Cineverse Corp. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CINEDIGM CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets at March 31, 2021 and 2020 F-2 Consolidated Statements of Operations for the fiscal years ended March 31, 2021 and 2020 F-3 Consolidated Statements of Comprehensive Loss for the fiscal years ended March 31, 2021 and 2020 F-4 Consolidated Statements of Equity (Deficit) for the fiscal years ended March 31, 2021 and 2020 F-5 Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2021 and 2020 F-7 Notes to Consolidated Financial Statements F-8 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Cinedigm Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Cinedigm Corp. (the “Company”) as of March 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive loss, equity(deficit), and cash flows for each of the years in the two-year period ended March 31, 2021, and the related notes. In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue recognition – Content & Entertainment Business segment. As disclosed in Note 2 to the consolidated financial statements, the Company’s Content & Entertainment business segment (“CEG”) earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD”) and physical goods. Fees earned are typically a percentage based on the net amounts received from customers. Depending on the nature of the agreements with the platform and content providers, the fee rate that is earned varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ads supported on the digital platforms, and shipment of DVDS and Blu-Ray disks. Revenue is recognized at the point in time when the performance obligation is satisfied which is when the content is available for subscription on the digital platform, at the time of shipment of physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical titles is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation. Physical revenue is recognized after deducting the reserves for sales returns and revenue reductions, which are accounted for as variable consideration. Revenue is determined to be reported on a gross or net basis for each revenue stream based on the transfer of control of goods and services. Total CEG revenues for the year ended March 31, 2021 was $28.2 million. We identified revenue recognition for CEG as a critical audit matter due the level of judgement and estimation required by management in the recognition of fees earned from customers and estimation of revenues accrued at period end. As such, there is a degree of auditor judgement and subjectivity, and significant audit effort and audit procedures to address management’s revenue recognition for CEG. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of the Company’s controls over the revenue recognition of CEG. We gained an understanding of the Company’s role as either principal or agent in the revenue streams and management’s determination of revenue streams as either gross or net based on the transfer of control for the good and service. Our audit procedures included, among others, comparing the revenue recognized to third party statements/reports, which can include sales, cash receipts, returns, revenue deductions, advance payments, advance recoupments, expenses, and other information, to reconcile to the revenue recognized or the net amounts in which fees are calculated on, as determined by the underlying contracts or third party statements for a sample of transactions. We also tested the mathematical accuracy of management's calculations of revenue and the associated timing of revenue recognized in the financial statements, as well as the Company’s estimation process, on a sample basis, for revenues accrued at period end. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2004. EISNERAMPER LLP Iselin, New Jersey July 29, 2021 F- 1 CINEDIGM CORP. CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) March 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 16,849 $ 14,294 Accounts receivable, net 21,093 34,785 Inventory, net 166 582 Unbilled revenue 1,377 1,992 Prepaid and other current assets 3,657 5,382 Total current assets 43,142 57,035 Restricted cash 1,000 1,000 Equity investment in Starrise, a related party, at fair value 6,443 23,433 Property and equipment, net 3,500 7,967 Operating lease right-of use assets 100 1,210 Intangible assets, net 9,860 6,924 Goodwill 8,701 8,701 Other long-term assets 2,700 4,170 Total assets $ 75,446 $ 110,440 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities Accounts payable and accrued expenses $ 46,627 $ 77,085 Current portion of notes payable, including unamortized debt discount and debt issuance costs of $ 0 and $ 460 , respectively (see Note 6) 1,956 37,249 Current portion of notes payable, non-recourse including unamortized debt discount of $ 0 and $ 763 , respectively (see Note 6) 7,786 11,442 Operating lease liabilities 87 593 Current portion of deferred revenue 924 1,645 Total current liabilities 57,380 128,014 PPP Loan 2,152 — Operating lease liabilities, net of current portion 13 684 Deferred revenue, net of current portion — 919 Other long-term liabilities 19 110 Total liabilities 59,564 129,727 Commitments and contingencies (see Note 8) Stockholders’ Equity (Deficit) Preferred stock, 15,000,000 shares authorized; Series A 10 % - $ 0.001 par value per share; 20 shares authorized; 7 shares issued and outstanding at March 31, 2021 and 2020. Liquidation preference of $ 3,648 3,559 3,559 Common stock, $ 0.001 par value; Class A stock 200,000,000 and 150,000,000 shares authorized at March 31, 2021 and 2020, respectively, 167,542,404 and 63,251,429 shares issued and 166,228,568 and 61,937,593 shares outstanding at March 31, 2021 and 2020, respectively. 164 62 Additional paid-in capital 499,272 400,784 Treasury stock, at cost; 1,313,836 Class A common shares at March 31, 2021 and 2020. ( 11,603 ) ( 11,603 ) Accumulated deficit ( 474,080 ) ( 410,904 ) Accumulated other comprehensive (loss) income ( 68 ) 92 Total stockholders’ equity (deficit) of Cinedigm Corp. 17,244 ( 18,010 ) Deficit attributable to noncontrolling interest ( 1,362 ) ( 1,277 ) Total equity (deficit) 15,882 ( 19,287 ) Total liabilities and equity (deficit) $ 75,446 $ 110,440 See accompanying Notes to Consolidated Financial Statements F- 2 CINEDIGM CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for share and per share data) For the Fiscal Year Ended March 31, 2021 2020 Revenues $ 31,419 $ 39,291 Costs and expenses: Direct operating (excludes depreciation and amortization shown below) 16,103 17,146 Selling, general and administrative 21,992 16,344 (Recovery) Provision for doubtful accounts ( 122 ) 758 Depreciation and amortization of property and equipment 4,404 6,620 Amortization of intangible assets 2,515 2,772 Total operating expenses 44,892 43,640 Loss from operations ( 13,473 ) ( 4,349 ) Interest income 37 21 Interest expense ( 4,087 ) ( 7,258 ) Changes in fair value of equity investment in Starrise, a related party ( 43,518 ) ( 1,618 ) Loss in extinguishment of note payable ( 1,498 ) — Other expense, net ( 681 ) ( 1,207 ) Loss from operations before income taxes ( 63,220 ) ( 14,411 ) Income tax benefit (expense) 315 ( 313 ) Net loss ( 62,905 ) ( 14,724 ) Net income (loss) attributable to noncontrolling interest 85 ( 10 ) Net loss attributable to controlling interests ( 62,820 ) ( 14,734 ) Preferred stock dividends ( 356 ) ( 356 ) Net loss attributable to common stockholders $ ( 63,176 ) $ ( 15,090 ) Net loss per Class A common stock attributable to common stockholders - basic and diluted: Net loss attributable to common stockholders $ ( 0.49 ) $ ( 0.34 ) Weighted average number of Class A common stock outstanding: basic and diluted 127,787,379 44,004,780 See accompanying Notes to Consolidated Financial Statements F- 3 CINEDIGM CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) For the Fiscal Year Ended March 31, 2021 2020 Net loss $ ( 62,905 ) $ ( 14,724 ) Other comprehensive (loss) income: foreign exchange translation ( 160 ) 82 Comprehensive loss ( 63,065 ) ( 14,642 ) Less: comprehensive income (loss) attributable to noncontrolling interest 85 ( 10 ) Comprehensive loss attributable to controlling interests $ ( 62,980 ) $ ( 14,652 ) See accompanying Notes to Consolidated Financial Statements F- 4 CINEDIGM CORP. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (In thousands, except share data) Series A Preferred Stock Class A Common Stock Treasury Stock Additional Paid-In Accumulated Accumulated Other Comprehensive (Loss) Total Stockholders’ Non-Controlling Total Shares Amount Shares Amount Shares Amount Capital Deficit Income Deficit Interest Deficit Balances as of March 31, 2019 7 $ 3,559 35,678,597 $ 36 1,313,836 $ ( 11,603 ) $ 368,531 $ ( 395,814 ) $ 10 $ ( 35,281 ) $ ( 1,287 ) $ ( 36,568 ) Foreign exchange translation — — — — — — — — 82 82 — 82 Issuance of Class A common stock for third party professional services — — 374,286 — — — — — — — — — Issuance of Class A common stock to Bison — — 3,900,000 4 — — 5,846 — — 5,850 — 5,850 Issuance of Class A common stock in connection with the Starrise transaction, a related party — — 21,646,604 22 — — 11,235 — — 11,257 — 11,257 Contributed capital under the Starrise transaction, a related party — — — — — — 13,795 — — 13,795 — 13,795 Fair value of conversion feature in connection with convertible note — — — — — — 478 — — 478 — 478 Stock-based compensation — — — — — — 543 — — 543 — 543 Preferred stock dividends paid with common stock — — 338,106 — — — 356 ( 356 ) — — — — Net loss — — — — — — — ( 14,734 ) — ( 14,734 ) 10 ( 14,724 ) Balances as of March 31, 2020 7 $ 3,559 61,937,593 $ 62 1,313,836 $ ( 11,603 ) $ 400,784 $ ( 410,904 ) $ 92 $ ( 18,010 ) $ ( 1,277 ) $ ( 19,287 ) See accompanying Notes to Consolidated Financial Statements F- 5 CINEDIGM CORP. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (In thousands, except share data) Series A Preferred Stock Class A Common Stock Treasury Stock Additional Paid-In Accumulated Accumulated Other Comprehensive (Loss) Total Stockholders’ Non- Controlling Total Shares Amount Shares Amount Shares Amount Capital Deficit Income Deficit Interest Deficit Balances as of March 31, 2020 7 $ 3,559 61,937,593 $ 62 1,313,836 $ ( 11,603 ) $ 400,784 $ ( 410,904 ) $ 92 $ ( 18,010 ) $ ( 1,277 ) $ ( 19,287 ) Foreign exchange translation — — — — — — — ( 160 ) ( 160 ) — ( 160 ) Issuance of Class A common stock in connection with public offerings — — 51,885,840 52 — 42,299 — — 42,351 — 42,351 Issuance of Class A common stock in connection with the Starrise transaction, a related party — — 29,855,081 30 — 11,016 — — 11,046 — 11,046 Contributed capital under the Starrise transaction, a related party — — — — — 17,187 — — 17,187 — 17,187 Common stock issued in connection with conversion of Convertible Notes and second lien loans — — 16,534,613 16 — 21,536 — — 21,552 — 21,552 Stock-based compensation — — 1,860,554 1 — — 2,891 — — 2,892 — 2,892 Exercise of warrants for Class A common stock — — 236,889 — — 301 — — 301 — 301 Class A common stock to be issued in connection with asset acquisitions — — 3,098,126 3 — — 2,902 — — 2,905 — 2,905 Issuance of f Class A common stock for third party professional services — — 196,914 — — — — — — Preferred stock dividends paid with common stock — — 622,948 356 ( 356 ) — — — Net loss — — — — — — ( 62,820 ) — ( 62,820 ) ( 85 ) ( 62,905 ) Balances as of March 31, 2021 7 $ 3,559 166,228,568 $ 164 1,313,836 $ ( 11,603 ) $ 499,272 $ ( 474,080 ) $ ( 68 ) $ 17,244 $ ( 1,362 ) $ 15,882 See accompanying Notes to Consolidated Financial Statements F- 6 CINEDIGM CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Fiscal Year Ended March 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 62,905 ) $ ( 14,724 ) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization of property and equipment and amortization of intangible assets 6,919 9,392 Changes in fair value of equity investment in Starrise 43,518 1,618 Loss from sale of property and equipment 44 3 Amortization of debt issuance costs included in interest expense 1,223 1,218 (Recovery) Provision for doubtful accounts ( 122 ) 758 Reserve (recovery) for inventory reserve 155 ( 404 ) Stock-based compensation and expenses 2,892 543 Loss on extinguishment of note payable 1,498 — Accretion and PIK interest expense added to note payable 302 1,495 Changes in operating assets and liabilities: Accounts receivable 13,814 ( 33 ) Inventory 251 495 Unbilled revenue 615 344 Prepaid and other current assets 3,195 554 Accounts payable and accrued expenses ( 29,766 ) 7,983 Deferred revenue ( 1,640 ) ( 1,480 ) Net cash (used in) provided by operating activities ( 20,007 ) 7,762 Cash flows from investing activities: Purchases of property and equipment ( 64 ) ( 1,237 ) Purchase of intangible assets ( 2,545 ) ( 10 ) Proceeds from the sale of property and equipment 84 — Sale of equity investment shares 815 — Net cash used in investing activities ( 1,710 ) ( 1,247 ) Cash flows from financing activities: Payments of notes payable ( 7,703 ) ( 39,493 ) (Repayments) proceeds under revolving credit agreement, net ( 12,829 ) 23,550 Proceeds from PPP Loan 2,152 — Net proceeds from issuance of Class A common stock 42,652 5,850 Net cash provided by (used in) financing activities 24,272 ( 10,093 ) Net change in cash, cash equivalents and restricted cash 2,555 ( 3,578 ) Cash, cash equivalents and restricted cash at beginning of year 15,294 18,872 Cash, cash equivalents and restricted cash at end of year $ 17,849 $ 15,294 See accompanying Notes to Consolidated Financial Statements F- 7 CINEDIGM CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND LIQUIDITY Cinedigm Corp. (“Cinedigm,” the “Company,” “we,” “us,” or similar pronouns) was incorporated in Delaware on March 31, 2000. We are (i) a distributor and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of titles and episodes released across digital, physical, theatrical, home and mobile entertainment platforms (“Streaming”) and (ii) a servicer of digital cinema assets (“Systems”) for over 6,200 movie screens in both North America and several international countries. Risks and Uncertainties The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the year. As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. With the closure of non-essential retail stores beginning in the spring of 2020, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product. As part of our Cinema Equipment business, the Company earns revenue when movies are exhibited in theaters. Many movie theaters in the United States closed during the spring of 2020 and remained closed or re-opened on a limited basis through March 31, 2021. The majority of major studios shifted films out of the fiscal year to dates when more screens would be available, and consumers felt safe to return to theaters. Films released during the year had box office results below pre-Covid expectations due to theater closure, limited capacity and new commercial models that permitted viewing day and date via premium video on demand (“PVOD”) and subscription video on demand (“SVOD”). To the extent films are not shown in theaters, we do not earn revenue. Longer term, there may be a shift in consumer preference towards digital consumption over physical or theatrical viewing. Studios may reduce their theatrical slates to tentpoles and certain genres releasing other content directly on their own streaming services. This decision could negatively impact the Company’s ability to license content for the sale of physical product, if those rights are withheld to create exclusivity to the platform and reduce revenue opportunities for virtual print fees and sales of digital cinema equipment. While the Company has been encouraged by the pace of mass vaccinations, spikes or the emergence of new variants could require future closures. These changes could negatively impact results of operations, financial conditional and cash flows. Liquidity We have incurred net losses historically and have an accumulated deficit of $ 474.1 million and negative working capital of $ 14.2 million as of March 31, 2021. Net cash used in operating activities for the fiscal year ended March 31, 2021 was $ 20 million. We may continue to generate net losses for the foreseeable future. In addition, we have significant debt-related contractual obligations as of March 31, 2021 and beyond. Based on these conditions, the Company entered into the following transactions described below: Capital Raise On February 2, 2021, the Company entered into a securities purchase agreement with a single institutional investor for the purchase and sale of 5,600,000 shares of the Company’s Class A common stock for net proceeds of $ 6.5 million. In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with certain sales agents (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 The Nasdaq Global Market 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 registration statement on Form S-3 filed by the Company with the Securities and Exchange Commission on July 6, 2020, for an aggregate offering price of up to $ 30 million. During the year ended March 31, 2021, we sold 28,405,840 shares of Common Stock under the ATM Sales Agreement. Net proceeds from such sales totaled $ 18.6 million. F- 8 On July 16, 2020, the Company entered into a securities purchase agreement for the sale of 7,213,334 shares of Class A common stock at a purchase price of $ 1.50 per share, in a registered direct offering, pursuant to an effective shelf registration statement on Form S-3 and an applicable prospectus supplement. This registration statement covers offerings of up to an aggregate offering price of $ 75.0 million. The Company closed the transaction on July 20, 2020. The net proceeds to the Company from the sale of the shares, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, was approximately $ 10.1 million. On May 20, 2020, the Company entered into a securities purchase agreement with certain investors for the purchase and sale of 10,666,666 shares of the Company’s Class A common stock, at a purchase price of $ 0.75 per share, in a registered direct offering, pursuant to an effective shelf registration statement on Form S-3 and an applicable prospectus supplement. The Company closed the transaction on May 22, 2020. The net proceeds to the Company from the sale of the Shares, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, were approximately $ 7.1 million. Sale of Cinematic Equipment On March 17, 2021, the Company entered into two separate agreements for the sale of cinematic equipment to American Multi-Cinema, Inc. (“AMC”), the agreements included the sale in tranches of a total of 2,369 cinematic projectors starting in March 2021 throughout January 2023 for a total cash consideration of $ 10.8 million. As of March 31, 2021, the Company executed the sale of the first tranche and recognized revenue for $ 300 thousand. A portion of the total proceeds will be utilized to eliminate the remaining Prospect notes payable. Equity Investment in Starrise, a related party transaction On December 27, 2019, the Company entered into, and on February 14, 2020 amended, (see Note 2 - Summary of Significant Accounting Policies), a stock purchase agreement (as so amended, the “Starrise Stock Purchase Agreement”) with BeiTai Investment LP (“BeiTai”) and Aim Right Ventures Limited (“Aim Right”), two shareholders of Starrise Media Holdings Limited, a leading Chinese entertainment company (“Starrise”), to buy from them an aggregate of 410,901,000 outstanding Starrise ordinary shares (the “Share Acquisition”). On February 14, 2020, the Company purchased 162,162,162 of the Starrise ordinary shares from BeiTai and issued BeiTai 21,646,604 shares of Class A common stock as consideration. On April 10, 2020, the Company, in accordance with the terms of the Starrise Stock Purchase Agreement, terminated its obligation to purchase Starrise ordinary shares from Aim Right under the December 27, 2019 stock purchase agreement. On April 10, 2020, the Company entered into another stock purchase agreement (the “April Stock Purchase Agreement”) with five (5) shareholders of Starrise - Bison Global Investment SPC - Bison Global No. 1 SP (“Bison Global”), Huatai Investment LP, Antai Investment LP, Mingtai Investment LP (“Mingtai”) and Shangtai Asset Management LP - to buy an aggregate of 223,380,000 outstanding Starrise ordinary shares from them and for the Company to issue to them an aggregate of 29,855,081 shares of its Class A common stock in consideration therefore (the “April Share Acquisition”). On April 15, 2020, the April Share Acquisition was consummated and recorded as an equity investment in Starrise and is a related party transaction. As of March 31, 2021, the Company owns 362,987,397 shares in Starrise or approximately 26 %. Starrise’s ordinary shares (HK 1616) are listed on the main board of the Stock Exchange of Hong Kong Limited. Based on the closing price of HKD 0.15 per share on July 23, 2021, calculated at an exchange rate of $7.7698 Hong Kong Dollars to 1 US dollar, the Cinedigm’s ownership in Starrise ordinary shares was approximately $7.0 million. Borrowings On June 22, 2021, the maturity date of the East West Credit Facility (as defined in Note 6 - Notes Payable) with East West Bank was extended from June 30, 2021 to September 28, 2021. F- 9 On April 15, 2020, the Company received $ 2.2 million from East West Bank, the Company’s existing lender, pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 10, 2022 (the “PPP Maturity Date”), accrues interest at 1 % per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the PPP Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment. On January 5, 2021, the Company submitted its application for forgiveness and, as of June 30, 2021, obtained forgiveness for the full amount as discussed on Note 12 – Subsequent Events . On June 2, 2020, the Company exchanged 33,465 shares of Class A common stock in exchange for $ 61,000 of second lien loan principal. On June 24, 2020, the Company entered into an exchange agreement (the “Exchange Agreement”) pursuant to which the Company issued 329,501 shares of its Class A common stock, in exchange for the’ principal amount and accrued and unpaid interest of outstanding Second Lien Loans (as defined in Note 6 - Notes Payable ). The surrendered Second Lien Loans were immediately canceled. The exchange was consummated on June 24, 2020. On June 26, 2020, the Company signed a consent agreement with the holders of the Second Lien loans to extend the maturity date to September 30, 2020 and grant the Company options to extend further to March 31, 2021 and then to June 30, 2021. A consent fee of $ 100,000 was paid in connection with this extension. In a separate exchange with another holder of Second Lien Notes, on November 19, 2020, the Company issued 452,499 shares of Class A common stock in exchange for $ 247,108 principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled. On December 4, 2020, the Company entered into exchange agreements (the “December Exchange Agreements”) with certain holders of notes under its Second Lien Loan Agreement dated as of July 14, 2016 among the Company, the lenders party thereto, and Cortland Capital Market Services LLC, as Agent (“Second Lien Notes”). Pursuant to the December Exchange Agreements, the Company issued an aggregate of 2,776,284 shares of its Class A common stock, par value $ 0.001 per share Common Stock in exchange for an aggregate of $ 1,386,106 of principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled. In January 2021, the Company entered into exchange agreements with holders of the Second Lien Loan to exchange $ 2,389,650 of Second Lien Loans for 2,517,574 shares of Class A Common Stock. The exchanged Second Lien Notes were immediately cancelled. In February 2021, the Company entered into exchange agreements with one holder of the Second Lien Loan to exchange $500,000 of Second Lien Loans for 425,290 shares of Class A Common Stock. The exchanged Second Lien Notes were immediately cancelled. On February 9, 2021, the Company prepaid all of the outstanding Second Lien Loans. On April 15, 2020, the Company executed a letter amendment (the “Letter Amendment”) to the Bison Convertible Note (as defined in Note 6 - Notes Payable ). Among other things, the Letter Amendment amended the Note, effective as of March 4, 2020, to extend the maturity date of the Bison Convertible note to March 4, 2021. On October 9, 2019, the Company signed an extension to the Ming Tai Note of $5.0 million for the first of two (2) permitted additional (1) year extensions at the Company’s option from the original maturity date to October 9, 2020. This note will continue in full force and effect in accordance with its terms, including the Company’s reservation of its right to further extend the maturity date of this note, if it so elects. On September 11, 2020, the Bison and Mingtai Notes, having an aggregate of $15 million principal amount (the “Notes”) were converted in full into an aggregate of 10,000,000 shares of Common Stock at a conversion price of $1.50 per share in accordance with the terms of the Notes. Accordingly, the Notes have been extinguished. The Notes were held by Bison Global and, both of which are affiliates of Peixin Xu, the Chairman of Bison Capital Holding Company Limited, which is indirectly Cinedigm’s largest stockholder. See Note 6- Notes Payable . F- 10 On March 4, 2021, Cinedigm DC Holdings, LLC (“CDCH”), Access Digital Media, Inc., Access Digital Cinema Phase 2, Corp., Christie/AIX, Inc., Cinedigm Digital Funding I, LLC, certain Lenders, and Prospect Capital Corporation, as administrative agent and collateral agent (“Prospect”), entered into Amendment No. 3 (the “Amendment”) to the Term Loan Agreement dated February 28, 2013 (the “Term Loan Agreement”). Under the Amendment, the maturity date of the loan under the Term Loan Agreement (the “Loan”) was extended to March 31, 2022. We believe the combination of: (i) our cash and cash equivalent balances at March 31, 2021, (ii) expected cash flows from operations, (iii) expansion into Streaming, and (iv) the capacity under existing arrangements and access to new sources of capital will be sufficient to satisfy our contractual obligations, as well as liquidity for our operational and capital needs, for twelve months from the filing of this document. Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND CONSOLIDATION Our consolidated financial statements include the accounts of Cinedigm and its wholly owned and majority owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Investments in which we do not have a controlling interest or are not the primary beneficiary, but have the ability to exert significant influence, are accounted for under the equity method of accounting. Noncontrolling interests for which we have been determined to be the primary beneficiary are consolidated and recorded as net loss attributable to noncontrolling interest. See Note 4 - Other Interests to the Consolidated Financial Statements for a discussion of our noncontrolling interests. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include the adequacy of accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, intangible asset impairment and estimated amortization lives, fair value for asset acquisitions, valuation allowances for income taxes and stock awards. Actual results could differ from these estimates. RECLASSIFICATIONS Certain amounts related to cash advances classified as current assets in the prior year consolidated balance sheet have been reclassified to long-term assets to conform to the presentation of the current period as follows: March 31, 2020 (as reported) Reclassification March 31, 2020 (as reclassified) Prepaid and other current assets $ 9,409 $ ( 4,027 ) $ 5,382 Total current asset 61,062 ( 4,027 ) 57,035 Other long-term assets 143 4,027 4,170 Total assets $ 110,440 $ — $ 110,440 F- 11 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits. We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal. Our Prospect Loan requires that we maintain specified cash balances that are restricted to repayment of interest thereunder. See Note 6- Notes Payable for information about our restricted cash balances. Cash, cash equivalents, and restricted cash consisted of the following: As of (in thousands) March 31, 2021 March 31, 2020 Cash and Cash Equivalents $ 16,849 $ 14,294 Restricted Cash 1,000 1,000 $ 17,849 $ 15,294 EQUITY INVESTMENT IN STARRISE, A RELATED PARTY On February 14, 2020, the Company acquired an approximately 11.5 % interest in Starrise Media Holdings Limited (“Starrise”), a leading publicly traded Chinese entertainment company whose ordinary shares are listed on the Stock Exchange of Hong Kong. The Company acquired such interest as a strategic investment and in a private transaction from a shareholder of Starrise that is related to our major shareholders. Our major shareholders also maintain a significant beneficial interest ownership in Starrise. Upon consummation of the transaction on February 14, 2020, the Company recorded an initial investment of approximately $ 25.1 million, which is the fair market value of the Starrise shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $ 11.2 million, valued as of the date of the issuance of the Class A common stock of the Company. The difference in value of shares received in Starrise and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital. On April 10, 2020, the Company purchased an additional 15 % interest in Starrise in a private transaction from shareholders of Starrise that are affiliated with the major shareholder of the Company. The Company recorded an additional equity investment of approximately $ 28.2 million, which is the fair market value of the Starrise shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $ 11.0 million, valued at the date of the issuance of the Class A common stock of the Company. The difference in the value of shares received in Starrise and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital. This transaction was also recorded as an equity investment in Starrise. The Company has accounted for these investments under the equity method of accounting as the Company can exert significant influence over Starrise with its direct ownership and affiliation with the Company’s majority shareholders. The Company has made an irrevocable election to apply the fair value option under ASC 825-10, Financial Instruments , as it relates to its equity investment in Starrise. The Company’s investment in Starrise is marked to market and recorded at fair value. The stock is traded on the Hong Kong Stock exchange with readily available pricing that is classified as Level 1 in the fair value hierarchy. The Company has established a policy that consistently uses either the closing price of last active trades or the latest bid price when there is no active trades, unadjusted at the last day of each reporting period, as the most relevant and representative input to the Level 1 fair value measures of its investment holdings. During the year ended March 31, 2021, the Company sold 8,370,000 of Starrise shares for net proceeds of approximately $ 0.8 million which resulted in a loss on sale of approximately $ 73 thousand. As of March, 31, 2021 and 2020, the value of our equity investment in Starrise, using the readily determinable fair value inputs from the market pricing of the Stock Exchange of Hong Kong, was approximately $ 6.4 million and $ 23.4 million, respectively, resulting in a change in fair value of approximately $ 43.5 million for the year ended March 31, 2021, on our consolidated statement of operations. At March 31, 2021, the Company owned 362,987,397 shares or 26 % of Starrise. NON-MONETARY TRANSACTIONS During the year ended March 31, 2021, respectively, the Company entered into agreements with certain vendors to transfer 14,184,765 Starrise shares to satisfy outstanding liabilities with these vendors. Upon the sale of the Starrise shares by the vendors, with certain restrictions on sales unless the Company gives consent to sell, if the proceeds do not satisfy the amount due to the vendor, the Company is liable for the balance owed. Pursuant to such agreements, the Company reduced the amount payable to its vendors by $ 0.8 million as of March 31, 2021. There was no gain or loss resulting from these transactions for the year ended March 31, 2021. F- 12 ACCOUNTS RECEIVABLE We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. We record accounts receivable, long-term in connection with activation fees that we earn from our digital cinema equipment (the “Systems”) deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rate. ADVANCES Advances, which are recorded within prepaid and other current assets on the consolidated balance sheets, represent amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable as of the consolidated balance sheet date. Impairments and accelerated amortization related to advances were $ 0.3 million and $ 0.9 million, respectively, for the years ended March 31, 2021 and 2020. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows: Computer equipment and software 3 - 5 years Internal use software 5 years Digital cinema projection systems 10 years Machinery and equipment 3 - 10 years Furniture and fixtures 3 - 6 years We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications. These capitalized costs are included in property and equipment and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over the useful life of the software. Post-configuration training and maintenance costs are expensed as incurred. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leasehold improvements. Repair and maintenance costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized. Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the consolidated statements of operations. FAIR VALUE MEASUREMENTS The fair value measurement disclosures are grouped into three levels based on valuation factors: ● Level 1 – quoted prices in active markets for identical investments ● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) ● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments) F- 13 Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities. The equity investment in Starrise is in Hong Kong dollars and was translated into US dollars as of March 31, 2021 and 2020 at an exchange rate of 7.8 and 7.8 Hong Kong Dollars to 1 US Dollar, respectively. The fair value of this equity investment is measured by the unadjusted market pricing of Starrise on the Stock Exchange of Hong Kong. The following tables summarize the levels of fair value measurements of our financial assets and liabilities as of March 31, 2021and, 2020: As of March 31, 2021 (in thousands) Level 1 Level 2 Level 3 Total Restricted cash $ 1,000 $ — $ — $ 1,000 Equity investment in Starrise, at fair value 6,443 — — 6,443 $ 7,443 $ — — $ 7,443 As of March 31, 2020 (in thousands) Level 1 Level 2 Level 3 Total Restricted cash $ 1,000 $ — $ — $ 1,000 Equity investment in Starrise, at fair value 23,433 — — 23,433 $ 24,433 $ — $ — $ 24,433 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. At March 31, 2021 and 2020, the estimated fair value of our fixed rate debt approximated its carrying amounts. We estimated the fair value of debt based upon current interest rates available to us at the respective balance sheet dates for arrangements with similar terms and conditions. Based on borrowing rates currently available to us for loans with similar terms, the fair value of the variable rate debt is $ 7.8 million and lease obligations approximates fair value. IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. During the years ended March 31, 2021 and 2020, no impairment charge was recorded from operations for long-lived assets or finite-lived assets. ASSET ACQUISITIONS An asset acquisition is an acquisition of an asset, or a group of assets, that does not meet the definition of a business. Asset acquisitions are accounted for by using the cost accumulation model whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. GOODWILL 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. F- 14 Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations. The Company has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or to perform the quantitative impairment test. The quantitative test involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, an impairment loss is recognized in an amount equal to the excess. No goodwill impairment charge was recorded in the years ended March 31, 2021 and 2020. In 2021, we conducted a qualitative assessment of goodwill considering the favorable developments in the equity and credit markets and the improvement on financial performance of the business; in 2020, we elected to conduct a quantitative goodwill assessment as of March 31, 2020. In determining fair value, we used various assumptions, including expectations of future cash flows based on projections or forecasts derived from analysis of business prospects, economic or market trends and any regulatory changes that may occur. We estimated the fair value of the reporting unit using a net present value methodology, which is dependent on significant assumptions related to estimated future discounted cash flows, discount rates and tax rates. Gross amounts of goodwill and accumulated impairment charges that we have recorded are as follows: (In thousands) Goodwill $ 32,701 Accumulated impairment charges ( 24,000 ) Goodwill at March 31, 2021 and 2020 $ 8,701 REVENUE RECOGNITION We determine revenue recognition by: ● identifying the contract, or contracts, with the customer; ● identifying the performance obligations in the contract; ● determining the transaction price; ● allocating the transaction price to performance obligations in the contract; and ● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services. We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVDs and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and video on demand services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities such as sales value-added taxes and other similar taxes. Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less. We have in the past entered into arrangements in connection with activation fees due from our System deployments that had extended payment terms. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant. F- 15 Cinema Equipment Business Our Cinema Equipment Business consists of financing vehicles and administrators for 3,122 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,104 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”). We retain ownership of our digital cinema equipment (the “Systems”) and the residual cash flows related to the Systems in Phase I Deployment after the after the end of the 10-year deployment payment period. For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements. The Cinema Equipment Business also provides monitoring, collection, verification and management services to this segment, as well as to exhibitors who purchase their own equipment, and also collects and disburses Virtual print fees (“VPFs”) from motion picture studios, and distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”). VPFs are earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase I Deployment and to Phase II Deployment when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to Phase I Deployment based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period in which the digital title first plays on a System for general audience viewing in a digitally equipped movie theatre, as Phase I Deployment’s and Phase II Deployment’s performance obligations have been substantially met at that time. Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with movie studios and distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.” The Company evaluated the constraining estimates related to the variable consideration, i.e., the one-time bonus and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved. Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. 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. Cinedigm completed the sale of 2,177 and 152 digital projection Systems, respectively, for an aggregate sales price of approximately $ 6.7 million and $ 1.6 million, and recognized revenue of $ 600 thousand and $ 1.4 million, during the years ended March 31, 2021 and 2020, respectively. Revenues earned in connection with up front exhibitor contributions are deferred and recognized over the expected cost recoupment period. Exhibitors who purchased and own Systems using their own financing in the Cinema Equipment Business paid us an upfront activation fee of approximately $ 2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $ 1.0 thousand and $ 2.0 thousand on Phase II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 4 - Other Interests ) upon installation and such fees are generally collected upfront upon installation. Our services division manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10 % of the VPFs collected (the “Services”). The Cinema Equipment Business earns an administrative fee of approximately 5 % of VPFs collected and, in addition, earns an incentive service fee equal to 2.5 % of the VPFs earned by Phase 1 DC. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at that time the related VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the movie studios and distributors. F- 16 Content & Entertainment Business CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD”) (“OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/FAST on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the performance obligation is satisfied which is when the content is available for subscription on the digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation. Physical Revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration. Physical goods reserves for sales returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required. Reserves for product returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required. CEG also has contracts for the theatrical distribution of third party feature movies and alternative content. CEG’s distribution fee revenue and CEG’s participation in box office receipts is recognized at the time a feature movie and alternative content are viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date. Principal Agent Considerations We determine whether revenue should be reported on a gross or net basis for each revenue stream based on the transfer of control of goods and services. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following: ● which party is primarily responsible for fulfilling the promise to provide the specified good or service; and ● which party has discretion in establishing the price for the specified good or service. Shipping and Handling Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer. Contract Liabilities We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable. We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. Our CEG segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances is variable consideration as part of the transaction price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required. F- 17 We record accounts receivable, long-term in connection with activation fees that we earn from Systems deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rates. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant. Deferred revenue pertaining to our Content & Entertainment Business includes amounts related to the sale of DVDs with future release dates. Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms. The ending deferred revenue balance, including current and non-current balances, as of March 31, 2021 was $ 0.9 million. For the year ended March 31, 2021, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business. During the years ended March 31, 2021 and 2020, $ 1.6 million and $ 4.2 million, respectively of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. As of March 31, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $ 0.9 million. We expect to recognize this balance over the next 12 months. Participations and royalties payable When we use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers. Disaggregation of Revenue The Company disaggregates revenue into different revenue categories for the Cinema Equipment and CEG Businesses. The Cinema Equipment Business revenue categories are: Phase I Deployment revenue, Phase II Deployment revenue, Services, and Digital System Sales, and the Content & Entertainment Business revenue categories are: Base Distribution Business and OTT Streaming and Digital. For the year ended March 31, 2021, the Company further refined its reporting within the revenue categories of the Content & Entertainment Business resulting in the update of Disaggregated Revenues for the Base Distribution Business and OTT Streaming and Digital previously reported amounts of $ 19,222 and $ 7,328 , respectively for the year ended March 31, 2020 to the amounts disclosed in the table below. The following tables present the Company’s revenue categories for the year ended March 31, 2021 and 2020 (in thousands): Year Ended March 31, 2021 2020 Cinema Equipment Business: Phase I Deployment $ 552 $ 5,476 Phase II Deployment 1,531 1,717 Services 539 4,122 Digital System Sales 600 1,426 Total Cinema Equipment Business revenue $ 3,222 $ 12,714 Content & Entertainment Business: Base Distribution Business $ 10,230 $ 13,984 OTT Streaming and Digital 17,967 12,566 Total Content & Entertainment Business revenue $ 28,197 $ 26,550 DIRECT OPERATING COSTS Direct operating costs consist of operating costs such as cost of goods sold, fulfillment expenses, shipping costs, property taxes and insurance on Systems, royalty expenses, impairments of advances, and marketing and direct personnel costs. F- 18 STOCK-BASED COMPENSATION The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock units and performance stock units. The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors. Employee and director stock-based compensation expense related to our stock-based awards was as follows: Year Ended March 31, (In thousands) 2021 2020 Selling, general and administrative $ 2,892 $ 543 $ 2,892 $ 543 During the year ended March 31, 2021, the Company granted 7,692,323 stock appreciation rights (“SARs”). The SARs were granted under the Company’s 2017 Equity Incentive Plan (the “2017 Plan). All SARs issued have an exercise price equal to the fair value of the Company’s common stock on the date of grant and a maturity date of 10 years. The SARs were valued on the grant date utilizing an option pricing model, as follows: Grant Date: November 19, 2020 – February 17, 2021 Maturity Date: November 19, 2030 – February 17, 2031 Fair value of class A common stock on grant date: $ 0.54 - $ 1.97 Volatility: 91.05 % - 93.12 % Discount rate: 0.88 % - 1.59 % There was $ 1.6 million and $ 441 thousand of stock-based compensation recorded for the year ended March 31, 2021 and 2020, respectively, relating to these SARs. Total SARs outstanding are as follows: Year Ended March 31, 2021 SARs Outstanding March 31, 2020 1,462,610 Issued 7,692,323 Forfeited — Total SARs Outstanding March 31, 2021 9,154,933 There are 696,050 units of performance stock units (“PSU”) which were granted on July 26, 2018 fully vested that were settled during the year ended March 31, 2021. There was no stock-based compensation recorded related to these units for the year ended March 31, 2021 and there was a cumulative adjustment of $ 166 thousand of stock-based compensation recorded for the year ended March 31, 2020. During the year ended March 31, 2021, the vested PSU’s were settled for 693,647 shares of Class A common stock. In addition, the Company issued 689,364 shares of Class A common stock as a bonus to employees. The Company recorded $ 786 thousand as stock compensation expense related to the bonus awards based on the $ 1.14 Class A common share value on the date of grant during the year ended March 31, 2021. In addition, during the year ended March 31, 2021, the Company granted and issued 320,000 shares of Class A common stock to the Company’s Chief Executive Officer as a compensatory bonus. The shares were valued on the date of grant utilizing the fair value of the Company’s class A common stock. The Company recognized stock compensation of $ 166 thousand for the issuance. F- 19 There was $ 5 thousand and $ 4 thousand of stock-based compensation recorded for the years ended March 31, 2021 and 2020, respectively, related to employees’ restricted stock awards. There was $ 239 thousand and $ 263 of stock-based compensation for the years ended March 31, 2021 and 2020 related to board of directors. On September 1, 2020, we issued 80,000 shares of Class A common stock to Ronald L. Chez as a bonus payable to him under the Strategic Investor Agreement between the Company and him dated as of April 3, 2017. During the year ended March 31, 2021, we recognized an expense of $ 71 thousand based on the stock price of the Class A common stock on the date of grant. INCOME TAXES The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized. The Company is primarily subject to income taxes in the United States. The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes) , which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50 % likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS Basic and diluted net loss per common share has been calculated as follows: Basic and diluted net loss per common share attributable to common stockholders = Net loss attributable to common stockholders Weighted average number of common stock outstanding during the period Stock issued and treasury stock repurchased during the period are weighted for the portion of the period that they are outstanding. Shares issued and any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding. We incurred net losses for the years ended March 31, 2021 and 2020, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 11,127,539 shares and 4,117,323 shares as of March 31, 2021 and 2020, respectively, were excluded from the computations of loss per share as their impact would have been anti-dilutive. COMPREHENSIVE LOSS As of the year ended March 31, 2021 and 2020, comprehensive loss consisted of net loss and foreign currency translation adjustments. F- 20 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Adopted In August 2018, the FASB issued ASU No. 2018-13, “ Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ”. The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of this ASU on April 1, 2020 did not have a material impact on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, “ Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting .” ASU 2020-04 provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. The amendments of ASU No. 2020-04 are effective immediately, as of March 12, 2020, and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The adoption of this ASU did not have a material impact on our consolidated financial statements. Not yet adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how the Company determines its allowance for estimated uncollectible receivables and evaluates its available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of fiscal 2023. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures. On December 18, 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, ” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The update also simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance to improve consistent application. The amendment in this update is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the impact this pronouncement may have on our consolidated financial statements. 3. CONSOLIDATED BALANCE SHEET COMPONENTS ACCOUNTS RECEIVABLE Accounts receivable, net consisted of the following: As of (In thousands) March 31, 2021 March 31, 2020 Trade receivables $ 23,969 40,073 Allowance for doubtful accounts ( 2,876 ) ( 5,288 ) Total accounts receivable $ 21,093 $ 34,785 F- 21 PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets consisted of the following: As of (In thousands) March 31, 2021 March 31, 2020 Non-trade accounts receivable $ 413 $ 509 Advances 1,841 3,213 Due from producers 589 1,009 Prepaid insurance 409 336 Other prepaid expenses 405 315 Total prepaid and other current assets $ 3,657 $ 5,382 PROPERTY AND EQUIPMENT Property and equipment, net consisted of the following: As of (In thousands) March 31, 2021 March 31, 2020 Leasehold Improvements $ 8 $ 183 Computer equipment and software 1,002 1,051 Internal Use Software 5,164 3,950 Construction in Process 40 1,212 Digital Cinema Projection Systems 307,487 324,760 Machinery and Equipment 437 437 Furniture and Fixtures 1 24 314,139 331,617 Less - Accumulated Depreciation and Amortization ( 310,639 ) ( 323,650 ) Total property and equipment, net $ 3,500 $ 7,967 Total depreciation and amortization of property and equipment was $ 4.4 million and $ 6.6 million for the years ended March 31, 2021 and 2020, respectively. INTANGIBLE ASSETS Intangible assets, net consisted of the following: As of March 31, 2021 (In thousands) Gross Carrying Amount Accumulated Amortization Net Amount Useful life (years) Trademarks $ 2,839 $ ( 382 ) $ 2,457 3 Customer relationships and contracts 22,137 ( 17,610 ) 4,527 3 - 15 Theatre relationships 550 ( 550 ) - 10 - 12 Content library 23,148 ( 20,272 ) 2,876 3 - 6 Total $ 48,674 $ ( 38,814 ) $ 9,860 F- 22 As of March 31, 2020 (In thousands) Gross Carrying Amount Accumulated Amortization Net Amount Useful life (years) Trademarks $ 271 $ ( 259 ) $ 12 3 Customer relationships and contracts 21,968 ( 15,473 ) 6,495 3 - 15 Theatre relationships 550 ( 527 ) 23 10 - 12 Content library 20,420 ( 20,026 ) 394 3 - 6 Total $ 43,209 $ ( 36,285 ) $ 6,924 Amortization expense related to intangible assets was $ 2.5 million and $ 2.8 million for the years ended March 31, 2021 and 2020, respectively. Based on identified intangible assets that are subject to amortization as of March 31, 2021, we expect future amortization expense for each period to be as follows: (In thousands) Fiscal years ending March 31, 2022 $ 2,760 2023 2,090 2024 1,920 2025 1,091 2026 177 Thereafter 1,822 Total $ 9,860 ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: As of (In thousands) March 31, 2021 March 31, 2020 Accounts payable $ 30,111 $ 50,708 Amounts due to producers, net 10,557 19,599 Accrued compensation and benefits 2,995 1,237 Accrued taxes (refund) payable ( 99 ) 453 Interest payable 10 954 Accrued other expenses 3,053 4,134 Total accounts payable and accrued expenses $ 46,627 $ 77,085 4. OTHER INTERESTS Investment in CDF2 Holdings We indirectly own 100 % of the common equity of CDF2 Holdings, LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology. CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital technology by providing financing, equipment, installation and related ongoing services. F- 23 CDF2 Holdings is a Variable Interest Entity (“VIE”), as defined in Accounting Standards Codification Topic 810 (“ASC 810”), “Consolidation.” ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE. To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, among other factors. Although we indirectly, wholly own CDF2 Holdings, we, a third party that also has a variable interest in CDF2 Holdings, and an independent third party manager must mutually approve all business activities and transactions that significantly impact CDF2 Holdings’ economic performance. We have therefore assessed our variable interests in CDF2 Holdings and determined that we are not the primary beneficiary of CDF2 Holdings. As a result, CDF2 Holdings’ financial position and results of operations are not consolidated in our financial position and results of operations. In completing our assessment, we identified the activities that we consider most significant to the economic performance of CDF2 Holdings and determined that we do not have the power to direct those activities, and therefore we account for our investment in CDF2 Holdings under the equity method of accounting. As of March 31, 2021 and 2020, 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 $ 0.3 million and $ 0.4 million as of March 31, 2021 and 2020, respectively, which are included in accounts receivable, net on the accompanying consolidated balance sheets. The accompanying Consolidated Statements of Operations include $ 128 thousand of digital cinema servicing revenue from CDF2 Holdings for the year ended March 31, 2021. The accompanying Consolidated Statements of Operations include $ 1.1 million of digital cinema servicing revenue from CDF2 Holdings for the year ended March 31, 2020. Total Stockholders’ Deficit of CDF2 Holdings at March 31, 2021 and 2020 was $ 46.3 million and $ 31.8 million, respectively. We have no obligation to fund the operating loss or the stockholders’ deficit beyond our initial investment of $ 2.0 million and, accordingly, our investment in CDF2 Holdings as of March 31, 2021 and 2020 is carried at $ 0 . Majority Interest in CONtv We own an 85 % interest in CON TV, LLC, a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the Internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets. 5. ASSET ACQUISTION On December 21, 2020, the Company acquired substantially all of the assets of The Film Detective, LLC (“TFD”), a leading content distributor and streaming channel company focused on classic film and television programming. The purchase price for the TFD acquisition was $ 750,000 in cash and 2,504,592 shares of the Company’s Class A common stock at $ 0.74 per share or $ 1,853,000 , as of the acquisition date. In addition, TFD may be entitled to receive earnout amounts of up to an aggregate of $ 1,600,000 for the four years beginning on April 1, 2021, payable in cash or with respect to a portion thereof, at the Company’s discretion and subject to certain conditions, in shares of Common Stock. This acquisition is accounted for as an asset acquisition as substantially all of the value acquired resides in a single group of assets. Accordingly, the acquisition cost related to the transaction is capitalized and the potential earnout will only be recognized when the contingency is probable and estimable in the future. As of March 31, 2021 the Company determined that the potential earnout was not probable. Acquired intangible assets include TFD’s content library, distribution contracts, trade name and other and the final fair value allocation was as follows: Asset Amount in ($000) Useful Life Content Library $ 2,471 20 years Distribution Contracts 124 2 years Trade Name 24 2 years Other 32 3 years Total $ 2,651 F- 24 In January 2021, the Company acquired Fandor’s tradename, which specializes in independent film streaming service for a total of $ 745 thousand in cash. In February 2021, the Company acquired Screambox’s trademark, a horror streaming service, for $1.8 million consisting of cash of $650 thousand, $850 thousand by issuance of 593,534 Class A common shares at a price of $1.4321 plus an amount held in escrow for $200 thousand for future issuance of Class A common shares. In March 2021, the Company acquired Films Around the World’s classic film content library for a total of $ 257 thousand in cash. Cinedigm estimates the useful life of these acquired assets is 3 years. These are asset acquisitions where substantially all the value is ascribed to a single asset. 6. NOTES PAYABLE Notes payable consisted of the following: March 31, 2021 March 31, 2020 (In thousands) Current Portion Long Term Portion Current Portion Long Term Portion Prospect Loan $ 7,786 $ — $ 12,205 $ — Total non-recourse notes payable 7,786 — 12,205 — Less: Unamortized debt issuance costs and debt discounts — — ( 763 ) — Total non-recourse notes payable, net of unamortized debt issuance costs and debt discounts $ 7,786 $ — $ 11,442 $ — Bison Note Payable $ — — $ 10,000 $ — Second Lien Loans — — 8,222 — Credit Facility 1,956 — 14,487 — Mingtai Convertible Note — — 5,000 — PPP Loan 2,152 — — Total recourse notes payable 1,956 2,152 37,709 — Less: Unamortized debt issuance costs and debt discounts — — ( 460 ) — Total recourse notes payable, net of unamortized debt issuance costs and debt discounts $ 1,956 $ 2,152 $ 37,249 $ — Total notes payable, net of unamortized debt issuance costs $ 9,742 $ 2,152 $ 48,691 $ — Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults, is limited to the value of the asset, which is collateral for the debt. Certain of our subsidiaries are liable with respect to, and their assets serve as collateral for, certain indebtedness for which our assets and the assets of our other subsidiaries that are not parties to the transaction are generally not liable. We have referred to this indebtedness as “non-recourse debt” because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan. Prospect Loan In February 2013, our DC Holdings, AccessDM and Phase 2 DC subsidiaries entered into a term loan agreement (the “Prospect Loan”) with Prospect Capital Corporation (“Prospect”), pursuant to which DC Holdings borrowed $ 70.0 million. The Prospect Loan bears interest at LIBOR plus 9.0 % (with a 2.0 % LIBOR floor), which is payable in cash, and at an additional 2.50 % to be accrued as an increase to the aggregate principal amount of the Prospect Loan until the Prospect Loan is paid off, at which time all accrued interest will be payable in cash. Collections of DC Holdings accounts receivable are deposited into accounts designated to pay certain operating expenses, principal, interest, fees, costs and expenses relating to the Prospect Loan. On a quarterly basis, if there is excess cash flow, it is used for prepayment of the Prospect Loan. We also maintain a debt service fund under the Prospect Loan for future principal and interest payments. As of March 31, 2021, and 2020 , the debt service fund had a balance of $ 1.0 million, which is classified as part of restricted cash on our Consolidated Balance Sheets. F- 25 On March 4, 2021, Cinedigm DC Holdings, LLC (“CDCH”), Access Digital Media, Inc., Access Digital Cinema Phase 2, Corp., Christie/AIX, Inc., Cinedigm Digital Funding I, LLC, certain Lenders, and Prospect Capital Corporation, as administrative agent and collateral agent (“Prospect”), entered into Amendment No. 3 (the “Amendment”) to the Term Loan Agreement dated February 28, 2013 (the “Term Loan Agreement”). Under the Amendment, the maturity date of the loan under the Term Loan Agreement (the “Loan”) was extended to March 31, 2022. As a condition to the effectiveness of the Amendment, CDCH paid $ 3,500,000 to Prospect to reduce the outstanding principal amount of the Loan. The Prospect Loan matures on March 31, 2022 and may be accelerated upon a change in control (as defined in the agreement) or other events of default as set forth therein and would be subject to mandatory acceleration upon insolvency of DC Holdings. We are permitted to pay the full outstanding balance of the Prospect Loan at any time after the second anniversary of the initial borrowing, subject to the following prepayment penalties: ● 5.0 % of the principal amount prepaid between the second and third anniversaries of issuance; ● 4.0 % of the principal amount prepaid between the third and fourth anniversaries of issuance; ● 3.0 % of the principal amount prepaid between the fourth and fifth anniversaries of issuance; ● 2.0 % of the principal amount prepaid between the fifth and sixth anniversary of issuance; ● 1.0 % of the principal amount prepaid between the sixth and seventh anniversaries of issuance; and ● No penalty if the balance of the Prospect Loan, including accrued interest, is prepaid thereafter. The Prospect Loan is secured by, among other things, a first priority pledge of the stock of CDF2 Holdings, our wholly owned unconsolidated subsidiary, the stock of AccessDM, owned by DC Holdings, and the stock of our Phase 2 DC subsidiary, and is also guaranteed by AccessDM and Phase 2 DC. We provide limited financial support to the Prospect Loan not to exceed $ 1.5 million per year in the event financial performance does not meet certain defined benchmarks. The Prospect Loan contains customary representations, warranties, affirmative covenants, negative covenants and events of default. The following table summarizes the activity related to the Prospect Loan: As of (In thousands) March 31, 2021 March 31, 2020 Prospect Loan, at issuance $ 70,000 $ 70,000 PIK Interest 6,397 4,778 Payments to date ( 68,611 ) ( 62,573 ) Prospect Loan, gross $ 7,786 $ 12,205 Less unamortized debt issuance costs and debt discounts — ( 763 ) Prospect Loan, net 7,786 11,442 Less current portion ( 7,786 ) ( 11,442 ) Total long term portion $ — $ — Bison Note Payable In December 2017, the Company entered into a loan with Bison for $ 10.0 million (the “Bison Loan”) and issued Warrants to purchase 1,400,000 shares of the Company’s Class A common stock. See Note 7 - Stockholders’ Equity (Deficit) for further discussion of the warrants. F- 26 The loan was made in accordance with the Stock Purchase Agreement between the Company and Bison Entertainment Investment Limited, another affiliate of Bison, entered into on June 29, 2017. On July 20, 2018, the Company entered into a term loan agreement (the “2018 Loan Agreement”) with Bison Global, pursuant to which the Company borrowed from Bison Global $ 10.0 million (the “2018 Loan”), the proceeds of which were used to pay off the Bison Loan. The 2018 Loan has a one ( 1 ) year term that may be extended by mutual agreement of Bison Global and the Company and bears interest at 5 % per annum, payable quarterly in cash. On July 12, 2019, we entered into a Termination Agreement for the 2018 Loan and at the same time entered into a $ 10.0 million convertible note with Bison Global (the “Bison Convertible Note”). Bison Convertible Note The Bison Convertible Note has a term ending on March 4, 2021, and bears interest at 5 % per annum. The principal is due on March 4, 2021, in cash or in shares of Common Stock, or a combination of cash and Common Stock, at the Company’s option. The Bison Convertible Note is convertible at the Company’s option, at any time prior to payment in full of the principal balance and all accrued interest of the note, to convert this note in whole or in part, into fully paid and nonassessable shares of the Company’s Class A common stock. The Bison Convertible Note is Convertible into 6,666,666 shares of Company’s Class A common stock, based on initial conversion price of $ 1.50 per share. The Bison Convertible Note is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties. The proceeds of the Bison Convertible Note were used to repay the 2018 Loan. On April 15, 2020, the Company executed a letter amendment to the Bison Convertible Note dated July 12, 2019, amending the Bison Convertible Note, effective as of March 4, 2020, to change the maturity date of the note to March 4, 2021. The Bison Convertible Note, offset by the concurrent payoff and termination of the 2018 Loan, did not result in any increase to the Company’s outstanding debt balance. On September 11, 2020, Bison Global converted the Bison Convertible Note in full into an aggregate of 6,666,667 shares of Common Stock at a conversion price of $ 1.50 per share. Accordingly, the Bison Convertible Note has been extinguished. In accordance with ASC 470, the Company recognized a loss on extinguishment of $ 285 thousand related to unamortized debt issuance costs for the nine months ended December 31, 2020. Second Secured Lien Loans On July 14, 2016, we entered into a Second Lien Loan Agreement (the “Second Lien Loan Agreement”), under which we may borrow up to $ 15.0 million (the “Second Lien Loans”), subject to certain limitations imposed on us regarding the number of shares that we may issue in connection with the loans. The Second Lien Loan Agreement included balances borrowed from Ronald L. Chez, at that time a member of the Board of Directors. Mr. Chez resigned from the Board of Directors in April 2017, and became a strategic advisor to the Company through September 2020. The Second Lien Loans bear interest at 12.75 %, payable 7.5 % in cash and 5.25 % in cash or in kind at our option. Before the June 30, 2019 maturity date, on June 28, 2019, the Company entered into a consent agreement with lenders of the Second Lien Loans to an extension of the Second Lien Loans pursuant to which (i) the Company paid down a portion of the outstanding principal amount plus accrued interest to date, and (ii) the maturity date of the remaining outstanding principal amount of the Second Lien Loans was extended to September 30, 2019. In addition, under the terms of the Second Lien Loan Agreement, we are required to issue 98,000 shares of our Class A common stock for every $ 1.0 million borrowed, subject to pro rata adjustments. As of March 31, 2021, we have issued 906,450 shares of Class A common stock cumulatively under the Second Lien Loan Agreement. The Second Lien Loans may be prepaid without premium or penalty and contain customary covenants, representations and warranties. The obligations under the Second Lien Loans are guaranteed by certain of our existing and future subsidiaries. We have pledged substantially all of our assets, except those assets related to our digital cinema deployment business, to secure payment on the Second Lien Loans. On June 24, 2020, the Company entered into an exchange agreement (the “Exchange Agreement”) pursuant to which the Company issued 329,501 shares of its Class A common stock in exchange for $ 842 thousand principal amount and accrued and unpaid interest of Second Lien Loans with the holders of such notes. The surrendered notes were immediately canceled and the Company recognized a gain on extinguishment of $ 23 thousand. F- 27 The Exchange Agreement included a true-up clause. The true-up clause stated that if the gross proceeds from the sale of the Company’s Class A common stock are less than $ 758 thousand, the Company shall pay up to an aggregate maximum of $ 50 thousand of such shortfall in cash, and, with respect to any balance of the shortfall remaining after the cash payment, shall issue such additional number of shares of common stock not to exceed, together with the Shares, 1,000,000 shares equal in value, based on the closing price of the common stock. On July 2, 2020, in accordance with the true-up clause, an additional 33,465 shares of Class A common stock ($ 61 thousand based on the stock price of the Company’s Class A common stock on the date of issue) were issued as a true-up adjustment pursuant to the Exchange Agreement. In addition, the Company paid an additional $ 50 thousand in July 2020. On June 26, 2020, the Company entered into a consent agreement to extend the maturity date to September 30, 2020 and grant the Company options to extend further to March 31, 2021 and then to June 30, 2021.There was a consent fee of $ 100,000 paid in connection with this extension. On September 21, 2020, the Company extended the maturity date to March 31, 2021 upon payment of a fee of $ 50,000 . On February 9, 2021, the Company prepaid all of the outstanding obligations in respect of principal, interest, fees and expenses under the Second Lien Loan Agreement, and the Second Lien Loan Agreement was terminated. On November 19, 2020, the Company issued 452,499 shares of Common Stock in exchange for $ 247 thousand of principal and interest of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled and the Company recorded a gain on extinguishment of $ 5 thousand. On December 4, 2020, the Company entered into exchange agreements (the “December Exchange Agreements”) with certain holders of notes under its Second Lien Loan Agreement dated as of July 14, 2016 among the Company, the lenders party thereto, and Cortland Capital Market Services LLC, as Agent (“Second Lien Notes”). Pursuant to the December Exchange Agreements, the Company issued an aggregate of 2,776,284 shares of its Class A common stock, par value $ 0.001 per share Common Stock in exchange for an aggregate of $ 1,386 thousand of principal and interest of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled and the Company recorded a loss on extinguishment of $ 545 thousand. On January 21, 2021, the Company entered into an exchange agreement (the “Exchange Agreement”) with a holder of notes under its Second Lien Loan Agreement dated as of July 14, 2016 among the Company, the lenders party thereto, and Cortland Capital Market Services LLC, as Agent (“Second Lien Notes”). Pursuant to the Exchange Agreement, the Company issued an aggregate of 1,247,626 shares of its Class A common stock, par value $ 0.001 per share Common Stock in exchange for an aggregate of $ 1,289,650 of principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled and the Company recorded a loss on extinguishment of $ 341 thousand. In two separate exchanges with another holder of Second Lien Notes, on January 14, 2021 and January 21, 2021, the Company issued 689,500 shares and 580,448 shares (an aggregate of 1,269,948 shares) of Class A Common Stock in exchange for $ 500,000 and $ 600,000 (an aggregate of $ 1,100,000 ) principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled and the Company recorded a loss on extinguishment of $ 247 thousand. In an exchange with another holder of Second Lien Notes, on February 2, 2021, the Company issued 425,290 shares of Class A Common Stock in exchange for $ 500,000 principal amount of Second Lien Notes and the Company recorded a loss of $ 59 thousand. Credit Facility and Cinedigm Revolving Loans On March 30, 2018, the Company entered into the Loan, Guaranty and Security Agreement, dated as of March 30, 2018, by and between the Company, East West Bank and the Guarantors named therein (the “Credit Facility”) for a maximum of $ 19.0 million in revolving loans outstanding at any one time with a maturity date of March 31, 2020, which may be extended for two successive one-year periods at the sole discretion of the lender, subject to certain conditions. Interest under the Credit Facility is due monthly at a rate elected by the Company of either 0.5 % plus Prime Rate or 3.25 % above LIBOR Rate established by the lender. F- 28 As of March 31, 2021 and 2020, there was $ 2.0 million and $ 14.5 million outstanding, respectively, and there was $ 6.3 million available, under the Credit Facility based on the Company’s borrowing base as of March 31, 2021. On July 3, 2019, the Company entered into the EWB Amendment to the Credit Facility. The EWB Amendment reduced the size of the facility to $ 18.0 million, required certain prepayments and daily cash sweeps from collections of receivables to be made, changed in certain respects how the borrowing base is calculated, and extended the maturity date to June 30, 2020. In connection with the EWB Amendment, three of our subsidiaries became Guarantors under the Credit Facility. On June 25, 2020, the Company signed amendment No. 4 with East West Bank to extend the maturity of the Credit Facility to June 30, 2021 and waive events of default provisions. On June 22, 2021, the maturity date of the Credit Facility was extended to September 28, 2021. Mingtai Convertible Note On October 9, 2018, the Company issued a subordinated convertible note (the “Mingtai Convertible Note”) to Mingtai for $ 5.0 million. All proceeds from the Mingtai Convertible Note were used to pay the then-outstanding $ 5.0 million 2013 Notes. The $ 5.0 million in aggregate principal bears interest at 8 % maturing on October 9, 2019 with two one year extensions at the Company’s option. The Mingtai Convertible Note is convertible into 3,333,333 shares of the Company’s Class A common stock, based on initial conversion price of $ 1.50 per share. On October 9, 2019, the Company signed an extension, for one additional year from the original maturity date to be due on October 9, 2020. The Mingtai Convertible Note is convertible at the option of the Lender, or the Company, at any time prior to payment in full of the principal balance, and all accrued interest of this Convertible Note in whole, or in part, into fully paid and non-assessable shares of Company’s Class A common stock at the conversion rate of $ 1.50 . Upon conversion prior to maturity by Mingtai, or the Company, we may elect to settle such conversion in shares of our Class A common stock, cash or a combination thereof. Upon the maturity date, the Company has the option to pay in Class A common shares convertible at the greater of the closing price of the Class A common stock or $ 1.10 . As a result of our cash conversion option, we separately accounted for the value of the embedded conversion option as a debt discount (with an offset to additional paid-in capital) of $ 270 thousand. The value of the embedded conversion option was determined based on the estimated fair value of the debt without the conversion feature, which was determined using market comparables to estimate the fair value similar nonconvertible debt; the debt discount is being amortized to interest expense using the effective interest method over the one year term of the Mingtai Convertible Note. On September 11, 2020, Mingtai converted the Notes in full into an aggregate of 3,333,333 shares of Common Stock at a conversion price of $ 1.50 per share. Accordingly, the Note has been extinguished. In accordance with ASC 470, the Mingtai Convertible Note was analyzed for potential debt extinguishment. The discount on the note had been fully accreted prior to conversion, resulting in no gain or loss from extinguishment. PPP Loan On April 15, 2020, the Company received $ 2.2 million from East West Bank, the Company’s existing lender. The PPP Loan matures on April 10, 2022 (the “PPP Maturity Date”), accrues interest at 1 % per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the PPP Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment. On January 5, 2021, the Company has submitted its application for forgiveness and, as of June 30, 2021 obtained forgiveness for the full amount as discussed on Note 12 – Subsequent Events . F- 29 7. STOCKHOLDERS’ EQUITY (DEFICIT) COMMON STOCK During the year ended March 31, 2021, we issued 104,326,689 shares of Class A common stock which consists of the sale of 28,405,840 shares of our Class A common stock, 29,855,081 in connection with the Starrise transaction, 23,480,000 shares of our Class A common stock in registered direct offerings, issuance of Class A common stock in asset acquisitions, settlement of the outstanding second lien loans, issuance of restricted shares to employees, directors, consultants and third parties, and the issuances of Class A common stock for warrants exercised and preferred stock dividends. On March 8, 2021, the Company cancelled 35,714 shares of Class A common stock issued to a board director that resigned from the board before such shares vested. On June 24, 2020, the Company issued 329,501 shares of Common Stock in exchange for $ 842,000 of principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled. In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B. 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 The Nasdaq Global Market at the time of the sale of such shares. The Company is not obligated to sell any shares under the Sales Agreement. Any sales of shares made under the Sales Agreement will be made pursuant to an effective registration statement on Form S-3 filed by the Company with the SEC on July 6, 2020, for an aggregate offering price of up to $ 30 million. During the year ended March 31, 2021, we sold 28,405,840 shares of Common Stock under the ATM Sales Agreement. Net proceeds from such sales totaled $ 18.6 million. Proceeds were used to strengthen our liquidity and working capital position. On September 1, 2020, we issued 80,000 shares of Class A common stock to Ronald L. Chez as a bonus payable to him under the Strategic Investor Agreement between the Company and him dated as of April 3, 2017. We recognized an expense of $ 71 thousand based on the stock price of the Class A common stock on the date of grant. On October 23, 2020, the Company filed a Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation, pursuant to which the number of shares of Class A common stock authorized for issuance was increased to 200,000,000 shares. On November 19, 2020, the Company issued 452,499 shares of Common Stock in exchange for $ 247,108 of principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled. On December 4, 2020, the Company entered into Exchange Agreements with certain holders of the Second Lien Loans. Pursuant to the Exchange Agreements, the Company issued an aggregate of 2,776,284 shares of its Class A common stock, par value $ 0.001 per share Common Stock in exchange for an aggregate of $ 1,386,106 of principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled. The exchange was consummated on December 4, 2020. On January 14, 2021 and January 21, 2021, the Company issued 689,500 shares, 580,448 shares, and 1,247,626 shares (an aggregate of 2,517,574 shares) of Class A Common Stock in exchange for $ 500,000 , $ 600,000 and $ 1,289,650 (an aggregate of $ 2,389,650 ) principal amount of Second Lien Notes. The exchanged Second Lien Notes were immediately cancelled. In an exchange with another holder of Second Lien Notes, on February 2, 2021, the Company issued 425,290 shares of Class A Common Stock in exchange for $ 500,000 principal amount of Second Lien Notes. PREFERRED STOCK Cumulative dividends in arrears on preferred stock were $ 0.1 million as of March 31, 2021 and 2020. In May 2021, we paid the preferred stock dividends in arrears in the form of 53,278 shares of Class A common stock. TREASURY STOCK We have treasury stock, at a cost, consisting of 1,313,836 shares of Class A common stock at March 31, 2021 and 2020. F- 30 CINEDIGM’S EQUITY INCENTIVE PLANS Stock Based Compensation Awards Awards issued under our 2000 Equity Incentive Plan (the “2000 Plan”) may be in any of the following forms (or a combination thereof) (i) stock option awards; (ii) stock appreciation rights; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan provides for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Class A 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 Class A Common Stock on the date of grant. ISOs and non-statutory stock options granted under the 2000 Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options are set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the initial equity investment in Cinedigm by Bison, as a result of which there was a change of control of the Company, all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable. In connection with the grants of stock options and shares of restricted stock under the 2000 Plan, we and the participants have executed stock option agreements and notices of restricted stock awards setting forth the terms of the grants. The 2000 Plan provided for the issuance of up to 2,380,000 shares of Class A Common Stock to employees, outside directors and consultants. As of March 31, 2021, there were 261,587 stock options outstanding in the Plan with weighted average exercise price of $ 14.99 and a weighted average contract life of 2.11 years. As of March 31, 2020, there were 272,766 shares pursuant to stock options outstanding in the Plan with weighted average exercise price of $ 15.00 and a weighted average contract life of 3.11 years. In August 2017, the Company adopted the 2017 Plan. The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provided for the issuance of up to 2,108,270 shares of Class A common stock, in the form of various awards, including stock options, stock appreciation rights, stock, restricted stock, restricted stock units, performance awards and cash awards. The Compensation Committee of the Company’s Board of Directors (the “Board”) is authorized to administer the 2017 Plan and make grants thereunder. The approval of the 2017 Plan does not affect awards already granted under the 2000 Plan. On December 4, 2019, upon shareholder approval, the 2017 Plan was amended to increase the maximum number of shares of Class A common stock authorized for issuance thereunder from 2,108,270 shares to 4,098,270 . On October 23, 2020, the Company amended its 2017 Equity Incentive Plan to increase the number of shares authorized for issuance thereunder from 4,098,270 to 14,098,270 . The analysis of all options outstanding under the 2000 Plan as of March 31, 2020 is as follows: As of March 31, 2021 Range of Prices Options Outstanding Weighted Average Remaining Life in Years Weighted Average Exercise Price Aggregate Intrinsic Value (In thousands) $ 1.16 - $ 7.40 5,000 4.25 $ 7.40 $ — $ 13.70 - $ 24.40 249,087 2.12 14.69 — $ 30.00 - $ 50.00 7,500 0.38 30.00 — 261,587 $ — An analysis of all options exercisable under the 2000 Plan as of March 31, 2021 is presented below: Options Exercisable Weighted Average Remaining Life in Years Weighted Average Exercise Price Aggregate Intrinsic Value (In thousands) 261,587 2.11 $ 14.99 — F- 31 OPTIONS GRANTED OUTSIDE CINEDIGM’S EQUITY INCENTIVE PLAN In October 2013, we issued options outside of the 2000 Plan to 10 individuals who became employees as a result of a business combination. The employees received options to purchase an aggregate of 62,000 shares of our Class A Common Stock at an exercise price of $ 17.50 per share. The options were fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised. As of March 31, 2021, 12,500 of such options remained outstanding. In December 2010, we issued options to purchase 450,000 shares of Class A Common Stock outside of the 2000 Plan as part of our Chief Executive Officer’s initial employment agreement with the Company. Such options have exercise prices per share between $ 15.00 and $ 50.00 , were vested as of December 2013 and expired in December 2020. As of March 31, 2021, none of such options remained outstanding. WARRANTS The following table presents information about outstanding warrants to purchase shares of our Class A common stock as of March 31, 2021. All of the outstanding warrants are fully vested and exercisable. Recipient Amount outstanding Expiration Exercise price per share Strategic management service provider 52,500 July 2021 $ 17.20 - $ 30.00 Warrants issued in connection with Convertible Notes exchange transaction 246,019 December 2021 $ 1.30 5-year Warrant issued to BEMG in connection with a term loan agreement 1,400,000 December 2022 $ 1.80 Certain warrants issued in connection with the Second Lien Loans (See Note 6- Notes Payable ) to Ronald L. Chez, at the time a member of our Board of Directors, contain a cashless exercise provision and customary anti-dilution rights. On June 4, 2020, Ronald L. Chez exercised all such warrants to purchase 236,889 shares of Class A common stock in connection with the Second Lien Loans, resulting in gross proceeds of $ 301 thousand. 8. COMMITMENTS AND CONTINGENCIES We operate from leased properties under non-cancelable operating lease agreements, certain of which contain escalating lease clauses. The Company leases office space under operating leases. The Company’s portfolio of leases is primarily related to real estate and since most of our leases do not provide a readily determinable implicit rate, the Company estimated its incremental borrowing rate to discount the lease payments based on information available at either the implementation date of Topic 842 or at lease commencement for leases entered into thereafter. The table below presents the lease-related assets and liabilities recorded on the balance sheet as of March31, 2021 (In thousands) Classification on the Balance Sheet March 31, 2021 Assets Noncurrent Operating lease right-of-use asset $ 100 Liabilities Current Operating leases - current portion 87 Noncurrent Operating leases - long-term portion 13 Total operating lease liabilities $ 100 Weighted-average discount rate (1) 5.1 % (1) Upon adoption of the new lease standard, discount rates used for existing leases were established at April 1, 2019. F- 32 Lease Costs The table below presents certain information related to lease costs for leases: Year Ended (In thousands) March 31, 2021 Operating lease cost $ 195 Total lease cost $ 195 Other Information The table below presents supplemental cash flow information related to leases: Year Ended (In thousands) March 31, 2021 Cash paid for amounts included in the measurement of lease liabilities 197 Operating cash flows used for operating leases $ 197 The Company terminated an office lease in Los Angeles in April 2020 and a lease for office equipment was terminated in June 2020. The Company removed the right-of-use assets of $ 927 thousand and the lease liabilities of $ 1.0 million as of June 30, 2020. The estimated future lease liabilities are not expected to be material for the remaining outstanding office and equipment leases. 9. SUPPLEMENTAL CASH FLOW INFORMATION Year Ended March 31, (In thousands) 2021 2020 Cash interest paid $ 4,052 $ 4,905 Income taxes paid 232 439 Accrued dividends on preferred stock 89 89 Issuance of Class A common stock for payment of preferred stock dividends 356 356 Issuance of Class A common stock to Starrise, a related party 11,046 11,257 Contributed capital under the Starrise transaction, a related party 17,187 13,795 Settlement of second lien loan with Class A common stock 6,485 — Settlement of note payable with Class A common stock 15,067 — Class A common stock to be issued in connection with the asset acquisition 2,905 — Right-of-use assets and operating lease liability recorded upon adoption of ASU 842, net — 90 Amounts accrued in connection with addition of property and equipment — 403 Starrise shares used to pay down vendors 897 — 10. SEGMENT INFORMATION We operate in two reportable segments: Cinema Equipment Business and Content & Entertainment Business. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our CODM to evaluate performance, which is generally the segment’s operating income (loss) before depreciation and amortization. F- 33 Operations of: Products and services provided: Cinema Equipment Business Financing vehicles and administrators for 3,122 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,104 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”). We retain ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements. For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements. The Cinema Equipment Business segment also provides monitoring, collection, verification and management services to this segment, as well as to exhibitors who purchase their own equipment, and also collects and disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”). Content & Entertainment Business Leading independent streaming company of content and channels. We collaborate with producers and other content owners to market, source, curate and distribute independent content to targeted and under-served audiences in theatres and homes, and via mobile and emerging platforms. The following tables present certain financial information related to our reportable segments and Corporate: As of March 31, 2021 (In thousands) Intangible Assets, net Goodwill Total Assets Notes Payable, Non- Recourse Notes Payable Operating lease liabilities Cinema Equipment Business $ — $ — $ 13,169 $ 7,786 $ — $ 1 Content & Entertainment Business 9,858 8,701 42,733 — — 69 Corporate 2 — 19,544 — 4,108 30 Total $ 9,860 $ 8,701 $ 75,446 $ 7,786 $ 4,108 $ 100 As of March 31, 2020 (In thousands) Intangible Assets, net Goodwill Total Assets Notes Payable, Non- Recourse Notes Payable Operating lease liabilities Cinema Equipment Business $ 23 $ — $ 34,465 $ 11,442 $ — $ 594 Content & Entertainment Business 6,895 8,701 49,923 — — 73 Corporate 6 — 26,052 — 37,249 610 Total $ 6,924 $ 8,701 $ 110,440 $ 11,442 $ 37,249 $ 1,277 F- 34 Statements of Operations Year Ended March 31, 2021 (in thousands) Cinema Equipment Business Content & Entertainment Business Corporate Consolidated Revenues $ 3,222 $ 28,197 $ — $ 31,419 Direct operating (exclusive of depreciation and amortization shown below) 683 15,420 — 16,103 Selling, general and administrative 2,277 9,798 9,917 21,992 Allocation of corporate overhead 586 3,872 ( 4,458 ) — Recovery for doubtful accounts ( 121 ) ( 1 ) — ( 122 ) Depreciation and amortization of property and equipment 3,916 461 27 4,404 Amortization of intangible assets 23 2,488 4 2,515 Total operating expenses 7,364 32,038 5,490 44,892 Loss from operations $ ( 4,142 ) $ ( 3,841 ) $ ( 5,490 ) $ ( 13,473 ) The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows: (In thousands) Cinema Equipment Business Content & Entertainment Business Corporate Consolidated Direct operating $ — $ — $ — $ — Selling, general and administrative — 264 2,628 2,892 Total stock-based compensation $ — $ 264 $ 2,628 $ 2,892 Statements of Operations Year Ended March 31, 2020 (in thousands) Cinema Equipment Business Content & Entertainment Corporate Consolidated Revenues $ 12,741 $ 26,550 $ — $ 39,291 Direct operating (exclusive of depreciation and amortization shown below) 1,236 15,910 — 17,146 Selling, general and administrative 2,085 10,017 4,242 16,344 Allocation of corporate overhead 807 4,704 ( 5,511 ) — Provision for doubtful accounts 759 ( 1 ) — 758 Depreciation and amortization of property and equipment 6,087 366 167 6,620 Amortization of intangible assets 46 2,722 4 2,772 Total operating expenses 11,020 33,718 ( 1,098 ) 43,640 Income (loss) from operations $ 1,721 $ ( 7,168 ) $ 1,098 $ ( 4,349 ) The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows: Cinema Equipment Business Content & Entertainment Corporate Consolidated Direct operating $ — $ — $ — $ — Selling, general and administrative ( 6 ) 55 494 543 Total stock-based compensation $ ( 6 ) $ 55 $ 494 $ 543 F- 35 11. INCOME TAXES We calculate income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions. We recorded an income tax benefit from operations of $ 0.3 million and income tax expense of $ 0.3 million for the years ended March 31, 2021 and 2020, respectively, primarily for state income taxes in our Cinema Equipment Business and Corporate segments. The income tax benefit for the year ended March 31, 2021 was mainly related to changes in estimates from timing of the income tax provisions to the income tax fillings to state income tax expense. The income tax expense for the year ended March 31, 2020 was mainly related to taxable income at the state level and timing differences related to fixed asset depreciation. The following table presents the components of income tax benefit (expense): For the Fiscal Year Ended March 31, (In thousands) 2021 2020 Federal: Current $ — $ — Deferred — — Total federal — — State: Current 315 ( 313 ) Deferred — — Total State 315 ( 313 ) Income tax benefit (expense) $ 315 $ ( 313 ) Net deferred taxes consisted of the following: As of March 31, (In thousands) 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 15,019 $ 7,549 Stock-based compensation 934 2,666 Intangibles 5,879 6,162 Accrued liabilities 1,054 1,162 Allowance for doubtful accounts 845 1,540 Investments 3,857 — Nondeductible interest expense 3,693 2,821 Other 114 359 Total deferred tax assets before valuation allowance 31,394 22,259 Less: Valuation allowance ( 30,968 ) ( 17,614 ) Total deferred tax assets after valuation allowance $ 425 $ 4,645 Deferred tax liabilities: Depreciation and amortization $ ( 425 ) $ ( 1,398 ) Investments — ( 3,247 ) Total deferred tax liabilities ( 425 ) ( 4,645 ) Net deferred tax $ — $ — F- 36 We have provided a valuation allowance equal to our net deferred tax assets for the years ended March 31, 2021 and 2020. We are required to recognize all or a portion of our deferred tax assets if we believe that it is more likely than not that such assets will be realized, given the weight of all available evidence. We assess the realizability of the deferred tax assets at each interim and annual balance sheet date. In assessing the need for a valuation allowance, we considered both positive and negative evidence, including recent financial performance, projections of future taxable income and scheduled reversals of deferred tax liabilities. The net change in the valuation allowance of $ 13.4 million during the fiscal year ended March 31, 2021 was mainly due to increases in the deferred tax asset related to our investment in Starrise, a related party, and increases in the net operating loss carryforward. The net change in the valuation allowance of $ 1.5 million during the fiscal year ended March 31, 2020, was mainly due to the recording of a deferred tax liability related to our investment in Starrise, offset by an increase in other deferred tax assets. We will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results. As of March 31, 2021, we had federal and state net operating loss carryforwards of approximately $ 52.6 million available in the United States of America (“U.S.”) and approximately $ 1.1 million in Australia to reduce future taxable income. U.S. federal and state net operating loss carryforwards of approximately $ 22.2 and $ 52.6 million, respectively, generally begin to expire in 2022. U.S. federal net operating loss carryforwards that were generated during the years ended March 31, 2020 and 2021, of approximately $ 30.4 million, do not expire. The Australian net operating loss carryforward of $ 1.1 million, does not expire. Under the provisions of the Internal Revenue Code, certain substantial changes in our ownership may result in a limitation on the amount of net operating losses that may be utilized in future years. During the year ended March 31, 2018, approximately $ 233.5 million of our net operating losses became subject to limitation under Internal Revenue Code Section 382 in connection with the consummation in November 2017 of the transactions under the Stock Purchase Agreement with Bison. Approximately $ 209.0 million of our net operating losses will not be able to be utilized because of the ownership change. Future significant ownership changes could cause a portion or all of our remaining net operating losses to expire before utilization. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The Act contains several new or changed income tax provisions, including but not limited to the following: increased limitation threshold for determining deductible interest expense; class life changes to qualified improvements (in general, from 39 years to 15 years); and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years. The Company has evaluated the new tax provisions of the CARES Act and determined the impact to be either immaterial or not applicable. The differences between the United States statutory federal tax rate and our effective tax rate are as follows: For the fiscal years ended March 31, 2021 2020 Provision at the U.S. statutory federal tax rate 21.0 % 21.0 % State income taxes, net of federal benefit 5.7 % ( 0.1 )% Change in valuation allowance ( 26.7 )% ( 9.9 )% Non-deductible expenses ( 3.4 )% ( 3.4 )% Net operating loss decrease under IRC 382 --- ( 10.2 ) Effect of tax reform — — Losses from non-consolidated entities 3.8 % 0.4 % Other 0.1 — Income tax benefit /(expense) 0.5 % ( 2.2 )% We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and Australia. For federal income tax purposes, our fiscal 2018 through 2021 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. For U.S. state and Australian tax purposes, our fiscal 2017 through 2021 tax years generally remain open for examination by most of the tax authorities under a four-year statute of limitations. F- 37 12. SUBSEQUENT EVENTS Stock Purchase Agreement On May 12, 2021, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with FoundationTV, Inc. (“FoundationTV”), to buy all of FoundationTV´s issued and outstanding stock and for the Company to exchange in consideration an aggregate of $5,125,000, of which $1 million was paid in cash and issue 1,483,129 shares of Class A common stock were issued for a total of $2 million in consideration therefor at closing in June 9, 2021 and an additional $1.9 million will be paid in eight equal installments of one installment on each six month anniversary of closing over forty-eight months, and a final lump sum payment of $225 thousand on the four year anniversary of the closing. The Stock Purchase Agreement contains certain conditions to closing, including that the Company obtain approval of its stockholders, applicable lenders, and regulatory authorities, as applicable, and representations and warranties and covenants as are customary for transactions of this type. On June 9, 2021, the Stock Acquisition was consummated. Prospect Loan Payment On a series of payments between April 30 and July 9, 2021, the Company paid in full the prospect loan non-recourse debt amount by paying an aggregate principal amount of $ 7.8 million. Pre-payment of the Prospect loan is permissible without penalty. PPP Loan Forgiveness On July 7, 2021, the Company received notification from the Lender that the U.S. Small Business Administration had approved the Company’s PPP Loan forgiveness application for the entire PPP Loan amount and accrued interest as of June 30, 2021. The forgiveness of the PPP Loan will be recognized during the Company’s fiscal quarter ending June 30, 2021. F- 38 PART II. OTHER INFORMATION ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.