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What changed in Cineverse Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Cineverse Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+218 added−377 removedSource: 10-K (2023-06-29) vs 10-K (2022-07-01)

Top changes in Cineverse Corp.'s 2023 10-K

218 paragraphs added · 377 removed · 155 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

35 edited+11 added−69 removed4 unchanged
Biggest changeThe Company believes it is positioned to deliver sustained profitable growth in the future by executing on several key initiatives: ● Content : Delivering high-quality, curated content through subscription video on demand (SVOD) and dedicated ad-supported (AVOD) and free, ad-supported streaming (FAST) channels ● Technology & Distribution : o Dramatically expanding streaming content business through its Matchpoint™ platform, o Launching and scaling our channel portfolio – including the building of an umbrella streaming service encompassing all of the Company’s brands. o Accelerating the Company’s device and platform reach, which has exceeded 700 million consumer devices, and establishing key strategic advantages through partnership deals with connected streaming TV including Samsung, Roku and Vizio, as well as large OEM’s, cable companies and technology platforms including Sinclair Broadcast Group, Samsung, Comcast Xfinity, Roku, Amazon, Vewd and Vizio, and others. o Licensing film and TV content to every key player in OTT streaming ecosystem with Amazon, Apple, Netflix and Google. ● Audience : Growing viewership and subscription numbers significantly beyond our current base of more than 23 million viewers to potentially hundreds of millions of global viewers across billions of connected devices. ● Financial Performance/Metrics : o Driving EBITDA through incremental revenue growth from new channel launches, expansion of distribution, improved monetization and partnerships, and continuous efforts on cost mitigation. 2 The Company announced its acquisition of FoundationTV on March 8, 2021, which acquisition was consummated on June 14, 2021, and the formation of Cinedigm India, its wholly-owned subsidiary formed to house FoundationTV.
Biggest changeThe Company believes it is positioned to deliver sustained profitable growth in the future by executing on several key initiatives: • Content : Acquiring and distributing high-quality, curated content through SVOD, AVOD and linear FAST channels • Technology & Distribution : o Dramatically expanding streaming content business through its Matchpoint™ platform, o Launching and scaling our portfolio of enthusiast streaming channels. o Accelerating the Company’s device and platform reach, which has exceeded 900 million consumer devices, and further establishing key strategic advantages through expanded partnership deals with connected streaming TV companies including Amazon, Samsung, Roku, YouTube TV and Vizio, as well as large OEM’s, cable companies and technology platforms including LG, Sling TV, and others. o Licensing film and TV content to every key player in OTT streaming ecosystem with Amazon, Apple, Netflix and Google. 2 • Audience : Growing viewership and subscription numbers significantly beyond our current base of more than 72 million monthly viewers to potentially hundreds of millions of global viewers across billions of connected devices. • Financial Performance/Metrics : o Driving EBITDA through incremental revenue growth from new channel launches, expansion of distribution, improved monetization and partnerships, and continuous efforts on cost mitigation.
In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding companies that file electronically with the Commission. This information is available at www.sec.gov, the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549 or by calling 1-800-SEC-0330. 9
In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding companies that file electronically with the Commission. This information is available at www.sec.gov, the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549 or by calling 1-800-SEC-0330.
Our library of films and television episodes encompasses award winning documentaries from Docurama Films®, acclaimed independent films, festival picks and a wide range of content from brand name suppliers, including Scholastic, NFL, Konami and Hallmark.
Our library of films and television episodes encompasses award winning documentaries from Docurama Films®, acclaimed independent films, festival picks and a wide range of content from brand name suppliers, including NFL, Konami and Hallmark.
We believe that our large library of film and television episodes, long-standing relationships with digital platforms, state of the art technologies and years of experience operating and growing streaming audiences (collectively, our “Streaming” business) will allow us to continue to build a diversified portfolio of enthusiasts OTT channels that generate recurring revenue streams from advertising, merchandising and subscriptions.
We believe that our large library of film and television programs, long-standing relationships with digital platforms, state of the art technologies and years of experience operating and growing streaming audiences (collectively, our “Streaming” business) will allow us to continue to build a diversified portfolio of enthusiasts OTT channels that generate recurring revenue streams from advertising, subscriptions and merchandising.
We believe our scaled channel portfolio, our superior capabilities in launching and managing channels at scale, and our strategic partnerships with key content owners and platforms will provide us a strategic advantage to gain considerable market share in the immediate future. 5 Our Strategy The shift from traditional entertainment consumption to streaming is accelerating.
We believe our scaled channel portfolio, our superior capabilities in launching and managing channels at scale, and our strategic partnerships with key content owners and platforms will provide us a strategic advantage to gain considerable market share in the immediate future. 3 Our Strategy The shift from traditional entertainment consumption to streaming is accelerating.
We believe that we are well positioned to succeed in the streaming channel business for the following key reasons: ● More than 13 years of experience as a primary distributor of content to scale third party OTT platforms such as Netflix, Hulu, Amazon Prime, Apple iTunes and more, and nearly seven years of history operating OTT channels with millions of downloads, hundreds of thousands of registered users, and hundreds of millions of discrete data points on our customer’s behavior and preferences; ● The depth and breadth of our almost 33,000 title film and television episode library; ● Our digital assets and deep, long-standing relationships as launch partners that cover the major digital platforms and devices; ● Our marketing expertise; ● Our flexible releasing strategies, which differ from larger entertainment companies that need to protect their legacy businesses; ● Our proprietary streaming technology enabling us to operate at scale and at lower operating costs than our competitors; and ● Our experienced management team.
We believe that we are well positioned to succeed in the streaming channel business for the following key reasons: • More than 15 years of experience as a primary distributor of content to scale third party OTT platforms such as Netflix, Hulu, Amazon Prime, Tubi, Apple iTunes and more, and nearly seven years of history operating OTT channels with millions of downloads, hundreds of thousands of registered users, and hundreds of millions of discrete data points on our customer’s behavior and preferences; • The depth and breadth of our almost 58,000 title film and television episode library; • Our digital assets and deep, long-standing relationships as launch partners that cover the major digital platforms and devices; • Our marketing expertise; • Our flexible releasing strategies, which differ from larger entertainment companies that need to protect their legacy businesses; • Our proprietary streaming technology enabling us to operate at scale and at lower operating costs than our competitors; and • Our experienced management team.
Over the past several years, Cinedigm has transformed itself from being a digital cinema equipment and physical content distributor to a leading independent streaming company with the planned phasing out of its legacy projector division. Cinedigm is a leading independent streaming entertainment company serving global enthusiast fan bases.
Over the past several years, Cineverse has transformed itself from being a digital cinema equipment and physical content distributor to a leading independent streaming company with the planned phasing out of its legacy projector division. Cineverse is a leading independent streaming entertainment company serving global enthusiast fan bases.
Intellectual Property We own certain copyrights, trademarks and Internet domain names in connection with the Content & Entertainment business. We view these proprietary rights as valuable assets. We maintain registrations, where appropriate, to protect them and monitor them on an ongoing basis.
Intellectual Property We own certain copyrights, trademarks and Internet domain names in connection with the Content & Entertainment segment. We view these proprietary rights as valuable assets. We maintain registrations, where appropriate, to protect them and monitor them on an ongoing basis.
As part of its M&A strategy, the Company is: ● Executing on roll-up by completing several content related acquisitions enabling monetization; ● Focused on acquiring higher quality content and streaming channels; ● Exploring opportunities for new technology and other revenue channels including NFTs, ecommerce, podcasts and merchandise; and ● Leveraging its proprietary tech platform (Matchpoint TM ), which allows for on-boarding multiple acquisitions concurrently.
As part of its M&A strategy, the Company is: • Executing on roll-up by completing several content related acquisitions enabling monetization; • Focused on acquiring premium content and streaming channels; • Exploring opportunities for new technology and other revenue channels including NFTs, ecommerce, podcasts and merchandise; and • Leveraging its proprietary tech platform (Matchpoint TM ), which allows for on-boarding multiple acquisitions concurrently.
Cinedigm is capitalizing on an evolving competitive environment where the top of the streaming industry is consolidating including competitors such as Netflix, Amazon Prime, Hulu and Disney Plus while Cinedigm has a complimentary offering as a leading independent distributor with a focus on the enthusiast segment of the market.
Cineverse is capitalizing on an evolving competitive environment where the top of the streaming industry is consolidating including competitors such as Netflix, Amazon Prime, Hulu and Disney Plus while Cineverse has a complimentary offering as a leading 1 independent distributor with a focus on the enthusiast segment of the market.
The Company distributes content for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, NFL, and NHL as well as leading international and domestic content creators, movie producers, television producers and other short form digital content producers.
The Company distributes content for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, NFL, NHL, and Cirque du Soliel, as well as leading international and domestic content creators, movie producers, television producers and other short form digital content producers.
Since our inception, we have played a significant role in the digital distribution revolution that continues to transform the media and entertainment landscape. Cinedigm delivers high-quality, curated content through subscription video on demand (SVOD) and dedicated ad-supported (AVOD) and free, ad-supported streaming linear (FAST) channels.
Since our inception, we have played a significant role in the digital distribution revolution that continues to transform the media and entertainment landscape. Cineverse delivers high-quality, curated content through subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts.
Some of the evolving consumer habits that are driving consumption of streaming and OTT content include: ● Continued “cord-cutting” resulting in an increase in SVOD & AVOD migration, ● Consumer preference towards third party channels and content platforms, ● The rapid adoption of connected televisions and other dedicated streaming devices, ● A rapid rise in consumption of ad-based content, ● Increasing demand for underserved content; and ● Growth trend in youth (kids) media consumption across multiple devices and brands.
Some of the evolving consumer habits that are driving consumption of streaming and OTT content include: • Continued “cord-cutting” resulting in an increase in SVOD & AVOD migration, • Consumer preference towards third party channels and content platforms, • The rapid adoption of connected televisions and other dedicated streaming devices, • A rapid rise in consumption of ad-based content, and • Increasing demand for underserved content.
Beginning in December 2015, certain of our digital cinema equipment began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, revenues ceased to be recognized on such Systems, related to such distributors.
Beginning in December 2015, certain of our Systems began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, revenue ceased to be recognized on such Systems.
For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.
For certain Phase II Deployment Systems, we did not retain ownership of the Systems and residual cash flows after the completion of cost recoupment and the expiration of the exhibitor master license agreements.
Cinedigm’s broad portfolio enables the Company to achieve significant market share on every key consumer streaming device and platform. As the Company obtains high-growth distribution territories globally, the Company expects each of these channels to generate high-margin revenues to Cinedigm. As its channel portfolio has grown, the Company’s viewership and subscription metrics have grown significantly.
Cineverse’s broad portfolio enables the Company to achieve significant market share on every key consumer streaming devices and platforms. As the Company expands further into high-growth distribution territories globally, the Company expects each of these channels to generate high-margin revenues to Cineverse. As its channel portfolio has grown, the Company’s viewership and subscription metrics have grown significantly.
We retain ownership of our digital cinema equipment (the “Systems”) and the residual cash flows related to the Systems in Phase I Deployment after the after the end of the 10-year deployment payment period.
We retained ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the end of the 10-year deployment payment period.
From time to time, the company will announce channel development deals with a variety of media companies. The timeline for planning and launching a channel varies from months to years and is also dependent on carriage conversations with a wide array of platforms and distributors.
The timeline for planning and launching a channel varies from months to years and is also dependent on carriage conversations with a wide array of platforms and distributors.
ITEM 1. BUSINESS OVERVIEW Cinedigm Corp. was incorporated in Delaware on March 31, 2000 (“Cinedigm”, “us”, “our”, and “Company” refers to Cinedigm Corp. and its subsidiaries unless the context otherwise requires).
ITEM 1. BUSINESS OVERVIEW Cineverse Corp. (“Cineverse”, “us”, “our”, and “Company” refers to Cineverse Corp. and its subsidiaries unless the context otherwise requires) was incorporated in Delaware on March 31, 2000. On May 22, 2023, the Company changed its corporate name to Cineverse Corp.
As permitted by these agreements, we have begun, and expect to continue, to pursue the sale of the Systems to such exhibitors. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan.
As permitted by these agreements, we have begun, and expect to continue, to pursue the sale of the Systems to such exhibitors. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. System sales for the years ended March 31, 2023 and 2022 were $11.8 million and $16.1 million, respectively.
The Company’s streaming technology platform, known as Matchpoint TM , is a software-as-a-service platform which automates the distribution of streaming content and OTT channels. The Company has a long legacy in using technology to transform the entertainment industry, and played a pioneering role in transitioning over 11,000 movie screens from traditional analog film prints to digital distribution.
The Company has a long legacy in using technology to transform the entertainment industry, and played a pioneering role in transitioning movie screens from traditional analog film prints to digital distribution. The Company operates a growing portfolio of OTT streaming entertainment channels.
Cinedigm collaborates with producers, major brands and other IP owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including Apple, Amazon Prime, Netflix, Hulu, Xbox, Tubi, PlutoTV, Vudu and cable/satellite video-on-demand (“VOD”) and (ii) packaged distribution of DVD and Blu-ray discs to wholesalers and retailers with sales coverage to over 48,000 retail storefronts, including Walmart, Target, Best Buy and Amazon.
Cineverse collaborates with producers, major brands and other IP owners to market, source, curate and distribute quality content to targeted audiences through (i) third-party streaming service providers, including Apple, Amazon Prime, Netflix, Hulu, Xbox, Tubi, PlutoTV, and Vudu, (ii) packaged distribution of physical consumer products to wholesalers and retailers with sales coverage to over 48,000 retail and e-commerce storefronts, including Walmart, Target, Best Buy and Amazon.
The Company believes the enthusiast segment, focusing on audiences and genres underserved by the major streamers, will be a significant opportunity on a global basis. Today, the Company operates channels in numerous specialty sectors, including faith and family, science fiction, horror, kids, and other major segments.
The Company believes the enthusiast segment, focusing on the 97% of content and genres not offered by major streamers, provides a significant and underserved market opportunity on a global basis. Today, the Company operates channels in numerous specialty sectors, including faith and family, anime, action, horror, sports, Westerns, Asian, standup comedy, and other major segments.
Given our extensive experience in operating and distributing enthusiast content, as well as the Company’s significantly improved financial position, the Company has begun executing an M&A roll-up strategy with a focus on enthusiast channels, content, and supporting technology. Over the past two years, the Company has acquired numerous channels and content libraries.
Given our extensive experience in operating and distributing enthusiast content, and the ability to centralize operations and reduce operating costs due to our proprietary technology, the Company has developed an M&A roll-up strategy with a focus on enthusiast channels, content, and supporting technology. Over the past several years, the Company has acquired numerous channels and content libraries.
In fiscal year 2021, we elected to cease operating or distributing the following channels: ● Bambu, a Chinese entertainment linear channel owned and operated by Cinedigm; ● Hallypop, a Korean music and lifestyle linear channel distributed by Cinedigm; and ● CombatGo, an international combat sports linear channel distributed by Cinedigm; We distribute our streaming channels in several distinct ways: direct to consumer, through major application platforms such as the web, iOS, Android, Roku, Apple TV, Amazon Fire, Vizio, and Samsung; and through third party distributors of content on platforms such as Amazon Prime, Twitch, Xumo and Sling/Dish, and a wide variety of Smart TV manufacturers globally.
We distribute our streaming channels in several distinct ways: direct-to-consumer, through major application platforms such as the web, iOS, Android, Roku, Apple TV, Amazon Fire, Vizio, and Samsung; and through third party distributors of content on platforms such as Amazon Prime, YouTubeTV, Xumo and Sling TV/Dish, and a wide variety of Smart TV manufacturers globally.
Cinedigm has been a technological pioneer over its history and continues to be one today. Through its world-class, proprietary streaming technology, the Company has become a partner of choice for content producers, rightsholders, and major media companies seeking to monetize their content in the streaming ecosystem.
Through its world-class, proprietary streaming technology, the Company has become a partner of choice for content producers, rights holders, and major media companies seeking to launch web, mobile, and connected TV streaming services to monetize their content in the streaming ecosystem.
The Cinema Equipment Business also provides monitoring, collection, verification and management services to this segment, as well as to exhibitors who purchase their own equipment, and also collects and disburses VPFs from motion picture studios, and distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”).
The Cinema Equipment segment also provided monitoring, collection, verification and management services to exhibitors who purchased their own equipment and collected and disbursed virtual print fees (“VPFs”) and alternative content fees (“ACFs”) from motion picture studios and distributors and movie and theatrical exhibitors (collectively, “Services”).
We announced three channels in 2020 that remain in development through 2022: ● LIVX, a music and entertainment channel ● Party Crashers, a political news channel ● AudPop, a short form entertainment channel The digital channels market is a nascent industry, and from time to time, the Company will cease operating or distributing channels that do not find adequate audiences or meet the needs of platforms or audiences.
The digital channels market is a nascent industry, and from time to time, the Company will cease operating or distributing channels that do not find adequate audiences or meet the needs of platforms or audiences. From time to time, the Company will announce channel development deals with a variety of media companies.
Our focus in the near term will be to expand our market position in the FAST and AVOD divisions of the streaming industry, taking advantage of the shift of more than $70 billion dollars in television advertising revenue to the OTT market.
Through our rapidly expanding base of distribution arrangements, Cineverse has an estimated addressable device footprint of 1.1 billion devices on a global basis. Our focus in the near term will be to expand our market position in the FAST and AVOD divisions of the streaming industry, taking advantage of the shift in television advertising revenue to the OTT market.
The Company currently reaches over 23.8 million streaming channel monthly active viewers. The Company has rights to a library of over 33,000 film & TV assets, 16 different enthusiast streaming brands across 19 live streaming channels, and over 640,000 subscribers (SVOD) reaching 900 million unique streaming devices globally.
The Company currently reaches over 72 million monthly active users across streaming apps, FAST linear channels, third party services, social video, and browser based services. The Company has rights to a library of over 58,000 film & TV assets, 26 different enthusiast streaming brands including 16 live streaming channels, and over 1.23 million SVOD subscribers.
Additionally, we are leveraging our infrastructure, technology, content and distribution expertise to rapidly and cost effectively build and expand our streaming digital network businesses, which operates as Cinedigm Networks.
Additionally, we are leveraging our infrastructure, technology, content and distribution expertise to rapidly and cost effectively build and expand our streaming digital network businesses, which operates as Cineverse Networks. The Company owns, operates and has the right to operate 64 different enthusiast streaming brands including 16 current live streaming channels under a wide array of business models.
The reduction in VPF revenue on cinema equipment business systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017. 7 Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value.
For those Systems for which we retained ownership, under the terms of our standard cinema equipment licensing agreements provide that after expiration the exhibitors have the option to: (1) return the Systems to us; (2) renew 4 their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value.
EMPLOYEES As of March 31, 2022 we had 146 employees, with 6 part-time, 134 full-time and 6 temporaries, of which 11 are in sales and marketing, 61 are in operations, and 74 are in executive, finance, technology and administrative functions. AVAILABLE INFORMATION Our Internet website address is www.cinedigm.com.
Of these employees, 63 are in operations, 11 are in sales and marketing, and 94 are in executive, finance, technology and administrative functions. There are 115 employees based in the United States and 53 employees based in India. AVAILABLE INFORMATION Our Internet website address is www.cineverse.com.
Competitors to our Content & Entertainment and Digital Networks segment are Chicken Soup for the Soul Entertainment, Inc. and RLI/American Multi-Cinema, Inc. 6 CINEMA EQUIPMENT BUSINESS The Phase I Deployment and Phase II Deployment operations consist of the following: Operations of: Products and services provided: Cinema Equipment Business Financing vehicles and administrators for 696 Systems (as defined below) installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 2,147 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).
CINEMA EQUIPMENT SEGMENT Our Cinema Equipment segment was launched in 2005 and served as a financing vehicle and administrator for digital equipment systems (the “Systems”) installed nationwide in our first deployment phase to theatrical exhibitors (“Phase I Deployment”) and for Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).
On April 4, 2022, the Company received a letter from the Nasdaq indicating that the Company no longer met the Bid Price Rule. 3 Risk and Uncertainties The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the year.
Our common stock is listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “CNVS.” On April 4, 2022, the Company received a letter from the Nasdaq indicating that the Company no longer met the Bid Price Rule.
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Cinedigm is (i) a leading independent distributor and aggregator of independent music, television, and other short form content rights distributed across digital, over-the-top (OTT), physical, and home and mobile entertainment platforms as well as (ii) a leading servicer of digital cinema assets on over 2,843 domestic and several international countries.
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Cineverse is a premier streaming technology and entertainment company with core business segments (i) across a portfolio of owned and operated enthusiast streaming channels with large fan bases; (ii) as a large-scale global aggregator and full-service distributor of feature films and television programs; (iii) as a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content distribution; and (iv) as a leading servicer of domestic and international digital cinema assets.
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Cinedigm is a leading distributor of independent film and television content. The Company operates a growing portfolio of owned and operated over-the-top (“OTT”) streaming entertainment channels.
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The Company’s services are available to consumers on an addressable footprint of an estimated 1.1 billion streaming devices. Cineverse has been a technological pioneer over its history and continues to be one today.
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The Company is actively focused on integrating the most recent acquisitions, as well as building and launching a variety of associated critical products, including: Fantawild, Fandor, The Film Detective, Screambox, Films Around the World, Bloody Disgusting, DMR, and other initiatives driving major technological changes in the entertainment industry. 1 The Company will continue to pursue accretive M&A opportunities in order to grow profitably and fortify its competitive advantage.
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The Company’s streaming technology platform, known as Matchpoint TM , is a software-based streaming operating platform which provides clients with AVOD, SVOD, TVOD and linear capabilities, automates the distribution of content, and features a robust data analytics platform.
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The Company has completed & integrated six accretive acquisitions between October 2020 and March 31, 2022 with ongoing active M&A pipeline.
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Based on publicly accessible data and internal Company research, less than 3% of the total content listed on IMDB released since 1950 is available on the top 10 global streaming services.
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In addition to powering Cinedigm’s portfolio of streaming channels and digital video distribution business, the new division will allow Cinedigm to expand their global streaming footprint. The Company is developing a channel umbrella with global reach, which is expected to further enable growth and profitability.
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The Company will continue to pursue accretive M&A opportunities in order to grow profitably and fortify its competitive advantage.
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As previously announced, on December 27, 2019, the Company entered into, and on February 14, 2020 amended, (see Note 2 - Summary of Significant Accounting Policies ), a stock purchase agreement (as so amended, the “Metaverse Stock Purchase Agreement”) with BeiTai Investment LP (“BeiTai”), a related party for accounting purposes of Cinedigm, and Aim Right Ventures Limited (“Aim Right”), two shareholders of A Metaverse Company, a leading Chinese entertainment company (“Metaverse”), formerly Starrise Media Holdings Limited, and related party, to buy from them an aggregate of 410,901,000 outstanding Metaverse ordinary shares (the “Metaverse Share Acquisition”).
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On June 7, 2023, The Nasdaq Stock Market LLC (“Nasdaq”) approved an additional extension through July 19, 2023, during which the Company may cure the previously-announced minimum bid price deficiency.
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On February 14, 2020, the Company purchased 162,162,162 of the Metaverse ordinary shares from BeiTai and issued to BeiTai 21,646,604 shares of its Class A common stock in consideration.
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In order to regain compliance with the Bid Price Rule, in addition to the initiation of the implementation of a stock repurchase program of up to 10 million shares in the open market over a 12 month period since announcement in March 2023, the Company has effected a reverse stock split.
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On April 10, 2020, the Company, in accordance with the terms of the Metaverse Stock Purchase Agreement, terminated its obligation to purchase Metaverse ordinary shares from Aim Right under the December 27, 2019 stock purchase agreement.
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On June 7, 2023, Cineverse Corp. filed with the Secretary of State of the State of Delaware a Certificate of Amendment to the Company's Fifth Amended and Restated Certificate of Incorporation (the "Reverse Split Charter Amendment"), pursuant to which the Company effected a 1-for-20 reverse stock split of the Company's Class A common stock.
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On April 10, 2020, the Company entered into another stock purchase agreement (the “April Metaverse Stock Purchase Agreement”) with five (5) shareholders of Metaverse - Bison Global Investment SPC - Bison Global No. 1 SP, Huatai Investment LP, Antai Investment LP, Mingtai Investment LP and Shangtai Asset Management LP - to buy an aggregate of 223,380,000 outstanding Metaverse ordinary shares from them and for the Company to issue to them an aggregate of 29,855,081 shares of its Class A common stock in consideration therefor (the “April Metaverse Share Acquisition”).
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The reverse stock split became effective as of 12:01 a.m. Eastern Time on June 9, 2023. All shares and price amounts in this report reflect the 1-for-20 reverse stock split effected on June 9, 2023. CONTENT & ENTERTAINMENT SEGMENT The Content & Entertainment segment provides some of the leading independent content distribution services in North America.
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On April 15, 2020, the April Metaverse Share Acquisition was consummated and this transaction was also recorded as an equity investment in Metaverse. Mingtai is indirectly managed by a subsidiary BFGL, which is controlled by Peixin Xu, one of our directors. BFGL’s subsidiary acts as a manager of Bison Global.
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As of March 31, 2023, our Phase I Deployment and Phase II Deployment agreements with certain major studios have reached their conclusion and we do not expect any material revenues to be generated in the Cinema Equipment segment except for System Sales.
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Shangtai and Hutai are indirectly managed by a subsidiary of BFGL. Peixin Xu controls the manager of the general partner of Antai. As of March 31, 2022, the market value of Cinedigm’s ownership in A Metaverse Company (“Metaverse”) ordinary shares was approximately $7.03 million.
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For the years ended March 31, 2023 and 2022, our Cinema Equipment segment Services revenues were $0.3 million and $2.1 million, respectively. ENVIRONMENTAL The nature of our business does not subject us to environmental laws in any material manner. EMPLOYEES As of March 31, 2023 we had 168 employees, 165 full-time and 3 part time or temporaries.
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On October 11, 2019, the Company received a letter from the Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s Class A common stock, par value $0.001 per share (the “Common Stock”), for the prior 30 consecutive business days, the Company no longer met the requirement to maintain a minimum bid price of $1 per share (the “Bid Price Rule”), as set forth in Nasdaq Listing Rule 5450(a)(1).
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On December 18, 2019, the Company received a letter from Nasdaq indicating that the Company no longer met the requirement to maintain a minimum market value of publicly held shares of $15,000,000 (the “MVPHS Rule”), as set forth in Nasdaq Listing Rule 5450(b)(3)(C).
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On April 17, 2020, the Company received notice from Nasdaq that it has suspended, effective April 16, 2020 and until June 30, 2020, relevant grace periods to regain compliance with the Bid Price Rule and the MVPHS Rule due to the global market impact caused by COVID-19.
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Specifically, (x) no delisting would occur until July 1, 2020, and any extension to reach compliance with the Bid Price Rule, if granted by the Panel, would be further extended by the duration of the suspension, and (y) the Company now had until August 29, 2020 to regain compliance with the MVPHS Rule.
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On May 7, 2020, the Company was notified by Nasdaq that the previously disclosed MVPHS Rule deficiency had been cured, that the Company was in compliance, and that Nasdaq considered the matter closed.
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On June 17, 2020, the Company was notified by Nasdaq that the previously disclosed Bid Price Rule had been cured and that the Company was in compliance, and that Nasdaq considered the matter closed. On October 5, 2020, the Company received a letter from the Nasdaq indicating that the Company no longer met the Bid Price Rule.
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On February 2, 2021, the Company was notified by Nasdaq that the previously disclosed Bid Price Rule had been cured and that the Company was in compliance, and that Nasdaq considered the matter closed.
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As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. With the closure of non-essential retail stores beginning in the spring of 2020, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product.
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As part of our Cinema Equipment business, the Company earns revenue when movies are exhibited in theaters. Many movie theaters in the United States slowly re-opened with limited capacities through March 31, 2022. The majority of major studios resumed blockbuster films releases during the year which showed an encouraging return of consumer confidence for the theatrical experience.
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As vaccines became readily available and COVID cases decreased, major studios resumed theatrical releases and there was an uptick in box office revenue during the period ending March 31, 2022.
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Longer term, there had been speculation that the future of theatrical release strategies could change as a result of Major Studios being able to release movies simultaneously in theatres and on streaming platforms during the pandemic. If fewer movies are released theatrically, a shift to digital viewing reduces revenue opportunities for virtual print fees and sales of digital cinema equipment.
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While Studios are still in an experimentation phase regarding theatrical/streaming strategies we are encouraged by the success of recent exclusive theatrical releases such as Sony’s ‘Spider-Man: No Way Home’, which became the first movie since the pandemic to hit $1 billion globally with no current plans to premiere on any streaming platforms.
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CONTENT & ENTERTAINMENT Content Distribution and our Enthusiast Streaming Channels Cinedigm Entertainment Group, or CEG, is a leading independent content distributor in North America.
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The Company currently operates 16 different enthusiast streaming brands across 19 live streaming channels under a wide array of business models: Our Subscription Video on Demand (SVOD) Services consist of: ● Docurama – a documentary and nonfiction streaming service launched in September 2014; ● CONtv – a fandom-centric service focused on comics, genre films and geek culture, launched in March 2015; ● Dove Channel – a faith and family entertainment service launched in August 2015; ● Viewster Anime – a Japanese Anime streaming service acquired in February, 2018; ● Fandor – an independent film streaming service, acquired in January 2021; and ● Screambox – a horror streaming service acquired in February 2021.
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Our Ad-Supported Video on Demand (AVOD) or Free Ad Supported Streaming Television Channels consist of: ● Dove Channel – a faith and family linear channel launched in 2017; ● Docurama – a documentary and nonfiction linear channel launched in 2018; ● CONtv – a fandom-centric linear channel launched in 2018; ● Comedy Dynamics – a comedy linear channel launched in 2019; ● The Bob Ross Channel, a lifestyle linear channel launched in 2020; ● MyTime, a women’s entertainment linear channel, launched in 2020; ● WhistleTV – a sports lifestyle channel launched in 2020, ended December 31, 2021; 4 ● CONtv Anime, an anime linear channel launched in 2020; ● Bloody Disgusting TV a horror linear channel launched in 2020; ● The Film Detective – a classic film linear channel and on demand platform acquired in 2020; and ● Lone Star – a classic western channel and on demand platform acquired in 2020; ● Real Madrid TV – a sports and lifestyle linear channel launched in 2021; ● The Only Way is Essex – a British reality and content linear channel launched in 2021; ● El Rey – a Latino centric linear channel launched in 2021; ● The Country Network – a country music lifestyle linear channel launched in 2021; ● So…Real – a reality TV and documentary enthusiast linear channel launched in 2020; ● Asian Crush – a pan-Asian culture and lifestyle linear channel acquired in March 2022; ● Retro Crush – a classic anime linear channel acquired in March 2022; ● Cocoro – a kid and family centric Asian linear channel acquired in March 2022; ● KMTV – a Korean-pop linear channel acquired in March 2022; ● Yuyu – a general programming adjunct linear channel acquired in March 2022; ● Midnight Pulp – a horror, thriller and cult linear channel acquired in March 2022.
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Through our rapidly expanding base of distribution arrangements, Cinedigm has an estimated addressable device footprint of more than 330 million devices in North America and more than 370 million internationally.
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Customers For the fiscal year ended March 31, 2022, two customers, Amazon and Distribution Solutions each represented 18% and 25% respectively of CEG’s revenues and approximately 6% and 8%, respectively, of our consolidated revenues.
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For the fiscal year ended March 31, 2021, Amazon and Distribution Solutions represented 15% and 22% respectively of CEG’s revenues and approximately 9% and 13%, respectively, of our consolidated Revenues. Competition Numerous companies are engaged in various forms of producing and distributing independent movies and alternative content.
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These competitors may have significantly greater financial, marketing and managerial resources than we do, may have generated greater revenue and may be better known than we are at this time.
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PHASE I DEPLOYMENT AND PHASE II DEPLOYMENT In June 2005, we formed our Phase I Deployment division in order to purchase up to 4,000 Systems under an amended framework agreement with Christie Digital Systems USA, Inc. (“Christie”). As of March 31, 2022, Phase I Deployment had 696 Systems installed.
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In October 2007, we formed our Phase II Deployment division for the administration of up to 10,000 additional Systems. As of March 31, 2022, Phase II Deployment had 2,147 of such Systems installed.
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Our Phase I Deployment and Phase II Deployment divisions own and license Systems to theatrical exhibitors and collect virtual print fees (“VPFs”) from motion picture studios and distributors, as well as alternative content fees (“ACFs”) from alternative content providers and theatrical exhibitors, when content is shown on exhibitors’ screens.
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We have licensed the necessary software and technology solutions to the exhibitor and have facilitated the industry’s transition from analog (film) to digital cinema.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

49 edited+13 added−31 removed78 unchanged
Biggest changeCDF2 and CDF2 Holdings are our indirect wholly-owned, non-consolidated VIEs that are intended to be special purpose, bankruptcy remote entities. CDF2 Holdings has entered into the a lease (the “CHG Lease”) pursuant to which CHG-Meridian U.S.
Biggest changeIf we refinance our credit facilities, we cannot guarantee that any new credit facility will not contain similar covenants and restrictions. Cinedigm Digital Funding 2, LLC ("CDF2") and CDF2 Holdings, LLC ("CDF2 Holdings") are our indirect wholly-owned, non-consolidated variable interest entities ("VIEs") that are intended to be special purpose, bankruptcy remote entities.
Our board of directors also has the power, without stockholder approval, to set the terms of any such series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our Common Stock with respect to dividends or if we liquidate, dissolve or wind up our business and other terms.
Our Board of Directors (the "Board of Directors") also has the power, without stockholder approval, to set the terms of any such series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our Common Stock with respect to dividends or if we liquidate, dissolve or wind up our business and other terms.
Our stock price has been volatile and may continue to be volatile in the future; this volatility may affect the price at which you could sell our Common Stock. The trading price of the Common Stock has been volatile and may continue to be volatile in response to various factors, some of which are beyond our control.
Our stock price has been volatile and may continue to be volatile in the future; this volatility may affect the price at which you could sell our Common Stock. The trading price of our Common Stock has been volatile and may continue to be volatile in response to various factors, some of which are beyond our control.
Any of the factors listed below could have a material adverse effect on an investment in our securities: ● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; ● changes in the market’s expectations about our operating results; ● success of competitors; ● our operating results failing to meet the expectation of securities analysts or investors in a particular period; ● changes in financial estimates and recommendations by securities analysts concerning us, the market for digital and physical content, content distribution and entertainment in general; ● operating and stock price performance of other companies that investors deem comparable to us; ● our ability to market new and enhanced products on a timely basis; ● changes in laws and regulations affecting our business or our industry; ● commencement of, or involvement in, litigation involving us; ● changes in our capital structure, such as future issuances of securities or the incurrence of debt; ● the volume of shares of the Common Stock available for public sale; ● any major change in our board of directors or management; ● sales of substantial amounts of Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and ● general economic and political conditions such as recessions, interest rates, international currency fluctuations and acts of war or terrorism.
Any of the factors listed below could have a material adverse effect on an investment in our securities: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; 12 • success of competitors; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us, the market for digital and physical content, content distribution and entertainment in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business or our industry; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of debt; • the volume of shares of the Common Stock available for public sale; • any major change in our Board of Directors or management; • sales of substantial amounts of Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, international currency fluctuations and acts of war or terrorism.
These provisions include: ● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ● the ability of our board of directors to determine to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; ● the requirement that an annual meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; ● limiting the liability of, and providing indemnification to, our directors and officers; ● controlling the procedures for the conduct and scheduling of stockholder meetings; and ● providing that directors may be removed prior to the expiration of their terms by the Board of Directors only for cause.
These provisions include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • the ability of our Board of Directors to determine to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the requirement that an annual meeting of stockholders may be called only by the Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; 13 • limiting the liability of, and providing indemnification to, our directors and officers; • controlling the procedures for the conduct and scheduling of stockholder meetings; and • providing that directors may be removed prior to the expiration of their terms by the Board of Directors only for cause.
We have encountered and may continue to encounter the challenges, uncertainties and difficulties frequently experienced in new and rapidly evolving markets, including: ● limited operating experience; ● net losses; ● lack of sufficient customers or loss of significant customers; ● a changing business focus; ● the downward trend in sales of physical DVD and Blu-ray discs; ● rapidly-changing technology for some of the products and services we offer; and ● difficulties in managing potentially rapid growth.
We have encountered and may continue to encounter the challenges, uncertainties and difficulties frequently experienced in new and rapidly evolving markets, including: • limited operating experience; • net losses; • lack of sufficient customers or loss of significant customers; • a changing business focus; 5 • the downward trend in sales of physical DVD and Blu-ray discs; • rapidly-changing technology for some of the products and services we offer; and • difficulties in managing potentially rapid growth.
In addition, we have outstanding a substantial number of options and warrants exercisable for shares of Common Stock that may be exercised in the future. These factors could also make it more difficult for us to raise funds through future offerings of our equity securities. 18 You will incur substantial dilution as a result of certain future equity issuances.
In addition, we have outstanding a substantial number of options and warrants exercisable for shares of our Common Stock that may be exercised in the future. These factors could also make it more difficult for us to raise funds through future offerings of our equity securities. You will incur substantial dilution as a result of certain future equity issuances.
Factors that may be considered a change in circumstances indicating that the carrying value of our reporting units and intangible assets may not be recoverable include a decline in stock price and market capitalization, slower growth rates in our industry or our own operations, and/or other materially adverse events that have implications on the profitability of our business.
Factors that may be considered a change in circumstances indicating that the carrying value of our reporting units and intangible assets may not be recoverable include a decline in stock price and market capitalization, slower growth rates in our industry or our own operations, and/or 6 other materially adverse events that have implications on the profitability of our business.
Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. O ur revenues and earnings are subject to market downturns . Our revenues and earnings may fluctuate significantly in the future.
Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. 10 O ur revenues and earnings are subject to market downturns . Our revenues and earnings may fluctuate significantly in the future.
As a result, you may not receive any return on an investment in our Common Stock unless you sell any shares you hold for a price greater than that which you paid for them. Our ability to raise capital in the future may be limited, which could make us unable to fund our capital requirements.
As a result, you may not receive any return on an investment in our Common Stock unless you sell any shares you hold for a price greater than that which you paid for them. 14 Our ability to raise capital in the future may be limited, which could make us unable to fund our capital requirements.
If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as: ● reducing capital expenditures; ● reducing our overhead costs and/or workforce; ● reducing research and development efforts; ● selling assets; ● restructuring or refinancing our remaining indebtedness; and ● seeking additional funding.
If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as: • reducing capital expenditures; • reducing our overhead costs and/or workforce; • reducing research and development efforts; • selling assets; 8 • restructuring or refinancing our remaining indebtedness; and • seeking additional funding.
A decline in the market price of the Common Stock also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. 19 Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
A decline in the market price of the Common Stock also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
We cannot assure that our existing material weakness will be remediated or that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We cannot assure that our existing material weakness will be remediated or that additional material 15 weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. 13 We have incurred long term losses.
We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. We have incurred long term losses.
We have intellectual property consisting of: ● rights to certain domain names; ● registered service marks on certain names and phrases; ● various unregistered trademarks and service marks; 11 ● film, television and other forms of viewing content; ● know-how; and ● rights to certain logos.
We have intellectual property consisting of: • rights to certain domain names; • registered service marks on certain names and phrases; • various unregistered trademarks and service marks; • film, television and other forms of viewing content; • know-how; and • rights to certain logos.
The market price for the Common Stock could decline, perhaps significantly, as a result of resales or issuances of a large number of shares of the Common Stock in the public market or even the perception that such resales or issuances could occur.
The market price for our Common Stock could decline, perhaps significantly, as a result of resales or issuances of a large number of shares of our Common Stock in the public market or even the perception that such resales or issuances could occur.
Similar rules may apply under state tax laws. On November 1, 2018, we experienced an ownership change with respect to the Bison acquisition. Accordingly, our ability to utilize our NOL carryforwards attributable to periods prior to November 1, 2018 is subject to substantial limitations. These limitations could result in increased future tax payments, which could be material.
Similar rules may apply under state tax laws. On November 1, 2017, we experienced an ownership change with respect to the Bison acquisition. Accordingly, our ability to utilize our NOL carryforwards attributable to periods prior to November 1, 2017, is subject to substantial limitations. These limitations could result in increased future tax payments, which could be material.
As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. With the closure of non-essential retail stores beginning in the spring of 2020, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product.
As part of our Content & Entertainment segment, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. With the closure of non-essential retail stores beginning in the spring of 2020, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the General Corporation Law of the State of Delaware (the "DGCL"), which prevents some stockholders holding more than 15% of our outstanding Common Stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.
Our fifth amended and restated certificate of incorporation and bylaws, as amended, contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors.
The Company's Fifth Amended and Restated Certificate of Incorporation, as amended, and our Second Amended and Restated Bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our Board of Directors.
In addition, our certificate of incorporation authorizes the issuance of 15,000,000 shares of preferred stock. The terms of our preferred stock may be fixed by the company’s board of directors without further stockholder action.
In addition, our certificate of incorporation authorizes the issuance of 15 million shares of preferred stock. The terms of our preferred stock may be fixed by the company’s Board of Directors without further stockholder action.
We identified deficiencies in our internal control that we consider to be material weaknesses in our internal control over financial reporting which existed as of March 31, 2021 and 2022.
We identified deficiencies in our internal control that we consider to be material weaknesses in our internal control over financial reporting which existed as of March 31, 2022 and 2023.
We may experience unanticipated effects of the COVID-19 pandemic. Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the outbreak of COVID-19. The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the year.
We may experience unanticipated effects of the COVID-19 pandemic. 11 Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the outbreak of COVID-19. The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results during recent years.
The Common Stock is presently listed on Nasdaq. On April 4, 2022, we received a letter (the “Notice”) from the Listing Qualifications staff of Nasdaq indicating that the Company no longer meets the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5450(a)(1).
On April 4, 2022, we received a letter (the “Notice”) from the Listing Qualifications staff of Nasdaq indicating that the Company no longer meets the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5450(a)(1). The Notice did not result in the immediate delisting of the Common Stock from Nasdaq.
In January 2018, we announced a strategic alliance with A Metaverse Company, a leading Chinese entertainment company, formerly Starrise Media Holdings Limited, whose ordinary shares are listed on the Hong Kong Stock Exchange (“Metaverse”), to release films in China theatrically and to digital platforms, and to evaluate opportunities to jointly produce Chinese/American film co-productions, and in February and April 2020, we acquired approximately 26% of the outstanding ordinary shares of Metaverse.
In January 2018, we announced a strategic alliance with A Metaverse Company, a leading Chinese entertainment company, formerly Starrise Media Holdings Limited (“Metaverse”), to release films in China theatrically and to digital platforms, and to evaluate opportunities to jointly produce Chinese/American film co-productions, and in February and April 2020, we acquired approximately 26% of the outstanding ordinary shares of Metaverse, which percentage has declined to approximately 17%.
As of March 31, 2022, our directors, executive officers and principal stockholders, those known by us to beneficially own more than 5% of the outstanding shares of our Common Stock, beneficially own, directly or indirectly, in the aggregate, approximately 23.9% of our outstanding Common Stock. Certain of these stockholders are under the common control of one of our directors.
As of June 21, 2023, our directors, executive officers and principal stockholders, those known by us to beneficially own more than 5% of the outstanding shares of our Common Stock, beneficially own, directly or indirectly, in the aggregate, approximately 13.3% of our outstanding Common Stock. Certain of these stockholders are under the common control of one of our directors.
We expect competition to be intense. If we are unable to compete successfully, our business and results of operations will be seriously harmed. The markets for the digital cinema business and the content distribution business are competitive, evolving and subject to rapid technological and other changes.
We expect competition to be intense. If we are unable to compete successfully, our business and results of operations will be seriously harmed. The markets for the content distribution business are competitive, evolving and subject to rapid technological and other changes. We expect the intensity of competition in each of these areas to increase in the future.
Our future success will also depend upon our ability to hire, train, integrate and retain qualified new employees and our inability to do so may have an adverse impact upon our business, financial condition, operating results, liquidity and prospects for growth.
Our future success will also depend upon our ability to hire, train, integrate and retain qualified new employees and our inability to do so may have an adverse impact upon our business, financial condition, operating results, liquidity and prospects for growth. Our success depends on external factors in the motion picture and television industry.
We expect the intensity of competition in each of these areas to increase in the future. Companies willing to expend the necessary capital to create facilities and/or capabilities similar to ours may compete with our business. Increased competition may result in reduced revenues and/or margins and loss of market share, any of which could seriously harm our business.
Companies willing to expend the necessary capital to create facilities and/or capabilities similar to ours may compete with our business. Increased competition may result in reduced revenues and/or margins and loss of market share, any of which could seriously harm our business. In order to compete effectively in each of these fields, we must differentiate ourselves from our competitors.
If we are unable to compete successfully, our business and results of operations will be seriously harmed. 10 Our plan to acquire additional businesses involves risks, including our inability to complete or integrate an acquisition successfully, our assumption of liabilities, dilution of your investment and significant costs. Strategic and financially appropriate acquisitions are a key component of our growth strategy.
Our plan to acquire additional businesses involves risks, including our inability to complete or integrate an acquisition successfully, our assumption of liabilities, dilution of your investment and significant costs. Strategic and financially appropriate acquisitions are a key component of our growth strategy.
R isks Related to Common Stock The liquidity of the Common Stock is uncertain; the limited trading volume of the Common Stock may depress the price of such stock or cause it to fluctuate significantly.
However, the level of these sales has substantially recovered. R isks Related to Common Stock The liquidity of our Common Stock is uncertain; the limited trading volume of our Common Stock may depress the price of such stock or cause it to fluctuate significantly.
Our success will depend in significant part upon the continued performance of our senior management personnel and other key technical, sales and creative personnel. We do not currently have significant “key person” life insurance policies for any of our employees. We currently have employment agreements with our chief executive officer.
Our success will significantly depend on our ability to hire and retain key personnel. Our success will depend in significant part upon the continued performance of our senior management personnel and other key technical, sales and creative personnel. We do not currently have significant “key person” life insurance policies for any of our employees.
We have no obligation to fund the operating loss or the deficit beyond our initial investment, and accordingly, we carried our investment in CDF2 Holdings at $0 as of March 31, 2022 and 2021. 12 The obligations and restrictions under the CHG Lease could have important consequences for CDF2 and CDF2 Holdings, including: ● Limiting our ability to obtain necessary financing in the future; ● restricting us from incurring liens on the digital cinema projection systems financed and from subleasing, assigning or modifying the digital cinema projection systems financed; and ● requiring them to dedicate a substantial portion of their cash flow to payments on their debt obligations, thereby reducing the availability of their cash flow for other uses.
The obligations and restrictions under the CHG Lease could have important consequences for CDF2 and CDF2 Holdings, including: • limiting our ability to obtain necessary financing in the future; • restricting us from incurring liens on the digital cinema projection systems financed and from subleasing, assigning or modifying the digital cinema projection systems financed; and • requiring them to dedicate a substantial portion of their cash flow to payments on their debt obligations, thereby reducing the availability of their cash flow for other uses.
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our securities. 20 We may not be able to maintain the listing of our Common Stock on Nasdaq, which may adversely affect the flexibility of holders of Common Stock to resell their securities in the secondary market.
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our securities.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. 21 In the evaluation, management identified material weaknesses in internal controls related to our financial close and reporting process and information and communication controls.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.
No assurance can be made that, if we were to sell these shares on the Hong Kong Stock Exchange in Hong Kong currency, we would receive the full value in U.S. dollars upon repatriating the proceeds, based on fluctuating currency exchange rates.
No assurance can be made that, if we were to sell these shares on the Hong Kong Stock Exchange in Hong Kong currency, we would receive the full value in U.S. dollars upon repatriating the proceeds, based on fluctuating currency exchange rates. 9 While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect the value of our investment in the Metaverse shares.
Our success depends on external factors in the motion picture and television industry. Our success depends on the commercial success of movies and television programs, which is unpredictable. Operating in the motion picture and television industry involves a substantial degree of risk.
Our success depends on the commercial success of movies and television programs, which is unpredictable. Operating in the motion picture and television industry involves a substantial degree of risk. Each movie and television program is an individual artistic work, and inherently unpredictable audience reactions primarily determine commercial success.
Changes to existing rules and pronouncements, future changes, if any, or the questioning of current practices or interpretations may adversely affect our reported financial results or the way we conduct our business. 17 Our ability to utilize our net operating loss carryforwards in the future is subject to substantial limitations and we may not be able to use some identified net operating loss carryforwards, which could result in increased tax payments in future periods.
Our ability to utilize our net operating loss carryforwards in the future is subject to substantial limitations and we may not be able to use some identified net operating loss carryforwards, which could result in increased tax payments in future periods.
The absence of an active trading market may cause the price per share of the Common Stock to fluctuate significantly. Substantial resales or future issuances of our Common Stock could depress our stock price.
As a result, you may not be able to sell your shares of our Common Stock in short time periods, or possibly at all. The absence of an active trading market may cause the price per share of our Common Stock to fluctuate significantly. Substantial resales or future issuances of our Common Stock could depress our stock price.
Finance, Ltd. provided sale/leaseback financing for digital cinema projection systems that were partially financed as part of the Phase II deployment of our Digital Equipment segment. The CHG Lease is non-recourse to Cinedigm and our subsidiaries, excluding our VIEs, CDF2 and CDF2 Holdings, as the case may be.
CDF2 Holdings has entered into the a lease (the “CHG Lease”) pursuant to which CHG-Meridian U.S. Finance, Ltd. provided sale/leaseback financing for digital cinema projection systems that were partially financed as part of the Phase II deployment of our Digital Equipment segment.
We own approximately 18% of the outstanding ordinary shares of Metaverse, a company that operates in China and whose ordinary shares trade on the Hong Kong Stock Exchange. We have partnered with Metaverse in the past, and continue to do so, with respect to the release of U.S.-sourced content in China and China-sourced content in the U.S.
Metaverse’s ordinary shares are listed on the Hong Kong Stock Exchange, although the trading of such shares was halted on April 1, 2022. We have partnered with Metaverse in the past, and continue to do so, with respect to the release of U.S.-sourced content in China and China-sourced content in the U.S.
In order to compete effectively in each of these fields, we must differentiate ourselves from competitors. Many of our current and potential competitors have longer operating histories and greater financial, technical, marketing and other resources than we do, which may permit them to adopt aggressive pricing policies.
Many of our current and potential competitors may have longer operating histories and greater financial, technical, marketing and other resources than we do, which may permit them to adopt aggressive pricing policies. As a result, we may suffer from pricing pressures that could adversely affect our ability to generate revenues and our results of operations.
Although the Common Stock is listed on Nasdaq, there has been a limited public market for the Common Stock and there can be no assurance that a more active trading market for the Common Stock will develop. As a result, you may not be able to sell your shares of Common Stock in short time periods, or possibly at all.
Although our Common Stock is listed on Nasdaq, there has been a limited public market for our Common Stock and there can be no assurance that a more active trading market for our Common Stock will develop.
There can be no assurance that we regain compliance within such period, or will be granted an extension of time to cure the deficiency.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until October 3, 2022, in which to regain compliance. There can be no assurance that we regain compliance within such period, or will be granted an extension of time to cure the deficiency.
As of March 31, 2022, we had negative working capital, defined as current assets less current liabilities, of $(4.8) million, and cash and cash equivalents totaling $13.1 million, total equity of $41 million, and $4.9 million provided by net cash flows from operating activities.
We have incurred long term losses and have financed our operations principally through equity investments and borrowings. As of March 31, 2023, we had negative working capital, defined as current assets less current liabilities, of $(7.8) million, and cash and cash equivalents of $7.2 million, total equity of $39.1 million, and $8.8 million net cash flows used in operating activities.
As a result, we may suffer from pricing pressures that could adversely affect our ability to generate revenues and our results of operations. Many of our competitors also have significantly greater name and brand recognition and a larger customer base than us.
Many of our competitors also have significantly greater name and brand recognition and a larger customer base than us. If we are unable to compete successfully, our business and results of operations will be seriously harmed.
The industry may continue to be negatively impacted by delays in the production and release schedules of new motion pictures and TV shows, which may negatively affect our business, financial condition, operating results, liquidity and prospects. 16 Our business involves risks of liability claims for media content, which could adversely affect our business, results of operations and financial condition.
The failure to achieve any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. Our business involves risks of liability claims for media content, which could adversely affect our business, results of operations and financial condition.
We may be unable to prevent third parties from acquiring domain names that are similar to or diminish the value of our proprietary rights. Any future debt obligations of ours, and debt obligations of our non-consolidated subsidiaries, could impair our financial flexibility and restrict our business significantly. We do not currently have debt obligations.
We may be unable to prevent third parties from acquiring domain names that are similar to or diminish the value of our proprietary rights. We maintain an amount of outstanding indebtedness, which could impair our ability to operate our business and react to changes in our business, remain in compliance with debt covenants and make payments on our debt.
We face risks associated with our business in China. In November 2017, Bison, a Hong Kong-based entity that does business in mainland China as well as other locations, became our majority owner. We anticipate that Bison’s presence and relationships in China will provide us with assistance in expanding our business to China.
We are subject to risks from our equity investment in a foreign company. In November 2017, Bison, a Hong Kong-based entity that does business in mainland China as well as other locations, became our majority owner, although their ownership has since been reduced to less than 10%.
Removed
However, if we incur debt obligations in the future, such debt obligations could have important consequences for us, including: ● limiting our ability to obtain necessary financing in the future; ● requiring us to dedicate a substantial portion of our cash flow to payments on our debt obligations, thereby reducing the availability of our cash flow to fund working capital, capital expenditures; and ● other corporate requirements that may affect or limit our business activities.
Added
We maintain an amount of outstanding indebtedness, which could impair our ability to operate our business and react to changes in our business, remain in compliance with debt covenants and make payments on our debt.
Removed
CDF2 Holding’s total stockholder’s deficit at March 31, 2022 was $55.6 million.
Added
Our level of indebtedness could require a significant portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities.
Removed
We have incurred long term losses and have financed our operations principally through equity investments and borrowings.
Added
In addition, our current credit facilities contain, and any future credit facilities will likely contain, covenants and other provisions that restrict our operations.
Removed
Accordingly, we are exposed to risks of doing business in China. As a result, the economic, political, legal and social conditions in China could have a material adverse effect on our business.
Added
These restrictive covenants and provisions could limit our ability to obtain future financing, make needed capital expenditures, withstand a future downturn in our business or the 7 economy in general, or otherwise conduct necessary corporate activities, and may prevent us from taking advantage of business opportunities that arise in the future.
Removed
In addition, the legal system in China has inherent uncertainties that may limit the legal protections available in the event of any claims or disputes that we may have with third parties, including our ability to protect the intellectual property we use in China.
Added
The CHG Lease is non-recourse to Cineverse and our subsidiaries, excluding our VIEs, CDF2 and CDF2 Holdings, as the case may be.
Removed
As China’s legal system is still evolving, the interpretation of many laws, regulations and rules is not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit the remedies available in the event of any claims or disputes with third parties.
Added
CDF2 Holding’s total stockholder’s deficit at March 31, 2023 was $59.2 million. We have no obligation to fund the operating loss or the deficit beyond our initial investment, and accordingly, we carried our investment in CDF2 Holdings at $0 as of March 31, 2023 and 2022.
Removed
Some of the other risks related to doing business in China include: ● the Chinese government exerts substantial influence over the manner in which we must conduct our business activities; ● restrictions on currency exchange may limit our ability to receive and use our cash effectively; ● the Chinese government may favor local businesses and make it more difficult for foreign businesses to operate in China on an equal footing, or generally; ● there are increased uncertainties related to the enforcement of contracts with certain parties; and ● more restrictive rules on foreign investment could adversely affect our ability to expand our operations in China As a result of our growing operations in China, these risks could have a material adverse effect on our business, results of operations and financial condition. 14 We are subject to risks from our equity investment in a foreign company.
Added
We currently have employment agreements with our Chief Executive Officer, our President and Chief Strategy Officer, our Chief Operating Officer and Chief Technology Officer, our Chief Legal Officer, and our Chief Financial Officer.
Removed
While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect the value of our investment in the Metaverse shares. Our success will significantly depend on our ability to hire and retain key personnel.
Added
Changes to existing rules and pronouncements, future changes, if any, or the questioning of current practices or interpretations may adversely affect our reported financial results or the way we conduct our business.
Removed
If we do not respond to future changes in technology and customer demands, our financial position, prospects and results of operations may be adversely affected. The demand for our Systems and other assets in connection with our digital cinema business (collectively, our “Digital Cinema Assets”) may be affected by future advances in technology and changes in customer demands.
Added
We experienced subsequent ownership changes under Section 382 on September 15, 2020 and November 1, 2022, which resulted in additional limitations in our ability to utilize our NOL carryforwards attributable to periods prior to September 15, 2020 and November 2022, respectively.
Removed
We cannot assure you that there will be continued demand for our Digital Cinema Assets. Our profitability depends largely upon the continued use of digital presentations at theatres.
Added
The limitations triggered by the September 15, 2020 and November 1, 2022 ownership changes were significantly less substantial than the limitation triggered by the November 1, 2017 ownership change, however.
Removed
Although we have entered into long term agreements with major motion picture studios and independent studios (the “Studio Agreements”), there can be no assurance that these studios will continue to distribute digital content to movie theatres.
Added
We may not be able to maintain the listing of our Common Stock on Nasdaq, which may adversely affect the flexibility of holders of Common Stock to resell their securities in the secondary market. The Common Stock is presently listed on Nasdaq.
Removed
If the development of digital presentations and changes in the way digital files are delivered does not continue or technology is used that is not compatible with our Systems, there may be no viable market for our Systems and related products.
Added
On April 5, 0223, the Company received a notice of delisting as of April 14, 2023 from Nasdaq, and on April 12, 2023, the Company requested a hearing to appeal the delisting notice. Such hearing took place on May 25, 2023 and Nasdaq subsequently agreed to extend the compliance date to July 19, 2023.
Removed
Any reduction in the use of our Systems and related products resulting from the development and deployment of new technology may negatively impact our revenues and the value of our Systems. The demand for DVD products is declining, and we anticipate that this decline will continue.
Added
In the evaluation, management identified material weaknesses in internal controls related to our financial close and reporting process and information and communication controls.
Removed
We anticipate, however, that the distribution of DVD products will continue to generate positive cash flows for the Company for the foreseeable future. Should a decline in consumer demand be greater than we anticipate, our business could be adversely affected. Termination of the MLAs and MLAAs could damage our revenue and profitability.
Removed
The master license agreements with each of our licensed exhibitors (the “MLAs”) are critical to our business as are master license administrative agreements (the “MLAAs”). The MLAs have terms, which expire in 2020 through 2022 and provide the exhibitor with an option to purchase our Systems or to renew for successive one-year periods up to ten years thereafter.
Removed
The MLAs also require our suppliers to upgrade our Systems when Technology is necessary for compliance with DCI Specification becomes commercially available and we may determine to enhance the Systems, which may require additional capital expenditures.
Removed
If any one of the MLAs were terminated prior to the end of its term, not renewed at its expiration or found to be unenforceable, or if our Systems are not upgraded or enhanced as necessary, it would have a material adverse effect on our revenue, profitability, financial condition and cash flows.
Removed
Additionally, termination of MLAAs could adversely impact our servicing business. 15 An increase in the use of alternative movie distribution channels and other competing forms of entertainment could drive down movie theatre attendance, which, if causing significant theatre closures or a substantial decline in motion picture production, may lead to reductions in our revenues.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLEGAL PROCEEDINGS None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 22 PART II
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 16 PART II
Removed
ITEM 2. PROPERTIES We operated from the following leased properties at March 31, 2022. Location Square Feet (Approx.) Lease Expiration Date Primary Use 264 W. 40 th St. 15 th Floor, New York City, NY 10018 5,363 Jan 31, 2025 Office space We do not own any real estate or invest in real estate or related investments. ITEM 3.
Added
ITEM 2. PROPERTIES As of March 31, 2023, our leased Principal Executive Office address is 244 Fifth Avenue, Suite M289, New York, New York 10001; however, we primarily operate as a company with a virtual workforce. We do not own any real estate or invest in real estate or related investments. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table shows the high and low sales prices per share of our Common Stock as reported by Nasdaq for the periods indicated: For the Fiscal Year Ended March 31, 2022 2021 HIGH LOW HIGH LOW April 1 – June 30 $ 1.71 $ 1.14 $ 3.20 $ 0.32 July 1 – September 30 $ 2.63 $ 1.08 $ 2.49 $ 0.55 October 1 – December 31 $ 2.84 $ 1.16 $ 1.09 $ 0.45 January 1 – March 31 $ 1.25 $ 0.64 $ 2.33 $ 0.69 The last reported closing price per share of our Common Stock as reported by Nasdaq on June 29, 2022 was $0.53 per share.
Biggest changeThe following table shows the high and low sales prices per share of our Common Stock as reported by Nasdaq for the periods indicated, as effected by the Reverse Stock Split: For the Fiscal Year Ended March 31, 2023 2022 HIGH LOW HIGH LOW April 1 – June 30 $ 17.20 $ 9.80 $ 34.20 $ 22.80 July 1 – September 30 $ 15.40 $ 7.80 $ 52.60 $ 21.60 October 1 – December 31 $ 12.20 $ 7.60 $ 56.80 $ 23.20 January 1 – March 31 $ 12.20 $ 8.00 $ 25.00 $ 12.80 The reported closing price per share of our Common Stock as reported by Nasdaq on June 21, 2023 was $2.21 per share.
DIVIDEND POLICY We have never paid any cash dividends on our Common Stock or Class B Common Stock and do not anticipate paying any on our Common Stock in the foreseeable future. Any future payment of dividends on our Common Stock will be in the sole discretion of our board of directors.
DIVIDEND POLICY We have never paid any cash dividends on our Common Stock and do not anticipate paying any on our Common Stock in the foreseeable future. Any future payment of dividends on our Common Stock will be in the sole discretion of our Board of Directors.
As of June 29, 2022, there were 59 holders of record of our Common Stock, not including beneficial owners of our Common Stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.
As of June 21, 2023, there were 71 holders of record of our Common Stock, not including beneficial owners of our Common Stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.
PURCHASE OF EQUITY SECURITIES There were no purchases of shares of our Common Stock made by us or on our behalf during the year ended March 31, 2022 and 2021. 23 ITEM 6. [Reserved]
PURCHASE OF EQUITY SECURITIES There were no purchases of shares of our Common Stock made by us or on our behalf during the year ended March 31, 2023 and 2022.
The holders of our Series A 10% Non-Voting Cumulative Preferred Stock are entitled to receive dividends. There were $89 thousand of cumulative dividends in arrears on the Preferred Stock at March 31, 2022. SALES OF UNREGISTERED SECURITIES None.
The holders of our Series A 10% Non-Voting Cumulative Preferred Stock are entitled to receive dividends. There were $87 thousand of cumulative dividends in arrears on our Preferred Stock at March 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES COMMON STOCK Our Common Stock trades publicly on The Nasdaq Global Market (“Nasdaq”), under the trading symbol “CIDM”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES COMMON STOCK Our Common Stock trades publicly on The Nasdaq Capital Market (“Nasdaq”), under the trading symbol “CNVS” following a rebranding announcement on May 22, 2023, when we changed our name from Cinedigm Corp. to Cineverse Corp..
Removed
CLASS B COMMON STOCK On October 31, 2017, we filed our Fifth Amended and Restated Certificate of Incorporation which, in addition to other things, eliminated the Class B Common Stock. Accordingly, no further Class B Common Stock will be issued.
Added
Previously, the Company traded under the trading symbol "CIDM".
Added
SALES OF UNREGISTERED SECURITIES On March 2, 2023, the Company issued 83,000 shares to Dove Family Channel, pursuant to an Asset Purchase Agreement, for a value of $898,339, to acquire the rights to certain intellectual property. The sale of these shares of Common Stock was exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
Added
On February 28, 2023, the Board of Directors of the Company approved a stock repurchase program of up to 0.5 million shares under which the Company is authorized to repurchase Class A shares from time to time in the open market during the following 12 months at its discretion. ITEM 6. [Reserved] 17

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+35 added−120 removed31 unchanged
Biggest changeFollowing is the reconciliation of our consolidated net loss to Adjusted EBITDA: For the Fiscal Year Ended March 31, ($ in thousands) 2022 2021 Net income (loss) $ 2,271 $ (62,905 ) Add Back: Income tax (income) expense (788 ) (315 ) Depreciation and amortization of property and equipment 1,734 4,404 Amortization of intangible assets 2,832 2,515 (Gain) Loss on extinguishment of note payable (2,178 ) 1,498 Interest expense, net 355 4,050 Intangible impairment 1,968 - Change in fair value on equity investment in Metaverse (585 ) 43,518 Other expense, net 471 1,475 Recovery of doubtful accounts (485 ) (122 ) Stock-based compensation and expenses 5,487 2,892 Net income (loss) attributable to noncontrolling interest (59 ) 85 Adjusted EBITDA $ 11,023 $ (2,905 ) Adjustments related to the Cinema Equipment Business Depreciation and amortization of property and equipment (1,160 ) $ (3,916 ) Amortization of intangible assets - (23 ) Stock-based compensation and expenses - 73 Other expense (11 ) - Recovery of doubtful accounts 485 - Income from operations (14,347 ) 4,142 Adjusted negative EBITDA from Content and Entertainment business $ (4,010 ) $ (2,629 ) Recent Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included herein.
Biggest changeFollowing is the reconciliation of our consolidated net loss to Adjusted EBITDA (in thousands): For the Fiscal Year Ended March 31, 2023 2022 Net income (loss) $ (9,694 ) $ 2,271 Add Back: Income tax (income) expense 119 (788 ) Depreciation and amortization 3,763 4,566 Gain on forgiveness of PPP loan — (2,178 ) Employee retention tax credit (2,475 ) — Interest expense 1,290 356 (Increase) decrease in fair value of equity investment in Metaverse, a related party 1,828 (585 ) Impairment of intangible assets — 1,968 Other (income) expense, net 13 (1 ) Provision (recovery) of doubtful accounts 54 (485 ) Stock-based compensation 4,470 5,487 Net loss attributable to noncontrolling interest (39 ) (59 ) Mergers and acquisitions costs 207 354 Transition-related costs 541 116 Adjusted EBITDA $ 76 $ 11,022 Adjustments related to the Cinema Equipment segment Depreciation and amortization $ (326 ) $ (1,160 ) Other expense — (11 ) Recovery of (provision for) doubtful accounts (54 ) 485 Income from operations (8,293 ) (14,347 ) Adjusted negative EBITDA from Content & Entertainment segment $ (8,598 ) $ (4,011 ) Consolidated Adjusted EBITDA (including the results of the Cinema Equipment segment) for the year ended March 31, 2023 decreased by $10.7 million compared to the year ended March 31, 2022.
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.
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 consolidated financial statements are presented fairly and in accordance with GAAP.
The assessment for recoverability is based primarily on our ability to recover the carrying value of its long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the assets the asset is deemed not to be recoverable and possibly impaired.
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 assets the asset is deemed not to be recoverable and possibly impaired.
For the year ended March 31, 2022, cash flows provided by financing activities consisted of payments of approximately $7.8 million in notes payable, $2.0 million in Credit Facility repayments, and $12.4 million received in connection with the issuance Common Stock.
For the year ended March 31, 2022, cash flows provided by financing activities consisted of payments of approximately $7.8 million in notes payable, $2.0 million in Line of Credit Facility repayments, and $12.4 million received in connection with the issuance Common Stock.
Contract Liabilities We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.
Contract Assets and Liabilities We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.
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.
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.
For the year ended March 31, 2022, net cash provided by operating activities is primarily driven by income from operations, excluding non-cash expenses such as depreciation, amortization, recovery for doubtful accounts and stock-based compensation, gain on extinguishment of note payable, including other changes in working capital.
For the year ended March 31, 2022, net cash provided by operating activities was primarily driven by income from operations, excluding non-cash expenses such as depreciation, amortization, recovery for doubtful accounts and stock-based compensation, gain on extinguishment of note payable, including other changes in working capital.
Deferred revenue pertaining to our Content & Entertainment Business includes amounts related to the sale of DVDs with future release dates. Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period.
Deferred revenue pertaining to our Content & Entertainment segment includes amounts related to the sale of DVDs with future release dates. Deferred revenue relating to our Cinema Equipment segment pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period.
It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms. The ending deferred revenue balance, including current and non-current balances, as of March 31, 2022 was $0.2 million.
It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms. The ending deferred revenue balance, including current and non-current balances, as of March 31, 2023 and 2022 was $0.2 million, respectively.
For this reason, we believe Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric. 36 We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net income (loss) from continuing operations as an indicator of operating performance.
For this reason, we believe Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric. 26 We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net income (loss) from continuing operations as an indicator of operating performance.
As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. We are structured so that our cinema equipment business segment operates independently from our Content & Entertainment business.
As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. 18 We are structured so that our Cinema Equipment segment operates independently from our Content & Entertainment segment.
The reduction in VPF revenue on cinema equipment business systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017.
The reduction in VPF revenue on cinema equipment segment 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.
On April 15, 2020, the Company received $2.2 million from East West Bank, the Company’s existing lender, pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
Other Borrowings On April 15, 2020, the Company received $2.2 million from East West Bank, the Company’s existing lender, pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
Our significant accounting policies are discussed in Note 2 – Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Our significant accounting policies are discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
We distribute products for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, NFL, and Scholastic, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital content producers.
We distribute products for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, and the NFL, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital content producers.
The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment.
The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts were eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment.
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. 39
Impact of Inflation The impact of inflation on our operations has not been significant to date. However, there can be no assurance that a sustained high rate of inflation in the future would not have an adverse impact on our operating results. 29
It also provides fee-based support to over 2,843 movie screens as well as directly to exhibitors and other third-party customers in the form of monitoring, billing, collection and verification services.
It also provides fee-based support to over 465 movie screens as well as directly to exhibitors and other third party customers in the form of monitoring, billing, collection and verification services.
For the year ended March 31, 2022, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.
For the years ended March 31, 2023 and 2022, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.
Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our board of directors. 29 FAIR VALUE ESTIMATES Goodwill, Intangible and Long-Lived Assets Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business.
Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors. FAIR VALUE ESTIMATES Goodwill Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business.
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.
Property and Equipment, net and Intangible Assets, net 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.
While CEG benefits from the winter holiday season, we believe the seasonality of motion picture exhibition, is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year. Off-balance sheet arrangements We are not a party to any off-balance sheet arrangements.
While our Content & Entertainment segment benefits from the winter holiday season, we believe the seasonality of motion picture exhibition, is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year. Off-Balance Sheet Arrangements We are not a party to any off-balance sheet arrangements.
Shipping and Handling Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.
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.
ASC 805 specifies criteria to be used in determining whether intangible assets acquired in a business combination must be recognized and reported separately from goodwill. Amounts assigned to goodwill and other identifiable intangible assets are based on independent appraisals or internal estimates.
ASC 805 specifies criteria to be used in determining whether intangible assets acquired in a business combination must be recognized and reported separately from goodwill. Amounts assigned to goodwill and other identifiable intangible assets require judgment, which may be based on independent appraisals or internal estimates.
Extinguishment of PPP Loan For the year ended March 31, 2022, we recognized a gain on extinguishment of note payable of $2.2 million for the forgiveness of PPP loan principal and interest due the approval of our PPP Loan forgiveness application by the U.S. Small Business Administration. This amount represents the entirety of our PPP loan and interest balance.
Gain on Forgiveness of PPP Loan For the year ended March 31, 2022, we recognized a gain on extinguishment of note payable of $2.2 million for the forgiveness of PPP loan principal and interest due the approval of our PPP Loan forgiveness application by the U.S. Small Business Administration.
Our Content & Entertainment segment operates in: (1) ancillary market aggregation and distribution of entertainment content and (2) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.
Our Content & Entertainment segment operates in: (i) ancillary market aggregation and distribution of entertainment content and (ii) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.
During the year ended March 31, 2022, $813 thousand of revenue was recognized that was included in the deferred revenue balance at the beginning of the year. Participations and royalties payable When we use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements.
During the year ended March 31, 2023, $0.2 million revenue was recognized that was included in the deferred revenue balance at the beginning of the year. Participations and Royalties Payable When we use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements.
ASC 805 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquirer (if any) at the acquisition date, measured at their fair values as of that date. ASC 805 also requires the acquirer to recognize contingent consideration (if any) at the acquisition date, measured at its fair value at that date.
ASC 805 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquirer (if any) at the acquisition date, measured at their fair values as of that date.
In addition, as discussed further in Note 2 - Basis of Presentation and Consolidation and Note - Other Interests to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, 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.
In addition, as discussed further in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies and Note 3 - Other Interests to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns CDF2; however, we are not the primary beneficiary of the VIE.
Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares. The Company is not obligated to sell any shares under the ATM Sales Agreement.
Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares.
BUSINESS COMBINATIONS The Company accounts for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “ Intangibles — Goodwill and Other” (“ASC 350”). The excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill.
BUSINESS COMBINATIONS The Company accounts for acquisitions in accordance with FASB Accounting Standard Codification ("ASC") 805, Business Combinations (“ASC 805”), and goodwill in accordance with ASC 350, Intangibles — Goodwill and Other (“ASC 350”). The excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill.
The Company considers the delivery of content through various distribution channels to be a single performance obligation. Physical revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration. Physical goods reserved for sales returns and other allowances are recorded based upon historical experience.
The Company considers the delivery of content through various distribution channels to be a single performance obligation. Revenue from the sale of physical goods is recognized after deducting reserves for sales returns and other allowances. Reserves for potential sales returns and other allowances are recorded based upon historical experience.
We report our financial results in two primary segments as follows: (1) cinema equipment business and (2) content and entertainment business (“Content & Entertainment” or “CEG”). The cinema equipment business segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North America and Australia.
We report our financial results in two reportable segments as follows: (i) Cinema Equipment ("Cinema Equipment") and (ii) Content and Entertainment (“Content & Entertainment”). The Cinema Equipment segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North America.
Asset acquisitions are accounted for by using the cost accumulation model whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on a relative fair value basis. Determining and valuing intangible assets requires judgment.
Asset acquisitions are accounted for by using the cost accumulation model whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on a relative fair value basis. Determining the cost of an acquisition may require judgment in certain circumstances depending on the nature of the asset transferred as consideration.
Our CEG 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. 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.
The 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. Reserves for product returns 22 and other allowances is variable consideration as part of the transaction price.
Cash flow Changes in our cash flows were as follows: For the Fiscal Years Ended March 31, ($ in thousands) 2022 2021 Net cash provided (used in) by operating activities $ 4,879 $ (20,007 ) Net cash used in investing activities (12,302 ) (1,710 ) Net cash provided by financing activities 2,636 24,272 Net increase (decrease) in cash and cash equivalents $ (4,787 ) $ 2,555 37 As of March 31, 2022, we had cash balances of $13.1 million.
Cash Flow Changes in our cash flows were as follows (in thousands): For the Fiscal Year Ended March 31, 2023 2022 Net cash provided (used in) by operating activities $ (8,797 ) $ 4,879 Net cash used in investing activities (1,271 ) (12,302 ) Net cash provided by financing activities 4,158 2,636 Net decrease in cash and cash equivalents $ (5,910 ) $ (4,787 ) As of March 31, 2023 and 2022, we had cash balances of $7.2 million and $13.1 million, respectively.
As of March, 31, 2022 and 2021, the value of our equity investment in Metaverse, using the readily determinable fair value method from the quoted trading price of the Stock Exchange of Hong Kong, was approximately $7.03 million and $6.44 million, respectively, resulting in a change in fair value of approximately $0.59 million and $(43.5) million for the years ended March 31, 2022 and 2021 respectively.
Changes in Fair Value in Metaverse As of March 31, 2022, the value of our equity investment in Metaverse, using the readily determinable fair value method from the quoted trading price of the Stock Exchange of Hong Kong, was $7.0 million, resulting in an increase in fair value of $0.6 million for the year ended March 31, 2022.
For the year ended March 31, 2022, cash flows used in investing activities consisted of proceeds from the sale of investment securities of $0.01 million, purchases of property and equipment of $0.6 million, and $11.7 million related to the purchase of a business.
For the year ended March 31, 2022, cash flows used in investing activities consisted of purchases of property and equipment of $0.3 million, intangible assets of $0.3 million, and $11.7 million related to the purchase of businesses.
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. 32 Principal Agent Considerations We determine whether revenue should be reported on a gross or net basis based on each revenue stream.
The Content & Entertainment segment has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date.
In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B.
The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs. In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B.
Content & Entertainment Business CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”).
The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant. 21 Content & Entertainment Segment The Content & Entertainment segment earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Base Distribution”).
If actual future returns and allowances differ from past experience, adjustments to our allowances may be required. 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 are recognized at the time a feature movie and alternative content are viewed.
If actual future returns and allowances differ from past experience, adjustments to our allowances may be required. The Content & Entertainment segment also has contracts for the theatrical distribution of third party feature movies and alternative content.
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. 33 ASSET ACQUISITIONS An asset acquisition is an acquisition of an asset, or a group of assets, that does not meet the definition of a business as substantially all of the fair value of the gross assets acquired are concentrated in a single or group of similar, identifiable assets.
ASSET ACQUISITIONS An asset acquisition is an acquisition of an asset, or a group of assets, that does not meet the definition of a business as substantially all of the fair value of the gross assets acquired are concentrated in a single or group of similar, identifiable assets.
We have in the past entered into arrangements in connection with activation fees due from our System deployments that had extended payment terms. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.
We have in the past entered into arrangements in connection with activation fees due from our System deployments that had extended payment terms.
When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing 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.
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.
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. 20 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 PPP Loan matures on April 10, 2022 (the “Maturity Date”), accrues interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan.
The PPP Loan was scheduled to mature on April 10, 2022 (the “Maturity Date”), accrued interest at 1% per annum and may be prepaid in whole or in part without penalty.
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”).
On January 5, 2021, the Company submitted its application for forgiveness and, as of June 30, 2021, obtained forgiveness for the full amount. 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”).
The interest accrued during the initial six-month period is due and payable, together with the principal, on the Maturity Date.
No interest payments were due within the initial six months of the PPP Loan and the interest which accrued during the initial six-month period was scheduled to be due and payable, together with the principal, on the Maturity Date.
We believe the combination of: (i) our cash and cash equivalent balances at March 31, 2022 and (ii) expected cash flow from operations, will be sufficient for our operations and capital needs, for at least twelve months from the filing of this report.
We believe our cash and cash equivalent balances as of March 31, 2023 and proceeds from the subsequent issuance of equity (See Note 9 - Subsequent Events ) will be sufficient to support our operations for at least twelve months from the filing of this report.
Additionally, during the year ended March 31, 2022, the Company increased accounts payable by $5.4 million to vendors. Accounts receivable increased due to growth in streaming and acquisitions of Bloody Disgusting, Screambox and DMR. Cash received from VPFs increased from the previous period as theatres reopened and major studios resumed blockbuster releases in the theatrical market.
Additionally, during the year ended March 31, 2022, the Company increased accounts payable by $4.1 million to vendors. Accounts receivable increased due to acquisitions of Bloody Disgusting, Screambox and DMR during the fiscal year ended March 31, 2022.
For the year ended March 31, 2021, cash flows used in investing activities consisted of proceeds from the sale of Metaverse shares of $0.8 million, purchases of property and equipment of $0.06 million, the sale of property and equipment of $0.08 million, and the purchase of intangible assets of $2.5 million related to the asset acquisition.
For the year ended March 31, 2023, cash flows used in investing activities consisted of purchases of property and equipment of $0.7 million, and expenditures to acquire intangible assets of $0.6 million.
Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity.
Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity. The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.
During the year ended March 31, 2022, we sold 5,300,000 shares of Common Stock under the Equity Line Purchase Agreement. Net proceeds from such sales totaled $12.4 million. As of March 31, 2022, there is still approximately $38.0 million available under the 2020 Shelf Registration Statement, and $37.6 million available under the Equity Line Purchase Agreement, to raise additional capital.
As of March 31, 2023, there was approximately $38.0 million available under the 2020 Shelf Registration Statement, and $37.6 million available under the Equity Line Purchase Agreement, to raise additional capital.
During the years ended March 31, 2022 and 2021, an impairment charge of $2.0 million and $0 was recorded to intangible assets. 30 REVENUE RECOGNITION Adoption of ASU Topic 606, “Revenue from Contracts with Customers” We determine revenue recognition by: ● identifying the contract, or contracts, with the customer; ● identifying the performance obligations in the contract; ● determining the transaction price; ● allocating the transaction price to performance obligations in the contract; and ● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
REVENUE RECOGNITION We determine revenue recognition by: • identifying the contract, or contracts, with the customer; • identifying the performance obligations in the contract; • determining the transaction price; • allocating the transaction price to performance obligations in the contract; and • recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
Income Tax Expense For the year ended March 31, 2022, the income tax (benefit) of $(0.8) million represents a $(0.9) tax benefit mainly related to the releases of valuation allowance for a net change of the deferred taxes, resulting from acquisition of Foundation TV.
We recorded an income tax (benefit) of $(0.8) million for the year ended March 31, 2022, related to a $(0.9) million tax benefit release of the valuation allowance resulting from the acquisition of Foundation TV, offset by $0.1 million of state income taxes due to taxable income at the state level and timing differences related to fixed asset depreciation.
Liquidity We have incurred net losses historically and net income for the year ended March 31, 2022 of $2.3 million. As of March 31, 2022, we had an accumulated deficit of $472.3 million and negative working capital of $4.8 million as of March 31, 2022.
As of March 31, 2023, we had an accumulated deficit of $482.4 million and negative working capital of $7.8 million. Net cash used in operating activities for the fiscal year ended March 31, 2023 was $8.8 million. We may continue to generate net losses for the foreseeable future.
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.
Contractual Obligations The following table summarizes our significant contractual obligations as of March 31, 2023 (in thousands): Payments Due Contractual Obligations Total 2024 2025 2026 2027 2028 Thereafter Operating lease obligations $ 1,321 $ 446 $ 415 $ 191 $ 201 $ 68 $ — 28 Seasonality 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.
Depreciation and Amortization Expense on Property and Equipment For the Fiscal Year Ended March 31, ($ in thousands) 2022 2021 $ Change % Change Cinema Equipment Business $ 1,160 3,916 (2,756 ) (70 )% Content & Entertainment 571 461 110 24 % Corporate 3 27 (24 ) (89 )% $ 1,734 $ 4,404 $ (2,670 ) (61 )% Depreciation and amortization expense decreased in our Cinema Equipment Business Segment as the majority of our digital cinema projection systems reached the conclusion of their ten-year useful lives during fiscal years 2022 and 2021.
Depreciation and Amortization For the Fiscal Year Ended March 31, 2023 2022 $ Change % Change Amortization of Intangible Assets $ 2,888 $ 2,832 $ 56 2 % Depreciation of Property and Equipment 875 1,734 (859 ) (98 )% $ 3,763 $ 4,566 $ (803 ) (21 )% For the Fiscal Year Ended March 31, 2023 2022 $ Change % Change Cinema Equipment $ - $ - $ - - Content & Entertainment 2,882 2,830 52 2 % Corporate 6 2 4 67 % $ 2,888 $ 2,832 $ 56 2 % Depreciation expense decreased primarily due to the majority of our digital cinema projection systems reaching the conclusion of their ten-year useful lives during the twelve months ended March 31, 2023.
Impairment of intangible assets During the years ended March 31, 2022 and 2021, we recorded an impairment of $2.0 million and $0 for our customer relationships, respectively, related to our Content & Entertainment Segment.
During the years ended March 31, 2023 and 2022, an impairment charge of $0 and $2.0 million was recorded to intangible assets, respectively. Investment in Metaverse The stock of Metaverse, an investment of the Company, was halted from trading on the Stock Exchange of Hong Kong in April 2022.
The net proceeds to the Company from the sale, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, is approximately $10.1 million. 25 On May 20, 2020, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain investors (the “Investors”) for the purchase and sale of 10,666,666 shares of the Common Stock, at a purchase price of $0.75 per share, in a registered direct offering, pursuant to an effective shelf registration statement on Form S-3 which was declared effective by the Securities and Exchange Commission on May 14, 2020 ( File No. 333-238183) and an applicable prospectus supplement.
On June 14, 2023, under a Securities Purchase Agreement and pursuant to a prospectus supplement which was part of an effective registration statement, the Company agreed to sell in a public offering an aggregate of 2,150,000 shares of our Class A common stock, pre-funded warrants to purchase up to 516,667 shares of Class A common stock, and common warrants to purchase up to 2,666,667 shares of Class A common stock at an effective combined purchase price of $3.00 per share and related common warrant, for aggregate gross proceeds of approximately $8.0 million, before deducting placement agents fees and offering expenses payable by the Company.
For the year ended March 31, 2021, net cash used in operating activities is primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, recovery for doubtful accounts and stock-based compensation, including other changes in working capital.
For the year ended March 31, 2023, net cash used by operating activities was primarily driven by a net loss ($9.7 million), offset by non-cash expenses of stock based compensation ($4.4 million), allowance against advances, a decrease in the valuation of the Company's investment in Metaverse, and non-cash interest expense.
Selling, General and Administrative Expenses For the Fiscal Year Ended March 31, ($ in thousands) 2022 2021 $ Change % Change Cinema Equipment Business $ 1,405 $ 2,155 $ (750 ) (35 )% Content & Entertainment 13,935 9,798 4,137 42 % Corporate 14,211 9,917 4,294 43 % $ 29,551 $ 21,870 $ 7,681 35 % Selling, general and administrative expenses for the year ended March 31, 2022 increased by $8 million primarily due to the acquisitions of Screambox, DMR and Bloody Disguising. $2.4 million increase in personnel costs, $2.2 million in long term incentive plan stock appreciation rights, $0.4 million in computer related expenses and $0.4 million in public relations expenses. 34 Recovery of Doubtful Accounts Recovery of doubtful accounts was $(0.5) million and $(0.1) million for the fiscal years ended March 31, 2022 and 2021, respectively.
Selling, General and Administrative Expenses For the Fiscal Year Ended March 31, 2023 2022 $ Change % Change Cinema Equipment $ 2,645 $ 1,405 $ 1,240 47 % Content & Entertainment 15,073 13,935 1,138 8 % Corporate 19,101 14,211 4,890 26 % $ 36,819 $ 29,551 $ 7,268 20 % For the Fiscal Year Ended March 31, 2023 2022 $ Change % Change Compensation expense $ 20,190 $ 16,030 $ 4,160 21 % Corporate expenses 5,538 5,067 471 9 % Share-based compensation 4,807 5,487 (680 ) (14 )% Other operating expenses 6,284 2,967 3,317 53 % $ 36,819 $ 29,551 $ 7,268 20 % Selling, general and administrative expenses for the year ended March 31, 2023 increased by $7.3 million, across each business segment, primarily due to $3.4 million increase in compensation expense from the acquisitions of Fandor, DMR, and Bloody Disgusting and an increase in severance, offset by a $1.2 million decrease in bonus expense.
Net Income/Loss attributable to common shareholders For the Fiscal Year Ended March 31, ($ in thousands) 2022 2021 $ Change % Change Cinema Equipment Business $ 14,192 $ (6,904 ) $ 21,096 306 % Content & Entertainment (5,369 ) (3,767 ) (1,602 ) (43 )% Corporate (7,053 ) (52,505 ) 45,452 87 % $ 1,770 $ (63,176 ) $ 64,946 103 % 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 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 non-recurring items. The Company also presents certain adjustments to present results exclusive of its Cinema Equipment segment, to better understand the Company's anticipated recurring operations.
Removed
As of March 31, 2022, we had approximately $0.0 million of non-recourse outstanding debt principal that relates to, and is serviced by, our cinema equipment business.
Added
Risks and Uncertainties Our business and prospects are exposed to numerous risks and uncertainties. For more information, see “Item 1A. Risk Factors” in this report. Liquidity We have incurred net losses historically and a net loss for the year ended March 31, 2023 of $9.7 million.
Removed
We have approximately $0.0 million of outstanding debt principal, as of March 31, 2022 that is attributable to our Content & Entertainment and Corporate segments. 24 Risks and Uncertainties The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the year.
Added
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.
Removed
As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. With the closure of non-essential retail stores beginning in the spring of 2020, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product.
Added
The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate. The Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion.
Removed
As part of our Cinema Equipment business, the Company earns revenue when movies are exhibited in theaters. Many movie theaters in the United States slowly re-opened with limited capacities through March 31, 2021, and have since reopened as of March 31, 2022.
Added
On June 28, 2023, the Company was notified in writing by EWB that it intends to extend the maturity date of the Line of Credit Facility to September 15, 2024, subject to definitive documentation. As of March 31, 2023, $5.0 million was outstanding on the Line of Credit Facility.
Removed
The majority of major studios resumed blockbuster films releases during the year which showed an encouraging return of consumer confidence for the theatrical experience. As vaccines became readily available and COVID cases decreased, major studios resumed theatrical releases and there was an uptick in box office revenue during the year ending March 31, 2022.
Added
Under the Line of Credit Facility, the Company is subject to certain financial and nonfinancial covenants including terms which require the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis.
Removed
Longer term, there had been speculation that the future of theatrical release strategies could change as a result of Major Studios being able to release movies simultaneously in theatres and on streaming platforms during the pandemic. If fewer movies are released theatrically, a shift to digital viewing reduces revenue opportunities for virtual print fees and sales of digital cinema equipment.
Added
During the months of April and May 2023, a total of 177 thousand shares of Common Stock were sold under the ATM Sales Agreement for net proceeds of $1.1 million.
Removed
While Studios are still in an experimentation phase regarding theatrical/streaming strategies we are encouraged by the success of recent exclusive theatrical releases such as Sony’s ’Spider-Man: No Way Home’, which became the first movie since the pandemic to hit $1 billion globally with no current plans to release on any streaming platforms.
Added
The shares or pre-funded warrants and related common warrants are immediately exercisable and separable. Each pre-funded warrant is exercisable for one share of Class A common stock.
Removed
Net cash provided by operating activities for the fiscal year ended March 31, 2022 was $4.9 million. Based on these conditions, the Company entered into the following transactions described below.
Added
The pre-funded warrants have a nominal exercise price of $0.001 per share, after the remainder of the full exercise cost was pre-funded to the Company at the closing of the offering and will expire when exercised in full.

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