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Item 1. Financial Statements

2023-02-14 compared with 2022-11-14 · 822 added, 977 removed, 193 unchanged (90% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

September 30,

(In thousands, except share and per share data)

Current assets

2 unchanged sentences

Unbilled revenue

Employee retention tax credit

Prepaid and other current assets

Total current assets

Equity investment in A Metaverse Company, a related party, at fair value

Equity investment in Metaverse, a related party, at fair value

Property and equipment, net

Operating lease right-of use assets, net

Intangible assets, net

Other long-term assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities

Accounts payable and accrued expenses

Line of credit, including unamortized debt issuance costs of $ 165 and $ 0 , respectively (see Note 5)

Line of credit, including unamortized debt issuance costs of $ 133 and $ 0 , respectively

Current portion of deferred consideration on purchase of business

Current portion of earnout consideration on purchase of business

Operating lease liabilities

Deferred revenue

Other current liabilities

Total current liabilities

Deferred consideration on purchase – net of current portion

Earnout consideration on purchase – net of current portion

Operating lease liabilities, net of current portion

Deferred consideration on purchase of business –

net of current portion

Other long-term liabilities

Total liabilities

Commitments and contingencies (see Note 6)

Stockholders’ Equity

Stockholders’

Preferred stock, 15,000,000 shares authorized;

1 unchanged sentence

20 shares authorized;

7 shares issued and 7 shares outstanding at September 30, 2022 and March 31, 2022.

7 shares issued and 7 shares outstanding at December 31, 2022 and March 31, 2022.

Liquidation preference of $ 3,648

Common stock, $ 0.001 par value;

Class A stock 275,000,000 and 275,000,000 shares authorized at September 30, 2022 and March 31, 2022, respectively, 179,316,947 and 176,629,435 shares issued and 178,001,096 and 175,313,584 shares outstanding at September 30, 2022 and March 31, 2022, respectively

Class A Common stock, $ 0.001 par value;

275,000,000 shares authorized at December 31, 2022 and March 31, 2022, 180,225,330 and 176,629,435 shares issued and 178,909,479 and 175,313,584 shares outstanding at December 31, 2022 and March 31, 2022, respectively

Additional paid-in capital

Treasury stock, at cost;

1,315,851 and 1,315,851 Class A common shares at September 30, 2022 and March 31, 2022, respectively

1,315,851 shares

Accumulated deficit

Accumulated other comprehensive loss

Total stockholders’ equity of Cinedigm Corp.

Total stockholders’

equity of Cinedigm Corp.

Deficit attributable to noncontrolling interest

Total liabilities and equity

See accompanying Notes to Condensed Consolidated

Financial Statements

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

CONDENSED CONSOLIDATED STA TEMENTS OF OPERATIONS

(In thousands, except share and per share data)

Three Months Ended

September 30,

Six Months Ended

September 30,

Nine Months Ended

Costs and expenses:

Direct operating (excludes depreciation and amortization shown below)

Direct operating

Selling, general and administrative

Provision (recovery) for doubtful accounts

Depreciation and amortization of property and equipment

Amortization of intangible assets

Depreciation and amortization

Total operating expenses

Income (loss) from operations

Interest expense, net

Operating income (loss)

Interest expense

Gain on forgiveness of PPP loan

Change in fair value of equity investment in Metaverse, a related party

Other (income) expense, net

Employee retention tax credit

Other income (expense)

Income (loss) before income taxes

Income tax benefit (expense)

Income tax benefit

Net income (loss)

3 unchanged sentences

Net income (loss) attributable to common stockholders

Net income (loss) per Class A common stock attributable to common stockholders - basic:

Weighted average number of Class A common stock outstanding:

Net income (loss) per Class A common stock attributable to common stockholders - diluted:

Weighted average number of Class A common stock outstanding:

See accompanying Notes to Condensed Consolidated

Financial Statements

Net income (loss) per share attributable to common stockholders:

Weighted average shares of common stock outstanding:

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended

September 30,

Six Months Ended

September 30,

Nine Months Ended

Net income (loss)

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign exchange translation

Comprehensive income (loss)

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive income (loss) attributable to controlling interests

See accompanying Notes to Condensed Consolidated

Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF

(In thousands, except share data)

A Preferred Stock

Comprehensive

Stockholders’

Non-Controlling

Balances as of March 31, 2021

$ ( 474,080 )

Foreign exchange translation

Stock-based compensation

Issuance of common stock

in connection with a business combination

Preferred stock dividends

paid with common stock

Balances as of June

Foreign exchange translation

Stock-based compensation

Issuance of common stock

in connection with business combinations

Treasury stock in connection

with taxes withheld from employees

Preferred stock dividends

Balances as of September

See accompanying & Notes

to Condensed Consolidated Financial Statements

Comprehensive income (loss)

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF

(In thousands, except share data)

A Preferred Stock

Comprehensive

Stockholders’

Non-Controlling

as of March 31, 2022

exchange translation

stock dividends paid with common stock

stock dividends accrued

income (loss)

as of June 30, 2022

exchange translation

stock dividends paid with common stock

of common stock in connection with performance stock units and annual incentive awards, net of employee payroll taxes

of common stock for BD Earnout commitment

stock dividends accrued

income (loss)

as of September 30, 2022

See accompanying Notes to Condensed Consolidated

Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED ST ATEMENTS OF CASH FLOWS

(In thousands)

Six Months Ended

September 30,

Nine Months Ended

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization of property and equipment and amortization of intangible assets

Depreciation and amortization

Changes in fair value of equity investment in Metaverse

1 unchanged sentence

Impairment of advances

Provision for doubtful accounts

Amortization of debt issuance costs included in interest expense

Stock-based compensation, inclusive of $ 551 withheld for employee payroll taxes for shares not issued

Interest expense for deferred consideration

Interest expense for earnout consideration

Provision (benefit) for doubtful accounts

Amortization of debt issuance costs

Stock-based compensation

Interest expense for deferred consideration & earnouts

Non-monetary sale of content licenses

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

Accounts receivable, net

Unbilled revenue

Prepaids and other current assets, and other long-term assets

Prepaids and other current and long-term assets

Employee retention tax credit

Accounts payable, accrued expenses, and other liabilities

Deferred revenue

Net cash (used in) provided by operating activities

2 unchanged sentences

Purchase of businesses

Sale of equity investment in Metaverse

Sale of investment securities

Net cash used in investing activities

Cash flows from financing activities:

Payments of notes payable

Proceeds (payments) from line of credit, net of debt issuance cost

Net cash provided by (used in) financing activities

Payments of notes payable and deferred consideration

Proceeds from line of credit

Payments on line of credit

Debt issuance costs

Issuance of common stock

Net cash provided by financing activities

Net change in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at end of period

See accompanying Notes to Condensed Consolidated

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

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

(In thousands)

Nine Months Ended

Cash interest paid

Income taxes paid

Noncash investing and financing activities:

Accrued dividends on preferred stock

Issuance of Class A common stock for payment of accrued preferred stock dividends

Issuance of Class A common stock for business combination

Deferred consideration in purchase of business

Earnout consideration in purchase of a business

Earnout consideration paid with common shares of Company

Earnout consideration adjustment

Treasury shares acquired for withholding taxes

Issuance of common stock for Board of Director compensation

CINEDIGM CORP.

CONDENSED CONSOLIDA TED STATEMENTS OF EQUITY

(In thousands, except share data)

Preferred Stock

Comprehensive

Stockholders’

Balances as of March 31, 2021 (Audited)

Foreign exchange translation

Stock-based compensation

Issuance of common stock in connection with a business combination

Preferred stock dividends paid with common stock

Balances as of June 30, 2021

Foreign exchange translation

Stock-based compensation

Issuance of common stock in connection with business combinations

Treasury stock in connection with taxes withheld from employees

Preferred stock dividends

Balances as of September 30, 2021

Foreign exchange translation

Stock-based compensation

Issuance of common stock in connection with equity line purchase commitment

Preferred stock dividends

Issuance of common stock in connection with performance stock units

Issuance of common stock in connection with equity line, net

Preferred stock dividends accrued

Net income (loss)

Balances as of December 31, 2021

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

Preferred Stock

Comprehensive

Stockholders'

Balances as of March 31, 2022 (Audited)

Foreign exchange translation

Stock-based compensation

Preferred stock dividends paid with common stock

Preferred stock dividends accrued

Net income (loss)

Balances as of June 30, 2022

Foreign exchange translation

Stock-based compensation

Preferred stock dividends paid with common stock

Issuance of common stock in connection with performance stock units and annual incentive awards, net of employee payroll taxes

Issuance of common stock for BD Earnout commitment

Preferred stock dividends accrued

Net income (loss)

Balances as of September 30, 2022

Foreign exchange translation

Stock-based compensation

Preferred stock dividends paid with common stock

Issuance of common stock for Board of Director compensation

Preferred stock dividends accrued

Balances as of December 31, 2022

See accompanying Notes to Condensed Consolidated Financial Statements

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF OPERATIONS AND LIQUIDITY

Cinedigm Corp.

(“Cinedigm,” the “Company,”

“we,” “us,” or similar pronouns) was incorporated in Delaware on March 31, 2000.

We are (i) a distributor

and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of

titles and episodes released across digital, physical, theatrical, home and mobile entertainment platforms (“Streaming”) and

(ii) a servicer of digital cinema assets for movie screens in both North America and several international countries.

We report our financial results in two primary segments as follows:

(1) cinema equipment business and (2) content and entertainment business (“Content & Entertainment”).

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.

It also provides fee-based support to music and movie screens as well as directly

to exhibitors and other third-party customers in the form of monitoring, billing, collection and verification services.

Our Content &

Entertainment segment operates in:

(1) ancillary market aggregation and distribution of entertainment content and (2) branded and curated

over-the-top (“OTT”) digital network business providing entertainment channels and applications.

Risks and Uncertainties

The COVID-19 pandemic and related economic repercussions created significant

volatility and uncertainty impacting the Company’s results for the period.

As part of our Content & Entertainment business,

the Company sells DVDs and Blu-ray discs at brick-and-mortar stores.

The COVID-19 pandemic and the related economic impact are likely

to result in sustained volatility and uncertainty, which could have an adverse effect on our business, financial condition and results

of operations.

We have incurred net losses historically and have net loss of

$ 11.6 million for the six months ended September 30, 2022.

We also have an accumulated deficit of $ 484.2 million and negative

working capital of $ 10.1 million as of September 30, 2022.

Net cash used in operating activities for the six months ended

September 30, 2022 was $ 6.3 million.

(“Cinedigm,”

the “Company,”

“we,”

“us,”

or similar pronouns) was incorporated in Delaware on March 31, 2000.

We are (i) a distributor and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of titles and episodes released across digital, physical, theatrical, home and mobile entertainment platforms (“Streaming”) and (ii) a servicer of digital cinema assets for movie screens in both North America and several international countries.

We report our financial results in two reportable segments as follows:

(i) Cinema Equipment Business ("Cinema Equipment") and (ii) Content and Entertainment Business (“Content & Entertainment”).

The Cinema Equipment segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North America.

Our Content & Entertainment segment operates in:

(i) ancillary market aggregation and distribution of entertainment content and (ii) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.

Financial Condition and Liquidity

As of December 31, 2022, the Company has an accumulated deficit of $ 479.2 million and negative working capital of $ 4.5 million .

For the three and nine months ended December 31, 2022, the Company had net income (loss) attributable to common shareholders of $ 4.9 million and ($ 6.9 ) million , respectively.

Net cash used in operating activities for the nine months ended December 31, 2022 was $ 7.9 million .

We may continue to generate net losses for the foreseeable future.

We believe the combination of:

(i) our cash and cash equivalent balances

at September 30, 2022 and (ii) expected cash flow from operations, will be sufficient for our operations and capital needs, for at least

twelve months from the filing of this report.

Our capital requirements will depend on many factors, and we may need to use capital resources

and obtain additional capital.

Failure to generate additional revenues, obtain additional capital or manage discretionary spending could

have an adverse effect on our financial position, results of operations and liquidity.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

Our consolidated financial statements include the accounts of Cinedigm

and its wholly-owned and majority-owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

Investments in which we do not have a controlling interest or are not

the primary beneficiary, but have the ability to exert significant influence, are accounted for under the equity method of accounting.

Noncontrolling interests for which we have been determined to be the primary beneficiary are consolidated and recorded as net loss attributable

to noncontrolling interest.

See Note 3 - Other Interests to the Consolidated Financial Statements for a discussion of

our noncontrolling interests.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity

with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions

that affect the assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements

and the reported amounts of revenue and expenses during the reporting period.

Such estimates include the accrual of digital revenue, accounts

receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, intangible asset impairment

and estimated amortization lives, fair value for asset acquisitions and business combinations, valuation allowances for income taxes and

stock based compensation awards.

Actual results could differ from these estimates.

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments with an original maturity

of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may

exceed the Federal Deposit Insurance Corporation’s insured limits.

We periodically assess the financial condition of the institutions

and believe that the risk of any loss is minimal.

Cash and cash equivalents consisted of the following:

(in thousands)

September 30,

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’

The Line of Credit Facility bears interest at a rate equal to 1.5 % above the prime rate, 9.0 % as of December 31, 2022 .

The Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion.

As of December 31, 2022 , $ 5.0 million was outstanding on the Line of Credit Facility.

We believe our cash and cash equivalent balances, and availability under our credit facility, as of December 31, 2022 will be sufficient to support our operations for at least twelve months from the filing of this report.

The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The accompanying interim Condensed Consolidated Financial Statements of Cinedigm Corp.

have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on July 1, 2022.

These Condensed Consolidated Financial Statements are unaudited and have been prepared by the Company following the rules and regulations of the SEC.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations;

however, the Company believes the disclosures are adequate to make the information presented not misleading.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein.

The interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022.

Interim results are not necessarily indicative of the results for a full year.

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.

Significant items subject to such estimates and assumptions include revenue recognition, allowance for doubtful accounts, returns and recovery reserves, goodwill and intangible asset impairments, share-based compensation expense, valuation allowance for deferred income taxes and amortization of intangible assets.

The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances.

On a regular basis, the Company evaluates the assumptions, judgments and estimates.

Actual results may differ from these estimates.

We own an 85 % interest in CON TV, LLC ("CONtv"), a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

We evaluated the investment under the voting interest entity model and determined that the entity should be consolidated as we have a controlling financial interest in the entity through our ownership of outstanding voting shares, and that other equity holders do not have substantive voting, participating or liquidation rights.

We recorded net loss attributable to noncontrolling interest in our Condensed Consolidated Statements of Operations equal to 11 % of outstanding profit interest units retained by the noncontrolling interests.

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

Reclassifications

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

Cash and Cash Equivalents

EQUITY INVESTMENT IN A METAVERSE COMPANY, A RELATED PARTY

On February 14, 2020, the Company acquired an approximately 11.5 % interest

in A Metaverse Company (“Metaverse”), a leading publicly traded Chinese entertainment company, formerly Starrise Media Holdings

Limited, whose ordinary shares are listed on the Stock Exchange of Hong Kong.

The Company acquired such interest as a strategic investment

and in a private transaction from a shareholder of Metaverse that is related to our major shareholder.

Our major shareholder also maintains

a significant beneficial interest ownership in Metaverse.

Upon consummation of the transaction on February 14, 2020, the Company recorded

an initial investment of approximately $ 25.1 million, which is the fair market value of the Metaverse shares on the transaction date on

the Stock Exchange of Hong Kong, in exchange for the Company’s Class A common stock, par value of $ 0.001 per share (the “Common

Stock”) of $ 11.2 million, valued as of the date of the issuance of the Common Stock of the Company.

The difference in value of shares

received in Metaverse and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital.

On April 10, 2020, the Company purchased an additional 15 % interest

in Metaverse in a private transaction from shareholders of Metaverse that are affiliated with the major shareholder of the Company.

Company recorded an additional equity investment of approximately $ 28.2 million, which is the fair market value of the Metaverse shares

on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $ 11.0 million, valued

at the date of the issuance of the Common Stock of the Company.

The difference in the value of shares received in Metaverse and shares

issued by the Company is deemed as contributed capital and recorded in additional paid-in capital.

This transaction was also recorded

as an equity investment in Metaverse.

The Company has accounted for these investments under the equity method

of accounting as the Company can exert significant influence over Metaverse with its direct ownership and affiliation with the Company’s

majority shareholders.

The Company has made an irrevocable election to apply the fair value option under ASC 825-10, Financial Instruments,

as it relates to its equity investment in Metaverse.

On April 1, 2022, trading of Metaverse’s ordinary shares was

halted on the Hong Kong Stock Exchange.

This investment was previously a Level 1 investment as the shares were being actively traded in

a marketplace.

The investment is recorded at fair value as a Level 3 as there is not an active market or observable inputs.

As of September

30, 2022, Metaverse’s stock valuation is based on an independent valuation based on the market approach is categorized as Level

3 based on unobservable inputs.

ACCOUNTS RECEIVABLE

We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.”

We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits.

We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal.

Accounts Receivable, Net

We maintain reserves for potential credit losses on accounts receivable.

We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness,

current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

Reserves are recorded primarily

on a specific identification basis.

Advances, which are recorded within prepaid and other current assets

on the consolidated balance sheets, represent amounts prepaid to studios or content producers for which we provide content distribution

We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable

as of the consolidated balance sheet date.

Impairments related to advances were $ 0.6 million and $ 0.2 million, for the three

months ended September 30, 2022 and 2021, respectively.

Impairments related to advances were $ 0.6 million and $ 0.4 million, for

the six months ended September 30, 2022 and 2021, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation

and amortization.

Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets

We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

Reserves are recorded primarily on a specific identification basis.

Employee Retention Tax Credit

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") provided an employee retention credit which was a refundable tax credit against certain employment taxes.

The Consolidated Appropriations Act (the "Appropriations Act") extended and expanded the availability of the employee retention credit through December 31, 2021.

The Appropriations Act amended the employee retention credit to be equal to 70 % of qualified wages paid to employees during the 2021 fiscal year.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company qualified for the employee retention credit beginning in June 2020 for qualified wages through September 2021 and filed a cash refund claim during the three months ended September 30, 2022 and December 31, 2022 for $ 0.5 million and $ 2.0 million, respectively.

During the three and nine months ended December 31, 2022 , the Company recorded an employee retention credit totaling $ 2.0 million and $ 2.5 million, respectively, in the Employee retention tax credit line on the Company’s Condensed Consolidated Statements of Operations.

As of December 31, 2022, the tax credit receivable has been included in the Employee retention tax credit line on the Company's Condensed Consolidated Balance Sheet.

Property and Equipment, Net

Property and equipment, net are stated at cost, less accumulated depreciation and amortization.

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

Computer equipment and software

Internal use software

Digital cinema projection systems

1 unchanged sentence

Furniture and fixtures

We capitalize costs associated with software developed or obtained

for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced

capabilities and modifications.

These capitalized costs are included in property and equipment and include external direct cost of services

procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated

with, and who devote time to internal-use software projects.

Capitalization of these costs ceases once the project is substantially complete

and the software is ready for its intended use.

Once the software is ready for its intended use, the costs are amortized over the useful

life of the software.

Internal-Use Software

We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications.

These capitalized costs are included in property and equipment, net and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects.

Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use.

Once the software is ready for its intended use, the costs are amortized over the useful life of the software.

Post-configuration training and maintenance costs are expensed as incurred.

Leasehold improvements are amortized over the shorter of the lease

term or the estimated useful life of the leasehold improvements.

Repair and maintenance costs are charged to expense as incurred.

renewals, improvements and additions are capitalized.

Upon the sale or other disposition of any property and equipment, the cost and related

accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the consolidated

statements of operations.

We amortize internal-use software over its estimated useful life on a straight-line basis.

Impairment of Long-lived and Finite-lived Assets

We review the recoverability of our long-lived assets and finite-lived

intangible assets, when events or conditions occur that indicate a possible impairment exists.

The assessment for recoverability is based

primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net

If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset

is deemed not to be recoverable and possibly impaired.

We then estimate the fair value of the asset to determine whether an impairment

loss should be recognized.

An impairment loss will be recognized if the asset’s fair value is determined to be less than its

carrying value.

We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists.

The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows.

If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired.

We then estimate the fair value of the asset to determine whether an impairment loss should be recognized.

An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value.

Fair value is determined by computing the expected future discounted cash flows.

During the three and six months

ended September 30, 2022 and 2021, no impairment charge was recorded from operations for long-lived assets or finite-lived assets.

INTANGIBLE ASSETS

During the nine months ended December 31, 2022 and 2021 , no impairment charges were recorded from operations for long-lived assets or finite-lived assets.

Intangible Assets, Net

Intangible assets are stated at cost less accumulated amortization.

For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives

of the related assets.

For intangible assets with indefinite lives, the assets are tested annually for impairment or sooner if a triggering

event occurs.

During the three and six months ended September 30, 2022 and 2021, no impairment charge was recorded for intangible assets.

During the three months ended September 30, 2022 and 2021, the Company had an amortization expense of $ 0.7 million and $ 0.7 million, respectively.

During the six months ended September 30, 2022 and 2021, the Company had an amortization expense of $ 1.5 million and $ 1.5 million, respectively.

Amortization lives of the respective assets as follows:

For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets.

For intangible assets with indefinite lives, the assets are tested annually for impairment or sooner if a triggering event occurs.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Amortization lives of intangible assets are as follows:

Content Library

Customer Relationships

Supplier Agreements

Advertiser Relationships and Channel

The Company’s intangible assets included the following on September

Content Library

Customer Relationships

Theatre Relationship

Trademarks and Tradenames

Supplier Agreements

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

As of December 31, 2022

Content Library

Advertiser Relationships and Channel

Customer Relationships

Trademark and Tradenames

Total Intangible Assets

The Company’s intangible assets included

the following on March 31, 2022:

As of March 31, 2022

Content Library

Advertiser Relationships and Channel

Customer Relationships

Theatre Relationship

Trademark and Tradenames

Supplier Agreements

Advertiser relationships and Channel

Total Intangible Assets

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

During the nine months ended December 31, 2022 and 2021, no impairment charge was recorded for intangible assets.

During the three and nine months ended December 31, 2022, the Company had amortization expense of $ 0.7 million and $ 2.2 million , respectively.

During the three and nine months ended December 31, 2021, the Company had amortization expense of $ 0.7 million and $ 2.2 million , respectively.

During the three months ended December 31, 2022 , the Company entered into a non-monetary transaction for the purchase and sale of content licenses with an unrelated third-party.

The fair value of the content licenses sold was determined to be $ 1.0 million which is included in Revenues in our Condensed Consolidated Statement of Operations for the three months ended December 31, 2022 .

The fair value of the content licenses purchased was determined to be $ 1.0 million and is recognized in Intangible Assets, Net on our Condensed Consolidated Balance Sheet as of December 31, 2022.

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

Remainder of fiscal year 2023

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business.

Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.

Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations.

To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.

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

The Company reassessed goodwill impairment on its annual measurement date of March 31, 2022 by performing a qualitative analysis and determined that it was not more likely than not that the fair value of its reporting unit is less than its carrying amount.

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

Fair Value Measurements

The fair value measurement disclosures are grouped into three levels

based on valuation factors:

● Level 1 – quoted prices in active markets for identical investments

● Level 2 – other significant observable inputs (including quoted

prices for similar investments and market corroborated inputs)

● Level 3 – significant unobservable inputs (including our own

assumptions in determining the fair value of investments)

The equity investment in Metaverse is in Hong Kong dollars and was

translated into US dollars as of September 30, 2022 and March 31, 2022 at an exchange rate of 7.8 and 7.8 Hong Kong Dollars to 1 US Dollar,

respectively.

The fair value of this equity investment was measured by the quoted market price of Metaverse on the Stock Exchange of Hong

Kong as of March 31, 2022.

On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange and

as of September 30, 2022, Metaverse’s stock valuation is based on an independent valuation based on the market approach and is categorized

as Level 3 based on unobservable inputs.

The Company estimated the fair value based on the market approach based on the last known enterprise

value adjusting for trends in value from comparable companies.

The adjustment to fair value of this investment resulted in a loss of $ 1.8

million and gain of $ 1.0 million for the six months ended September 30, 2022 and 2021, respectively.

As the value of the investment in

Metaverse is determined based on unobservable inputs, company and industry fluctuations, as well as general economic, political, regulatory

and market conditions such as recessions, interest rate changes or international currency fluctuations, changes to these assumptions may

have a significant impact on the fair value of our investment in Metaverse.

The following tables summarize the levels of fair value measurements

of our financial assets and liabilities as of September 30, 2022 and March 31, 2022:

As of September 30, 2022

(in thousands)

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

Level 1 –

quoted prices in active markets for identical investments

Level 2 –

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

Level 3 –

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

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

As of December 31, 2022

Equity investment in Metaverse, at fair value

1 unchanged sentence

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

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of March 31, 2022

(in thousands)

Equity investment in Metaverse, at fair value

1 unchanged sentence

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

Our cash and cash equivalents, accounts receivable, unbilled revenue

and accounts payable and accrued expenses are financial instruments and are recorded at cost in the consolidated balance sheets.

The estimated

fair values of these financial instruments approximate their carrying amounts because of their short-term nature.

ASSET ACQUISITIONS

An asset acquisition is an acquisition of an asset, or a group of assets,

that does not meet the definition of a business.

Asset acquisitions are accounted for by using the cost accumulation model whereby the

cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values.

Goodwill is the excess of the purchase price paid over the fair value

of the net assets of an acquired business.

Goodwill is tested for impairment on an annual basis or more often if warranted by events or

changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.

Inherent in the fair value determination for each reporting unit are

certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators

and market conditions, and assumptions about our strategic plans with regard to its operations.

To the extent additional information arises,

market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired

could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position

or results of operations.

The Company has the option to assess goodwill

for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting

unit is less than its carrying amount or to perform the quantitative impairment test.

The Company reassessed goodwill impairment on its

annual measurement date of March 31, 2022 by performing a qualitative analysis and determined that it was not more likely than not that

the fair value of its reporting unit is less than its carrying amount.

impairment charge was recorded in the three and six months ended September 30, 2022 and 2021.

During the six months ended September 30,

2022, the Company recorded a $ 59 thousand reduction in goodwill as a result from working capital true-up related to DMR.

The Company's equity investment in A Metaverse Company ("Metaverse") is in Hong Kong dollars and was translated into US dollars as of December 31, 2022 and March 31, 2022 at an exchange rate of 7.8 Hong Kong Dollars to 1 US Dollar.

The fair value of this equity investment was measured by the quoted market price of Metaverse on the Stock Exchange of Hong Kong (SEHK:

1616) as of March 31, 2022.

On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange.

As of December 31, 2022, Metaverse’s stock valuation is based on an independent valuation based on the market approach and is categorized as Level 3 based on unobservable inputs.

The Company estimated the fair value based on the market approach based on the last known enterprise value adjusting for trends in value from comparable companies.

The adjustment to fair value of this investment resulted in a loss of $ 1.8 million and gain of $ 1.5 million for the nine months ended December 31, 2022 and 2021, respectively.

As the value of the investment in Metaverse is determined based on unobservable inputs, company and industry fluctuations, as well as general economic, political, regulatory and market conditions such as recessions, interest rate changes or international currency fluctuations, changes to these assumptions may have a significant impact on the fair value of our investment in Metaverse.

Our cash and cash equivalents, accounts receivable, unbilled revenue, accounts payable and accrued expenses are financial instruments and are recorded at cost in the Condensed Consolidated Balance Sheets.

The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature.

Prepaid and Other Current Assets

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

Due from producers

Other receivables

Other prepaid expenses

Total prepaid and other current assets

Advances represent amounts prepaid to studios or content producers for which we provide content distribution services.

We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable.

Impairments related to advances were $ 1.0 million and $ 0.4 million for the three months ended December 31, 2022 and 2021, respectively.

Impairments related to advances were $ 1.6 million and $ 0.8 million for the nine months ended December 31, 2022 and 2021 , respectively.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted

of the following:

(In thousands)

September 30,

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

Accounts payable

3 unchanged sentences

Total accounts payable and accrued expenses

PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of

the following:

(In thousands)

September 30,

Other receivables

Due from producers

Other prepaid expenses

Total prepaid and other current assets

Prepaid and other assets increased by $ 2.3 million primarily related

to a $ 1.5 million increase in advances paid to Hallmark and digital streaming TV partners and a $ 0.5 increase in distribution related

expenses to be reimbursed by the licensors.

Revenue Recognition

Payment terms and conditions vary by customer and typically provide

net 30 to 90 day terms.

We do not adjust the promised amount of consideration for the effects of a significant financing component when

we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for

that product or service will be one year or less.

We have in the past entered into arrangements in connection with activation fees due

from our System deployments that had extended payment terms.

The outstanding balances on these arrangements are insignificant and hence

the impact of significant financing would be insignificant.

Revenues from our Cinema Equipment Business derived from the collection

of VPFs from motion picture studios are seasonal, coinciding with the timing of releases of movies by the motion picture studios.

motion picture studios release the most marketable movies during the summer and the winter holiday season.

The unexpected emergence of

a hit movie during other periods can alter the traditional trend.

The timing of movie releases can have a significant effect on our results

of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other quarter.

Content Entertainment & Business benefits from the winter holiday season, we believe the seasonality of motion picture exhibition

is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year.

Cinema Equipment Business

Our Cinema Equipment Business consists of financing

vehicles and administrators for Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical

exhibitors and for Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

We retain ownership of our Systems and the residual cash flows related

to the Systems in Phase I Deployment after the end of the 10 -year deployment payment period.

For certain Phase II Deployment Systems, we do not retain ownership

of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration

of the exhibitor master license agreements.

The Cinema Equipment Business also provides monitoring, data collection,

serial data verification and management services to this segment, as well as to exhibitors who purchase their own equipment, in order

to collect virtual print fees (“VPFs”) from distributors and Alternative Content Fees (“ACFs”) from alternative

content providers, and to distribute those fees to theatrical exhibitors (collectively, “Services”).

VPFs are earned, net of administrative fees, pursuant to contracts

with distributors, whereby amounts are payable by a distributor to Phase I Deployment and to Phase II Deployment when distributor's movies

are displayed on screens utilizing our Systems installed in movie theatres.

VPFs are earned and payable to us with respect to Phase I

Deployment based on a defined fee schedule until the end of the VPF term.

One VPF is payable for every digital title initially displayed

The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given

accounting period.

VPF revenue is recognized in the period the title first plays for general audience viewing in a digital projector equipped

movie theatre.

The Phase 1 Deployment’s and Phase 2 Deployments performance obligations for revenue recognition are met at this

Phase II Deployment’s agreements with distributors require the

payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed;

however, Phase II Deployment

may no longer collect VPFs once “cost recoupment,” as defined in the contracts with distributors, is achieved.

Cost recoupment

will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows,

including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including

service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter.

Company evaluated the constraining estimates related to the variable consideration, that it is not probable to conclude at this point

in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the

variable consideration is subsequently resolved.

Under the terms of our standard cinema equipment licensing agreements,

exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time,

they have the option to:

(1) return the Systems to us;

(2) renew their license agreement for successive one-year terms;

or (3) purchase

the Systems from us at fair market value.

Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms.

We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less.

We have in the past entered into arrangements in connection with activation fees due from our System deployments that had extended payment terms.

The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.

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

Three Months Ended

Nine Months Ended

Cinema Equipment:

Digital system sales

Total Cinema Equipment revenue

Content & Entertainment:

Base distribution business

OTT streaming and digital

Total Content & Entertainment revenue

Total revenue

Cinema Equipment Segment

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

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

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

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

VPFs are earned, net of administrative fees, pursuant to contracts with distributors, whereby amounts are payable by a distributor to Phase I Deployment and to Phase II Deployment when distributor's movies are displayed on screens utilizing our Systems installed in movie theatres.

VPFs are earned and payable to us with respect to Phase I Deployment based on a defined fee schedule until the end of the VPF term.

One VPF is payable for every digital title initially displayed per System.

The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period.

VPF revenue is recognized in the period the title first plays for general audience viewing in a digital projector equipped movie theatre.

The Phase 1 Deployment’s and Phase 2 Deployment's performance obligations for revenue recognition are met at this time.

Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed;

however, Phase II Deployment may no longer collect VPFs once “cost recoupment,”

as defined in the contracts with distributors, is achieved.

Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter.

The Company evaluated the constraining estimates related to the variable consideration and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.

Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to:

(i) return the Systems to us;

(ii) renew their license agreement for successive one-year terms;

or (iii) purchase the Systems from us at fair market value.

As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors.

Cinedigm recognizes revenue once the customer takes possession of the Systems and Cinedigm received the sale proceeds.

Such sales were

originally contemplated as the conclusion of the digital cinema deployment plan.

The Cinema Equipment Business earns an administrative fee of approximately 5 %

of VPFs collected and, in addition, earns an incentive service fee equal to 2.5 % of the VPFs earned by Phase 1 DC.

This administrative

fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at that time the related

VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres.

fees are recognized as a point in time revenue when the corresponding VPF fees are due from the distributors.

A limited number of systems from our Phase I deployment remain eligible

for VPFs from certain distributors where Phase I exhibitors have renewed their term on an annual basis.

We continue to pursue system sales

for these remaining exhibitors.

Our Phase II deployment currently consists of a limited number of exhibitors who purchased their own systems

and have not yet reached recoupment or the end of their contractual term.

We continue to administer VPFs for these limited systems from

certain distributors.

Content & Entertainment Business

Content & Entertainment Business earns fees for the distribution

of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD”

or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base

Distribution Business”).

Cinedigm recognizes revenue once the customer takes possession of the Systems and Cinedigm receives the sale proceeds.

Such sales were originally contemplated as the conclusion of the digital cinema deployment plan.

The Cinema Equipment segment earns an administrative fee of approximately 5 % of VPFs collected and, in addition, earns an incentive service fee equal to 2.5 % of the VPFs earned by Phase 1 Deployment.

This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at the time the related VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres.

The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the distributors.

A limited number of systems from our Phase I deployment remain eligible for VPFs from certain distributors where Phase I exhibitors have renewed their term on an annual basis.

We continue to pursue system sales for these remaining exhibitors.

Our Phase II deployment currently consists of a limited number of exhibitors who purchased their own systems and have not yet reached recoupment or the end of their contractual term.

We continue to administer VPFs for these limited systems from certain distributors.

During the three and nine months ended December 31, 2022, $ 7.4 million and $ 9.1 million of revenue was recognized that was included in the accounts payable balance as constrained variable consideration at the beginning of the year.

The Company recognized the revenue once the uncertainty associated with the variable consideration was resolved.

As of December 31, 2022 , approximately $ 1.0 million remains on our balance sheet in accounts payable as constrained variable consideration.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Content & Entertainment Segment

Content & Entertainment segment earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD”

or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue”

or “Base Distribution Business”).

Fees earned are typically a percentage based on the net amounts received from our customers.

upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies.

The Company’s performance

obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”)

on the digital platforms, and shipment of DVDs and Blu-ray Discs.

Revenue is recognized at the point in time when the content is available

for subscription on the digital platform (the company’s digital content is considered functional IP), at the time of shipment for

physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred

to the customer.

Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies.

The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”) on the digital platforms, and shipment of DVDs and Blu-ray Discs.

Revenue is recognized at the point in time when the content is available for subscription on the digital platform (the Company’s digital content is considered functional IP), at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer.

The Company considers the delivery of content through various distribution channels to be a single performance obligation.

Physical revenue from the sale of physical goods is recognized after deducting the reserves for sales returns and other allowances, which

are accounted for as variable consideration.

Reserves for potential sales returns of physical goods and other allowances

are recorded based upon historical experience.

If actual future returns and allowances differ from past experience, adjustments to our

allowances may be required.

Content & Entertainment Business also has contracts for the theatrical

distribution of third party feature movies and alternative content.

Content & Entertainment Business’s distribution fee revenue

and Content & Entertainment Business’s participation in box office receipts are recognized at the time a feature movie and alternative

content are viewed.

Content & Entertainment Business has the right to receive or bill a portion of the theatrical distribution fee

in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution

revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date.

The Company follows the five-step model established by ASC 606 when

preparing its assessment of revenue recognition

We have omitted disclosure on the transaction price allocated to remaining

performance obligations and estimated timing of revenue recognition as our contracts with customers that have a duration of more than

one year are immaterial.

Revenue from the sale of physical goods is recognized after deducting reserves for sales returns and other allowances.

Reserves for potential sales returns of physical goods and other allowances are recorded based upon historical experience.

If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

The Content & Entertainment segment also has contracts for the theatrical distribution of third-party feature movies and alternative content.

The Content & Entertainment segment’s distribution fee revenue participation in box office receipts are recognized at the time a feature movie and alternative content are viewed.

The Content & Entertainment segment has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third-party feature movie's or alternative content’s theatrical release date.

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

Principal Agent Considerations

Revenue earned by our Content & Entertainment Business from the

delivery of digital content and physical goods may be recognized gross or net depending on the terms of the arrangement.

whether revenue should be reported on a gross or net basis based on each revenue stream.

Key indicators that we use in evaluating gross

versus net treatment include, but are not limited to, the following:

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

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

Revenue earned by our Content & Entertainment segment from the delivery of digital content and physical goods may be recognized gross or net depending on the terms of the arrangement.

We determine whether revenue should be reported on a gross or net basis based on each revenue stream.

Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:

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

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

Shipping and Handling

Shipping and handling costs are incurred to move physical goods (e.g.,

DVDs and Blu-ray Discs) to customers.

We recognize all shipping and handling costs as an expense in cost of goods sold because we are

responsible for delivery of the product to our customers prior to transfer of control to the customer.

Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers.

We recognize all shipping and handling costs as an expense in direct operating expenses because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Credit Losses

We maintain reserves for potential credit losses on accounts receivable.

We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness,

current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

Reserves are recorded primarily

on a specific identification basis.

Our Content & Entertainment Business recognizes accounts receivable,

net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale.

for product returns and other allowances is variable consideration as part of the transaction price.

If actual future returns and allowances

differ from past experience, adjustments to our allowances may be required.

During the three and six months ended September 30, 2021 and 2022,

we did not recognize any credit losses or reversals of previously recorded provisions, and did not have any write-offs charged against

the allowance.

Reserves are recorded primarily on a specific identification basis.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Our Content & Entertainment segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale.

Reserves for product returns and other allowances is variable consideration as part of the transaction price.

If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

During the three and nine months ended December 31, 2022 and 2021, we did not recognize any credit losses or reversals of previously recorded provisions, and did not have any write-offs charged against the allowance.

Contract Liabilities

We generally record a receivable related to revenue when we have an

unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received

or due in advance of our performance, even if amounts are refundable.

Deferred revenue pertaining to our Content & Entertainment Business

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

Deferred revenue relating to our Cinema & Equipment Business pertains

to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment

It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment

The ending deferred revenue balance, including current and non-current

balances, as of September 30, 2022 was $ 0.3 million.

For the three and six months ended September 30, 2022, the additions to our

deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the

reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations,

both of which were in the ordinary course of business.

recognized as of the six months ended September 30, 2022 and 2021 that was included in deferred revenue at the beginning of the year was

$ 0.2 million and $ 0.8 million, respectively.

Revenue recognized as of the three months ended September 30, 2022 and 2021 that was included

in deferred revenue at the beginning of the quarter was $ 0.4 million and $ 0.3 million, respectively.

We expect to recognize substantially

all of the deferred revenue as of September 30, 2022 as revenue in the next three months ending December 31, 2022.

During the quarter

ended September 30, 2022, $ 1.7 million of revenue was recognized that was included in the accounts payable balance as constrained variable

consideration at the beginning of the year.

The Company recognized the revenue related once the uncertainty associated with the variable

consideration was resolved .

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

Deferred revenue pertaining to our Content & Entertainment segment includes amounts related to 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 and December 31, 2022 was $ 0.2 million and $ 0.4 million , respectively.

For the three and nine months ended December 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.

Participations and royalties payable

When we use third parties to distribute company owned content, we record

participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements.

When we provide content distribution

services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements.

When we use third-parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements.

When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements.

We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.

Disaggregation of Revenue

The Company disaggregates revenue into different revenue categories

for the Cinema Equipment and Content & Entertainment Businesses.

The Cinema Equipment Business revenue categories are:

Phase I Deployment

revenue, Phase II Deployment revenue, Services, and Digital System Sales, and the Content & Entertainment Business revenue categories

Base Distribution Business and OTT Streaming and Digital.

The following tables present the Company’s revenue categories

for the three and six months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended

September 30,

Cinema Equipment Business:

Phase I Deployment

Phase II Deployment

Digital System Sales

Total Cinema Equipment Business revenue

Content & Entertainment Business:

Base Distribution Business

OTT Streaming and Digital

Total Content & Entertainment Business revenue

Concentrations

For the three months ended September 30, 2022, three customers, Amazon.com,

Inc., Distribution Solutions, a division of Alliance Entertainment, and Tubi, represented 35 % and 11 %, and 10 % respectively, of Content

& Entertainment Business revenues, and approximately 19 %, and 2 % and 11 %, respectively, of our consolidated

For the six months ended September 30, 2022, three customers, Amazon.com, Inc., Distribution Solutions,

a division of Alliance Entertainment, and Tubi, represented 35 % and 20 %, and 16 % respectively, of Content

& Entertainment Business revenues, and approximately 15 %, and 5 % and 9 %, respectively, of our consolidated

For the three months ended September 30, 2021, Amazon.com, Inc.

Solutions, a division of Alliance Entertainment and Tubi, represented 39 %, 5 % and 12 %, respectively, of Content

& Entertainment Business revenues and approximately 26 %, 3 % and 8 %, respectively, of our consolidated revenues.

the six months ended September 30, 2021, Amazon.com, Inc.

Distribution Solutions, a division of Alliance Entertainment and Roku,

Inc., represented 30 %, 8 % and 12 %, respectively, of Content & Entertainment Business revenues

and approximately 19 %, 5 % and 7 %, respectively, of our consolidated revenues.

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

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

For the three months ended December 31, 2021, Amazon.com, Inc., Distribution Solutions, a division of Alliance Entertainment and Tubi, represented 15 % , 11 % and 7 % , respectively, of Content & Entertainment segment revenues and approximately 13 % , 9 % and 6 % , respectively, of our consolidated revenues.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine months ended December 31, 2021, Amazon.com, Inc.

Distribution Solutions, a division of Alliance Entertainment and Roku, Inc., represented 24 % , 9 % and 10 % , respectively, of Content & Entertainment segment revenues and approximately 17 % , 6 % and 7 % , respectively, of our consolidated revenues.

Direct Operating Costs

Direct operating costs consist of operating costs such as cost of revenue,

fulfillment expenses, shipping costs, property taxes and insurance on Systems, royalty expenses, impairments of advances, and marketing

and direct personnel costs.

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

Stock-based Compensation

The Company issues stock-based awards to employees and non-employees,

generally in the form of restricted stock, restricted stock units, stock appreciation rights and performance stock units.

accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC

ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications

to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values.

The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments

based on the fair value of the award on the grant date.

That cost is recognized on a straight-line basis over the period during which

the employee and nonemployee is required to provide service in exchange for the award.

The fair values of options and stock appreciation

rights are calculated as of the date of grant using the Black-Scholes option pricing model based on key assumptions such as stock price,

expected volatility and expected term.

The Company’s estimates of these assumptions are primarily based on the trading price of

the Company’s stock, historical data, peer company data and judgment regarding future trends and factors.

Forfeitures are recognized

as they occur.

The Company accounts for income taxes using the asset and liability

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating

loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective

Valuation allowances are established when management is unable to conclude

that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized.

The Company is primarily

subject to income taxes in the United States.

The Company accounts for uncertain tax positions in accordance with

an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes) , which clarified the accounting for

uncertainty in tax positions.

This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial

statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority.

The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the

tax position may be challenged.

If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount

of tax benefit that is more than 50 % likely to be recognized upon ultimate settlement with the taxing authority is recorded.

has no uncertain tax positions as of September 30, 2022.

NET LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic and diluted net loss per common share has been calculated

Basic net income (loss) per common share attributable to common stockholders

Net loss attributable to common stockholders

Weighted average number of common stock

outstanding during the period

Diluted net income (loss) per common share attributable to common stockholders

Net loss attributable to common stockholders

Weighted average number of common stock

outstanding during the period plus potential dilutive shares

Stock issued and treasury stock repurchased or reacquired during the

period are weighted for the portion of the period that they are outstanding.

We incurred net loss for the three and six months ended September 30,

2022, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 9,664,050 shares

as of September 30, 2022, was excluded from the computations of loss per share as their impact would have been anti-dilutive.

We had net income for the six months ended September 30, 2021, and

therefore the impact of potentially dilutive common shares from outstanding stock options, stock appreciation rights, and warrants, totaling

3,219,141 shares for the six months ended September 30, 2021, respectively, was included in the computations of diluted earnings per share.

For the three months ended September 30, 2021, 11,937,243 potentially dilutive shares have been excluded from the diluted loss per share

as their impact would have been antidilutive.

We had a net loss for the three months ended September 30, 2021 and therefore no dilution

as basic and diluted loss per share are the same for the period.

The calculation of diluted net income per share for the six months ended

September 30, 2021 does not include the impact of 8,718,102 potentially dilutive shares relating to stock options, stock appreciation

rights, and warrants as their impact would have been anti-dilutive as their exercise prices are above the Company’s average Common

Stock price during the period.

COMPREHENSIVE LOSS

For the three and six months ended September 30, 2022 and 2021, comprehensive

loss consisted of net loss and foreign currency translation adjustments.

The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock, restricted stock units, stock appreciation rights ("SARs") and performance stock units ("PSUs").

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”).

ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) based on their fair values.

The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date.

That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award.

The fair values of options and SARs are calculated as of the date of grant using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility, risk-free rate and expected term.

The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors.

Forfeitures are recognized as they occur.

The Company accounts for income taxes using the asset and liability method.

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.

Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized.

The Company is primarily subject to income taxes in the United States.

The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes) , which clarified the accounting for uncertainty in tax positions.

This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not”

to be sustained were it to be challenged by a taxing authority.

The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged.

If an uncertain tax position meets the “more-likely-than-not”

threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded.

The Company has no uncertain tax positions as of December 31, 2022 .

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Earnings per Share

Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares include stock options and warrants outstanding during the period, using the treasury stock method.

Potentially dilutive common shares are excluded from the computations of diluted income (loss) per share if their effect would be anti-dilutive.

A net loss available to common stockholders causes all potentially dilutive securities to be anti-dilutive and are not included.

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

Three Months Ended

Nine Months Ended

Basic net income (loss) per share:

Net income (loss) attributable to common stockholders

Shares used in basic computation:

Weighted-average shares of common stock outstanding

Basic net income (loss) per share

Shares used in diluted computation:

Weighted-average shares of common stock outstanding

Stock options and SARs

Weighted-average number of shares

Diluted net income (loss) per share

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

Three Months Ended

December 31, 2022

Nine Months Ended

December 31, 2022

Stock options

For the three and nine months ended December 31, 2021, 12,088,473 and 8,484,982 , respectively, potentially dilutive shares have been excluded from the diluted loss per share as their impact would have been antidilutive.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments

– Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which

provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets.

Such guidance will

impact how the Company determines its allowance for estimated uncollectible receivables and evaluates its available-for-sale investments

for impairment.

ASU 2016-13 is effective for the Company in the first quarter of fiscal 2023.

The Company is currently evaluating

the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).

The amendments in this ASU provide temporary, optional guidance to ease the potential burden in accounting for reference rate reform.

The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met.

The ASU primarily includes relief related to contract modifications and hedging relationships, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity.

This guidance is effective immediately and the amendments were originally to be applied prospectively through December 31, 2022.

However, the FASB issued ASU 2022-06, deferring the sunset date to December 31, 2024.

The adoption of this ASU is not expected to have a material impact on the Company's Condensed Consolidated Financial Statements.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815) .

The amendments in this ASU clarify the guidance on ASC 815 on fair value hedge accounting of interest rate risk for portfolios and financial assets.

Among other things, the amended guidance establishes the "last-of-layer" method for making the fair value hedge accounting for these portfolios more accessible and renames that method the "portfolio layer" method.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

We do not expect the amendments to have a material effect on our Condensed Consolidated Financial Statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) .

The amendments in this ASU eliminate the guidance on troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulties.

The ASU also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

We do not expect the amendments to have a material effect on our Condensed Consolidated Financial Statements.

OTHER INTERESTS

Investment in CDF2 Holdings

We indirectly own 100 % of the common equity of CDF2 Holdings,

LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from

film to digital technology.

CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital

technology by providing financing, equipment, installation and related ongoing services.

CDF2 Holdings is a Variable Interest Entity (“VIE”), as

defined in Accounting Standards Codification Topic 810 (“ASC 810”), “Consolidation.” ASC 810 requires the consolidation

of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of

To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the

VIE’s economic performance, among other factors.

Although we indirectly, wholly own CDF2 Holdings, we, a third party that also has

a variable interest in CDF2 Holdings, and an independent third party manager must mutually approve all business activities and transactions

that significantly impact CDF2 Holdings’ economic performance.

We have therefore assessed our variable interests in CDF2 Holdings

and determined that we are not the primary beneficiary of CDF2 Holdings.

As a result, CDF2 Holdings’ financial position and results

of operations are not consolidated in our financial position and results of operations.

In completing our assessment, we identified the

activities that we consider most significant to the economic performance of CDF2 Holdings and determined that we do not have the power

to direct those activities, and therefore we account for our investment in CDF2 Holdings under the equity method of accounting.

As of September 30, 2022 and March 31, 2022, our maximum exposure to

loss, as it relates to the non-consolidated CDF2 Holdings entity, represents accounts receivable for service fees under a master service

agreement with CDF2 Holdings.

Such accounts receivable was $ 0.4 million and $ 0.8 million as of September 30, 2022 and

March 31, 2022, respectively, which are included in accounts receivable, net on the accompanying consolidated balance sheets.

The accompanying Consolidated Statements of Operations include $ 0.0

million and $ 0.3 million of digital cinema servicing revenue from CDF2 Holdings for the three months ended September 30, 2022

and 2021, respectively.

The accompanying Consolidated Statements of Operations include($ 104 ) thousand and $ 0.2 million

of digital cinema servicing revenue from CDF2 Holdings for the six months ended September 30, 2022 and 2021, respectively.

Total Stockholders’ Deficit of CDF2 Holdings at September 30,

2022 and March 31, 2022 was $ 57.5 million and $ 55.6 million, respectively.

We have no obligation to fund the operating

loss or the stockholders’ deficit beyond our initial investment of $ 2.0 million and, accordingly, our investment in CDF2 Holdings

as of September 30, 2022 and March 31, 2022 is carried at $ 0 .

Majority Interest in CONtv

We own an 85 % interest in CON TV, LLC, a worldwide digital network

that creates original content, and sells and distributes on-demand digital content on the Internet and other consumer digital distribution

platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

We evaluated the investment under the voting interest entity

(“VOE”) model and determined that the entity should be consolidated as we have a controlling financial interest in the entity

through our ownership of outstanding voting shares, and that other equity holders do not have substantive voting, participating or liquidation

We recorded net loss attributable to noncontrolling interest in our condensed consolidated statement of operations equal to 11 %

of outstanding profit interest units retained by the noncontrolling interests.

We indirectly o wn 100 % of the common equity of CDF2 Holdings, LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology.

CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital technology by providing financing, equipment, installation and related ongoing services.

CDF2 Holdings is a Variable Interest Entity (“VIE”), as defined in ASC Topic 810 (“ASC 810”), Consolidation .

ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE.

As of December 31, 2022 and March 31, 2022, our maximum exposure to loss, as it relates to the non-consolidated CDF2 Holdings entity, represents accounts receivable for service fees under a master service agreement with CDF2 Holdings.

Such accounts receivable was $ 2.1 million and $ 0.8 million as of December 31, 2022 and March 31, 2022, respectively, which are included in accounts receivable, net on the accompanying Condensed Consolidated Balance Sheets.

The accompanying Condensed Consolidated Statements of Operations include $ 0.1 million and $ 0.2 million of digital cinema servicing revenue from CDF2 Holdings for the three months ended December 31, 2022 and 2021, respectively.

The accompanying Condensed Consolidated Statements of Operations include $ 0.2 million and $ 0.5 million of digital cinema servicing revenue from CDF2 Holdings for the nine months ended December 31, 2022 and 2021, respectively.

Total Stockholders’

Deficit of CDF2 Holdings at December 31, 2022 and March 31, 2022 was $ 59.2 million and $ 55.6 million , respectively.

We have no obligation to fund the operating loss or the stockholders’

deficit beyond our initial investment of $ 2.0 million and, accordingly, our investment in CDF2 Holdings as of December 31, 2022 and March 31, 2022 is carried at $ 0 .

Investment in Roundtable

On March 15, 2022, the Company entered into a stock purchase agreement

with Roundtable Entertainment Holdings, Inc.

(“Roundtable”) pursuant to which the Company purchased 500 shares

of Roundtable Series A Preferred Stock and warrants to purchase 100 shares of Roundtable Common Stock (together, the “Roundtable

Securities”).

The Company paid the purchase price for the Roundtable Securities by issuing to Roundtable 316,937 shares

of Common Stock is based on the closing price of the Company on the date of the purchase.

The Company recorded $ 0.2 million for

the purchase of the Roundtable Securities which is included in other long-term assets on the consolidated balance sheet.

The investment

in the Roundtable Securities was made in connection with a proposed collaboration with Roundtable regarding production and distribution

of streaming content including the launch of high profile branded enthusiast streaming channels.

The Roundtable investment was accounted

for using the cost method and is included within other long term assets.

STOCKHOLDERS’ EQUITY

On March 15, 2022, the Company entered into a stock purchase agreement with Roundtable Entertainment Holdings, Inc.

(“Roundtable”) pursuant to which the Company purchased 

500  shares of Roundtable Series A Preferred Stock and warrants to purchase 

100  shares of Roundtable Common Stock (together, the “Roundtable Securities”).

The Company funded the purchase of the Roundtable Securities by issuing 

316,937  share s of Common Stock to Roundtable.

T he Company recorded $ 0.2  million for the purchase of the Securities which is included in other long-term assets on the Condensed Consolidated Balance Sheets. The Roundtable investment was accounted for using the cost method and is included within other long-term assets.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

STOCKHOLDERS’

Authorized Common Stock

As of September 30, 2022 the number of shares of Common Stock authorized

for issuance was 275,000,000 shares.

During the three months ended September 30, 2022, the Company issued 2,579,488 shares

of Common Stock .

This is comprised of 178,572 shares in payment of preferred stock dividends, 2,066,879 shares issued on August 18,2022

in connection with the vesting of grants pursuant to the 2017 Equity Incentive Plan, and 334,037 shares issued in payment of the Bloody

Disgusting earnout commitment.

During the six months ended September 30, 2022, the Company issued 2,687,512 shares

of Common Stock .

This is comprised of 286,596 shares in payment of preferred stock dividends, 2,066,879 shares issued on August 18, 2022

in connection with the vesting of grants pursuant to the 2017 Equity Incentive Plan, and 334,037 shares issued in payment of the Bloody

Disgusting earnout commitment.

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

During the three months ended December 31, 2022, the Company issued 908,383 shares of Common Stock.

This is comprised of 224,359 shares in payment of preferred stock dividends and 684,024 restricted shares issued in connection with Board of Director compensation.

During the nine months ended December 31, 2022, the Company issued 3,595,895 shares of Common Stock.

This is comprised of 510,955 shares in payment of preferred stock dividends, 2,750,903 shares issued on August 18, 2022 in connection with the vesting of grants pursuant to the 2017 Equity Incentive Plan, and 334,037 shares issued in payment of the Bloody Disgusting earnout commitment.

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

PREFERRED STOCK

Cumulative dividends in arrears on preferred stock were $ 0.1 million

and $ 0.2 million as of September 30, 2022 and 2021, respectively.

In May and July 2022 and 2021, we paid preferred stock dividends

in arrears in the form of 286,596 and 53,278 shares of Common Stock, respectively.

Cumulative dividends in arrears on preferred stock were $ 0.1 million as of December 31, 2022 and 2021.

In May, June and November 2022, we paid preferred stock dividends in arrears in the form of 510,955 shares of Class A Common Stock.

TREASURY STOCK

We have treasury stock, at cost, consisting of 1,315,851 and 1,315,851 shares

of Common Stock at September 30, 2022 and March 31, 2022, respectively.

CINEDIGM’S EQUITY INCENTIVE PLANS

We have treasury stock, at cost, consisting of 1,315,851 shares of Common Stock at December 31, 2022 and March 31, 2022.

EQUITY INCENTIVE PLANS

Stock Based Compensation Awards

Awards issued under our 2000 Equity Incentive Plan (the “2000

Plan”) may be in any of the following forms (or a combination thereof) (i) stock option awards;

(ii) stock appreciation rights;

Awards issued under our 2000 Equity Incentive Plan (the “2000 Plan”) may be in any of the following forms (or a combination thereof) (i) stock option awards;

(iii) stock or restricted stock or restricted stock units;

or (iv) performance awards.

The 2000 Plan provides for the granting of incentive

stock options (“ISOs”) with exercise prices not less than the fair market value of our Common Stock on the date of grant.

ISOs granted to shareholders having more than 10 % of the total combined voting power of the Company must have exercise prices of

at least 110 % of the fair market value of our Common Stock on the date of grant.

ISOs and non-statutory stock options granted under

the 2000 Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant.

The exercise prices

and vesting periods (if any) for non-statutory options are set at the discretion of our compensation committee.

On November 1, 2017, upon

the consummation of the initial equity investment in Cinedigm by Bison, as a result of which there was a change of control of the Company,

all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable.

In connection with the grants of stock options and shares of restricted

stock under the 2000 Plan, we and the participants have executed stock option agreements and notices of restricted stock awards setting

forth the terms of the grants.

The 2000 Plan provided for the issuance of up to 2,380,000 shares of Common Stock to employees,

outside directors and consultants.

As of September 30, 2022, there were 212,037 stock options

outstanding in the 2000 Plan with weighted average exercise price of $ 14.46 and a weighted average contract life of 1.07 years.

As of March 31, 2022, there were 217,337 shares pursuant to stock options outstanding in the Plan with weighted average exercise

price of $ 14.49 and a weighted average contract life of 1.54 years.

A total of 5,300 options expired during the

six months ended September 30, 2022.

Options outstanding under the 2000 Plan as of

September 30, 2022 is as follows:

As of September 30, 2022

The 2000 Plan provides for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Common Stock on the date of grant.

ISOs granted to shareholders having more than 10 % of the total combined voting power of the Company must have exercise prices of at least 110 % of the fair market value of our Common Stock on the date of grant.

ISOs and non-statutory stock options granted under the 2000 Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant.

The exercise prices and vesting periods (if any) for non-statutory options are set at the discretion of our compensation committee.

On November 1, 2017, upon the consummation of the initial equity investment in Cinedigm by Bison, as a result of which there was a change of control of the Company, all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable.

In connection with the grants of stock options and shares of restricted stock under the 2000 Plan, we and the participants have executed stock option agreements and notices of restricted stock awards setting forth the terms of the grants.

The 2000 Plan provided for the issuance of up to 2,380,000 shares of Common Stock to employees, outside directors and consultants.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

As of December 31, 2022:

Range of Prices

Weighted Average Remaining Life in

Weighted Average Exercise Price

Aggregate Intrinsic

Outstanding and

Weighted Average

Remaining Life in

Weighted Average

Exercise Price

Intrinsic Value

(In thousands)

1 unchanged sentence

$ 13.70 - $ 24.40

An analysis of all options exercisable under the

2000 Plan as of September 30, 2022 is presented below:

Options Exercisable

As of March 31, 2022:

Range of Prices

Outstanding and

Weighted Average

2 unchanged sentences

Exercise Price

Aggregate Intrinsic

Intrinsic Value

(In thousands)

In August 2017, the Company adopted the 2017 Equity Incentive Plan

(the “2017 Plan).

$ 14.00 - $ 24.40

In August 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan).

The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company.

The 2017 Plan provided for the issuance of up to 2,108,270 shares of Common Stock, in the form of various awards, including

stock options, stock appreciation rights (“SARs”), stock, restricted stock, restricted stock units, performance awards and

The Compensation Committee of the Company’s Board of Directors (the “Board”) is authorized to administer

the 2017 Plan and make grants thereunder.

The approval of the 2017 Plan did not affect awards already granted under the 2000 Plan.

December 4, 2019, upon shareholder approval, the 2017 Plan was amended to increase the maximum number of shares of Common Stock authorized

for issuance thereunder from 2,108,270 shares to 4,098,270 .

On October 23, 2020, the Company amended its 2017 Plan to increase

the number of shares authorized for issuance thereunder from 4,098,270 to 14,098,270 .

On October 11, 2021, the Company amended its 2017 Plan to increase

the number of shares authorized for issuance thereunder from 14,098,270 to 18,098,270 .

Stock appreciation rights outstanding under the 2017 Plan as of September

30, 2022 is as follows:

As of September 30, 2022

The 2017 Plan provides for the issuance of up to 18,098,270 shares of Common Stock, in the form of various awards, including stock options, SARs, restricted stock, restricted stock units, PSUs and cash awards.

SARs outstanding under the 2017 Plan are as follows:

As of December 31, 2022:

Range of Prices

SARs Outstanding

Weighted Average Remaining Life in

Weighted Average Exercise Price

Aggregate Intrinsic Value

Weighted Average

Remaining Life in

Weighted Average

Exercise Price

Intrinsic Value

(In thousands)

3 unchanged sentences

$ 2.23 - $ 2.56

An analysis of all stock appreciation rights exercisable

under the 2017 Plan as of September 30, 2022 is presented below:

SAR Exercisable

As of March 31, 2022:

Range of Prices

SARs Outstanding

Weighted Average

2 unchanged sentences

Exercise Price

Aggregate Intrinsic

Intrinsic Value

(In thousands)

$ 0.54 - $ 0.74

$ 1.16 - $ 1.47

$ 1.71 - $ 2.10

$ 2.23 - $ 2.56

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

SARs Exercisable

Weighted Average

Remaining Life in

Weighted Average

Exercise Price

Intrinsic Value

(In thousands)

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Total SARs outstanding are as follows:

September 30,

Nine Months Ended December 31, 2022

SARs Outstanding - March 31, 2022

Total SARs Outstanding September 30, 2022

Total performance stock units (“PSUs”)

outstanding are as follows:

September 30,

PSUs Outstanding March 31, 2022

Total PSUs Outstanding September 30, 2022

Following is the activity for performance stock unit awards:

Unvested balance at March 31, 2022

Unvested balance at September 30, 2022

During the six months ended September 30, 2022, zero shares

were issued for vested awards and 696,280 shares are to be issued as of September 30, 2022.

Employee and director stock-based compensation

expense related to our stock-based awards was as follows:

Total SARs Outstanding - December 31, 2022

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

Nine Months Ended December 31, 2022

Expected dividend yield

Expected equity volatility

Expected term (years)

Risk-free interest rate

Exercise price

Market price per share

Weighted average fair value per SAR

The risk-free rates are based on the implied yield available on U.S.

Treasury constant maturities with remaining terms equivalent to the respective expected terms of the options.

In addition, the Company has granted PSU awards under the 2017 Plan to employees.

These awards vest upon certain performance goals being achieved as of March 31, 2022 and 2023 and can be settled in cash or equity upon vesting.

During the three and nine months ended December 31, 2022 , the Company issued 482,628 shares of common stock, net of 199,498 shares withheld to pay taxes, related to the vesting of 682,126 of PSU awards.

As of December 31, 2022 , there were 696,280 of PSU awards outstanding that vest as of March 31, 2023 subject to achieving certain performance goals.

No additional PSU awards were granted during the three and nine months ended December 31, 2022.

During the nine months ended December 31, 2022 , 482,628 shares were issued for vested awards.

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

Three Months Ended

September 30,

Six Months Ended

September 30,

(In thousands)

Nine Months Ended

Selling, general and administrative

There was $ 2.1 million and $ 0.8 million of stock-based compensation

recorded for the three months ended September 30, 2022 and 2021, respectively, related to employees’ restricted stock awards inclusive

of $ 551 thousand employee payroll taxes withheld for shares not issued.

There was $ 3.0 million and $ 1.7 million

of stock-based compensation recorded for the six months ended September 30, 2022 and 2021, respectively, related to employees’

restricted stock awards inclusive of $ 551 employee payroll taxes withheld for shares not issued.

There was $ 0.1 million and $ 0.1 million of stock-based compensation

for the three months ended September 30, 2022 and 2021, respectively, related to board of directors.

There was $0.2 million and

$ 0.2 million of stock-based compensation for the six months ended September 30, 2022 and 2021, respectively, related to board of directors.

During the six months ended September 30, 2022, the Company issued zero restricted shares to non-employee directors.

There was $ 0.1 million of stock-based compensation expense for the three months ended December 31, 2022 and 2021, respectively, related to the Board.

There was $ 0.3 million and $ 0.3 million of stock-based compensation for the nine months ended December 31, 2022 and 2021, respectively, related to Board of Directors compensation.

During the nine months ended December 31, 2022, the Company issued 684,024 restricted shares to non-employee directors.

Options Granted Outside Cinedigm's Equity Incentive Plan

In October 2013, we issued options outside of the 2000 Plan to 10 individuals

who became employees as a result of a business combination.

The employees received options to purchase an aggregate of 62,000 shares

of our Common Stock at an exercise price of $ 17.50 per share.

The options were fully vested as of October 2017 and expire 10 years

from the date of grant, if unexercised.

As of September 30, 2022, 12,500 of such options remained outstanding.

the year ended March 31, 2022, the Company granted 2,025,250 stock appreciation rights (“SARs”).

The SARs were granted under

the 2017 Plan, except for 600,000 SARs granted to an officer of the Company as an inducement grant.

All SARs issued have an exercise price

equal to the fair value of the Company’s Common Stock on the date of grant and a maturity date of 10 years.

The following table presents information about outstanding warrants

to purchase shares of our Common Stock as of September 30, 2022.

All of the outstanding warrants are fully vested and exercisable.

Exercise price

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

December 2022

On September 15, 2022, the Company entered into a Loan, Guaranty, and

Security Agreement with East West Bank (“EWB”).

The agreement provided for a revolving line of credit (“the Line of

Credit Facility”) of $ 5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all

of our and such subsidiaries’ assets.

The Line of Credit Facility bears interest at a rate equal to 1.5 % above the prime rate.

Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion.

As of September 30,

2022, $ 3.8 million remained outstanding on this line of credit.

The interest rates as of September 30, 2022 were approximately 7.75 %.

Under the Line of Credit Facility, The Company is subject to certain financial and nonfinancial covenants including terms which require

the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand, and to report financial information to our

lender on a periodic basis.

During the three months and six months ended September 30, 2022 the company had interest expense of $ 19 thousand

related to this note.

COMMITMENTS AND CONTINGENCIES

We operate from leased properties under non-cancelable operating lease

agreements, certain of which contain escalating lease clauses.

The Company leases office space under an operating lease.

The Company’s

portfolio of leases is primarily related to real estate and since most of our leases do not provide a readily determinable implicit rate,

the Company estimated its incremental borrowing rate to discount the lease payments based on information available at either the implementation

date of Topic 842 or at lease commencement for leases entered into thereafter.

The table below presents the lease-related assets and liabilities recorded

on the balance sheet as of September 30, 2022 and March 31, 2022:

(In thousands)

Classification on the Balance Sheet

September 30,

Operating lease right-of-use asset, net

Operating leases – current portion

Operating leases – long-term portion

Total operating lease liabilities

The table below presents certain information related to lease costs

(In thousands)

September 30,

Operating lease cost

Total lease cost

Six Months Ended

(In thousands)

September 30,

Operating lease cost

Total lease cost

Other Information

The table below presents supplemental cash flow

information related to leases:

Six Months Ended

(In thousands)

September 30,

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows used for operating leases Hyde Park Agreement

On January 5, 2022, the Company entered into a letter agreement with

Hyde Park Entertainment, Inc.

(“Hyde Park”), pursuant to which the Company and Hyde Park are collaborating on the development,

production and/or distribution of a project based on the novel Audition by Ryu Murakami (the “Audition Project”).

Each of the Company and Hyde Park owns 50 % of the rights in connection with the Audition Project.

The Company paid $ 100 thousand

to Hyde Park plus $ 26 thousand in legal fees to counsel for the Audition project.

Ashok Amritraj, a director of the Company, is the

Chairman and CEO of Hyde Park and has an interest in 100 % of the revenues of Hyde Park.

Ashok Amritraj is a current board member

and related party to the Company.

SUPPLEMENTAL CASH FLOW INFORMATION AND DISCLOSURE OF NON-CASH

INVESTING AND FINANCING ACTIVITY

Six Months Ended

September 30,

(In thousands)

Cash interest paid

Income taxes paid

Noncash investing and financing activities:

Accrued dividends on preferred stock

Issuance of Class A common stock for payment of accrued preferred stock dividends

Issuance of Class A common stock for business combination

Earnout consideration paid with common shares of Company

Earnout consideration adjustment

Treasury shares acquired for withholding taxes

Deferred consideration in purchase of a business

SEGMENT INFORMATION

As of March 31, 2022 , there were 12,500 options and 600,000 SARs granted to employees outside of Cinedigm's Equity Incentive Plan.

During the three months ended December 31, 2022 , 100,000 SARs were granted as an inducement to a new employee.

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

LINE OF CREDIT FACILITY

On September 15, 2022, the Company entered into a Loan, Guaranty, and Security Agreement with EWB.

The agreement provided for a 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’

The Line of Credit Facility bears interest at a rate equal to 1.5 % above the prime rate, 9.0 % as of December 31, 2022 .

The Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion.

As of December 31, 2022, $ 5.0 million was outstanding on the Line of Credit Facility.

Under the Line of Credit Facility, the Company is subject to certain financial and nonfinancial covenants including terms which require the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis.

During the three and nine months ended December 31, 2022 the Company had interest expense of $ 0.1 million related to the Line of Credit Facility.

SEGMENT REPORTING

We operate in two reportable segments:

Cinema Equipment Business

and Content & Entertainment Business.

Our segments were determined based on the economic characteristics of our products and services,

our internal organizational structure, the manner in which our operations are managed and the criteria used by our CODM to evaluate performance,

which is generally the segment’s operating income (loss) before depreciation and amortization.

Cinema Equipment and Content & Entertainment.

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

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Operations of:

Products and services provided:

Cinema Equipment Business

Financing vehicles and administrators for 355 Systems installed

nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 320 Systems installed

domestically and internationally in our second deployment phase (“Phase II Deployment”).

We retain ownership of the Systems and the residual cash flows related

to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements.

For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II

Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Cinema Equipment Business segment also provides monitoring, collection,

verification and management services to this segment, as well as to exhibitors who purchase their own equipment, and also collects and

disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical

exhibitors (collectively, “Services”).

Content & Entertainment Business

Cinema Equipment

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

We retain ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements.

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

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

Content & Entertainment

Leading independent streaming company of content and channels.

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

The following tables present certain financial

information related to our reportable segments and Corporate:

As of September 30, 2022

(In thousands)

Cinema Equipment Business

Content & Entertainment Business

The following tables present certain financial information related to our reportable segments and Corporate (in thousands):

As of December 31, 2022

Cinema Equipment

Content & Entertainment

As of March 31, 2022

(In thousands)

Cinema Equipment Business

Content & Entertainment Business

Statements of Operations

Three Months Ended September 30, 2022

(in thousands)

Cinema Equipment

Content & Entertainment

Direct operating (exclusive of depreciation and amortization shown below)

Condensed Consolidated Statement of Operations

Three Months Ended December 31, 2022

Content & Entertainment

Direct operating

Selling, general and administrative

Allocation of corporate overhead

Provision of doubtful accounts

Depreciation and amortization of property and equipment

Amortization of intangible assets

Depreciation and amortization

Total operating expenses

Income (loss) from operations

The following employee and director stock-based compensation expense

related to our stock-based awards is included in the above amounts as follows:

(In thousands)

Operating income (loss)

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Three Months Ended December 31, 2022

Content & Entertainment

2 unchanged sentences

Total stock-based compensation

Statements of Operations

Three Months Ended

September 30,

(in thousands)

Condensed Consolidated Statement of Operations

Three Months Ended December 31, 2021

Content & Entertainment

Direct operating (exclusive of depreciation and amortization shown below)

Direct operating

Selling, general and administrative

Allocation of corporate overhead

Provision for (recovery of) doubtful accounts

Depreciation and amortization of property and equipment

Amortization of intangible assets

Depreciation and amortization

Total operating expenses

Income (loss) from operations

The following

employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows:

(In thousands)

Operating income (loss)

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

Three Months Ended December 31, 2021

Content & Entertainment

2 unchanged sentences

Total stock-based compensation

Statements of Operations

Six Months Ended September 30, 2022

(in thousands)

Condensed Consolidated Statement of Operations

Nine Months Ended December 31, 2022

Content & Entertainment

Direct operating (exclusive of depreciation and amortization shown below)

Direct operating

Selling, general and administrative

Allocation of corporate overhead

Provision for (recovery of) doubtful accounts

Depreciation and amortization of property and equipment

Amortization of intangible assets

Depreciation and amortization

Total operating expenses

Income (loss) from operations

The following employee and director stock-based compensation expense

related to our stock-based awards is included in the above amounts as follows:

(In thousands)

Operating income (loss)

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Nine Months Ended December 31, 2022

Content & Entertainment

2 unchanged sentences

Total stock-based compensation

Statements of Operations

Six Months Ended September 30, 2021

(in thousands)

Condensed Consolidated Statement of Operations

Nine Months Ended December 31, 2021

Content & Entertainment

Direct operating (exclusive of depreciation and amortization shown below)

Direct operating

Selling, general and administrative

Allocation of corporate overhead

(Recovery of) provision for doubtful accounts

Depreciation and amortization of property and equipment

Amortization of intangible assets

Depreciation and amortization

Total operating expenses

Income (loss) from operations

The following

employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows:

(In thousands)

Operating income (loss)

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

Nine Months Ended December 31, 2021

Content & Entertainment

2 unchanged sentences

Total stock-based compensation

We calculate income tax expense based upon an annual effective tax

rate forecast, including estimates and assumptions.

We recorded an income tax benefit (expense) of zero for the three and six months ended

September 30, 2022.

We recorded an income tax benefit of approximately $ 487 thousand and $ 550 thousand for the three and six months ended

September 30, 2021.

We have not recorded tax benefits on our loss before income taxes because we have provided for a full valuation allowance

that offsets potential deferred tax assets resulting from net operating loss carry forwards, reflecting our inability to use such loss

carry forwards.

Our effective tax rate for the six months ended September 30, 2022

and 2021 was zero and negative 12.4 %, respectively.

We calculate income tax expense upon an annual effective tax rate forecast, including estimates and assumptions.

We recorded an income tax benefit (expense) of $ 0.0 million for the three and nine months ended December 31, 2022.

We recorded an income tax benefit of approximately $ 0.0 million and $ 0.6 million for the three and nine months ended December 31, 2021, respectively.

We have not recorded tax benefits on our loss before income taxes because we have provided for a full valuation allowance that offsets potential deferred tax assets resulting from net operating loss carry forwards, reflecting our inability to use such loss carry forwards.

Our effective tax rate for the three months ended December 31, 2022 and 2021 was 0 % and 4 %, respectively.

Our effective tax rate for the nine months ended December 31, 2022 and 2021 was 0 % and ( 14 %) , respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

This report contains forward-looking statements within the meaning of the federal securities laws.

These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,”

“anticipates,”

“expects,”

“intends,”

“plans,”

“will,”

“estimates,”

and similar words.

Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Since our inception, we have played a significant role in the digital distribution revolution that continues to transform the media landscape.

In addition to our pioneering role in transitioning approximately 12,000 movie screens from traditional analog film prints to digital distribution, we have become a leading distributor of independent content, both through organic growth and acquisitions.

We distribute products for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, NFL and Scholastic, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital content producers.

We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, Tubi and most video-on-demand (“VOD”) and free ad-supported television (“FAST”) streaming platforms, as well as (ii) physical goods, including DVD and Blu-ray Discs.

We report our financial results in two reportable segments as follows:

(i) Cinema Equipment Business ("Cinema Equipment") and (ii) Content and Entertainment Business (“Content & Entertainment”).

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.

Our Content & Entertainment segment operates in:

Beginning in December 2015, certain of our cinema equipment began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, Virtual Print Fee (“VPF”) revenues ceased to be recognized on such Systems, related to such distributors.

Furthermore, because the Phase I Deployment installation period ended in November 2007, a majority of the VPF revenue associated with the Phase I Deployment Systems has ended.

The reduction in VPF revenue on Cinema Equipment systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017.

(i) return the Systems to us;

(ii) renew their license agreement for successive one-year terms;

or (iii) purchase the Systems from us at fair market value.

As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors.

Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan.

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

Financial Condition and Liquidity

As of December 31, 2022, the Company has an accumulated deficit of $479.2 million and negative working capital of $4.5 million.

For the three and nine months ended December 31, 2022, the Company had net income (loss) attributable to common shareholders of $4.9 million and ($6.9) million, respectively.

Net cash used in operating activities for the nine months ended December 31, 2022 was $7.9 million.

We may continue to generate net losses for the foreseeable future.

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’

The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate.

The Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion.

As of December 31, 2022, $5.0 million was outstanding on the Line of Credit Facility.

The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.

Critical Accounting Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.

We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our Condensed Consolidated Financial Statements are prepared.

On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 2 –

Summary of Significant Accounting Policies , of the Notes to the Condensed Consolidated Financial Statements, included in Item 1, Condensed Consolidated Financial Statements (Unaudited) , of this Quarterly Report on Form 10-Q.

Management believes that fair value estimates, revenue recognition, asset acquisitions and business combinations are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

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

For the Three Months Ended December 31,

Change Period over Period

Content & Entertainment

Streaming and Digital

Base Distribution

Cinema Equipment

Streaming and Digital experienced 79% growth in “FAST”

and TV-VOD revenue due to the addition of six new streaming channels related to the Asian Media Rights, LLC d/b/a Digital Media Rights ("DMR") business acquisition and five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex.

Additionally, Subscription revenue grew 38% primarily due to the Screambox platform performance driven by strong content acquisition strategies driving increasing subscriptions and the aforementioned DMR business acquisition.

New releases such as Terrifier 2, MK Ultra, Chesapeake Shores, and continued success of Demon Slayer, Highlander and Short Circuit added to overall performance.

Revenue in Base Distribution increased by 121% for the three months ended December 31, 2022 compared to the three months ended December 31, 2021.

The increase is driven by significant growth in box office theatrical performance bolstered by the Terrifier 2 release during the three months ended December 31, 2022.

Revenues generated by the Cinema Equipment business increased as a result of an increase in Phase II variable consideration of $7.4 million during the period offset by lower system revenue and eligible VPF systems.

Total system revenue recognized was ($0.3) million and $1.3 million, during the three months ended December 31, 2022 and 2021, respectively.

Blockbuster content released during the period ending December 31, 2022 was consistent with Studio output from the prior period, however VPF eligible theatres decreased significantly for the same period last year.

Direct Operating Expenses

For the Three Months Ended December 31,

Change Period over Period

Content & Entertainment

Cinema Equipment

The increase in direct operating expenses for the three months ended December 31, 2022 for the Content & Entertainment segment compared to the prior year was primarily due to $6.6 million higher content and licensing costs including royalties and distribution expenses related to the continued growth in revenue noted above, coupled with a $1.2 million increase related to DVD manufacturing and fulfillment.

Selling, General and Administrative Expenses

For the Three Months Ended December 31,

Change Period over Period

Compensation expense

Public company expenses

Share-based compensation

Insurance expense

Other operating expenses

Selling, general and administrative expenses for the three months ended December 31, 2022 increased by $1.7 million primarily due to a $1.3 million increase in compensation expense primarily from the acquisition of DMR partially offset by a reduction in payroll taxes in the prior year as a result of the CARES Act and $0.7 million increase in other operating expenses primarily from rent, direct marketing and subscriptions, offset by $0.6 million decrease related to stock-based compensation to management and employees.

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

Depreciation and Amortization Expense

For the Three Months Ended December 31,

Change Period over Period

Amortization of Intangible Assets

Depreciation of Property and Equipment

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 three months ended December 31, 2022.

Interest expense, net

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

Employee retention tax credit

Employee retention tax credit was $2.0 million for the three months ended December 31, 2022 compared to no employee retention credit for the three months ended December 31, 2021.

The employee retention tax credits were filed pursuant to the CARES Act.

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

For the Nine Months Ended December 31,

Change Period over Period

Content & Entertainment

Streaming and Digital

Base Distribution

Cinema Equipment

Streaming and Digital experienced 102% growth in “FAST”

and TV-VOD revenue due to the addition of six new streaming channels related to the DMR business acquisition and five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex.

Additionally, Subscription revenue grew 39% primarily due to the Screambox platform performance driven by strong content acquisition strategies driving increasing subscriptions and the aforementioned DMR business acquisition.

Top performing titles, including new releases, such as the Terrifier 2, Demon Slayer, Boon, The Ravine, The Mulligan, Incarnation, 7 Days, Chesapeake Shores, When Calls the Heart and the classics, Short Circuit and Highlander added to overall performance.

Revenue in Base Distribution increased by 75% for the nine months ended December 31, 2022 compared to the nine months ended December 31, 2021.

The increase is driven by significant growth in box office theatrical performance bolstered by the Terrifier 2 release during the nine months ended December 31, 2022.

Revenues generated by our Cinema Equipment business decreased slightly despite an increase in Phase II variable consideration of $9.1 million during the period.

Total system revenue recognized was $2.0 million and $9.1 million during the nine months ended December 31, 2022 and 2021, respectively.

Direct Operating Expenses

For the Nine Months Ended December 31,

Change Period over Period

Content & Entertainment

Cinema Equipment

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

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

Selling, General and Administrative Expenses

For the Nine Months Ended December 31,

Change Period over Period

Compensation expense

Public company expenses

Share-based compensation

Insurance expense

Other operating expenses

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

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

Depreciation and Amortization Expense

For the Nine Months Ended December 31,

Change Period over Period

Amortization of Intangible Assets

Depreciation of Property and Equipment

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

Interest expense, net

Interest expense, net increased by $0.6 million to $0.9 million for the nine months ended December 31, 2022 as a result of deferred and earnout consideration accretion related to the acquisitions of Bloody Disgusting, FoundationTV and DMR and interest expense associated with our new Line of Credit facility obtained in September 2022.

Employee retention tax credit

Employee retention tax credit was $2.5 million for the nine months ended December 31, 2022 compared to no employee retention credit for the nine months ended December 31, 2021.

The employee retention tax credits were filed pursuant to the CARES Act.

Changes in fair value in Metaverse

On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange.

This investment was previously a level 1 investment as the shares were being actively traded in a marketplace, but with the trading of the shares being halted the Company needed to reassess the fair value level of the investment.

Without an active market where the shares are being traded, the investment no longer qualifies as a level 1.

The changes in the valuation resulted in a decrease in fair value of $1.8 million during the nine months ended December 31, 2022.

Adjusted EBITDA

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

Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies.

We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities.

For this reason, we believe Adjusted EBITDA will also be useful to others, including our stockholders, as a valuable financial metric.

We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net income (loss) from continuing operations as an indicator of operating performance.

We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors.

We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.

We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net income (loss) from continuing operations and Adjusted EBITDA has been provided in the financial results.

Adjusted EBITDA should not be considered as an alternative to net income (loss) from operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity.

In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows.

We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

These non-GAAP measures should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with GAAP.

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

For the Three Months Ended

Net income (loss)

Income tax benefit

Depreciation and amortization

Interest expense

Change in fair value on equity investment in Metaverse

Other expense

Provision (recovery) for doubtful accounts

Stock-based compensation

Employee retention tax credit

Net (income) loss attributable to noncontrolling interest

Adjusted EBITDA

Adjustments related to Cinema Equipment

Depreciation and amortization

Provision for doubtful accounts

Income from operations

Adjusted EBITDA from non-Cinema Equipment

For the Nine Months Ended

Net income (loss)

Income tax benefit

Depreciation and amortization

Gain on forgiveness of PPP loan

Interest expense

Change in fair value on equity investment in Metaverse

Other expense

Provision (recovery) for doubtful accounts

Stock-based compensation

Employee retention tax credit

Net (income) loss attributable to noncontrolling interest

Adjusted EBITDA

Adjustments related to Cinema Equipment

Depreciation and amortization

Acquisition, integration and other expense

Provision (recovery) for doubtful accounts

Income from operations

Adjusted EBITDA from non-Cinema Equipment

Recent Accounting Pronouncements

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

Changes in our cash flows were as follows:

For the Nine Months Ended

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

For the nine months ended December 31, 2022, 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.

Additionally, during the nine months ended December 31, 2022, the Company decreased accounts payable by $11.8 million to vendors.

Cash received from VPFs decreased from the previous period in alignment with the decrease in eligible VPF systems.

Prepaid and other current assets increased by $2.7 million.

Operating cash flows from the Content & Entertainment segment are typically seasonally lower during the first two fiscal quarters and higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season.

In addition, we made $1.1 million in advances for the nine months ended December 31, 2022, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twelve months.

For the nine months ended December 31, 2021, net cash provided by operating activities was primarily driven by income from operations, excluding non-cash expenses such as depreciation, amortization, provision for doubtful accounts and stock-based compensation, gain on extinguishment of note payable, including other changes in working capital.

Additionally, during the nine months ended December 31, 2021, the Company paid down $32.6 million to vendors at both the Content & Entertainment segment and Corporate.

Operating cash flows from the Content & Entertainment segment are typically higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season, and lower in the other two quarters as we pay royalties on such revenues.

In addition, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twenty four months.

For the nine months ended December 31, 2021 revenues from the sale of digital projections Systems was $9.1 million.

Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements other than as discussed in Note 2 –

Summary of Significant Accounting Policies, Basis of Presentation and Consolidation and Note 3 - Other Interests to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC;

however, we are not the primary beneficiary of the VIE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements