What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-02-14 · 206 added, 237 removed, 382 unchanged (54% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Accounts receivable

Accounts receivable, net of allowance for credit losses of $ 114 and $ 269 , respectively

Unbilled revenue

3 unchanged sentences

Total current assets

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

Property and equipment, net

7 unchanged sentences

Current portion of deferred consideration on purchase of business

Current portion of earnout consideration on purchase of business

Operating lease liabilities

Current portion of deferred revenue

Term Loan, including unamortized debt issuance costs of $ 131 and $ 0 , respectively

Earnout consideration on purchase of business

Current portion of operating lease liabilities

Deferred revenue

Total current liabilities

8 unchanged sentences

20 shares authorized;

7 shares issued and 7 shares outstanding at December 31, 2023 and March 31, 2023.

7 shares issued and 7 shares outstanding at June 30, 2024 and March 31, 2024

Common Stock, $ 0.001 par value;

Class A Stock:

275,000,000 shares authorized as of December 31, 2023, and March 31, 2023;

13,553,767 and 9,413,597 shares issued, with 13,265,214 and 9,347,805 shares outstanding as of December 31, 2023, and March 31, 2023, respectively.

275,000,000 shares authorized as of June 30, 2024, and March 31, 2024;

16,081,458 and 15,985,620 shares issued, with 15,608,410 and 15,699,135 shares outstanding as of June 30, 2024 and March 31, 2024, respectively

Additional paid-in capital

Treasury stock, at cost;

288,554 and 65,792 shares at December 31, 2023 and March 31, 2023, respectively.

473,049 and 288,554 shares at June 30, 2024 and March 31, 2024, respectively

Accumulated deficit

7 unchanged sentences

(In thousands, except per share data)

Three Months Ended December 31,

Nine Months Ended

Three Months Ended June 30,

Costs and expenses

3 unchanged sentences

Total operating expenses

Operating income (loss)

Operating loss

Interest expense

Loss from equity investment in Metaverse, a related party

Employee retention tax credit

Other income (expenses), net

Net (loss) income before income taxes

Income tax benefit (expense)

Net (loss) income

Gain from equity investment in Metaverse, a related party

Other income (expense), net

Net loss before income taxes

Income tax expense

Net income attributable to noncontrolling interest

Net (loss) income attributable to controlling interests

Net loss attributable to controlling interests

Preferred stock dividends

Net (loss) income attributable to common stockholders

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

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders:

Weighted average shares of Common Stock outstanding:

3 unchanged sentences

(In thousands)

Three Months Ended December 31,

Nine Months Ended

Net (loss) income

Three Months Ended June 30,

Other comprehensive (loss) income:

1 unchanged sentence

Net income attributable to noncontrolling interest

Comprehensive (loss) income

Comprehensive loss

See accompanying Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Nine Months Ended

Three Months Ended June 30,

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Provision for doubtful accounts

Changes in fair value of equity investment in Metaverse

Provision for credit losses

Amortization of debt issuance costs

1 unchanged sentence

Interest expense for deferred consideration and earnouts

Capitalized content

Change in estimated earnout consideration

Non-monetary sale of content licenses

Interest expense for term loan

Barter-related non-cash expenses

5 unchanged sentences

Accounts payable, accrued expenses, and other liabilities

Capitalized content

Unbilled Revenue

8 unchanged sentences

Payments on line of credit

Payment of earnout consideration

Financing fees for line of credit

Payment of deferred consideration

At-the-market issuance fees

Cost to acquire treasury shares

Proceeds from the issuance of a term loan, net of debt issuance costs

Issuance of Class A common stock, net of issuance costs

7 unchanged sentences

(In thousands)

Nine Months Ended

Three Months Ended June 30,

Cash interest paid

2 unchanged sentences

Noncash investing and financing activities:

Issuance of Class A common stock for payment of accrued employee bonuses

Treasury shares acquired for withholding taxes

Earnout liability settled in stock

Bonus liability settled in stock

Accrued dividends on preferred stock

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

Earnout consideration adjustment

Issuance of common stock for Board of Director compensation

See accompanying Notes to Condensed Consolidated Financial Statements

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

3 unchanged sentences

Stockholders'

Balances as of March 31, 2023 (Audited)

Balances as of March 31, 2024

Foreign exchange translation

Stock-based compensation

Issuance of Class A common stock in connection with ATM raises, net

Issuance of Class A common stock in connection with direct equity offering

Treasury stock acquired

Fees incurred in connection with ATM offering

Issuance of common stock for acquiree consideration

Preferred stock dividends paid in stock

1 unchanged sentence

Balances as of June 30, 2024

Foreign exchange translation

Stock-based compensation

Issuance of Class A common stock in connection employee bonuses

Estimated fee decrease associated with equity issuance

Issuance in connection with the exercise of warrants

Issuance of Class A common stock for earnout commitment

Treasury stock in connection with taxes withheld from employees

Preferred stock dividends paid in stock

Preferred stock dividends accrued

Balances as of September 30, 2023

Foreign exchange translation

Stock-based compensation

Issuance of common stock for Board of Director compensation

Preferred stock dividends paid in stock

Preferred stock dividends accrued

Balances as of December 31, 2023

See accompanying Notes to Condensed Consolidated Financial Statements

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cineverse Corp.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

1 unchanged sentence

Preferred Stock

Additional Paid-In

Accumulated Other

Comprehensive

Stockholders'

Balances as of March 31, 2022 (Audited)

Balances as of March 31, 2023

Foreign exchange translation

Stock-based compensation

Issuance of Class A common stock in connection with ATM raises, net

Issuance of Class A common stock in connection with direct equity offering

Preferred stock dividends paid in stock

1 unchanged sentence

Balances as of June 30, 2023

Foreign exchange translation

Stock-based compensation

Preferred stock dividends paid in stock

Issuance of Class A common stock in connection employee bonuses

Issuance of Class A common stock for earnout commitment

Preferred stock dividends accrued

Balances as of September 30, 2022

Foreign exchange translation

Stock-based compensation

Preferred stock dividends paid in 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

3 unchanged sentences

Cineverse Corp.

(“Cineverse”, “us”, “our”, and “Company” refers to Cineverse Corp.

(“Cineverse”, “us”, “our”, "we", and “Company” refers to Cineverse Corp.

and its subsidiaries unless the context otherwise requires) was incorporated in Delaware on March 31, 2000.

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

Cineverse is a premier streaming technology and entertainment company with its core business operating as (i) a portfolio of owned and operated enthusiast streaming channels with enthusiast fan bases;

Cineverse is a premier streaming technology and entertainment company with its core business operating as (i) a portfolio of owned and operated streaming channels with enthusiast fan bases;

(ii) a large-scale global aggregator and full-service distributor of feature films and television programs;

and (iii) a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content distribution through subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts.

Our streaming channels reach audiences in several distinct ways:

direct-to-consumer, through these major application platforms, and through third party distributors of content on platforms.

The Company’s streaming technology platform, known as MatchpointTM, is a software-based streaming operating platform which provides clients with AVOD, SVOD, transactional video on demand ("TVOD") and linear capabilities, automates the distribution of content, and features a robust data analytics platform.

We distribute products for major brands such as Hallmark, ITV, Nelvana, ZDF, Konami, NFL and Highlander, 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, and Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

We played a pioneering role in transitioning approximately 12,000 movie screens from traditional analog film prints to digital distribution, and at the end of our fiscal year 2023, the Company's cinema equipment business concluded its active operations, as its contracts reached maturity.

The Company no longer manages cinema equipment separately, and with the run-off of its operations, no longer presents this part of the business as a separate segment.

All prior period reporting within this report reflect this change.

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

Our Class A common stock, par value $ 0.001 per share (the "Common Stock") is listed on The Nasdaq Capital Market (“Nasdaq”) under the symbol “CNVS.”

On July 10, 2024, the Company received a letter from the Nasdaq Listing Qualifications staff indicating that, based upon the closing bid price of the Common Stock for the last 30 consecutive business days, the Company no longer meets the requirement to maintain a minimum bid price of $ 1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2).

In accordance with Nasdaq Listing Rules 5810(c)(3)(A), the Company has been provided a period of 180 calendar days, or until January 6, 2025 , in which to regain compliance with the deficiency.

In order to regain compliance with the minimum bid price requirement, the closing bid price of the Common Stock must be at least $ 1 per share for a minimum of ten consecutive business days during this 180 -day period.

If the Company does not regain compliance with this requirement by January 6, 2025 , the Company may be eligible for an additional 180 calendar day compliance period provided that it meets certain continued listing standards, and provides the Staff with written notice of its intention to cure the deficiency.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Financial Condition and Liquidity

We have a history of net losses, and for the nine months ended December 31, 2023, we had a net loss attributable to common stockholders in the amount of $ 6.9 million.

We have a history of net losses, and for the three months ended June 30, 2024, we had a net loss attributable to Common Stockholders in the amount of $ 3.2 million .

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

As of December 31, 2023, the Company has an accumulated deficit of $ 489.3 million and negative working capital of $ 0.4 million .

Net cash used in operating activities for the nine months ended December 31, 2023 was $ 9.3 million which included $ 6.5 million of incremental investment in our content portfolio via advances or minimum guarantee payouts.

The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $ 5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets.

The line of credit expires on September 15, 2024 .

The Line of Credit Facility bears interest at a rate equal to 1.5 % above the prime rate, 10.00 % as of December 31, 2023 .

As of December 31, 2023, $ 5.0 million was outstanding on the Line of Credit Facility, net of unamortized issuance costs of $ 69 thousand.

On February 9, 2024, the Company expanded the Line of Credit Facility to $ 7.5 million at the same interest rate and with the same maturity date.

As of June 30, 2024, the Company has an accumulated deficit of $ 507.3 million and negative working capital of $ 0.9 million.

Net cash used in operating activities for the three months ended June 30, 2024 was $ 1.7 million which included $ 2.0 million of incremental investment in our content portfolio via advances or minimum guarantee payouts.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended to date, with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $ 7.5 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, equal to 10.00 % as of June 30, 2024.

The term of the Line of Credit Facility has been extended to September 15, 2025 .

As of June 30, 2024, $ 4.8 million was outstanding on the Line of Credit Facility, net of unamortized issuance costs of $ 127 thousand.

On April 5, 2024, Cineverse Terrifier LLC (“T3 Borrower”), a wholly-owned subsidiary of the Company entered into a Loan and Security Agreement with BondIt LLC (“T3 Lender”) and the Company, as a guarantor (the “T3 Loan Agreement”).

The T3 Loan Agreement provides for a term loan with a principal amount not to exceed $ 3,666,000 (the “T3 Loan”), and a maturity date of April 1, 2025 , unless extended for 120 days under certain conditions.

The T3 Loan bears no interest until the maturity date other than an interest advance equal to $ 576,000 paid at the closing of the T3 Loan on April 5, 2024.

After the principal of the T3 Loan is paid in full, T3 Lender will be entitled to receive 15 % of all royalties earned by the Company on the film titled Terrifier 3 (the "Film") under its distribution agreements for the Film until T3 Lender has received 1.75 times the full commitment amount of $ 3,666,000 , consisting of the principal amount plus interest and fees advanced to T3 Borrower, plus any extension interest.

See Note 5 - Debt, for further information.

In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B.

Riley FBR, Inc.

Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares.

The Company is not obligated to sell any shares under the ATM Sales Agreement.

Any sales of shares made under the ATM Sales Agreement will be made pursuant to an effective shelf registration statement, for an aggregate offering price of up to $ 30 million.

For the three months ended December 31, 2023 , the Company did no t sell any shares under this agreement.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

nine months ended December 31, 2023 , the Company sold 177 thousand shares for $ 1.1 million in net proceeds, respectively, after deduction of commissions and fees.

The ATM Sales Agreement has expired in accordance with its terms.

Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company was able to offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares.

For the twelve months ended March 31, 2024, the Company sold 177 thousand shares for $ 1.1 million in net proceeds, respectively, after deduction of commissions and fees.

The ATM Sales Agreement expired in fiscal year 2024 in accordance with its terms.

On May 3, 2024, the Company entered into a sales agreement (the “2024 Sales Agreement”) with A.G.P./Alliance Global Partners and The Benchmark Company, LLC (collectively, the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock.

Shares of Common Stock may be offered and sold for an aggregate offering price of up to $ 15 million.

The Sales Agents’ obligations to sell shares under the 2024 Sales Agreement are subject to satisfaction of certain conditions, including the continuing effectiveness of the Registration Statement on Form S-3 (Registration No.

333-273098) (the “Registration Statement”) filed by the Company with the U.S.

Securities and Exchange Commission (the “SEC”) on June 30, 2023 and declared effective by the SEC on January 25, 2024, and other customary closing conditions.

The Company will pay the Sales Agents a commission of 3.0 % of the aggregate gross proceeds from each sale of shares and has agreed to provide the Sales Agents with customary indemnification and contribution rights.

The Company has also agreed to reimburse the Sales Agents for certain specified expenses.

The Company is not obligated to sell any shares under the 2024 Sales Agreement and has not sold any shares through the date of this report.

On June 16, 2023, the Company closed on the sale of 2,150 thousand shares of Common Stock, 517 thousand pre-funded warrants, and warrants to purchase up to 2,667 thousand shares of Common Stock at a combined public offering price of $ 3.00 per share and accompanying warrant for aggregate gross proceeds of approximately $ 7.4 million, after deducting placement agent fees and other offering expenses in the amount of $ 0.6 million.

1 unchanged sentence

The Company received $ 2.999 per share for the pre-funded warrants, with the remaining $ 0.001 due at the time of exercise.

All 516,667 pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $ 0.5 thousand.

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

All 517 thousand pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $ 0.5 thousand.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

We believe our cash and cash equivalents and our credit facility, as of December 31, 2023, will be sufficient to support our operations for at least twelve months from the filing of this report.

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

As of June 30, 2024 and March 31, 2024, short term content advances were $ 12.2 million and $ 9.3 million, respectively, and content advances, net of current portion were, $ 1.7 million and $ 2.6 million, respectively.

Our capital requirements will depend on many factors, and we may need to use existing capital resources and/or undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.

We believe our cash and cash equivalent balances as of June 30, 2024 will be sufficient to support our operations for at least twelve months from the filing of this report.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1 unchanged sentence

The accompanying interim Condensed Consolidated Financial Statements of Cineverse Corp.

have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on June 29, 2023.

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, 2024 filed with the Securities and Exchange Commission (the “SEC”) on July 1, 2024.

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

1 unchanged sentence

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

Certain columns and rows may not add due to the use of rounded numbers.

Certain columns and rows may not foot due to the use of rounded numbers.

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.

6 unchanged sentences

Actual results may differ from these estimates.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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, 2024 .

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment Reporting

Beginning in fiscal year 2024, following the run-off of the Company's digital cinema operations, the Company now manages its operations and manages its business in one reporting segment.

Earlier periods presented herein have been presented to conform to this reportable segment composition.

The Company manages its operations and its business in one reporting segment.

Reclassifications

7 unchanged sentences

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

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 fiscal year ended March 31, 2023 in the amount of $ 2.5 million in the Employee retention tax credit line on the Company’s Condensed Consolidated Statements of Operations, of which $ 2.0 million was recognized during the three months ended December 31, 2022.

As of December 31, 2023 and March 31, 2023, the tax credit receivable of $ 1.7 and $ 2.1 million, respectively, has been included in the Employee retention tax credit line on the Company's Condensed Consolidated Balance Sheet.

The Company has received notification during the second quarter of fiscal year 2024 that its ERTC claim is under examination with the Internal Revenue Service ("IRS").

As of the date of this report, the examination is ongoing, and the Company is responding to audit requests as they arise.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2024 and March 31, 2024, the tax credit receivable of $ 0.1 and $ 1.7 million, respectively, has been included in the Employee retention tax credit line on the Company's Condensed Consolidated Balance Sheet.

The Company received notification during the second quarter of fiscal year 2024 that its ERTC claim was under examination with the Internal Revenue Service ("IRS").

In April 2024, the Company received a letter from the IRS indicating that its claim had been accepted and $ 1.7 million was received in June 2024, inclusive of interest.

Property and Equipment, Net

11 unchanged sentences

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

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets, Net

4 unchanged sentences

Content Library

Trademarks and Tradenames

Tradenames, Trademarks and Patents

Customer Relationships

3 unchanged sentences

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

As of December 31, 2023

As of June 30, 2024

Content Library

1 unchanged sentence

Customer Relationships

Trademark and Tradenames

Tradenames, Trademarks and Patents

Capitalized Content

Total Intangible Assets

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2024

3 unchanged sentences

Trademark and Tradenames

Capitalized Content

Total Intangible Assets

During the three and nine months ended December 31, 2023, the Company had amortization expense of $ 879 thousand and $ 2,381 thousand, respectively.

During the three and nine months ended December 31, 2022, the Company had amortization expense of $ 712 thousand and $ 2,193 thousand, respectively.

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

During the three months ended June 30, 2024 and June 30, 2023, the Company had amortization expense of $ 0.7 million and $ 0.7 million, res pectively .

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2024, amortization expense is expected to be (in thousands):

In-process intangible assets

Remainder of fiscal year 2024

Capitalized Content

9 unchanged sentences

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

There were no impairment charges recorded for long-lived and finite-lived intangible assets during the three and nine months ended December 31, 2023 and 2022 .

There were no impairment charges recorded for long-lived and finite-lived intangible assets during the three months ended June 30, 2024 and 2023 .

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.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

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

The Company annually assesses goodwill for potential impairment during its fourth fiscal quarter, or sooner if event occurs or circumstances would indicate it would be more likely than not that fair value would be reduced below its carrying amount.

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

The Company annually assesses goodwill for potential impairment during its fourth fiscal quarter, or sooner if events occur or circumstances would indicate it would be more likely than not that fair value would be reduced below its carrying amount.

For the year ended, March 31, 2024, the Company recognized a goodwill impairment charge of $ 14.0 million.

No goodwill impairment charge was recorded in the three months ended June 30, 2024 and 2023 .

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements

4 unchanged sentences

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

As of December 31, 2023

As of June 30, 2024

Equity investment in Metaverse, at fair value

3 unchanged sentences

Current portion of earnout consideration on purchase of a business

The Company has an investment in A Metaverse Company ("Metaverse") (SEHK:

1616) accounted for under the equity method of accounting as the Company can exert significant influence over Metaverse with its direct

Equity Investment in Metaverse

The Company has an equity investment in A Metaverse Company (“Metaverse”), a publicly traded Chinese entertainment company, formerly Starrise Media Holdings Limited, whose ordinary shares are listed on the Stock Exchange of Hong Kong.

After a period of time when trading in Metaverse's ordinary shares had been halted, the resumption of active trading status in November 2023 represented renewed availability of quoted, unadjusted prices in active markets for identical assets, upon which the Company can execute a sale and readily access pricing information at the measurement date.

Accordingly, the Company has presented the fair value of its Metaverse shares held as of March 31, 2024 within the Level 1 grouping.

The fair value of the shares held is presented within Other long term assets and as of June 30, 2024 and March 31, 2024 was $ 0.2 million and $ 0.4 million, respect ively.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ownership of approximately 15 % and affiliation with the Company’s largest shareholder.

The Company has also made an irrevocable election to apply the fair value option under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 825-10, Financial Instruments , as it relates to its equity investment in Metaverse.

Changes in the investment's fair value are recognized within the "Loss from equity investment in Metaverse, a related party" line item within the Condensed Consolidated Statements of Operations.

Following the halting of Metaverse stock trading on The Stock Exchange of Hong Kong Limited on April 1, 2022, the Company valued our equity investment in Metaverse using a market approach and the investment was categorized as a Level 3 valuation based on unobservable inputs.

As such, as of March 31, 2023, the Company estimated the fair value of Metaverse based the last known enterprise value, adjusting for trends in enterprise valuations and market capitalization for comparable companies with a resulting fair value was $ 5.2 million.

On November 6, 2023, Metaverse's stock resumed trading on The Stock Exchange of Hong Kong Limited.

During the quarter ended December 31, 2023, the Company sold 30 million of the 362 million shares held as of September 30, 2023, which resulted in a realized loss of $ 131 thousand during the three months ended December 31, 2023.

The resumption of active trading status represented renewed availability of quoted, unadjusted prices in active markets for identical assets, upon which the Company can execute a sale and readily access pricing information at the measurement date.

Accordingly, the Company has presented the fair value of its Metaverse shares held as of December 31, 2023 within the Level 1 grouping.

The fair value of the shares held as of December 31, 2023 was $ 1.3 million, with associated unrealized losses of $ 3.6 million.

The Company estimated the fair value of its earnout consideration using contractual inputs from the related business combination, which established specific fiscal year revenue growth, profitability and EBITDA targets.

The Company utilizes the most up to date forecast to estimate the outcome against these targets to determine the ultimate estimated payout.

During the nine months ended December 31, 2023, the Company estimated a $ 682 thousand decrease in the estimated ultimate earnout payments based on Bloody Disgusting's performance, made cash payments of $ 291 thousand, and issued equity to settle earnout liability of $ 392 thousand, and accrued interest of $ 29 thousand.

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

Earnout consideration on purchase of business

Prior to the completion of the earnout period at the end of fiscal year 2024, the Company estimated the fair value of its earnout liability using contractual inputs from the related business combination, which established specific fiscal year revenue growth, profitability and EBITDA targets.

As of June 30, 2024, the balance which is classified as short term in nature remains unchanged from the balance March 31, 2024.

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.

Content Advances

Content advances represents amounts prepaid to studios or content producers for which we provide content distribution services.

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

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

Amounts which are expected to be recovered in more than 12 months are classified as long term and presented within content advances, net of current portion, which were $ 3.2 million and $ 1.4 million as of December 31, 2023, and March 31, 2023, respectively.

For the nine months ended December 31, 2023, the Company recorded a recovery in the provision for advances of $ 0.5 million.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Amounts which are expected to be recovered in more than 12 months are classified as long term and presented within content advances, net of current portion, which were $ 1.7 million and $ 2.6 million as of June 30, 2024, and March 31, 2024, respectively.

For the three months ended June 30, 2024 and 2023, the Company recognized an increase and reduction in our reserve for the recovery of advances in the amount of $ 57 thousand and $ 172 thousand, respectively.

Accounts Payable and Accrued Expenses

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Total Accounts Payable and Accrued Expenses

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

Deferred Consideration

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These payments are fixed in nature and are due to the sellers of the respective companies.

The Company initially recognized the liability at fair value at the time of acquisition and has since recognizes interest expense related to accretion in advance of the ultimate settlement of these liabilities.

The Company initially recognized the liability at fair value at the time of acquisition and has since recognized interest expense related to accretion in advance of the ultimate settlement of these liabilities.

Amounts due within 12 months under the terms of the agreements are classified as current within the Condensed Consolidated Balance Sheets.

The deferred consideration related to the acquisition of DMR is payable in either Class A common shares of the Company stock or cash, at the Company's discretion and subject to certain conditions.

Payments of $ 3.0 million and $ 2.4 million are due in March 2024 and March 2025, respectively.

The deferred consideration related to the FTV acquisition is payable in the amount of $ 238 thousand in each of June 2024 and December 2024, and $ 464 thousand in June 2025.

The deferred consideration related to the acquisition of DMR is payable in either shares of Common Stock or cash, at the Company's discretion and subject to certain conditions.

A payment of $ 2.4 million is due in March 2025.

The deferred consideration related to the FTV acquisition is payable in the amount of $ 238 thousand in December 2024, and $ 464 thousand in June 2025.

There is $ 618 thousand presently due and payable.

The Company has the right to pay up to 25 % of post-close purchase price in equity.

The Company has the right to pay up to 25 % of post-close purchase price in shares of Common Stock.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

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

Three Months Ended

Nine Months Ended

Three Months Ended June 30,

Streaming and digital

Base distribution

Podcast and other

Base distribution

Other non-recurring

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

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

distribution revenue relates to non-streaming revenue, including Theatrical revenue and the sale of DVD's.

Podcast and other revenue primarily relates to the Company's Bloody Disgusting Podcast Network.

Base distribution revenue relates to non-streaming revenue, including Theatrical revenue and the sale of DVD's.

Podcast and other revenue primarily relate to the Company's Bloody Disgusting Podcast Network.

As the Company satisfies its performance obligations from these revenue sources, whether relating to the delivery of digital content, physical goods, or licensing, revenue is generally measured at a point in time.

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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.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We recognize accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that we recognize revenue from a sale.

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

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

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

During the three and nine months ended December 31, 2023, we did no t recognize any credit losses as part of our ongoing operations or reversals of previously recorded provisions.

During the three and nine months ended December 31, 2022, we recognized credit losses of $ 7 thousand and $ 54 thousand, respectively.

During the three months ended June 30, 2024 and 2023, the Company recognized a reduction in its provision for credit losses of $ 0.2 million and $ 0 , respectively.

Contract Liabilities

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Amounts recorded as contract liabilities are generally not long-term in nature.

The ending deferred revenue balance, including current and non-current balances as of December 31, 2023 and March 31, 2023, was and $ 0.2 million and $ 0.2 million , respectively.

In each period, the additions to our deferred revenue balance are due to cash payments received or due in advance of satisfying performance

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The ending deferred revenue balance, including current and non-current balances as of June 30, 2024 and March 31, 2024, was $ 0.3 million and $ 0.4 million, respectively.

In each period, the additions to our deferred revenue balance are due to cash payments received or due in advance of satisfying performance obligations, while the reductions are due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

Participations and royalties payable

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Concentrations

For the three and nine months ended December 31, 2023 , one customer represen ted 26 % and 23 % of consolidated revenues, respectively.

For the three months ended December 31, 2022 , one customer represented approxima tely 16 % of consolidated revenues and another customer represented 14 % of consolidated revenues, respectively.

For the nine months ended December 31, 2022 , one customer represented 11 % of consolidated revenues.

For the three months ended June 30, 2024 and 2023 one customer represen ted 39 % and 26 % of consolidated revenues, respectively.

Direct Operating Expenses

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Forfeitures are recognized as they occur.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

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

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 had no uncertain tax positions as o f December 31, 2023 and March 31, 2023 .

The Company had no uncertain tax positions as o f June 30, 2024 and March 31, 2024 .

Earnings per Share

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

Three Months Ended December 31,

Nine Months Ended

Basic net income (loss) per share:

Net income (loss) attributable to common stockholders

Three Months Ended June 30,

Basic net loss per share:

Net loss attributable to Common Stockholders

Shares used in basic computation:

Weighted-average shares of Common Stock outstanding

Basic net income (loss) per share

Basic Net Loss Per Share

Shares used in diluted computation:

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Weighted-average number of shares

Diluted net income (loss) per share

The calculation of diluted net loss per share for the three and nine months ended December 31, 2023 does not include the impact of 798 thousand and 763 thousand anti-dilutive shares, respectively.

The calculation of diluted net loss per share for the three and nine months ended December 31, 2022 does not include the impact of 674 thousand and 640 thousand potentially anti-dilutive shares, respectively.

Diluted Net Loss Per Share

The calculation of diluted net loss per share for the three months ended June 30, 2024 and 2023 does not include the impact o f 5,199 thousand and 3,601 thousand anti-dilutive shares, respectively.

The first quarter of fiscal 2024 includes a weighted 1.8 million of a total 2.4 million re stricted stock units and awards which were issued during the three months ended June 30, 2024 and vest over a three-year term from the date of issuance.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

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The Company is assessing the impact of ASU 2023-07 on its consolidated financial statements.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740)—Improvements to Income Tax Disclosures" On an annual basis, this update requires the disclosure of specific tax categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

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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, 2023 and March 31, 2023, our maximum exposure to loss, as it relates to the non-consolidated CDF2 Holdings entity, represents accounts receivable for service fees under a master service agreement with CDF2 Holdings.

Such accounts receivable was $ 0.0 million and $ 0.5 million as of December 31, 2023 and March 31, 2023, respectively, which are included in accounts receivable, net on the accompanying Condensed Consolidated Balance Sheets.

The accompanying Condensed Consolidated Statements of Operations includes digital cinema servicing revenue from CDF2 Holdings in the amount of $ 0.0 for the three and nine months ended December 31, 2023, respectively, and $ 0.1 and $ 0.2 million for the three and nine months ended December 31, 2022, respectively.

Total Stockholders’ Deficit of CDF2 Holdings at December 31, 2023 and March 31, 2023 was $ 59.2 million and $ 59.2 million, r espectively.

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, 2023 and March 31, 2023 is carried at $ 0 .

As of June 30, 2024 and March 31, 2024 , 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 as of both June 30, 2024 and March 31, 2024 included in accounts receivable, net on the accompanying Condensed Consolidated Balance Sheets.

The accompanying Condensed Consolidated Statements of Operations includes digital cinema servicing revenue from CDF2 Holdings in the amount of $ 0 for both the three months ended June 30, 2024 and the three months ended June 30, 2023.

Total Stockholders’ Deficit of CDF2 Holdings at both June 30, 2024 and March 31, 2024 was $ 59.2 million.

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 both June 30, 2024 and March 31, 2024 is carried at $ 0 .

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Investment in Roundtable

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The Company paid the purchase price for the Roundtable Securities by issuing 16 thousand shares of Common Stock to Roundtable.

The Company recorded $ 0.2 million for the purchase of the Roundtable Securities which is included in other long-term assets on the accompanying Consolidated Balance Sheets.

The Compan y recorded $ 0.2 mi llion for the purchase of the Roundtable Securities which is included in other long-term assets on the accompanying Consolidated Balance Sheets.

The investment in the Roundtable Securities was made in connection with a proposed collaboration with Roundtable regarding production and distribution of streaming content including the launch of high profile branded enthusiast streaming channels.

1 unchanged sentence

Our President and Chief Strategy Officer is on the Roundtable Board of Directors.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STOCKHOLDERS’ EQUITY

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

During the three months ended December 31, 2023 , the Company issued 0 .5 million shares of Common Stock.

This was comprised of 74 thousand shares for preferred stock dividends, and 400 thousand shares for Board of Director compensation.

During the nine months ended December 31, 2023 , the Company issued 3.9 million shares of Common Stock.

In addition to the activity cited for three months ended December 31, 2023 , this was comprised of 517 thousand shares issued in conjunction with the exercise of pre-funded warrants issued, 502 shares issued in connection with employee bonuses, 56 thousand shares for preferred stock dividends, 41 thousand to satisfy earnout-related liabilities, 2,150 thousand shares were issued through a June 16, 2023 direct offering, and 177 thousand issued in connection with ATM sales during the first fiscal quarter.

In addition, the Company issued common warrants to purchase up to 2,667 thousand shares of Common Stock in conjunction with its direct offering on June 16, 2023.

All pre-funded and common warrants were issued as immediately exercisable.

All common warrants remain outstanding as of December 31, 2023.

During the three months ended December 31, 2022 , the Company issued 45 thousand shares.

This was comprised of 11 thousand shares for preferred stock dividends and 34 thousand shares for Board of Director compensation.

During the nine months ended December 31, 2022 , the Company issued 179 thousand shares.

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

As of June 30, 2024 and March 31, 2023, the number of shares of Common Stock authorized for issuance was 275,000,000 shares.

During the three months ended June 30, 2024, the Company issue d 93 thousand shares of Common Stock.

This was comprised of 64 thousand shares for preferred stock dividends, and 29 thousand shares for payment of compensation to former owners of an acquired entity.

During the three months ended June 30, 2023 , the Company issued 2,337 thousand shares of Common Stock.

This was comprised of 2,150 thousand shares issued through a direct offering, 177 thousand issued in connection with ATM sales, and 10 thousand issued in payment of preferred stock dividends.

In addition, the Company sold 517 thousand pre-funded warrants, and issued common warrants to purchase up to 2,667 thousand shares of Common Stock.

All pre-funded and common warrants were issued as immediately exercisable and remained outstanding as of June 30, 2023.

All pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $ 0.5 thousand.

PREFERRED STOCK

Cumulative dividends in arrears on Series A Preferred Stock were $ 87 th ousand and $ 88 thousand as of December 31, 2023 and 2022, respectively.

During the three and nine months ended December 31, 2023 and 2022, the Company paid preferred stock dividends in arrears for the same amount in the form of shares of Common Stock.

Cumulative dividends in arrears on Series A Preferred Stock were $ 89 th ousand and $ 88 thousand as of June 30, 2024 and 2023, respectively.

During the three months ended June 30, 2024 and 2023, the Company paid preferred stock dividends in arrears of $ 89 thousand and $ 88 thousand in the form of shares of Common Stock, respectively.

The Company has the right to pay preferred stock dividends in cash or stock, at the Company's discretion.

TREASURY STOCK

We have treasury stock, at cost, consisting of 289 thousand and 66 thousand shares of Common Stock at December 31, 2023 and March 31, 2023, respectively.

During the nine months ended December 31, 2023 , the Company acquired 223 thousand shares of Common Stock withheld in connection with employee bonuses that the Company elected to settle in shares of Common Stock.

We have treasury stock, at cost, consisting of 473 thousand and 289 thousand shares of Common Stock at June 30, 2024 and March 31, 2024, respectively.

During the three months ended June 30, 2024, the Company acquired 184 thousand shares of treasury stock, repurchased through a Rule 10b5-1 trading plan with B.

Riley Securities, Inc.

CINEVERSE CORP.

6 unchanged sentences

or (iv) performance awards.

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

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

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

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

1 unchanged sentence

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

In August 2017, the Company adopted the 2017 Plan.

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

The 2017 Plan provided for the issuance of up to 905 thousand shares of Common Stock, in the form of various awards, including stock options, SARs, restricted stock, restricted stock units, PSUs and cash awards.

For the three and nine months ended December 31, 2023 , the Company incurred stock-based compensation expenses of $ 0.2 million and $ 1.1 million, respectively.

Of these amounts, $ 0.1 million and $ 0.3 million related to Board of Director compensation, respectively.

For the three and nine months ended December 31, 2022 , the Company incurred stock-based compensation expenses of $ 0.7 million and $ 3.9 million, respectively.

Of these amounts, $ 0.1 million and $ 0.3 million related to Board of Director compensation, respectively.

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 provides for the issuance of up to 2,055 thousand shares of Common Stock as of December 8, 2023, in the form of various awards, including stock options, stock appreciation rights, stock, restricted stock, restricted stock units, performance awards and cash awards.

For both the three months ended June 30, 2024 and three months ended June 30, 2023, the Company incurred stock-based compensation expenses of $ 0.5 million, of which $ 0.1 million related to Board of Director compensation in both periods as well.

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

LINE OF CREDIT FACILITY

The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank ("EWB") providing for a revolving line of credit (the "Line of Credit Facility") of $ 5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries' assets.

The Line of Credit bears an interest rate equal to 1.5 % above the prime rate, and was 10.00 % as of December 31, 2023.

As of December 31, 2023 and March 31, 2023, a balance of $ 5.0 million was outstanding on the line of the Credit Facility, gross of unamortized issuance costs of $ 69 thousand and $ 76 thousand, respectively.

The Line of Credit Facility bears interest at a rate equal to 1.5 % above the prime rate, equal to 10.00 % as of June 30, 2024.

The term of the Line of Credit Facility has been extended to September 15, 2025 .

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

The Line of Credit Facility matures on September 15, 2024 .

On February 9, 2024, the Company expanded the Line of Credit Facility to $ 7.5 million at the same interest rate and with the same maturity date.

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

As of June 30, 2024, $ 4.8 million was outstanding on the Line of Credit Facility, net of unamortized issuance costs of $ 127 thousand.

During the three months ended June 30, 2024 and 2023, the Company had interest expense, including cash interest and amortization, of $ 0.2 million and $ 0.2 million related to its Line of Credit Fa cility, respectively.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On April 5, 2024, T3 Borrower, a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement with T3 Lender and the Company, as guarantor, to the T3 Loan Agreement.

The T3 Loan Agreement provides for the T3 Loan with a principal amount not to exceed $ 3,666 thousand, and a maturity date of April 1, 2025 , with a permitted extension of the term for 120 days under certain conditions.

The T3 Loan bears no interest until the maturity date other than an interest advance equal to $ 576 thousand at the closing of the T3 Loan on April 5, 2024.

The interest advance was recorded as a discount on the T3 Loan at inception and will be amortized to interest expense and increase the loan amount over its term.

If the T3 Loan is extended as noted above, the T3 Loan will bear interest at a rate of 1.44 % per month.

T3 Borrower may prepay the obligations under the T3 Loan, in full or in part, without penalty or premium.

The proceeds under the T3 Loan Agreement are being used for the funding under the Company’s distribution arrangements for the film titled Terrifier 3 (the “Film”).

The T3 Loan Agreement contains customary covenants, representation and warranties and events of default.

The T3 Loan is presented as current within the Company's Condensed Consolidated Balance Sheets and has a balance of $ 3.1 million as of June 30, 2024.

After the principal of the T3 Loan is paid in full, T3 Lender will be entitled to receive 15 % of all royalties earned by the Company on the Film under its distribution agreements for the Film until T3 Lender has received 1.75 times the full commitment amount of $ 3,666 thousand, consisting of the principal amount plus interest and fees advanced to T3 Borrower, plus any extension interest.

The T3 Loan is secured by a first priority interest in all of T3 Borrower’s rights and interest in the Film and the distribution agreements, including the proceeds to T3 Borrower from the distribution of the Film.

The Company entered into a Guaranty Agreement pursuant to which it provided a guarantee of the T3 Loan (the "Guarantee") which is capped at obligations not exceeding $ 1,500 thousand (the “T3 Guaranty Agreement”).

The Guarantee is subordinated in payment and performance to the Line of Credit Facility pursuant to an intercreditor agreement between EWB and the T3 Lender, and acknowledged by the Company and the T3 Borrower.

In connection with the T3 Loan Agreement, the Company entered into Amendment No.

3 to the Amended and Restated Loan, Guaranty and Security Agreement dated as of September 15, 2022 with East West Bank and the Guarantors named therein, as amended to date (the “EWB Amendment”) to facilitate the T3 Loan and the Guarantee.

COMMITMENTS AND CONTINGENCIES

Cineverse is a virtual company with one domestic operating lease, acquired through the acquisition of DMR which is subleased to a third party.

Cineverse is a virtual company with one domestic operating lease, acquired through the acquisition of DMR which property is subleased to a third party.

The Company has not been relieved of the original lease obligation and therefore recognizes both a lease liability and righ t-of-use asset as part of the arrangement.

1 unchanged sentence

In addition, the Company has two operating leases related to its Cinev erse India operations, with expiration dates in July 2027 .

Expenses related to these leases were $ 109 thousand and $ 337 thousand during the three and nine months ended December 31, 2023 and $ 94 thousand and $ 242 thousand three and nine months ended December 31, 2022, respectively.

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

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

Expenses related to these leases were $ 115 thousand and $ 111 thousand during the three months ended June 30, 2024 and 2023, respectively.

The Company recognized $ 45 thousand and $ 44 thousand of income related to its subleasing arrangement for the three months ended June 30, 2024 and three months ended June 30, 2023 , respectively.

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

CINEVERSE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fiscal year ending March 31,

1 unchanged sentence

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

We recognized income tax (benefit) expense of approximately $( 24 ) thousand and $ 12 thousand for the three and nine months ended December 31, 2023 , respectively.

We recognized $ 0 for both the three and nine months ended December 31, 2022.

We recognized income tax expense of approximately $ 7 thousand and $ 20 thousand for the three months ended June 30, 2024 and 2023, respectively.

The Company's annual income tax expense is attributable to taxable income earned in India relating to transfer pricing.

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

Our effective tax rate was ( 0.9 %) and 0.2 % for the three and nine months ended December 31, 2023, respectively, and 0 % and 0 % for the three and nine months ended December 31, 2022 .

Our effective tax rate was ( 0.2 )% and ( 0.6 )% for the three months ended June 30, 2024 and 2023 , respectively.

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