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Item 1. Financial Statements

2020-08-14 compared with 2020-02-14 · 356 added, 388 removed, 477 unchanged (61% of the section changed)

FINANCIAL STATEMENTS (UNAUDITED)

CINEDIGM CORP.CONDENSED CONSOLIDATED BALANCE SHEETS

CINEDIGM CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

December 31, 2019

March 31, 2019

June 30, 2020 March 31, 2020

ASSETS (Unaudited)

Current assets

6 unchanged sentences

Restricted cash 1,000 1,000

Equity investment in Starrise, a related party, at fair value 34,963 23,433

Property and equipment, net 6,457 7,967

1 unchanged sentence

Intangible assets, net 6,333 6,924

Goodwill 8,701 8,701

Other long-term assets 5 143

Total assets $ 111,096 $ 110,440

LIABILITIES AND DEFICIT

2 unchanged sentences

Current portion of notes payable, including unamortized debt discount of $ 347 and $ 460 respectively (see Note 5)

32,364 37,249

Current portion of notes payable, non-recourse including unamortized debt discount of $ 563 and $ 763 , respectively (see Note 5)

11,544 11,442

Operating lease liabilities 137 593

1 unchanged sentence

Total current liabilities 111,088 128,014

Notes payable, non-recourse, net of current portion and unamortized debt issuance costs and debt discounts of $955 and $1,495 respectively (see Note 5)

Notes payable 2,152 —

Operating lease liabilities, noncurrent 67 684

7 unchanged sentences

20 shares authorized;

and 7 shares issued and outstanding at December 31, 2019 and March 31, 2019.

and 7 shares issued and outstanding at June 30, 2020 and March 31, 2020.

Liquidation preference of $ 3,648

Common stock, $ 0.001 par value;

Class A stock 60,000,000 shares authorized at December 31, 2019 and March 31, 2019;

41,105,917 and 36,992,433 shares issued and 39,792,081 and 35,678,597 shares outstanding at December 31, 2019 and March 31, 2019, respectively

Class A stock 150,000,000 shares authorized at June 30, 2020 and March 31, 2020;

104,606,655 and 63,251,429 shares issued and 103,292,819 and 61,937,593 shares outstanding at June 30, 2020 and March 31, 2020, respectively

Additional paid-in capital

437,450 400,784

Treasury stock, at cost;

1,313,836 Class A common shares at December 31, 2019 and March 31, 2019

1,313,836 Class A common shares at June 30, 2020 and March 31, 2020

( 11,603 ) ( 11,603 )

Accumulated deficit

( 430,849 ) ( 410,904 )

Accumulated other comprehensive income 12 92

Total stockholders’ deficit of Cinedigm Corp.

( 1,328 ) ( 18,010 )

Deficit attributable to noncontrolling interest ( 1,291 ) ( 1,277 )

5 unchanged sentences

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

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Revenues $ 6,018 $ 9,803

Costs and expenses:

1 unchanged sentence

Selling, general and administrative 3,840 5,849

(Recovery) provision for doubtful accounts

Provision for doubtful accounts — 270

Depreciation and amortization of property and equipment

1 unchanged sentence

Total operating expenses 8,633 12,500

Income (loss) from operations

Loss from operations ( 2,615 ) ( 2,697 )

Interest expense, net ( 1,290 ) ( 2,282 )

Gain on extinguishment of notes payable 23 —

Changes in fair value of equity investment in Starrise, a related party ( 15,794 ) —

Other expense, net ( 194 ) ( 13 )

1 unchanged sentence

Income tax expense — ( 47 )

Net (income) loss attributable to noncontrolling interest

Net loss ( 19,870 ) ( 5,039 )

Net loss attributable to noncontrolling interest 14 6

Net loss attributable to controlling interests ( 19,856 ) ( 5,033 )

5 unchanged sentences

basic and diluted

94,416,684 38,351,161

See accompanying Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended

Net loss $ ( 19,870 ) $ ( 5,039 )

Other comprehensive income:

1 unchanged sentence

Comprehensive loss ( 19,950 ) ( 5,033 )

comprehensive (income) loss attributable to noncontrolling interest

comprehensive income attributable to noncontrolling interest 14 6

Comprehensive loss attributable to controlling interests $ ( 19,936 ) $ ( 5,027 )

3 unchanged sentences

(In thousands, except share data)

Series A Preferred Stock

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Income

Total Stockholders' Deficit

Non-Controlling Interest

Series A Preferred Stock Class A

Common Stock Treasury Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Deficit Non-Controlling Interest Total

Shares Amount Shares Amount Shares Amount

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 )

2 unchanged sentences

Preferred stock dividends paid with common stock — — 45,390 — — — 89 ( 89 ) — — — —

Net loss — — — — — — — ( 5,033 ) — ( 5,033 ) ( 6 ) ( 5,039 )

Balances as of June 30, 2019 7 $ 3,559 35,723,987 36 1,313,836 ( 11,603 ) 368,631 ( 400,936 ) 16 ( 40,297 ) ( 1,293 ) ( 41,590 )

Foreign exchange translation

Stock-based compensation

Issuance of Class A common stock

Preferred stock dividends paid with common stock

Fair value of conversion feature in connection with convertible note

Net (loss) income

Balances as of September 30, 2019

Foreign exchange translation

Stock-based compensation

Preferred stock dividends paid with common stock

Net (loss) income

Balances as of December 31, 2019

See accompanying Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(In thousands, except share data)

Series A Preferred Stock

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Total Stockholders' Deficit

Non-Controlling Interest

Series A Preferred Stock Class A

Common Stock Treasury Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit Non-Controlling Interest Total

Shares Amount Shares Amount Shares Amount

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 — — — — — — — — ( 80 ) ( 80 ) — ( 80 )

Stock issued in connection with the SPA with certain investors, net — — 10,666,666 11 — — 7,139 — — 7,150 — 7,150

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

Issuance of stock in connection with settlement of second lien loan — — 329,501 — — — 757 — — 757 — 757

Exercise of warrants for Class A common stock — — 236,899 — — — 301 — — 301 — 301

Stock-based compensation — — — — — — 177 — — 177 — 177

Preferred stock dividends paid with common stock — — 267,079 — — — 89 ( 89 ) — — — —

Net loss — — — — — — — ( 19,856 ) — ( 19,856 ) ( 14 ) ( 19,870 )

Balances as of June 30, 2020 7 $ 3,559 103,292,819 $ 103 1,313,836 $ ( 11,603 ) $ 437,450 $ ( 430,849 ) $ 12 $ ( 1,328 ) $ ( 1,291 ) $ ( 2,619 )

Foreign exchange translation

Stock-based compensation

Preferred stock dividends paid with common stock

Balances as of September 30, 2018

Issuance of shares for asset acquisition

Foreign exchange translation

Issuance of common stock for third party professional services

Fair value of conversion feature in connection with convertible note

Stock-based compensation

Issuance of restricted stock to employees

Preferred stock dividends paid with common stock

Balances as of December 31, 2018

See accompanying Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Net loss $ ( 19,870 ) $ ( 5,039 )

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

Depreciation and amortization of property and equipment and amortization of intangible assets 2,114 2,769

Changes in fair value of equity investment in Starrise 15,794 —

Gain on extinguishment of note payable

Gain from sale of property and equipment ( 16 ) —

Amortization of debt issuance costs included in interest expense 233 523

9 unchanged sentences

Deferred revenue ( 503 ) ( 410 )

Net cash provided by operating activities

Net cash (used in) provided by operating activities ( 3,738 ) 4,015

Cash flows from investing activities:

Purchases of property and equipment ( 79 ) ( 252 )

Purchases of intangible assets

Net cash used in investing activities

Sale of equity investment in Starrise

Net cash provided by (used in) in investing activities 508 ( 252 )

Cash flows from financing activities:

Payment of notes payable ( 7,754 ) ( 5,493 )

Proceeds under revolving credit agreement

Proceeds from issuance of convertible note and notes payable

Net proceeds from issuance of common stock

Net cash used in financing activities

Proceeds under revolving credit agreement, net 3,388 —

Proceeds from PPP Loan 2,152 —

Proceeds from issuance of Class A common stock, net

Net cash provided by (used in) in financing activities 5,237 ( 5,493 )

Net change in cash and cash equivalents 2,007 ( 1,730 )

8 unchanged sentences

("Cinedigm," the "Company," "we," "us," or similar pronouns) was incorporated in Delaware on March 31, 2000.

We are (i) a leading 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 and (ii) a leading servicer of digital cinema assets for over 12,000 movie screens in both North America and several international countries.

We have incurred net losses historically and have an accumulated deficit of $406.4 million and negative working capital of $54.7 million as of December 31, 2019 .

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 and (ii) a servicer of digital cinema assets for over 12,000 movie screens in both North America and several international countries.

Risks and Uncertainties

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

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

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

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

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

As a result of COVID-19, studios have temporarily halted distribution of new content to movie theatres due to mandatory theatre shutdown.

Because our digital cinema business earns a Virtual Print Fee when a movie is first played on a system, the temporary theatre closures resulting from the COVID-19 pandemic will result in reduced revenues that service the Prospect Loan.

We do not yet know the full impact of such reduced revenues or whether our ability to service the Prospect Loan will be materially affected.

We expect the studios to reschedule, once the theatres reopen, the release of those movies originally scheduled during the temporary movie theatre closure.

Management believes the cash flows from the Digital Cinema business, including the revenue from the sale of digital cinema projection systems, will be sufficient to pay the Prospect Loan.

The Borrower on the Prospect Loan is Cinedigm DC Holdings, LLC and the Prospect Loan is only guaranteed by the digital cinema subsidiaries.

Prospect has a security interest in certain digital cinema projection equipment and has no recourse to Cinedigm Corp., Cinedigm Entertainment Corp., Cinedigm Home Entertainment, LLC, OTT Holdings, LLC or any other non-digital cinema legal entity;

provided, however, Cinedigm Corp.

has provided a limited recourse guaranty pursuant to which it agreed to become a primary obligor of such indebtedness in certain specified circumstances, none of which have occurred as of the date hereof.

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

Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related closures and market conditions will persist, or the extent of the impact they will have on our business or results of operations and financial condition.

We have incurred net losses historically and have an accumulated deficit of $ 430.8 million and negative working capital of $ 57.7 million as of June 30, 2020.

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

In addition, we have significant debt-related contractual obligations as of December 31, 2019 and beyond.

The Second Lien Loans (as defined in Note 5 - Notes Payable ) were to mature on June 30, 2019.

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.

On July 30, 2019, one of the lenders, signed a waiver to defer the receipt of the portion of the outstanding principal amount on the Second Lien Loans agreed to be paid no later than September 30, 2019.

During the nine months ended December 31, 2019 , the Company paid $3.4 million of the outstanding Second Lien Loans and expects to obtain additional capital from or through Bison Capital Holding Limited or an affiliate thereof ("Bison") for final payment of the remaining outstanding balances.

On October 24, 2019, the Company entered into a consent agreement to extend the maturity date to November 30, 2019.

On January 8, 2020, the Company entered into another consent agreement to extend the maturity date to February 17, 2020.

There were no consent fees paid for these consent agreements.

See Note 5 - Notes Payable and Note 10 - Subsequent Events .

The $10.0 million note payable ("2018 Loan") to Bison Global Investment SPC due July 20, 2019 is guaranteed by Bison Entertainment and Media Group ("BEMG").

On July 20, 2018, the Company also entered into a side letter (the “Letter”) with BEMG, where BEMG agreed to guarantee the payment directly to Bison Global of any amount due if (i) the 2018 Loan matures prior to June 28, 2021 or (ii) Bison Global demands payment of the 2018 Loan, in whole or in part, prior to maturity.

On July 12, 2019, the Company and Bison Global Investment SPC for and on behalf of Global Investment SPC-Bison Global No.

1, another affiliate of Bison (“Bison Global”), entered into a termination agreement (the “Termination Agreement”) with respect to the $10.0 million 2018 Loan.

Contemporaneously with the Termination Agreement, the Company entered into a convertible promissory note (“Bison Convertible Note”) with Bison Global for $10.0 million .

The Bison Convertible Note has a term ending on March 4, 2020, and bears interest at 5% per annum.

The principal is payable upon maturity, in cash or in shares of our Class A common stock, par value $0.001 per share (the “Common Stock” or "Class A common stock"), or a combination of cash and Common Stock, at the Company’s option.

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.

The Company expects to enter into an agreement with Bison to extend the Bison Convertible Note or convert it to equity in March 2020.

See Note 5 - Notes Payable.

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 July 9, 2019, the Company entered into a common stock purchase agreement (the “July Stock Purchase Agreement”) with BEMG where 2,000,000 shares of Common Stock (the “ July SPA Shares”), for an aggregate purchase price in cash of $3.0 million priced at $1.50 per share was sold to BEMG.

The SPA Shares are subject to certain transfer restrictions.

The proceeds of

the sale of the July SPA Shares sold were used for working capital purposes and the repayment of Second Lien Loans (as defined in Note 5 - Notes Payable ).

In addition, the Company agreed to enter into a registration rights agreement for the resale of the July SPA Shares.

On August 2, 2019, the Company entered into another common stock purchase agreement (the "August Stock Purchase Agreement") with BEMG, where the Company sold to BEMG a total of 1,900,000 shares of Common Stock (the “August SPA Shares”), for an aggregate purchase price in cash of $2.9 million priced at $1.50 per share.

The August SPA Shares are subject to certain transfer restrictions.

The proceeds of the sale of the August SPA Shares sold were used for working capital purposes.

In addition, the Company agreed to enter into a registration rights agreement for the resale of the August SPA Shares.

On October 9, 2018, the Company issued a subordinated convertible note (the “Convertible Note”) to MingTai Investment LP (the “Lender”) for $5.0 million .

All proceeds from the Convertible Note were used to pay the $5.0 million 2013 Notes described above.

See Note 5 - Notes Payable .

The Convertible Note bears interest at 8% and matures on October 9, 2019 with one additional year extension at the Company's option.

On October 9, 2019, the Company exercised its option to extend for an additional year.

The new maturity date of the Convertible Note is October 9, 2020.

On July 3, 2019, the Company entered into an amendment (the “EWB Amendment”) to 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 “EWB Credit Agreement”).

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 EWB Credit Agreement.

On July 26, 2019, the previously announced Agreement and Plan of Merger, dated as of March 14, 2019, among the Company, C&F Merger Sub, Inc., a wholly-owned subsidiary of the Company, Future Today Inc, Alok Ranjan and Vikrant Mathur (individually and as Stockholder Representative) and the Company Stockholders identified therein, was amended (the “Merger Amendment”).

Pursuant to the Merger Amendment, among other things, the parties (x) extended the End Date and exclusivity period to July 31, 2019, (y) provided for payment of a non-refundable deposit of $500,000 by the Company, and (z) provided the Company with the unilateral right to extend the End Date and exclusivity period to August 14, 2019 upon making an additional non-refundable deposit of $500,000 .

Any non-refundable deposit(s) made prior to closing will be credited against the purchase price at closing.

On July 31, 2019, the Company exercised its right to extend to August 14, 2019.

Effective January 1, 2020, the Agreement and Plan of Merger was terminated.

See Note 10 - Subsequent Events.

Because of the termination of the Merger Agreement, $1.0 million deposit of purchase price was forfeited and written off during the three months ended December 31, 2019.

On October 9, 2019, the Company elected to extend the term of the Convertible Note with Ming Tai Investment LP to mature the Convertible Note on October 9, 2020.

The Convertible Note is for $5.0 million and bears interest at 8% .

In addition, we have significant debt-related contractual obligations as of June 30, 2020 and beyond.

Based on these conditions, the Company entered into the following transactions described below:

Capital Raise

On May 20, 2020, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain investors (the “Investors”) for the purchase and sale of 10,666,666 shares (the “Shares”) of the Company’s Class A common stock, par value $ 0.001 per share, (the "Common Stock" or "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 (Reg.

333-238183) which was declared effective by the Securities and Exchange Commission on May 14, 2020 and an applicable prospectus supplement.

The aggregate gross proceeds for the sale of the Shares was $ 8.0 million.

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.

The Company intends to use the net proceeds for working capital and other general corporate purposes, which may include, among other things, product development, acquisitions, capital expenditures, and other business opportunities.

On July 16, 2020, the Company entered into a securities purchase agreement (the “July Securities Purchase Agreement” ) with the Investors for the purchase and sale of 7,213,334 shares (the “July 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 (Reg.

333-239710) which was declared effective by the Securities and Exchange Commission on July 10, 2020 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 aggregated gross proceeds from the sale of the July Shares were approximately $ 10.8 million.

The net proceeds to the Company from the sale of the July Shares, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, was approximately $ 10.0 million.

The Company intends to use the net proceeds from the transaction for working capital and for other general corporate purposes, which may include, among other things, product development, acquisitions, capital expenditures, and other business opportunities.

Equity Investment

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 “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 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, Huatai Investment LP, Antai Investment LP, Mingtai Investment LP 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 therefo (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.

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 0.38 per share on August 13, 2020, calculated at an exchange rate of 7.8 Hong Kong Dollars to 1 US dollar, the market value of Cinedigm’s ownership in Starrise ordinary shares was approximately $ 17.8 million.

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 “PPN 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 PPN 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 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 outstanding Second Lien Loans.

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.

consent fee of $ 100,000 was paid in connection with this extension.

On April 15, 2020, the Company executed a letter amendment (the “Letter Amendment”) to the Bison Convertible Note.

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.

The Bison Convertible note due 2021 is also convertible into Common Stock at our election.

See Note 5 - Notes Payable.

On January 13, 2020, Bison Entertainment Investment Limited, the Company’s majority stockholder, signed a written consent approving the acquisition by the Company of shares of Starrise Media Limited, a leading Chinese entertainment company, from two of Starrise’s stockholders.

The Company mailed a definitive information statement to its stockholders in late January.

The Company closed on the purchase of 162,162,162 Starrise shares and issued 21,646,604 shares of Common Stock as consideration therefor on February 14, 2020, and expects to close on the remainder of the Starrise shares as soon as practicable.

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 June 25, 2020, the Company signed an amendment to extend the maturity date of the East West credit facility from March 30, 2021 to June 30, 2021.

We believe the combination of:

(i) our cash and cash equivalent balances at December 31, 2019 , (ii) expected cash flows from operations, and (iii) the support or availability of funding from Bison and its related parties and other capital resources and financing will be sufficient to satisfy our contractual obligations, operational and liquidity and capital requirements to February 2021.

(i) our cash and cash equivalent balances as of June 30, 2020, (ii) expected cash flows from operations, (iii) cost cutting measures including payroll expense reduction and real estate occupancy cost reductions, and (iv) the extension of maturity dates of our borrowings, the ability to convert the convertible debt into Class A common stock, the Starrise equity investment, the capital raises during and subsequent to June 30, 2020, and the support or availability of funding from other capital resources and financings will be sufficient to satisfy our contractual obligations, as well as liquidity for our operational and capital requirements, 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.

6 unchanged sentences

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

See Note 3 - Other Interests to the Condensed Consolidated Financial Statements for a discussion of our noncontrolling and majority interests.

USE OF ESTIMATES

2 unchanged sentences

Actual results could differ from these estimates.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), although we believe that the disclosures are adequate to make the information presented not misleading.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), although we believe that the disclosures are adequate to make the information presented not misleading.

The results of operations for the respective interim periods are not necessarily indicative of the results expected for the full year.

1 unchanged sentence

SIGNIFICANT ACCOUNTING POLICES

The significant accounting policies used in the preparation of these condensed consolidated financial statements for the three and nine months ended December 31, 2019 are consistent with those disclosed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended March 31, 2019 except as noted below.

RECLASSIFICATIONS

Certain amounts in the prior year consolidated balance sheet has been reclassified to conform to the presentation of the current period.

The significant accounting policies used in the preparation of these condensed consolidated financial statements for the three months ended June 30, 2020 are consistent with those disclosed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended March 31, 2020.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

5 unchanged sentences

(in thousands )

December 31, 2019

March 31, 2019

June 30, 2020 March 31, 2020

Cash and Cash Equivalents $ 16,301 $ 14,294

Restricted Cash 1,000 1,000

$ 17,301 $ 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 Chinese entertainment publicly traded company 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 interest of 15 % 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.

During the three months ended June 30, 2020, the Company sold 5,384,000 of Starrise shares for net proceeds of approximately $ 0.6 million which resulted in a loss on sale of approximately $ 50 thousand.

As of June 30, 2020 and March, 31, 2020, the value of our equity investment in Starrise, using the readily determinable fair value method from the quoted trading price of the Stock Exchange of Hong Kong, was approximately $ 35.0 million and $ 23.4 million, respectively, resulting in an unrealized loss for the change in fair value of approximately $ 15.8 million for the three months ended June 30, 2020, on our consolidated statement of operations.

NON-MONETARY TRANSACTIONS

During the three months ended June 30, 2020, the Company entered in agreements with certain vendors to transfer 9,006,215 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 $ 0.3 million for the three months ended June 30, 2020 or 3,408,000 Starrise shares.

Subsequent to June 30, 2020, the Company transferred 2,010,000 shares in Starrise amounting to approximately $ 0.1 million related to such vendor liabilities.

There was no gain or loss resulting from these transactions.

ACCOUNTS RECEIVABLE

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Reserves are recorded primarily on a specific identification basis.

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.

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, which are recorded within prepaid and other current assets on the condensed 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 $0.3 million , respectively for the three months ended December 31, 2019 and 2018.

Impairments and accelerated amortization related to advances were $0.7 million and $0.9 million , respectively for the nine months ended December 31, 2019 and 2018.

Impairments and accelerated amortization related to advances was $ 0.2 million, for each of the three months ended June 30, 2020 and 2019.

PROPERTY AND EQUIPMENT

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

Computer equipment and software

Digital cinema projection systems

Machinery and equipment

Furniture and fixtures

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.

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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 following tables summarize the levels of fair value measurements of our financial assets and liabilities as of December 31, 2019 and March 31, 2019 :

(in thousands)

The equity investment in Starrise is in Hong Kong dollars and was translated into US dollars as of June 30, 2020 and March 31, 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 quoted market price 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 June 30, 2020 and March 31, 2020:

As of June 30, 2020

(in thousands) Level 1 Level 2 Level 3 Total

Restricted cash $ 1,000 $ — $ — $ 1,000

Equity investment in Starrise, at fair value 34,963 — — 34,963

$ 35,963 $ — — $ — $ 35,963

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 condensed consolidated balance sheets.

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

At December 31, 2019 and March 31, 2019 , the estimated fair value of our fixed rate debt approximated its carrying amounts.

At June 30, 2020 and March 31, 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 $13.1 million , and capital lease obligations approximates fair value.

Based on borrowing rates currently available to us for loans with similar terms, the fair value of the variable rate debt is $ 11.8 million and lease obligations approximates fair value.

IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS

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

During the three months and nine months ended December 31, 2019 and 2018 , no impairment charge was recorded from operations for long-lived assets or finite-lived assets.

During the three months June 30, 2020 and 2019 no impairment charge was recorded from operations for long-lived assets or finite-lived assets.

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

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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.

No goodwill impairment charge was recorded in the three and nine months ended December 31, 2019 and 2018 .

No goodwill impairment charge was recorded in the three months ended June 30, 2020 and 2019.

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 December 31, 2019 and March 31, 2019

Goodwill at June 30, 2020 and March 31, 2020 $ 8,701

REVENUE RECOGNITION

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• 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 VOD 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.

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.

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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 digital cinema equipment (the “Systems”) deployments that had extended payment terms.

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.

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or (3) purchase the Systems from us at fair market value.

As permitted by these agreements, we have begun, and expect to continue, to pursue the sale of the Systems to such exhibitors.

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.

During the three and nine months ended December 31, 2019 , there was $0.2 million and $1.2 million , respectively, of digital System sales revenue for the sale of 24 and 136 digital projection Systems, respectively.

Cinedigm completed the sale of 30 and 35 digital projection Systems, respectively, for an aggregate sales price of approximately $ 195.0 thousand and $ 0.4 million, and recognized revenue of $ 76.2 thousand and $ 0.4 million, during the three months ended June 30, 2020 and 2019, respectively.

Revenues earned in connection with up front exhibitor contributions are deferred and recognized over the expected cost recoupment period.

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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.

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.

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

Revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

Reserves for sales returns and other allowances are recorded based upon historical experience.

Revenue is recognized after deducting the reserves for product returns and other allowances, which are accounted for as variable consideration.

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.

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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 are recorded based upon historical experience.

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.

Sales returns and allowances are reported as a reduction of revenues.

We record accounts receivable, long-term in connection with activation fees that we earn from Systems deployments that have extended payment terms.

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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 December 31, 2019 was $3.0 million .

For the three months ended December 31, 2019 , 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 three and nine months ended December 31, 2019 , $1.3 million and $3.4 million , respectively of revenue was recognized that was included in the deferred revenue balance at the beginning of the period.

As of December 31, 2019 , the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $3.0 million .

The ending deferred revenue balance, including current and non-current balances, as of June 30, 2020 was $ 2.1 million.

For the three months ended June 30, 2020, 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 three months ended June 30, 2020 and 2019, $ 0.6 million and $ 0.8 million, respectively of revenue was recognized that was included in the deferred revenue balance at the beginning of the period.

As of June 30, 2020, the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $ 2.1 million.

We expect to recognize approximately $ 1.7 million of this balance over the next 12 months, and the remainder thereafter.

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Base Distribution Business and OTT Streaming and Digital.

The following tables present the Company's revenue categories for the three and nine months ended December 31, 2019 :

The following tables present the Company's revenue categories for the three months ended June 30, 2020:

(in thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Cinema Equipment Business:

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Phase II Deployment 398 459

Services 100 1,330

Digital System Sales 76 350

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

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

(In thousands) 2020 2019

Selling, general and administrative $ 177 $ 11

During the three months and nine months ended December 31, 2019 , the Company did not grant any stock appreciation rights ("SARs").

During the three months ended December 31, 2018 , the Company granted 1,222,830 SARs to a Company executive.

There were 2,277,830 SARs granted to our Chief Executive Officer and other executives during the nine months ended December 31, 2018 of which 815,220 SARs were forfeited due to the terminations of two executives during the year ended March 31, 2019.

The SARs were granted under the Company's 2017 Equity Incentive Plan (the "2017 Plan").

There was $111 thousand and $332 thousand of stock-based compensation recorded for the three and nine months ended December 31, 2019 , respectively relating to these SARs.

There was $178 thousand and $282 thousand stock-based compensation recorded for the three and nine months ended December 31, 2018 .

During the three months ended June 30, 2020 and 2019, the Company did not grant stock appreciation rights ("SARs").The SARs were granted under the Company's 2017 Equity Incentive Plan (the "2017 Plan").

There was $ 110 thousand, of stock-based compensation recorded for the three months ended June 30, 2020 and 2019, respectively relating to these SARs.

Total SARs outstanding are as follows:

Nine Months Ended December 31, 2019

Three Months Ended

June 30, 2020

SARs Outstanding March 31, 2020 1,462,610

Total SARs Outstanding December 31, 2019

On July 26, 2018, the Company granted 1,941,402 units of performance stock units ("PSUs") to certain executives and employees under the 2017 Plan.

The total units represent the maximum number of units eligible to vest at the end of the performance period.

The awards vest in two tranches;

one at each of March 31, 2019 and March 31, 2020, based on the Company achieving certain financial targets at each period.

The Company engaged an outside consulting firm to provide valuation services relating to estimating the fair value of these PSUs each reporting period.

Based on their analysis as of December 31, 2019 using the Monte Carlo simulation technique, the estimated per unit fair value of the PSU's, was $0.00 based on the projections.

The Company recorded a cumulative adjustment of $166 thousand of stock-based compensation in the nine months ended December 31, 2019 .

The PSUs outstanding are as follows:

Nine Months Ended

December 31, 2019

PSUs Outstanding March 31, 2019

Total PSUs Outstanding December 31, 2019

There was $2 thousand and $4 thousand of stock-based compensation recorded in the three and nine months ended December 31, 2019 , respectively, related to employees' restricted stock awards.

Total SARs Outstanding June 30, 2020 1,462,610

There are 696,050 units of performance stock units ("PSU") which were granted on July 26, 2018 fully vested but not paid yet.

There was no stock-based compensation recorded related to these units for the three months ended June 30, 2020 and there was a cumulative adjustment of $ 166 thousand of stock-based compensation recorded for the three months ended June 30, 2019.

There was $ 1 thousand of stock-based compensation recorded in the three months ended June 30, 2020 and 2019, respectively, related to employees' restricted stock awards.

There was $ 66 thousand of stock-based compensation recorded for the three months ended June 30, 2020 and 2019 respectively, related to board of directors.

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

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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

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 three and nine months ended December 31, 2019 and 2018 , and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 4,066,172 shares and 5,043,341 shares as of December 31, 2019 and 2018 , respectively, and 9,999,999 shares from the convertible notes issued on October 9, 2018 and on July 12, 2019, were excluded from the computations of loss per share, as their impact would have been anti-dilutive.

We incurred net losses for the three months ended June 30, 2020 and 2019, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 3,940,138 shares and 4,155,921 shares as of June 30, 2020 and 2019, respectively, and 9,999,999 shares from the convertible notes issued on October 9, 2018 and on July 12, 2019, were excluded from the computations of loss per share, as their impact would have been anti-dilutive.

COMPREHENSIVE LOSS

As of the three and nine months ended December 31, 2019 and 2018, comprehensive loss consisted of net loss and foreign currency translation adjustments.

As of the three months ended June 30, 2020 and 2019, comprehensive loss consisted of net loss and foreign currency translation adjustments.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently adopted

In February, 2016, the Financial Accounting Standards Board ("FASB") issued guidance amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting.

On April 1, 2019, the Company adopted the new leasing standard using the prospective transaction method.

See Note 7- Commitments and Contingencies for further details.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees.

Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.

This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods, with early adoption permitted.

The Company adopted the guidance as of April 1, 2019 and it did not have a material impact on the Company’s consolidated financial statements.

Not yet adopted

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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

OTHER INTERESTS

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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 December 31, 2019 and March 31, 2019 , 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 $0.5 million and $0.4 million as of December 31, 2019 and March 31, 2019 which are included in accounts receivable, net on the accompanying condensed consolidated balance sheets.

The accompanying Condensed Consolidated Statements of Operations include $0.3 million and $0.9 million of digital cinema servicing revenue from CDF2 Holdings for each of the three months and nine months ended December 31, 2019 and 2018 , respectively.

Total Stockholders' Deficit of CDF2 Holdings at December 31, 2019 and March 31, 2019 was $ 30.1 million and $ 28.9 million , respectively.

We have no obligation to fund the operating loss or the stockholders' deficit beyond our initial investment of $2.0 million and, accordingly, our investment in CDF2 Holdings as of December 31, 2019 and March 31, 2019 is carried at $0 .

As of June 30, 2020 and March 31, 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 $ 0.2 million and $ 0.4 million as of June 30, 2020 and March 31, 2020 which are included in accounts receivable, net on the accompanying condensed consolidated balance sheets.

The accompanying Condensed Consolidated Statements of Operations include $ 9 thousand and $ 0.3 million of digital cinema servicing revenue from CDF2 Holdings for each of the three months ended June 30, 2020 and 2019, respectively.

Total Stockholders' Deficit of CDF2 Holdings at June 30, 2020 and March 31, 2020 was $ 35.9 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 June 30, 2020 and March 31, 2020 is carried at $ 0 .

Majority Interest in CONtv

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

For each of the three months ended December 31, 2019 and 2018, we recorded income tax expense of approximately $0.1 million .

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

For each of the nine months ended December 31, 2019 and 2018, we recorded income tax expense of approximately $0.2 million .

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

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

Our effective tax rate for the nine months ended December 31, 2019 and 2018 was negative 2.0% .

For each of the three months ended June 30, 2020 and June 30, 2019, we recorded income tax expense of approximately zero and $ 47 thousand, respectively.

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

Our effective tax rate for the three months ended June 30, 2020 and 2019 was zero and negative 0.9 %, respectively.

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.

NOTES PAYABLE

Notes payable consisted of the following:

December 31, 2019

March 31, 2019

(In thousands)

Current Portion

Long Term Portion

Current Portion

Long Term Portion

June 30, 2020 March 31, 2020

(In thousands) Current Portion Long Term Portion Current Portion Long Term Portion

Prospect Loan $ 12,107 $ — $ 12,205 $ —

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Bison Note Payable $ 10,000 $ — $ 10,000 $ —

Bison Convertible Note

Second Lien Loans 7,493 — 8,222 —

Credit Facility 10,218 — 14,487 —

Convertible Note

MingTai Convertible Note 5,000 — 5,000 —

PPP Loan — 2,152 — —

Total recourse notes payable 32,711 2,152 37,709 —

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We also maintain a debt service fund under the Prospect Loan for future principal and interest payments.

As of December 31, 2019 , and March 31, 2019 , the debt service fund had a balance of $1.0 million , which is classified as part of restricted cash on our Condensed Consolidated Balance Sheets.

As of June 30, 2020, and March 31, 2020, the debt service fund had a balance of $ 1.0 million, which is classified as part of restricted cash on our Condensed Consolidated Balance Sheets.

The Prospect Loan matures on March 31, 2021 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.

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The following table summarizes the activity related to the Prospect Loan:

(In thousands)

December 31, 2019

March 31, 2019

(In thousands) June 30, 2020 March 31, 2020

Prospect Loan, at issuance $ 70,000 $ 70,000

PIK Interest 4,778 4,778

Payments to date ( 62,671 ) ( 62,573 )

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Bison Note Payable

As discussed in Note 1 - Nature of Operations and Liquidity , the Company entered into a loan with Bison for $10.0 million and issued Warrants to purchase 1,400,000 shares of the Company's Class A common stock.

The Company entered into a loan with Bison for $ 10.0 million and issued Warrants to purchase 1,400,000 shares of the Company's Class A common stock.

See Note 6 - Stockholders' Deficit for further discussion of the warrants.

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 Investment SPC, pursuant to which the Company borrowed from Bison Global $10.0 million (the “2018 Loan”).

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 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 Bison Convertible Note with Bison Global.

$10.0 Million Loan converted into 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 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.

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 $478 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 of similar non-convertible debt;

the debt is being amortized to interest expense using the effective interest method over the term of the note.

The Bison Convertible Note is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties.

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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.

The Company expects to enter into an agreement with Bison to extend the Bison Convertible Note or convert it to equity in March 2020.

Second Lien Loans

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.

As of December 31, 2019 we have an outstanding balance of $ 8.1 million which includes $4.0 million borrowed from Ronald L.

As of June 30, 2020 we have an outstanding balance of $ 7.5 million which includes $ 4.0 million borrowed from Ronald L.

Chez, at that time a member of the Board of Directors.

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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.

On July 30, 2019, one of the lenders, signed a waiver to defer the receipt of the portion of the outstanding principal amount and the Second Lien Loans agreed to be paid no later than 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 December 31, 2019 , we have issued 906,450 shares of Class A common stock cumulatively under the Second Lien Loan Agreement.

There were no shares issued in the three and nine months ended December 31, 2019 .

As of June 30, 2020, we have issued 906,450 shares of Class A common stock cumulatively under the Second Lien Loan Agreement.

There were no shares issued in the three months ended June 30, 2020.

The Second Lien Loans may be prepaid without premium or penalty and contain customary covenants, representations and warranties.

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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 October 24, 2019, the Company entered into a consent agreement to extend the maturity date to November 30, 2019.

On January 8, 2020, the Company entered into another consent agreement to extend the maturity date to February 17, 2020.

There were no consent fees paid for these consent agreements.

See Note 10 - Subsequent Events.

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.

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.

Credit Facility and Cinedigm Revolving Loans

On March 30, 2018, the Company entered into a Credit Facility with a retail bank 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.

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.

As of December 31, 2019 and March 31, 2019, there was $15.9 million and $18.6 million outstanding, respectively, and there was no additional availability, under the Credit Facility based on the Company's borrowing base as of December 31, 2019 .

On July 3, 2019, the Company entered into the EWB Amendment to 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.

As of June 30, 2020 and March 31, 2020, there was $ 10.2 million and $ 14.5 million outstanding, respectively, and there was $0.8 million available, under the Credit Facility based on the Company's borrowing base as of June 30, 2020.

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 EWB Credit Agreement.

Convertible Note

On October 9, 2018, the Company issued a Convertible Note for $5.0 million .

All proceeds from the Convertible Note were used to pay the $5.0 million 2013 Notes described below.

The $5.0 million in aggregate principal bears interest at 8% and

matures on October 9, 2019 with two one year extensions at the Company's option.

On October 9, 2019, the Company extended the note for one additional year and the new maturity date of the Convertible Note is October 9, 2020.

The 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.

The 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 the Lender, 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 debt discount is being amortized to interest expense using the effective interest method over the one year term of the Convertible Note.

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.

This amendment also includes a financial covenant that begins on August 31, 2020.

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 will continue in full force and effect in accordance with its terms, including Company’s right to further extend the maturity date of this note, if it so elects.

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 debt discount is being amortized to interest expense using the effective interest method over the one year term of the Mingtai Convertible Note.

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 “PPN 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 PPN Maturity Date.

STOCKHOLDERS’ DEFICIT

During the nine months ended December 31, 2019 , we issued 4,113,484 shares of Class A common stock in connection with the sale of 3,900,000 shares of our Class A common stock and the issuance of Class A common stock for preferred stock dividends.

During the three months ended June 30, 2020, we issued 41,355,226 shares of Class A common stock in connection with the sale of 10,666,666 shares of our Class A common stock, 29,855,081 in connection with the Starrise transaction, settlement of a portion of the outstanding second lien loan, and the issuances of Class A common stock for warrants exercised and preferred stock dividends.

See Note - 8 Supplemental Cash Flow Disclosure .

PREFERRED STOCK

Cumulative dividends in arrears on preferred stock were $0.1 million as of December 31, 2019 and 2018.

In January 2020, we paid the preferred stock dividends in arrears in the form of 124,622 shares of Class A common stock.

Cumulative dividends in arrears on preferred stock were $ 0.1 million as of June 30, 2020 and 2019.

In July 2020, we paid the preferred stock dividends in arrears in the form of 44,913 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 each of December 31, 2019 and March 31, 2019.

We have treasury stock, at a cost, consisting of 1,313,836 shares of Class A common stock at June 30, 2020 and March 31, 2020.

CINEDIGM’S EQUITY INCENTIVE PLANS

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

or (iv) performance awards.

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.

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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 transactions pursuant to the Stock Purchase Agreement, 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.

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 December 31, 2019 , there were 274,116 stock options outstanding in the Plan with weighted average exercise price of $15.00 and a weighted average contract life of 3.36 years .

As of June 30, 2020, there were 265,887 stock options outstanding in the Plan with weighted average exercise price of $ 15.02 and a weighted average contract life of 2.86 years.

As of March 31, 2020, there were 272,766 shares outstanding in the Plan with weighted average exercise price of $ 15.00 and a weighted average contract life of 3.11 years.

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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 .

An analysis of all options outstanding under the 2000 Plan as of December 31, 2019 is as follows:

As of December 31, 2019

Range of Prices

Options Outstanding

Life in Years

Aggregate Intrinsic Value (In thousands)

The analysis of all options outstanding under the 2000 Plan as of June 30, 2020 is as follows:

As of June 30, 2020

Range of Prices Options Outstanding Weighted

Life in Years Weighted

Price Aggregate Intrinsic Value (In thousands)

$ 1.16 - $ 7.40

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$ 13.70 - $ 24.40

An analysis of all options exercisable under the 2000 Plan as of December 31, 2019 is presented below:

Life in Years

Aggregate Intrinsic Value

(In thousands)

As of December 31, 2019

253,387 2.87 14.72 —

$ 30.00 - $ 50.00

7,500 1.13 30.00 —

OPTIONS GRANTED OUTSIDE CINEDIGM’S EQUITY INCENTIVE PLAN

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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 are fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised.

As of December 31, 2019 , 12,500 of such options remained outstanding.

The options were fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised.

As of June 30, 2020, 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 will expire in December 2020.

As of December 31, 2019 , all such options remained outstanding.

The following table presents information about outstanding warrants to purchase shares of our Class A common stock as of December 31, 2019 .

As of June 30, 2020, all such options remained outstanding.

The following table presents information about outstanding warrants to purchase shares of our Class A common stock as of June 30, 2020.

All of the outstanding warrants are fully vested and exercisable.

Amount outstanding

Exercise price per share

Strategic management service provider

$17.20 - $30.00

Warrants issued to Ronald L.

Chez in connection with the Second Lien Loans

$1.34 - $1.57

Warrants issued in connection with Convertible Notes exchange transaction

December 2021

5-year Warrant issued to BEMG in connection with a term loan agreement

December 2022

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 244,141 December 2021 $ 1.31

5-year Warrant issued to BEMG in connection with a term loan agreement 1,400,000 December 2022 $ 1.80

The warrants issued in connection with the Second Lien Loans (See Note 5 - 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 warrants to purchase 236,899 shares of Class A common stock in connection with the Second Lien Loans, resulting in gross proceeds of $ 301 thousand.

COMMITMENTS AND CONTINGENCIES

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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 December 31, 2019

(In thousands)

Classification on the Balance Sheet

December 31, 2019

Operating lease right-of-use asset

Operating leases - current portion

Operating leases - long -term portion

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of June 30, 2020

(In thousands) Classification on the Balance Sheet June 30, 2020

Noncurrent Operating lease right-of-use asset $ 204

Current Operating leases - current portion $ 137

Noncurrent Operating leases - long -term portion 67

Total operating lease liabilities $ 204

Weighted-average remaining lease term in years

Weighted-average discount rate (1)

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Three Months Ended

Nine Months Ended

(In thousands)

December 31, 2019

(In thousands) June 30, 2020

Operating lease cost $ 86

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Three Months Ended

Nine Months Ended

(In thousands)

December 31, 2019

(In thousands) June 30, 2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows used for operating leases $ 88

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for the remaining years on the leases to the lease liabilities recorded on the balance sheet as of December 31, 2019.

(In thousands)

Operating Leases

2020 (remaining 3 months)

Total minimum lease payments

Present value of lease liabilities

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.

SUPPLEMENTAL CASH FLOW INFORMATION

Nine Months Ended

Three Months Ended

(In thousands) 2020 2019

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Issuance of Class A common stock for payment of preferred stock dividends 89 89

Issuance of Class A common stock to Starrise, a related party 11,046 106

Contributed capital under the Starrise transaction, a related party 17,187 —

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

Settlement of second lien loan with Class A common stock 757 —

Starrise shares used to pay down vendors 335 — —

SEGMENT INFORMATION

We operate in two reportable segments:

Cinema Equipment Business and Content & Entertainment Business, or CEG.

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.

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Products and services provided:

Cinema Equipment Business

Financing vehicles and administrators for 3,367 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 4,976 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

Cinema Equipment Business Financing vehicles and administrators for 3,328 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,164 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.

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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 VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”).

Content & Entertainment Business

Leading distributor of independent content, and collaborates with producers and other content owners to market, source, curate and distribute independent content to targeted and profitable audiences in theatres and homes, and via mobile and emerging platforms.

Content & Entertainment Business Leading distributor of independent content, and collaborates with producers and other content owners to market, source, curate and distribute independent content to targeted and profitable 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 December 31, 2019

(In thousands)

Intangible Assets, net

Notes Payable, Non-Recourse

Notes Payable

Operating lease liabilities

As of June 30, 2020

(In thousands) Intangible Assets, net Goodwill Total Assets Notes Payable, Non-Recourse Notes Payable Operating lease liabilities

Cinema Equipment Business $ 15 $ — $ 24,001 $ 11,544 $ — $ 137

Content & Entertainment Business 6,313 8,701 45,674 — — 41

Corporate 5 — 41,421 — 34,516 26

Total $ 6,333 $ 8,701 $ 111,096 $ 11,544 $ 34,516 $ 204

As of March 31, 2020

(In thousands)

Intangible Assets, net

Notes Payable, Non-Recourse

Notes Payable

Operating lease liabilities

Cinema Equipment Business

Content & Entertainment Business

Statements of Operations

Three Months Ended December 31, 2019

(Unaudited, in thousands)

Cinema Equipment Business

Content & Entertainment

Direct operating (exclusive of depreciation and amortization shown below)

Selling, general and administrative

Allocation of corporate overhead

Recovery for doubtful accounts

Depreciation and amortization of property and equipment

Amortization of intangible assets

Total operating expenses

Income (loss) from operations

Employee and director stock-based compensation expense related to the Company’s stock-based awards was $0.2 million for the three months ended December 31, 2019 .

(In thousands)

Cinema Equipment Business

Content & Entertainment

Direct operating

Selling, general and administrative

Total stock-based compensation

Statements of Operations

Three Months Ended December 31, 2018

(Unaudited, in thousands)

(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

Direct operating (exclusive of depreciation and amortization shown below)

Selling, general and administrative

Allocation of Corporate overhead

Provision (recovery) for doubtful accounts

Depreciation and amortization of property and equipment

Amortization of intangible assets

Total operating expenses

Income (loss) from operations

Employee and director stock-based compensation expense related to the Company’s stock-based awards was $0.4 million for the three months ended December 31, 2018.

(In thousands)

Cinema Equipment Business

Content & Entertainment

Direct operating

Selling, general and administrative

Total stock-based compensation

Corporate 6 — 26,052 — 37,249 610

Total $ 6,924 $ 8,701 $ 110,440 $ 11,442 $ 37,249 $ 1,277

Statements of Operations

Nine Months Ended December 31, 2019

Three Months Ended June 30, 2020

(Unaudited, in thousands)

Cinema Equipment Business

Content & Entertainment

Cinema Equipment Business Content & Entertainment

Business Corporate Consolidated

Revenues $ 605 $ 5,413 $ — $ 6,018

Direct operating (exclusive of depreciation and amortization shown below)

182 2,497 — 2,679

Selling, general and administrative

549 1,895 1,396 3,840

Allocation of corporate overhead

Provision (recovery) for doubtful accounts

124 784 ( 908 ) —

Depreciation and amortization of property and equipment

1,403 103 18 1,524

Amortization of intangible assets 8 582 — 590

Total operating expenses 2,266 5,861 506 8,633

Income (loss) from operations

Employee and director stock-based compensation expense related to the Company’s stock-based awards was $ 0.4 million for the nine months ended December 31, 2019 .

(In thousands)

Cinema Equipment Business

Content & Entertainment

Loss from operations $ ( 1,661 ) $ ( 448 ) $ ( 506 ) $ ( 2,615 )

Employee and director stock-based compensation expense related to the Company’s stock-based awards was $ 0.2 million for the three months ended June 30, 2020.

(In thousands) Cinema Equipment Business Content & Entertainment

Business Corporate Consolidated

Direct operating $ — $ — $ — $ —

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Statements of Operations

Nine Months Ended December 31, 2018

Three Months Ended June 30, 2019

(Unaudited, in thousands)

Cinema Equipment Business

Content & Entertainment Business

Cinema Equipment Business Content & Entertainment Business Corporate Consolidated

Revenues $ 3,993 $ 5,810 $ — $ 9,803

Direct operating (exclusive of depreciation and amortization shown below)

234 3,378 — 3,612

Selling, general and administrative

496 3,224 2,129 5,849

Allocation of Corporate overhead

202 1,270 ( 1,472 ) —

Provision (recovery) for doubtful accounts

271 ( 1 ) — 270

Depreciation and amortization of property and equipment

1,646 86 42 1,774

Amortization of intangible assets 11 983 1 995

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Income (loss) from operations $ 1,133 $ ( 3,130 ) $ ( 700 ) $ ( 2,697 )

Employee and director stock-based compensation expense related to the Company’s stock-based awards was $ 0.8 million for the nine months ended December 31, 2018 .

(In thousands)

Cinema Equipment Business

Content & Entertainment

Employee and director stock-based compensation expense related to the Company’s stock-based awards was $11.0 thousand for the three months ended June 30, 2019.

(In thousands) Cinema Equipment Business Content & Entertainment

Business Corporate Consolidated

Direct operating $ — $ — $ — $ —

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SUBSEQUENT EVENTS

Effective January 1, 2020, the Company entered into a Second Amendment to the AVOD License Agreement (the “Second Amendment”) with Future Today, Alok Ranjan and Vikrant Mathur.

Pursuant to the Second Amendment, (i) the Company and Future Today will expand their licensing relationship by adding new content to the existing agreement pursuant to which Future Today currently licenses content from Cinedigm Entertainment Corp., and (ii) the Agreement and Plan of Merger dated as of March 14, 2019 among the Company, C&F Merger Sub, Inc.

(“C&F”), Future Today, Alok Ranjan and Vikrant Mathur (individually and as Stockholder Representative) and the Company Stockholders identified therein, as amended by Amendment No.

1 (the “Merger Agreement”) was terminated.

Pursuant to the Merger Agreement, the Company had agreed to acquire Future Today through a merger with C&F.

Because of the termination of the Merger Agreement, $1.0 million deposit of purchase price was forfeited and written off during the three months ended December 31, 2019.

On January 8, 2020, the Company entered into a consent agreement with lenders of the Second Lien Loans to extend the maturity date to February 17, 2020.

On January 13, 2020, Bison Entertainment Investment Limited, the Company’s majority stockholder, signed a written consent approving the issuance of 54,850,103 shares of Common Stock in exchange for the acquisition by the Company of 410,901,000 shares of Starrise Media Limited, a leading Chinese entertainment company, from two of Starrise’s stockholders pursuant to a Stock Purchase Agreement dated December 27, 2019 (the "Starrise Agreement").

The Company mailed a definitive information statement to its stockholders in late January.

On February 14, 2020, the parties to the Starrise Agreement amended it to provide for multiple closings.

On February 14, 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 150,000,000 shares.

Registered Direct Offering

On July 16, 2020, the Company entered into another securities purchase agreement (the “July Securities Purchase Agreement” ) with the Investors for the purchase and sale of 7,213,334 shares (the “July Shares”) of the Company’s 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 (Reg.

333-239710) which was declared effective by the Securities and Exchange Commission on July 10, 2020 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 aggregated gross proceeds from the sale of the July Shares were approximately $ 10.8 million.

The Company intends to use the net proceeds from the transaction for working capital and for the other general corporate purposes, which may include, among other things, product development, acquisitions, capital expenditures, and other business opportunities.

Transfer of Starrise Shares

Subsequent to June 30, 2020, the Company transferred 2,010,000 Starrise ordinary shares amounting to approximately $ 0.1 million related to certain vendor liabilities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements