10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal period ended: June 30, 2021

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-31810

Cinedigm Corp.

(Exact name of registrant as specified in its charter)

Delaware	22-3720962
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
237 West 35th Street, Suite 605, New York, NY	10001
(Address of principal executive offices)	(Zip Code)

(212) 206-8600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE	CIDM	NASDAQ GLOBAL MARKET

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging Growth Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒    

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

As of August 25, 2021, 167,932,971 shares of Class A Common Stock, $0.001 par value, were outstanding.

CINEDIGM CORP.

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at June 30, 2021 (Unaudited) and March 31, 2021	1
	Unaudited Condensed Consolidated Statements of Operations for the Three Months ended June 30, 2021 and 2020	2
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months ended June 30, 2021 and 2020	3
	Unaudited Condensed Consolidated Statements of (Deficit) Equity for the Three Months June 30, 2021 and 2020	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended June 30, 2021 and 2020	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 4.	Controls and Procedures	42
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Exhibit Index		45
Signatures		46

i

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CINEDIGM CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	June 30, 2021			March 31, 2021
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	13,355		$	16,849
Accounts receivable, net		27,145			21,093
Inventory, net		142			166
Unbilled revenue		1,672			1,377
Prepaid and other current assets		2,856			3,657
Total current assets		45,150			43,142
Restricted cash		1,000			1,000
Equity investment in Starrise, a related party, at fair value		6,777			6,443
Property and equipment, net		2,922			3,500
Right-of-use assets		66			100
Intangible assets, net		12,213			9,860
Goodwill		10,738			8,701
Other long-term assets		1,771			2,700
Total assets	$	80,637		$	75,446
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	50,213		$	46,627
Current portion of notes payable (see Note 6)		387			1,956
Current portion of notes payable, non-recourse (see Note 6)		3,031			7,786
Current portion of deferred consideration on purchase of a business		465			-
Operating lease liabilities		58			87
Current portion of deferred revenue		449			924
Total current liabilities		54,603			57,380
PPP Loan		-			2,152
Deferred consideration on purchase of a business - net of current portion		1,515			-
Operating lease liabilities, noncurrent		8			13
Other long-term liabilities		-			19
Total liabilities		56,126			59,564
Commitments and contingencies (see Note 8)
Stockholders’ equity
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; and 7 shares issued and outstanding at June 30, 2021 and March 31, 2021. Liquidation preference of $3,648		3,559			3,559
Common stock, $0.001 par value; Class A stock 200,000,000 and 200,000,000 shares authorized at June 30, 2021 and March 31, 2021, respectively; 169,114,525 and 167,542,404 shares issued and 167,800,689 and 166,228,568 shares outstanding at June 30, 2021 and March 31, 2021, respectively		166			164
Additional paid-in capital		502,848			499,272
Treasury stock, at cost; 1,313,836 Class A common shares at June 30, 2021 and March 31, 2021		(11,603	)		(11,603	)
Accumulated deficit		(468,982	)		(474,080	)
Accumulated other comprehensive loss		(122	)		(68	)
Total stockholders’ equity of Cinedigm Corp.		25,866			17,244
Deficit attributable to noncontrolling interest		(1,355	)		(1,362	)
Total equity		24,511			15,882
Total liabilities and equity	$	80,637		$	75,446

See accompanying Notes to Condensed Consolidated Financial Statements

1

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

	Three Months Ended June 30,
	2021			2020
Revenues	$	15,015		$	6,018
Costs and expenses:
Direct operating (excludes depreciation and amortization shown below)		4,631			2,679
Selling, general and administrative		6,043			3,840
Provision for doubtful accounts		71			-
Depreciation and amortization of property and equipment		649			1,524
Amortization of intangible assets		847			590
Total operating expenses		12,241			8,633
Income (loss) from operations		2,774			(2,615	)
Interest expense, net		(144	)		(1,290	)
Gain on forgiveness of PPP loan and extinguishment of note payable		2,178			23
Change in fair value of equity investment in Starrise, a related party		334			(15,794	)
Other expense, net		(11	)		(194	)
Income (loss) before income taxes		5,131			(19,870	)
Income tax benefit		63			-
Net income (loss)		5,194			(19,870	)
Net (income) loss attributable to noncontrolling interest		(7	)		14
Net income (loss) attributable to controlling interests		5,187			(19,856	)
Preferred stock dividends		(89	)		(89	)
Net income (loss) attributable to common stockholders	$	5,098		$	(19,945	)
Net income (loss) per Class A common stock attributable to common stockholders - basic:	$	0.03		$	(0.21	)
Weighted average number of Class A common stock outstanding: basic		167,940,285			94,416,684
Net income (loss) per Class A common stock attributable to common stockholders - diluted:	$	0.03		$	(0.21	)
Weighted average number of Class A common stock outstanding: diluted		171,257,356			94,416,684

See accompanying Notes to Condensed Consolidated Financial Statements

2

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

	Three Months Ended June 30,
	2021			2020
Net income (loss)	$	5,194		$	(19,870	)
Other comprehensive loss: foreign exchange translation		(54	)		(80	)
Comprehensive income (loss)		5,140			(19,950	)
Less: comprehensive (income) loss attributable to noncontrolling interest		(7	)		14
Comprehensive income (loss) attributable to controlling interests	$	5,133		$	(19,936	)

See accompanying Notes to Condensed Consolidated Financial Statements

3

CINEDIGM CORP.

CONSOLIDATED STATEMENTS OF (DEFICIT) EQUITY

(Unaudited)

(In thousands, except share data)

	Series A Preferred Stock				Class A Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’ Equity			Non-Controlling			Total Equity
	Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			(Deficit)			Interest			(Deficit)
Balances as of March 31, 2020		7	$	3,559		61,937,593	$	62		1,313,836	$	(11,603	)	$	400,784	$	(410,904	)	$	92		$	(18,010	)	$	(1,277	)	$	(19,287	)
Foreign exchange translation		—		—		—		—		—		—			—		—			(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	)

See accompanying Notes to Condensed Consolidated Financial Statements

4

CINEDIGM CORP.

CONSOLIDATED STATEMENTS OF (DEFICIT) EQUITY

(Unaudited)

(In thousands, except share data)

	Series A Preferred Stock				Class A Common Stock				Treasury					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’ Equity			Non-Controlling			Total Equity
	Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			(Deficit)			Interest			(Deficit)
Balances as of March 31, 2021		7	$	3,559		166,228,568	$	164		1,313,836	$	(11,603	)	$	499,272	$	(474,080	)	$	(68	)	$	17,244		$	(1,362	)	$	15,882
Foreign exchange translation		—		—		—		—		—		—			—		—			(54	)		(54	)		—			(54	)
Stock-based compensation		—		—		35,714		—		—		—			983		—			—			983			—			983
Issuance of common stock in connection with a business combination		—		—		1,483,129		2		—		—			2,504		—			—			2,506			—			2,506
Preferred stock dividends paid with common stock		—		—		53,278		—		—		—			89		(89	)		—			—			—			—
Net income		—		—		—		—		—		—			—		5,187			—			5,187			7			5,194
Balances as of June 30, 2021		7		3,559		167,800,689		166		1,313,836		(11,603	)		502,848		(468,982	)		(122	)		25,866			(1,355	)		24,511

See accompanying Notes to Condensed Consolidated Financial Statements

5

CINEDIGM CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	5,194		$	(19,870	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment and amortization of intangible assets		1,496			2,114
Changes in fair value of equity investment in Starrise		(334	)		15,794
Gain from forgiveness of PPP loan and extinguishment of note payable		(2,178	)		(23	)
Loss from sale of property and equipment		—			(16	)
Amortization of debt issuance costs included in interest expense		—			233
Provision for doubtful accounts		71			—
Recovery for inventory reserve		(34	)		(328	)
Stock-based compensation		983			177
Accretion and PIK interest expense added to note payable		—			176
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(6,103	)		8,236
Inventory		58			473
Unbilled revenue		(295	)		191
Prepaids and other current assets, and other long-term assets		1,730			1,135
Accounts payable, accrued expenses, and other liabilities		3,508			(11,527	)
Deferred revenue		(475	)		(503	)
Net cash provided by (used in) operating activities		3,621			(3,738	)
Cash flows from investing activities:
Purchases of property and equipment		(41	)		(79	)
Purchase of a business		(750	)		—
Sale of equity investment in Starrise		—			587
Net cash (used in) provided by investing activities		(791	)		508
Cash flows from financing activities:
Payment of notes payable		(4,755	)		(7,754	)
(Payment) proceeds under revolving credit agreement, net		(1,569	)		3,388
Proceeds from PPP Loan		—			2,152
Proceeds from issuance of Class A common stock, net		—			7,451
Net cash (used in) provided by  financing activities		(6,324	)		5,237
Net change in cash, cash equivalents, and restricted cash		(3,494	)		2,007
Cash, cash equivalents, and restricted cash at beginning of period		17,849			15,294
Cash, cash equivalents, and restricted cash at end of period	$	14,355		$	17,301

See accompanying Notes to Condensed Consolidated Financial Statements

6

CINEDIGM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share information)

1. NATURE OF OPERATIONS AND LIQUIDITY

Cinedigm Corp. (“Cinedigm,” the “Company,” “we,” “us,” or similar pronouns) was incorporated in Delaware on March 31, 2000. We are (i) a distributor and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of titles and episodes released across digital, physical, theatrical, home and mobile entertainment platforms (“Streaming”) and (ii) a servicer of digital cinema assets (“Systems”) for over 6,200 movie screens in both North America and several international countries.

Risks and Uncertainties

The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the period. As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. Due to the lingering effects of the COVID-19 pandemic in the quarter ended June 30, 2021, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product and increases in streaming views. As part of our Cinema Equipment business, the Company earns revenue when movies are exhibited in theatres. As vaccines became readily available and COVID cases decreased, major studios began to test consumer confidence by releasing blockbusters in the theatrical venues during the quarter ended June 30, 2021. This test period encouraged theatre re-openings and proved commercial viability for theatrical distribution of tentpole films. Films released during this period saw an uptick in box office revenue compared to the previous 12 months; however, box office results remained below pre-Covid expectations due to limited seating capacities and shortened windows for release on streaming platforms such as premium video on demand (“PVOD”) and subscription video on demand (“SVOD”). To the extent films are not shown in theatres, we do not earn revenue.

Liquidity

We have incurred net losses historically and have an accumulated deficit of $469.0 million and negative working capital of $9.5 million as of June 30, 2021. Net cash provided by operating activities for the three months ended June 30, 2021 was $3.6 million. We may continue to generate net losses for the foreseeable future. In addition, we had debt-related contractual obligations as of June 30, 2021. Upon a series of payments between April 30 and July 9, 2021, the Company paid in full the Prospect loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million. Based on these conditions, the Company entered into the following transactions described below:

Sale of Cinematic Equipment

On March 17, 2021, the Company entered into two separate agreements for the sale of cinematic equipment to American Multi-Cinema, Inc. (“AMC”), the agreements included the sale in tranches of a total of 2,369 cinematic projectors starting in March 2021 throughout January 2023 for a total cash consideration of $10.8 million. As of June 30, 2021, the Company executed the sale of the second tranche and recognized revenue of $5.6 million. A portion of the total proceeds has been utilized to eliminate the remaining Prospect notes payable.

7

Equity Investment in a Related Party

As previously announced, 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”), a related party for accounting purposes of Cinedigm 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 its Class A common stock in consideration. The Starrise shares received were valued at approximately $25 million and the Company issued shares that were valued at approximately $11.2 million. 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, all of which are related parties to the Company 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 as consideration therefor (the “April Share Acquisition”). On April 15, 2020, the April Share Acquisition was consummated and this transaction was also recorded as an equity investment in Starrise.

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 0.13 per share on August 26, 2021, 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 $6.1 million. 

Borrowings

On June 22, 2021, the maturity date of the East West Credit Facility (as defined in Note 6 - Notes Payable) with East West Bank was extended from June 30, 2021 to September 28, 2021. 

On April 15, 2020, the Company received $2.2 million from East West Bank, the Company’s existing lender, pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 10, 2022 (the “PPP Maturity Date”), accrues interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the PPP Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment. On July 7, 2021, the Company received notification from the Lender that the U.S. Small Business Administration had approved the Company’s PPP Loan forgiveness application for the entire PPP Loan amount and accrued interest effective as of June 30, 2021. The forgiveness of the PPP Loan was recognized as a gain of $2.2 million during the Company’s fiscal quarter ending June 30, 2021.

Upon a series of payments between April 30 and July 9, 2021, the Company paid in full the Prospect loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million. Pre-payment of the Prospect loan was permissible without penalty.

We believe the combination of: (i) our cash and cash equivalent balances at June 30, 2021, (ii) expected cash flows from operations, and (iii) the capacity under existing arrangements and access to new sources of capital will be sufficient to satisfy our contractual obligations, as well as liquidity for our operational and capital needs, for twelve months from the filing of this document. Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity.

8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

Our consolidated financial statements include the accounts of Cinedigm and its wholly owned and majority owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Investments in which we do not have a controlling interest or are not the primary beneficiary, but have the ability to exert significant influence, are accounted for under the equity method of accounting. Noncontrolling interests for which we have been determined to be the primary beneficiary are consolidated and recorded as net loss attributable to noncontrolling interest. See Note 4 - Other Interests to the Consolidated Financial Statements for a discussion of our noncontrolling interests.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include the adequacy of accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, long-lived and finite-lived assets impairment and estimated amortization lives, fair value for asset acquisitions and business combinations, valuation allowances for income taxes and stock awards. Actual results could differ from these estimates.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits. We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal. Our Prospect Loan (as defined below) requires that we maintain specified cash balances that are restricted to repayment of interest thereunder. See Note 6- Notes Payable for information about our restricted cash balances.

Cash, cash equivalents, and restricted cash consisted of the following:

	As of
(in thousands)	June 30, 2021		March 31, 2021
Cash and Cash Equivalents	$	13,355	$	16,849
Restricted Cash		1,000		1,000
	$	14,355	$	17,849

EQUITY INVESTMENT IN STARRISE, A RELATED PARTY

On February 14, 2020, the Company acquired an approximately 11.5% interest in Starrise Media Holdings Limited (“Starrise”), a leading publicly traded Chinese entertainment company whose ordinary shares are listed on the Stock Exchange of Hong Kong. The Company acquired such interest as a strategic investment and in a private transaction from a shareholder of Starrise that is related to our major shareholders. When we acquired the Starrise stock, our then-majority affiliated stockholders also maintained a significant beneficial interest 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.

9

On April 10, 2020, the Company purchased an additional 15% interest in Starrise in a private transaction from shareholders of Starrise that are affiliated with the major shareholder of the Company. The Company recorded an additional equity investment of approximately $28.2 million, which is the fair market value of the Starrise shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.0 million, valued at the date of the issuance of the Class A common stock of the Company. The difference in the value of shares received in Starrise and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital. This transaction was also recorded as an equity investment in Starrise.

The Company has accounted for these investments under the equity method of accounting as the Company can exert significant influence over Starrise with its direct ownership and affiliation with the Company’s majority shareholders. The Company has made an irrevocable election to apply the fair value option under ASC 825-10, Financial Instruments, as it relates to its equity investment in Starrise. The Company’s investment in Starrise is marked to market and recorded at fair value.  The stock is traded on the Hong Kong Stock exchange with readily available pricing that is classified as Level 1 in the fair value hierarchy. The Company has established a policy that consistently uses either the closing price of last active trades or the latest bid price when there is no active trades, unadjusted at the last day of each reporting period, as the most relevant and representative input to the Level 1 fair value measures of its investment holdings.

As of June 30, 2021 and March 31, 2021, the value of our equity investment in Starrise, using the readily determinable fair value inputs from the market pricing of the Stock Exchange of Hong Kong, was approximately $6.7 million and $6.4 million, respectively, resulting in a change in fair value of approximately $0.3 million and $15.8 million for the three months ended June 30, 2021 and 2020 respectively, on our consolidated statement of operations. At June 30, 2021 and March 31, 2021, the Company owned 362,307,397 shares or 26% of Starrise.

NON-MONETARY TRANSACTIONS

During the three months ended June 30, 2020, the Company entered into 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. There were no such transactions during the three months ended June 30, 2021.

There was no gain or loss resulting from these transactions for the three months ended June 30, 2020.

ACCOUNTS RECEIVABLE

We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

We record accounts receivable, long-term in connection with activation fees that we earn from our digital cinema equipment (the “Systems”) deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rate.

ADVANCES

Advances, which are recorded within prepaid and other current assets on the consolidated balance sheets, represent amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable as of the consolidated balance sheet date. Impairments and accelerated amortization related to advances were $0.2 million and $0.2 million, respectively, for the three months ended June 30, 2021 and 2020.

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PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

Computer equipment and software	3 - 5 years
Internal use software	5 years
Digital cinema projection systems	10 years
Machinery and equipment	3 - 10 years
Furniture and fixtures	3 - 6 years

We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications. These capitalized costs are included in property and equipment and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over the useful life of the software. Post-configuration training and maintenance costs are expensed as incurred.

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leasehold improvements. Repair and maintenance costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized. Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the consolidated statements of operations.

FAIR VALUE MEASUREMENTS

The fair value measurement disclosures are grouped into three levels based on valuation factors:

● Level 1 – quoted prices in active markets for identical investments

● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)

● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments)

Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities.

The equity investment in Starrise is in Hong Kong dollars and was translated into US dollars as of June 30, 2021 and March 31, 2021 at an exchange rate of 7.8 and 7.8 Hong Kong Dollars to 1 US Dollar, respectively. The fair value of this equity investment is measured by the unadjusted market pricing of Starrise on the Stock Exchange of Hong Kong.

The following tables summarize the levels of fair value measurements of our financial assets and liabilities as of June 30, 2021 and March 31, 2021:

As of June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,777		—		—		6,777
	$	7,777	$	—		—	$	7,777

As of March 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,443		—		—		6,443
	$	7,443	$	—	$	—	$	7,443

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Our cash and cash equivalents, accounts receivable, unbilled revenue and accounts payable and accrued expenses are financial instruments and are recorded at cost in the consolidated balance sheets. The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature. At June 30, 2021 and March 31, 2021, 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 consolidated 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 $3.0 million and lease obligations approximates fair value.

IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS

We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. During the three months ended June 30, 2021 and 2020, no impairment charge was recorded from operations for long-lived assets or finite-lived assets.

GOODWILL

Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.

Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.

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

No goodwill impairment charge was recorded in the three months ended June 30, 2021 and 2020.

Gross amounts of goodwill and accumulated impairment charges that we have recorded are as follows:

(In thousands)
Goodwill, net at March 31, 2021	$	8,701
Goodwill from business combination – see Note 5		2,037
Goodwill  , net at June 30, 2021	$	10,738

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REVENUE RECOGNITION

We determine revenue recognition by:

● identifying the contract, or contracts, with the customer;

● identifying the performance obligations in the contract;

● determining the transaction price;

● allocating the transaction price to performance obligations in the contract; and

● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVDs and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and video on demand services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities such as sales value-added taxes and other similar taxes.

Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less.

Cinema Equipment Business

Our Cinema Equipment Business consists of financing vehicles and administrators for 2,519 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,025 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

We retain ownership of our digital cinema equipment (the “Systems”) and the residual cash flows related to the Systems in Phase I Deployment after the end of the 10-year deployment payment period.

For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Cinema Equipment Business also provides monitoring, data collection, serial data verification and management services to this segment, as well as to exhibitors who purchase their own equipment, in order to collect virtual print fees (“VPFs”) from motion picture studios and distributors and Alternative Content Fees (“ACFs  ”) from alternative content providers, and to distribute those fees to theatrical exhibitors (collectively, “Services”).

VPFs are earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase I Deployment and to Phase II Deployment when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to Phase I Deployment based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period the title first plays for general audience viewing in a digital projector equipped movie theatre. The Phase 1 Deployment’s and Phase 2 Deployments performance obligations for revenue recognition are met at this time. 

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Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with movie studios and distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.” The Company evaluated the constraining estimates related to the variable consideration, i.e., the one-time bonus and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.

Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the systems and is predicated on Cinedigm’s receipt of sale proceeds. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. Cinedigm completed the sale of 650 and 30 digital projection Systems, respectively, for an aggregate sales price of approximately $5.6 million and $195.0 thousand, and recognized revenue of $5.6 million and $76.2 thousand, during the three months ended June 30, 2021 and 2020, respectively.

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

Exhibitors who purchased and own Systems using their own financing in the Cinema Equipment Business paid us an upfront activation fee of approximately $2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $1.0 thousand and $2.0 thousand on Phase II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 4 - Other Interests) upon installation and such fees are generally collected upfront upon installation. Our services division manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.

The Cinema Equipment Business earns an administrative fee of approximately 5% of VPFs collected and, in addition, earns an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 DC. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at that time the related VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the movie studios and distributors.

Content & Entertainment Business

CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”)   on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the performance obligation is satisfied which is when the content is available for subscription on the digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation. Physical Revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

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Physical goods reserves for sales returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

CEG also has contracts for the theatrical distribution of third party feature movies and alternative content. CEG’s distribution fee revenue and CEG’s participation in box office receipts is recognized at the time a feature movie and alternative content are viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date.

Principal Agent Considerations

We determine whether revenue should be reported on a gross or net basis for each revenue stream based on the transfer of control of goods and services. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:

● which party is primarily responsible for fulfilling the promise to provide the specified good or service; and

● which party has discretion in establishing the price for the specified good or service.

Shipping and Handling

Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Contract Liabilities

We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.

We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

Our CEG segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances is variable consideration as part of the transaction price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

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.

Deferred revenue pertaining to our Content & Entertainment Business includes amounts related to the sale of DVDs with future release dates.

Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms.

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The ending deferred revenue balance, including current and non-current balances, as of June 30, 2021 was $0.4 million. For the three months ended June 30, 2021 and 2020, respectively, 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, 2021 and 2020, $0.5 million and $0.6 million, respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. As of June 30, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $0.4 million. We expect to recognize this balance in full by September 30, 2021.

Participations and royalties payable

When we use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.

Disaggregation of Revenue

The Company disaggregates revenue into different revenue categories for the Cinema Equipment and CEG Businesses. The Cinema Equipment Business revenue categories are: Phase I Deployment revenue, Phase II Deployment revenue, Services, and Digital System Sales, and the Content & Entertainment Business revenue categories are: Base Distribution Business and OTT Streaming and Digital.

The following tables present the Company’s revenue categories for the three months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,
	2021		2020
Cinema Equipment Business:
Phase I Deployment	$	91	$	31
Phase II Deployment		386		398
Services		179		100
Digital System Sales		5,575		76
Total Cinema Equipment Business revenue	$	6,231	$	605
Content & Entertainment Business:
Base Distribution Business	$	1,778	$	2,157
OTT Streaming and Digital		7,006		3,256
Total Content & Entertainment Business revenue	$	8,784	$	5,413

DIRECT OPERATING COSTS

Direct operating costs consist of operating costs such as cost of goods sold, fulfillment expenses, shipping costs, property taxes and insurance on Systems, royalty expenses, impairments of advances, and marketing and direct personnel costs.

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STOCK-BASED COMPENSATION

The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock units and performance stock units. The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors.

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.

Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized. The Company is primarily subject to income taxes in the United States.

The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions.

NET INCOME/LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic and diluted net loss per common share has been calculated as follows:

Basic and diluted net loss per common share attributable to common stockholders	=	Net loss attributable to common stockholders
		Weighted average number of common stock outstanding during the period

Stock issued and treasury stock repurchased during the period are weighted for the portion of the period that they are outstanding. Shares issued and any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding.

We incurred net income for the three months ended June 30, 2021, and therefore the impact of potentially dilutive common shares from outstanding stock options, stock appreciation rights, and warrants, totaling 2,003,235 shares for the three months ended June 30, 2021, respectively, were included in the computations of diluted earnings per share. The calculation of diluted net income per share for the three months ended June 30, 2021 does not include the impact of 9,616,429 potentially dilutive shares relating to stock options, stock appreciation rights, and warrants as their impact would have been anti-dilutive.

We incurred net losses for the three months ended June 30, 2020, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 3,940,138 shares as of June 30, 2020, respectively, were excluded from the computations of loss per share as their impact would have been anti-dilutive.

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COMPREHENSIVE LOSS

As of the three months ended June 30, 2021 and 2020, comprehensive loss consisted of net loss and foreign currency translation adjustments.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Adopted

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. The Company adopted this guidance on April 1, 2021 and the adoption of this ASU did not have a material impact on our consolidated financial statements.

Not yet adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how the Company determines its allowance for estimated uncollectible receivables and evaluates its available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of fiscal 2023. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

4. OTHER INTERESTS

Investment in CDF2 Holdings

We indirectly own 100% of the common equity of CDF2 Holdings, LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology. CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital technology by providing financing, equipment, installation and related ongoing services.

CDF2 Holdings is a Variable Interest Entity (“VIE”), as defined in Accounting Standards Codification Topic 810 (“ASC 810”), “Consolidation.” ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE. To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, among other factors. Although we indirectly, wholly own CDF2 Holdings, we, a third party that also has a variable interest in CDF2 Holdings, and an independent third party manager must mutually approve all business activities and transactions that significantly impact CDF2 Holdings’ economic performance. We have therefore assessed our variable interests in CDF2 Holdings and determined that we are not the primary beneficiary of CDF2 Holdings. As a result, CDF2 Holdings’ financial position and results of operations are not consolidated in our financial position and results of operations. In completing our assessment, we identified the activities that we consider most significant to the economic performance of CDF2 Holdings and determined that we do not have the power to direct those activities, and therefore we account for our investment in CDF2 Holdings under the equity method of accounting.

As of June 30, 2021 and March 31, 2021, 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 $0.4 million and $0.3 million as of June 30, 2021 and March 31, 2021, respectively, which are included in accounts receivable, net on the accompanying consolidated balance sheets.

The accompanying Consolidated Statements of Operations include $77 thousand and $9 thousand of digital cinema servicing revenue from CDF2 Holdings for the three months ended June 30, 2021 and 2020, respectively.

Total Stockholders’ Deficit of CDF2 Holdings at June 30, 2021 and March 31, 2021 was $49.6 million and $46.3 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, 2021 and March 31, 2021 is carried at $0.

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Majority Interest in CONtv

We own an 85% interest in CON TV, LLC, a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the Internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

5. BUSINESS COMBINATION

Stock Purchase Agreement

On May 12, 2021, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with FoundationTV, Inc. (“FoundationTV”), to buy all of FoundationTV´s issued and outstanding stock in consideration of an aggregate of $5.2 million, of which $0.7 million was paid in cash and 1,483,129 shares of Class A common stock, which were valued at $2.5 million, were issued at closing stock price of $1.69 on the closing date of June 9, 2021, and an additional $2.0 million will be paid in eight equal installments of one installment on each six month anniversary of closing over forty-eight months, and a final lump sum payment of $225 thousand on the four year anniversary of the closing; reduced by $0.2 million settlement of a prior relationship. The Stock Purchase Agreement contained certain conditions to closing, including that the Company obtain approval of its stockholders, applicable lenders, and regulatory authorities, as applicable, and representations and warranties and covenants as are customary for transactions of this type. On June 9, 2021, the FoundationTV acquisition was consummated. The Company incurred transaction cost $36 thousand during the three months ended June 30, 2021. As of June 30, 2021, the deferred consideration is presented according to the agreed-upon cash payments, including a $0.5 million short-term payable and a long-term payable for $1.5 million.

Purchase Price
Purchase Price	$	5,237
Total purchase price	$	5,237
Allocation of purchase price
Developed technology		3,200
Goodwill		2,037
Total allocation of purchase price	$	5,237

The developed technology acquired in this transaction has a useful life of 10 years. Due to proximately of the closing date to the end of the quarter, the Company did not record any amortization expense during the three months ended June 30, 2021 related to the developed technology acquired in the business combination.

Below is the amortization expense per year for the developed technology acquired in the business combination:

2022 (remaining)	$	240
2023		320
2024		320
2025		320
2026		320
2027		320
2028		320
2029		320
2030		320
2031		320
2032		80
Total	$	3,200

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6. NOTES PAYABLE

Notes payable consisted of the following:

	June 30, 2021				March 31, 2021
(In thousands)	Current Portion		Long Term Portion		Current Portion		Long Term Portion
Prospect Loan	$	3,031	$	—	$	7,786	$	—
Total non-recourse notes payable		3,031		—		7,786		—
Total non-recourse notes payable, net of unamortized debt issuance costs and debt discounts	$	3,031	$	—	$	7,786	$	—
Credit Facility	$	387	$	—	$	1,956	$	—
PPP Loan		—		—		—		2,152
Total recourse notes payable		387		—		1,956		2,152
Total recourse notes payable, net of unamortized debt issuance costs and debt discounts	$	387	$	—	$	1,956	$	2,152
Total notes payable, net of unamortized debt issuance costs	$	3,418	$	—	$	9,742	$	2,152

Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults, is limited to the value of the asset, which is collateral for the debt. Certain of our subsidiaries are liable with respect to, and their assets serve as collateral for, certain indebtedness for which our assets and the assets of our other subsidiaries that are not parties to the transaction are generally not liable. We have referred to this indebtedness as “non-recourse debt” because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan.

Prospect Loan

In February 2013, our DC Holdings, AccessDM and Phase 2 DC subsidiaries entered into a term loan agreement (the “Prospect Loan” or the “Term Loan Agreement”) with Prospect Capital Corporation (“Prospect”), pursuant to which DC Holdings borrowed $70.0 million. The Prospect Loan bears interest at LIBOR plus 9.0% (with a 2.0% LIBOR floor), which is payable in cash, and at an additional 2.50% to be accrued as an increase to the aggregate principal amount of the Prospect Loan until the Prospect Loan is paid off, at which time all accrued interest will be payable in cash.

Collections of DC Holdings accounts receivable are deposited into accounts designated to pay certain operating expenses, principal, interest, fees, costs and expenses relating to the Prospect Loan. On a quarterly basis, if there is excess cash flow, it is used for prepayment of the Prospect Loan. We also maintain a debt service fund under the Prospect Loan for future principal and interest payments. As of June 30, 2021, and March 31, 2021, the debt service fund had a balance of $1.0 million, which is classified as part of restricted cash on our Consolidated Balance Sheets.

On March 4, 2021, Cinedigm DC Holdings, LLC (“CDCH”), Access Digital Media, Inc., Access Digital Cinema Phase 2, Corp., Christie/AIX, Inc., Cinedigm Digital Funding I, LLC, certain Lenders, and Prospect Capital Corporation, as administrative agent and collateral agent, entered into Amendment No. 3 (the “Amendment”) to the Term Loan Agreement dated February 28, 2013. Under the Amendment, the maturity date of the loan under the Term Loan Agreement was extended to March 31, 2022. As a condition to the effectiveness of the Amendment, CDCH paid $3,500,000 to Prospect to reduce the outstanding principal amount of the Loan.

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The Prospect Loan matures on March 31, 2022 and may be accelerated upon a change in control (as defined in the agreement) or other events of default as set forth therein and would be subject to mandatory acceleration upon insolvency of DC Holdings. We are permitted to pay the full outstanding balance of the Prospect Loan at any time after the second anniversary of the initial borrowing, subject to the following prepayment penalties:

● 5.0% of the principal amount prepaid between the second and third anniversaries of issuance;

● 4.0% of the principal amount prepaid between the third and fourth anniversaries of issuance;

● 3.0% of the principal amount prepaid between the fourth and fifth anniversaries of issuance;

● 2.0% of the principal amount prepaid between the fifth and sixth anniversary of issuance;

● 1.0% of the principal amount prepaid between the sixth and seventh anniversaries of issuance; and

● No penalty if the balance of the Prospect Loan, including accrued interest, is prepaid thereafter.

The Prospect Loan is secured by, among other things, a first priority pledge of the stock of CDF2 Holdings, our wholly owned unconsolidated subsidiary, the stock of AccessDM, owned by DC Holdings, and the stock of our Phase 2 DC subsidiary, and is also guaranteed by AccessDM and Phase 2 DC. We provide limited financial support to the Prospect Loan not to exceed $1.5 million per year in the event financial performance does not meet certain defined benchmarks.

The Prospect Loan contains customary representations, warranties, affirmative covenants, negative covenants and events of default.

With a series of payments between April 30 and July 9, 2021, the Company paid in full the Prospect Loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million. Pre-payment of the Prospect Loan is permissible without penalty. See Note 11 – Subsequent Events.

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

	As of
(In thousands)	June 30, 2021			March 31, 2021
Prospect Loan, at issuance	$	70,000		$	70,000
PIK Interest		6,397			6,397
Payments to date		(73,366	)		(68,611	)
Prospect Loan, gross	$	3,031		$	7,786
Less unamortized debt issuance costs and debt discounts		—			—
Prospect Loan, net		3,031			7,786
Less current portion		(3,031	)		(7,786	)
Total long term portion	$	—		$	—

Credit Facility and Cinedigm Revolving Loans

On March 30, 2018, the Company entered into the Loan, Guaranty and Security Agreement, dated as of March 30, 2018, by and between the Company, East West Bank and the Guarantors named therein (the “Credit Facility”) for a maximum of $19.0 million in revolving loans outstanding at any one time with a maturity date of March 31, 2020, which may be extended for two successive one-year periods at the sole discretion of the lender, subject to certain conditions.

Interest under the Credit Facility is due monthly at a rate elected by the Company of either 0.5% plus Prime Rate or 3.25% above LIBOR Rate established by the lender.

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As of June 30, 2021 and March 31, 2021, there was $0.4 million and $2.0 million outstanding, respectively, and there was $8.1 million available, under the Credit Facility based on the Company’s borrowing base as of June 30, 2021. On July 3, 2019, the Company entered into the EWB Amendment to the Credit Facility. The EWB Amendment reduced the size of the facility to $18.0 million, required certain prepayments and daily cash sweeps from collections of receivables to be made, changed in certain respects how the borrowing base is calculated, and extended the maturity date to June 30, 2020. In connection with the EWB Amendment, three of our subsidiaries became Guarantors under the Credit Facility. On June 25, 2020, the Company signed amendment No. 4 with East West Bank to extend the maturity of the Credit Facility to June 30, 2021 and waive events of default provisions. On June 22, 2021, the maturity date of the Credit Facility was extended to September 28, 2021. During this extension period, until an amendment is entered into, we are not able to access any additional borrowings under the Credit Facility.   

PPP Loan

On April 15, 2020, the Company received $2.2 million from East West Bank, the Company’s existing lender. The PPP Loan matures on April 10, 2022 (the “PPP Maturity Date”), accrues interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the PPP Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment. On July 7, 2021, the Company received notification from the Lender that the U.S. Small Business Administration had approved the Company’s PPP Loan forgiveness application for the entire PPP Loan amount and accrued interest effective June 30, 2021.

7. STOCKHOLDERS’ EQUITY

COMMON STOCK

During the three months ended June 30, 2021, we issued 1,536,407 shares of Class A common stock which consists of the issuance of Class A common stock for business combination, the issuances of Class A common stock preferred stock dividends, and SARs awards.

PREFERRED STOCK

Cumulative dividends in arrears on preferred stock were $0.1 million and $0.1 million as of June 30, 2021 and March 31, 2021. In May 2021, we paid the preferred stock dividends in arrears in the form of 53,278 shares of Class A common stock.

TREASURY STOCK

We have treasury stock, at cost, consisting of 1,313,836 shares of Class A common stock at June 30, 2021 and March 31, 2021.

CINEDIGM’S EQUITY INCENTIVE PLANS

Stock Based Compensation Awards

Awards issued under our 2000 Equity Incentive Plan (the “2000 Plan”) may be in any of the following forms (or a combination thereof) (i) stock option awards; (ii) stock appreciation rights; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan provides for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Class A Common Stock on the date of grant. ISOs granted to shareholders having more than 10% of the total combined voting power of the Company must have exercise prices of at least 110% of the fair market value of our Class A Common Stock on the date of grant. ISOs and non-statutory stock options granted under the 2000 Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options are set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the initial equity investment in Cinedigm by Bison, as a result of which there was a change of control of the Company, all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable.

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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 June 30, 2021, there were 261,587 stock options outstanding in the 2000 Plan with weighted average exercise price of $14.99 and a weighted average contract life of 1.86 years. As of March 31, 2021, there were 261,587 shares pursuant to stock options outstanding in the Plan with weighted average exercise price of $14.99 and a weighted average contract life of 2.11 years.

In August 2017, the Company adopted the 2017 Plan. The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provided for the issuance of up to 2,108,270 shares of Class A common stock, in the form of various awards, including stock options, stock appreciation rights, stock, restricted stock, restricted stock units, performance awards and cash awards. The Compensation Committee of the Company’s Board of Directors (the “Board”) is authorized to administer the 2017 Plan and make grants thereunder. The approval of the 2017 Plan did not affect awards already granted under the 2000 Plan. On December 4, 2019, upon shareholder approval, the 2017 Plan was amended to increase the maximum number of shares of Class A common stock authorized for issuance thereunder from 2,108,270 shares to 4,098,270.

On October 23, 2020, the Company amended its 2017 Equity Incentive Plan to increase the number of shares authorized for issuance thereunder from 4,098,270 to 14,098,270.

The analysis of all options outstanding under the 2000 Plan as of June 30, 2021 is as follows:

As of June 30, 2021
Range of Prices		Options Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
	$7.40 - $13.69		5,000		4.00	$	7.40	$	-
	$13.70 - $24.40		249,087		1.87		14.69		-
	$24.41 - 30.00		7,500		0.13		30.00		-
			261,587					$	-

An analysis of all options exercisable under the 2000 Plan as of June 30, 2021 is presented below:

Options Exercisable		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
	261,587		1.86	$	14.99		—

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

	Three Months Ended June 30,
(In thousands)	2021		2020
Selling, general and administrative	$	983	$	177
	$	983	$	177

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During the three months ended June 30, 2021, the Company granted 584,000 stock appreciation rights (“SARs”). The SARs were granted under the Company’s 2017 Equity Incentive Plan (the “2017 Plan). All SARs issued have an exercise price equal to the fair value of the Company’s Class A common stock on the date of grant and a maturity date of 10 years. The SARs were valued on the grant date utilizing an option pricing model, as follows:

Grant Date: May 23, 2021 – June 21, 2021

Maturity Date: May 23, 2031 – June 21, 2031

Fair value of class A common stock on grant date: $1.29 - $1.37

Volatility: 94.56% - 94.63%

Discount rate: 1.50% - 1.63%

There was $856 thousand and $110 thousand of stock-based compensation recorded for the three months ended June 30, 2021 and 2020, respectively, relating to these SARs.

Total SARs outstanding are as follows:

	Three Months Ended June 30, 2021
SARs Outstanding March 31, 2021		9,154,933
Issued		584,000
Forfeited		(91,875	)
Total SARs Outstanding June 30, 2021		9,647,058

There was $1 thousand and $1 thousand of stock-based compensation recorded for the three months ended June 30, 2021 and 2020, respectively, related to employees’ restricted stock awards.

There was $126 thousand and $66 thousand of stock-based compensation for the three months ended June 30, 2021 and 2020, respectively, related to board of directors.   During the three months ended June 30, 2021 the company issued 35,714 shares to the board of directors.

OPTIONS GRANTED OUTSIDE CINEDIGM’S EQUITY INCENTIVE PLAN

In October 2013, we issued options outside of the 2000 Plan to 10 individuals who became employees as a result of a business combination. The employees received options to purchase an aggregate of 62,000 shares of our Class A Common Stock at an exercise price of $17.50 per share. The options were fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised. As of June 30, 2021, 12,500 of such options remained outstanding.

WARRANTS

The following table presents information about outstanding warrants to purchase shares of our Class A common stock as of June 30, 2021. All of the outstanding warrants are fully vested and exercisable.

Recipient	Amount outstanding		Expiration	Exercise price per share
Strategic management service provider		52,500	July 2021	$	17.20 - 30.00
Warrants issued in connection with Convertible Notes exchange transaction		246,019	December 2021	$	1.30
5-year Warrant issued to BEMG in connection with a term loan agreement		1,400,000	December 2022	$	1.80

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8. COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. 

We operate from leased properties under non-cancelable operating lease agreements, certain of which contain escalating lease clauses.

The Company leases office space under operating leases. The Company’s portfolio of leases is primarily related to real estate and since most of our leases do not provide a readily determinable implicit rate, the Company estimated its incremental borrowing rate to discount the lease payments based on information available at either the implementation date of Topic 842 or at lease commencement for leases entered into thereafter.

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of June 30, 2021

(In thousands)	Classification on the Balance Sheet	June 30, 2021
Assets
Noncurrent	Operating lease right-of-use asset	$	66
Liabilities
Current	Operating leases - current portion		58
Noncurrent	Operating leases - long-term portion		8
Total operating lease liabilities		$	66

Lease Costs

The table below presents certain information related to lease costs for leases:

	Year Ended
(In thousands)	June 30, 2021
Operating lease cost	$	22
Total lease cost	$	22

Other Information

The table below presents supplemental cash flow information related to leases:

	Year Ended
(In thousands)	June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities		22
Operating cash flows used for operating leases	$	22

9. SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended June 30,
(In thousands)	2021		2020
Cash interest paid	$	663	$	25
noncash investing and financing activities:
Accrued dividends on preferred stock		89		89
Issuance of Class A common stock for payment of accrued preferred stock dividends		—		89
Issuance of Class A common stock to Starrise, a related party		—		11,046
Contributed capital under the Starrise transaction, a related party		—		17,187
Settlement of second lien loan with Class A common stock		—		757
Issuance of Class A common stock for business combination		2,506		—
Starrise shares used to pay down vendors		—		335
Forgiveness of PPP loan		2,152		—
Deferred consideration in purchase of a business		1,980		—
Preferred stock dividends paid with common stock		89		—

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10. SEGMENT INFORMATION

We operate in two reportable segments: Cinema Equipment Business and Content & Entertainment Business. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our CODM to evaluate performance, which is generally the segment’s operating income (loss) before depreciation and amortization.

Operations of:	Products and services provided:
Cinema Equipment Business	Financing vehicles and administrators for 2,519 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,025 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”). We retain ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements. For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements. The Cinema Equipment Business segment also provides monitoring, collection, verification and management services to this segment, as well as to exhibitors who purchase their own equipment, and also collects and disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”).
Content & Entertainment Business	Leading independent streaming company of content and channels. We collaborate with producers and other content owners to market, source, curate and distribute independent content to targeted and under-served audiences in theatres and homes, and via mobile and emerging platforms.

The following tables present certain financial information related to our reportable segments and Corporate:

	As of June 30, 2021
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	14,038	$	387	$	—	$	1
Content & Entertainment Business		12,213		10,738		50,534		—		—		40
Corporate		—		—		16,065		—		3,031		25
Total	$	12,213	$	10,738	$	80,637	$	387	$	3,031	$	66

	As of March 31, 2021
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	13,169	$	7,786	$	—	$	1
Content & Entertainment Business		9,858		8,701		42,733		—		—		69
Corporate		2		—		19,544		—		4,108		30
Total	$	9,860	$	8,701	$	75,446	$	7,786	$	4,108	$	100

	Statements of Operations
	Three Months Ended June 30, 2021
	(in thousands)
	Cinema Equipment Business		Content & Entertainment Business			Corporate			Consolidated
Revenues	$	6,231	$	8,784		$	—		$	15,015
Direct operating (exclusive of depreciation and amortization shown below)		257		4,374			—			4,631
Selling, general and administrative		429		2,818			2,796			6,043
Allocation of corporate overhead		99		660			(759	)		—
Provision for doubtful accounts		27		44			—			71
Depreciation and amortization of property and equipment		507		143			(1	)		649
Amortization of intangible assets		—		845			1			847
Total operating expenses		1,319		8,884			2,037			12,241
Income (loss) from operations	$	4,912	$	(100	)	$	(2,037	)	$	2,774

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The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows:

(In thousands)	Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—
Selling, general and administrative		—		166		817		983
Total stock-based compensation	$	—	$	166	$	817	$	983

	Statements of Operations
	Three Months Ended June 30, 2020 (in thousands)
	Cinema Equipment Business			Content & Entertainment			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		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	$	(1,661	)	$	(488	)	$	(506	)	$	(2,615	)

The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows:

	Cinema Equipment Business		Content & Entertainment		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—
Selling, general and administrative		—		26		151		177
Total stock-based compensation	$	—	$	26	$	151	$	177

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11. INCOME TAXES

We calculate income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions. We recorded an income tax benefit (expense) of approximately $63 thousand and zero for the three months ended June 30, 2021 and 2020, 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, 2021 and 2020 was negative 1.2% and zero, 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.

12. SUBSEQUENT EVENT

Prospect Loan Payment

Upon a series of payments between April 30 and July 9, 2021  , the Company paid in full the Prospect loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million, with $3.1 million having been paid subsequent to the period. Pre-payment of the Prospect loan was permissible without penalty.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

This report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,” and similar words. Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

OVERVIEW

Since our inception, we have played a significant role in the digital distribution revolution that continues to transform the media landscape. In addition to our pioneering role in transitioning approximately 12,000 movie screens from traditional analog film prints to digital distribution, we have become a leading distributor of independent content, both through organic growth and acquisitions. We distribute products for major brands such as the Hallmark Channel, Televisa, ITV, Nelvana, ZDF, Konami, NFL, NHL and Scholastic, as well as leading international and domestic content creators, movie producers, television producers and other short form digital content producers. We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to, iTunes, Amazon Prime, Netflix, Hulu, Xbox, Tubi, Roku, Pluto TV, and cable video-on-demand (“VOD”), and (ii) physical goods, including DVD and Blu-ray Discs.

We report our financial results in two primary segments as follows: (1) cinema equipment business and (2) media content and entertainment business (“Content & Entertainment” or “CEG”). The cinema equipment business segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North America and several international countries. It also provides fee-based support to over 6,200 movie screens as well as directly to exhibitors and other third-party customers in the form of monitoring, billing, collection and verification services. Our Content & Entertainment segment is a market leader in: (1) ancillary market aggregation and distribution of entertainment content and (2) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.

Beginning in December 2015, certain of our cinema equipment began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, Virtual Print Fees (“VPF”) revenues ceased to be recognized on such Systems, related to such distributors. Furthermore, because the Phase I Deployment installation period ended in November 2007, a majority of the VPF revenue associated with the Phase I Deployment Systems has ended. The reduction in VPF revenue on cinema equipment business systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017.

Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the systems and is predicated on Cinedigm’s receipt of sale proceeds. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan.

We are structured so that our cinema equipment business segment operates independently from our Content & Entertainment business. As of June 30, 2021, we had approximately $3.0 million of non-recourse outstanding debt principal that relates to, and is serviced by, our cinema equipment business. We had approximately $3.0 million of outstanding debt principal, as of June 30, 2021 that is attributable to our Content & Entertainment and Corporate segments.

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Risks and Uncertainties

The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the period. As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. With the closure of non-essential retail stores beginning in the spring of 2020, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product. As part of our Cinema Equipment business, the Company earns revenue when movies are exhibited in theatres. As vaccines became readily available and COVID cases decreased, major studios began to test consumer confidence by releasing blockbusters in the theatrical venues during the quarter ended June 30, 2021. This test period encouraged theatre re-openings and proved commercial viability for theatrical distribution of tentpole films. Films released during this period saw an uptick in box office revenue compared to the previous 12 months; however, box office results remained below pre-Covid expectations due to limited seating capacities and shortened windows for release on streaming platforms such as premium video on demand (“PVOD”) and subscription video on demand (“SVOD”). To the extent films are not shown in theatres, we do not earn revenue.

Longer term, there may be a shift in consumer preference towards digital consumption over theatrical viewing. Studios may reduce their theatrical slates to tentpoles and certain genres releasing other content directly on their own streaming services. If fewer movies are released theatrically, this shift to digital viewing reduces revenue opportunities for virtual print fees and sales of digital cinema equipment. While the Company has been encouraged by the pace of mass vaccinations, spikes or the emergence of new variants could require future closures, which impact the Cinema Equipment business.

In connection to the CEG business, if larger branded companies choose to make their content available earlier on their own streaming platforms, this could limit our ability monetize this content on a transactional digital basis, as consumers can access it via the company’s streaming platform. However, most content suppliers including filmmakers and producers, do not have their own streaming platforms and rely on us for distribution through our digital home entertainment business and OTT digital networks.  As a result, this risk is limited, and our digital distribution capabilities and digital networks provide us with the opportunity to take advantage of this consumer shift towards digital consumption.

Over the last year and a half, the COVD-19 pandemic resulted in a film and TV production slow-down.  Independent producers and filmmakers had to either suspend or delay their productions due to rising infection rates and the high costs of appropriate COVID-19 production protocols. As a result, there are fewer available films to acquire, so our pipeline for content could be negatively impacted.  As well, with the rise of new variants, productions may be at risk again of shutting down or being delayed, which would further limit available content.     

The COVID-19 pandemic has also resulted in an acceleration of cord-cutting, and, as more consumers move away from cable, this could lead to a decrease in cable TV VOD revenues, as well as a decrease in licensing fees as Pay One window budgets get shifted from licensing and towards originals.  However, given the overall shift towards digital consumption, these risks may be offset by increased revenues from transactional, subscription and ad supported/FAST platforms, including our own owned and operated digital network business.   

Liquidity

We have incurred net losses historically and have an accumulated deficit of $469.0 million and negative working capital of $9.5 million as of June 30, 2021. We may continue to generate net losses for the foreseeable future. In addition, we have debt-related contractual obligations as of June 30, 2021 and beyond. Based on these conditions, the Company entered into the following transactions:

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Capital Raises

On February 2, 2021, the Company entered into a Securities Purchase Agreement with a single institutional investor for the purchase and sale of 5,600,000 shares of Class A common stock at a purchase price of $1.25 per share, in a registered direct offering, pursuant to an effective shelf registration statement on Form S-3 which was declared effective by the Securities and Exchange Commission on July 10, 2020 (File No. 333-239710) and an applicable prospectus supplement. The closing of the sale occurred on February 5, 2021. The aggregate gross proceeds for the sale was approximately $7.0 million. The net proceeds to the Company from the sale, after deducting the fees of the placement agent but before paying the Company’s estimated offering expenses, was approximately $6.5 million.

In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B. Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares. The Company is not obligated to sell any shares under the ATM Sales Agreement. Any sales of shares made under the ATM Sales Agreement will be made pursuant to an effective registration statement on Form S-3 which was declared effective by the Securities and Exchange Commission on July 10, 2020 (File No. 333-239710), for an aggregate offering price of up to $30 million. During the quarter ended June 30, 2021, we did not sell any shares of Common Stock under the ATM Sales Agreement.

On July 16, 2020, the Company entered into a securities purchase agreement with certain investors for the purchase and sale of 7,213,334 shares of Class A common stock, par value $0.001 per share, 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 which was declared effective by the Securities and Exchange Commission on July 10, 2020 (File No. 333-239710) and an applicable prospectus supplement. The closing of the sale occurred on July 20, 2020. The aggregate gross proceeds for the sale was approximately $10.8 million. The net proceeds to the Company from the sale, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, is approximately $10.1 million.

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 of the 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 which was declared effective by the Securities and Exchange Commission on May 14, 2020 (File No. 333-238183) and an applicable prospectus supplement. The closing of the sale occurred on May 22, 2020. The aggregate gross proceeds for the sale was $8.0 million. The net proceeds to the Company from the sale, after deducting the fees of the placement agents but before paying the Company’s estimated offering expenses, were approximately $7.1 million.

As of June 30, 2021, there is still approximately $38.0 million remaining unsold under our shelf registration.

Sale of Cinematic Equipment

On March 17, 2021, the Company entered into two separate agreements for the sale of cinematic equipment to American Multi-Cinema, Inc. (“AMC”), the agreements included the sale in tranches of a total of 2,369 cinematic projectors starting in March 2021 throughout January 2023 for a total cash consideration of $10.8 million. As of June 30, 2021, the Company executed the sale of the second tranche and recognized revenue for $5.6 million. A portion of the total proceeds has been utilized to eliminate the remaining Prospect notes payable.

Equity Investment in a Related Party

As previously announced, 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”), a related party for accounting purposes of Cinedigm 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 its Class A common stock in consideration. The Starrise shares received were valued at approximately $25 million and the Company issued shares that were valued at approximately $11.2 million. 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.

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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, all of which are related parties to the Company 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 as consideration therefor (the “April Share Acquisition”). On April 15, 2020, the April Share Acquisition was consummated and this transaction was also recorded as an equity investment in Starrise.

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 0.13 per share on August 26, 2021, 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 $6.1 million. 

Borrowings

On June 22, 2021, the maturity date of the East West Credit Facility (as defined in Note 6 - Notes Payable) with East West Bank was extended from June 30, 2021 to September 28, 2021. 

On April 15, 2020, the Company received $2.2 million from East West Bank, the Company’s existing lender, pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 10, 2022 (the “PPP Maturity Date”), accrues interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the PPP Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment. On July 7, 2021, the Company received notification from the Lender that the U.S. Small Business Administration had approved the Company’s PPP Loan forgiveness application for the entire PPP Loan amount and accrued interest effective as of June 30, 2021. The forgiveness of the PPP Loan was recognized as a gain of $2.2 million during the Company’s fiscal quarter ending June 30, 2021.

Upon a series of payments between April 30 and July 9, 2021, the Company paid in full the Prospect loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million. Pre-payment of the Prospect loan was permissible without penalty.

We believe the combination of: (i) our cash and cash equivalent balances at June 30, 2021, (ii) expected cash flows from operations, and (iii) the capacity under existing arrangements and access to new sources of capital will be sufficient to satisfy our contractual obligations, as well as liquidity for our operational and capital needs, for twelve months from the filing of this document. Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

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Our significant accounting policies are discussed in Note 2 - Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, Financial Statements and Supplementary Data, of this Quarterly Report on Form 10-Q. Management believes that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our board of directors.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

Computer equipment and software	3-5 years
Internal use software	5 years
Digital cinema projection systems	10 years
Machinery and equipment	3-10 years
Furniture and fixtures	3-6 years

Leasehold improvements are being amortized over the shorter of the lease term or the estimated useful life of the improvement. Maintenance and repair costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized.

Software developed or purchased for internal use by the Company is capitalized and amortized over its estimated useful life. Changes in these estimates could result in impairment in the value of the asset.  

Useful lives are determined based on an estimate of either physical or economic obsolescence, or both. During the three months ended June 30, 2021 and 2020, we have neither made any revisions to estimated useful lives, nor recorded any impairment charges on our property, equipment and internal use software.

FAIR VALUE ESTIMATES

Goodwill, Finite-Lived Assets and Long-Lived Assets

We evaluate our goodwill for impairment in the fourth quarter of each fiscal year (as of March 31), or whenever events or changes in circumstances indicate the fair value of a reporting unit is below its carrying amount. The determination of whether or not goodwill has become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of our reporting units. Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to our operations. To the extent additional information arises, market conditions change or our strategies change, it is possible that the conclusion regarding whether goodwill is impaired could change and result in future goodwill impairment charges that could have a material adverse effect on our consolidated financial position or results of operations.

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

The quantitative test involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, an impairment loss is recognized in an amount equal to the excess.

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The Company tests for goodwill impairment annually at March 31. During the three months ended June 30, 2021 and 2020, there were no impairment charges recorded on goodwill. In 2021, we elected to conduct a qualitative goodwill assessment and in 2020 we conducted a quantitative goodwill assessment. In determining fair value, we used various assumptions, including expectations of future cash flows based on projections or forecasts derived from analysis of business prospects, economic or market trends and any regulatory changes that may occur. We estimated the fair value of the reporting unit using a net present value methodology, which is dependent on significant assumptions related to estimated future discounted cash flows, discount rates and tax rates. Certain of the estimates and assumptions that we used in determining the value of our CEG reporting unit are discussed in Note 2 - Summary of Significant Accounting Policies.

We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. Determining whether impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. The assessment for recoverability is based primarily on our ability to recover the carrying value of its long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the assets the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows.

REVENUE RECOGNITION

We determine revenue recognition by:

● identifying the contract, or contracts, with the customer;

● identifying the performance obligations in the contract;

● determining the transaction price;

● allocating the transaction price to performance obligations in the contract; and

● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVDs and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and video on demand services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities such as sales value-added taxes and other similar taxes.

Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less. We have in the past entered into arrangements in connection with activation fees due from our System deployments that had extended payment terms. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.

Cinema Equipment Business

Our Cinema Equipment Business consists of financing vehicles and administrators for 2,519 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,025 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

We retain ownership of our digital cinema equipment (the “Systems”) and the residual cash flows related to the Systems in Phase I Deployment after the end of the 10-year deployment payment period.

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For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Cinema Equipment Business also provides monitoring, data collection, serial data verification and management services to this segment, as well as to exhibitors who purchase their own equipment, in order to collect virtual print fees (“VPFs”) from motion picture studios and distributors and ACFs from alternative content providers, and to distribute those fees to theatrical exhibitors (collectively, “Services”).

VPFs are earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase I Deployment and to Phase II Deployment when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to Phase I Deployment based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period in which the digital title first plays on a System for general audience viewing in a digitally equipped movie theatre, as Phase I Deployment’s and Phase II Deployment’s performance obligations have been substantially met at that time.

Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with movie studios and distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.” The Company evaluated the constraining estimates related to the variable consideration, i.e., the one-time bonus and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.

Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the systems and is predicated on Cinedigm’s receipt of sale proceeds. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. Cinedigm completed the sale of 650 and 30 digital projection Systems, respectively, for an aggregate sales price of approximately $5.6 million and $195.0 thousand, and recognized revenue of $5.6 million and $76.2 thousand, during the three months ended June 30, 2021 and 2020, respectively.

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

Exhibitors who purchased and own Systems using their own financing in the Cinema Equipment Business paid us an upfront activation fee of approximately $2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $1.0 thousand and $2.0 thousand on Phase II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 4 - Other Interests) upon installation and such fees are generally collected upfront upon installation. Our services division manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.

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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. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the movie studios and distributors.

Content & Entertainment Business

CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/FAST on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the performance obligation is satisfied which is when the content is available for subscription on the digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation. Physical Revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

Physical goods reserves for sales returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

CEG also has contracts for the theatrical distribution of third party feature movies and alternative content. CEG’s distribution fee revenue and CEG’s participation in box office receipts is recognized at the time a feature movie and alternative content are viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date.

Principal Agent Considerations

We determine whether revenue should be reported on a gross or net basis for each revenue stream based on the transfer of control of goods and services. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:

● which party is primarily responsible for fulfilling the promise to provide the specified good or service; and

● which party has discretion in establishing the price for the specified good or service.

Shipping and Handling

Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Contract Liabilities

We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.

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We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

Our CEG segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances is variable consideration as part of the transaction price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

We record accounts receivable, long-term in connection with activation fees that we earn from Systems deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rates. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.

Deferred revenue pertaining to our Content & Entertainment Business includes amounts related to the sale of DVDs with future release dates.

Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms.

The ending deferred revenue balance, including current and non-current balances, as of June 30, 2021 was $0.4 million. For the three months ended June 30, 2021 and 2020, respectively, 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, 2021 and 2020, $0.5 million and $0.6 million, respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. As of June 30, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $0.4 million. We expect to recognize this balance in full by September 30, 2021.

Participations and royalties payable

When we use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.

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BUSINESS COMBINATIONS

A business combination is an acquisition of business. Business combination are accounted by allocating the purchase price of the business across the assets acquired from the business and assumed liabilities.

Results of Operations for the Three Months Ended June 30, 2021 and 2020

Revenues

	For the Three Months Ended June 30,
($ in thousands)	2021		2020		$ Change		% Change
Cinema Equipment Business	$	6,231	$	605	$	5,626		930	%
Content & Entertainment		8,784		5,413		3,371		62	%
	$	15,015	$	6,018	$	8,997		149	%

The revenues in the Content & Entertainment Business segment increased by 62% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase is attributed to continued growth in new release transactional sales, the addition of several new streaming channels, and an expansion of the Company's distribution with new and existing Smart TV platforms. In addition, the Company deployed new advertising technology from our streaming partner Amagi, which had a material impact on the Company's advertising fill and CPM rates. The revenues in the Cinema Equipment Business segment increased by 930% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Cinema Equipment Business segment increased primarily due to contractually standard terms of digital projector sales to related exhibitors in the Cinedigm deployments.

Direct Operating Expenses

	For the Three Months Ended June 30,
($ in thousands)	2021		2020		$ Change		% Change
Cinema Equipment Business	$	257	$	182	$	75		41	%
Content & Entertainment		4,374		2,497		1,877		75	%
	$	4,631	$	2,679	$	1,952		73	%

The increase in direct operating expenses in the three months ended June 30, 2021 for the Cinema Equipment Business compared to the prior period was primarily due to an increase in property tax obligations for the Cinedigm owned projector assets. The increase in direct operating expenses in the three months ended June 30, 2021 for the Content & Entertainment Business compared to the prior period was primarily due to higher royalty expenses and an increase in infrastructure and personnel costs offset by a decrease in manufacturing and fulfillment of physical sales.

Selling, General and Administrative Expenses

	For the Three Months Ended June 30,
($ in thousands)	2021		2020		$ Change			% Change
Cinema Equipment Business	$	429	$	549	$	(120	)		(22	)%
Content & Entertainment		2,818		1,895		923			33	%
Corporate		2,796		1,396		1,400			100	%
	$	6,043	$	3,840	$	2,203			57	%

Selling, general and administrative expenses for the three months ended June 30, 2021 increased by $2.2 million primarily due to a $1.3 million increase in bonus incentive expense and stock-based compensation to management and employees, $0.3 million for additional personnel, $0.4 million for legal and accounting fees related to securities reporting and consulting, and $0.2 for remote-working equipment and computer expense.

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Bad Debt expense

The bad debt expense was $71 thousand and $0 for the three months ended June 30, 2021 and 2020, respectively. These amounts are related to Cinema Equipment Business and Content & Entertainment accounts that are uncollectable.

Depreciation and Amortization Expense on Property and Equipment

	For the Three Months Ended June 30,
($ in thousands)	2021			2020		$ Change			% Change
Cinema Equipment Business	$	507			1,403		(896	)		(64	)%
Content & Entertainment		143			103		40			39	%
Corporate		(1	)		18		(19	)		(106	)%
	$	649		$	1,524	$	(875	)		(57	)%

Depreciation and amortization expense decreased in our Cinema Equipment Business Segment as the majority of our digital cinema projection systems reached the conclusion of their ten-year useful lives during the year ended March 31, 2021 leading to a lower fixed asset balance to be depreciated in the three months ended June 30, 2021. Corporate and Content & Entertainment depreciation and amortization expense is lower due to the write off of leasehold improvements with the closing of the Los Angeles office.

Interest expense, net

	For the Three Months Ended June 30,
($ in thousands)	2021		2020		$ Change			% Change
Cinema Equipment Business	$	133	$	578	$	(445	)		(77	)%
Content & Entertainment		-		-		-			-	%
Corporate		11		712		(701	)		(98	)%
	$	144	$	1,290	$	(1,146	)		(89	)%

Interest expense in the Cinema Equipment Business segment decreased primarily as a result of reduced debt balances compared to the prior period on the Prospect Term Loan. Interest expense in our Corporate segment decreased as a result of lower loan balances from our Credit Facility, Second Lien Loans and the conversion of the Bison Convertible Note and the Mingtai Convertible Note into shares of Class A common stock in the prior period.

Income Tax Expense

We recorded an income tax benefit of $63 thousand for the three months ended June 30, 2021. We recorded income tax expense of approximately $0 for the three months ended June 30, 2020.

Our effective tax rate for the three months ended June 30, 2021 and 2020 was negative 1.2% and zero, respectively.

Adjusted EBITDA

We define Adjusted EBITDA to be earnings before interest, taxes, depreciation and amortization, other income, net, stock-based compensation and expenses, merger and acquisition costs, restructuring, transition and acquisitions expense, net, goodwill impairment, change in fair value on equity investment in Starrise and certain other items.

Consolidated Adjusted EBITDA (including the results of Cinema Equipment Business segment) for the three months ended June 30, 2021 increased by $5.7 million compared to the three months ended June 30, 2020. Adjusted EBITDA from our Cinema Equipment Business segment increased primarily due to contractually standard terms of digital projector sales to related exhibitors in the Cinedigm deployments. Adjusted EBITDA from the Content & Entertainment business and Corporate segment decreased by $46 thousand for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due to the growth of Streaming & Digital expenses based on higher volume for streaming due to the pandemic and adding additional channels and content compared to the prior period.    

Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies. We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, we believe Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric.

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We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net loss from continuing operations as an indicator of operating performance. We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors. We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.

We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net loss from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income from operations or net loss from continuing operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

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

	For the Three Months Ended June 30,
($ in thousands)	2021			2020
Net income (loss)	$	5,194		$	(19,870	)
Add Back:
Income tax benefit		(63	)		-
Depreciation and amortization of property and equipment		649			1,524
Amortization of intangible assets		847			590
Gain on forgiveness of PPP loan and extinguishment of note payable		(2,178	)		-
Interest expense, net		144			1,290
Change in fair value on equity investment in Starrise		(334	)		15,794
Acquisition, integration and other expense		173			299
Provision for doubtful accounts		71			-
Stock-based compensation		983			177
Net income (loss) attributable to noncontrolling interest		(7	)		14
Adjusted EBITDA	$	5,479		$	(182	)
Adjustments related to the Cinema Equipment Business
Depreciation and amortization of property and equipment	$	(507	)	$	(1,403	)
Amortization of intangible assets		-			(8	)
Stock-based compensation and expenses		-			-
Acquisition, integration and other expense		(11	)		-
Provision for doubtful accounts		(27	)		-
Income from operations		(4,912	)		1,661
Adjusted EBITDA from non-cinema equipment business	$	22		$	68

Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included herein.

Changes in our cash flows were as follows:

	For the Three Months Ended June 30,
($ in thousands)	2021			2020
Net cash provided (used in) by operating activities	$	3,621		$	(3,738	)
Net cash used in investing activities		(791	)		(508	)
Net cash (used in) provided by financing activities		(6,324	)		5,237
Net change in cash, cash equivalents, and restricted cash	$	(3,494	)	$	2,007

As of June 30, 2021, we had cash, cash equivalents, and restricted cash balances of $14.4 million.

As of June 30, 2020, we had cash, cash equivalents, and restricted cash balances of $17.3 million.

40

For the three months ended June 30, 2021, net cash provided by operating activities is primarily driven by income from operations, excluding non-cash expenses such as depreciation, amortization, provision for doubtful accounts and stock-based compensation, including other changes in working capital. Additionally, during the three months ended June 30, 2021, the Company paid down $8.1 million to vendors at both CEG and Corporate. Cash received from VPFs declined from the previous period as Phase I Deployment Systems in our Cinema Equipment Business reached the conclusion of their deployment payment periods with certain major studios. Changes in accounts receivable from our studio customers largely impact cash flows from operating activities and vary based on the seasonality of movie release schedules by the major studios. As vaccines became readily available and COVID cases decreased Major Studios began to schedule tentpole releases in theatres to test consumer confidence during the three months ended June 30, 2021. During this test period, box office revenue remained below pre-COVID pandemic results due to limited seat capacities and the shortening of theatrical window before the streaming debut on streaming platforms. Because our digital cinema business earns a VPF when a movie is first played on a system, the temporary theatre closures resulting from the COVID-19 pandemic resulted in reduced revenues. Operating cash flows from CEG are typically higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season, and lower in the other two quarters as we pay royalties on such revenues. In addition, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twelve months. For the three months ended June 30, 2021 revenues from the sale of digital projections Systems was $5.6 million.

For the three months ended June 30, 2020, net cash provided by operating activities is primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, provision for doubtful accounts and stock-based compensation, offset by changes in working capital. Cash received from VPFs declined from the previous period as Phase I Deployment Systems in our Cinema Equipment Business reached the conclusion of their deployment payment period with certain major studios. Changes in accounts receivable from our studio customers largely impact cash flows from operating activities and vary based on the seasonality of movie release schedules by the major studios. Operating cash flows from CEG are typically higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season, and lower in the other two quarters as we pay royalties on such revenues. In addition, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twelve months. 

For the three months ended June 30, 2021, cash flows used in investing activities consisted of purchases of property and equipment of $0.04 million and the purchase of a business of $1.0 million related to the business combination for FoundationTV.

For the three months ended June 30, 2020, Cash flows provided by investing activities consisted of proceeds from the sale of Starrise shares of $0.6 million and purchases of property, equipment and internal use software.

For the three months ended June 30, 2021, cash flows used in financing activities consisted of payments of approximately $4.8 million in notes payable and $1.6 million in Credit Facility repayments.

For the three months ended June 30, 2020, cash flows provided by financing activities reflects payments of approximately $7.8 million for the Credit Facility and Prospect Loan, offset by $3.4 million from Credit Facility draw, $7.5 million received in connection with the sale of 10,666,666 shares of Class A common stock and exercise of warrants, and $2.2 million received pursuant to the Payment Protection Program of the Coronavirus Aid, Relief and Economic Security Act.

We may continue to generate net losses for the foreseeable future primarily due to depreciation and amortization, interest on our debt obligations, marketing and promotional activities and content acquisition and marketing costs. Certain of these costs, including costs of content acquisition, marketing and promotional activities, could be reduced if necessary. The restrictions imposed by the terms of our debt obligations may limit our ability to obtain financing, make it more difficult to satisfy our debt obligations or require us to dedicate a substantial portion of our cash flow to payments on our existing debt obligations. We feel we are adequately financed for at least the next twelve months; however, we may need to raise additional capital for working capital as deemed necessary. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations or liquidity.

41

Seasonality

Revenues from our Cinema Equipment segment derived from the collection of VPFs from motion picture studios are seasonal, coinciding with the timing of releases of movies by the motion picture studios. Generally, motion picture studios release the most marketable movies during the summer and the winter holiday season. The unexpected emergence of a hit movie during other periods can alter the traditional trend. The timing of movie releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other quarter. While CEG benefits from the winter holiday season, we believe the seasonality of motion picture exhibition, is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year. 

Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements, other than operating leases in the ordinary course of business, which are disclosed above in the table of our significant contractual obligations, and CDF2 Holdings, LLC ("CDF2 Holdings"), our wholly-owned unconsolidated subsidiary. As discussed further in Note 3 - Other Interests to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC; however, we are not the primary beneficiary of the VIE.

Impact of Inflation

The impact of inflation on our operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse impact on our operating results.

Item 4. CONTROLS AND PROCEDURES

Definition and Limitations of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Operating Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2021. Based on such evaluation, our principal executive officer and principal financial and accounting officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, on a timely basis, and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Operating Officer, as appropriate, to allow timely decisions regarding required disclosures due to the material weaknesses identified in our internal control over financial reporting as of June 30, 2021.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our evaluation, management concluded that our internal control over financial reporting was not effective as of June 30, 2021 and identified the following material weaknesses:

● Financial Close Process: the Company did not maintain an effective control environment related to the financial close process due to significant turnover of personnel in the accounting function where there was an insufficient complement of personnel, contributing to:

○ the Company did not design and maintain effective controls over the financial close process including timely and sufficient analysis of certain financial statement account balances;

○ the Company did not identify and evaluate certain transactions under the appropriate accounting literature; and

○ the Company did not perform timely and sufficient analysis of certain financial statement account balances as part of the financial close process.

● Information and Communication Controls: the Company did not design and maintain effective controls regarding significant transaction cycles to ensure policies and procedures designed to mitigate the risks to the achievement of objectives are carried out.

42

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis. As this deficiency created a reasonable possibility that a material misstatement would not be prevented or detected in a timely basis, management concluded that the control deficiency represented a material weakness and accordingly our internal control over financial reporting was not effective as of June 30, 2021. Management concluded that additional formal procedures should be implemented in the financial close and reporting process to ensure that appropriate and timely reviews occur on all financial reporting analysis.

Management also concluded that due to employee turnover within our corporate accounting group as of June 30, 2021, we did not have a sufficient complement of corporate personnel with appropriate levels of accounting and controls knowledge and experience commensurate with our financial reporting requirements to appropriately analyze, record and disclose accounting matters completely and accurately.

Remediation. Following identification of this control deficiency, management is implementing modifications to better ensure that the Company has appropriate and timely reviews on all financial reporting analysis. The material weakness in our internal control over financial reporting will not be considered remediated until these modifications are implemented, in operation for a sufficient period of time, tested, and concluded by management to be designed and operating effectively. In addition, as we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify our remediation plan. Management will test and evaluate the implementation of these modifications to ascertain whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material misstatement in the Company’s financial statements. 

The steps we took to address the deficiencies identified included: 

● we appointed an SVP Finance and Accounting;

● we have engaged in efforts to restructure accounting processes and revise organizational structures to enhance accurate accounting and appropriate financial reporting;

● we have hired additional experienced accounting personnel in the corporate office to enhance the application of accounting standards and our financial closing and reporting process;

● we have engaged external advisors to provide financial accounting and reporting assistance;

● we will enhance information and communication processes through information technology solutions to ensure that information needed for financial reporting is accurate, complete, relevant and reliable, and communicated in a timely manner; and

● we plan to engage external advisors to evaluate and document the design and operating effectiveness of our internal control over financial reporting and assist with the remediation and implementation of our internal control function.

As noted above, we believe that, as a result of management’s in-depth review of its accounting processes, and the additional procedures management has implemented, there are no material inaccuracies or omissions of material fact in this Form 10-Q and, to the best of our knowledge, we believe that the consolidated financial statements in this Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows in conformity with GAAP. 

We and our Board treat the controls surrounding, and the integrity of, our financial statements with the utmost priority. Management is committed to the planning and implementation of remediation efforts to address control deficiencies and any other identified areas of risk. These remediation efforts are intended to both address the identified material weakness and to enhance our overall financial control environment. We are committed to maintaining a strong internal control environment, and we believe the measures described above will strengthen our internal control over financial reporting and remediate the material weakness we have identified. Our remediation efforts have begun, and we will continue to devote significant time and attention to these remedial efforts. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to strengthen controls or to modify the remediation plan described above, which may require additional implementation time. 

Changes in Internal Control Over Financial Reporting

There have been no changes, other than our remediation efforts discussed above, in the Company’s internal control over financial reporting during the fiscal quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

43

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There have been no material changes to the Risk Factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 9, 2021, the Company acquired all of the issued and outstanding stock of FoundationTV, Inc. (“FoundationTV”). As part of the purchase price for the acquisition of FoundationTV, the Company issued 1,483,129 shares of Class A common stock pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

44

ITEM 6. EXHIBITS

EXHIBIT INDEX

Exhibit Number	Description of Document
10.1	Letter from East West Bank dated June 22, 2021.
31.1	Officer’s Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Officer’s Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CINEDIGM CORP.
Date:	September 9, 2021	By:	/s/ Christopher J. McGurk
			Christopher J. McGurk Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)
Date:	September 9, 2021	By:	/s/ Gary S. Loffredo
			Gary S. Loffredo President, Chief Operating Officer, General Counsel and Secretary (Principal Financial Officer)

46

EX-10.1

Exhibit 10.1

 

June 22, 2021

Mr. Gary Loffredo

Chief Operating Officer

Cinedigm Corporation

237 West 35^th Street, Suite 605

New York, New York 10001

Re: Loan No. 372001061

Dear Mr. Loffredo:

Reference is made to that certain Loan, Guaranty and Security Agreement dated as of March 30, 2018, entered into between Cinedigm Corp. (“Borrower”), the other Loan Parties (together with Borrower, collectively “Loan Parties”), and East West Bank (“Bank”), together with any and all amendments, modifications, riders and attachments thereto (collectively, the “Loan Agreement”) governing certain financial accommodations which Bank has extended to Borrower. All capitalized terms used in this letter shall have the meanings given to them in the Loan Agreement, unless specifically defined herein. Under the terms of the loan documents, your loan is about to mature on June 30, 2021.

In order to provide you smooth uninterrupted service under your credit facility while your request for a maturity extension of your loan to June 30, 2022 is being reviewed, we are pleased to inform you that you have been approved for an extension of the maturity date of your loan to September 28, 2021.

This extension should allow ample time for you to assemble and for us to review the financial information needed to consider your request for a renewal and maturity extension to June 30, 2022.

We appreciate your business and look forward to working with you on your request to renew this loan.

Very truly yours,

/s/ Robert Mostert, FVP

Robert Mostert, FVP

135 N. Los Robles Ave., 6^th Floor, Pasadena, CA 91101 • Tel. 626.768.6924 • Fax 626.243.9810 • Nasdaq: EWBC

EX-31.1

Exhibit 31.1

CINEDIGM CORP.

CERTIFICATION

I, Christopher J. McGurk, certify that:

1. I have reviewed this Form 10-Q of Cinedigm Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 9, 2021	By:	/s/ Christopher J. McGurk
		Christopher J. McGurk Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CINEDIGM CORP.

CERTIFICATION

I, Gary Loffredo, certify that:

1. I have reviewed this Form 10-Q of Cinedigm Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 9, 2021	By:	/s/ Gary Loffredo
		Gary Loffredo Chief Operating Officer, President Digital Cinema, General Counsel and Secretary (Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CINEDIGM CORP.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Form 10-Q of Cinedigm Corp. (the “Company”) for the period ended June 30, 2021 as filed with the SEC (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: September 9, 2021	By:	/s/ Christopher J. McGurk
		Christopher J. McGurk Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CINEDIGM CORP.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Form 10-Q of Cinedigm Corp. (the “Company”) for the period ended June 30, 2021 as filed with the SEC (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: September 9, 2021	By:	/s/ Gary Loffredo
		Gary Loffredo Chief Operating Officer, President Digital Cinema, General Counsel and Secretary (Principal Financial Officer and Principal Accounting Officer)

XML

Document And Entity Information - shares	3 Months Ended
	Jun. 30, 2021	Aug. 25, 2021
Document Information Line Items
Entity Registrant Name	Cinedigm Corp.
Trading Symbol	CIDM
Document Type	10-Q
Current Fiscal Year End Date	--03-31
Entity Common Stock, Shares Outstanding		167,932,971
Amendment Flag	false
Entity Central Index Key	0001173204
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-31810
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	22-3720962
Entity Address, Address Line One	237 West 35th Street
Entity Address, Address Line Two	Suite 605
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10001
City Area Code	(212)
Local Phone Number	206-8600
Title of 12(b) Security	CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Current assets
Cash and cash equivalents	$ 13,355	$ 16,849
Accounts receivable, net	27,145	21,093
Inventory, net	142	166
Unbilled revenue	1,672	1,377
Prepaid and other current assets	2,856	3,657
Total current assets	45,150	43,142
Restricted cash	1,000	1,000
Equity investment in Starrise, a related party, at fair value	6,777	6,443
Property and equipment, net	2,922	3,500
Right-of-use assets	66	100
Intangible assets, net	12,213	9,860
Goodwill	10,738	8,701
Other long-term assets	1,771	2,700
Total assets	80,637	75,446
Current liabilities
Accounts payable and accrued expenses	50,213	46,627
Current portion of notes payable (see Note 6)	387	1,956
Current portion of notes payable, non-recourse (see Note 6)	3,031	7,786
Current portion of deferred consideration on purchase of a business	465
Operating lease liabilities	58	87
Current portion of deferred revenue	449	924
Total current liabilities	54,603	57,380
PPP Loan		2,152
Deferred consideration on purchase of a business - net of current portion	1,515
Operating lease liabilities, noncurrent	8	13
Other long-term liabilities		19
Total liabilities	56,126	59,564
Commitments and contingencies (see Note 8)
Stockholders’ equity
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; and 7 shares issued and outstanding at June 30, 2021 and March 31, 2021. Liquidation preference of $3,648	3,559	3,559
Common stock, $0.001 par value; Class A stock 200,000,000 and 200,000,000 shares authorized at June 30, 2021 and March 31, 2021, respectively; 169,114,525 and 167,542,404 shares issued and 167,800,689 and 166,228,568 shares outstanding at June 30, 2021 and March 31, 2021, respectively	166	164
Additional paid-in capital	502,848	499,272
Treasury stock, at cost; 1,313,836 Class A common shares at June 30, 2021 and March 31, 2021	(11,603)	(11,603)
Accumulated deficit	(468,982)	(474,080)
Accumulated other comprehensive loss	(122)	(68)
Total stockholders’ equity of Cinedigm Corp.	25,866	17,244
Deficit attributable to noncontrolling interest	(1,355)	(1,362)
Total equity	24,511	15,882
Total liabilities and equity	$ 80,637	$ 75,446

XML

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Preferred stock, shares authorized	15,000,000	15,000,000
Treasury stock	1,313,836	1,313,836
Series A preferred stock
Preferred stock, shares authorized	20	20
Preferred stock, dividend rate	10.00%	10.00%
Preferred stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares issued	7	7
Preferred stock, shares outstanding	7	7
Preferred stock, Liquidation preference Value (in Dollars)	$ 3,648	$ 3,648
Class A Common Stock
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	169,114,525	167,542,404
Common stock, shares outstanding	167,800,689	166,228,568
Treasury stock	1,313,836	1,313,836

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Revenues	$ 15,015	$ 6,018
Costs and expenses:
Direct operating (excludes depreciation and amortization shown below)	4,631	2,679
Selling, general and administrative	6,043	3,840
Provision for doubtful accounts	71
Depreciation and amortization of property and equipment	649	1,524
Amortization of intangible assets	847	590
Total operating expenses	12,241	8,633
Income (loss) from operations	2,774	(2,615)
Interest expense, net	(144)	(1,290)
Gain on forgiveness of PPP loan and extinguishment of note payable	2,178	23
Change in fair value of equity investment in Starrise, a related party	334	(15,794)
Other expense, net	(11)	(194)
Income (loss) before income taxes	5,131	(19,870)
Income tax benefit	63
Net income (loss)	5,194	(19,870)
Net (income) loss attributable to noncontrolling interest	(7)	14
Net income (loss) attributable to controlling interests	5,187	(19,856)
Preferred stock dividends	(89)	(89)
Net income (loss) attributable to common stockholders	$ 5,098	$ (19,945)
Net income (loss) per Class A common stock attributable to common stockholders - basic: (in Dollars per share)	$ 0.03	$ (0.21)
Weighted average number of Class A common stock outstanding: basic (in Shares)	167,940,285	94,416,684
Net income (loss) per Class A common stock attributable to common stockholders - diluted: (in Dollars per share)	$ 0.03	$ (0.21)
Weighted average number of Class A common stock outstanding: diluted (in Shares)	171,257,356	94,416,684

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 5,194	$ (19,870)
Other comprehensive loss: foreign exchange translation	(54)	(80)
Comprehensive income (loss)	5,140	(19,950)
Less: comprehensive (income) loss attributable to noncontrolling interest	(7)	14
Comprehensive income (loss) attributable to controlling interests	$ 5,133	$ (19,936)

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Consolidated Statements of (Deficit) Equity (Unaudited) - USD ($) $ in Thousands	Total	Treasury Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total Stockholders’ Equity (Deficit)	Non-Controlling Interest	Series A Preferred Stock	Class A Common Stock
Balance at Mar. 31, 2020	$ (19,287)	$ (11,603)	$ 400,784	$ (410,904)	$ 92	$ (18,010)	$ (1,277)	$ 3,559	$ 62
Balance (in Shares) at Mar. 31, 2020		1,313,836						7	61,937,593
Foreign exchange translation	(80)				(80)	(80)
Stock issued in connection with the SPA with certain investors, net	7,150		7,139			7,150			$ 11
Stock issued in connection with the SPA with certain investors, net (in Shares)									10,666,666
Issuance of Class A common stock in connection with the Starrise transaction, a related party	11,046		11,016			11,046			$ 30
Issuance of Class A common stock in connection with the Starrise transaction, a related party (in Shares)									29,855,081
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	757		757			757
Issuance of stock in connection with settlement of second lien loan (in Shares)									329,501
Exercise of warrants for Class A common stock	301		301			301
Exercise of warrants for Class A common stock (in Shares)									236,899
Stock-based compensation	177		177			177
Preferred stock dividends paid with common stock			89	(89)
Preferred stock dividends paid with common stock (in Shares)									267,079
Net income / loss	(19,870)			(19,856)		(19,856)	(14)
Balance at Jun. 30, 2020	(2,619)	$ (11,603)	437,450	(430,849)	12	(1,328)	(1,291)	$ 3,559	$ 103
Balance (in Shares) at Jun. 30, 2020		1,313,836						7	103,292,819
Balance at Mar. 31, 2021	15,882	$ (11,603)	499,272	(474,080)	(68)	17,244	(1,362)	$ 3,559	$ 164
Balance (in Shares) at Mar. 31, 2021		1,313,836						7	166,228,568
Foreign exchange translation	(54)				(54)	(54)
Contributed capital under the Starrise transaction, a related party
Stock-based compensation	983		983			983
Stock-based compensation (in Shares)									35,714
Issuance of common stock in connection with a business combination	2,506		2,504			2,506			$ 2
Issuance of common stock in connection with a business combination (in Shares)									1,483,129
Preferred stock dividends paid with common stock			89	(89)
Preferred stock dividends paid with common stock (in Shares)									53,278
Net income / loss	5,194			5,187		5,187	7
Balance at Jun. 30, 2021	$ 24,511	$ (11,603)	$ 502,848	$ (468,982)	$ (122)	$ 25,866	$ (1,355)	$ 3,559	$ 166
Balance (in Shares) at Jun. 30, 2021		1,313,836						7	167,800,689

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities:
Net income (loss)	$ 5,194	$ (19,870)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment and amortization of intangible assets	1,496	2,114
Changes in fair value of equity investment in Starrise	(334)	15,794
Gain from forgiveness of PPP loan and extinguishment of note payable	(2,178)	(23)
Loss from sale of property and equipment		(16)
Amortization of debt issuance costs included in interest expense		233
Provision for doubtful accounts	71
Recovery for inventory reserve	(34)	(328)
Stock-based compensation	983	177
Accretion and PIK interest expense added to note payable		176
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(6,103)	8,236
Inventory	58	473
Unbilled revenue	(295)	191
Prepaids and other current assets, and other long-term assets	1,730	1,135
Accounts payable, accrued expenses, and other liabilities	3,508	(11,527)
Deferred revenue	(475)	(503)
Net cash provided by (used in) operating activities	3,621	(3,738)
Cash flows from investing activities:
Purchases of property and equipment	(41)	(79)
Purchase of a business	(750)
Sale of equity investment in Starrise		587
Net cash (used in) provided by investing activities	(791)	508
Cash flows from financing activities:
Payment of notes payable	(4,755)	(7,754)
(Payment) proceeds under revolving credit agreement, net	(1,569)	3,388
Proceeds from PPP Loan		2,152
Proceeds from issuance of Class A common stock, net		7,451
Net cash (used in) provided by financing activities	(6,324)	5,237
Net change in cash, cash equivalents, and restricted cash	(3,494)	2,007
Cash, cash equivalents, and restricted cash at beginning of period	17,849	15,294
Cash, cash equivalents, and restricted cash at end of period	$ 14,355	$ 17,301

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Nature of Operations and Liquidity

3 Months Ended

Jun. 30, 2021

Disclosure of Nature of Operations and Liquidity [Abstract]

NATURE OF OPERATIONS AND LIQUIDITY

1. NATURE OF OPERATIONS AND LIQUIDITY

Cinedigm Corp. (“Cinedigm,” the “Company,” “we,” “us,” or similar pronouns) was incorporated in Delaware on March 31, 2000. We are (i) a distributor and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of titles and episodes released across digital, physical, theatrical, home and mobile entertainment platforms (“Streaming”) and (ii) a servicer of digital cinema assets (“Systems”) for over 6,200 movie screens in both North America and several international countries.

Risks and Uncertainties

The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty impacting the Company’s results for the period. As part of our Content & Entertainment business, the Company sells DVDs and Blu-ray discs at brick-and-mortar stores. Due to the lingering effects of the COVID-19 pandemic in the quarter ended June 30, 2021, the sale of physical discs through our retail partners declined although this was partially offset by digital purchases of physical product and increases in streaming views. As part of our Cinema Equipment business, the Company earns revenue when movies are exhibited in theatres. As vaccines became readily available and COVID cases decreased, major studios began to test consumer confidence by releasing blockbusters in the theatrical venues during the quarter ended June 30, 2021. This test period encouraged theatre re-openings and proved commercial viability for theatrical distribution of tentpole films. Films released during this period saw an uptick in box office revenue compared to the previous 12 months; however, box office results remained below pre-Covid expectations due to limited seating capacities and shortened windows for release on streaming platforms such as premium video on demand (“PVOD”) and subscription video on demand (“SVOD”). To the extent films are not shown in theatres, we do not earn revenue.

Liquidity

We have incurred net losses historically and have an accumulated deficit of $469.0 million and negative working capital of $9.5 million as of June 30, 2021. Net cash provided by operating activities for the three months ended June 30, 2021 was $3.6 million. We may continue to generate net losses for the foreseeable future. In addition, we had debt-related contractual obligations as of June 30, 2021. Upon a series of payments between April 30 and July 9, 2021, the Company paid in full the Prospect loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million. Based on these conditions, the Company entered into the following transactions described below:

Sale of Cinematic Equipment

On March 17, 2021, the Company entered into two separate agreements for the sale of cinematic equipment to American Multi-Cinema, Inc. (“AMC”), the agreements included the sale in tranches of a total of 2,369 cinematic projectors starting in March 2021 throughout January 2023 for a total cash consideration of $10.8 million. As of June 30, 2021, the Company executed the sale of the second tranche and recognized revenue of $5.6 million. A portion of the total proceeds has been utilized to eliminate the remaining Prospect notes payable.

Equity Investment in a Related Party

As previously announced, 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”), a related party for accounting purposes of Cinedigm 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 its Class A common stock in consideration. The Starrise shares received were valued at approximately $25 million and the Company issued shares that were valued at approximately $11.2 million. 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, all of which are related parties to the Company 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 as consideration therefor (the “April Share Acquisition”). On April 15, 2020, the April Share Acquisition was consummated and this transaction was also recorded as an equity investment in Starrise.

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 0.13 per share on August 26, 2021, 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 $6.1 million. 

Borrowings

On June 22, 2021, the maturity date of the East West Credit Facility (as defined in Note 6 - Notes Payable) with East West Bank was extended from June 30, 2021 to September 28, 2021. 

On April 15, 2020, the Company received $2.2 million from East West Bank, the Company’s existing lender, pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 10, 2022 (the “PPP Maturity Date”), accrues interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the PPP Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment. On July 7, 2021, the Company received notification from the Lender that the U.S. Small Business Administration had approved the Company’s PPP Loan forgiveness application for the entire PPP Loan amount and accrued interest effective as of June 30, 2021. The forgiveness of the PPP Loan was recognized as a gain of $2.2 million during the Company’s fiscal quarter ending June 30, 2021.

Upon a series of payments between April 30 and July 9, 2021, the Company paid in full the Prospect loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million. Pre-payment of the Prospect loan was permissible without penalty.

We believe the combination of: (i) our cash and cash equivalent balances at June 30, 2021, (ii) expected cash flows from operations, and (iii) the capacity under existing arrangements and access to new sources of capital will be sufficient to satisfy our contractual obligations, as well as liquidity for our operational and capital needs, for twelve months from the filing of this document. Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity.

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Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

Our consolidated financial statements include the accounts of Cinedigm and its wholly owned and majority owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Investments in which we do not have a controlling interest or are not the primary beneficiary, but have the ability to exert significant influence, are accounted for under the equity method of accounting. Noncontrolling interests for which we have been determined to be the primary beneficiary are consolidated and recorded as net loss attributable to noncontrolling interest. See Note 4 - Other Interests to the Consolidated Financial Statements for a discussion of our noncontrolling interests.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include the adequacy of accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, long-lived and finite-lived assets impairment and estimated amortization lives, fair value for asset acquisitions and business combinations, valuation allowances for income taxes and stock awards. Actual results could differ from these estimates.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits. We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal. Our Prospect Loan (as defined below) requires that we maintain specified cash balances that are restricted to repayment of interest thereunder. See Note 6- Notes Payable for information about our restricted cash balances.

Cash, cash equivalents, and restricted cash consisted of the following:

	As of
(in thousands)	June 30, 2021		March 31, 2021
Cash and Cash Equivalents	$	13,355	$	16,849
Restricted Cash		1,000		1,000
	$	14,355	$	17,849

EQUITY INVESTMENT IN STARRISE, A RELATED PARTY

On February 14, 2020, the Company acquired an approximately 11.5% interest in Starrise Media Holdings Limited (“Starrise”), a leading publicly traded Chinese entertainment company whose ordinary shares are listed on the Stock Exchange of Hong Kong. The Company acquired such interest as a strategic investment and in a private transaction from a shareholder of Starrise that is related to our major shareholders. When we acquired the Starrise stock, our then-majority affiliated stockholders also maintained a significant beneficial interest in Starrise. Upon consummation of the transaction on February 14, 2020, the Company recorded an initial investment of approximately $25.1 million, which is the fair market value of the Starrise shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.2 million, valued as of the date of the issuance of the Class A common stock of the Company. The difference in value of shares received in Starrise and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital.

On April 10, 2020, the Company purchased an additional 15% interest in Starrise in a private transaction from shareholders of Starrise that are affiliated with the major shareholder of the Company. The Company recorded an additional equity investment of approximately $28.2 million, which is the fair market value of the Starrise shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.0 million, valued at the date of the issuance of the Class A common stock of the Company. The difference in the value of shares received in Starrise and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital. This transaction was also recorded as an equity investment in Starrise.

The Company has accounted for these investments under the equity method of accounting as the Company can exert significant influence over Starrise with its direct ownership and affiliation with the Company’s majority shareholders. The Company has made an irrevocable election to apply the fair value option under ASC 825-10, Financial Instruments, as it relates to its equity investment in Starrise. The Company’s investment in Starrise is marked to market and recorded at fair value.  The stock is traded on the Hong Kong Stock exchange with readily available pricing that is classified as Level 1 in the fair value hierarchy. The Company has established a policy that consistently uses either the closing price of last active trades or the latest bid price when there is no active trades, unadjusted at the last day of each reporting period, as the most relevant and representative input to the Level 1 fair value measures of its investment holdings.

As of June 30, 2021 and March 31, 2021, the value of our equity investment in Starrise, using the readily determinable fair value inputs from the market pricing of the Stock Exchange of Hong Kong, was approximately $6.7 million and $6.4 million, respectively, resulting in a change in fair value of approximately $0.3 million and $15.8 million for the three months ended June 30, 2021 and 2020 respectively, on our consolidated statement of operations. At June 30, 2021 and March 31, 2021, the Company owned 362,307,397 shares or 26% of Starrise.

NON-MONETARY TRANSACTIONS

During the three months ended June 30, 2020, the Company entered into 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. There were no such transactions during the three months ended June 30, 2021.

There was no gain or loss resulting from these transactions for the three months ended June 30, 2020.

ACCOUNTS RECEIVABLE

We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

We record accounts receivable, long-term in connection with activation fees that we earn from our digital cinema equipment (the “Systems”) deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rate.

ADVANCES

Advances, which are recorded within prepaid and other current assets on the consolidated balance sheets, represent amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable as of the consolidated balance sheet date. Impairments and accelerated amortization related to advances were $0.2 million and $0.2 million, respectively, for the three months ended June 30, 2021 and 2020.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

Computer equipment and software	3 - 5 years
Internal use software	5 years
Digital cinema projection systems	10 years
Machinery and equipment	3 - 10 years
Furniture and fixtures	3 - 6 years

We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications. These capitalized costs are included in property and equipment and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over the useful life of the software. Post-configuration training and maintenance costs are expensed as incurred.

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leasehold improvements. Repair and maintenance costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized. Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the consolidated statements of operations.

FAIR VALUE MEASUREMENTS

The fair value measurement disclosures are grouped into three levels based on valuation factors:

● Level 1 – quoted prices in active markets for identical investments

● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)

● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments)

Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities.

The equity investment in Starrise is in Hong Kong dollars and was translated into US dollars as of June 30, 2021 and March 31, 2021 at an exchange rate of 7.8 and 7.8 Hong Kong Dollars to 1 US Dollar, respectively. The fair value of this equity investment is measured by the unadjusted market pricing of Starrise on the Stock Exchange of Hong Kong.

The following tables summarize the levels of fair value measurements of our financial assets and liabilities as of June 30, 2021 and March 31, 2021:

As of June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,777		—		—		6,777
	$	7,777	$	—		—	$	7,777

As of March 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,443		—		—		6,443
	$	7,443	$	—	$	—	$	7,443

Our cash and cash equivalents, accounts receivable, unbilled revenue and accounts payable and accrued expenses are financial instruments and are recorded at cost in the consolidated balance sheets. The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature. At June 30, 2021 and March 31, 2021, 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 consolidated 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 $3.0 million and lease obligations approximates fair value.

IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS

We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. During the three months ended June 30, 2021 and 2020, no impairment charge was recorded from operations for long-lived assets or finite-lived assets.

GOODWILL

Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.

Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.

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

No goodwill impairment charge was recorded in the three months ended June 30, 2021 and 2020.

Gross amounts of goodwill and accumulated impairment charges that we have recorded are as follows:

(In thousands)
Goodwill, net at March 31, 2021	$	8,701
Goodwill from business combination – see Note 5		2,037
Goodwill  , net at June 30, 2021	$	10,738

REVENUE RECOGNITION

We determine revenue recognition by:

● identifying the contract, or contracts, with the customer;

● identifying the performance obligations in the contract;

● determining the transaction price;

● allocating the transaction price to performance obligations in the contract; and

● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVDs and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and video on demand services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities such as sales value-added taxes and other similar taxes.

Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less.

Cinema Equipment Business

Our Cinema Equipment Business consists of financing vehicles and administrators for 2,519 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,025 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

We retain ownership of our digital cinema equipment (the “Systems”) and the residual cash flows related to the Systems in Phase I Deployment after the end of the 10-year deployment payment period.

For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Cinema Equipment Business also provides monitoring, data collection, serial data verification and management services to this segment, as well as to exhibitors who purchase their own equipment, in order to collect virtual print fees (“VPFs”) from motion picture studios and distributors and Alternative Content Fees (“ACFs  ”) from alternative content providers, and to distribute those fees to theatrical exhibitors (collectively, “Services”).

VPFs are earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase I Deployment and to Phase II Deployment when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to Phase I Deployment based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period the title first plays for general audience viewing in a digital projector equipped movie theatre. The Phase 1 Deployment’s and Phase 2 Deployments performance obligations for revenue recognition are met at this time. 

Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with movie studios and distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.” The Company evaluated the constraining estimates related to the variable consideration, i.e., the one-time bonus and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.

Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the systems and is predicated on Cinedigm’s receipt of sale proceeds. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. Cinedigm completed the sale of 650 and 30 digital projection Systems, respectively, for an aggregate sales price of approximately $5.6 million and $195.0 thousand, and recognized revenue of $5.6 million and $76.2 thousand, during the three months ended June 30, 2021 and 2020, respectively.

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

Exhibitors who purchased and own Systems using their own financing in the Cinema Equipment Business paid us an upfront activation fee of approximately $2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $1.0 thousand and $2.0 thousand on Phase II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 4 - Other Interests) upon installation and such fees are generally collected upfront upon installation. Our services division manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.

The Cinema Equipment Business earns an administrative fee of approximately 5% of VPFs collected and, in addition, earns an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 DC. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at that time the related VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the movie studios and distributors.

Content & Entertainment Business

CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”)   on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the performance obligation is satisfied which is when the content is available for subscription on the digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation. Physical Revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

Physical goods reserves for sales returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

CEG also has contracts for the theatrical distribution of third party feature movies and alternative content. CEG’s distribution fee revenue and CEG’s participation in box office receipts is recognized at the time a feature movie and alternative content are viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date.

Principal Agent Considerations

We determine whether revenue should be reported on a gross or net basis for each revenue stream based on the transfer of control of goods and services. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:

● which party is primarily responsible for fulfilling the promise to provide the specified good or service; and

● which party has discretion in establishing the price for the specified good or service.

Shipping and Handling

Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Contract Liabilities

We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.

We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

Our CEG segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances is variable consideration as part of the transaction price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

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.

Deferred revenue pertaining to our Content & Entertainment Business includes amounts related to the sale of DVDs with future release dates.

Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms.

The ending deferred revenue balance, including current and non-current balances, as of June 30, 2021 was $0.4 million. For the three months ended June 30, 2021 and 2020, respectively, 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, 2021 and 2020, $0.5 million and $0.6 million, respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. As of June 30, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $0.4 million. We expect to recognize this balance in full by September 30, 2021.

Participations and royalties payable

When we use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.

Disaggregation of Revenue

The Company disaggregates revenue into different revenue categories for the Cinema Equipment and CEG Businesses. The Cinema Equipment Business revenue categories are: Phase I Deployment revenue, Phase II Deployment revenue, Services, and Digital System Sales, and the Content & Entertainment Business revenue categories are: Base Distribution Business and OTT Streaming and Digital.

The following tables present the Company’s revenue categories for the three months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,
	2021		2020
Cinema Equipment Business:
Phase I Deployment	$	91	$	31
Phase II Deployment		386		398
Services		179		100
Digital System Sales		5,575		76
Total Cinema Equipment Business revenue	$	6,231	$	605
Content & Entertainment Business:
Base Distribution Business	$	1,778	$	2,157
OTT Streaming and Digital		7,006		3,256
Total Content & Entertainment Business revenue	$	8,784	$	5,413

DIRECT OPERATING COSTS

Direct operating costs consist of operating costs such as cost of goods sold, fulfillment expenses, shipping costs, property taxes and insurance on Systems, royalty expenses, impairments of advances, and marketing and direct personnel costs.

STOCK-BASED COMPENSATION

The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock units and performance stock units. The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors.

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.

Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized. The Company is primarily subject to income taxes in the United States.

The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions.

NET INCOME/LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic and diluted net loss per common share has been calculated as follows:

Basic and diluted net loss per common share attributable to common stockholders	=	Net loss attributable to common stockholders
		Weighted average number of common stock outstanding during the period

Stock issued and treasury stock repurchased during the period are weighted for the portion of the period that they are outstanding. Shares issued and any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding.

We incurred net income for the three months ended June 30, 2021, and therefore the impact of potentially dilutive common shares from outstanding stock options, stock appreciation rights, and warrants, totaling 2,003,235 shares for the three months ended June 30, 2021, respectively, were included in the computations of diluted earnings per share. The calculation of diluted net income per share for the three months ended June 30, 2021 does not include the impact of 9,616,429 potentially dilutive shares relating to stock options, stock appreciation rights, and warrants as their impact would have been anti-dilutive.

We incurred net losses for the three months ended June 30, 2020, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 3,940,138 shares as of June 30, 2020, respectively, were excluded from the computations of loss per share as their impact would have been anti-dilutive.

COMPREHENSIVE LOSS

As of the three months ended June 30, 2021 and 2020, comprehensive loss consisted of net loss and foreign currency translation adjustments.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Adopted

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. The Company adopted this guidance on April 1, 2021 and the adoption of this ASU did not have a material impact on our consolidated financial statements.

Not yet adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how the Company determines its allowance for estimated uncollectible receivables and evaluates its available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of fiscal 2023. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

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Other Interests

3 Months Ended

Jun. 30, 2021

Disclosure of Other Interests [Abstract]

OTHER INTERESTS

4. OTHER INTERESTS

Investment in CDF2 Holdings

We indirectly own 100% of the common equity of CDF2 Holdings, LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology. CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital technology by providing financing, equipment, installation and related ongoing services.

CDF2 Holdings is a Variable Interest Entity (“VIE”), as defined in Accounting Standards Codification Topic 810 (“ASC 810”), “Consolidation.” ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE. To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, among other factors. Although we indirectly, wholly own CDF2 Holdings, we, a third party that also has a variable interest in CDF2 Holdings, and an independent third party manager must mutually approve all business activities and transactions that significantly impact CDF2 Holdings’ economic performance. We have therefore assessed our variable interests in CDF2 Holdings and determined that we are not the primary beneficiary of CDF2 Holdings. As a result, CDF2 Holdings’ financial position and results of operations are not consolidated in our financial position and results of operations. In completing our assessment, we identified the activities that we consider most significant to the economic performance of CDF2 Holdings and determined that we do not have the power to direct those activities, and therefore we account for our investment in CDF2 Holdings under the equity method of accounting.

As of June 30, 2021 and March 31, 2021, 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 $0.4 million and $0.3 million as of June 30, 2021 and March 31, 2021, respectively, which are included in accounts receivable, net on the accompanying consolidated balance sheets.

The accompanying Consolidated Statements of Operations include $77 thousand and $9 thousand of digital cinema servicing revenue from CDF2 Holdings for the three months ended June 30, 2021 and 2020, respectively.

Total Stockholders’ Deficit of CDF2 Holdings at June 30, 2021 and March 31, 2021 was $49.6 million and $46.3 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, 2021 and March 31, 2021 is carried at $0.

Majority Interest in CONtv

We own an 85% interest in CON TV, LLC, a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the Internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

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Business Combination

3 Months Ended

Jun. 30, 2021

Disclosure of Asset Acquistion [Abstract]

BUSINESS COMBINATION

5. BUSINESS COMBINATION

Stock Purchase Agreement

On May 12, 2021, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with FoundationTV, Inc. (“FoundationTV”), to buy all of FoundationTV´s issued and outstanding stock in consideration of an aggregate of $5.2 million, of which $0.7 million was paid in cash and 1,483,129 shares of Class A common stock, which were valued at $2.5 million, were issued at closing stock price of $1.69 on the closing date of June 9, 2021, and an additional $2.0 million will be paid in eight equal installments of one installment on each six month anniversary of closing over forty-eight months, and a final lump sum payment of $225 thousand on the four year anniversary of the closing; reduced by $0.2 million settlement of a prior relationship. The Stock Purchase Agreement contained certain conditions to closing, including that the Company obtain approval of its stockholders, applicable lenders, and regulatory authorities, as applicable, and representations and warranties and covenants as are customary for transactions of this type. On June 9, 2021, the FoundationTV acquisition was consummated. The Company incurred transaction cost $36 thousand during the three months ended June 30, 2021. As of June 30, 2021, the deferred consideration is presented according to the agreed-upon cash payments, including a $0.5 million short-term payable and a long-term payable for $1.5 million.

Purchase Price
Purchase Price	$	5,237
Total purchase price	$	5,237
Allocation of purchase price
Developed technology		3,200
Goodwill		2,037
Total allocation of purchase price	$	5,237

The developed technology acquired in this transaction has a useful life of 10 years. Due to proximately of the closing date to the end of the quarter, the Company did not record any amortization expense during the three months ended June 30, 2021 related to the developed technology acquired in the business combination.

Below is the amortization expense per year for the developed technology acquired in the business combination:

2022 (remaining)	$	240
2023		320
2024		320
2025		320
2026		320
2027		320
2028		320
2029		320
2030		320
2031		320
2032		80
Total	$	3,200

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Notes Payable

3 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

NOTES PAYABLE

6. NOTES PAYABLE

Notes payable consisted of the following:

	June 30, 2021				March 31, 2021
(In thousands)	Current Portion		Long Term Portion		Current Portion		Long Term Portion
Prospect Loan	$	3,031	$	—	$	7,786	$	—
Total non-recourse notes payable		3,031		—		7,786		—
Total non-recourse notes payable, net of unamortized debt issuance costs and debt discounts	$	3,031	$	—	$	7,786	$	—
Credit Facility	$	387	$	—	$	1,956	$	—
PPP Loan		—		—		—		2,152
Total recourse notes payable		387		—		1,956		2,152
Total recourse notes payable, net of unamortized debt issuance costs and debt discounts	$	387	$	—	$	1,956	$	2,152
Total notes payable, net of unamortized debt issuance costs	$	3,418	$	—	$	9,742	$	2,152

Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults, is limited to the value of the asset, which is collateral for the debt. Certain of our subsidiaries are liable with respect to, and their assets serve as collateral for, certain indebtedness for which our assets and the assets of our other subsidiaries that are not parties to the transaction are generally not liable. We have referred to this indebtedness as “non-recourse debt” because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan.

Prospect Loan

In February 2013, our DC Holdings, AccessDM and Phase 2 DC subsidiaries entered into a term loan agreement (the “Prospect Loan” or the “Term Loan Agreement”) with Prospect Capital Corporation (“Prospect”), pursuant to which DC Holdings borrowed $70.0 million. The Prospect Loan bears interest at LIBOR plus 9.0% (with a 2.0% LIBOR floor), which is payable in cash, and at an additional 2.50% to be accrued as an increase to the aggregate principal amount of the Prospect Loan until the Prospect Loan is paid off, at which time all accrued interest will be payable in cash.

Collections of DC Holdings accounts receivable are deposited into accounts designated to pay certain operating expenses, principal, interest, fees, costs and expenses relating to the Prospect Loan. On a quarterly basis, if there is excess cash flow, it is used for prepayment of the Prospect Loan. We also maintain a debt service fund under the Prospect Loan for future principal and interest payments. As of June 30, 2021, and March 31, 2021, the debt service fund had a balance of $1.0 million, which is classified as part of restricted cash on our Consolidated Balance Sheets.

On March 4, 2021, Cinedigm DC Holdings, LLC (“CDCH”), Access Digital Media, Inc., Access Digital Cinema Phase 2, Corp., Christie/AIX, Inc., Cinedigm Digital Funding I, LLC, certain Lenders, and Prospect Capital Corporation, as administrative agent and collateral agent, entered into Amendment No. 3 (the “Amendment”) to the Term Loan Agreement dated February 28, 2013. Under the Amendment, the maturity date of the loan under the Term Loan Agreement was extended to March 31, 2022. As a condition to the effectiveness of the Amendment, CDCH paid $3,500,000 to Prospect to reduce the outstanding principal amount of the Loan.

The Prospect Loan matures on March 31, 2022 and may be accelerated upon a change in control (as defined in the agreement) or other events of default as set forth therein and would be subject to mandatory acceleration upon insolvency of DC Holdings. We are permitted to pay the full outstanding balance of the Prospect Loan at any time after the second anniversary of the initial borrowing, subject to the following prepayment penalties:

● 5.0% of the principal amount prepaid between the second and third anniversaries of issuance;

● 4.0% of the principal amount prepaid between the third and fourth anniversaries of issuance;

● 3.0% of the principal amount prepaid between the fourth and fifth anniversaries of issuance;

● 2.0% of the principal amount prepaid between the fifth and sixth anniversary of issuance;

● 1.0% of the principal amount prepaid between the sixth and seventh anniversaries of issuance; and

● No penalty if the balance of the Prospect Loan, including accrued interest, is prepaid thereafter.

The Prospect Loan is secured by, among other things, a first priority pledge of the stock of CDF2 Holdings, our wholly owned unconsolidated subsidiary, the stock of AccessDM, owned by DC Holdings, and the stock of our Phase 2 DC subsidiary, and is also guaranteed by AccessDM and Phase 2 DC. We provide limited financial support to the Prospect Loan not to exceed $1.5 million per year in the event financial performance does not meet certain defined benchmarks.

The Prospect Loan contains customary representations, warranties, affirmative covenants, negative covenants and events of default.

With a series of payments between April 30 and July 9, 2021, the Company paid in full the Prospect Loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million. Pre-payment of the Prospect Loan is permissible without penalty. See Note 11 – Subsequent Events.

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

	As of
(In thousands)	June 30, 2021			March 31, 2021
Prospect Loan, at issuance	$	70,000		$	70,000
PIK Interest		6,397			6,397
Payments to date		(73,366	)		(68,611	)
Prospect Loan, gross	$	3,031		$	7,786
Less unamortized debt issuance costs and debt discounts		—			—
Prospect Loan, net		3,031			7,786
Less current portion		(3,031	)		(7,786	)
Total long term portion	$	—		$	—

Credit Facility and Cinedigm Revolving Loans

On March 30, 2018, the Company entered into the Loan, Guaranty and Security Agreement, dated as of March 30, 2018, by and between the Company, East West Bank and the Guarantors named therein (the “Credit Facility”) for a maximum of $19.0 million in revolving loans outstanding at any one time with a maturity date of March 31, 2020, which may be extended for two successive one-year periods at the sole discretion of the lender, subject to certain conditions.

Interest under the Credit Facility is due monthly at a rate elected by the Company of either 0.5% plus Prime Rate or 3.25% above LIBOR Rate established by the lender.

As of June 30, 2021 and March 31, 2021, there was $0.4 million and $2.0 million outstanding, respectively, and there was $8.1 million available, under the Credit Facility based on the Company’s borrowing base as of June 30, 2021. On July 3, 2019, the Company entered into the EWB Amendment to the Credit Facility. The EWB Amendment reduced the size of the facility to $18.0 million, required certain prepayments and daily cash sweeps from collections of receivables to be made, changed in certain respects how the borrowing base is calculated, and extended the maturity date to June 30, 2020. In connection with the EWB Amendment, three of our subsidiaries became Guarantors under the Credit Facility. On June 25, 2020, the Company signed amendment No. 4 with East West Bank to extend the maturity of the Credit Facility to June 30, 2021 and waive events of default provisions. On June 22, 2021, the maturity date of the Credit Facility was extended to September 28, 2021. During this extension period, until an amendment is entered into, we are not able to access any additional borrowings under the Credit Facility.   

PPP Loan

On April 15, 2020, the Company received $2.2 million from East West Bank, the Company’s existing lender. The PPP Loan matures on April 10, 2022 (the “PPP Maturity Date”), accrues interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the PPP Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act and could be subject to repayment. On July 7, 2021, the Company received notification from the Lender that the U.S. Small Business Administration had approved the Company’s PPP Loan forgiveness application for the entire PPP Loan amount and accrued interest effective June 30, 2021.

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Stockholders' Equity

3 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

STOCKHOLDERS’ EQUITY

7. STOCKHOLDERS’ EQUITY

COMMON STOCK

During the three months ended June 30, 2021, we issued 1,536,407 shares of Class A common stock which consists of the issuance of Class A common stock for business combination, the issuances of Class A common stock preferred stock dividends, and SARs awards.

PREFERRED STOCK

Cumulative dividends in arrears on preferred stock were $0.1 million and $0.1 million as of June 30, 2021 and March 31, 2021. In May 2021, we paid the preferred stock dividends in arrears in the form of 53,278 shares of Class A common stock.

TREASURY STOCK

We have treasury stock, at cost, consisting of 1,313,836 shares of Class A common stock at June 30, 2021 and March 31, 2021.

CINEDIGM’S EQUITY INCENTIVE PLANS

Stock Based Compensation Awards

Awards issued under our 2000 Equity Incentive Plan (the “2000 Plan”) may be in any of the following forms (or a combination thereof) (i) stock option awards; (ii) stock appreciation rights; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan provides for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Class A Common Stock on the date of grant. ISOs granted to shareholders having more than 10% of the total combined voting power of the Company must have exercise prices of at least 110% of the fair market value of our Class A Common Stock on the date of grant. ISOs and non-statutory stock options granted under the 2000 Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options are set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the initial equity investment in Cinedigm by Bison, as a result of which there was a change of control of the Company, all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable.

In connection with the grants of stock options and shares of restricted stock under the 2000 Plan, we and the participants have executed stock option agreements and notices of restricted stock awards setting forth the terms of the grants. The 2000 Plan provided for the issuance of up to 2,380,000 shares of Class A Common Stock to employees, outside directors and consultants.

As of June 30, 2021, there were 261,587 stock options outstanding in the 2000 Plan with weighted average exercise price of $14.99 and a weighted average contract life of 1.86 years. As of March 31, 2021, there were 261,587 shares pursuant to stock options outstanding in the Plan with weighted average exercise price of $14.99 and a weighted average contract life of 2.11 years.

In August 2017, the Company adopted the 2017 Plan. The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provided for the issuance of up to 2,108,270 shares of Class A common stock, in the form of various awards, including stock options, stock appreciation rights, stock, restricted stock, restricted stock units, performance awards and cash awards. The Compensation Committee of the Company’s Board of Directors (the “Board”) is authorized to administer the 2017 Plan and make grants thereunder. The approval of the 2017 Plan did not affect awards already granted under the 2000 Plan. On December 4, 2019, upon shareholder approval, the 2017 Plan was amended to increase the maximum number of shares of Class A common stock authorized for issuance thereunder from 2,108,270 shares to 4,098,270.

On October 23, 2020, the Company amended its 2017 Equity Incentive Plan to increase the number of shares authorized for issuance thereunder from 4,098,270 to 14,098,270.

The analysis of all options outstanding under the 2000 Plan as of June 30, 2021 is as follows:

As of June 30, 2021
Range of Prices		Options Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
	$7.40 - $13.69		5,000		4.00	$	7.40	$	-
	$13.70 - $24.40		249,087		1.87		14.69		-
	$24.41 - 30.00		7,500		0.13		30.00		-
			261,587					$	-

An analysis of all options exercisable under the 2000 Plan as of June 30, 2021 is presented below:

Options Exercisable		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
	261,587		1.86	$	14.99		—

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

	Three Months Ended June 30,
(In thousands)	2021		2020
Selling, general and administrative	$	983	$	177
	$	983	$	177

During the three months ended June 30, 2021, the Company granted 584,000 stock appreciation rights (“SARs”). The SARs were granted under the Company’s 2017 Equity Incentive Plan (the “2017 Plan). All SARs issued have an exercise price equal to the fair value of the Company’s Class A common stock on the date of grant and a maturity date of 10 years. The SARs were valued on the grant date utilizing an option pricing model, as follows:

Grant Date: May 23, 2021 – June 21, 2021

Maturity Date: May 23, 2031 – June 21, 2031

Fair value of class A common stock on grant date: $1.29 - $1.37

Volatility: 94.56% - 94.63%

Discount rate: 1.50% - 1.63%

There was $856 thousand and $110 thousand of stock-based compensation recorded for the three months ended June 30, 2021 and 2020, respectively, relating to these SARs.

Total SARs outstanding are as follows:

	Three Months Ended June 30, 2021
SARs Outstanding March 31, 2021		9,154,933
Issued		584,000
Forfeited		(91,875	)
Total SARs Outstanding June 30, 2021		9,647,058

There was $1 thousand and $1 thousand of stock-based compensation recorded for the three months ended June 30, 2021 and 2020, respectively, related to employees’ restricted stock awards.

There was $126 thousand and $66 thousand of stock-based compensation for the three months ended June 30, 2021 and 2020, respectively, related to board of directors.   During the three months ended June 30, 2021 the company issued 35,714 shares to the board of directors.

OPTIONS GRANTED OUTSIDE CINEDIGM’S EQUITY INCENTIVE PLAN

In October 2013, we issued options outside of the 2000 Plan to 10 individuals who became employees as a result of a business combination. The employees received options to purchase an aggregate of 62,000 shares of our Class A Common Stock at an exercise price of $17.50 per share. The options were fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised. As of June 30, 2021, 12,500 of such options remained outstanding.

WARRANTS

The following table presents information about outstanding warrants to purchase shares of our Class A common stock as of June 30, 2021. All of the outstanding warrants are fully vested and exercisable.

Recipient	Amount outstanding		Expiration	Exercise price per share
Strategic management service provider		52,500	July 2021	$	17.20 - 30.00
Warrants issued in connection with Convertible Notes exchange transaction		246,019	December 2021	$	1.30
5-year Warrant issued to BEMG in connection with a term loan agreement		1,400,000	December 2022	$	1.80

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Commitments and Contingencies

3 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. 

We operate from leased properties under non-cancelable operating lease agreements, certain of which contain escalating lease clauses.

The Company leases office space under operating leases. The Company’s portfolio of leases is primarily related to real estate and since most of our leases do not provide a readily determinable implicit rate, the Company estimated its incremental borrowing rate to discount the lease payments based on information available at either the implementation date of Topic 842 or at lease commencement for leases entered into thereafter.

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of June 30, 2021

(In thousands)	Classification on the Balance Sheet	June 30, 2021
Assets
Noncurrent	Operating lease right-of-use asset	$	66
Liabilities
Current	Operating leases - current portion		58
Noncurrent	Operating leases - long-term portion		8
Total operating lease liabilities		$	66

Lease Costs

The table below presents certain information related to lease costs for leases:

	Year Ended
(In thousands)	June 30, 2021
Operating lease cost	$	22
Total lease cost	$	22

Other Information

The table below presents supplemental cash flow information related to leases:

	Year Ended
(In thousands)	June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities		22
Operating cash flows used for operating leases	$	22

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Supplemental Cash Flow Information

3 Months Ended

Jun. 30, 2021

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

9. SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended June 30,
(In thousands)	2021		2020
Cash interest paid	$	663	$	25
noncash investing and financing activities:
Accrued dividends on preferred stock		89		89
Issuance of Class A common stock for payment of accrued preferred stock dividends		—		89
Issuance of Class A common stock to Starrise, a related party		—		11,046
Contributed capital under the Starrise transaction, a related party		—		17,187
Settlement of second lien loan with Class A common stock		—		757
Issuance of Class A common stock for business combination		2,506		—
Starrise shares used to pay down vendors		—		335
Forgiveness of PPP loan		2,152		—
Deferred consideration in purchase of a business		1,980		—
Preferred stock dividends paid with common stock		89		—

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Segment Information

3 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

SEGMENT INFORMATION

10. SEGMENT INFORMATION

We operate in two reportable segments: Cinema Equipment Business and Content & Entertainment Business. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our CODM to evaluate performance, which is generally the segment’s operating income (loss) before depreciation and amortization.

Operations of:	Products and services provided:
Cinema Equipment Business	Financing vehicles and administrators for 2,519 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,025 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”). We retain ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements. For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements. The Cinema Equipment Business segment also provides monitoring, collection, verification and management services to this segment, as well as to exhibitors who purchase their own equipment, and also collects and disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”).
Content & Entertainment Business	Leading independent streaming company of content and channels. We collaborate with producers and other content owners to market, source, curate and distribute independent content to targeted and under-served audiences in theatres and homes, and via mobile and emerging platforms.

The following tables present certain financial information related to our reportable segments and Corporate:

	As of June 30, 2021
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	14,038	$	387	$	—	$	1
Content & Entertainment Business		12,213		10,738		50,534		—		—		40
Corporate		—		—		16,065		—		3,031		25
Total	$	12,213	$	10,738	$	80,637	$	387	$	3,031	$	66

	As of March 31, 2021
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	13,169	$	7,786	$	—	$	1
Content & Entertainment Business		9,858		8,701		42,733		—		—		69
Corporate		2		—		19,544		—		4,108		30
Total	$	9,860	$	8,701	$	75,446	$	7,786	$	4,108	$	100

	Statements of Operations
	Three Months Ended June 30, 2021
	(in thousands)
	Cinema Equipment Business		Content & Entertainment Business			Corporate			Consolidated
Revenues	$	6,231	$	8,784		$	—		$	15,015
Direct operating (exclusive of depreciation and amortization shown below)		257		4,374			—			4,631
Selling, general and administrative		429		2,818			2,796			6,043
Allocation of corporate overhead		99		660			(759	)		—
Provision for doubtful accounts		27		44			—			71
Depreciation and amortization of property and equipment		507		143			(1	)		649
Amortization of intangible assets		—		845			1			847
Total operating expenses		1,319		8,884			2,037			12,241
Income (loss) from operations	$	4,912	$	(100	)	$	(2,037	)	$	2,774

The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows:

(In thousands)	Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—
Selling, general and administrative		—		166		817		983
Total stock-based compensation	$	—	$	166	$	817	$	983

	Statements of Operations
	Three Months Ended June 30, 2020 (in thousands)
	Cinema Equipment Business			Content & Entertainment			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		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	$	(1,661	)	$	(488	)	$	(506	)	$	(2,615	)

The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows:

	Cinema Equipment Business		Content & Entertainment		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—
Selling, general and administrative		—		26		151		177
Total stock-based compensation	$	—	$	26	$	151	$	177

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Income Taxes

3 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

11. INCOME TAXES

We calculate income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions. We recorded an income tax benefit (expense) of approximately $63 thousand and zero for the three months ended June 30, 2021 and 2020, 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, 2021 and 2020 was negative 1.2% and zero, 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.

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Subsequent Event

3 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENT

12. SUBSEQUENT EVENT

Prospect Loan Payment

Upon a series of payments between April 30 and July 9, 2021  , the Company paid in full the Prospect loan non-recourse debt amount by paying an aggregate principal amount of $7.8 million, with $3.1 million having been paid subsequent to the period. Pre-payment of the Prospect loan was permissible without penalty.

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Accounting Policies, by Policy (Policies)

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND CONSOLIDATION

BASIS OF PRESENTATION AND CONSOLIDATION

Our consolidated financial statements include the accounts of Cinedigm and its wholly owned and majority owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Investments in which we do not have a controlling interest or are not the primary beneficiary, but have the ability to exert significant influence, are accounted for under the equity method of accounting. Noncontrolling interests for which we have been determined to be the primary beneficiary are consolidated and recorded as net loss attributable to noncontrolling interest. See Note 4 - Other Interests to the Consolidated Financial Statements for a discussion of our noncontrolling interests.

USE OF ESTIMATES

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include the adequacy of accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, long-lived and finite-lived assets impairment and estimated amortization lives, fair value for asset acquisitions and business combinations, valuation allowances for income taxes and stock awards. Actual results could differ from these estimates.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits. We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal. Our Prospect Loan (as defined below) requires that we maintain specified cash balances that are restricted to repayment of interest thereunder. See Note 6- Notes Payable for information about our restricted cash balances.

Cash, cash equivalents, and restricted cash consisted of the following:

	As of
(in thousands)	June 30, 2021		March 31, 2021
Cash and Cash Equivalents	$	13,355	$	16,849
Restricted Cash		1,000		1,000
	$	14,355	$	17,849

EQUITY INVESTMENT IN STARRISE, A RELATED PARTY

EQUITY INVESTMENT IN STARRISE, A RELATED PARTY

On February 14, 2020, the Company acquired an approximately 11.5% interest in Starrise Media Holdings Limited (“Starrise”), a leading publicly traded Chinese entertainment company whose ordinary shares are listed on the Stock Exchange of Hong Kong. The Company acquired such interest as a strategic investment and in a private transaction from a shareholder of Starrise that is related to our major shareholders. When we acquired the Starrise stock, our then-majority affiliated stockholders also maintained a significant beneficial interest in Starrise. Upon consummation of the transaction on February 14, 2020, the Company recorded an initial investment of approximately $25.1 million, which is the fair market value of the Starrise shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.2 million, valued as of the date of the issuance of the Class A common stock of the Company. The difference in value of shares received in Starrise and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital.

On April 10, 2020, the Company purchased an additional 15% interest in Starrise in a private transaction from shareholders of Starrise that are affiliated with the major shareholder of the Company. The Company recorded an additional equity investment of approximately $28.2 million, which is the fair market value of the Starrise shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.0 million, valued at the date of the issuance of the Class A common stock of the Company. The difference in the value of shares received in Starrise and shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital. This transaction was also recorded as an equity investment in Starrise.

The Company has accounted for these investments under the equity method of accounting as the Company can exert significant influence over Starrise with its direct ownership and affiliation with the Company’s majority shareholders. The Company has made an irrevocable election to apply the fair value option under ASC 825-10, Financial Instruments, as it relates to its equity investment in Starrise. The Company’s investment in Starrise is marked to market and recorded at fair value.  The stock is traded on the Hong Kong Stock exchange with readily available pricing that is classified as Level 1 in the fair value hierarchy. The Company has established a policy that consistently uses either the closing price of last active trades or the latest bid price when there is no active trades, unadjusted at the last day of each reporting period, as the most relevant and representative input to the Level 1 fair value measures of its investment holdings.

As of June 30, 2021 and March 31, 2021, the value of our equity investment in Starrise, using the readily determinable fair value inputs from the market pricing of the Stock Exchange of Hong Kong, was approximately $6.7 million and $6.4 million, respectively, resulting in a change in fair value of approximately $0.3 million and $15.8 million for the three months ended June 30, 2021 and 2020 respectively, on our consolidated statement of operations. At June 30, 2021 and March 31, 2021, the Company owned 362,307,397 shares or 26% of Starrise.

NON-MONETARY TRANSACTIONS

NON-MONETARY TRANSACTIONS

During the three months ended June 30, 2020, the Company entered into 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. There were no such transactions during the three months ended June 30, 2021.

There was no gain or loss resulting from these transactions for the three months ended June 30, 2020.

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

We record accounts receivable, long-term in connection with activation fees that we earn from our digital cinema equipment (the “Systems”) deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rate.

ADVANCES

ADVANCES

Advances, which are recorded within prepaid and other current assets on the consolidated balance sheets, represent amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable as of the consolidated balance sheet date. Impairments and accelerated amortization related to advances were $0.2 million and $0.2 million, respectively, for the three months ended June 30, 2021 and 2020.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

Computer equipment and software	3 - 5 years
Internal use software	5 years
Digital cinema projection systems	10 years
Machinery and equipment	3 - 10 years
Furniture and fixtures	3 - 6 years

We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications. These capitalized costs are included in property and equipment and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over the useful life of the software. Post-configuration training and maintenance costs are expensed as incurred.

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leasehold improvements. Repair and maintenance costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized. Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the consolidated statements of operations.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The fair value measurement disclosures are grouped into three levels based on valuation factors:

● Level 1 – quoted prices in active markets for identical investments

● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)

● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments)

Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities.

The equity investment in Starrise is in Hong Kong dollars and was translated into US dollars as of June 30, 2021 and March 31, 2021 at an exchange rate of 7.8 and 7.8 Hong Kong Dollars to 1 US Dollar, respectively. The fair value of this equity investment is measured by the unadjusted market pricing of Starrise on the Stock Exchange of Hong Kong.

The following tables summarize the levels of fair value measurements of our financial assets and liabilities as of June 30, 2021 and March 31, 2021:

As of June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,777		—		—		6,777
	$	7,777	$	—		—	$	7,777

As of March 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,443		—		—		6,443
	$	7,443	$	—	$	—	$	7,443

Our cash and cash equivalents, accounts receivable, unbilled revenue and accounts payable and accrued expenses are financial instruments and are recorded at cost in the consolidated balance sheets. The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature. At June 30, 2021 and March 31, 2021, 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 consolidated 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 $3.0 million and lease obligations approximates fair value.

IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS

IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS

We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. During the three months ended June 30, 2021 and 2020, no impairment charge was recorded from operations for long-lived assets or finite-lived assets.

GOODWILL

GOODWILL

Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.

Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.

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

No goodwill impairment charge was recorded in the three months ended June 30, 2021 and 2020.

Gross amounts of goodwill and accumulated impairment charges that we have recorded are as follows:

(In thousands)
Goodwill, net at March 31, 2021	$	8,701
Goodwill from business combination – see Note 5		2,037
Goodwill  , net at June 30, 2021	$	10,738

REVENUE RECOGNITION

REVENUE RECOGNITION

We determine revenue recognition by:

● identifying the contract, or contracts, with the customer;

● identifying the performance obligations in the contract;

● determining the transaction price;

● allocating the transaction price to performance obligations in the contract; and

● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVDs and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and video on demand services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities such as sales value-added taxes and other similar taxes.

Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less.

Cinema Equipment Business

Our Cinema Equipment Business consists of financing vehicles and administrators for 2,519 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 3,025 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).

We retain ownership of our digital cinema equipment (the “Systems”) and the residual cash flows related to the Systems in Phase I Deployment after the end of the 10-year deployment payment period.

For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Cinema Equipment Business also provides monitoring, data collection, serial data verification and management services to this segment, as well as to exhibitors who purchase their own equipment, in order to collect virtual print fees (“VPFs”) from motion picture studios and distributors and Alternative Content Fees (“ACFs  ”) from alternative content providers, and to distribute those fees to theatrical exhibitors (collectively, “Services”).

VPFs are earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Phase I Deployment and to Phase II Deployment when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to Phase I Deployment based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period the title first plays for general audience viewing in a digital projector equipped movie theatre. The Phase 1 Deployment’s and Phase 2 Deployments performance obligations for revenue recognition are met at this time. 

Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with movie studios and distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.” The Company evaluated the constraining estimates related to the variable consideration, i.e., the one-time bonus and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.

Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the systems and is predicated on Cinedigm’s receipt of sale proceeds. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. Cinedigm completed the sale of 650 and 30 digital projection Systems, respectively, for an aggregate sales price of approximately $5.6 million and $195.0 thousand, and recognized revenue of $5.6 million and $76.2 thousand, during the three months ended June 30, 2021 and 2020, respectively.

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

Exhibitors who purchased and own Systems using their own financing in the Cinema Equipment Business paid us an upfront activation fee of approximately $2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $1.0 thousand and $2.0 thousand on Phase II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 4 - Other Interests) upon installation and such fees are generally collected upfront upon installation. Our services division manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.

The Cinema Equipment Business earns an administrative fee of approximately 5% of VPFs collected and, in addition, earns an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 DC. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at that time the related VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the movie studios and distributors.

Content & Entertainment Business

CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”)   on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the performance obligation is satisfied which is when the content is available for subscription on the digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation. Physical Revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

Physical goods reserves for sales returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

CEG also has contracts for the theatrical distribution of third party feature movies and alternative content. CEG’s distribution fee revenue and CEG’s participation in box office receipts is recognized at the time a feature movie and alternative content are viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date.

Principal Agent Considerations

We determine whether revenue should be reported on a gross or net basis for each revenue stream based on the transfer of control of goods and services. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:

● which party is primarily responsible for fulfilling the promise to provide the specified good or service; and

● which party has discretion in establishing the price for the specified good or service.

Shipping and Handling

Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Contract Liabilities

We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.

We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

Our CEG segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances is variable consideration as part of the transaction price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

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.

Deferred revenue pertaining to our Content & Entertainment Business includes amounts related to the sale of DVDs with future release dates.

Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms.

The ending deferred revenue balance, including current and non-current balances, as of June 30, 2021 was $0.4 million. For the three months ended June 30, 2021 and 2020, respectively, 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, 2021 and 2020, $0.5 million and $0.6 million, respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. As of June 30, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $0.4 million. We expect to recognize this balance in full by September 30, 2021.

Participations and royalties payable

When we use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.

Disaggregation of Revenue

The Company disaggregates revenue into different revenue categories for the Cinema Equipment and CEG Businesses. The Cinema Equipment Business revenue categories are: Phase I Deployment revenue, Phase II Deployment revenue, Services, and Digital System Sales, and the Content & Entertainment Business revenue categories are: Base Distribution Business and OTT Streaming and Digital.

The following tables present the Company’s revenue categories for the three months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,
	2021		2020
Cinema Equipment Business:
Phase I Deployment	$	91	$	31
Phase II Deployment		386		398
Services		179		100
Digital System Sales		5,575		76
Total Cinema Equipment Business revenue	$	6,231	$	605
Content & Entertainment Business:
Base Distribution Business	$	1,778	$	2,157
OTT Streaming and Digital		7,006		3,256
Total Content & Entertainment Business revenue	$	8,784	$	5,413

DIRECT OPERATING COSTS

DIRECT OPERATING COSTS

Direct operating costs consist of operating costs such as cost of goods sold, fulfillment expenses, shipping costs, property taxes and insurance on Systems, royalty expenses, impairments of advances, and marketing and direct personnel costs.

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock units and performance stock units. The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors.

INCOME TAXES

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.

Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized. The Company is primarily subject to income taxes in the United States.

The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions.

NET INCOME/LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

NET INCOME/LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic and diluted net loss per common share has been calculated as follows:

Basic and diluted net loss per common share attributable to common stockholders	=	Net loss attributable to common stockholders
		Weighted average number of common stock outstanding during the period

Stock issued and treasury stock repurchased during the period are weighted for the portion of the period that they are outstanding. Shares issued and any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding.

We incurred net income for the three months ended June 30, 2021, and therefore the impact of potentially dilutive common shares from outstanding stock options, stock appreciation rights, and warrants, totaling 2,003,235 shares for the three months ended June 30, 2021, respectively, were included in the computations of diluted earnings per share. The calculation of diluted net income per share for the three months ended June 30, 2021 does not include the impact of 9,616,429 potentially dilutive shares relating to stock options, stock appreciation rights, and warrants as their impact would have been anti-dilutive.

We incurred net losses for the three months ended June 30, 2020, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 3,940,138 shares as of June 30, 2020, respectively, were excluded from the computations of loss per share as their impact would have been anti-dilutive.

COMPREHENSIVE LOSS

COMPREHENSIVE LOSS

As of the three months ended June 30, 2021 and 2020, comprehensive loss consisted of net loss and foreign currency translation adjustments.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Adopted

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. The Company adopted this guidance on April 1, 2021 and the adoption of this ASU did not have a material impact on our consolidated financial statements.

Not yet adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how the Company determines its allowance for estimated uncollectible receivables and evaluates its available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of fiscal 2023. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Schedule of cash, cash equivalents and restricted cash

	As of
(in thousands)	June 30, 2021		March 31, 2021
Cash and Cash Equivalents	$	13,355	$	16,849
Restricted Cash		1,000		1,000
	$	14,355	$	17,849

Schedule of estimated useful lives of property and equipment

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

Schedule of fair value measurements of financial assets

As of June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,777		—		—		6,777
	$	7,777	$	—		—	$	7,777

As of March 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Restricted cash	$	1,000	$	—	$	—	$	1,000
Equity investment in Starrise, at fair value		6,443		—		—		6,443
	$	7,443	$	—	$	—	$	7,443

Schedule of goodwill

(In thousands)
Goodwill, net at March 31, 2021	$	8,701
Goodwill from business combination – see Note 5		2,037
Goodwill  , net at June 30, 2021	$	10,738

Schedule of revenue categories

	Three Months Ended June 30,
	2021		2020
Cinema Equipment Business:
Phase I Deployment	$	91	$	31
Phase II Deployment		386		398
Services		179		100
Digital System Sales		5,575		76
Total Cinema Equipment Business revenue	$	6,231	$	605
Content & Entertainment Business:
Base Distribution Business	$	1,778	$	2,157
OTT Streaming and Digital		7,006		3,256
Total Content & Entertainment Business revenue	$	8,784	$	5,413

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Business Combination (Tables)

3 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Schedule of acquired intangible assets

Purchase Price
Purchase Price	$	5,237
Total purchase price	$	5,237
Allocation of purchase price
Developed technology		3,200
Goodwill		2,037
Total allocation of purchase price	$	5,237

Schedule of amortization expense per year for the developed technology acquired in the business combination

2022 (remaining)	$	240
2023		320
2024		320
2025		320
2026		320
2027		320
2028		320
2029		320
2030		320
2031		320
2032		80
Total	$	3,200

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Notes Payable (Tables)

3 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Schedule of notes payable

	June 30, 2021				March 31, 2021
(In thousands)	Current Portion		Long Term Portion		Current Portion		Long Term Portion
Prospect Loan	$	3,031	$	—	$	7,786	$	—
Total non-recourse notes payable		3,031		—		7,786		—
Total non-recourse notes payable, net of unamortized debt issuance costs and debt discounts	$	3,031	$	—	$	7,786	$	—
Credit Facility	$	387	$	—	$	1,956	$	—
PPP Loan		—		—		—		2,152
Total recourse notes payable		387		—		1,956		2,152
Total recourse notes payable, net of unamortized debt issuance costs and debt discounts	$	387	$	—	$	1,956	$	2,152
Total notes payable, net of unamortized debt issuance costs	$	3,418	$	—	$	9,742	$	2,152

Schedule of debt outstanding

	As of
(In thousands)	June 30, 2021			March 31, 2021
Prospect Loan, at issuance	$	70,000		$	70,000
PIK Interest		6,397			6,397
Payments to date		(73,366	)		(68,611	)
Prospect Loan, gross	$	3,031		$	7,786
Less unamortized debt issuance costs and debt discounts		—			—
Prospect Loan, net		3,031			7,786
Less current portion		(3,031	)		(7,786	)
Total long term portion	$	—		$	—

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Stockholders' Equity (Tables)

3 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

Schedule of analysis of option activity

As of June 30, 2021
Range of Prices		Options Outstanding		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
	$7.40 - $13.69		5,000		4.00	$	7.40	$	-
	$13.70 - $24.40		249,087		1.87		14.69		-
	$24.41 - 30.00		7,500		0.13		30.00		-
			261,587					$	-

Options Exercisable		Weighted Average Remaining Life in Years		Weighted Average Exercise Price		Aggregate Intrinsic Value (In thousands)
	261,587		1.86	$	14.99		—

Schedule of stock-based compensation expense

	Three Months Ended June 30,
(In thousands)	2021		2020
Selling, general and administrative	$	983	$	177
	$	983	$	177

Schedule of SARs outstanding

	Three Months Ended June 30, 2021
SARs Outstanding March 31, 2021		9,154,933
Issued		584,000
Forfeited		(91,875	)
Total SARs Outstanding June 30, 2021		9,647,058

Schedule of warrants

Recipient	Amount outstanding		Expiration	Exercise price per share
Strategic management service provider		52,500	July 2021	$	17.20 - 30.00
Warrants issued in connection with Convertible Notes exchange transaction		246,019	December 2021	$	1.30
5-year Warrant issued to BEMG in connection with a term loan agreement		1,400,000	December 2022	$	1.80

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Commitments and Contingencies (Tables)

3 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Schedule of lease-related assets and liabilities

(In thousands)	Classification on the Balance Sheet	June 30, 2021
Assets
Noncurrent	Operating lease right-of-use asset	$	66
Liabilities
Current	Operating leases - current portion		58
Noncurrent	Operating leases - long-term portion		8
Total operating lease liabilities		$	66

Schedule of lease costs

	Year Ended
(In thousands)	June 30, 2021
Operating lease cost	$	22
Total lease cost	$	22

	Year Ended
(In thousands)	June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities		22
Operating cash flows used for operating leases	$	22

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Jun. 30, 2021

Supplemental Cash Flow Elements [Abstract]

Schedule of supplemental cash flows

	Three Months Ended June 30,
(In thousands)	2021		2020
Cash interest paid	$	663	$	25
noncash investing and financing activities:
Accrued dividends on preferred stock		89		89
Issuance of Class A common stock for payment of accrued preferred stock dividends		—		89
Issuance of Class A common stock to Starrise, a related party		—		11,046
Contributed capital under the Starrise transaction, a related party		—		17,187
Settlement of second lien loan with Class A common stock		—		757
Issuance of Class A common stock for business combination		2,506		—
Starrise shares used to pay down vendors		—		335
Forgiveness of PPP loan		2,152		—
Deferred consideration in purchase of a business		1,980		—
Preferred stock dividends paid with common stock		89		—

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Segment Information (Tables)

3 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Schedule of segment reporting, assets and debt

	As of June 30, 2021
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	14,038	$	387	$	—	$	1
Content & Entertainment Business		12,213		10,738		50,534		—		—		40
Corporate		—		—		16,065		—		3,031		25
Total	$	12,213	$	10,738	$	80,637	$	387	$	3,031	$	66

	As of March 31, 2021
(In thousands)	Intangible Assets, net		Goodwill		Total Assets		Notes Payable, Non- Recourse		Notes Payable		Operating lease liabilities
Cinema Equipment Business	$	—	$	—	$	13,169	$	7,786	$	—	$	1
Content & Entertainment Business		9,858		8,701		42,733		—		—		69
Corporate		2		—		19,544		—		4,108		30
Total	$	9,860	$	8,701	$	75,446	$	7,786	$	4,108	$	100

Schedule of segment reporting, statement of operations

	Statements of Operations
	Three Months Ended June 30, 2021
	(in thousands)
	Cinema Equipment Business		Content & Entertainment Business			Corporate			Consolidated
Revenues	$	6,231	$	8,784		$	—		$	15,015
Direct operating (exclusive of depreciation and amortization shown below)		257		4,374			—			4,631
Selling, general and administrative		429		2,818			2,796			6,043
Allocation of corporate overhead		99		660			(759	)		—
Provision for doubtful accounts		27		44			—			71
Depreciation and amortization of property and equipment		507		143			(1	)		649
Amortization of intangible assets		—		845			1			847
Total operating expenses		1,319		8,884			2,037			12,241
Income (loss) from operations	$	4,912	$	(100	)	$	(2,037	)	$	2,774

	Statements of Operations
	Three Months Ended June 30, 2020 (in thousands)
	Cinema Equipment Business			Content & Entertainment			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		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	$	(1,661	)	$	(488	)	$	(506	)	$	(2,615	)

Schedule of segment reporting, employee stock-based compensation expense

(In thousands)	Cinema Equipment Business		Content & Entertainment Business		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—
Selling, general and administrative		—		166		817		983
Total stock-based compensation	$	—	$	166	$	817	$	983

	Cinema Equipment Business		Content & Entertainment		Corporate		Consolidated
Direct operating	$	—	$	—	$	—	$	—
Selling, general and administrative		—		26		151		177
Total stock-based compensation	$	—	$	26	$	151	$	177

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Nature of Operations and Liquidity (Details) $ in Millions		1 Months Ended				3 Months Ended
	Apr. 10, 2020 shares	Mar. 17, 2021 USD ($) shares	Apr. 15, 2020 USD ($)	Feb. 14, 2020 shares	Dec. 27, 2019 shares	Jun. 30, 2021 USD ($) shares	Jul. 09, 2021 USD ($)	Apr. 30, 2021 USD ($)
Nature of Operations and Liquidity [Abstract]
Number of movie theatres						6,200
Accumulated deficit						$ (469.0)
Working capital						9.5
Net cash used in operating activities						3.6
Aggregate principal amount								$ 7.8
Agreements included the sale in tranches (in Shares) | shares		2,369
cash consideration		$ 10.8
Recognized revenue						5.6
Maturity description					As previously announced, 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”), a related party for accounting purposes of Cinedigm 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”).
Aggregate of outstanding starrise ordinary shares (in Shares) | shares					410,901,000
Number of shares acquired (in Shares) | shares				162,162,162
Starrise shares received amount						25.0
Starrise shares issued amount						$ 11.2
Converted aggregate description	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, all of which are related parties to the Company 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 as consideration therefor (the “April Share Acquisition”).
Common stock, capital shares reserved for future issuance (in Shares) | shares	29,855,081
Stock purchase agreement, description						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 0.13 per share on August 26, 2021, 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 $6.1 million.
Proceeds from PPP loan			$ 2.2
Interest rate			1.00%
Borrowings [Member]
Nature of Operations and Liquidity [Abstract]
Aggregate principal amount								$ 7.8
Borrowings [Member] | Subsequent Event [Member]
Nature of Operations and Liquidity [Abstract]
Aggregate principal amount							$ 7.8
BeiTai [Member]
Nature of Operations and Liquidity [Abstract]
Number of shares issued for acquisition (in Shares) | shares				21,646,604
Bison Note Payable [Member]
Nature of Operations and Liquidity [Abstract]
Aggregate of outstanding starrise ordinary shares (in Shares) | shares	223,380,000
Class A Common Stock [Member]
Nature of Operations and Liquidity [Abstract]
Issuance of common stock and warrants in connection with debt instruments (in Shares) | shares						2,200,000

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Summary of Significant Accounting Policies (Details)		1 Months Ended	3 Months Ended			12 Months Ended
	Apr. 10, 2020 USD ($)	Feb. 14, 2020 USD ($)	Jun. 30, 2021 USD ($) shares	Mar. 31, 2021 shares	Jun. 30, 2020 USD ($) shares	Mar. 31, 2020 USD ($)
Summary of Significant Accounting Policies (Details) [Line Items]
Initial investment	$ 28,200,000	$ 25,100,000
Impairment accelerated amortization			$ 200,000		$ 200,000
Foreign currency exchange rate, translation			7.8	7.8
Debt instrument, fair value disclosure			$ 3,000,000.0
Aggregate sales price of systems			5,600,000		195,000.0
Recognized revenue			5,600,000		76,200
Activation fee revenue, per screen			2,000.0
Activation fee revenue range, minimum			1,000.0
Activation fee revenue range, maximum			2,000.0
Deferred revenue balance			400,000
Deferred revenue			500,000		$ 600,000
Unsatisfied performance obligations			$ 400,000
Tax benefit percentage			50.00%
Warrants of right shares (in Shares) | shares			2,003,235
Potentially dilutive shares			9,616,429
Stock options and warrants (in Shares) | shares			3,940,138
Phase I Deployment [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Number of systems installed			2,519
Phase II Deployment [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Number of systems installed			3,025
Starrise [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Ownership percentage	15.00%	11.50%
Shares owned (in Shares) | shares			362,307,397	362,307,397
Shares percentage			26.00%	26.00%
Shares outstanding (in Shares) | shares					9,006,215
Common Class A [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Issuance of shares for asset acquisition	$ 11,000,000.0	$ 11,200,000
Services [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Administrative fee VPFs			5.00%
Incentive fees, percentage of VPF Phase I			2.50%
Stock Exchange of Hong Kong Limited [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Change in fair value			$ 300,000		$ 15,800,000
Stock Exchange of Hong Kong Limited [Member] | Starrise [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Change in fair value			$ 6,700,000			$ 6,400,000
Up-front Payment Arrangement [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Administrative fee VPFs			10.00%

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Summary of Significant Accounting Policies (Details) - Schedule of cash, cash equivalents and restricted cash - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Schedule of cash, cash equivalents and restricted cash [Abstract]
Cash and Cash Equivalents	$ 13,355	$ 16,849
Restricted Cash	1,000	1,000
Total	$ 14,355	$ 17,849

XML

Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives of property and equipment	3 Months Ended
	Jun. 30, 2021
Internal use software [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	5 years
Digital cinema projection systems [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	10 years
Minimum [Member] | Computer equipment and software [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	3 years
Minimum [Member] | Machinery and equipment [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	3 years
Minimum [Member] | Furniture and fixtures [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	3 years
Maximum [Member] | Computer equipment and software [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	5 years
Maximum [Member] | Machinery and equipment [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	10 years
Maximum [Member] | Furniture and fixtures [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Property and equipment estimated useful lives	6 years

XML

Summary of Significant Accounting Policies (Details) - Schedule of fair value measurements of financial assets - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Summary of Significant Accounting Policies (Details) - Schedule of fair value measurements of financial assets [Line Items]
Restricted cash	$ 1,000	$ 1,000
Equity investment in Starrise, at fair value	6,777	6,443
Total	7,777	7,443
Level 1 [Member]
Summary of Significant Accounting Policies (Details) - Schedule of fair value measurements of financial assets [Line Items]
Restricted cash	1,000	1,000
Equity investment in Starrise, at fair value	6,777	6,443
Total	7,777	7,443
Level 2 [Member]
Summary of Significant Accounting Policies (Details) - Schedule of fair value measurements of financial assets [Line Items]
Restricted cash
Equity investment in Starrise, at fair value
Total
Level 3 [Member]
Summary of Significant Accounting Policies (Details) - Schedule of fair value measurements of financial assets [Line Items]
Restricted cash
Equity investment in Starrise, at fair value
Total

XML

Summary of Significant Accounting Policies (Details) - Schedule of goodwill - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2021	Mar. 31, 2021
Schedule of goodwill [Abstract]
Goodwill gross ending balance	$ 10,738	$ 8,701
Goodwill from business combination – see Note 5	$ 2,037

XML

Summary of Significant Accounting Policies (Details) - Schedule of revenue categories - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cinema Equipment Business [Member]
Cinema Equipment Business:
Total Cinema Equipment Business revenue	$ 6,231	$ 605
Content & Entertainment Business [Member]
Content & Entertainment Business:
Total Content & Entertainment Business revenue	8,784	5,413
Phase I Deployment [Member] | Cinema Equipment Business [Member]
Cinema Equipment Business:
Total Cinema Equipment Business revenue	91	31
Phase II Deployment [Member] | Cinema Equipment Business [Member]
Cinema Equipment Business:
Total Cinema Equipment Business revenue	386	398
Services [Member] | Cinema Equipment Business [Member]
Cinema Equipment Business:
Total Cinema Equipment Business revenue	179	100
Digital System Sales [Member] | Cinema Equipment Business [Member]
Cinema Equipment Business:
Total Cinema Equipment Business revenue	5,575	76
Base Distribution Business [Member] | Content & Entertainment Business [Member]
Content & Entertainment Business:
Total Content & Entertainment Business revenue	1,778	2,157
OTT Streaming and Digital [Member] | Content & Entertainment Business [Member]
Content & Entertainment Business:
Total Content & Entertainment Business revenue	$ 7,006	$ 3,256

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Other Interests (Details) - USD ($)	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2021
CDF2 Holdings [Member]
Other Interests [Abstract]
Digital cinema servicing revenue	$ 77,000	$ 9,000
CDF2 Holdings [Member]
Other Interests [Abstract]
Ownership percentage	100.00%
Accounts receivable	$ 400,000		$ 300,000
Total Stockholders’ Deficit	49,600,000		46,300,000
Initial investment amount	$ 2,000,000.0		$ 0
CON TV, LLC [Member]
Other Interests [Abstract]
Majority interest, percentage	85.00%

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Business Combination (Details) - USD ($) $ in Thousands		3 Months Ended
	May 12, 2021	Jun. 30, 2021
Business Combination (Details) [Line Items]
Description of stock purchase agreement	On May 12, 2021, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with FoundationTV, Inc. (“FoundationTV”), to buy all of FoundationTV´s issued and outstanding stock in consideration of an aggregate of $5.2 million, of which $0.7 million was paid in cash and 1,483,129 shares of Class A common stock, which were valued at $2.5 million, were issued at closing stock price of $1.69 on the closing date of June 9, 2021, and an additional $2.0 million will be paid in eight equal installments of one installment on each six month anniversary of closing over forty-eight months, and a final lump sum payment of $225 thousand on the four year anniversary of the closing; reduced by $0.2 million settlement of a prior relationship.
Incurred transaction cost		$ 36
Short-term payable		500
Long-term payable		$ 1,500
Developed Technology [Member]
Business Combination (Details) [Line Items]
Useful life		10 years

XML

Business Combination (Details) - Schedule of acquired intangible assets $ in Thousands	Jun. 30, 2021 USD ($)
Purchase Price
Purchase Price	$ 5,237
Total purchase price	5,237
Allocation of purchase price
Developed technology	3,200
Goodwill	2,037
Total allocation of purchase price	$ 5,237

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Business Combination (Details) - Schedule of amortization expense per year for the developed technology acquired in the business combination $ in Thousands	Jun. 30, 2021 USD ($)
Schedule of amortization expense per year for the developed technology acquired in the business combination [Abstract]
2022 (remaining)	$ 240
2023	320
2024	320
2025	320
2026	320
2027	320
2028	320
2029	320
2030	320
2031	320
2032	80
Total	$ 3,200

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Notes Payable (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended
	Apr. 15, 2020	Feb. 28, 2013	Jun. 30, 2021	Mar. 31, 2021	Mar. 31, 2020	Mar. 30, 2018
Notes Payable (Details) [Line Items]
Debt face amount			$ 70,000	$ 70,000
Restricted cash			1,000	1,000
Current portion gross			3,418	9,742
Proceeds from issuance of debt	$ 2,200
CDCH [Member]
Notes Payable (Details) [Line Items]
Principal amount loan			3,500,000
Prospect Loan [Member]
Notes Payable (Details) [Line Items]
Restricted cash			1,000		$ 1,000
Line of Credit [Member]
Notes Payable (Details) [Line Items]
Maximum borrowing capacity				18,000
Current portion gross			400	2,000
Remaining borrowing capacity				8,100
Prospect Loan [Member]
Notes Payable (Details) [Line Items]
Debt face amount		$ 70,000
Basis spread on variable rate		9.00%
Debt interest rate		2.50%
Debt instrument maximum amount of support			1,500
Current portion gross			$ 3,031	$ 7,786
Prospect Loan [Member] | London Interbank Offered Rate (LIBOR) [Member]
Notes Payable (Details) [Line Items]
Debt variable rate basis floor		2.00%
Revolving Credit Facility [Member]
Notes Payable (Details) [Line Items]
Maximum borrowing capacity						$ 19,000
Convertible Notes Payable [Member]
Notes Payable (Details) [Line Items]
Debt interest rate	1.00%
Proceeds from issuance of debt	$ 2,200
Debt Instrument, Prepayment Period - Between Second And Third Anniversary [Member] | Prospect Loan [Member]
Notes Payable (Details) [Line Items]
Prepayment premium			5.00%
Debt Instrument, Prepayment Period - Between Third and Fourth Anniversary [Member] | Prospect Loan [Member]
Notes Payable (Details) [Line Items]
Prepayment premium			4.00%
Debt Instrument, Prepayment Period - Between Fourth and Fifth Anniversary [Member] | Prospect Loan [Member]
Notes Payable (Details) [Line Items]
Prepayment premium			3.00%
Debt Instrument, Prepayment Period - Between Fifth and Sixth Anniversary [Member] | Prospect Loan [Member]
Notes Payable (Details) [Line Items]
Prepayment premium			2.00%
Debt Instrument, Prepayment Period - Between Sixth and Seventh Anniversary [Member] | Prospect Loan [Member]
Notes Payable (Details) [Line Items]
Prepayment premium			1.00%
Prime Rate [Member] | Cinedigm Credit Facility [Member] | Revolving Credit Facility [Member]
Notes Payable (Details) [Line Items]
Basis spread on variable rate			0.50%
London Interbank Offered Rate (LIBOR) [Member] | Cinedigm Credit Facility [Member] | Revolving Credit Facility [Member]
Notes Payable (Details) [Line Items]
Basis spread on variable rate			3.25%

XML

Notes Payable (Details) - Schedule of notes payable - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Debt Instrument [Line Items]
Current portion, gross	$ 3,418	$ 9,742
Long term portion, gross		2,152
PPP Loan [Member]
Debt Instrument [Line Items]
Current portion, gross
Long term portion, gross		2,152
Recourse Notes Payable [Member]
Debt Instrument [Line Items]
Current portion, gross	387	1,956
Long term portion, gross		2,152
Current portion	387	1,956
Long term portion		2,152
Prospect Loan [Member]
Debt Instrument [Line Items]
Current portion, gross	3,031	7,786
Long term portion, gross
Current portion	3,031	7,786
Long term portion
Prospect Loan [Member] | Non-recourse Notes Payable [Member]
Debt Instrument [Line Items]
Current portion, gross	3,031	7,786
Long term portion, gross
Credit Facility [Member]
Debt Instrument [Line Items]
Current portion, gross	387	1,956
Long term portion, gross

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Notes Payable (Details) - Schedule of debt outstanding - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Schedule of debt outstanding [Abstract]
Prospect Loan, at issuance	$ 70,000	$ 70,000
PIK Interest	6,397	6,397
Payments to date	(73,366)	(68,611)
Prospect Loan, gross	3,031	7,786
Less unamortized debt issuance costs and debt discounts
Prospect Loan, net	3,031	7,786
Less current portion	(3,031)	(7,786)
Total long term portion

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Stockholders' Equity (Details) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended		12 Months Ended
	May 31, 2021 shares	Oct. 31, 2013 $ / shares shares	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($) $ / shares shares	Mar. 31, 2021 shares	Oct. 23, 2020 shares	Dec. 04, 2019 shares	Aug. 31, 2017 shares
Stockholders' Equity (Details) [Line Items]
Dividends preferred stock (in Dollars) | $			$ 100		$ 100
Stock Dividends	53,278
Treasury stock			1,313,836			1,313,836
Share-based Payment arrangement, option, exercise price range, shares outstanding			261,587
Granted shares			584,000
Maturity date			10 years
Gaiam Americas, Inc. and Gaiam, Inc. GVE [Member]
Stockholders' Equity (Details) [Line Items]
Number of employees joining company following acquisition		10
Shares under option, granted		62,000
Weighted average exercise price per share, granted (in Dollars per share) | $ / shares		$ 17.50
Share-based compensation arrangement by share-based payment award, options, outstanding, number			12,500
Board of Directors [Member]
Stockholders' Equity (Details) [Line Items]
Shares issued			35,714
SARs [Member]
Stockholders' Equity (Details) [Line Items]
Stock based compensation (in Dollars) | $			$ 856	$ 110
Board of Directors [Member]
Stockholders' Equity (Details) [Line Items]
Stock based compensation (in Dollars) | $			126	66
Restricted Stock Awards [Member]
Stockholders' Equity (Details) [Line Items]
Stock based compensation (in Dollars) | $			$ 1	$ 1
Class A Common Stock [Member]
Stockholders' Equity (Details) [Line Items]
Shares of common stock			1,536,407
Treasury stock			1,313,836			1,313,836
Common stock, shares authorized			200,000,000			200,000,000
Minimum [Member]
Stockholders' Equity (Details) [Line Items]
Fair value common stock per share (in Dollars per share) | $ / shares			$ 1.29
Volatility percentage			94.56%
Discount rate percentage			1.50%
Maximum [Member]
Stockholders' Equity (Details) [Line Items]
Fair value common stock per share (in Dollars per share) | $ / shares			$ 1.37
Volatility percentage			94.63%
Discount rate percentage			1.63%
Cinedigm Equity Incentive Plan [Member]
Stockholders' Equity (Details) [Line Items]
Percent voting power threshold			10.00%
Exercise price if voting threshold is met, percent			110.00%
Cinedigm Equity Incentive Plan [Member] | Class A Common Stock [Member]
Stockholders' Equity (Details) [Line Items]
Number of shares authorized			2,380,000
Share-based Payment arrangement, option, exercise price range, shares outstanding			261,587		261,587
Share-based payment arrangement, option, exercise price range, outstanding, weighted average exercise price (in Dollars per share) | $ / shares			$ 14.99		$ 14.99
Options outstanding, weighted average remaining contractual term			1 year 10 months 9 days		2 years 1 month 9 days
2017 Plan [Member] | Class A Common Stock [Member]
Stockholders' Equity (Details) [Line Items]
Number of shares authorized								4,098,270	2,108,270
2017 Plan [Member] | Minimum [Member]
Stockholders' Equity (Details) [Line Items]
Common stock, shares authorized							4,098,270
2017 Plan [Member] | Maximum [Member]
Stockholders' Equity (Details) [Line Items]
Common stock, shares authorized							14,098,270
Stock option [Member] | Gaiam Americas, Inc. and Gaiam, Inc. GVE [Member]
Stockholders' Equity (Details) [Line Items]
Aware expiration period		10 years

XML

Stockholders' Equity (Details) - Schedule of analysis of option activity	3 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Options Outstanding (in Shares) | shares	261,587
Aggregate Intrinsic Value (in Dollars) | $
$7.40 - $13.69 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Range of Prices, Minimum	$ 7.40
Range of Prices, Maximum	$ 13.69
Options Outstanding (in Shares) | shares	5,000
Weighted Average Remaining Life in Years	4 years
Weighted Average Exercise Price	$ 7.40
Aggregate Intrinsic Value (in Dollars) | $
$13.70 - $24.40 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Range of Prices, Minimum	$ 13.70
Range of Prices, Maximum	$ 24.40
Options Outstanding (in Shares) | shares	249,087
Weighted Average Remaining Life in Years	1 year 10 months 13 days
Weighted Average Exercise Price	$ 14.69
Aggregate Intrinsic Value (in Dollars) | $
$24.41 - 30.00 [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Range of Prices, Minimum	$ 24.41
Range of Prices, Maximum	$ 30.00
Options Outstanding (in Shares) | shares	7,500
Weighted Average Remaining Life in Years	1 month 17 days
Weighted Average Exercise Price	$ 30.00
Aggregate Intrinsic Value (in Dollars) | $
Options Exercisable [Member]
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years	1 year 10 months 9 days
Weighted Average Exercise Price	$ 14.99
Options Exercisable (in Shares) | shares	261,587

XML

Stockholders' Equity (Details) - Schedule of stock-based compensation expense - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Stockholders' Equity (Details) - Schedule of stock-based compensation expense [Line Items]
Selling, general and administrative	$ 983	$ 177
Selling, general and administrative [Member]
Stockholders' Equity (Details) - Schedule of stock-based compensation expense [Line Items]
Selling, general and administrative	$ 983	$ 177

XML

Stockholders' Equity (Details) - Schedule of SARs outstanding	3 Months Ended
	Jun. 30, 2021 shares
Schedule of SARs outstanding [Abstract]
SARs Outstanding March 31, 2021	9,154,933
Issued	584,000
Forfeited	(91,875)
Total SARs Outstanding June 30, 2021	9,647,058

XML

Stockholders' Equity (Details) - Schedule of warrants	3 Months Ended
	Jun. 30, 2021 $ / shares shares
Strategic management service provider [Member]
Class of Warrant or Right [Line Items]
Amount outstanding (in Shares) | shares	52,500
Expiration	2021-07
Strategic management service provider [Member] | Minimum [Member]
Class of Warrant or Right [Line Items]
Exercise price per share	$ 17.20
Strategic management service provider [Member] | Maximum [Member]
Class of Warrant or Right [Line Items]
Exercise price per share	$ 30.00
Warrants issued in connection with Convertible Notes exchange transaction [Member]
Class of Warrant or Right [Line Items]
Amount outstanding (in Shares) | shares	246,019
Expiration	2021-12
Exercise price per share	$ 1.30
BEMG in connection with a term loan agreement [Member]
Class of Warrant or Right [Line Items]
Amount outstanding (in Shares) | shares	1,400,000
Expiration	2022-12
Exercise price per share	$ 1.80

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Commitments and Contingencies (Details) - Schedule of lease-related assets and liabilities - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Assets
Noncurrent	$ 66	$ 100
Liabilities
Current	58	87
Noncurrent	8	$ 13
Total operating lease liabilities	$ 66

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Commitments and Contingencies (Details) - Schedule of lease costs $ in Thousands	3 Months Ended
	Jun. 30, 2021 USD ($)
Schedule of lease costs [Abstract]
Operating lease cost	$ 22
Total lease cost	22
Cash paid for amounts included in the measurement of lease liabilities	22
Operating cash flows used for operating leases	$ 22

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Supplemental Cash Flow Information (Details) - Schedule of supplemental cash flows - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Schedule of supplemental cash flows [Abstract]
Cash interest paid	$ 663	$ 25
noncash investing and financing activities:
Accrued dividends on preferred stock	89	89
Issuance of Class A common stock for payment of accrued preferred stock dividends		89
Issuance of Class A common stock to Starrise, a related party		11,046
Contributed capital under the Starrise transaction, a related party		17,187
Settlement of second lien loan with Class A common stock		757
Issuance of Class A common stock for business combination	2,506
Starrise shares used to pay down vendors		335
Forgiveness of PPP loan	2,152
Deferred consideration in purchase of a business	1,980
Preferred stock dividends paid with common stock	$ 89

XML

Segment Information (Details)	3 Months Ended
	Jun. 30, 2021
Segment Information (Details) [Line Items]
Number of reportable segments	2
Phase I Deployment [Member]
Segment Information (Details) [Line Items]
Number of systems installed	2,519
Phase II Deployment [Member]
Segment Information (Details) [Line Items]
Number of systems installed	3,025

XML

Segment Information (Details) - Schedule of segment reporting, assets and debt - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Segment Information (Details) - Schedule of segment reporting, assets and debt [Line Items]
Intangible Assets, net	$ 12,213	$ 9,860
Goodwill	10,738	8,701
Total Assets	80,637	75,446
Notes Payable, Non-Recourse	387	7,786
Notes Payable	3,031	4,108
Operating lease liabilities	66	100
Cinema Equipment Business [Member]
Segment Information (Details) - Schedule of segment reporting, assets and debt [Line Items]
Intangible Assets, net
Goodwill
Total Assets	14,038	13,169
Notes Payable, Non-Recourse	387	7,786
Notes Payable
Operating lease liabilities	1	1
Content & Entertainment Business [Member]
Segment Information (Details) - Schedule of segment reporting, assets and debt [Line Items]
Intangible Assets, net	12,213	9,858
Goodwill	10,738	8,701
Total Assets	50,534	42,733
Notes Payable, Non-Recourse
Notes Payable
Operating lease liabilities	40	69
Corporate [Member]
Segment Information (Details) - Schedule of segment reporting, assets and debt [Line Items]
Intangible Assets, net		2
Goodwill
Total Assets	16,065	19,544
Notes Payable, Non-Recourse
Notes Payable	3,031	4,108
Operating lease liabilities	$ 25	$ 30

XML

Segment Information (Details) - Schedule of segment reporting, statement of operations - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Segment Reporting Information [Line Items]
Revenues	$ 15,015	$ 6,018
Direct operating (exclusive of depreciation and amortization shown below)	4,631	2,679
Selling, general and administrative	6,043	3,840
Allocation of corporate overhead
Provision for doubtful accounts	71
Depreciation and amortization of property and equipment	649	1,524
Amortization of intangible assets	847	590
Total operating expenses	12,241	8,633
Income (loss) from operations	2,774	(2,615)
Cinema Equipment Business [Member]
Segment Reporting Information [Line Items]
Revenues	6,231	605
Direct operating (exclusive of depreciation and amortization shown below)	257	182
Selling, general and administrative	429	549
Allocation of corporate overhead	99	124
Provision for doubtful accounts	27
Depreciation and amortization of property and equipment	507	1,403
Amortization of intangible assets		8
Total operating expenses	1,319	2,266
Income (loss) from operations	4,912	(1,661)
Content & Entertainment Business [Member]
Segment Reporting Information [Line Items]
Revenues	8,784	5,413
Direct operating (exclusive of depreciation and amortization shown below)	4,374	2,497
Selling, general and administrative	2,818	1,895
Allocation of corporate overhead	660	784
Provision for doubtful accounts	44
Depreciation and amortization of property and equipment	143	103
Amortization of intangible assets	845	582
Total operating expenses	8,884	5,861
Income (loss) from operations	(100)	(488)
Corporate [Member]
Segment Reporting Information [Line Items]
Revenues
Direct operating (exclusive of depreciation and amortization shown below)
Selling, general and administrative	2,796	1,396
Allocation of corporate overhead	(759)	(908)
Provision for doubtful accounts
Depreciation and amortization of property and equipment	(1)	18
Amortization of intangible assets	1
Total operating expenses	2,037	506
Income (loss) from operations	$ (2,037)	$ (506)

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Segment Information (Details) - Schedule of segment reporting, employee stock-based compensation expense - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation	$ 983	$ 177
Cinema Equipment Business [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation
Content & Entertainment Business [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation	166	26
Corporate [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation	817	151
Direct operating [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation
Direct operating [Member] | Cinema Equipment Business [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation
Direct operating [Member] | Content & Entertainment Business [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation
Direct operating [Member] | Corporate [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation
Selling, general and administrative [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation	983	177
Selling, general and administrative [Member] | Cinema Equipment Business [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation
Selling, general and administrative [Member] | Content & Entertainment Business [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation	166	26
Selling, general and administrative [Member] | Corporate [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total stock-based compensation	$ 817	$ 151

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Income Taxes (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Mar. 27, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Income tax expense		$ 63	$ 0
Effective tax rate percentage		1.20%	0.00%
Income tax description	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.

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Subsequent Event (Details) - Subsequent Event [Member] $ in Millions	Jul. 09, 2021 USD ($)
Subsequent Event (Details) [Line Items]
Paying principal amount	$ 7.8
Loan payable	$ 3.1