What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-17 compared with 2025-11-14 · 55 added, 55 removed, 113 unchanged (49% of the section changed)

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Financial Condition and Liquidity

As of September 30, 2025, the Company has an accumulated deficit of $510.2 million and negative working capital of $1.3 million.

For the three and six months ended September 30, 2025, the Company had a net loss attributable to the Company's common stock, par value $0.001 per share (the "Common Stock") holders of $9.3 million.

Net cash used in operating activities for the six months ended September 30, 2025 was $21.7 million, which included $4.2 million of incremental investment in our content portfolio via advances or minimum guarantee payouts.

As of December 31, 2025, the Company has an accumulated deficit of $(511.2) million and negative working capital of $(1.4) million.

For the three and nine months ended December 31, 2025, the Company had a net loss attributable to the Company's common stock holders of $(1.0) million and $(10.3) million, respectively.

Net cash used in operating activities for the nine months ended December 31, 2025 was $23.3 million, which included $7.9 million of incremental investment in our content portfolio via advances or minimum guarantee payouts.

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

During the six months ended September 30, 2025, 1.9 million warrants were exercised for net proceeds of $5.8 million.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025, with East West Bank (the "Line of Credit Facility") providing for borrowings of up to $12.5 million and expandable to $15.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets.

As of September 30, 2025, $6.6 million was outstanding on the Line of Credit Facility.

During the nine months ended December 31, 2025, 1.9 million warrants were exercised for net proceeds of $5.8 million.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025, with East West Bank (the "Line of Credit Facility") providing for borrowings of up to $12.5 million guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets.

The facility includes provisions that allow for an increase in total borrowing capacity up to $15.0 million, subject to lender approval.

As of December 31, 2025, $8.3 million was outstanding on the Line of Credit Facility.

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

As of September 30, 2025 and March 31, 2025, short-term content advances were $5.4

million and $6.7 million, respectively, and content advances, net of current portion, were $7.9 million and $4.1 million, respectively.

As of December 31, 2025 and March 31, 2025, short-term content advances were $7.9 million and $6.7 million, respectively, and long-term content advances, net of current portion, were $9.2 million and $4.1 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 equivalents and availability under our Line of Credit Facility as of September 30, 2025 will be sufficient to support our operations for at least twelve months from the filing of this report.

We believe our cash and cash equivalents, availability under our Line of Credit Facility and ability to use our ATM as of December 31, 2025 will be sufficient to support our operations for at least twelve months from the filing of this report.

Critical Accounting Estimates

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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 September 30, 2025 and 2024 (unaudited) (in thousands) :

For the Three Months Ended September 30,

Results of Operations for the three months ended December 31, 2025 and 2024 (unaudited) (in thousands) :

For the Three Months Ended December 31,

As a % of Revenue

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Total Revenue

Streaming and digital revenue for the three months ended September 30, 2025 decreased by $0.5 million, primarily due to lower licensing revenue.

The same period in 2024 included $1.6 million license fee revenue related to the licensing of the Dog Whisperer content.

In the prior-year quarter, the Company recorded $1.6 million from a Dog Whisperer licensing agreement, while this quarter includes a recently signed $1.1 million licensing deal for The Toxic Avenger Unrated that will be recognized in future periods.

Excluding these timing effects, performance across the Company’s core business lines continued to show solid underlying growth.

The $0.5 million increase in Base distribution revenue for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily attributable to approximately $1.1 million of revenue recognized from the theatrical release of Toxic Avenger and the final theatrical revenue for Terrifier 3, offset by a decrease in physical sales.

Podcast and other revenue declined by $0.3 million during the three months ended September 30, 2025, compared to same period in 2024 due to lower podcast direct advertising.

Streaming and digital revenue for the three months ended December 31, 2025 decreased by $2.6 million, primarily due to strong digital release revenue of $2.8 million from Terrifier 3 in the prior period.

This is partially offset by revenue growth of $1.5 million in our top channels.

Programmatic revenue decreased by $1.2 million due to reduced advertiser demand.

Base distribution revenue decreased by $21.0 million for the three months ended December 31, 2025 compared to the three months ended December 31, 2024, primarily attributable to the strong theatrical release revenue of $22.8 million from Terrifier 3 in the prior period.

This is partially offset by theatrical release revenue of $1.2 million in the current period.

Podcast and other revenue decreased by $0.8 million during the three months ended December 31, 2025, compared to same period in 2024 due to lower podcast direct advertising.

Direct Operating Expenses

For the Three Months Ended September 30,

For the Three Months Ended December 31,

As a % of Revenue

Direct operating expenses

The $1.0 million decrease in Direct operating expenses for the three months ended September 30, 2025 was primarily driven by lower variable costs compared to the prior year quarter, including royalty expense, platform fees, manufacturing, freight, and fulfillment charges, offset by an increase in theatrical distribution fees related to Toxic Avenger.

The $15.9 million decrease in Direct operating expenses for the three months ended December 31, 2025 was primarily driven by lower variable costs compared to the prior year quarter, which included royalty expenses for Terrifier 3 , platform fees, freight, and fulfillment charges, offset by an increase in manufacturing costs related to Toxic Avenger.

Selling, General and Administrative Expenses

For the Three Months Ended September 30,

For the Three Months Ended December 31,

As a % of Revenue

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Selling, General and Administrative

For the three months ended September 30, 2025 compared to three months ended September 30, 2024, Compensation expense increased by $1.2 million due to increased employee headcount.

For the three months ended December 31, 2025 compared to three months ended December 31, 2024, compensation expense decreased by $1.8 million primarily due to a lower bonus accrual.

Corporate expenses increased by $0.8 million reflecting higher professional services and legal expenses associated with strategic business and content acquisitions.

Marketing expenses increased by $2.0 million primarily due to Toxic Avenger .

For the three months ended September 30, 2024, $0.3 million Marketing expenses were included in Direct operating expenses.

For the three months ended December 31, 2024, $0.6 million Marketing expenses were included in Direct operating expenses.

Depreciation and Amortization Expense

For the Three Months Ended September 30,

For the Three Months Ended December 31,

As a % of Revenue

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Depreciation and Amortization

Amortization expense increased during the three months ended September 30, 2025 compared to the prior year quarter primarily due to increased capitalized content costs.

Amortization expense increased by $0.3 million during the three months ended December 31, 2025 compared to the prior year quarter primarily due to increased capitalized content costs.

Interest Expense, Net

For the three months ended September 30, 2025, interest expense decreased by $0.2 million to $0.1 million compared to the prior year quarter.

The decrease is primarily the result of a lower average balance on the Line of Credit Facility during the quarter compared to the prior year quarter.

Results of Operations for the six months ended September 30, 2025 and 2024 (unaudited) (in thousands) :

For the Six Months Ended September 30,

For the three months ended December 31, 2025, compared with the same period in 2024, interest expense decreased by $2.1 million to $0.2 million primarily due to higher interest participation in the prior year related to the T3 Loan, which was obtained and repaid during the prior fiscal year, lower borrowings under our line of credit, and lower interest rates.

Results of Operations for the nine months ended December 31, 2025 and 2024 (unaudited) (in thousands) :

For the Nine Months Ended December 31,

As a % of Revenue

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Total Revenue

Streaming and digital revenue for the six months ended September 30, 2025 increased by $0.9 million compared to the same period in 2024, primarily driven by $0.5 million from the digital release of Terrifier 3, and continued growth across the Company’s subscription-based platforms.

Podcast and other revenue declined by $0.4 million during the six months ended September 30, 2025 compared to same period in 2024, due to direct advertising offset by an increase in Matchpoint revenue.

The $1.2 million increase in Base distribution revenue for the six months ended September 30, 2025, compared to the same period in 2024, due to the theatrical release of Toxic Avenger and final theatrical revenue for Terrifier 3.

Streaming and digital revenue for the nine months ended December 31, 2025 decreased by $1.8 million compared to the same period in 2024, primarily driven by primarily due to strong digital release revenue of $2.8 million for Terrifier 3 in the prior period.

This is partially offset by growth of $1.4 million in our top channels.

Base distribution revenue decreased by $19.8 million for the nine months ended December 31, 2025, compared to the same period in 2024, primarily due to the strong theatrical release revenue of $22.8 million in the prior period.

This is partially offset by the theatrical and physical releases bringing in $2.0 million in the current period.

Podcast and other revenue declined by $1.2 million during the nine months ended December 31, 2025 compared to same period in 2024, due to lower podcast direct advertising.

Direct Operating Expenses

For the Six Months Ended September 30,

For the Nine Months Ended December 31,

As a % of Revenue

Direct operating expenses

The decrease of $0.7 million in Direct Operating Expenses for the six months ended September 30, 2025, compared to the six months ended September 30, 2024 was primarily driven by lower variable costs, including royalty expenses, platform fees, and freight and fulfillment charges.

The decrease of $16.7 million in Direct operating Expenses for the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024 was primarily driven by lower variable costs, including royalty expenses and platform fees.

The reduction also reflects higher recoupements on our content advances resulting in lower provision for royalty advance allowance.

1 unchanged sentence

Selling, General and Administrative Expenses

For the Six Months Ended September 30,

For the Nine Months Ended December 31,

As a % of Revenue

5 unchanged sentences

Selling, General and Administrative

For the six months ended September 30, 2025 compared to six months ended September 30, 2024, Compensation expenses increased by $2.6 million due to increased employee headcount.

For the nine months ended December 31, 2025 compared to nine months ended December 31, 2024, Compensation expenses increased by $0.8 million due to increased employee headcount.

Corporate expenses increased by $1.7 million reflecting higher professional services and legal expenses associated with strategic business and content acquisitions.

Marketing expenses increased by primarily due to Toxic Avenger.

For the six months ended September 30, 2024, $0.3 million Marketing expenses were included in Direct operating expenses.

Marketing expenses increased primarily due to costs associated with Toxic Avenger .

For the nine months ended December 31, 2024, $0.8 million of marketing expenses were included in Direct operating expenses.

Other operating expenses increased by $0.6 million primarily due to increased administrative costs.

Depreciation and Amortization Expense

For the Six Months Ended September 30,

For the Nine Months Ended December 31,

As a % of Revenue

2 unchanged sentences

Depreciation and Amortization

Amortization expense increased by $0.5 million during the six months ended September 30, 2025, compared to 2024, primarily due to increased capitalized content costs.

Amortization expense increased by $0.8 million during the nine months ended December 31, 2025, compared to 2024, primarily due to increased capitalized content costs.

Interest Expense, Net

For the six months ended September 30, 2025 compared to the same period of 2024, interest expense decreased by $0.9 million primarily due to higher outstanding debt balances and increased interest rates in 2024, along with a $0.4 million discount to accrued interest provided by the Terrifier 3 lender during the six months ended September 30, 2025 in return for the final payment made in the quarter.

For the nine months ended December 31, 2025, compared with the same period in 2024, interest expense decreased by $3.0 million, primarily due to higher interest participation in the prior year related to the T3 Loan, which was obtained and repaid during prior fiscal year, lower borrowings under our line of credit, and lower interest rates.

In addition, during the nine months ended December 31, 2025, we recognized a $0.4 million discount on accrued interest provided by the T3 lender in exchange for the final payment made during the period.

Adjusted EBITDA

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

For the Three Months Ended

September 30,

For the Six Months Ended September 30,

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Net (loss) income

Income tax expense

Depreciation and amortization ⁽¹⁾

Interest expense (income)

Interest expense

Stock-based compensation

Other (income) expense, net

Other expense (income), net

Net income attributable to noncontrolling interest

Other transaction costs ⁽²⁾

Acquisition-related costs

Employee severance costs

Adjusted EBITDA

(1) - Includes $129 thousand and $214 thousand of amortization included in direct operating expenses on our Consolidated Statements of Operations for the three and six months ended September 30, 2025, respectively.

(2) - Primarily includes employee severance related costs.

(1) - Includes $129 thousand and $344 thousand of amortization included in direct operating expenses on our Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2025, respectively, and $85 thousand and $256 thousand for the three and nine months ended December 31, 2024, respectively.

Changes in our cash flows were as follows (in thousands):

For the Six Months Ended September 30,

Net cash used in operating activities

For the Nine Months Ended December 31,

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net Change in Cash and Cash Equivalents

For the six months ended September 30, 2025, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization and stock-based compensation, and other changes in working capital.

For the nine months ended December 31, 2025, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization and stock-based compensation, and other changes in working capital.

Specifically, the adjustments are primarily driven by net cash outflows related to content advances made to partners for which initial expenditures are generally recovered within six to twelve months and operating prepayments and a decrease in accounts payable and accrued expenses.

Operating cash flows 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.

Cash used in investing activities is primarily related to expenditures towards long-lived intangible and fixed assets, along with strategic acquisitions.

Cash flows from financing were primarily attributable to proceeds under the Line of Credit Facility, net of payments, and proceeds from common stock warrant exercises.

For the six months ended September 30, 2024, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, reserve for credit losses and stock-based compensation, including capitalized content spend and other changes in working capital.

For the three and nine months ended December 31, 2024, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, reserve for credit losses and stock-based compensation, including capitalized content spend and other changes in working capital.

Off-balance sheet arrangements

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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 2. Management’s Discussion and Analysis