What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-02-22 compared with 2020-11-16 · 551 added, 252 removed, 67 unchanged (92% of the section changed)

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

The following discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included elsewhere in this document.

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 the NFL, Hallmark 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, iTunes, Amazon Prime, Netflix, Hulu, Xbox, Sony PlayStation, Tubi and cable video-on-demand ("VOD"), and (ii) physical goods, including DVD and Blu-ray Discs.

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

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

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

It also provides fee-based support to over 12,000 movie screens as well as directly to exhibitors and other third party customers in the form of monitoring, billing, collection and verification services.

following discussion and analysis should be read in conjunction with our historical consolidated financial statements and the

related notes included elsewhere in this document.

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

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.

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

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 the NFL, Hallmark 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, iTunes, Amazon Prime, Netflix, Hulu,

Xbox, Sony PlayStation, Tubi and cable video-on-demand (“VOD”), and (ii) physical goods, including DVD and Blu-ray

report our financial results in two primary segments as follows:

(1) cinema equipment business and (2) media content and entertainment

business (“Content & Entertainment” or “CEG”).

The cinema equipment business segment consists of the

non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in

movie theatres throughout North America and several international countries.

It also provides fee-based support to over 12,000

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 is a market leader in:

(1) ancillary market aggregation and distribution of entertainment content and;

(2) branded and curated over-the-top ("OTT") digital network business providing entertainment channels and applications.

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

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

As of June 30, 2020, all of our 3,313 systems from the Phase I Deployment phase of our cinema equipment business segment had ceased to earn a significant portion of VPF revenue from certain major studios, although various other studios, consisting mostly of small independent studios, will continue to pay VPFs through December 2020.

We expect to continue to earn such ancillary revenue from the cinema equipment segment through December of 2020;

however, such amounts are expected to be significantly less material to our consolidated financial statements.

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

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) ancillary market aggregation

and distribution of entertainment content and;

(2) branded and curated over-the-top (“OTT”) digital network business

providing entertainment channels and applications.

Beginning in December 2015, certain of our cinema equipment

began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, Virtual Print

Fees (“VPF”) revenues ceased to be recognized on such Systems, related to such distributors.

Furthermore, because

the Phase I Deployment installation period ended in November 2007, a majority of the VPF revenue associated with the Phase I Deployment

Systems has ended.

The reduction in VPF revenue on cinema equipment business systems approximately coincided with the conclusion

of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations

partially offset the reduced VPF revenue since November 2017.

the 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;

1 unchanged sentence

or (3) 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 business segment operates independently from our Content & Entertainment business.

As of September 30, 2020, we had approximately $12.1 million of non-recourse outstanding debt principal that relates to, and is serviced by, our cinema equipment business.

We also have approximately $18.8 million of outstanding debt principal, as of September 30, 2020 that is attributable to our Content & Entertainment and Corporate segments.

Risks and Uncertainties

The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil in certain industries.

Closures of certain entertainment facilities and retail locations have significantly impacted consumers’ behaviors as a result of the virus outbreak and corresponding preventative measures taken around the world to mitigate the spread of the virus.

As part of our Content & Entertainment business, we sell physical goods, including DVDs and Blu-ray discs, at brick-and-mortar stores.

Many of such stores in the United States closed during the spring of 2020 due to COVID-19 restrictions, and many of those have not yet re-opened, or have re-opened on a limited basis.

We expect that we will experience a loss of sales of such physical goods due to such closures, and we cannot predict the extent of such losses, or how long the closures or limited openings of the stores may last.

As part of our Cinema Equipment business, we earn revenues that are generated when movies are exhibited by theatres.

Many movie theatres in the United States closed during the spring of 2020 due to COVID-19 restrictions and many of those have not yet re-opened, or have re-opened on a limited basis.

To the extent movies are not shown in movie theatres due to the closures, we have not received, and will not receive, related revenue.

The studios that produce movies may elect to delay the release of movies until theatres re-open, or to bypass exhibiting movies in theatres at all and distribute the movies through other means, such as on streaming platforms, in which case we would not earn revenues at all from such movies.

These events have negatively affected, and are expected to continue to negatively affect, our business and results of operations.

Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and

related closures and market conditions will persist, or the extent of the impact they will have on our business or results of

operations and financial condition.

Results of Operations for the Three Months Ended September 30, 2020 and 2019

Three Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

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

Such sales were as originally contemplated

as the conclusion of the digital cinema deployment plan.

We are structured so that our cinema equipment business segment

operates independently from our Content & Entertainment business.

As of December 31, 2020, we had approximately $11.9 million

of non-recourse outstanding debt principal that relates to, and is serviced by, our cinema equipment business.

We also have approximately

$13.3 million of outstanding debt principal, as of December 31, 2020 that is attributable to our Content & Entertainment and

Corporate segments.

and Uncertainties

The COVID-19 pandemic and related economic repercussions have

created significant volatility, uncertainty, and turmoil in certain industries.

Closures of certain entertainment facilities and

retail locations have significantly impacted consumers’ behaviors as a result of the virus outbreak and corresponding preventative

measures taken around the world to mitigate the spread of the virus.

As part of our Content & Entertainment business, we sell

physical goods, including DVDs and Blu-ray discs, at brick-and-mortar stores.

Many of such stores in the United States closed

during the spring of 2020 due to COVID-19 restrictions, and many of those have not yet re-opened, or have re-opened on a limited

We expect that we will experience a loss of sales of such physical goods due to such closures, and we cannot predict the

extent of such losses, or how long the closures or limited openings of the stores may last.

As part of our Cinema Equipment business,

we earn revenues that are generated when movies are exhibited by theatres.

Many movie theatres in the United States closed during

the spring of 2020 due to COVID-19 restrictions and many of those have not yet re-opened, or have re-opened on a limited basis.

The majority of major studios moved releases originally scheduled for the three months ended December 31, 2020 to future dates

with the exception of two Studios that had theatrical releases that opened in theatres on the same day as becoming available on

a streaming channel.

To the extent movies are not shown in movie theatres due to the closures, we have not received, and will

not receive, related revenue.

The studios that produce movies may elect to delay the release of movies until theatres re-open,

or to bypass exhibiting movies in theatres at all and distribute the movies through other means, such as on streaming platforms,

in which case we would not earn revenues at all from such movies.

events have negatively affected, and are expected to continue to negatively affect, our business and results of operations.

the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related closures

and market conditions will persist, or the extent of the impact they will have on our business or results of operations and financial

Results of Operations for the Three Months Ended December

31, 2020 and 2019

Three Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

$ 7,182 $ 10,241 $ (3,059) (30) %

Revenues generated by our Cinema Equipment Business segment decreased primarily as a result of the reduced number of Systems earning VPF revenue and commissions for Phase II Deployment Systems.

In addition, as a result of COVID-19, during the six months ended September 30, 2020 studios have temporarily halted distribution of new content to movie theatres due to mandatory theatre shutdowns.

Because our digital cinema business earns a VPF when a movie is first played on a system, the temporary theatre closures resulting from the COVID-19 pandemic resulted in reduced revenues.

The revenues derived from the Content & Entertainment Business segment decreased by 1% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Revenues generated by our Cinema Equipment Business segment

decreased primarily as a result of the reduced number of Systems earning VPF revenue and commissions for Phase II Deployment Systems.

In addition, as a result of COVID-19, during the three months ended December 31, 2020, theatres in many major markets remained

closed throughout the third quarter causing the majority of major studios to move wide releases scheduled for the three months

ended December 31, 2020 to future dates.

Only two major studios had wide theatrical releases in November/December, however,

the theatrical window before the streaming debut was shortened or eliminated to accommodate the lack of theatrical venues.

our digital cinema business earns a VPF when a movie is first played on a system, the temporary theatre closures resulting from

the COVID-19 pandemic resulted in reduced revenues.

The revenues in the Content & Entertainment Business segment increased

by 8% for the three months ended December 31, 2020 compared to the three months ended December 31, 2019.

The increase is due to

the addition of five new third-party OTT channels and an increase in the number of advertising partners.

Direct Operating Expenses

Three Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

Three Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

$ 4,330 $ 4,087 $ 243 6 %

The increase in direct operating expenses in the three months ended September 30, 2020 for the Content & Entertainment Business compared to the prior period was primarily due to transition expenses related to a new third party DVD distributor.

These costs were mainly fulfillment and freight expenses.

The decrease in direct operating expenses in the three months

ended December 31, 2020 for the Content & Entertainment Business compared to the prior period was primarily due to transition

credits received related to a new third-party DVD distributor.

These credits mainly offset fulfillment and freight expenses.

addition, there was a significant decrease in manufacturing costs between the distributor in place in the prior period and the

inventory reserve has decreased.

The decrease in direct operating expenses in the three months ended December 31, 2020 for the

Cinema Equipment Business compared to the prior period was primarily due to a reduction in head count and shifting of certain

employees from full time to part time as a result of the negative impact of the Covid 19 pandemic.

Selling, General and Administrative Expenses

Three Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

Three Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

Corporate 3,009 1,793 1,216 68 %

$ 6,168 $ 4,988 $ 1,180 24 %

Selling, general and administrative expenses for the three months ended September 30, 2020 increased by $1.2 million, primarily due to a $1.5 million retention bonus expense management and employees received in cash, and an issuance of Class A common stock to employees of $0.8 million, offset by decreases in other general and administrative expenses.

Depreciation and Amortization Expense on Property and Equipment

Three Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

Selling, general and administrative expenses for the three

month ended December 31, 2020 increase by $2.4 million, primarily due to increase in share based compensation expense of $0.8

million and a bonus expense of $1.4 million.

and Amortization Expense on Property and Equipment

Three Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

Corporate 5 42 (37) (88) %

$ 1,345 $ 1,609 $ (264) (16) %

Depreciation and amortization expense decreased in our Cinema Equipment Business segment as additional digital cinema projection Systems reached the conclusion of their ten-year useful lives during fiscal year 2020.

Interest expense, net

Three Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

and amortization expense decreased in our Cinema Equipment Business segment as additional digital cinema projection Systems reached

the conclusion of their ten-year useful lives during fiscal year 2020.

Three Months Ended December

($ in thousands)

Cinema Equipment Business

Corporate 571 1,122 (551) (49) %

$ 1,194 $ 1,813 $ (619) (34) %

Interest expense in the Cinema Equipment Business segment decreased primarily as a result of reduced note payable balances compared to the prior period, primarily on the Prospect Term Loan.

Interest expense in our Corporate Segment decreased as a result of lower loan balances from our Credit Facility and Second Lien Loans.

Content & Entertainment Business

Interest expense in the Cinema Equipment Business segment decreased

primarily as a result of reduced note payable balances compared to the prior period, solely on the Prospect Term Loan.

expense in our Corporate Segment decreased as a result of lower loan balances from our Credit Facility and Second Lien Loans settled

with Class A common stock and the conversion of the Bison Convertible Note and the Mingtai Convertible Note into shares of Class

A Common Stock.

Change in fair value of equity investment in Starrise, a

related party

Our investment in Starrise is accounted for at fair value with

changes in fair value recognized in the statement of operations.

The loss of $6.8 million during the three months ended December

31, 2020 reflects the decrease during the period in the market price of Starrise’s stock.

Income Tax Expense

We recorded an income tax benefit of approximately $181 thousand for the three months ended September 30, 2020.

We recorded income tax expense of approximately $27 thousand for the three months ended September 30, 2019.

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 September 30, 2020 and 2019 was 0.7% and negative 0.9%, respectively.

We recorded an income tax benefit of $0 for the three months

ended December 31, 2020.

We recorded income tax expense of approximately $0.1 million for the three months ended December

Our effective tax rate for the three months ended December

31, 2020 and 2019 was 0% and negative 2.0%, respectively.

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.

Consolidated Adjusted EBITDA (including the results of Cinema Equipment Business segment) for the three months ended September 30, 2020 decreased by $2.5 million, compared to the three months ended September 30, 2019.

Adjusted EBITDA from our Cinema Equipment Business segment decreased by $2.5 million or 105% compared to the three months ended September 30, 2019 primarily due to state mandated theater closures due to COVID-19, the temporary halt of distribution of major studio releases and the expected decline of the Cinema Equipment Business.

Adjusted EBITDA from our Content & Entertainment Business increased $25 thousand or 2.5% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

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

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

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

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

We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors.

We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.

We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net loss from continuing operations and Adjusted EBITDA has been provided in the financial results.

Adjusted EBITDA should not be considered as an alternative to income from operations or net loss from continuing operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity.

In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows.

We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Following is the reconciliation of our consolidated net loss to Adjusted EBITDA:

Three Months Ended September 30,

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.

Consolidated Adjusted EBITDA (including the results of Cinema

Equipment Business segment) for the three months ended December 31, 2020 decreased by $1.8 million compared to the three months

ended December 31, 2019.

Adjusted EBITDA from our Cinema Equipment Business segment decreased primarily due to state mandated

theater closures due to COVID-19, the temporary halt of distribution of major studio releases and the expected decline of the

Cinema Equipment Business.

Adjusted EBITDA from our Content & Entertainment Business and corporate increased for the three

months ended December 31, 2020 compared to the three months ended December 31, 2019 by $0.2 million due to the addition of five

new third-party OTT channels and an increase in the number of advertising partners.

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

other companies.

We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management

believes it provides additional information with respect to the performance of its fundamental business activities.

For this reason,

we believe Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric.

present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net loss from continuing operations

as an indicator of operating performance.

We also believe that Adjusted EBITDA is a financial measure that is useful both to management

and investors when evaluating our performance and comparing our performance with that of our competitors.

We also use Adjusted

EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses

or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.

believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net

loss from continuing operations and Adjusted EBITDA has been provided in the financial results.

Adjusted EBITDA should not be

considered as an alternative to income from operations or net loss from continuing operations as an indicator of performance or

as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance

with GAAP, or as a measure of liquidity.

In addition, Adjusted EBITDA does not take into account changes in certain assets and

liabilities as well as interest and income taxes that can affect cash flows.

We do not intend the presentation of these non-GAAP

measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

These non-GAAP measures

should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

is the reconciliation of our consolidated net loss to Adjusted EBITDA:

Three Months Ended

($ in thousands)

Net loss $ (26,566) $ (3,088)

Income tax (benefit) expense (181) 27

Income tax expense

Depreciation and amortization of property and equipment

3 unchanged sentences

Changes in fair value on equity investment in Starrise

Other expense, net 1,291 296

Other (income) expense, net

Stock-based compensation and expenses

Net income attributable to noncontrolling interest 23 (7)

Net income (loss) attributable to noncontrolling interest

Adjusted EBITDA

2 unchanged sentences

Amortization of intangible assets

Loss (income) from operations 1,384 (917)

Adjusted EBITDA from Content & Entertainment business and corporate segment $ (963) $ (998)

Results of Operations for the Six Months Ended Months Ended September 30, 2020 and 2019

Six Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

Other income and expense

Income (loss) from operations

Adjusted EBITDA from Content & Entertainment business and corporate

of Operations for the Nine Months Ended Months Ended December 31, 2020 and 2019

Nine Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

$ 13,200 $ 20,044 $ (6,844) (34) %

Revenues generated by our Cinema Equipment Business segment decreased primarily as a result of the reduced number of Systems earning VPF revenue and commissions for Phase II Deployment Systems.

In addition, as a result of COVID-19, during the six months ended September 30, 2020 studios have temporarily halted distribution of new content to movie theatres due to mandatory theatre shutdowns.

Because our digital cinema business earns a VPF when a movie is first played on a System, the temporary theatre closures resulting from the COVID-19 pandemic resulted in reduced revenues.

The revenues derived from the Content & Entertainment Business decreased by 4% for the six months ended September 30, 2020 compared to the six months September 30, 2019, respectively, as a result of the temporary closure of DVD distribution warehouses due to COVID-19.

Direct Operating Expenses

Six Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

Revenues generated by our Cinema Equipment Business segment

decreased primarily as a result of the reduced number of Systems earning VPF revenue and commissions for Phase II Deployment Systems.

In addition, as a result of COVID-19, during the nine months ended December 31, 2020, theatres in many major markets remained

closed throughout the third quarter causing the majority of major studios to move wide releases scheduled for the three months

ended December 31, 2020 to future dates.

Only two major studios had wide theatrical releases in November/December, however,

the theatrical window before the streaming debut was shortened or eliminated to accommodate the lack of theatrical venues.

our digital cinema business earns a VPF when a movie is first played on a system, the temporary theatre closures resulting from

the COVID-19 pandemic resulted in reduced revenues.

The revenues in the Content & Entertainment Business segment increased

by 1% for the nine months ended December 31, 2020 compared to the nine months ended December 31, 2019.

The increase is due to

the addition of five new OTT third-party channels and an increase in the number of advertising partners.

Operating Expenses

Nine Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

$ 7,009 $ 7,699 $ (690) (9) %

The decrease in direct operating expenses in the six months ended September 30, 2020 for the Content & Entertainment Business compared to the prior period was primarily due a decrease in overall revenue offset by an increase due to transition expenses related to a new third party DVD distributor.

These costs were mainly fulfillment and freight expenses.

The decrease for the Cinema Equipment business was due to a reduction in property tax payments.

Selling, General and Administrative Expenses

Six Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

The decrease in direct operating expenses in the nine months

ended December 31, 2020 for the Content & Entertainment Business compared to the prior period was primarily due to a decrease

in overall revenue partially offset by an increase due to transition expenses related to a new third party DVD distributor.

costs were mainly fulfillment and freight expenses.

The decrease in direct operating expenses in the nine months ended December

31, 2020 for the Cinema Equipment Business compared to the prior period was primarily due to a reduction in head count and shifting

of certain employees from full time to part time as a result of the negative impact of the Covid 19 pandemic.

General and Administrative Expenses

Nine Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

Corporate 4,405 3,922 483 12 %

$ 10,008 $ 10,837 $ (829) (8) %

Selling, general and administrative expenses for the six months ended September 30, 2020 decreased by $0.8 million primarily due to a $1.5 million retention bonus expense management and employees received in cash, and an issuance of Class A common stock to employees of $0.8 million, offset by decreases in other general and administrative expenses.

Depreciation and Amortization Expense on Property and Equipment

Six Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

Selling, general and administrative expenses for the nine months

ended December 31, 2020 increased by $1.5 million primarily due to a $1.2 million increase in bonus expense and a $1.7 million

increase in stock based compensation, for Corporate, partially offset by decreases of $650 thousand related to personnel expenses

as a result of the company-wide downsizing program and $660 thousand related to occupancy costs as a result of the company-wide

program to downsize office space and move to a more remote workforce, in the Content & Entertainment Business segment.

and Amortization Expense on Property and Equipment

Nine Months Ended December

($ in thousands)

Cinema Equipment Business

Content & Entertainment Business

Corporate 23 84 (61) (73) %

$ 2,869 $ 3,383 $ (514) (15) %

Interest expense, net

Six Months Ended September 30,

($ in thousands) 2020 2019 $ Change % Change

and amortization expense decreased in our Cinema Equipment Business segment as additional digital cinema projection Systems reached

the conclusion of their ten-year useful lives during the nine months ended December 31, 2020.

Nine Months Ended December

($ in thousands)

Cinema Equipment Business

Corporate 1,283

2,576 (1,293)

$ 2,484 $ 4,095 $ (1,611) (39) %

Interest expense in the Cinema Equipment Business segment decreased primarily as a result of reduced debt balances compared to the prior period on the Prospect Term Loan.

Interest expense in our Corporate Segment decreased as a result of lower loan balances from our Credit Facility and Second Lien Loans.

Income Tax Expense

We recorded an income tax benefit of approximately $181 thousand for the six months ended September 30, 2020.

We recorded income tax expense of approximately $74 thousand six months ended September 30, 2019.

Adjusted EBITDA

Consolidated Adjusted EBITDA (including the results of Cinema Equipment Business segment) for the six months ended September 30, 2020 decreased by $3.3 million compared to the six months ended September 30, 2019.

Adjusted EBITDA from our Cinema Equipment Business segment decreased by $5.6 million or 107% compared to the six months ended September 30, 2019 primarily due to state mandated theater closures due to COVID-19, the temporary halt of distribution of major studio releases and the expected decline of the Cinema Equipment Business.

Adjusted EBITDA from Content & Entertainment business and corporate segment increased by $2.3 million or 72% for the six months ended September 30, 2020 compared to the six months ended September 30, 2019, due to growth of higher margin OTT Streaming & Digital revenues.