the fair value of debt based upon current interest rates available to us at the respective balance sheet dates for arrangements with similar terms and conditions. Based on borrowing rates currently available to us for loans with similar terms, the carrying value of notes payable and capital lease obligations approximates fair value.

~~IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS~~

Finite-lived Intangible Assets

We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the ~~asset's~~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~~There were no impairment charges recorded for long-lived and finite-lived intangible assets during the three and nine months ended December 31, ~~2017~~2023 and ~~2016, no impairment charge was recorded from operations for long-lived assets or finite-lived assets.~~2022.

~~GOODWILL~~

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 ~~at the end of the fourth quarter of each fiscal year,~~ or more often if warranted by events or changes in circumstances indicating that the carrying value ~~of a reporting unit~~ may exceed fair value, also known as impairment indicators. Our process of evaluating goodwill for impairment involves the determination of fair value of goodwill compared to its carrying value. Our only reporting unit with goodwill is our Content & Entertainment reporting unit.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 annually assesses goodwill for potential impairment during its fourth fiscal quarter, or sooner if event occurs or circumstances would indicate it would be more likely than not that fair value would be reduced below its carrying amount. No goodwill impairment charge was recorded in the three orand nine months ended December 31, ~~2017~~2023 and ~~2016.~~2022.

Fair Value Measurements

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

•

Level 1 – quoted prices in active markets for identical investments

•

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

•

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

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


	As of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Equity investment in Metaverse, at fair value	$	1,276	$	—	$	—	$	1,276
	$	1,276	$	—	$	—	$	1,276

Liabilities:
Current portion of earnout consideration on purchase of a business	$	—	$	—	$	110	$	110
	$	—	$	—	$	110	$	110


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

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

The Company has an investment in A Metaverse Company ("Metaverse") (SEHK: 1616) accounted for under the equity method of accounting as the Company can exert significant influence over Metaverse with its direct

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

ownership of approximately 15% and affiliation with the Company’s largest shareholder. The Company has also made an irrevocable election to apply the fair value option under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 825-10, Financial Instruments, as it relates to its equity investment in Metaverse. Changes in the investment's fair value are recognized within the "Loss from equity investment in Metaverse, a related party" line item within the Condensed Consolidated Statements of Operations.

Following the halting of Metaverse stock trading on The Stock Exchange of Hong Kong Limited on April 1, 2022, the Company valued our equity investment in Metaverse using a market approach and the investment was categorized as a Level 3 valuation based on unobservable inputs. As such, as of March 31, 2023, the Company estimated the fair value of Metaverse based the last known enterprise value, adjusting for trends in enterprise valuations and market capitalization for comparable companies with a resulting fair value was $5.2 million.

On November 6, 2023, Metaverse's stock resumed trading on The Stock Exchange of Hong Kong Limited. During the quarter ended December 31, 2023, the Company sold 30 million of the 362 million shares held as of September 30, 2023, which resulted in a realized loss of $131 thousand during the three months ended December 31, 2023. The resumption of active trading status represented renewed availability of quoted, unadjusted prices in active markets for identical assets, upon which the Company can execute a sale and readily access pricing information at the measurement date. Accordingly, the Company has presented the fair value of its Metaverse shares held as of December 31, 2023 within the Level 1 grouping. The fair value of the shares held as of December 31, 2023 was $1.3 million, with associated unrealized losses of $3.6 million.

The Company estimated the fair value of its earnout consideration using contractual inputs from the related business combination, which established specific fiscal year revenue growth, profitability and EBITDA targets. The Company utilizes the most up to date forecast to estimate the outcome against these targets to determine the ultimate estimated payout. During the nine months ended December 31, 2023, the Company estimated a $682 thousand decrease in the estimated ultimate earnout payments based on Bloody Disgusting's performance, made cash payments of $291 thousand, and issued equity to settle earnout liability of $392 thousand, and accrued interest of $29 thousand.

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

Content Advances

Content advances represents amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record a provision for amounts that we expect may not be recoverable. Amounts which are expected to be recovered in more than 12 months are classified as long term and presented within content advances, net of current portion, which were $3.2 million and $1.4 million as of December 31, 2023, and March 31, 2023, respectively. For the nine months ended December 31, 2023, the Company recorded a recovery in the provision for advances of $0.5 million.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounts Payable and Accrued Expenses

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


	As of
	December 31, 2023		March 31, 2023
Accounts payable	$	6,568	$	15,042
Amounts due to producers		15,553		13,114
Accrued compensation and benefits		1,209		2,532
Accrued other expenses		3,657		3,843
Total accounts payable and accrued expenses	$	26,987	$	34,531

Compared to March 31, 2023, the decrease in accounts payable was primarily attributable to an $8.3 million decrease from the run-off of the Company's digital cinema operations, and the decrease in accrued compensation and benefits was driven by a decrease of $1.2 million due to a reduced bonus accrual.

Deferred Consideration

The Company has recognized liabilities related to deferred consideration arrangements related to the acquisition of FoundationTV ("FTV") and Digital Media Rights ("DMR"). These payments are fixed in nature and are due to the sellers of the respective companies. The Company initially recognized the liability at fair value at the time of acquisition and has since recognizes interest expense related to accretion in advance of the ultimate settlement of these liabilities. Amounts due within 12 months under the terms of the agreements are classified as current within the Condensed Consolidated Balance Sheets.

The deferred consideration related to the acquisition of DMR is payable in either Class A common shares of the Company stock or cash, at the Company's discretion and subject to certain conditions. Payments of $3.0 million and $2.4 million are due in March 2024 and March 2025, respectively.

The deferred consideration related to the FTV acquisition is payable in the amount of $238 thousand in each of June 2024 and December 2024, and $464 thousand in June 2025. There is $617 thousand presently due and payable. The Company has the right to pay up to 25% of post-close purchase price in equity.

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.

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


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Streaming and digital	$	9,537	$	11,598	$	29,006	$	31,375
Base distribution		2,811		8,121		4,529		11,145
Podcast and other		864		977		1,953		1,740
Other non-recurring		64		7,186		3,780		11,218
Total revenue	$	13,276	$	27,882	$	39,268	$	55,478

The Company's Streaming and digital revenue pertains to its OTT business, including the licensing, service, advertising, and subscription revenue related to the Company's streaming business and partnerships. Base

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

distribution revenue relates to non-streaming revenue, including Theatrical revenue and the sale of DVD's. Podcast and other revenue primarily relates to the Company's Bloody Disgusting Podcast Network. As the Company satisfies its performance obligations from these revenue sources, whether relating to the delivery of digital content, physical goods, or licensing, revenue is generally measured at a point in time.

Other non-recurring revenue relates to the Company's legacy digital cinema operations, whose operations have run-off, still may generate non-recurring revenue from the sale of cinema assets or the recognition of variable consideration as the associated uncertainty associated with the revenue is resolved.

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

Principal Agent Considerations

Revenue earned 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

~~PARTICIPATIONS AND ROYALTIES PAYABLE~~•

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

Shipping and Handling

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

Credit Losses

We maintain reserves for expected credit losses on accounts receivable primarily on a specific identification basis. 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.

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

During the three and nine months ended December 31, 2023, we did not recognize any credit losses as part of our ongoing operations or reversals of previously recorded provisions. During the three and nine months ended December 31, 2022, we recognized credit losses of $7 thousand and $54 thousand, respectively.

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, such as the sale of DVDs with future release dates, even if amounts are refundable. Amounts recorded as contract liabilities are generally not long-term in nature.

The ending deferred revenue balance, including current and non-current balances as of December 31, 2023 and March 31, 2023, was and $0.2 million and $0.2 million, respectively. In each period, the additions to our deferred revenue balance are due to cash payments received or due in advance of satisfying performance

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

obligations, while the reductions are due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

Participations and royalties payable

When we use ~~third parties~~third-parties to distribute ~~company-owned~~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.

~~DEBT ISSUANCE COSTS~~

We incur debt issuance costs in connection with long-term debt financings. Such costs are recorded as a direct deduction to notes payable and amortized over the terms of the respective debt obligations using the effective interest rate method. Debt issuance costs recorded in connection with revolving debt arrangements are presented as other assets on the Consolidated Balance Sheets and are amortized over the term of the revolving debt agreements using the effective interest rate method.

~~REVENUE RECOGNITION~~

~~Phase I Deployment and Phase II Deployment~~

Virtual print fees (“VPFs”) are earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase 1 DC, CDF I and to Phase 2 DC when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to Phase 1 DC and CDF I based on a defined fee schedule with a reduced VPF rate year over year until the sixth year (calendar year 2011) at which point the VPF rate remains unchanged through the tenth year until the VPFs phase out. 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 in which the digital title first plays on a System for general audience viewing in a digitally equipped movie theatre, as Phase 1 DC’s, CDF I's and Phase 2 DC’s performance obligations have been substantially met at that time.

Phase 2 DC’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 2 DC 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 2 DC 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 must pay us a one-time “cost recoupment bonus.” Any other cash flows, net of expenses, received by Phase 2 DC following the achievement of cost recoupment are required to be returned to the distributors on a pro-rata basis. At this time, we cannot estimate the timing or probability of the achievement of cost recoupment. Beginning in December 2018, certain Phase 2 DC Systems will have reached the conclusion of their deployment payment period, subject to earlier achievement of cost recoupment. In accordance with existing agreements with distributors, VPF revenues will cease to be recognized on such Systems. Because the Phase II deployment installation period ended in December 2012, a majority of the VPF revenue associated with the Phase II systems will end by December 2022 or earlier if cost recoupment is achieved.

Alternative content fees (“ACFs”) are earned pursuant to contracts with movie exhibitors, whereby amounts are payable to Phase 1 DC, CDF I and to Phase 2 DC, generally either a fixed amount or as a percentage of the applicable box office revenue derived from the exhibitor’s showing of content other than feature movies, such as concerts and sporting events (typically referred to as “alternative content”). ACF revenue is recognized in the period in which the alternative content first opens for audience viewing.

~~Revenues earned in connection with up front exhibitor contributions are deferred and recognized over the expected cost recoupment period.~~

~~Services~~

Exhibitors who purchased and own Systems using their own financing in the Phase II Deployment 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 2 DC 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 segment manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.

Our Services segment earns an administrative fee of approximately 5% of VPFs collected and, in addition, earns an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 DC. This administrative fee is recognized in the period in which the billing of VPFs occurs, as performance obligations have been substantially met at that time.

~~Content & Entertainment~~

CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, VOD, and physical goods (e.g., DVD and Blu-ray Discs). Fees earned are typically based on the gross amounts billed to our customers less the amounts owed to the media studios or content producers under distribution agreements, and gross media sales of owned or licensed content. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. Generally, revenues are recognized when 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. Reserves 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. Sales returns and allowances are reported as a reduction of revenues.

CEG also has contracts for the theatrical distribution of third party feature movies and alternative content. CEG’s distribution fee revenue and CEG's participation in box office receipts is recognized at the time a feature movie and alternative content are viewed. CEG 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.

Revenue is deferred in cases where a portion or the entire contract amount cannot be recognized as revenue due to non-delivery of services. Such amounts are classified as deferred revenue and are recognized as earned revenue in accordance with our revenue recognition policies described above.

~~DIRECT OPERATING COSTS~~

Direct operating costs primarily consist of operating costs such as cost of goods sold, fulfillment expenses, property taxes and insurance on systems, shipping costs, royalty expenses, impairments of advances, participation expenses, marketing and direct personnel costs.

~~STOCK-BASED COMPENSATION~~

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

Three Months Ended December 31, Nine Months Ended December 31,
(In thousands) 2017 2016 2017 2016
Direct operating $ 47
$ 3
$ 60
$ 8
Selling, general and administrative 1,520
341
2,154
1,356
$ 1,567
$ 344
$ 2,214
$ 1,364

~~No stock options were granted or exercised during~~

Concentrations

For the three and nine months ended December 31, ~~2017~~2023, one customer represented 26% and ~~2016.~~

~~No restricted shares were awarded to employees during~~23% of consolidated revenues, respectively. For the three months ended December 31, 2022, one customer represented approximately 16% of consolidated revenues and another customer represented 14% of consolidated revenues, respectively. For the nine months ended December 31, ~~2017. There were 1,055,465 restricted shares awarded~~2022, one customer represented 11% of consolidated revenues.

Direct Operating Expenses

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

Stock-based Compensation

The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock, restricted stock units, stock appreciation rights ("SARs") and performance stock units ("PSUs"). The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the Condensed Consolidated Statements of Operations and Comprehensive 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 ~~three and nine months ended December 31, 2016.~~

~~There were 111,724 shares awarded~~employee or nonemployee is required to ~~the board of directors~~provide service in exchange for the ~~three~~award. The fair values of options and ~~nine months ended December 31, 2017. There were no shares awarded to~~SARs are calculated as of the ~~board~~date of ~~directors for~~grant using the ~~three~~Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility, risk-free rate and ~~nine months ended December 31, 2016.~~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~~

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.~~

States and India.

The ~~Tax Cuts and Jobs Act (the "Act") was enacted~~Company accounts for uncertain tax positions in ~~December 2017. Among other things,~~accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the ~~Act reduces~~accounting for uncertainty in tax positions. This amendment provides that the ~~U.S. federal corporate~~ tax ~~rate~~effects from ~~35 percent~~an uncertain tax position can be recognized in the financial

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

statements only if the position is “more-likely-than-not” to ~~21 percent and eliminates the alternative minimum tax (“AMT”) for corporations. Since the deferred tax assets are expected~~be sustained were it to ~~reverse in~~be challenged by a ~~future year, it has been tax effected using the 21% federal corporate tax rate. As a result~~taxing authority. The assessment of the ~~reduction in~~tax position is based solely on the ~~corporate income~~technical merits of the position, without regard to the likelihood that the tax ~~rate, we wrote down approximately $35.5 million~~position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of ~~our gross deferred~~ tax ~~assets and valuation allowance~~benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company had no uncertain tax positions as of December 31, ~~2017, which has no impact in our condensed consolidated financial statements~~2023 and March 31, 2023.

Earnings per Share

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

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


	Three Months Ended December 31,					Nine Months Ended December 31,
	2023			2022		2023			2022
Basic net income (loss) per share:
Net income (loss) attributable to common stockholders	$	(2,864	)		4,926	$	(6,946	)	$	(6,919	)
Shares used in basic computation:
Weighted-average shares of Common Stock outstanding		12,828			8,945		11,678			8,854
Basic net income (loss) per share	$	(0.22	)	$	0.55	$	(0.59	)	$	(0.78	)

Shares used in diluted computation:
Weighted-average shares of Common Stock outstanding		12,828			8,945		11,678			8,854
Stock options and SARs		—			—		—			—
Weighted-average number of shares		12,828			8,945		11,678			8,854
Diluted net income (loss) per share	$	(0.22	)	$	0.55	$	(0.59	)	$	(0.78	)

The calculation of diluted net loss per share for the three and nine months ended December 31, ~~2017.~~

~~NET LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS~~

~~Basic~~2023 does not include the impact of 798 thousand and763 thousand anti-dilutive shares, respectively. The calculation of diluted net loss per ~~common~~ share ~~has been calculated as follows:~~



~~Basic and diluted net loss per common share attributable to common stockholders =~~	~~Net loss attributable to common stockholders~~
	~~Weighted average number of common stock~~ ~~outstanding during the period~~

Stock issued and treasury stock repurchased during the period are weighted for the portion of the period that they are outstanding. The shares to be repurchased in connection with the forward stock purchase transaction discussed in Note 5 - ~~Notes Payable~~ ~~are considered repurchased for the purposes of calculating earnings per share and therefore are in the calculation of weighted average shares outstanding~~ for the three and nine months ended December 31, ~~2017.~~

~~We incurred net losses for the three and nine months ended December 31, 2017 and 2016, and therefore~~2022 does not include the impact of 674 thousand and 640 thousand potentially ~~dilutive common~~anti-dilutive shares, from outstanding stock options and warrants, totaling 2,893,574 shares and 1,420,227 shares as of December 31, 2017 and 2016, respectively, were excluded from the computation of loss per share as their impact would have been anti-dilutive.respectively.

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

~~In May 2014, the Financial~~

Recently Issued Accounting ~~Standards Board~~Pronouncements

The Company evaluates all Accounting Standard Updates ("~~FASB"~~ASUs") issued ~~new accounting guidance on revenue recognition. The new standard, issued Accounting Standards Update ("ASU") as ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, provides~~but not yet effective by FASB for ~~a single five-step model~~consideration of their applicability. ASU's not included in the Company's disclosures were assessed and determined to be ~~applied~~not applicable and material to ~~all revenue contracts with customers as well as requires additional~~the Company's consolidated financial ~~statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. During 2016,~~statements or disclosures.

In November 2023, the FASB issued ~~several accounting~~ASU 2023-07, "Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures." The update requires disclosure of incremental segment information, including significant segment expenses, on an annual and interim basis, and would apply to single segment companies. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption is permitted. The Company is required to apply the updates (ASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct unintended application of the guidance. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. We plan to adopt Topic 606 effective the start of our 2019 fiscal year, April 1, 2018, but the process of evaluatingretrospectively. The Company is assessing the impact ~~if any,~~of ASU 2023-07 on ~~our~~its consolidated financial ~~statements remains ongoing. During~~statements.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In December 2023, the ~~third quarter we engaged outside assistance~~FASB issued ASU 2023-09, "Income Taxes (Topic 740)—Improvements to ~~support our ongoing assessment.~~Income Tax Disclosures" On an annual basis, this update requires the disclosure of specific tax categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The amendments are effective for annual periods beginning after December 15, 2024. Prospective and retrospective adoption is permitted. The Company is still evaluating its method of adoption and assessing the impact of ASU 2023-09 on the disclosures within its consolidated financial statements.

3. OTHER INTERESTS

Investment in CDF2 Holdings

We indirectly own ~~100%~~100% of the common equity of CDF2 Holdings, LLC ("(“CDF2 ~~Holdings"~~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~~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~~ASC Topic 810 ("(“ASC ~~810"~~810”), ~~“Consolidation."~~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 December 31, ~~2017~~2023 and March 31, ~~2017,~~2023, our maximum exposure to loss, as it relates to the non-consolidated CDF2 Holdings entity, represents accounts receivable for service fees under a master service agreement with CDF2 Holdings. Such accounts receivable ~~were $0.4~~was $0.0 million and $0.5 million as of December 31, ~~2017~~2023 and March 31, ~~2017,~~2023, respectively, which are included in accounts receivable, net on the accompanying Condensed Consolidated Balance Sheets.

~~For~~

The accompanying Condensed Consolidated Statements of Operations includes digital cinema servicing revenue from CDF2 Holdings in the amount of $0.0 for the three and nine months ended December 31, ~~2017~~2023, respectively, and ~~2016,~~$0.1 and $0.2 million for the ~~accompanying Condensed Consolidated Statements of Operations includes $0.3 million~~three and ~~$0.8 million, respectively of digital cinema servicing revenue from CDF2 Holdings.~~

nine months ended December 31, 2022, respectively.

Total ~~Stockholders'~~Stockholders’ Deficit of CDF2 Holdings at December 31, ~~2017~~2023 and March 31, ~~2017~~2023 was ~~$24.3~~$59.2 million and ~~$18.7~~$59.2 million, respectively. We have no obligation to fund the operating loss or the ~~stockholders'~~stockholders’ deficit beyond our initial investment of ~~$2.0~~$2.0 million and, accordingly, our investment in CDF2 Holdings as of December 31, ~~2017~~2023 and March 31, ~~2017~~2023 is carried at ~~$0.~~

~~Majority Interest~~$0.

Investment in ~~CONtv~~

~~We own an 85% interest~~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 0.5 thousand shares of Roundtable Series A Preferred Stock and warrants to purchase 0.1 thousand shares of Roundtable Common Stock (together, the “Roundtable Securities”). The Company paid the purchase price for the Roundtable Securities by issuing 16 thousand shares of Common Stock to Roundtable. The Company recorded $0.2 million for the purchase of the Roundtable Securities which is included in ~~CON TV, LLC, a worldwide digital network that creates original content, and sells and distributes on-demand digital content~~other long-term assets on the ~~Internet~~accompanying Consolidated Balance Sheets. The investment in the Roundtable Securities was made in connection with a proposed collaboration with Roundtable regarding production and ~~other consumer digital~~ distribution ~~platforms,~~of streaming content including the launch of high profile branded enthusiast streaming channels. The Roundtable investment was accounted for using the cost method of accounting as we own less than 20% of Roundtable and do not exert a significant influence over their operations. Our President and Chief Strategy Officer is on the Roundtable Board of Directors.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. STOCKHOLDERS’ EQUITY

COMMON STOCK

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

During the three months ended December 31, 2023, the Company issued 0.5 million shares of Common Stock. This was comprised of 74 thousand shares for preferred stock dividends, and 400 thousand shares for Board of Director compensation.

During the nine months ended December 31, 2023, the Company issued 3.9 million shares of Common Stock. In addition to the activity cited for three months ended December 31, 2023, this was comprised of 517 thousand shares issued in conjunction with the exercise of pre-funded warrants issued, 502 shares issued in connection with employee bonuses, 56 thousand shares for preferred stock dividends, 41 thousand to satisfy earnout-related liabilities, 2,150 thousand shares were issued through a June 16, 2023 direct offering, and 177 thousand issued in connection with ATM sales during the first fiscal quarter. In addition, the Company issued common warrants to purchase up to 2,667 thousand shares of Common Stock in conjunction with its direct offering on June 16, 2023. All pre-funded and common warrants were issued as immediately exercisable. All common warrants remain outstanding as of December 31, 2023.

During the three months ended December 31, 2022, the Company issued 45 thousand shares. This was comprised of 11 thousand shares for preferred stock dividends and 34 thousand shares for Board of Director compensation.

During the nine months ended December 31, 2022, the Company issued 179 thousand shares. In addition to the activity cited during the three months ended December 31, 2022, this was comprised of 14 thousand shares for preferred stock dividends, 103 thousand shares for employee bonuses, and 17 thousand shares to satisfy earnout-related liabilities.

PREFERRED STOCK

Cumulative dividends in arrears on Series A Preferred Stock were $87 thousand and $88 thousand as of December 31, 2023 and 2022, respectively. During the three and nine months ended December 31, 2023 and 2022, the Company paid preferred stock dividends in arrears for the same amount in the form of shares of Common Stock. The Company has the right to pay preferred stock dividends in cash or stock, at the Company's discretion.

TREASURY STOCK

We have treasury stock, at cost, consisting of 289 thousand and 66 thousand shares of Common Stock at December 31, 2023 and March 31, 2023, respectively. During the nine months ended December 31, 2023, the Company acquired 223 thousand shares of Common Stock withheld in connection with employee bonuses that the Company elected to settle in shares of Common Stock.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

EQUITY INCENTIVE PLANS

Stock Based Compensation Awards

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

Awards issued under our 2000 Plan were permitted to be issued to employees, outside directors or consultants in any of the following forms (or a combination thereof) (i) stock option awards; (ii) SARs; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan provided for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Common Stock on the date of grant. ISOs granted to shareholders having more than 10% of the total combined voting power of the Company must have exercise prices of at least 110% of the fair market value of our Common Stock on the date of grant. ISOs and non-statutory stock options granted under the 2000 Plan were subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options were set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the initial equity investment in Cineverse by Bison Entertainment Investment Limited, 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 August 2017, the Company adopted 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 905 thousand shares of Common Stock, in the form of various awards, including stock options, SARs, restricted stock, restricted stock units, PSUs and cash awards.

For the three and nine months ended December 31, 2023, the Company incurred stock-based compensation expenses of $0.2 million and $1.1 million, respectively. Of these amounts, $0.1 million and $0.3 million related to Board of Director compensation, respectively.

For the three and nine months ended December 31, 2022, the Company incurred stock-based compensation expenses of $0.7 million and $3.9 million, respectively. Of these amounts, $0.1 million and $0.3 million related to Board of Director compensation, respectively.

Share-based compensation expense is reported within Selling, General and Administrative expenses.

5. LINE OF CREDIT FACILITY

The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank ("EWB") providing for a revolving line of credit (the "Line of Credit Facility") of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries' assets. The Line of Credit bears an interest rate equal to 1.5% above the prime rate, and was 10.00% as ~~gaming consoles, set-top boxes, handsets,~~of December 31, 2023. As of December 31, 2023 and ~~tablets.~~March 31, 2023, a balance of $5.0 million was outstanding on the line of the Credit Facility, gross of unamortized issuance costs of $69 thousand and $76 thousand, respectively. Under the Line of Credit Facility, the Company is subject to certain financial and nonfinancial covenants 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. The Line of Credit Facility matures on September 15, 2024. On February 9, 2024, the Company expanded the Line of Credit Facility to $7.5 million at the same interest rate and with the same maturity date.

During the three and nine months ended December 31, 2023, the Company had interest expense, including cash interest and amortization, of $0.2 million and $0.4 million related to its Line of Credit Facility, respectively.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. COMMITMENTS AND CONTINGENCIES

LEASES

Cineverse is a virtual company with one domestic operating lease, acquired through the acquisition of DMR which is subleased to a third party. The Company has not been relieved of the original lease obligation and therefore recognizes both a lease liability and right-of-use asset as part of the arrangement. The end of both the original lease and sublease's term is January 2025. In addition, the Company has two operating leases related to its Cineverse India operations, with expiration dates in July 2027. Expenses related to these leases were $109 thousand and $337 thousand during the three and nine months ended December 31, 2023 and $94 thousand and $242 thousand three and nine months ended December 31, 2022, respectively.

The Company has recognized $45 thousand and $135 thousand of income related to its subleasing arrangement during three and nine months ended December 31, 2023, respectively. The Company recognized $44 thousand and $71 thousand of income related to its subleasing arrangement for the three and nine months ended December 31, 2022, respectively.

The table below presents the lease-related assets and liabilities recorded on our Consolidated Balance Sheets (in thousands):


Classification on the Balance Sheet		December 31, 2023		March 31, 2023
Assets
Noncurrent	Other long-term assets	$	943	$	1,265
Liabilities
Current	Operating leases liabilities		440		418
Noncurrent	Operating leases liabilities, net of current portion		531		863
Total operating lease liabilities		$	971	$	1,281

The table below presents the annual gross undiscounted cash flows related to the Company's operating lease commitments (in thousands):


Fiscal year ending March 31,	Operating Lease Commitments
2024	$	115
2025		376
2026		247
2027		210
2028		72
Thereafter		—
Total lease payments	$	1,020
Less imputed interest		(49	)
Total	$	971

For leases which have a term of twelve months or less and do not contain an option to extend which the Company is reasonably certain to extend the term, the Company has elected to not apply the recognition provisions of ASC 842 and recognizes these expenses on a straight-line basis over the term of the agreement.

The table below presents the annual gross undiscounted cash flows related to the Company's operating lease subleasing arrangements (in thousands):

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Fiscal year ending March 31,	Sublease Payments
2024	$	45
2025		154
2026		—
2027		—
2028		—
Thereafter		—
Total	$	199

7. INCOME TAXES

We calculate income tax expense based upon an annual effective tax rate forecast, ~~including~~which includes estimates and assumptions. ~~Income~~We recognized income tax (benefit) expense ~~recorded~~of approximately $(24) thousand and $12 thousand for the three and nine ~~month periods~~months ended December 31, ~~2017~~2023, respectively. We recognized $0 for both the three and ~~2016 represent state~~nine months ended December 31, 2022. The Company's annual income ~~taxes.~~ tax expense is attributable to taxable income earned in India relating to transfer pricing.

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 nine months ended December 31, 2017~~was (0.9%) and ~~2016 was negative 2.7% and negative 2.7%, respectively.~~

The Act was enacted in December 2017. Among other things, the Act reduces the U.S. federal corporate tax rate from 35 percent to 21 percent and eliminates the alternative minimum tax (“AMT”) for corporations. Since the deferred tax assets are expected to reverse in a future year, it has been tax effected using the 21% federal corporate tax rate. As a result of the reduction in the corporate income tax rate, we wrote down approximately $35.5 million of our gross deferred tax assets and valuation allowance as of December 31, 2017, which has no impact in our condensed consolidated financial statements0.2% for the three and nine months ended December 31, ~~2017.~~

~~5. NOTES PAYABLE~~

~~Notes payable consisted of the following:~~

December 31, 2017 March 31, 2017
(In thousands) Current Portion Long Term Portion Current Portion Long Term Portion
Prospect Loan $ —
$ 40,212
$ —
$ 54,656
KBC Facilities 2,553
408
5,744
2,890
P2 Vendor Note 357
—
227
181
P2 Exhibitor Notes 44
—
85
22
Total non-recourse notes payable 2,954
40,620
6,056
57,749
Less: Unamortized debt issuance costs and debt discounts —
(2,289 ) —
(2,701 )
Total non-recourse notes payable, net of unamortized debt issuance costs and debt discounts $ 2,954
$ 38,331
$ 6,056
$ 55,048

Bison Note Payable —
10,000
—
—
5.5% Convertible Notes Due 2035 —
—
—
50,571
Second Secured Lien Notes —
10,442
—
9,165
Cinedigm Revolving Loans 11,809
—
19,599
—
2013 Notes 5,000
—
—
5,000
Total recourse notes payable 16,809
20,442
19,599
64,736
Less: Unamortized debt issuance costs and debt discounts (318 ) (3,445 ) —
(5,340 )
Total recourse notes payable, net of unamortized debt issuance costs and debt discounts $ 16,491
$ 16,997
$ 19,599
$ 59,396
Total notes payable, net of unamortized debt issuance costs $ 19,445
$ 55,328
$ 25,655
$ 114,444

~~Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults, is limited to the value of the asset, which is collateral~~2023, respectively, and 0% and 0% for the debt. Certain of our subsidiaries are liable with respect to, and their assets serve as collateral for, certain indebtedness for which our assets and the assets of our other subsidiaries that are not parties to the transaction are generally not liable. We have referred to this indebtedness as "non-recourse debt" because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan, the KBC Facilities, the 2013 Term Loans, the P2 Vendor Note and the P2 Exhibitor Notes.

~~Prospect Loan~~

In February 2013, our DC Holdings, AccessDM and Phase 2 DC subsidiaries entered into a term loan agreement (the “Prospect Loan”) with Prospect Capital Corporation (“Prospect”), pursuant to which DC Holdings borrowed $70.0 million. The Prospect Loan bears interest at LIBOR plus 9.0% (with a 2.0% LIBOR floor), which is payable in cash, and at an additional 2.50% to be accrued as an increase to the aggregate principal amount of the Prospect Loan until the 2013 Credit Agreement is paid off, at which time all accrued interest will be payable in cash.

Collections of DC Holdings accounts receivable are deposited into accounts designated to pay certain operating expenses, principal, interest, fees, costs and expenses relating to the Prospect Loan. On a quarterly basis, if there is excess cash flow, it is used for prepayment of the Prospect Loan. We also maintain a debt service fund under the Prospect Loan for future principal and interest payments. As of December 31, 2017 and March 31, 2017, the debt service fund had a balance of $1.0 million, which is classified as part of restricted cash on our Condensed Consolidated Balance Sheets.

The Prospect Loan matures on March 31, 2021 and may be accelerated upon a change in control (as defined in the agreement) or other events of default as set forth therein and would be subject to mandatory acceleration upon insolvency of DC Holdings. We are permitted to pay the full outstanding balance of the Prospect Loan at any time after the second anniversary of the initial borrowing, subject to the following prepayment penalties:

~~5.0% of the principal amount prepaid between the second and third anniversaries of issuance;~~

~~4.0% of the principal amount prepaid between the third and fourth anniversaries of issuance;~~

~~3.0% of the principal amount prepaid between the fourth and fifth anniversaries of issuance;~~

~~2.0% of the principal amount prepaid between the fifth and sixth anniversary of issuance;~~

~~1.0% of the principal amount prepaid between the sixth and seventh anniversaries of issuance; and~~

~~No penalty if the balance of the Prospect Loan, including accrued interest, is prepaid thereafter.~~

The Prospect Loan is primarily secured by a first priority pledge of the stock of DC Holdings, our wholly owned subsidiary, the stock of AccessDM, which is wholly owned by DC Holdings, the stock of Access Digital Cinema Phase II, Corp., our wholly owned subsidiary, and the stock of our Phase I DC subsidiaries, which are subsidiaries of AccessDM. The Prospect Loan is also guaranteed by each of those subsidiaries.

The Prospect Loan contains customary representations, warranties, affirmative covenants, negative covenants and events of default. The following table summarizes the activity related to the Prospect Loan:

(In thousands) December 31, 2017 March 31, 2017
Prospect Loan, at issuance $ 70,000
$ 70,000
PIK Interest 4,778
4,778
Payments to date (34,566 ) (20,122 )
Prospect Loan, net 40,212
54,656
Less current portion —
—
Total long term portion $ 40,212
$ 54,656

~~KBC Facilities~~

In December 2008, we began entering into multiple credit facilities to fund the purchase of Systems to be installed in movie theatres as part of our Phase II Deployment. There were no borrowings under the KBC Facilities during the nine months ended December 31, 2017. The following table presents a summary of the KBC Facilities (dollar amounts in thousands):

Outstanding Principal Balance
Facility¹
Credit Facility
Interest Rate²
Maturity Date December 31, 2017 March 31, 2017
1
$ 22,336
3.75 % September 2018 $ —
$ 3,758
3
11,425
3.75 % March 2019 2,040
3,264
4
6,450
3.75 % December 2018 921
1,612
$ 40,211
$ 2,961
$ 8,634


^1.	~~For each facility, principal is to be repaid in twenty-eight quarterly installments.~~


^2.	~~Each of the facilities bears interest at the three-month LIBOR rate, which was 1.69% at December 31, 2017, plus the interest rate noted above.~~

~~Bison Note Payable~~

~~As discussed in Note 1 -~~ ~~Nature of Operations and Liquidity, the Company entered into a Loan with Bison for $10,000,000 and issued Warrants to purchase 1,400,000 shares of the Company's Class A Common Stock. See Note 6 -~~ ~~Stockholders' Deficit~~ ~~for further discussion of the warrants.~~

~~The Loan was made in accordance with the previously disclosed Stock Purchase Agreement between the Company and Bison entered into on June 29, 2017.~~

~~5.5% Convertible Notes Due April 2035~~

On April 29, 2015, we issued $64.0 million aggregate principal amount of unsecured senior convertible notes payable (the "Convertible Notes") that bear interest at a rate of 5.5% per year, payable semiannually.

On July 10, 2017, we entered into exchange agreements (the “Exchange Agreements”) with holders of the remaining Convertible Notes representing approximately 99% of the outstanding principal amount, pursuant to which $50.6 million of the Convertible Notes were surrendered by such holders in exchange for $17.6 million cash, 3,536,783 shares of Class A Common Stock and $1.5 million in second lien notes under the Loan Agreement during the nine months ended December 31, 2017. As a

result of the exchanges, we recorded debt conversion expense and loss on extinguishment of notes payable of $4.5 million for the nine months ended December 31, 2017. On November 7, 2017, we repurchased the remaining balance of $0.5 million of Convertible Notes from the holder for cash and the Convertible Notes were immediately retired. As a result of the exchanges and repurchasing, this debt was retired. In connection with exchanges, we recorded debt conversion expenses and a gain on extinguishment of notes payable of $4.5 million for the nine months ended December 31, 2017.

~~Second Secured Lien Notes~~

~~On July 14, 2016, we entered into a Second Lien Loan Agreement (the “Loan Agreement”), under which we may borrow up to~~

~~$15.0 million, subject to certain limitations imposed on us regarding the number of shares that we may issue in connection with~~

the loans. During the nine months ended December 31, 2017, we borrowed an aggregate principal amount of $1.5 million under the Loan Agreement (the "Second Secured Lien Notes"), and have borrowed $10.5 million in total under the Loan Agreement. The Second Secured Lien Notes mature on June 30, 2019 and bear interest at 12.75%, payable 7.5% in cash and 5.25% in cash or in kind at our option. In addition, under the terms of the Loan Agreement, we are required to issue 98,000 shares of our Class A common stock for every $1 million borrowed, subject to prorata adjustments. The Loans may be prepaid without premium or penalty and contain customary covenants, representations and warranties. The obligations under the Loans are guaranteed by certain of our existing and future subsidiaries. We have pledged substantially all of our assets, except those assets related to our digital cinema deployment business, to secure payment on the Second Secured Lien Notes. The Loan Agreement was amended on August 4, 2016, on October 7, 2016, and on March 31, 2017 to facilitate subsequent borrowing transactions and clarify certain terms of the shares issuable in connection with the loans.

~~Cinedigm Credit Agreement~~

On October 17, 2013, we entered into a credit agreement (the “Cinedigm Credit Agreement”) with Société Générale. Under the Cinedigm Credit Agreement, as amended in February 2015 and April 2015, we were permitted to borrow an aggregate principal amount of up to $55.0 million, including term loans of $25.0 million (the “Cinedigm Term Loans”) and revolving loans of up to $30.0 million (the “Cinedigm Revolving Loans”). Interest under the Cinedigm Term Loans was charged at a base rate plus 5.0%, or the Eurodollar rate plus 6.0% until the Cinedigm Term Loan was repaid on April 29, 2015 in connection with the Convertible Notes offering. The Cinedigm Revolving Loans bear interest at a base rate of 6.25% or the Eurodollar rate of 1.0% plus 4.0%. The Base rate, per annum, is equal to the highest of (a) the rate quoted by the Wall Street Journal as the “base rate on corporate loans by at least 75% of the nation’s largest banks,” (b) 0.50% plus the federal funds rate, and (c) the Eurodollar rate plus 4.0%.

We repaid the entire outstanding balance of the Cinedigm Term Loans and amended the terms of the Cinedigm Revolving Loans in connection with our issuance of the Convertible Notes. In connection with the repayment of the Cinedigm Term Loans, we wrote-off certain unamortized debt issuance costs and the discount that remained on the balance of the note payable. As a result, we recorded $0.9 million as a loss on extinguishment of debt for the year ended March 31, 2016.

An April 2015 amendment to the Cinedigm Revolving Loans extended the term of the Cinedigm Credit Agreement to March 31, 2018, provided for the release of the equity interests in the subsidiaries that we had previously pledged as collateral, changed the interest rate and replaced all financial covenants with a single debt service coverage ratio test commencing at June 30, 2016 and a $5.0 million minimum liquidity covenant. The Cinedigm Revolving Loans, as amended, bear interest at Base Rate (as defined in the amendment) plus 3% or LIBOR plus 4%, at our election, but in no event may the elected Base Rate or LIBOR rate be less than 1%. We are permitted to repay the Cinedigm Revolving Loans, at our option, in whole or in part.

In May 2016, we entered into an amendment to the Cinedigm Credit Agreement (the “May 2016 Amendment”) which primarily increased the Company’s cash available for operations. The May 2016 Amendment also reduced the maximum principal amount available under the Cinedigm Credit Agreement from $30.0 million to $22.0 million.

In July 2016, we entered into an amendment to the Cinedigm Credit Agreement, which, among other things, lowered the minimum liquidity requirement to $0.8 million up to June 30, 2017 and all times after at least $5.0 million in minimum liquidity. On August 10, 2017, we received a waiver to keep the minimum liquidity at $0.8 million through October 13, 2017 and at all times after October 13, 2017, we must maintain at least $5.0 million minimum liquidity. On November 9, 2017, we entered into an amendment to maintain the minimum liquidity at $0.8 million until the maturity date of the Revolving Maturity date. This amendment also reduced the revolving aggregate maximum credit amount by $2.0 million on each of January 31, 2018 and February 28, 2018 if the outstanding obligations are not repaid in full by such date. In addition, certain of our subsidiaries that are guarantors to the Cinedigm Credit Agreement entered into a Guaranty Supplement, pursuant to which certain of the subsidiaries guaranteed the Company’s obligations under the Cinedigm Credit Agreement and the subsidiaries pledged substantially all of their assets to secure such obligations. In addition, pursuant to the July 2016 amendment, (i) the Eurodollar rate loans were changed to Base plus 4.5%

and base plus 3.5% for Base rate loans, (ii) the requirement for the debt service reserve account was eliminated, and (iii) the maximum principal amount available to borrow was reduced from $22.0 million to $17.1 million. As of December 31, 2017, no additional borrowings were available under the Cinedigm Revolving Loans.

In connection with the Cinedigm Revolving Loans, we maintained a debt service reserve account in restricted cash for certain scheduled interest and principal payments due on the Cinedigm Revolving Loans and Convertible Notes as of March 31, 2016 of $2.2 million. As a result of the July 2016 amendment to the Cinedigm Credit Agreement, no such reserve amount was required to be maintained as of March 31, 2017.

In November 2017, we entered into a waiver and amendment the ("November 2017 Amendment") pursuant to which the Consolidated Debt Service Coverage Ratio may be maintained at not less than 1.25:1.00 for the Fiscal Quarter ending September 30, 2017 and for each Fiscal Quarter thereafter. The November 2017 Amendment also reduced the Revolving Aggregate Maximum Credit Amount to $11.8 million effective November 14, 2017. The November 2017 Amendment also permits us to maintain at all times an aggregate amount of Minimum Liquidity of at least $800,000. Under the November 2017 Amendment, the Revolving Aggregate Maximum Credit Amount will be reduced by $2.0 million on each of January 31, 2018 and February 28, 2018 if the outstanding Obligations are not repaid in full by such date. On January 31, 2018, we paid $2.0 million resulting in an outstanding balance of $9.8 million.

~~2013 Notes~~

In October 2013, we entered into securities purchase agreements with certain investors, pursuant to which we sold notes in the aggregate principal amount of $5.0 million (the “2013 Notes”) and warrants to purchase an aggregate of 150,000 shares of Class A Common Stock (the “2013 Warrants”) to such investors. We allocated a fair value of $1.6 million to the 2013 Warrants, which was recorded as a discount to the 2013 Notes and is being amortized through the maturity of the 2013 Notes as interest expense.

The principal amount outstanding under the 2013 Notes is due on October 21, 2018. The 2013 Notes bear interest at 9.0% per annum, payable in quarterly installments over the term of the 2013 Notes. The 2013 Notes may be redeemed at any time, subject to certain premiums.

~~Zvi Rhine, a member of our Board of Directors and a related party, is a holder of $0.5 million of the 2013 Notes as of December 31, 2017 and March 31, 2017.~~

~~6. STOCKHOLDERS’ DEFICIT~~

~~COMMON STOCK~~

On October 31, 2017, the Company filed a Fifth Amended and Restated Certificate of Incorporation, pursuant to which (i) the number of shares of Common Stock authorized for issuance was increased to 60,000,000 shares, (ii) share transfer restrictions under Article Fourth were eliminated and (iii) two inactive classes of capital stock, the Class B common stock and the Series B Junior Participating preferred stock, were eliminated.

~~On November 1, 2017, in connection with the Stock Purchase Agreement with Bison, we sold 19,666,667 shares of our Class A~~

~~Common Stock to Bison, and as a result Bison became a majority shareholder of the outstanding Class A Common Stock.~~

During the nine months ended December 31, 2017, we issued 4,677,808 shares of Class A Common Stock in exchange for Convertible Notes and Second Lien Loans, as compensation to the board of directors, as payment of preferred stock dividends, as settlement of an obligation to a content provider, and as awards to employees.

~~PREFERRED STOCK~~

Cumulative dividends in arrears on preferred stock at December 31, 2017 were $0.2 million. In February 2018, we paid the preferred stock dividends in arrears in the form of 59,972 shares of Class A Common Stock.

~~TREASURY STOCK~~

In November 2017, the Company completed the previously announced June 29, 2017 stock purchase agreement with Bison which accelerated the vesting of all its equity awards. As a result, 134,698 shares of vested restricted stock were surrendered to the Company by employees in payment for withholding taxes, and were placed in treasury and are no longer outstanding.

In connection with the sale of the Convertible Notes in April 2015, the Company and a financial institution (the "Forward Counterparty") which is one of the lenders under our credit agreement, entered into a privately negotiated forward stock purchase transaction, pursuant to which we paid $11.4 million to purchase 1,179,138 shares of our Class A common stock for settlement at anytime prior to the fifth year anniversary of the issuance date of the notes. On December 1, 2017, the Company announced the settlement of these shares in full with the Forward Counterparty as of November 24, 2017. This was included in additional paid in capital at the time the Forward Contract was entered into. The shares have been placed in treasury and are no longer outstanding.

~~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 Class A 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 Class A 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 transactions pursuant to the Stock Purchase Agreement, 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 Class A Common Stock to employees, outside directors and consultants.

At the August 31, 2017 Annual Meeting, the stockholders of the Company approved the 2017 Equity Incentive Plan (the "2017 Plan”), the Company’s new equity incentive plan. The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provides for the issuance of up to 2,098,270 shares of Class A common stock, in the form of various awards, including stock options, stock appreciation rights, 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 does not affect awards already granted under the 2000 Plan. No awards were granted under the 2017 Plan during the three and nine months ended December 31, ~~2017.~~2022.

~~The following table summarizes the activity of the Plan related to shares issuable pursuant to outstanding options:~~

Shares Under Option
Weighted Average Exercise Price
Per Share
Balance at March 31, 2017 345,615
$ 16.03
Granted —
—
Exercised —
—
Canceled/forfeited (7,300 ) 42.49
Balance at December 31, 2017 338,315
$ 15.57

~~The weighted average remaining contractual life for stock options outstanding as of December 31, 2017 was 5.37 years.~~

~~OPTIONS GRANTED OUTSIDE CINEDIGM’S EQUITY INCENTIVE PLAN~~

In October 2013, we issued options outside of the 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 Class A Common Stock at an exercise price of $17.5 per share. The options are fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised. As of December 31, 2017, all options were fully vested.

In December 2010, we issued options to purchase 450,000 shares of Class A Common Stock outside of the Plan as part of our Chief Executive Officer's initial employment agreement with the Company. Such options have exercise prices per share between $15.00 and $50.00, were vested as of December 2013 and will expire in December 2020. As of December 31, 2017, all such options remained outstanding.

~~WARRANTS~~

The following table presents information about outstanding warrants to purchase shares of our Class A Common Stock as of December 31, 2017. All of the outstanding warrants are fully vested and exercisable.

Recipient Amount outstanding Expiration Exercise price per share
Strategic management service provider 52,500
July 2021 $17.20 - $30.00
Warrants issued to creditors in connection with the 2013 Notes (the "2013 Warrants") 125,063
October 2018 $18.50
Warrants issued to Ronald L. Chez in connection with the Second Secured Lien Notes 206,768
July 2023 $1.34 - $1.57
Warrants issued in connection with Convertible Notes exchange transaction 207,679
December 2021 $1.54
5-year Warrant issued to Bison in connection with a term loan agreement 1,400,000
December 2022 $1.80

Outstanding warrants held by the strategic management service provider were issued in connection with a consulting management services agreement ("MSA"). The warrants may be terminated with 90 days' notice in the event of termination of the MSA.

~~The 2013 Warrants and related 2013 Notes are subject to certain transfer restrictions.~~

The warrants issued in connection with the Second Secured Lien Notes to Ronald L. Chez, at the time a member of Board of Directors, contain a cashless exercise provision and customary anti-dilution rights.

Warrants to purchase Class A Common Stock issued in connection with the Convertible Notes exchange transaction were issued on December 22, 2016, became exercisable six months after issuance and contain customary anti-dilution provisions. The value of the warrants issued in connection with the Exchange Agreement was $0.2 million, determined by using the Black-Scholes Option Pricing Model, assuming a 5-year life, a risk free rate interest of 2.0% and an expected volatility of 76.4%.

On December 29, 2017, the Company issued Bison the Warrants to purchase 1,400,000 shares of the Company’s Class A common stock in connection with the Loan. The Warrants have a 5-year term and are immediately exercisable at $1.80 per share. The Warrants contain certain anti-dilution adjustments. The Company valued the Warrants at $1.1 million, on a relative fair value basis, using Black-Scholes Option Pricing Model assuming a 5-year life, a risk-free rate of interest of 2.2% and an expected volatility of 74.3%. These Warrants were recorded as debt issuance costs.

~~7. COMMITMENTS AND CONTINGENCIES~~

~~LEASES~~

On April 10, 2017, we entered into lease agreements for new office space in New York City, which coincides with the termination of our previous New York City office lease. The new agreements commenced on July 1, 2017 and initially required minimum lease payments of $33 with customary escalation clauses over the course of the contract which terminates in April 2021.

~~Our capital lease obligations are primarily related to computer equipment.~~

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

~~8. SUPPLEMENTAL CASH FLOW INFORMATION~~

December 31,
(in thousands) 2017 2016
Cash interest paid $ 8,533
$ 12,193
Accrued dividends on preferred stock 89
178
Issuance of Class A common stock for payment of preferred stock dividends 267
89
Issuance of Class A common stock in connection with Second Secured Lien Notes —
1,163
Issuance of Class A common stock and warrants to purchase Class A common stock in exchange for Convertible Notes —
3,838
Issuance of Second Lien Loans in connection with Convertible Notes exchange 1,462
—
Issuance of warrants in connection with debt instruments 1,084
—
Issuance of Class A common stock in exchange for the CEO's Second Lien Loans 500
—

~~9. SEGMENT INFORMATION~~

We operate in four reportable segments: Phase I Deployment, Phase II Deployment, Services and Content & Entertainment or CEG. Our segments were determined based on the economic characteristics of our products and services, our ~~internal organizational structure, the manner in which our operations are managed and the criteria used by our Chief Operating Decision Maker to evaluate performance, which is generally~~ ~~the segment’s income (loss) from continuing operations before interest, taxes, depreciation and amortization. Certain Corporate assets, liabilities and operating expenses are not allocated to our reportable segments.~~



~~Operations of:~~	~~Products and services provided:~~
~~Phase I Deployment~~	Financing vehicles and administrators for 3,724 Systems installed nationwide in Phase 1 DC's deployment to theatrical exhibitors. We retain ownership of the Systems and the residual cash flows related to the Systems after the repayment of all non-recourse debt at the expiration of exhibitor, master license agreements. As of December 31, 2017, we are no longer earning a significant portion of VPF revenues from certain major studios on all such systems.
~~Phase II Deployment~~	Financing vehicles and administrators for our 8,904 Systems installed domestically and internationally, for which we retain no ownership of the residual cash flows and digital cinema equipment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.
~~Services~~	Provides monitoring, collection, verification and other management services to our Phase I Deployment, Phase II Deployment, CDF2 Holdings, as well as to exhibitors who purchase their own equipment. Services also collects and disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors.
~~Content & Entertainment~~	Leading distributor of independent content, and collaborates with producers and other content owners to market, source, curate and distribute independent content to targeted and profitable 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 December 31, 2017
(In thousands) Intangible Assets, net Goodwill Total Assets Notes Payable, Non-Recourse Notes Payable
Phase I Deployment $ 126
$ —
$ 6,709
$ 37,923
$ —
Phase II Deployment —
—
41,338
3,362
—
Services —
—
923
—
—
Content & Entertainment 15,911
8,701
59,574
—
—
Corporate 8
—
13,683
—
33,488
Total $ 16,045
$ 8,701
$ 122,227
$ 41,285
$ 33,488

As of March 31, 2017
(In thousands) Intangible Assets, net Goodwill Total Assets Notes Payable, Non-Recourse Notes Payable Capital Leases
Phase I Deployment $ 160
$ —
$ 15,118
$ 51,955
$ —
$ —
Phase II Deployment —
—
48,461
9,149
—
—
Services —
—
1,052
—
—
—
Content & Entertainment 20,057
8,701
79,911
—
—
8
Corporate 10
—
6,792
—
78,995
58
Total $ 20,227
$ 8,701
$ 151,334
$ 61,104
$ 78,995
$ 66

Statements of Operations
Three Months Ended December 31, 2017
(Unaudited, in thousands)
Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues $ 3,219
$ 3,193
$ 2,049
$ 10,031
$ —
$ 18,492
Direct operating (exclusive of depreciation and amortization shown below) 337
94
28
5,904
—
6,363
Selling, general and administrative 337
99
247
4,634
3,942
9,259
Allocation of Corporate overhead —
—
410
871
(1,281 ) —
Provision for doubtful accounts 452
182
—
(3 ) —
631
Depreciation and amortization of property and equipment 185
1,881
—
91
56
2,213
Amortization of intangible assets 11
—
—
1,384
—
1,395
Total operating expenses 1,322
2,256
685
12,881
2,717
19,861
Income (loss) from operations $ 1,897
$ 937
$ 1,364
$ (2,850 ) $ (2,717 ) $ (1,369 )

~~The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:~~

Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $ —
$ —
$ 28
$ 19
$ —
$ 47
Selling, general and administrative —
—
10
594
916
1,520
Total stock-based compensation $ —
$ —
$ 38
$ 613
$ 916
$ 1,567

Statements of Operations
Three Months Ended December 31, 2016
(Unaudited, in thousands)
Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues $ 7,266
$ 2,995
$ 2,625
$ 11,559
$ —

$ 24,445
Direct operating (exclusive of depreciation and amortization shown below) 336

168

3

6,780

—

7,287
Selling, general and administrative 158

62

227

3,910

1,738

6,095
Allocation of Corporate overhead —

—

399

906

(1,305 )
—
Provision for doubtful accounts 318
98
—
—
—
416
Restructuring, transition and acquisition expenses, net —

—

—

—

22

22
Depreciation and amortization of property and equipment 4,136

1,881

—

69

185

6,271
Amortization of intangible assets 11

—

—

1,383

1

1,395
Total operating expenses 4,959
2,209
629
13,048
641
21,486
Income (loss) from operations $ 2,307
$ 786
$ 1,996
$ (1,489 ) $ (641 ) $ 2,959

~~The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:~~

Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $ —

$ —

$ 3

$ —

$ —

$ 3
Selling, general and administrative —

—

2

88

251

341
Total stock-based compensation $ —
$ —
$ 5
$ 88
$ 251
$ 344

Statements of Operations
Nine Months Ended December 31, 2017
(Unaudited, in thousands)
Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues $ 12,879

$ 8,845

$ 6,550

$ 21,736

$ —
$ 50,010
Direct operating (exclusive of depreciation and amortization shown below) 888

284

38

13,260

—

14,470
Selling, general and administrative 520

265

768

12,518

7,753

21,824
Allocation of Corporate overhead —

—

1,210

2,572

(3,782 )
—
Provision for doubtful accounts 1,360
223
—
(3 ) —
1,580
Depreciation and amortization of property and equipment 4,101

5,642

—

242

230

10,215
Amortization of intangible assets 34

—

—

4,147

4

4,185
Total operating expenses 6,903
6,414
2,016
32,736
4,205
52,274
Income (loss) from operations $ 5,976
$ 2,431
$ 4,534
$ (11,000 ) $ (4,205 ) $ (2,264 )

~~The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:~~

Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $ —

$ —

$ 36

$ 24

$ —

$ 60
Selling, general and administrative —

—

14

817

1,323

2,154
Total stock-based compensation $ —
$ —
$ 50
$ 841
$ 1,323
$ 2,214

Statements of Operations
Nine Months Ended December 31, 2016
(Unaudited, in thousands)
Phase I Phase II Services Content & Entertainment Corporate Consolidated
Revenues $ 26,022

$ 9,448

$ 9,042

$ 26,288

$ —

$ 70,800
Direct operating (exclusive of depreciation and amortization shown below) 770

270

6

16,834

—

17,880
Selling, general and administrative 407

144

529

11,486

5,200

17,766
Allocation of Corporate overhead —

—

1,194

2,706

(3,900 )
—
Provision for doubtful accounts 318

98
—
—
—
416
Restructuring, transition and acquisition expenses, net —

—

—

87

45

132
Depreciation and amortization of property and equipment 16,156

5,642

—

204

556

22,558
Amortization of intangible assets 34

—

—

4,282

6

4,322
Total operating expenses 17,685
6,154
1,729
35,599
1,907
63,074
Income (loss) from operations $ 8,337
$ 3,294
$ 7,313
$ (9,311 ) $ (1,907 ) $ 7,726

~~The following employee and director stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:~~

Phase I Phase II Services Content & Entertainment Corporate Consolidated
Direct operating $ —

$ —

$ 6

$ 2

$ —

$ 8
Selling, general and administrative —

—

3

181

1,172

1,356
Total stock-based compensation $ —
$ —
$ 9
$ 183
$ 1,172
$ 1,364

ITEM 2. ~~MANAGEMENT'S~~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~~Condensed Consolidated Financial Statements and the related notes included elsewhere in this ~~document.~~

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~~

Business Overview

Cineverse is a significant role in the digital distribution revolution that continues to transform the media landscape. In addition to our pioneering role in transitioning over 12,000 movie screens from traditional analog film prints to digital distribution, we have becomepremier streaming technology and entertainment company with its core business (i) across a ~~leading~~portfolio of owned and operated enthusiast streaming channels with enthusiast fan bases; (ii) as a large-scale global aggregator and full-service distributor of ~~independent~~feature films and television programs; and (iii) as a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content ~~both~~distribution through ~~organic growth~~subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and ~~acquisitions.~~audio podcasts. We distribute products for major brands such as ~~the Discovery Networks, National Geographic~~Hallmark, ITV, Nelvana, ZDF, Konami, NFL and ~~Scholastic,~~Highlander, as well as leading international and domestic content creators, movie producers, television producers and other ~~short form~~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, ~~PlayStation,~~Pluto, and ~~cable video-on-demand ("VOD"), and~~Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

We ~~report our financial results~~played a significant role in ~~four primary segments as follows: (1)~~ the ~~first~~ digital ~~cinema deployment (“Phase I Deployment”), (2)~~distribution revolution that continues to transform the ~~second digital cinema deployment (“Phase II Deployment”), (3) digital cinema services (“Services”) and (4)~~ media content and entertainment group (“Content & Entertainment” or "CEG"). The Phase I Deployment and Phase II Deployment segments are the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installedlandscape, playing a pioneering role in ~~movie theatres throughout the United States, and in Australia and New Zealand. Our Services segment provides fee based support to over~~transitioning approximately 12,000 movie screens ~~in our Phase I Deployment, Phase II Deployment segments as well as directly~~from traditional analog film prints to ~~exhibitors~~digital distribution, and ~~other third party customers in~~at the form of monitoring, billing, collection and verification services. Our Content & Entertainment segment is a market leader 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~~end of our ~~Phase I Deployment Systems began to reach~~fiscal year 2023, the ~~conclusion~~Company's cinema equipment business concluded its active operations, as its contracts reached maturity. The Company no longer manages cinema equipment separately, and with the run-off of their 10-year deployment payment period with certain distributors and, therefore, Virtual Print Fees ("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 majorityits operations, no longer presents this part of the ~~VPF revenue associated with the Phase I Deployment Systems has ended.~~ business as a separate segment. All prior period reporting within this report reflects this change.

Financial Condition and Liquidity

As of December 31, ~~2017, all~~2023, the Company has an accumulated deficit of our 3,724 systems in our Phase I Deployment segment had ceased to earn a significant portion of VPF revenue from certain major studios in our Phase I Deployment, although various other studios, consisting mostly of small independent studios, will continue to pay VPFs through December 2020. We expect to continue to earn such ancillary revenue from the Phase I Deployment Systems through December of 2020; however, such amounts are expected to be significantly less material to our consolidated financial statements. The reduction in VPF revenue on our Phase I Deployment systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017.

Under the terms of our standard Phase I Deployment licensing agreements, exhibitors will continue to have the right to use our Systems through December 2020, 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.

We are structured so that our digital cinema business (collectively, our Phase I Deployment, Phase II Deployment and Services segments) operates independently from our Content & Entertainment business. As of December 31, 2017, we had approximately $43.6 million of non-recourse outstanding debt principal that relates to, and is serviced by, our digital cinema business. We also have approximately $37.3 million of outstanding debt principal, as of December 31, 2017, that is attributable to our Content & Entertainment and Corporate segments of which, $2.0 million was retired subsequent to December 31, 2017.

~~Liquidity~~

~~We incurred consolidated net loss of $5.9~~$489.3 million and ~~$18.5 million for~~negative working capital of $0.4 million. For the three and nine months ended December 31, ~~2017, respectively, and~~2023, the Company had a net loss attributable to common stockholders of ~~$0.5~~$(2,864) thousand and $(6.9) million, ~~and $5.5 million~~respectively. Net cash used in operating activities for the ~~three and~~ nine months ended December 31, ~~2016, respectively.~~2023 was $9.3 million, which included $6.5 million of incremental investment in our content portfolio via advances or minimum guarantee payouts. We ~~have an accumulated deficit~~may continue to generate net losses for the foreseeable future.

The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”) providing for a revolving line of ~~$379.2~~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 expires on September 15, 2024. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate, 10.00% as of December 31, ~~2017. In addition, we have significant debt-related contractual obligations for~~2023. As of December 31, 2023, $5.0 million was outstanding on the ~~fiscal year ending March 31, 2018~~Line of Credit Facility, gross of issuance costs of $(69) thousand. On February 9, 2024, the Company expanded the Line of Credit Facility to $7.5 million at the same interest rate and ~~beyond.~~

~~On November 1, 2017, in connection~~ with the ~~Stock Purchase Agreement with Bison Entertainment and Media Group, an affiliate of Bison Capital Holding Company Limited (“Bison”),~~same maturity date.

In July 2020, we sold 20,000,000 shares of our Class A Common Stock for an aggregate purchase price of $30.0 million, of which 19,666,667 shares were sold to Bison, and 333,333 shares were sold to the CEO of the Company. In addition, we completed the exchanges under the Exchange Agreements for the remaining outstanding 5.5% Convertible Notes due 2035, (the "Convertible Notes") whereby $46.3 million principal amount of the Convertible Notes were exchanged for a combination of $17.1 million in cash and 2,221,457 shares of Class A Common Stock. The Convertible Notes were immediately retired.

~~On November 7, 2017, we repurchased the remaining balance of $0.5 million of Convertible Notes from the holder thereof for cash and the Convertible Notes were immediately retired.~~

As a result of the of the transactions described above, Bison became a majority shareholder of the outstanding Class A Common Stock and is entitled to designate two (2) members of the Company’s Board of Directors, the size of which is set at seven (7) members.

~~In accordance with the Stock Purchase Agreement, on December 29, 2017, the Company~~ entered into ~~a loan~~an At-the-Market sales agreement ~~("the "Loan"~~(the “ATM Sales Agreement”) with ~~Bison,~~ 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 ~~borrowed $10,000,000. The Loan matures~~may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on ~~June 28, 2021 and bears interest~~Nasdaq at 5% per annum, payable quarterly in cash. The principal is payable upon maturity. The Loan is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties. The proceedsthe time of the ~~Loan~~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 ~~used~~made pursuant to an effective shelf registration statement, for ~~working capital and general corporate purposes. In conjunction with~~an aggregate offering price of up to $30 million. During the ~~Loan agreement,~~first quarter of the fiscal year, the Company ~~issued~~sold 177 thousand shares under the ATM Sales Agreement for $1.1 million in net proceeds, after deduction of commissions and fees. The ATM Sales Agreement has expired in accordance with its terms.

On June 16, 2023, the Company closed on the sale of 2,150 thousand shares of Common Stock, 517 thousand pre-funded warrants, and warrants to purchase ~~1,400,000~~up to 2,667 thousand shares of Common Stock at a combined public offering price of $3.00 per share and accompanying warrant for aggregate gross proceeds of approximately $7.4 million, after deducting placement agent fees and other offering expenses in the ~~Company’s Class A common stock (~~amount of $0.6 million. The warrants had an exercise price of $3.00 per share, were exercisable immediately and will expire five years from the ~~"Warrants"). The Warrants have a 5-year term and are immediately exercisable at $1.80 per share. The Warrants contain certain anti-dilution adjustments.~~issuance. The Company ~~valued~~received $2.999 per share for the ~~Warrants~~pre-funded warrants, with the remaining $0.001 due at ~~$1.1 million,~~the time of exercise. All 516,667 pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand.

In addition, the Company remains authorized to purchase up to an aggregate of 500 thousand shares of its outstanding Common Stock, following the announcement of a stock repurchase program on ~~a relative fair value basis, using Black-Scholes Option Pricing Model assuming a 5-year life, a risk-free rate of interest of 2.2%~~March 1, 2023.

The Company will continue to invest in content development and acquisition, from which it believes it will obtain an ~~expected volatility of 74.3%.~~

appropriate return on its investment.

Critical Accounting Estimates

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

Our ~~capital requirements will depend~~significant accounting policies are discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to the Condensed Consolidated Financial Statements, included in Item 1, Condensed Consolidated Financial Statements (Unaudited), of this Quarterly Report on ~~many factors,~~Form 10-Q. Management believes that these policies are the most critical to aid in fully understanding and ~~we may~~evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to ~~develop~~make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and ~~formulate operating plans~~related disclosures with Bison to use available capital resources and raise additional capital. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect onthe Audit Committee of our ~~financial position, results~~Board of ~~operations and liquidity.~~ Directors.

Results of Operations for the Three Months Ended December 31, ~~2017~~2023, and ~~2016~~

2022 (in thousands):

Revenues

Three Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 3,219

$ 7,266

$ (4,047 )
(56 )%
Phase II Deployment 3,193

2,995

198

7 %
Services 2,049

2,625

(576 )
(22 )%
Content & Entertainment 10,031

11,559

(1,528 )
(13 )%
$ 18,492

$ 24,445

$ (5,953 )
(24 )%

Decreased revenues in our Phase I Deployment business reflects a reduced number of Phase I Systems earning VPF revenue compared to the prior period. Since December 2015, all of our Phase I Systems in 290 theatre locations (the "Expired Theatres"), have reached the end of their deployment agreement periods and, therefore, have ceased to earn VPF revenues from certain major studios.

Revenues generated by our Services segment decreased primarily as a result of the lower VPF revenues earned by our Phase I Deployment business. Our Services segment earns commissions on VPF revenue generated by the Phase I and Phase II deployment segments and therefore we expect this segment's revenues to continue to decrease in proportion to the revenues generated by our Phase I business as a result of Expired Theaters and the resulting reduction of VPF revenues.

Revenues at our Content & Entertainment segment decreased due to lower overall sales volumes across both physical and digital sales channels combined with a significant shift in product mix towards lower margin content.

~~Direct Operating Expenses~~

Three Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 337

$ 336

$ 1

— %
Phase II Deployment 94

168

(74 )
(44 )%
Services 28

3

25

833 %
Content & Entertainment 5,904

6,780

(876 )
(13 )%
$ 6,363

$ 7,287

$ (924 )
(13 )%

~~Direct operating expenses decreased in~~


	For the Three Months Ended December 31,
	2023		2022		$ Change			% Change
Streaming and digital	$	9,537	$	11,598	$	(2,061	)		(18	)%
Base distribution		2,811		8,121		(5,310	)		(65	)%
Podcast and other		864		977		(113	)		(12	)%
Other non-recurring		64		7,186		(7,122	)		(99	)%
Total Revenue	$	13,276	$	27,882	$	(14,606	)		(52	)%

For the three months ended December 31, ~~2017~~2023, total revenue declined by $14.6 million, or 52% as compared to ~~the prior period, primarily from~~three months ended December 31, 2022. During this time, Streaming and Digital revenue for three months ended December 31, 2023, decreased by $2.1 million, driven by a corresponding decrease in revenue in our CEG business. The current period also reflects reduced costs related to marketing and content acquisition costs as we intentionally focused more on developing OTT channel entertainmentdecline in the ~~2018 fiscal year~~Company's AVOD revenue of $1.7 million due to continued headwinds in the broader advertising market. This decrease was partially offset by a $0.5 million increase in SVOD revenue as the Company continues to see the benefits from its acquisitions which have contributed value-accretive libraries, distribution platforms and ~~beyond.~~

~~Selling, General and Administrative Expenses~~

Three Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 337

$ 158

$ 179

113 %
Phase II Deployment 99

62

37

60 %
Services 247

227

20

9 %
Content & Entertainment 4,634

3,910

724

19 %
Corporate 3,942

1,738

2,204

127 %
$ 9,259

$ 6,095

$ 3,164

52 %

~~Selling, general and administrative expenses increased $3.2~~technologies, such as Screambox.

The Company's $5.3 million decline in Base Distribution revenue for the three months ended December 31, ~~2017,~~2023 as compared to the three months ended December 31, ~~2016,~~2022 was primarily ~~due~~driven by a ~~bonus payout of $1.5~~$3.8 million decline in theatrical revenue, in part due to the ~~officers~~Terrifier 2 success in fiscal year 2023, a decline of $1.1 million in barter-related licensing deal in the third quarter of fiscal 2023, as well as a $0.8 million decline in DVD-related sales and ~~employees~~related physical distribution revenue, as the Company's focus shifts away from physical sales.

Other non-recurring revenue related to the Company's legacy cinema equipment as its operations run-off. Following the completion of cost recoupment, the expiration of the exhibitor master license agreements applicable to this line of revenue, and the recognition of all remaining constrained variable consideration, revenue decreased $7.1 million. In the third quarter of fiscal 2024, $0.1 million of remaining systems sales were recognized.

Direct Operating Expenses


	For the Three Months Ended December 31,
	2023		2022		$ Change			% Change
Direct operating expenses	$	5,464	$	14,411	$	(8,947	)		(62	)%

The $8.9 million decrease in ~~conjunction~~Direct Operating Expenses for the three months ended December 31, 2023 is primarily driven by the variable costs associated with ~~the Bison transaction~~a 52% decrease in quarterly revenue, including reduced licensing, royalty and ~~consistent with the Management Annual Incentive Plan.~~participation expenses of $3.6 million; reduced manufacturing, freight, and fulfillment charges of $3.4 million. In addition, ~~stock-based~~the Company's reserve against advances provided to partners decreased by $1.1 million relative to the three months ended December 31, 2022 and a $0.5 million increase in acquired content-related preparation costs capitalized as a result of the Company's content investment initiative.

Selling, General and Administrative Expenses


	For the Three Months Ended December 31,
	2023		2022		$ Change			% Change
Compensation expense	$	4,336	$	5,217	$	(881	)		(17	)%
Corporate expenses		796		1,780		(984	)		(55	)%
Share-based compensation		183		658		(475	)		(72	)%
Other operating expenses		1,058		1,452		(394	)		(27	)%
Selling, General and Administrative	$	6,373	$	9,107	$	(2,733	)		(30	)%

Selling, general and administrative expenses for the three months ended December 31, 2023 decreased by $2.7 million. In comparison to the three months ended December 31, 2022, compensation ~~expense increased~~expenses decreased by ~~$1.2~~$0.9

million due to a $0.7 million reduction in bonus accrual attributable to fiscal year 2024 performance, a decrease in recurring salaries and associated taxes of $0.7 million, partially offset by a $0.2 million increase in severance expense.

Corporate expenses decreased by $1.0 million primarily related a reduction of $0.6 million in legal fees and $0.4 million in other consulting and service providers, as a result of the Company's savings initiatives.

Share-based compensation has decreased by $0.5 million, as a result of ~~accelerated vesting~~forfeitures associated with US-based workforce reduction, a decline in stock price, and a relatively higher number of ~~all stock options~~award tranches fully vesting.

Other operating expenses decreased by $0.4 million, primarily driven by reductions in marketing related costs of $0.3 million as a result of spending controls put into place.

Depreciation and ~~restricted stock~~Amortization Expense


	For the Three Months Ended December 31,
	2023		2022		$ Change			% Change
Amortization of intangible assets	$	879	$	712	$	167			23	%
Depreciation of property and equipment		133		211		(78	)		(37	)%
Depreciation and Amortization	$	1,012	$	924	$	88			10	%

Amortization expense has continued to increase and depreciation expense has continued to decrease as a result of the Company's shift away from the physical business to its focus on ~~November 1, 2017~~content-related spend during the three months ended December 31, 2023.

Interest expense, net

For the three months ended December 31, 2023, interest expense decreased by $76 thousand from $367 thousand to $291, primarily as a result of a $69 thousand decrease in deferred consideration amortization.

Results of Operations for the nine months ended December 31, 2023 and 2022 (in thousands):

Revenues


	For the Nine Months Ended December 31,
	2023		2022		$ Change			% Change
Streaming and digital	$	29,006	$	31,375	$	(2,369	)		(8	)%
Base distribution		4,529		11,145		(6,616	)		(59	)%
Podcast and other		1,953		1,740		213			12	%
Other non-recurring		3,780		11,218		(7,438	)		(66	)%
Total Revenue	$	39,268	$	55,478	$	(16,210	)		(29	)%

For the nine months ended December 31, 2023, the Company's revenue declined by $16.2 million. The decrease was driven by a $6.6 million decline in the Company's base distribution, driven by a $3.7 million decline in theatrical revenue following fiscal year 2023's theatrical success with films such as Terrifier 2, and a $2.4 million decrease in DVD and related supply chain costs, as the Company has shifted its focus away from the physical business.

Streaming and digital revenue decreased by $2.4 million, driven by a $6.2 million decrease in AVOD from the headwinds faced in the advertising market, partially offset by a $2.6 million increase in SVOD and a $0.9 million increase from digital revenue as the Company continued to see the benefits from recent years' acquisitions, such as DMR, Fandor and Bloody Disgusting, which have contributed value-accretive libraries, distribution platforms and technologies.

The decrease in Other non-recurring revenue decline was related to the run-off of the Company's legacy digital cinema business, whose active operations ran-off at the end of fiscal year 2023. For the nine months ended

December 31, 2023, variable consideration from these operations had decreased by $5.8 million and system sales decreased by$1.5 million.

Direct Operating Expenses


	For the Nine Months Ended December 31,
	2023		2022		$ Change			% Change
Direct operating expenses	$	17,097	$	29,859	$	(12,762	)		(43	)%

For the nine months ended December 31, 2023, the Company's direct operation expense decreased $12.8 million. The decrease was primarily driven by $4.3 million in fulfillment and manufacturing costs associated with the decline in the Company's physical distribution business, a $2.5 million decrease in licenses, royalties, and participation expenses, a $2.2 million decrease in the Company's costs associated with the Company's reserves against advances to partners, a $1.6 million reduction in SaaS related costs as a result of internalizing services previously performed by third parties and cost savings synergies, and $0.7 million related to a decrease in an estimated Bloody Disgusting earnout liability based on fiscal year 2024 performance to-date.

Selling, General and Administrative Expenses


	For the Nine Months Ended December 31,
	2023		2022		$ Change			% Change
Compensation expense	$	13,369	$	16,361	$	(2,992	)		(18	)%
Corporate expenses		3,092		5,193		(2,101	)		(40	)%
Share-based compensation		1,092		3,855		(2,763	)		(72	)%
Other operating expenses		3,535		3,607		(72	)		(2	)%
Selling, General and Administrative	$	21,088	$	29,016	$	(7,928	)		(27	)%

During the nine months ended December 31, 2023, the Company's SG&A decreased by $7.9 million. Relative to nine months ended December 31, 2022, compensation related costs primarily decreased due to a ~~change~~reduction in ~~control~~the Company's bonus expense of $2.2 million and an increase in capitalized labor of $0.5 million from the development of the ~~Company resulting from~~Company's Matchpoint software.

Corporate expenses declined by $2.1 million primarily decreased due to a corporate focus on reducing third-party legal costs in the ~~Bison transaction.~~

~~Provision for Doubtful Accounts~~

~~The increase~~amount of ~~$0.2~~$1.5 million and a decline of $0.6 million in other consulting and service providers due to the ~~provision for doubtful accounts is primarily related to~~Company's cost-saving initiatives.

Share-based compensation also decreased by $2.8 million, as a ~~content provider experiencing recent financial~~result of the US-based workforce reduction, a decline in stock price, and ~~legal difficulties.~~

a relatively higher number of awards tranches fully vesting.

Depreciation and Amortization Expense ~~on Property and Equipment~~

Three Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 185
$ 4,136
$ (3,951 ) (96 )%
Phase II Deployment 1,881
1,881
—
— %
Content & Entertainment 91
69
22
32 %
Corporate 56
185
(129 ) (70 )%
$ 2,213
$ 6,271
$ (4,058 ) (65 )%


	For the Nine Months Ended December 31,
	2023		2022		$ Change			% Change
Amortization of intangible assets	$	2,381	$	2,193		188			9	%
Depreciation of property and equipment		406		715		(309	)		(43	)%
Depreciation and Amortization	$	2,787	$	2,908		(121	)		(4	)%

Depreciation ~~and amortization~~ expense decreased ~~in our Phase I Deployment segment as~~primarily due to the ~~majority~~remainder of our digital cinema ~~projection systems reached~~assets reaching the conclusion of their ten-year useful lives ~~through December 31, 2017. The balance of the decline, for the current quarter was in the Corporate segment due to reduced depreciation for assets under capital lease and leasehold improvements.~~

~~Interest expense, net~~

Three Months Ended December 31,
($ in thousands) 2017
2016
$ Change
% Change
Phase I Deployment $ 1,632

$ 2,566

$ (934 )
(36 )%
Phase II Deployment 50

262

(212 )
(81 )%
Corporate 1,465

1,999

(534 )
(27 )%
$ 3,147

$ 4,827

$ (1,680 )
(35 )%

Interest expense reported by our Phase I and Phase II Deployment segments decreased primarily as a result of reduced debt balances compared to the prior period and the payoff of one of our KBC facilities. We expect interest expense related to the KBC Facilities to continue to decrease as we continue to paydown such balances. In addition, induring the fiscal year ended March 31, ~~2017, we repaid the entire remaining balance~~2023. Amortization expense has continued to increase as a result of the ~~2013 Term Loans and therefore no longer have any interest expense~~

Company's shift away from the physical business to its focus on content related ~~to the 2013 Term Loans in our Phase I business.~~ spend.

Interest expense, ~~in our Corporate segment also decreased as we paid off all of our $64 million convertible debt as of November 7, 2017.~~

~~Income Tax Expense~~

~~We recorded income tax expense of $0.1 million and $0.1 million for~~net

For the ~~three~~nine months ended December 31, ~~2017 and 2016, respectively, in our Phase I and Corporate segments, for state income taxes.~~

~~Debt conversion expense and loss on extinguishment of notes payable~~

~~In connection with Convertible Notes exchange transactions, we recorded debt conversion expense and loss on extinguishment of notes payable of $1.3 million and $1.1 million respectively for~~2023 relative to the ~~three~~nine months ended December 31, ~~2017 and 2016, respectively. In connection with the repayment of the 2013 Term Loans, we wrote-off debt issuance costs and debt discounts and~~2022, interest expense decreased by $99 thousand from $880 thousand to $781, primarily as a result ~~recognized~~of a ~~loss on extinguishment~~$233 thousand decrease

in deferred consideration amortization, partially offset by a $182 thousand increase in line of ~~debt of $0.7 million for the three months ended December 31, 2016.~~

credit related interest costs, which was entered into in September 2022.

Adjusted EBITDA

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

Adjusted EBITDA (including the results of Phase I and Phase II Deployments segments) for the three months ended December 31, 2017 decreased 52% compared to the three months ended December 31, 2016. Adjusted EBITDA loss from our non-deployment businesses was $0.3 million for the three months ended December 31, 2017 compared to $2.0 million for the three months ended December 31, 2016.

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~~our stockholders, as a valuable financial metric.

We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net ~~loss~~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~~income (loss) from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to net income (loss) from ~~operations 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~~Condensed Consolidated Financial Statements prepared in accordance with GAAP.

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

Three Months Ended December 31,
($ in thousands) 2017 2016
Net loss $ (5,924 ) $ (481 )
Add Back:

Income tax expense 113
33
Depreciation and amortization of property and equipment 2,213
6,271
Amortization of intangible assets 1,395
1,395
Gain on termination of capital lease —
(2,535 )
Interest expense, net 3,147
4,827
Debt conversion expense and loss on extinguishment of notes payable 1,299
1,099
Other (income) expense, net 1,491
126
Change in fair value of interest rate derivatives (44 ) (39 )
Provision for doubtful accounts 204
416
Stock-based compensation and expenses 1,567
344
Restructuring, transition and acquisition expenses, net —
22
Net loss attributable to noncontrolling interest 15
18
Adjusted EBITDA $ 5,476
$ 11,496

Adjustments related to the Phase I and Phase II Deployments:

Depreciation and amortization of property and equipment $ (2,066 ) $ (6,017 )
Amortization of intangible assets (11 ) (11 )
Provision for doubtful accounts (208 ) (416 )
Other (income) expense, net (59 ) —
Income from operations (2,834 ) (3,093 )
Adjusted EBITDA from non-deployment businesses $ 298
$ 1,959

~~Results of Operations for the nine months Ended December 31, 2017 and 2016~~

~~Revenues~~

Nine Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 12,879
$ 26,022
$ (13,143 ) (51 )%
Phase II Deployment 8,845
9,448
(603 ) (6 )%
Services 6,550
9,042
(2,492 ) (28 )%
Content & Entertainment 21,736
26,288
(4,552 ) (17 )%
$ 50,010
$ 70,800
$ (20,790 ) (29 )%

Decreased revenues in our Phase I and Phase II Deployment businesses reflects a reduced number of Phase I Systems earning VPF revenue compared to the prior period. Since December 2015, all of our Phase I Systems in 290 theatre locations (the "Expired Theatres"), have reached the end of their deployment agreement periods and, therefore, have ceased to earn VPF revenues from certain major studios.

Revenue generated by our Services segment decreased primarily as a result of the lower VPF revenues earned by our Phase I Deployment business. Our Services segment earns commissions on VPF revenue generated by the Phase I and Phase II deployment segments and therefore we expect this segment's revenues to continue to decrease in proportion to the revenues generated by our Phase I business as a result of Expired Theaters and the resulting reduction of VPF revenues.

Revenues at our Content & Entertainment segment decreased due to lower overall sales volumes for physical product and a change in the mix of content sold. Our traditional DVD and Blu-ray business continues to be negatively impacted by changing consumer behaviors and digital market shift to more original productions has lowered demand for third party content. Our product mix has also shifted significantly toward licensed content in the current period.

The decline in physical product sales was partially offset by a $0.7 million increase in sales related to our OTT channels and a slight increase in distribution related revenues. We continued to shift our strategy toward developing and marketing a portfolio of narrowcast OTT channels.

~~Direct Operating Expenses~~

Nine Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 888
$ 770
$ 118
15 %
Phase II Deployment 284
270
14
5 %
Services 38
6
32
533 %
Content & Entertainment 13,260
16,834
(3,574 ) (21 )%
$ 14,470
$ 17,880
$ (3,410 ) (19 )%

Direct operating expenses decreased in the nine months ended December 31, 2017 compared to the prior period, primarily resulted from a decrease in revenue in our CEG business. In addition, direct operating expenses in the prior period included higher third party distribution costs and higher OTT platform and content distribution costs. The current period also reflects reduced costs related to marketing and content acquisitions costs as we intentionally focused more on developing OTT channel entertainment in the 2018 fiscal year.

~~Selling, General and Administrative Expenses~~

Nine Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 520
$ 407
$ 113
28 %
Phase II Deployment 265
144
121
84 %
Services 768
529
239
45 %
Content & Entertainment 12,518
11,486
1,032
9 %
Corporate 7,753
5,200
2,553
49 %
$ 21,824
$ 17,766
$ 4,058
23 %

Selling, general and administrative expense increased $4.1 million primarily due to a bonus payout of $1.5 million to the officers and employees for the nine months ended December 31, 2017 and a reversal of an accrual for incentive compensation of $1.1 million for the nine months ended December 31, 2016. In addition, stock-based compensation expense increased by $0.9 million as a result of accelerated vesting of all stock options and restricted stock on November 1, 2017, and consulting and computer related expenses increased by approximately $0.3 million and $0.2 million, respectively.

~~Provision for Doubtful Accounts~~

The increase of $1.2 million in the provision for doubtful accounts is primarily related to two content providers. We are currently in negotiation with one provider on revising their contract's end-date and expect to settle on their outstanding balance. We also recorded a provision on a portion of the receivable for another content provider, due to their recent financial and legal difficulties.

~~Depreciation and Amortization Expense on Property and Equipment~~

Nine Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment $ 4,101

$ 16,156

$ (12,055 )
(75 )%
Phase II Deployment 5,642

5,642

—

— %
Content & Entertainment 242

204

38

19 %
Corporate 230

556

(326 )
(59 )%
$ 10,215

$ 22,558

$ (12,343 )
(55 )%

Depreciation and amortization expense decreased, primarily in our Phase I Deployment segment, as the majority of our digital cinema projection systems reached the conclusion of their ten-year useful lives through December 31, 2017. The depreciation in the Corporate segment declined mostly related to lower depreciation for assets under capital leases and leasehold improvements.

~~Interest expense, net~~

Nine Months Ended December 31,
($ in thousands) 2017 2016 $ Change % Change
Phase I Deployment 5,403

8,123

(2,720 )
(33 )%
Phase II Deployment 235

862

(627 )
(73 )%
Corporate 5,525

5,888

(363 )
(6 )%
$ 11,163

$ 14,873

$ (3,710 )
(25 )%

Interest expense reported by our Phase I and Phase II Deployment segments decreased primarily as a result of reduced debt balances compared to the prior period and the paydown of one of our KBC facilities. We expect interest expense related to the KBC Facilities to continue to decrease as we continue to pay-down such balances. In addition, in fiscal year ended March 31, 2017, we repaid the entire remaining balance of the 2013 Term Loans and therefore no longer have any interest expense related to the 2013 Term Loans in our Phase I business. In~~terest expense in our Corporate segment also decreased as we paid off all of our $64 million convertible debt as of November 7, 2017 and also paid down $7.8 million of our revolving line of credit.~~

~~Income Tax Expense~~

We recorded income tax expense from continuing operations of $0.5 million and $0.1 million for the nine months ended December 31, 2017 and 2016, respectively, in our Phase I and Corporate segments for state income taxes.

~~Debt conversion expense and loss on extinguishment of notes payable~~

We recorded debt conversion expense and loss on extinguishment of notes payable of $4.5 million and $1.1 million for the nine months ended December 31, 2017 and 2016, respectively, for the conversion of $50.6 million of Convertible Notes.

~~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.

Adjusted EBITDA (including the results of Phase 1 and Phase II Deployments segments) for the nine months ended December 31, 2017 decreased 54% compared to the nine months ended December 31, 2016. Adjusted EBITDA from our non-deployment businesses was negative $2.1 million for the nine months ended December 31, 2017, compared to an EBITDA of $2.8 million for the nine months ended December 31, 2016. The decrease in Adjusted EBITDA compared to the prior period primarily reflects lower revenue in all of our business segments, partially offset by savings from our restructuring initiatives which began in the third quarter of fiscal year 2016 and are expected to be completed through the remainder of fiscal year 2018.

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 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:~~

Nine Months Ended December 31,
($ in thousands) 2017 2016
Net loss $ (18,541 )
$ (5,539 )
Add Back:

Income tax expense 495

143
Depreciation and amortization of property and equipment 10,215

22,558
Amortization of intangible assets 4,185

4,322
Gain on termination of capital lease —

(2,535 )
Interest expense, net 11,163

14,873
Debt conversion expense and loss on extinguishment of notes payable 4,504
1,099
Other (income) expense, net 1,993

(140 )
Change in fair value of interest rate derivatives (127 )
(104 )
Provision for doubtful accounts 597
416
Stock-based compensation and expenses 2,214

1,364
Restructuring, transition and acquisition expenses, net —

132
Net loss attributable to noncontrolling interest 32

54
Adjusted EBITDA $ 16,730
$ 36,643

Adjustments related to the Phase I and Phase II Deployments:

Depreciation and amortization of property and equipment $ (9,743 )
$ (21,798 )
Amortization of intangible assets (34 )
(34 )
Provision for doubtful accounts (601 ) (416 )
Other (income) expense, net (59 ) —
Income from operations (8,407 )
(11,631 )
Adjusted EBITDA from non-deployment businesses $ (2,114 ) $ 2,764

~~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 consolidated 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.

~~The critical accounting estimates and assumptions have not materially changed from those identified in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2017.~~

~~Recent Accounting Pronouncements~~

~~In May, 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718)~~(in thousands): Scope of Modification Accounting,” clarifying when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The new guidance is effective for the Company on a prospective basis beginning on January 1, 2018, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-03 which amended Accounting Changes and Error Corrections (Topic 250) to state that registrants should consider additional qualitative disclosures if the impact of an issued but not yet adopted ASU is unknown or cannot be reasonably estimated and to include a description of the effect of the accounting policies that the registrant expects to apply, if determined. Transition guidance included in certain issued but not yet adopted ASUs was also updated to reflect this amendment.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, the new guidance eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for any impairment tests performed after April 1, 2017. The new guidance is not expected to have a material impact on the Company's consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which provides additional guidance on evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to the ability to create outputs. The guidance is effective for the Company on a prospective basis beginning on January 1, 2018, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued new accounting guidance on revenue recognition. The new standard, issued Accounting Standards Update ("ASU") as ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. During 2016, the FASB issued several accounting updates (ASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct unintended application of the guidance. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. We plan to adopt Topic 606 effective the start of our 2019 fiscal year, April 1, 2018, but the process of evaluating the impact, if any, on our consolidated financial statements remains ongoing. During the third quarter we engaged outside assistance to support our ongoing assessment.

~~Liquidity and Capital Resources~~

We have incurred net losses each year since we commenced our operations. Since our inception, we have financed our operations substantially through the private placement of shares of our common and preferred stock, the issuance of promissory notes, our initial public offering and subsequent private and public offerings, notes payable and common stock used to fund various acquisitions.

We may continue to generate net losses in the future primarily due to depreciation and amortization, interest on notes payable, 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. The restrictions imposed by our debt agreements may limit our ability to obtain financing, make it more difficult to satisfy our debt obligations or require us to dedicate a substantial portion of our cash flow to payments on our existing debt obligations. The Prospect Loan requires certain screen turn performance from certain of our Phase I and Phase II subsidiaries. While such restrictions may reduce the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements, we do not have similar restrictions imposed upon our CEG businesses. We may seek to raise additional capital as 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.

On November 1, 2017, in connection with the Stock Purchase Agreement with Bison, we sold 20,000,000 shares of our Class A Common Stock for an aggregate purchase price of $30.0 million, of which 19,666,667 shares were sold to Bison, and 333,333 shares were sold to the CEO of the Company. In addition, we consummated exchange agreements with holders of principal amount of our outstanding 5.5% Convertible Notes due 2035, whereby $46.3 million principal amount of the Convertible Notes were exchanged for a combination of the cash amount of $17.1 million and 2,221,457 shares of Class A Common Stock. The Convertible Notes were immediately retired.

~~On November 7, 2017, we repurchased the remaining balance of $0.5 million of Convertible Notes from the holder thereof for cash and the Convertible Notes were immediately retired.~~

In accordance with the Stock Purchase Agreement, on December 29, 2017, the Company entered into a loan agreement with Bison, pursuant to which the Company borrowed $10,000,000. The Loan matures on June 28, 2021 and bears interest at 5% per annum, payable quarterly in cash. The principal is payable upon maturity. The Loan is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties. The proceeds of the Loan will be used for working capital and general corporate purposes. The Loan is evidenced by a promissory note dated as of December 29, 2017. On December 29, 2017, the Company also issued to Bison Warrants to purchase 1,400,000 shares of Company’s Class A common stock. The Warrants have a 5-year term and are immediately exercisable at $1.80 per share. The Warrants contain certain anti-dilution adjustments. The Company valued the Warrants at $1.1 million, on a relative fair value basis, using Black-Scholes Option Pricing Model assuming a 5-year life, a risk-free rate of interest of 2.2% and an expected volatility of 74.3%. The Warrants were recorded as debt issuance costs.

Our business is primarily driven by the growth in global demand for video entertainment content in all forms and, in particular, the shifting consumer demand for content in digital forms within home and mobile devices as well as the maturing digital cinema marketplace. Our primary revenue drivers are expected to be the increasing number of digitally equipped devices/screens and the demand for entertainment content in theatrical, home and mobile ancillary markets. According to the Motion Picture Association of America, there were approximately 43,600 domestic (United States and Canada) movie theatre screens and approximately 152,000 screens worldwide, of which approximately 42,500 of the domestic screens were equipped with digital cinema technology, and more than 12,000 of those screens contained our Systems. Historically, the number of digitally equipped screens in the marketplace has been a significant determinant of our potential revenue. Going forward, the expansion of our content business into ancillary distribution markets and digital distribution of narrowcast OTT content are expected to be the primary drivers of our revenues.

~~Non-Recourse Indebtedness~~

Our Phase I and Phase II Deployment businesses have historically been financed through a series of non-recourse loans. Certain of the subsidiaries that make up our Phase I and Phase II Deployment businesses have pledged their assets as collateral for, and are liable with respect to, certain indebtedness for which the assets of our other subsidiaries generally are not. We have referred to this indebtedness as "non-recourse debt" because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan, the KBC Facilities, the 2013 Term Loans, the P2 Vendor Note and the P2 Exhibitor

Notes. The balance of our non-recourse debt, net of related debt issuance costs, as of December 31, 2017 was $41.3 million for our Phase I and Phase II Deployment segments, which matures as presented in the Contractual Obligations table below. We continue to expect cash flows from our Phase I and II deployment operations will be sufficient to satisfy our liquidity and contractual requirements that are linked to these operations.

~~Cinedigm Credit Agreement~~

As of November 14, 2017, the maximum principal amount available under the Cinedigm Credit Agreement was reduced to $11.8 million from $17.1 million. As of December 31, 2017, $11.8 million of the revolving loans was drawn upon with no amount available for borrowing. We generally use the revolving loans under the Cinedigm Credit Agreement for working capital needs and to invest in entertainment content, and the loans are supported by the cash flows from our media library. The revolving loans under the Cinedigm Credit Agreement bear interest at a Base Rate plus 3.5% or LIBOR plus 4.5%, at our election, and mature on March 31, 2018. On January 31, 2018 we paid $2.0 million resulting in an outstanding balance of $9.8 million.

~~Convertible Notes~~

In connection with the Stock Purchase Agreement with Bison on July 10, 2017, the Company entered into two Exchange Agreements with holders of the Convertible Notes, representing approximately 99% of the principal amount of the Company’s outstanding 5.5% Convertible Senior Notes due in 2035 to exchange their notes into cash, Class A Common Stock, Second Lien Loans or a combination thereof in order to decrease the debt obligations of the Company.

On November 1, 2017, the Company completed the transactions contemplated by the Exchange Agreements exchanging a combination of $17.1 million cash and 2,221,457 shares of Class A Common Stock for $46.3 million principal amount of Convertible Notes, which were retired.

On November 7, 2017, the Company repurchased the remaining $0.5 million principal amount of outstanding Convertible Notes in accordance with their terms for $515,000 in cash plus accrued and unpaid interest thereon, resulting in the termination of the Convertible Notes facility.

On February 8, 2017, we entered into an exchange agreement pursuant to which we agreed to issue 450,000 shares of our Class A Common Stock and notes in the principal amount of $1.4 million pursuant to the Second Lien Loan Agreement in exchange for $4.0 million principal amount of 5.5% Convertible Notes with the holder of such Convertible Notes. The exchange was consummated on February 14, 2017.

On February 17, 2017, we entered into an exchange agreement pursuant to which we agreed to issue 675,000 shares of our Class A Common Stock and notes in the principal amount of $2.1 million pursuant to the Second Lien Loan Agreement in exchange for $6.0 million principal amount of 5.5% Convertible Notes with the holder of such Convertible Notes. The exchange was consummated on February 21, 2017.

On December 22, 2016, we entered into an exchange agreement pursuant to which we agreed to issue 450,000 shares of our Class A Common Stock, and warrants to purchase 200,000 shares of Common Stock in exchange for $3.4 million principal amount of the Convertible Notes. The exchanged notes were immediately canceled. The warrants, which become exercisable nine months after issuance, have a five-year term, an exercise price of $1.60 per share, and customary anti-dilution provisions. The exchange was consummated on December 23, 2016.

~~Other Indebtedness~~

In October 2013, we issued notes to certain investors in the aggregate principal amount of $5.0 million (the "2013 Notes") and warrants to purchase 150,000 shares of Class A Common Stock to such investors. The principal amount outstanding under the 2013 Notes is due on October 21, 2018 and the notes bear interest at 9.0% per annum, payable in quarterly installments.

~~In addition, as discussed in more detail in Note 5 -~~ ~~Notes Payable~~, our debt obligations have instituted certain financial and liquidity covenants and capital requirements, and from time to time, we may need to use available capital resources and raise additional capital to satisfy these covenants and requirements.


	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2023			2022			2023			2022
Net income (loss)	$	(2,736	)	$	5,022		$	(6,589	)	$	(6,620	)
Add Back:
Income tax (benefit) expense		(24	)		—			12			—
Depreciation and amortization		1,012			924			2,787			2,908
Interest expense		291			367			781			880
Loss from equity investment in Metaverse		3,043			—			3,761			1,828
Provision for doubtful accounts		—			7			—			54
Stock-based compensation		183			658			1,092			3,855
Employee retention tax credit		—			(2,025	)					(2,475	)
Other (income) expense, net		(147	)		76			2			82
Net income attributable to noncontrolling interest		(41	)		(8	)		(94	)		(35	)
Transition-related costs		259			15			1,094			371
Mergers and acquisition costs		—			—			—			207
Adjusted EBITDA	$	1,840		$	5,036		$	2,846		$	1,056

Cash Flow

Changes in our cash flows were as ~~follows:~~

For the Nine Months Ended December 31,
($ in thousands) 2017 2016
Net cash provided by operating activities $ 14,096
$ 24,612
Net cash used in investing activities (534 ) (380 )
Net cash used in financing activities (8,910 ) (32,882 )
Net change in cash and cash equivalents $ 4,652
$ (8,650 )

~~As of~~follows (in thousands):


	For the Nine Months Ended December 31,
	2023			2022
Net used in operating activities		(9,287	)	$	(7,901	)
Net cash used in investing activities		(482	)		(429	)
Net cash provided by financing activities		8,156			4,064
Net change in cash and cash equivalents	$	(1,613	)	$	(4,266	)

For the nine months ended December 31, ~~2017, we had~~2023, net cash ~~and restricted cash balances of $18.2 million.~~

~~Net cash provided by~~used in operating activities is primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization ~~bad debt provisions~~ and stock-based compensation, ~~offset by~~and other changes in working capital. ~~We expect~~Specifically, the adjustments are primarily driven by net cash ~~received from VPFs~~outflows related to ~~continue~~content advances made to ~~decrease~~partners for which initial expenditures are generally recovered within six to twelve months and increases in ~~the fourth quarter of our current fiscal year as all our Phase I Systems reached the conclusion of their deployment payment period with certain major studios. Changes~~accounts payable, accrued expenses, and other liabilities, partially offset by a decrease in accounts receivable and the unrealized loss 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.~~Company's investment in Metaverse's stock. Operating cash flows ~~from CEG~~ 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 lower~~season.

Cash used in investing activities was used in the ~~following two quarters~~expenditures towards long-lived intangible assets and fixed assets, as ~~we pay royalties on~~well as the receipt from the return of investment from the sale of equity securities.

Cash provided by financing activities pertained to the draw and repayment of the Company's line of credit, payment of earnout consideration, and issuance of company equity, net of financing fees.

For the nine months ended December 31, 2022, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such ~~revenues.~~as depreciation, amortization, recovery for doubtful accounts and stock-based compensation, including other changes in working capital. Additionally, during the nine months ended December 31, 2022, the Company decreased accounts payable by $11.8 million to vendors. Cash received from virtual print fees ("VPFs"), from our legacy digital cinema business, decreased from the previous period in alignment with the decrease in eligible VPF systems. Prepaid and other current assets increased by $2.7 million. 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 months. To manage working capital fluctuations, we have a revolving line of credit that allows for borrowings of up to $11.8 million, of which no amount was available for borrowing as of December 31, 2017.

On November 9, 2017, we entered into an amendment to maintain the minimum liquidity at $0.8 million until the maturity date of the Revolving Maturity date. This amendment also reduced the revolving aggregate maximum credit amount by $2.0 million on each of January 31, 2018 and February 28, 2018 if the outstanding obligations are not repaid in full by such date. On November 14, 2017, the maximum principal amount available was reduced to $11.8 million. Selling, general and administrative expense increased $4.1 million primarily due to a bonus payout of $1.5 million to the officers and employees and a reversal of an accrual for incentive compensation ofmade $1.1 million in advances for the nine months ended December 31, 2016. In addition, stock-based compensation expense increased by $0.9 million as a result of accelerated vesting of all stock options and restricted stock on November 1, 2017, and consulting and computer related expenses increased by approximately $0.3 million and $0.2 million, respectively.2022.

We have undertaken initiatives to reduce cash operating expenses further in the future, including relocating our office from Century City, California to Sherman Oaks, California, which is expected to reduce operating expenses by $0.7 million annually. We expect operating activities to continue to be a positive source of cash.

Cash ~~flows used in investing activities consisted of purchases of property and equipment.~~

~~For the nine months ended December 31, 2017, cash flows~~ used in financing was used for the purchase of long-lived fixed assets.

Net cash provided by financing activities ~~primarily reflects~~was driven by the net receipt of ~~payments~~$5 million from the Company's line of ~~$46.2 million on our long-term debt arrangements and~~ credit, ~~facilities and~~partially offset by the ~~proceeds of $38.0 million in connection with the Stock Purchase Agreement~~Company's deferred consideration and ~~a loan with Bison.~~

~~We have contractual obligations that primarily consist of term notes payable, credit facilities, and non-cancelable operating leases related to office space.~~

~~The following table summarizes our significant contractual obligations as of December 31, 2017:~~

Payments Due
Contractual Obligations (in thousands) Total 2018
2019 &
2020

2021 &
2022
Thereafter
Long-term recourse debt $ 37,251
$ 16,809
$ 10,442
$ 10,000
$ —
Long-term non-recourse debt ⁽¹⁾
43,574
2,954
408
40,212
—
Capital lease obligations 8
8
—
—
—
Debt-related obligations, principal $ 80,833
$ 19,771
$ 10,850
$ 50,212
$ —

Interest on recourse debt $ 3,753
$ 1,404
$ 2,349
$ —
$ —
Interest on non-recourse debt ⁽¹⁾
18,004
5,619
11,028
1,357
—
Interest on capital leases —
—
—
—
—
Total interest $ 21,757
$ 7,023
$ 13,377
$ 1,357
$ —
Total debt-related obligations $ 102,590
$ 26,794
$ 24,227
$ 51,569
$ —

Total non-recourse debt including interest $ 61,578
$ 8,573
$ 11,436
$ 41,569
$ —
Operating lease obligations $ 4,226
$ 343
$ 2,070
$ 1,813
$ —


~~(1)~~	Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse, with respect to defaults, is limited to the value of the asset that is collateral for the debt. The Prospect Loan is not guaranteed by us or our other subsidiaries, other than Phase 1 DC and DC Holdings and the KBC Facilities are not guaranteed by us or our other subsidiaries, other than Phase 2 DC.

~~Seasonality~~

Revenues from our Phase I Deployment and Phase II Deployment segments 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. Our CEG segment benefits from the winter holiday season, and as a result, revenues in the segment are typically highest in our fiscal third quarter, however we believe the seasonality of motion picture exhibition is becoming less pronounced as the motion picture studios are releasing movies more evenly throughout the year.

debt issuance costs.

Off-balance sheet arrangements

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

~~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

~~A control system, no matter how well conceived~~

Definition and ~~operated, can provide only reasonable assurance, not absolute assurance that the objective~~Limitations of ~~the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints~~Disclosure Controls and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. Because of the inherent limitations in a cost-effective control system, misstatement due to error or

~~fraud may occur and not be detected. However, our~~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 ~~provide reasonable assurance~~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 ~~achieving their objectives.~~

Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the ~~Company's~~Company’s disclosure controls and procedures (as such term is defined in ~~Rule 13a-15(e) of~~ the ~~Securities~~ Exchange ~~Act of 1934, as amended (the "Exchange Act"))~~Act), as of December 31, ~~2017.~~

2023. Based on such evaluation, our principal executive officer and principal financial and accounting officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures ~~are~~were effective ~~in recording, processing, summarizing and reporting, on a timely basis, information required~~ to ~~be disclosed by the Company in the reports that it files or submits under the Exchange Act and are effective in ensuring~~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 ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required ~~disclosure.~~

disclosures as of December 31, 2023.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the ~~last fiscal quarter~~three months ended December 31, 2023 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 Risk Factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~

2023 and each Item 1A of our Quarterly Reports on Form 10-Q for quarters ended June 30, 2023 and September 30, 2023.

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

The exhibits are listed in the Exhibit Index beginning on the following page 43herein.

EXHIBIT INDEX


Exhibit Number
~~Exhibit~~ ~~Number~~		Description of Document


10.1		Amendment no. 2 to Amended and Restated Loan Guaranty and Security Agreement dated as of February 9, 2024 by and between Cineverse Corp., East West Bank and the Guarantors named therein.
31.1	‑‑	~~Officer's~~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~~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.~~Schema With Embedded Linkbases Document.
~~101.CAL~~ 104	‑‑	Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Calculation.~~
~~101.DEF~~	‑‑	~~XBRL Taxonomy Extension Definition.~~
~~101.LAB~~	‑‑	~~XBRL Taxonomy Extension Label.~~
~~101.PRE~~	‑‑	~~XBRL Taxonomy Extension Presentation.~~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.~~


	CINEVERSE CORP.


Date:	February 14, ~~2018~~2024	By:	/s/ Christopher J. McGurk
			Christopher J. McGurk Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

Date:	February 14, ~~2018~~ 2024	By:	/s/ ~~Jeffrey S. Edell~~Mark Lindsey
			~~Jeffrey S. Edell~~ Mark Lindsey Chief Financial Officer ~~(Principal~~ (Principal Financial Officer)


Delaware		22-3720962

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

~~45 West 36th Street, 7th Floor,~~ 224 W. 35th St.,Suite 500 #947,New York, NY 10001		~~10018~~ 10001
(Address of principal executive offices)		(Zip 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	~~NASDAQ GLOBAL MARKET~~ CNVS	The Nasdaq Stock 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~~ x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).	~~Yes~~ x No o

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



Large accelerated filer o ☐	Accelerated filer o☐	Non-accelerated filero☒	Smaller reporting company x☒	Emerging Growth Company o
	~~(Do not check if a smaller reporting company)~~

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



~~Securities registered pursuant to Section 12(g) of the Act:~~		~~NONE~~



	December 31, 2017			March 31, 2017
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	17,218		$	12,566
Accounts receivable, net	37,870			53,608
Inventory, net	812			1,137
Unbilled revenue	4,747			5,655
Prepaid and other current assets	10,885			13,484
Total current assets	71,532			86,450
Restricted cash	1,000			1,000
Property and equipment, net	23,479			33,138
Intangible assets, net	16,045			20,227
Goodwill	8,701			8,701
Debt issuance costs	134			260
Other assets	1,336			1,558
Total assets	$	122,227		$	151,334
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses	$	63,460		$	73,679
Current portion of notes payable, including unamortized debt discount of $318 and $0 (See Note 5)	16,491			19,599
Current portion of notes payable, non-recourse (see Note 5)	2,954			6,056
Current portion of capital leases	—			66
Current portion of deferred revenue	1,855			2,461
Total current liabilities	84,760			101,861
Notes payable, non-recourse, net of current portion and unamortized debt issuance costs and debt discounts of $2,289 and $2,701 respectively (see Note 5)	38,331			55,048
Notes payable, net of current portion and unamortized debt issuance costs and debt discounts of $3,445 and $5,340 respectively (see Note 5)	16,997			59,396
Deferred revenue, net of current portion	4,213			5,324
Other long-term liabilities	331			408
Total liabilities	144,632			222,037
Stockholders’ deficit
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 December 31, 2017 and March 31, 2017, respectively. Liquidation preference of $3,648	3,559			3,559
Common stock, $0.001 par value; Class A and Class B stock; Class A stock 60,000,000 shares and 25,000,000 shares authorized at December 31, 2017 and March 31, 2017 respectively; 36,138,785 and 11,841,983 shares issued and 34,824,949 and 11,841,983 shares outstanding at December 31, 2017 and March 31, 2017, respectively; 1,241,000 Class B stock authorized and issued and zero shares outstanding at March 31, 2017	35			12
Additional paid-in capital	366,092			287,393
Treasury stock, at cost; 1,313,836 Class A common shares at December 31, 2017	(11,603		)	—
Accumulated deficit	(379,191		)	(360,415		)
Accumulated other comprehensive loss	(51		)	(38		)
Total stockholders’ deficit of Cinedigm Corp.	(21,159		)	(69,489		)
Deficit attributable to noncontrolling interest	(1,246		)	(1,214		)
Total deficit	(22,405		)	(70,703		)
Total liabilities and deficit	$	122,227		$	151,334



	Three Months Ended December 31,						Nine Months Ended December 31,
	2017			2016			2017			2016
Revenues	$	18,492		$	24,445		$	50,010		$	70,800
Costs and expenses:
Direct operating (excludes depreciation and amortization shown below)	6,363			7,287			14,470			17,880
Selling, general and administrative	9,259			6,095			21,824			17,766
Provision for doubtful accounts	631			416			1,580			416
Restructuring expenses, net	—			22			—			132
Depreciation and amortization of property and equipment	2,213			6,271			10,215			22,558
Amortization of intangible assets	1,395			1,395			4,185			4,322
Total operating expenses	19,861			21,486			52,274			63,074
Income (loss) from operations	(1,369		)	2,959			(2,264		)	7,726
Interest expense, net	(3,147		)	(4,827		)	(11,163		)	(14,873		)
Debt conversion expense and loss on extinguishment of notes payable	(1,299		)	(1,099		)	(4,504		)	(1,099		)
Other (expense) income, net	(40		)	(55		)	(242		)	211
Gain on termination of capital lease	—			2,535			—			2,535
Change in fair value of interest rate derivatives	44			39			127			104
Loss from operations before income taxes	(5,811		)	(448		)	(18,046		)	(5,396		)
Income tax expense	(113		)	(33		)	(495		)	(143		)
Net loss	(5,924		)	(481		)	(18,541		)	(5,539		)
Net loss attributable to noncontrolling interest	15			18			32			54
Net loss attributable to controlling interests	(5,909		)	(463		)	(18,509		)	(5,485		)
Preferred stock dividends	(89		)	(89		)	(267		)	(267		)
Net loss attributable to common stockholders	$	(5,998	)	$	(552	)	$	(18,776	)	$	(5,752	)
Net loss per Class A and Class B common stock attributable to common stockholders - basic and diluted:
Net loss attributable to common stockholders	$	(0.20	)	$	(0.07	)	$	(1.02	)	$	(0.78	)
Weighted average number of Class A and Class B common stock outstanding: basic and diluted	29,389,017			8,361,807			18,399,597			7,409,746



	Series A Preferred Stock			Class A and Class B				Treasury Stock					Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Deficit			Non-Controlling Interest			Total Deficit
	Shares	Amount		Shares	Amount			Shares		Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Deficit			Non-Controlling Interest			Total Deficit
Balances as of March 31, 2016	7	$	3,559	7,977,861	$	79		(277,244	)	$	(2,839	)	$	269,871		$	(342,448	)	$	(64	)	$	(71,842	)	$	(1,185	)	$	(73,027	)
Adjust par value of common stock for 1-for-10 stock split	—	—		—	(70		)	—		—			70			—			—			—			—			—
Adjusted balance as of March 31, 2016	7	$	3,559	7,977,861	$	9		(277,244	)	$	(2,839	)	$	269,941		$	(342,448	)	$	(64	)	$	(71,842	)	$	(1,185	)	$	(73,027	)
Foreign exchange translation	—	—		—	—			—		—			—			—			26			26			—			26
Issuance of common stock for third-party professional services	—	—		419,838	—			—		—			342			—			—			342			—			342
Issuance of shares for CEO retention bonus	—	—		125,000	—			—		—			250			—			—			250			—			250
Amortization of stock based compensation issued to Board of Directors	—	—		—	—			—		—			272			—			—			272			—			272
Common stock issued in connection with induced conversion of Convertible Notes	—	—		1,297,756	1			—		—			14,279			—			—			14,280			—			14,280
Issuance of restricted stock awards	—	—		1,054,865	1			—		—			(1		)	—			—			—			—			—
Issuance of common stock in connection with Second Secured Lien Notes	—	—		751,450	1			—		—			1,055			—			—			1,056			—			1,056
Issuance of warrants in connection with Second Secured Lien Notes	—	—		—	—			—		—			107			—			—			107			—			107
Stock-based compensation	—	—		—	—			—		—			804			—			—			804			—			804
Extension of term in connection with Sageview Warrants	—	—		—	—			—		—			345			—			—			345			—			345
Preferred stock dividends paid with common stock	—	—		215,213	—			—		—			356			(356		)	—			—			—			—
Contributions by noncontrolling interests	—	—		—	—			—		—			—			—			—			—			39			39
Re-issuance of treasury stock in connection with convertible notes exchange transaction	—	—		—	—			277,244		2,839			(357		)	(2,482		)	—			—			—			—
Net loss	—	—		—	—			—		—			—			(15,129		)	—			(15,129		)	(68		)	(15,197		)
Balances as of March 31, 2017	7	$	3,559	11,841,983	$	12		—		$	—		$	287,393		$	(360,415	)	$	(38	)	$	(69,489	)	$	(1,214	)	$	(70,703	)



						Outstanding Principal Balance
Facility¹	Credit Facility		Interest Rate²		Maturity Date	December 31, 2017		March 31, 2017
1	$	22,336	3.75	%	September 2018	$	—	$	3,758
3	11,425		3.75	%	March 2019	2,040		3,264
4	6,450		3.75	%	December 2018	921		1,612
	$	40,211				$	2,961	$	8,634



	Shares Under Option		Weighted Average Exercise Price Per Share
Balance at March 31, 2017	345,615		$	16.03
Granted	—		—
Exercised	—		—
Canceled/forfeited	(7,300	)	42.49
Balance at December 31, 2017	338,315		$	15.57



Recipient	Amount outstanding	Expiration	Exercise price per share
Strategic management service provider	52,500	July 2021	$17.20 - $30.00
Warrants issued to creditors in connection with the 2013 Notes (the "2013 Warrants")	125,063	October 2018	$18.50
Warrants issued to Ronald L. Chez in connection with the Second Secured Lien Notes	206,768	July 2023	$1.34 - $1.57
Warrants issued in connection with Convertible Notes exchange transaction	207,679	December 2021	$1.54
5-year Warrant issued to Bison in connection with a term loan agreement	1,400,000	December 2022	$1.80



	December 31,
(in thousands)	2017		2016
Cash interest paid	$	8,533	$	12,193
Accrued dividends on preferred stock	89		178
Issuance of Class A common stock for payment of preferred stock dividends	267		89
Issuance of Class A common stock in connection with Second Secured Lien Notes	—		1,163
Issuance of Class A common stock and warrants to purchase Class A common stock in exchange for Convertible Notes	—		3,838
Issuance of Second Lien Loans in connection with Convertible Notes exchange	1,462		—
Issuance of warrants in connection with debt instruments	1,084		—
Issuance of Class A common stock in exchange for the CEO's Second Lien Loans	500		—



	As of December 31, 2017
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non-Recourse		Notes Payable
Phase I Deployment	$	126	$	—	$	6,709	$	37,923	$	—
Phase II Deployment	—		—		41,338		3,362		—
Services	—		—		923		—		—
Content & Entertainment	15,911		8,701		59,574		—		—
Corporate	8		—		13,683		—		33,488
Total	$	16,045	$	8,701	$	122,227	$	41,285	$	33,488



	As of March 31, 2017
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non-Recourse		Notes Payable		Capital Leases
Phase I Deployment	$	160	$	—	$	15,118	$	51,955	$	—	$	—
Phase II Deployment	—		—		48,461		9,149		—		—
Services	—		—		1,052		—		—		—
Content & Entertainment	20,057		8,701		79,911		—		—		8
Corporate	10		—		6,792		—		78,995		58
Total	$	20,227	$	8,701	$	151,334	$	61,104	$	78,995	$	66



	Statements of Operations
	Three Months Ended December 31, 2017
	(Unaudited, in thousands)
	Phase I		Phase II		Services		Content & Entertainment			Corporate			Consolidated
Revenues	$	3,219	$	3,193	$	2,049	$	10,031		$	—		$	18,492
Direct operating (exclusive of depreciation and amortization shown below)	337		94		28		5,904			—			6,363
Selling, general and administrative	337		99		247		4,634			3,942			9,259
Allocation of Corporate overhead	—		—		410		871			(1,281		)	—
Provision for doubtful accounts	452		182		—		(3		)	—			631
Depreciation and amortization of property and equipment	185		1,881		—		91			56			2,213
Amortization of intangible assets	11		—		—		1,384			—			1,395
Total operating expenses	1,322		2,256		685		12,881			2,717			19,861
Income (loss) from operations	$	1,897	$	937	$	1,364	$	(2,850	)	$	(2,717	)	$	(1,369	)



	Statements of Operations
	Three Months Ended December 31, 2016
	(Unaudited, in thousands)
	Phase I		Phase II		Services		Content & Entertainment			Corporate			Consolidated
Revenues	$	7,266	$	2,995	$	2,625	$	11,559		$	—		$	24,445
Direct operating (exclusive of depreciation and amortization shown below)	336		168		3		6,780			—			7,287
Selling, general and administrative	158		62		227		3,910			1,738			6,095
Allocation of Corporate overhead	—		—		399		906			(1,305		)	—
Provision for doubtful accounts	318		98		—		—			—			416
Restructuring, transition and acquisition expenses, net	—		—		—		—			22			22
Depreciation and amortization of property and equipment	4,136		1,881		—		69			185			6,271
Amortization of intangible assets	11		—		—		1,383			1			1,395
Total operating expenses	4,959		2,209		629		13,048			641			21,486
Income (loss) from operations	$	2,307	$	786	$	1,996	$	(1,489	)	$	(641	)	$	2,959



	Statements of Operations
	Nine Months Ended December 31, 2017
	(Unaudited, in thousands)
	Phase I		Phase II		Services		Content & Entertainment			Corporate			Consolidated
Revenues	$	12,879	$	8,845	$	6,550	$	21,736		$	—		$	50,010
Direct operating (exclusive of depreciation and amortization shown below)	888		284		38		13,260			—			14,470
Selling, general and administrative	520		265		768		12,518			7,753			21,824
Allocation of Corporate overhead	—		—		1,210		2,572			(3,782		)	—
Provision for doubtful accounts	1,360		223		—		(3		)	—			1,580
Depreciation and amortization of property and equipment	4,101		5,642		—		242			230			10,215
Amortization of intangible assets	34		—		—		4,147			4			4,185
Total operating expenses	6,903		6,414		2,016		32,736			4,205			52,274
Income (loss) from operations	$	5,976	$	2,431	$	4,534	$	(11,000	)	$	(4,205	)	$	(2,264	)



	Statements of Operations
	Nine Months Ended December 31, 2016
	(Unaudited, in thousands)
	Phase I		Phase II		Services		Content & Entertainment			Corporate			Consolidated
Revenues	$	26,022	$	9,448	$	9,042	$	26,288		$	—		$	70,800
Direct operating (exclusive of depreciation and amortization shown below)	770		270		6		16,834			—			17,880
Selling, general and administrative	407		144		529		11,486			5,200			17,766
Allocation of Corporate overhead	—		—		1,194		2,706			(3,900		)	—
Provision for doubtful accounts	318		98		—		—			—			416
Restructuring, transition and acquisition expenses, net	—		—		—		87			45			132
Depreciation and amortization of property and equipment	16,156		5,642		—		204			556			22,558
Amortization of intangible assets	34		—		—		4,282			6			4,322
Total operating expenses	17,685		6,154		1,729		35,599			1,907			63,074
Income (loss) from operations	$	8,337	$	3,294	$	7,313	$	(9,311	)	$	(1,907	)	$	7,726



	Three Months Ended December 31,
($ in thousands)	2017		2016		$ Change			% Change
Phase I Deployment	$	3,219	$	7,266	$	(4,047	)	(56	)%
Phase II Deployment	3,193		2,995		198			7	%
Services	2,049		2,625		(576		)	(22	)%
Content & Entertainment	10,031		11,559		(1,528		)	(13	)%
	$	18,492	$	24,445	$	(5,953	)	(24	)%



	Payments Due
Contractual Obligations (in thousands)	Total		2018		2019 & 2020		2021 & 2022		Thereafter
Long-term recourse debt	$	37,251	$	16,809	$	10,442	$	10,000	$	—
Long-term non-recourse debt ⁽¹⁾	43,574		2,954		408		40,212		—
Capital lease obligations	8		8		—		—		—
Debt-related obligations, principal	$	80,833	$	19,771	$	10,850	$	50,212	$	—

Interest on recourse debt	$	3,753	$	1,404	$	2,349	$	—	$	—
Interest on non-recourse debt ⁽¹⁾	18,004		5,619		11,028		1,357		—
Interest on capital leases	—		—		—		—		—
Total interest	$	21,757	$	7,023	$	13,377	$	1,357	$	—
Total debt-related obligations	$	102,590	$	26,794	$	24,227	$	51,569	$	—

Total non-recourse debt including interest	$	61,578	$	8,573	$	11,436	$	41,569	$	—
Operating lease obligations	$	4,226	$	343	$	2,070	$	1,813	$	—