10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2018.

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

For the transition period from ________ to ________.

Commission File Number 001-35675

RLJ ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Nevada	45-4950432
(State or other jurisdiction of incorporation)	(IRS Employer Identification Number)
8515 Georgia Avenue, Suite 650 Silver Spring, Maryland	20910
(Address of principal executive offices)	(Zip Code)
(301) 608-2115 (Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES ☒    NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an 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. (Check one):

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☒
			Emerging growth company	☐

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.   ☐

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

Number of shares outstanding of the issuer’s common stock on August 2, 2018:  15,614,607

RLJ ENTERTAINMENT, INC.

INDEX TO FORM 10-Q

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements  (Unaudited)
	(a)	Consolidated Balance Sheets — June 30, 2018 and December 31, 2017	4
	(b)	Consolidated Statements of Operations — Three and Six Months Ended June 30, 2018 and 2017	5
	(c)	Consolidated Statements of Comprehensive Loss — Three and Six Months Ended June 30, 2018 and 2017	6
	(d)	Consolidated Statement of Changes in Shareholders’ Equity — Six Months Ended June 30, 2018	7
	(e)	Consolidated Statements of Cash Flows — Six Months Ended June 30, 2018 and 2017	8
	(f)	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		37
Item 4.	Controls and Procedures		37
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		38
Item 1A.	Risk Factors		38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 6.	Exhibits		39
SIGNATURES			40

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018, includes forward-looking statements that involve risks and uncertainties within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Other than statements of historical fact, all statements made in this Quarterly Report are forward-looking, including, but not limited to, statements regarding industry prospects, future results of operations or financial position, and statements of our intent, belief and current expectations about our strategic direction, prospective and future results and condition. In some cases, forward-looking statements may be identified by words such as “will,” “should,” “could,” “may,” “might,” “expect,” “plan,” “possible,” “potential,” “predict,” “anticipate,” “believe,” “estimate,” “continue,” “future,” “intend,” “project” or similar words.

Forward-looking statements involve risks and uncertainties that are inherently difficult to predict, which could cause actual outcomes and results to differ materially from our expectations, forecasts and assumptions. Factors that might cause such differences include, but are not limited to:

• Our ability to satisfy the conditions in the Agreement and Plan of Merger we have entered into with AMC Networks, Inc. and to complete the merger contemplated by that agreement;

• Our financial performance, including our ability to achieve improved results from operations and improved Adjusted EBITDA (as defined in this Quarterly Report);

• Our expectation that revenues and financial performance of our digital channels will continue to grow and have a positive effect on our liquidity, cash flows and operating results;

• The effects of limited cash liquidity on operational performance;

• Our obligations under the credit agreement;

• Our ability to satisfy financial ratios;

• Our ability to generate sufficient cash flows from operating activities;

• Our ability to fund planned capital expenditures and development efforts;

• Our inability to gauge and predict the commercial success of our programming;

• Our ability to maintain relationships with customers, employees and suppliers, including our ability to enter into revised payment plans, when necessary, with our vendors that are acceptable to all parties;

• Delays in the release of new titles or other content;

• The effects of disruptions in our supply chain;

• The loss of key personnel; or

• Our public securities’ limited liquidity and trading.

All forward-looking statements should be evaluated with the understanding of inherent uncertainty. The inclusion of such forward-looking statements should not be regarded as a representation that contemplated future events, plans or expectations will be achieved. Unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any such forward-looking statements that may reflect events or circumstances occurring after the date of this Quarterly Report. Important factors that could cause or contribute to such material differences include those discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K filed on March 16, 2018. You are cautioned not to place undue reliance on such forward-looking statements.

3

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RLJ ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30, 2018 and December 31, 2017

	June 30,			December 31,
(In thousands, except share data)	2018			2017
ASSETS				(Revised)(1)
Cash	$	3,453		$	6,215
Accounts receivable, net		16,989			24,926
Inventories, net		4,599			4,448
Investments in content, net		78,660			70,483
Prepaid expenses and other assets		1,022			1,197
Property, equipment and improvements, net		1,049			1,185
Equity investment in affiliate		20,135			21,589
Other intangible assets, net		7,081			7,752
Goodwill		13,911			13,985
Total assets	$	146,899		$	151,780
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities	$	13,755		$	16,707
Accrued royalties and distribution fees		46,584			47,414
Deferred revenue		3,388			2,859
Debt, net of discounts and debt issuance costs		54,854			52,639
Deferred tax liability		367			518
Stock warrant and other derivative liabilities		17,123			13,685
Total liabilities		136,071			133,822
Commitments and contingencies (see Note 14)
Shareholders' Equity
Redeemable convertible preferred stock, $0.001 par value, 1,000,000 shares    authorized; 31,046 shares issued; 15,198 shares outstanding at June 30, 2018    and December 31, 2017; liquidation preference of $17,993 at June 30, 2018    and $17,997 at December 31, 2017		18,887			19,563
Common stock, $0.001 par value, 250,000,000 shares authorized, 15,138,250    shares issued and 15,127,138 shares outstanding at June 30, 2018; and    14,071,423 shares issued and outstanding at December 31, 2017		15			14
Additional paid-in capital		135,844			132,422
Accumulated deficit		(140,055	)		(130,842	)
Accumulated other comprehensive loss		(3,863	)		(3,199	)
Treasury shares, at cost, 11,112 shares at June 30, 2018 and zero at    December 31, 2017		—			—
Total shareholders' equity		10,828			17,958
Total liabilities and shareholders' equity	$	146,899		$	151,780

⁽¹⁾See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

See accompanying notes to consolidated financial statements.

4

RLJ ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three and Six Months Ended June 30, 2018 and 2017

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except share data)	2018			2017			2018			2017
Revenues	$	21,474		$	18,833		$	40,056		$	32,720
Cost of sales
Content amortization and royalties		7,562			6,261			14,258			12,329
Manufacturing and fulfillment		2,678			2,829			5,764			5,881
Total cost of sales		10,240			9,090			20,022			18,210
Gross profit		11,234			9,743			20,034			14,510
Selling expenses		4,776			2,875			9,041			5,159
General and administrative expenses		5,093			4,716			10,404			9,239
Depreciation and amortization		705			904			1,590			1,777
Total operating expenses		10,574			8,495			21,035			16,175
INCOME (LOSS) FROM OPERATIONS		660			1,248			(1,001	)		(1,665	)
Equity earnings of affiliate		1,288			869			2,072			1,420
Interest expense, net		(2,362	)		(2,152	)		(4,653	)		(4,038	)
Change in fair value of stock warrants and other derivatives		(471	)		(491	)		(3,438	)		(3,383	)
(Loss) Gain on extinguishment of debt		—			(425	)		—			470
Other (expense) income, net		(1,414	)		161			(1,591	)		445
LOSS FROM OPERATIONS    BEFORE BENEFIT (PROVISION) FOR INCOME TAXES		(2,299	)		(790	)		(8,611	)		(6,751	)
Benefit (Provision) for income taxes		285			(76	)		145			(237	)
NET LOSS		(2,014	)		(866	)		(8,466	)		(6,988	)
Accretion on preferred stock		(193	)		(379	)		(386	)		(756	)
NET LOSS ATTRIBUTABLE TO COMMON    SHAREHOLDERS	$	(2,207	)	$	(1,245	)	$	(8,852	)	$	(7,744	)
Net loss per common share attributable to common shareholders:
Basic and diluted net loss per common share attributable    to common shareholders	$	(0.15	)	$	(0.20	)	$	(0.60	)	$	(1.36	)
Weighted average shares outstanding:
Basic and diluted		15,031			6,196			14,730			5,691

See accompanying notes to consolidated financial statements.

5

RLJ ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

Three and Six Months Ended June 30, 2018 and 2017

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Net loss	$	(2,014	)	$	(866	)	$	(8,466	)	$	(6,988	)
Other comprehensive income (loss):
Foreign currency translation (loss) gain		(2,074	)		810			(664	)		923
Total comprehensive loss	$	(4,088	)	$	(56	)	$	(9,130	)	$	(6,065	)

See accompanying notes to consolidated financial statements.

6

RLJ ENTERTAINMENT, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

Six Months Ended June 30, 2018

				Common Stock					Additional						Accumulated Other			Treasury Stock
(In thousands)	Preferred Stock			Shares			Par Value		Paid-in Capital			Accumulated Deficit			Comprehensive Loss			Shares		At Cost		Total Equity
Balance at January 1, 2018 (Revised)(1)	$	19,563			14,071		$	14	$	132,422		$	(130,842	)	$	(3,199	)		—	$	—	$	17,958
Adjustment to adopt new revenue    standard		—			—			—		—			(747	)		—			—		—		(747	)
Issuance of restricted common stock    for services		—			240			—		—			—			—			—		—		—
Issuance of common stock to AMC    for interest		—			827			1		2,481			—			—			—		—		2,482
Forfeiture of restricted common stock		—			(11	)		—		—			—			—			11		—		—
Accretion on preferred stock		386			—			—		(386	)		—			—			—		—		—
Preferred stock dividends paid		(708	)		—			—		—			—			—			—		—		(708	)
Preferred stock dividends accrued		(354	)		—			—		—			—			—			—		—		(354	)
Stock-based compensation		—			—			—		1,327			—			—			—		—		1,327
Foreign currency translation		—			—			—		—			—			(664	)		—		—		(664	)
Net loss		—			—			—		—			(8,466	)		—			—		—		(8,466	)
Balance at June 30, 2018	$	18,887			15,127		$	15	$	135,844		$	(140,055	)	$	(3,863	)		11	$	—	$	10,828

⁽¹⁾See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

See accompanying notes to consolidated financial statements.

7

RLJ ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30, 2018 and 2017

	Six Months Ended June 30,
(In thousands)	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(8,466	)	$	(6,988	)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity earnings of affiliate		(2,072	)		(1,420	)
Content amortization and royalties		14,258			12,329
Depreciation and amortization		1,590			1,777
Foreign currency exchange loss (gain)		388			(475	)
Fair value adjustment of stock warrant and other derivative liabilities		3,438			3,383
Non-cash interest expense		4,653			3,221
Deferred tax liability		(145	)		(239	)
Gain on extinguishment of debt		—			(470	)
Stock-based compensation expense		1,327			512
Dividends received from affiliate		3,133			1,243
Changes in assets and liabilities:
Accounts receivable, net		7,893			8,859
Inventories, net		(196	)		416
Investments in content, net		(23,237	)		(25,584	)
Prepaid expenses and other assets		171			(494	)
Accounts payable and accrued liabilities		(3,078	)		(373	)
Deferred revenue		(528	)		31
Net cash used in operating activities		(871	)		(4,272	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(969	)		(816	)
Net cash used in investing activities		(969	)		(816	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from AMC to amend debt		—			18,000
Proceeds from exercise of warrants		—			28
Dividend payments to preferred stockholders		(708	)		—
Repayment of debt		—			(8,618	)
Payment of debt modification costs		—			(71	)
Net cash (used in) provided by financing activities		(708	)		9,339
Effect of exchange rate changes on cash		(214	)		162
NET (DECREASE) INCREASE IN CASH:		(2,762	)		4,413
Cash at beginning of period		6,215			7,834
Cash at end of period	$	3,453		$	12,247

See accompanying notes to consolidated financial statements.

8

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

RLJ Entertainment, Inc. (RLJE or the Company) was incorporated in Nevada in April 2012. On October 3, 2012, we completed the business combination of RLJE, Image Entertainment, Inc. (or Image) and Acorn Media Group, Inc. (or Acorn Media), which is referred to herein as the “Business Combination.” Acorn Media includes its United Kingdom (or U.K.) subsidiaries RLJ Entertainment Ltd (or RLJE Ltd.), Acorn Media Enterprises Limited (or AME), Acorn Global Enterprises Limited (or AGE), Acorn Productions Ltd (or APL), and RLJE International Ltd (collectively, RLJE UK), as well as RLJ Entertainment Australia Pty Ltd (or RLJE Australia). In February 2012, Acorn Media acquired a 64% ownership of Agatha Christie Limited (or ACL). References to Image include its wholly-owned subsidiary Image/Madacy Home Entertainment, LLC. “We,” “our” or “us” refers to RLJE and its subsidiaries unless otherwise noted. Our principal executive offices are located in Silver Spring, Maryland, with an additional location in Woodland Hills, California. We also have international offices in London, England and Sydney, Australia.

We are a premium digital channel company serving distinct audiences through our proprietary subscription-based video on demand (or SVOD) digital channels (or Digital Channels segment), Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and International mysteries and dramas. UMC showcases superior black television programs and films including original series, drama, romance, comedy, thrillers, stage plays, documentaries and other exclusive content for African-American and urban audiences.

We also exclusively control, co-produce, and own a large library of content primarily consisting of British mysteries and dramas, independent feature films and urban content. In addition to supporting our Digital Channels segment, we monetize our library through intellectual property (or IP) rights that we own, produce, and then exploit worldwide (our IP Licensing segment) and through distribution operations across all available wholesale windows of exploitation (our Wholesale Distribution segment). Our IP Licensing segment consists of our investment in ACL and owned intellectual property that is either owned or created by us and licensed for exploitation worldwide. Our Wholesale Distribution segment consists of worldwide exploitation of exclusive content in various formats through third party media and retail outlets in the United States of America (or U.S.), Canada, U.K. and Australia. We work closely with our wholesale partners to outline and implement release and promotional campaigns customized to the different audiences we serve and the program genres we exploit.

Basis of Presentation

Unaudited Interim Financial Statements

The consolidated financial information presented in the accompanying unaudited interim consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017 has been prepared in accordance with accounting principles generally accepted in the United States (or US GAAP) and with the Securities and Exchange Commission’s (or SEC) instructions for interim financial reporting for the Form 10-Q and Article 10 of Regulation S‑X of the SEC. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements.

In management’s opinion, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Due to the seasonal nature of our business, with a disproportionate amount of sales occurring in the fourth quarter and other factors, including our content release schedule, interim results are not necessarily indicative of the results that may be expected for the entire fiscal year. The accompanying unaudited financial information should, therefore, be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K filed on March 16, 2018 (or 2017 Form 10‑K). Note 2, Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2017 Form 10‑K contains a summary of our significant accounting policies. As of June 30, 2018, we have made no material changes to our significant accounting policies disclosed in our 2017 Form 10 K, except for the adoption of the new revenue recognition standard.

Correction of Immaterial Misstatements in Prior Period Financial Statements

In connection with the preparation of our unaudited condensed consolidated financial statements for the six months ended June 30, 2018, we identified an error as of December 31, 2017 that caused an overstatement of our previously reported deferred tax liability. Through 2017, we were tax affecting our ACL equity earnings and accumulating a deferred tax liability, which in theory would become payable when we disposed of our equity investment. As of December 31, 2017, our deferred tax liability was $2.9 million. In addition to recognizing equity earnings, we also receive distributions from ACL periodically, and when received, those distributions are not taxable nor does our foreign tax basis in ACL change. Therefore, we should have been tax affecting our ACL equity earnings after deducting distributions received.  Had we done this, our deferred tax liability at December 31, 2017 would

9

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

have been $0.5 million. In addition to overstating our deferred tax liability, we were also overstating our provision for income taxes within our consolidated statement of operations. In 2017 and 2016, we reported a total provision for income taxes of $1.2 million and $0.2 million, respectively, and this provision was overstated by $0.4 million for each period.

In accordance with Staff Accounting Bulletin (SAB) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the error and determined that the impact was not material to the results of operations or financial position for the years ended December 31, 2017 and 2016. We have elected to revise the 2017 financial statements when they are subsequently issued and accordingly, we have corrected the balance sheet as of December 31, 2017 in this filing. We will correct the statement of operations for 2017 the next time those statements are filed. We reduced our previously reported deferred tax liability as of December 31, 2017 by $2.4 million and increased, on a net basis, our shareholders’ equity by the same amount.

(In thousands)	December 31, 2017
Liabilities and Shareholders' Equity	As previously reported			Adjustment			As revised
Deferred tax liability	$	2,933		$	(2,415	)	$	518
Total liabilities		132,046			1,776			133,822
Accumulated deficit		(133,514	)		2,672			(130,842	)
Accumulated other comprehensive loss		(2,942	)		(257	)		(3,199	)
Total shareholders' equity		15,543			2,415			17,958
Total liabilities and shareholders' equity		147,589			4,191			151,780

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (or FASB) issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. Subsequent to the issuance of the May 2014 guidance, several clarifications and updates have been issued by the FASB on this topic, the most recent of which was issued in December 2016. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. We adopted Topic 606 as of January 1, 2018 using the modified retrospective method. See Note 2, Revenues, for further details.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required by lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of the pending adoption of this new standard on our financial statements and we have yet to determine the overall impact this ASU is expected to have. The likely impact will be one of presentation only on our consolidated balance sheets. Our leases currently consist of operating leases with varying expiration dates through 2023 and our future minimum lease commitments before sub-lease income total $4.0 million as of June 30, 2018.

Principles of Consolidation

The operations of ACL are subject to oversight by ACL’s Board of Directors. The investment in ACL is accounted for using the equity method of accounting given the voting control of the Board of Directors by the minority shareholder. We have included our share of ACL’s operating results as a separate line item in our consolidated financial statements.

Our consolidated financial statements include the accounts of all majority-owned subsidiary companies, except for ACL. We carry our investment in ACL as a separate asset on our consolidated balance sheet at cost adjusted for our share of the equity in undistributed earnings. Except for dividends and changes in ownership interest, we report changes in equity in undistributed earnings of ACL as “Equity earnings of affiliate” in our consolidated statements of operations. All intercompany transactions and balances have been eliminated.

10

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Fair Value of Financial Instruments

The carrying amount of our financial instruments, which principally include cash, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relative short maturity of such instruments. The carrying amount of our debt under our senior credit agreement approximates its fair value as it bears interest at market rates of interest after taking into consideration its debt discount. Our recurring fair value measurements of stock warrants and other derivative liabilities and our non-recurring fair value measurements of investments in content are disclosed in Note 11, Fair Value Measurements.

Earnings (Loss) per Common Share

Basic earnings (loss) per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the combination of dilutive common share equivalents and the weighted-average shares outstanding during the period. For the periods reporting a net loss, diluted loss per share is equivalent to basic loss per share, as inclusion of common share equivalents would be anti-dilutive.

Income Taxes

We account for income taxes pursuant to the provisions of ASC 740, Income Taxes, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and the future tax benefits derived from operating loss and tax credit carryforwards. We provide a valuation allowance on our deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. We have a valuation allowance against 100% of our net deferred tax assets.

ASC 740 requires that we recognize in the consolidated financial statements the effect of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The first step is to determine whether or not a tax benefit should be recognized. A tax benefit will be recognized if the weight of available evidence indicates that the tax position is more likely than not to be sustained upon examination by the relevant tax authorities. The recognition and measurement of benefits related to our tax positions requires significant judgment as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. Differences between actual results and our assumptions, or changes in our assumptions in future periods, are recorded in the period they become known. For tax liabilities, we recognize accrued interest related to uncertain tax positions as a component of income tax expense, and penalties, if incurred, are recognized as a component of operating expense.

In December 2017, SAB No. 118 was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (the Act). In accordance with SAB No. 118, our previously reported provisions for income taxes and our deferred tax assets and liabilities were provisional. During the second quarter of 2018, we completed our analysis and our updated assessment is that the Act has no further impact on our previously reported income tax provisions or our deferred tax assets or liabilities. These amounts are no longer provisional.

Our foreign subsidiaries are subject to income taxes in their respective countries, as well as U.S. Federal and state income taxes. The income tax payments they make outside the U.S. may give rise to foreign tax credits that we may use to offset taxable income in the U.S.

Liquidity

At June 30, 2018, our cash balance was $3.5 million. For the six months ended June 30, 2018, we recognized a net loss of $8.5 million and we used $0.9 million of cash for operating activities. At June 30, 2018, we had $54.9 million of term debt outstanding (see Note 8, Debt). We continue to experience liquidity constraints as we have several competing demands on our available cash and cash that may be generated from operations. We continue to have past-due vendor payables. These past-due payables are largely a result of past-due vendor payables acquired in 2012 when purchasing Image. As we work to catch up on the acquired past-due payables, we have fallen behind on other payables. We continue to work with our vendors to make payment arrangements that are agreeable with them and that give us flexibility in terms of when payments will be made. Additionally, we must maintain a certain level of expenditures for marketing to support subscriber growth and for the acquisition of new content that allows us to generate revenues and margins sufficient to meet our obligations.

11

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Growth of our Digital Channels segment has the potential to improve our liquidity. We continue to realize significant growth in our Digital Channels segment. Our Digital Channels segment revenues increased 46.0% to $9.4 million during the three months ended June 30, 2018 as compared to the same period in 2017. Our Digital Channels segment revenues increased 45.7% to $18.1 million during the six months ended June 30, 2018 as compared to the same period in 2017 (see Note 3, Segment Information).

We believe that our current cash at June 30, 2018, and cash generated from operations will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditure and debt repayments (none until 2020) for at least one year from the date of issuance of these consolidated financial statements. However, there can be no assurances that we will be successful in realizing improved results from operations, including improved Adjusted EBITDA, generating sufficient cash flows from operations or agreeing with vendors on revised payment terms. We define Adjusted EBITDA as earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.

NOTE 2. REVENUES

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to all contracts as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded a net increase to opening accumulated deficit of $0.7 million as of January 1, 2018 due to the cumulative impact to revenues and cost of sales of adopting Topic 606, with the impact primarily related to renewals for licensing agreements within our Wholesale Distribution segment. Under the new standard, renewals are a separate deliverable for which revenue should generally be deferred and recognized when the renewal period begins. Under the prior standards, renewals were generally recognized as revenue when entering into an amendment.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606, Revenue — Revenue from Contracts with Customers were as follows:

(In thousands)	Balance at						Balance at
Liabilities and Shareholders' Equity	December 31, 2017			Adjustment Due to Topic 606			January 1, 2018
Accrued royalties and distribution fees	$	47,414		$	(310	)	$	47,104
Deferred revenue		2,859			1,057			3,916
Accumulated deficit (Revised)(1)		(130,842	)		(747	)		(131,589	)

⁽¹⁾See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

12

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

The impact of adoption on our current period statement of operations was as follows:

(In thousands)	Three Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	21,474	$	21,417	$	57
Content amortization and royalties		7,562		7,561		1

(In thousands)	Six Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	40,056	$	39,328	$	728
Content amortization and royalties		14,258		13,919		339

Within our Wholesale Distribution segment, we estimate certain non-physical revenues each reporting period and we adjust our estimate when additional information becomes available, which includes the receipt of actual statements from our wholesalers. For the three months ended June 30, 2018, we recognized a decrease in revenues of $0.1 million, as actual information received was less than our prior period estimates. For the three months ended June 30, 2017, we recognized an increase in revenues of $0.1 million, as actual information received exceeded our prior period estimates. For the six months ended June 30, 2018 and 2017, we recognized an increase in revenues of $0.1 million and $0.2 million, respectively, as actual information received exceeded our prior period estimates.

Digital Channels segment revenues are recognized over time as subscription services are delivered. Wholesale Distribution segment revenues are generally recognized at a point in time when a sales transaction is completed. As of June 30, 2018, our deferred revenue of $3.4 million is comprised of prepaid subscriptions within our Digital Channels segment of $2.8 million, payments received within our Wholesale Distribution segment of $0.1 million for content not yet delivered or available due to certain restrictions, and $0.5 million for the license of our tradenames. Deferred revenue will be recognized over time as revenue upon delivery of subscription services or content, or upon the removal of restrictions whereby the wholesaler will be free to exploit the delivered content. Deferred revenue associated with the tradename license will be recognized in equal monthly amounts over the license term beginning in April 2018 through March 2020. We estimate that all deferred revenue amounts that are not associated with the tradename license will be recognized as revenue within the next 12 months.

Upon adoption of the new revenue standards, we also made certain other reclassifications within our consolidated balance sheet, which pertained to sales of physical product within our Wholesale Distribution segment, as follows:

• We estimate a certain amount of inventory that will be received when processing sales returns. This amount of inventory to be received had been included within our inventory balance. This amount is now included within prepaid expenses and other assets. As of December 31, 2017, the inventory balance reclassified was $0.5 million. The impact of this reclassification to our previously reported balances as of December 31, 2017, was for prepaid expenses and other assets to increase and inventories to decrease.

• We have reclassified our sales return reserve from accounts receivable to accounts payable and accrued liabilities, which had the impact of increasing the previously reported balances as of December 31, 2017, for both accounts. Our sales return reserve as of December 31, 2017 was $4.2 million.

Included in our accounts payable and other accrued liabilities are accruals for both sales returns and market development funds that total $2.5 million and $6.8 million as of June 30, 2018 and December 31, 2017, respectively. These accruals require the exercise of judgement and affect the reported revenues and net earnings. In determining these accruals, we analyze historical returns, pricing and other credit data; current economic trends; and changes in customer demand and acceptance of our products, including reorder activity. Based on this information, we determine our best estimates, which we believe is fair value, and accrue a percentage of each dollar of product sales where the customer has the right to either return the product and receive a credit or reduce their purchase price. Actual returns and reductions could differ from our estimates.

13

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

NOTE 3. SEGMENT INFORMATION

In accordance with the requirements of ASC 280 “Segment Reporting,” selected financial information regarding our reportable business segments, Digital Channels, IP Licensing and Wholesale Distribution, is presented below. Our reportable segments are determined based on the distinct nature of their operations. Each segment is a strategic business unit that is managed separately and either exploits our content over a different business model (subscription based vs. transactional) or acquires content differently. Our Digital Channels segment includes the subscription-based sale of film and television content directly and through third-party distribution to consumers through our digital channels, Acorn TV and UMC. Our IP Licensing segment includes intellectual property (or content) that we own, produce and then license for exploitation worldwide. The IP Licensing segment also includes our investment in ACL. Our Wholesale Distribution segment consists of the acquisition and worldwide exploitation of exclusive content in various formats, including digital (download-to-rent and electronic sell-through, or EST), television video on demand (VOD) through cable and satellite, broadcast, streaming, and DVD and Blu-ray through third party media and retail outlets. Our Wholesale Distribution segment also includes our U.K. mail-order catalog and ecommerce businesses.

Management currently evaluates segment performance based primarily on revenues and operating income (loss), including earnings from ACL. Operating costs and expenses attributable to our Corporate segment include only those expenses incurred by us at the parent corporate level, which are not allocated to our reporting segments and include costs associated with our corporate functions such as finance and accounting, human resources, legal and information technology departments. Interest expense, change in the fair value of stock warrants and other derivatives, other income (expense) and provision for income taxes are evaluated by management on a consolidated basis and are not allocated to our reportable segments.

Operating costs and expenses exclude costs related to depreciation and amortization which are separately presented in the tables below.

The tables below summarize the segment contribution for the three months ended June 30, 2018 and 2017.

	Three Months Ended June 30, 2018
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	9,402		$	17		$	12,055		$	—		$	21,474
Operating costs and expenses		(6,240	)		(195	)		(10,252	)		(3,422	)		(20,109	)
Depreciation and amortization		(291	)		(19	)		(294	)		(101	)		(705	)
Share in ACL earnings		—			1,288			—			—			1,288
Segment contribution income (loss)	$	2,871		$	1,091		$	1,509		$	(3,523	)	$	1,948

	Three Months Ended June 30, 2017
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	6,439		$	2		$	12,392		$	—		$	18,833
Operating costs and expenses		(3,965	)		(136	)		(9,856	)		(2,724	)		(16,681	)
Depreciation and amortization		(227	)		(31	)		(498	)		(148	)		(904	)
Share in ACL earnings		—			869			—			—			869
Segment contribution income (loss)	$	2,247		$	704		$	2,038		$	(2,872	)	$	2,117

14

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

The tables below summarize the segment contribution for the six months ended June 30, 2018 and 2017.

	Six Months Ended June 30, 2018
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	18,075		$	36		$	21,945		$	—		$	40,056
Operating costs and expenses		(12,155	)		(313	)		(19,935	)		(7,064	)		(39,467	)
Depreciation and amortization		(654	)		(52	)		(686	)		(198	)		(1,590	)
Share in ACL earnings		—			2,072			—			—			2,072
Segment contribution income (loss)	$	5,266		$	1,743		$	1,324		$	(7,262	)	$	1,071

	Six Months Ended June 30, 2017
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	12,404		$	4		$	20,312		$	—		$	32,720
Operating costs and expenses		(7,079	)		(229	)		(19,412	)		(5,888	)		(32,608	)
Depreciation and amortization		(430	)		(63	)		(991	)		(293	)		(1,777	)
Share in ACL earnings		—			1,420			—			—			1,420
Segment contribution income (loss)	$	4,895		$	1,132		$	(91	)	$	(6,181	)	$	(245	)

A reconciliation of total segment contribution income (loss) to loss from operations before provision for income taxes is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Total segment contribution income (loss)	$	1,948		$	2,117		$	1,071		$	(245	)
Interest expense, net		(2,362	)		(2,152	)		(4,653	)		(4,038	)
Change in fair value of stock warrants and    other derivatives		(471	)		(491	)		(3,438	)		(3,383	)
(Loss) Gain on extinguishment of debt		—			(425	)		—			470
Other (expense) income		(1,414	)		161			(1,591	)		445
Loss from operations before provision    for income taxes	$	(2,299	)	$	(790	)	$	(8,611	)	$	(6,751	)

Total assets for each segment primarily include accounts receivable, inventory and investments in content. The Corporate segment primarily includes assets not fully allocated to any other segment including consolidated cash accounts, certain prepaid assets and fixed assets used across all segments.

Total assets by segment are as follows:

	June 30,		December 31,
(In thousands)	2018		2017
Digital Channels	$	16,427	$	11,148
IP Licensing		25,585		23,981
Wholesale Distribution		100,291		109,178
Corporate		4,596		7,473
Total Assets	$	146,899	$	151,780

NOTE 4. EQUITY EARNINGS OF AFFILIATE

In February 2012, Acorn Media acquired a 64% interest in ACL for total purchase consideration of £13.7 million or approximately $21.9 million excluding direct transaction costs. The acquisition gave Acorn Media a majority ownership of ACL’s extensive works including a variety of short story collections, more than 80 novels, 19 plays and a film library of over 100 made-for-television films.

15

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

We account for our investment in ACL using the equity method of accounting because (1) Acorn Media is only entitled to appoint one-half of ACL’s board members and (2) in the event the board is deadlocked, the chairman of the board, who is appointed by the directors elected by the minority shareholders, casts a deciding vote.

As of the Business Combination, our 64% share of the difference between ACL’s fair value and the amount of underlying equity in ACL’s net assets was approximately $18.7 million. This step-up basis difference is primarily attributable to the fair value of ACL’s copyrights, which expire in 2046. We are amortizing the basis difference through 2046 using the straight-line method. Basis difference amortization is recorded against our share of ACL’s net income in our consolidated statements of operations; however, this amortization is not included within ACL’s financial statements.

The following summarized financial information is derived from the unaudited financial statements of ACL:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Revenues	$	12,129		$	3,094		$	15,269		$	6,954
Film cost amortization		(146	)		(183	)		(146	)		(1,915	)
General, administrative and other expenses		(9,247	)		(989	)		(10,605	)		(1,830	)
Income from operations	$	2,736		$	1,922		$	4,518		$	3,209
Net income	$	2,203		$	1,535		$	3,623		$	2,561

ACL's functional currency is the British Pound Sterling (the Pound). Amounts have been translated from the Pound to U.S. dollar using the average exchange rate for the periods presented.

NOTE 5. ACCOUNTS RECEIVABLE

Accounts receivable for our Digital Channels segment are primarily derived from subscription revenues, which are processed by merchant banks or our channel partners such as Amazon that have not cleared our bank as of period end. Accounts receivable for our Wholesale Distribution segment are primarily derived from (1) video content we license to broadcast, cable/satellite providers and digital subscription platforms like Netflix, and (2) the sale of physical content to retailers and wholesale distributors and U.K. ecommerce and catalog sales. Our accounts receivable typically trends with retail seasonality.

	June 30,			December 31,
(In thousands)	2018			2017
Digital Channels	$	3,516		$	2,864
Wholesale Distribution		13,542			22,133
Accounts receivable before allowances and reserves		17,058			24,997
Less: allowance for doubtful accounts		(69	)		(71	)
Accounts receivable, net	$	16,989		$	24,926

Wholesale Distribution receivables are partially billed and collected by our U.S. distribution facilitation partner, SPHE. Each month, SPHE preliminarily settles their portion of our wholesale receivables assuming a timing lag on collections and an average-return rate. When actual returns differ from the amounts previously estimated, adjustments are made that give rise to payables and receivables between us and SPHE. Amounts vary and tend to be seasonal following our sales activity. Receivables due from SPHE are reported net of amounts we owe for distribution services as these amounts are offset against each other when settling receivables in accordance with the contract.

As of June 30, 2018, the net Wholesale Distribution payables with SPHE were $2.8 million, which is included in accounts payable and accrued liabilities. As of December 31, 2017, the net Wholesale Distribution receivables with SPHE were $4.3 million, which is included in accounts receivable.

16

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

NOTE 6. INVENTORIES

Inventories are summarized as follows:

	June 30,		December 31,
(In thousands)	2018		2017
Packaged discs	$	3,975	$	3,652
Packaging materials		438		611
Other merchandise		186		185
Inventories, net	$	4,599	$	4,448

For each reporting period, we review the value of inventories on hand to estimate the recoverability through future sales. Values in excess of anticipated future sales are booked as obsolescence reserve. Our obsolescence reserve was $7.2 million as of June 30, 2018 and $10.2 million as of December 31, 2017. We reduce our inventories with adjustments for lower of cost or market valuation, shrinkage, excess quantities and obsolescence. During the three months ended June 30, 2018 and 2017 we recorded impairment charges of $0.1 million, for each period. During the six months ended June 30, 2018 and 2017, we recorded impairment charges of $0.1 million and $0.5 million, respectively. These charges are included in cost of sales as manufacturing and fulfillment cost.

NOTE 7. INVESTMENTS IN CONTENT

	June 30,		December 31,
(In thousands)	2018		2017
Released	$	65,409	$	60,660
Completed, not released		5,864		3,773
In-production		7,387		6,050
Investments in content, net	$	78,660	$	70,483

Investments in content are stated at the lower of unamortized cost or estimated fair value (See Note 11, Fair Value Measurements). The valuation of investments in content is reviewed on a title-by-title basis when an event or change in circumstances indicates that the fair value of content is less than its unamortized cost. Impairment charges for the three months ended June 30, 2018 and 2017, were $0.3 million for each period. Impairment charges for the six months ended June 30, 2018 and 2017, were $0.6 million for each period. Impairment charges are included in cost of sales as part of content amortization and royalties.

NOTE 8. DEBT

Debt consists of the following:

	Maturity	Interest	June 30,			December 31,
(In thousands)	Date	Rate	2018			2017
Senior secured term notes    with AMC:
Tranche A Loan	Beginning June 30, 2020	7.0%	$	23,000		$	23,000
Tranche B Loan	Beginning October 14, 2021	6.0%		54,999			54,999
Less: debt discount				(23,145	)		(25,360	)
Debt, net of discount			$	54,854		$	52,639

17

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Future minimum principal payments, exclusive of debt discount, as of June 30, 2018are as follows:

(In thousands)	Senior Notes
Remainder of 2018	$	—
2019		—
2020		13,000
2021		25,000
2022		30,000
2023		9,999
	$	77,999

Senior Term Notes

On October 14, 2016, we entered into a $65.0 million Credit and Guaranty Agreement (the AMC Credit Agreement) with Digital Entertainment Holdings LLC, a wholly owned subsidiary of AMC Networks Inc. (or AMC). Concurrent with entering into the AMC Credit Agreement, we also issued AMC three warrants (the AMC Warrants) to acquire a total of 20.0 million shares of our common stock at $3.00 per share. The entering of the AMC Credit Agreement, the issuance of the AMC Warrants and the associated transactions are referred to as the AMC Transaction.

Initially, the AMC Credit Agreement consisted of (i) a term loan tranche in the principal amount of $5.0 million (or Tranche A Loan), which was due on October 14, 2017, and (ii) a term loan tranche in the principal amount of $60.0 million (or Tranche B Loan) of which 25% is due after five years, 50% is due after six years and the remaining 25% is due after seven years. The Tranche A Loan bears interest at a rate of 7.0% per annum and the Tranche B Loan bears interest at a rate of 6.0% per annum. Interest was payable quarterly whereby 4.0% was payable in cash and the balance was payable in shares of common stock determined using a per-share value of $3.00. The loan is secured by a lien on substantially all of our consolidated assets.

On January 30, 2017, to repay prior debt obligations under the subordinated notes payable we amended the AMC Credit Agreement and borrowed an additional $8.0 million, thereby increasing our Tranche A Loan from $5.0 million to $13.0 million. We also extended the maturity date for our Tranche A Loan from October 14, 2017 to June 30, 2019. When doing so, we did not incur a prepayment penalty.

On June 16, 2017, to fuel the growth of our business, we expanded the AMC Credit Agreement and borrowed an additional $10.0 million, thereby increasing our Tranche A Loan from $13.0 million to $23.0 million. Further, we extended the maturity date for our Tranche A Loan from June 30, 2019 to beginning on June 30, 2020. We also amended the payment provisions regarding interest whereby all interest is now settled with shares of common stock at $3.00 per share beginning as of April 1, 2017. This amendment also changed certain debt covenant ratios to reflect the extended maturity date and the increase of the Tranche A Loan balance.

On January 2, 2018, we issued AMC 418,255 shares of common stock in payment of $1.3 million of interest on the principal outstanding under the AMC Credit Agreement. On April 2, 2018, we issued AMC 409,162 shares of common stock in payment of $1.2 million of interest on the principal outstanding under the AMC Credit Agreement.

Concurrent with the June 2017 amendment, RLJ SPAC Acquisition, LLC (a related party) converted all of its preferred stock holdings into shares of common stock (see Note 9, Redeemable Convertible Preferred Stock and Equity) and AMC exercised a portion of their warrants (see Note 10, Stock Warrants) that resulted in the Tranche B Loan principal reduction of $5.0 million.

Subject to certain customary exceptions, the AMC Credit Agreement requires mandatory prepayments if we were to receive proceeds from asset sales, insurance, debt issuance or the exercise of warrants (see Note 10, Stock Warrants). We may also make voluntary prepayments. Prepayments of the Tranche B Loan (either voluntary or mandatory) are subject to a prepayment premium of 3.0% if principal is repaid on or before October 14, 2018, and 1.5% if principal is repaid after October 14, 2018 but on or before October 14, 2019. No prepayment premium is due for amounts prepaid after October 14, 2019, and for mandatory prepayments made from proceeds received from the exercise of warrants. The Tranche A Loan is not subject to prepayment penalties.

The AMC Credit Agreement contains certain financial and non-financial covenants. Financial covenants are assessed annually and are based on Consolidated Adjusted EBITDA, as defined in the AMC Credit Agreement. Financial covenants vary by fiscal year and generally become more restrictive over time.

18

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Financial covenants include the following:

	December 31, 2017	December 31, 2018	Thereafter
Leverage Ratios:
Senior debt-to-Adjusted EBITDA	5.75 : 1.00	4.00 : 1.00	Ranges from 3.75 : 1.00 to 2.50 : 1.00
Total debt-to-Adjusted EBITDA	6.00 : 1.00	5.00 : 1.00	4.00 : 1.00
Fixed charge coverage ratio	1.00 : 1.00	2.00 : 1.00	2.00 : 1.00

The AMC Credit Agreement contains events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross defaults to certain other contracts (including, for example, business arrangements with our U.S. distribution facilitation partner and other material contracts) and indebtedness and events constituting a change of control or a material adverse effect in any of our results of operations or conditions (financial or otherwise). The occurrence of an event of default would increase the applicable rate of interest and could result in the acceleration of our obligations under the AMC Credit Agreement.

The AMC Credit Agreement imposes restrictions on such items as encumbrances and liens, payments of dividends to common stockholders, other indebtedness, stock repurchases, capital expenditures and entering into new lease obligations. Additional covenants restrict our ability to make certain investments, such as loans and equity investments, or investments in content that are not in the ordinary course of business. Pursuant to the AMC Credit Agreement, we must maintain at all times a cash balance of $3.5 million for all years beginning after 2017 except for a four-month period ending September 30, 2018 whereby the minimum cash balance requirement was reduced to $2.0 million per a waiver executed during June 2018. This requirement is being further amended after June 30, 2018 (see Note 16, Subsequent Events). As of June 30, 2018, we were in compliance with all covenants as set forth in the amended AMC Credit Agreement.

Concurrent with entering into the AMC Transaction, we issued the AMC Warrants to acquire shares of our common stock. The first warrant is for 5.0 million shares of common stock, of which 1.7 million shares were exercised in June 2017, and expires on October 14, 2021. The second warrant is for 10.0 million shares of common stock and expires on October 14, 2022. The third warrant is for 5.0 million shares of common stock, subject to adjustment, and expires on October 14, 2023. The AMC Warrants are subject to certain standard anti-dilution provisions and may be exercised on a non-cash basis at AMC’s discretion.

The third warrant (the AMC Tranche C Warrant)contains a provision that may increase the number of shares acquirable upon exercising, for no additional consideration payable by AMC, such that the number of shares acquirable upon exercise is equal to the sum of (i) at least 50.1% of our then outstanding shares of common stock, determined on a fully diluted basis, less (ii) the sum of 15.0 million shares and the equity interest shares issued in connection with the AMC Credit Agreement. This provision provides AMC the ability to acquire at least 50.1% of our common stock for $60.0 million, provided that all warrants are exercised and AMC elects not to exercise on a non-cash basis. The third warrant with this guarantee provision is being accounted for as a derivative liability.

NOTE 9. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY

Redeemable Convertible Preferred Stock and 2015 Warrants

On May 20, 2015, we closed a transaction in which we sold 31,046 shares of preferred stock and warrants to acquire 3.1 million shares of common stock (the 2015 Warrants) for $22.5 million in cash and the exchange of $8.5 million in subordinated notes. Of the preferred shares and warrants sold, 16,500 shares of preferred stock and warrants to acquire 1.7 million shares of common stock were sold to certain board members or their affiliated companies.

On October 14, 2016 and concurrent with the close of our AMC Credit Agreement, we amended our preferred stock such that we were able to classify our preferred stock and its embedded conversion feature within our shareholders’ equity. Prior to the amendment, our preferred stock and its embedded conversion feature were recorded on our consolidated balance sheet outside of shareholders’ equity. The amended terms are disclosed below.

19

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

The preferred stock has the following rights and preferences:

• Rank – the preferred stock ranks higher than other company issued equity securities in terms of distributions, dividends and other payments upon liquidation.

• Dividends – the preferred stockholders are entitled to cumulative dividends at a rate of 8% per annum of a preferred share’s stated value ($1,000 per share plus any unpaid dividends). The first dividend payment was made on July 1, 2017 and payments have been made quarterly thereafter. At our discretion, dividend payments are payable in either cash, or if we satisfy certain equity issuance conditions, in shares of common stock. Pursuant to the October 14, 2016 amended terms, if we don’t satisfy equity issuance conditions, then we may elect to accrue the value of the dividend and add it to the preferred share’s stated value.

• Conversion – at the preferred stockholder’s discretion, each share of preferred stock is convertible into 333.3 shares of our common stock, subject to adjustment for any unpaid dividends. Prior to the October 14, 2016 amendment, the conversion rate was subject to anti-dilution protection for offerings consummated at a per-share price of less than $3.00 per common share. This down-round provision was removed as part of the October 14, 2016 amendment.

• Mandatory Redemption – unless previously converted, on May 20, 2020, at our option we will either redeem the preferred stock with (a) cash equal to $1,000 per share plus any unpaid dividends (Redemption Value), or (b) shares of common stock determined by dividing the Redemption Value by a conversion rate equal to the lower of (i) the conversion rate then in effect (which is currently $3.00) or (ii) 85% of the then trading price, as defined, of our common stock. As part of the October 14, 2016 amendment, a floor was established for all but 16,500 shares of preferred stock such that the redemption ratio cannot be below $0.50 per common share. For the 16,500 shares of preferred stock, a floor of $2.49 was already in place and remained unchanged. If we were to redeem with shares of common stock, the actual number of shares that would be issued upon redemption is not determinable as the number is contingent upon the then trading price of our common stock. Generally, if we were to redeem with shares, the number of common shares needed for redemption increases as our common stock price decreases. Because of the October 14, 2016 amendment, the maximum number of common shares issuable upon redemption is determinable given the redemption conversion floors. If we elect to redeem with shares of common stock, and we fail to meet certain conditions with respect to the issuance of equity, then we would be subject to a 20% penalty of the maturity redemption price, payable in either cash or shares of common stock. This penalty is subject to, and therefore possibly limited by, a $0.50 per share floor.

• Voting – except for certain matters that require the approval of the preferred stockholders, such as changes to the rights and preferences of the preferred stock, the preferred stock does not have voting rights. However, the holders of the preferred stock are entitled to appoint two board members and, under certain circumstances, appoint a third member.

We are adjusting the carrying balance of our preferred stock to its Redemption Value using the effective interest-rate method over a period of time beginning from the issuance date of May 20, 2015 to the required redemption date of May 20, 2020. During the six months ended June 30, 2018 and 2017, we recognized accretion of $0.4 million and $0.8 million, respectively. Accretion includes cumulative preferred dividends. Pursuant to the October 14, 2016 amendment, accumulated unpaid dividends from the issuance date through April 1, 2017 were added to the stated value of the preferred stock. Subsequently, we began making quarterly dividend payments. As of June 30, 2018, the accumulated unpaid dividends on preferred stock were $0.4 million. During the six months ended June 30, 2018, we made cash dividend payments of $0.7 million. No dividend payments were made during the six months ended June 30, 2017.

During June 2017, the largest preferred shareholder (RLJ SPAC Acquisition, LLC) converted a total of 15,000 shares of preferred stock and $2.7 million of accumulated dividends into 5.9 million shares of common stock.

In 2015, we filed a registration statement with the Securities and Exchange Commission to register the shares issuable upon conversion of the preferred stock and exercise of the 2015 Warrants (see Note 10, Stock Warrants). The registration statement was declared effective in July 2015 and amended in 2016. If we are in default of the registration rights agreement, and as long as the event of default is not cured, then we are required to pay, in cash, partial liquidation damages, which in total are not to exceed 6% of the aggregated subscription amount of $31.0 million. We will use our best efforts to keep the registration statement effective.

20

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Share-Based Compensation

Our share-based compensation consists of awards of restricted stock, restricted stock units, performance stock units and stock options. The restricted stock-based awards are fair valued using the closing price of the common stock on the grant date. The restricted stock-based awards generally vest over a three to four-year period for executive officers and a one-year period for directors. The restricted stock units generally vest over a three-year period for employees. The vesting of restricted stock awards and restricted stock units is subject to certain service criteria. The awards may be subject to further forfeitures if the employee or director terminates his or her service during the vesting period. All shares of restricted stock participate in dividends, if declared prior to their vesting date.

The option grants in 2017 include an option to purchase 0.7 million shares of common stock with an exercise price of $2.66 per share cliff vesting in two years and an option to purchase 0.7 million shares of common stock with an exercise price of $3.00 per share cliff vesting in four years.

For the three and six months ended June 30, 2018 and 2017, share-based compensation expense is classified within our statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Cost of Sales — Manufacturing and fulfillment	$	5	$	1	$	10	$	3
Selling expenses		33		6		78		13
General and administrative expenses		600		351		1,239		496
Total share-based compensation	$	638	$	358	$	1,327	$	512

As of June 30, 2018, unrecognized share-based compensation expense relating to restricted stock-based service awards of $1.3 million is expected to be expensed ratably over the remaining weighted-average vesting period of 1.2 years. Unrecognized compensation expense relating to restricted stock-based performance awards of $1.0 million is expected to be expensed ratably over the remaining weighted-average vesting period of 1.5 years. Unrecognized compensation expense relating to unvested stock options of $1.4 million is expected to be expensed ratably over the remaining weighted-average vesting period of 1.7 years. Expense associated with our performance award is contingent upon achieving specified financial criteria and upon certification by the Compensation Committee of the satisfaction of the performance criteria based upon our audited financial statements for 2017, 2018, 2019 and 2020. The above unrecognized stock-based compensation expense assumes that the performance awards will vest at 130% (or 0.7 million shares). However, the possible range of vesting is between zero and 1.0 million shares.

Assuming 100% vesting for all service awards and 130% vesting of all performance awards, we expect to recognize $2.0 million of compensation expense over the next 12 months.

A summary of our restricted stock unit activity during the six months ended June 30, 2018 is presented below:

	Service Shares					Performance Shares
(In thousands, except per share data)	Shares			Weighted- AverageGrant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Unvested restricted stock units outstanding at    January 1, 2018		627		$	3.02		500	$	2.40
Granted		—		$	—		—	$	—
Vested		(158	)	$	3.18		—	$	—
Forfeited		(28	)	$	4.00		—	$	—
Unvested restricted stock units outstanding at    June 30, 2018		441		$	2.90		500	$	2.40

During the six months ended June 30, 2018, we issued 233,000 shares of common stock for restricted units, including 75,000 shares issued for restricted stock units that vested on December 31, 2017.

21

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

A summary of our restricted stock award activity during six months ended June 30, 2018 is presented below.

(In thousands, except per share data)	Shares			Weighted- AverageGrant Date Fair Value
Unvested restricted stock awards outstanding at January 1, 2018		130		$	2.66
Granted		7		$	4.43
Vested		(42	)	$	1.92
Forfeited		(11	)	$	1.92
Unvested restricted stock awards outstanding at June 30, 2018		84		$	3.27

A summary of our stock option activity during six months ended June 30, 2018 is presented below.

(In thousands, except per share data)	Options		Weighted- Average Exercise Price
Stock options outstanding at January 1, 2018		1,400	$	2.83
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Stock options outstanding at June 30, 2018		1,400	$	2.83

NOTE 10. STOCK WARRANTS

We have the following unregistered warrants outstanding:

	June 30, 2018
(In thousands, except per share data)	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Life
AMC Warrants		18,333	$	3.00	4.4 years
2015 Warrants		2,999	$	2.29	1.9 years
		21,332

Concurrent with entering into the AMC Credit Agreement, we issued the AMC Warrants to acquire shares of our common stock at $3.00 per share. The first warrant is for 5.0 million shares of common stock, of which 1.7 million shares were exercised in June 2017, and expires on October 14, 2021. The second warrant is for 10.0 million shares of common stock and expires on October 14, 2022. The third warrant is for 5.0 million shares of common stock, subject to adjustment, and expires on October 14, 2023. The AMC Warrants are subject to certain standard anti-dilution provisions and may be exercised on a non-cash basis at AMC’s discretion.

The AMC Tranche C Warrant contains a provision that may increase the number of shares acquirable upon exercising, for no additional consideration payable by AMC, such that the number of shares acquirable upon exercise is equal to the sum of (i) at least 50.1% of our then outstanding shares of common stock, determined on a fully diluted basis, less (ii) the sum of 15.0 million shares and the equity interest shares issued in connection with the AMC Credit Agreement. This provision provides AMC the ability to acquire at least 50.1% of our common stock for $60.0 million, provided that all warrants are exercised and AMC elects not to exercise on a non-cash basis. The third warrant with this guarantee provision is being accounted for as a derivative liability.

On May 20, 2015 and concurrent with our preferred stock placement, we issued the 2015 Warrants to our preferred stock holders to acquire 3.1 million shares of our common stock. The 2015 Warrants have a term of five years. On October 14, 2016 and in connection with the AMC Credit Agreement, we amended the anti-dilution and redemption provisions of the 2015 Warrants to conform to the terms of the amended preferred stock. Because of the AMC transaction and the then-existing terms of the 2015 Warrants, the warrant exercise price was reduced from $4.50 to $3.00; however, the exercise price was further reduced down to $1.50 for warrants to acquire 1.5 million shares of common stock, and down to $2.37 for warrants to acquire 150,000 shares of common stock. Because of the October 14, 2016 amendment, we began accounting for the 2015 Warrants as equity awards and reclassified the carrying balance of the 2015 Warrants to shareholders’ equity.

22

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

NOTE 11. FAIR VALUE MEASUREMENTS

Warrant Liability

Stock Warrant and Other Derivative Liabilities

We account for our AMC Tranche C Warrant to acquire 5.0 million shares of common stock as a derivative liability, which requires us to carry it on our consolidated balance sheet at its fair value.

We determined the fair value of the AMC Tranche C warrant using a lattice model, which is classified as Level 3 within the fair-value hierarchy. Inputs to the model include our publicly-traded stock price, our stock volatility, the risk-free interest rate and contractual terms of the warrant (which are remaining life of the warrant, exercise price and assumptions pertaining to increasing the number of acquirable shares of common stock to achieve 50.1% ownership). We use the closing stock price of our common stock to compute stock volatility. To quantify and value the possibility of increasing the number of acquirable shares, management took into consideration its current capital structure, the impact of the 20% penalty if we were to fail to meet certain equity issuance conditions, and management’s best estimates of the likelihood of being subject to the 20% penalty. The AMC Tranche C warrant was valued at $17.1 million as of June 30, 2018 and $13.7 million as of December 31, 2017. During the current year, the AMC Tranche C warrant increased in value as a result of an increase in our common stock price.

The following table represents the carrying amount, valuation and a roll-forward of activity for our warrant classified within Level 3 of the fair-value hierarchy:

	Estimated Fair Value Measurements Using Unobservable Inputs (Level 3)
	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Carrying amount of stock warrants, beginning of period	$	16,652	$	12,655	$	13,685	$	9,763
Change in fair value		471		491		3,438		3,383
Carrying amount of stock warrants, end of period	$	17,123	$	13,146	$	17,123	$	13,146

Investments in Content

When events and circumstances indicate that investments in content are impaired, we determine the fair value of the investment; and if the fair value is less than the carrying amount, we recognize additional amortization expense equal to the excess. The following fair value hierarchy tables present information about our assets and liabilities measured at fair value on a non-recurring basis:

	Estimated Fair Value Measurement Using Unobservable Inputs (Level 3)				Loss
	As of June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Investments in content	$	1,164	$	778	$	564	$	595

During the six months ended June 30, 2018 and 2017, the investments in content were impaired by $0.6 million, for each period. In determining the fair value of our investments in content, we employ a discounted cash flow (or DCF) methodology. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement.

NOTE 12. NET LOSS PER COMMON SHARE

We had outstanding warrants to acquire 21.3 million and 30.1 million shares of common stock as of June 30, 2018 and 2017, respectively, which are not included in the computation of diluted net loss per common share as the effect would be anti-dilutive.

During periods of reported net losses from operations after adjusting for accretion on preferred stock, all reported net losses are allocated to our unrestricted common stock. This has the effect of excluding our outstanding restricted common stock from the

23

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

computation of our net loss per common share. For the three months ended June 30, 2018 and 2017, we have weighted average unvested shares of 2.4 million and 1.3 million, respectively, of compensatory stock options and restricted share-based awards, that were not included in the computation of diluted net loss per common share as the effect would be anti-dilutive. For the six months ended June 30, 2018 and 2017, we have weighted average unvested shares of 2.5 million and 0.9 million, respectively, of compensatory stock options and restricted share-based awards, that were not included in the computation of diluted net loss per common share as the effect would be anti-dilutive

When dilutive, we include in our computation of diluted loss per share the number of shares of common stock that is acquirable upon conversion of the preferred stock by applying the as-converted method per ASC 260, Earnings per Share. For the three months ended June 30, 2018 and 2017, we excluded 5.9 million shares of common stock that are acquirable upon conversion of the preferred stock as they were anti-dilutive. For the six months ended June 30, 2018 and 2017, we excluded 5.9 million and 11.2 million shares of common stock that are acquirable upon conversion of the preferred stock as they were anti-dilutive.

NOTE 13. STATEMENTS OF CASH FLOWS

Supplemental Disclosures

	Six Months Ended June 30,
(In thousands)	2018		2017
Cash paid during the period for:
Interest	$	—	$	1,592
Income taxes	$	11	$	30
Non-cash investing and financing activities:
Accretion on preferred stock	$	386	$	756
Common stock issued to AMC as payment for    prior year interest expense	$	—	$	158
Conversion of preferred stock into shares of common	$	—	$	19,592
Exercise of AMC warrant and reduction of senior debt	$	—	$	2,847
Capital expenditures accrued for in accounts payable and    accrued liabilities	$	158	$	400
Preferred stock dividends accrued for in accounts payable    and accrued liabilities	$	354	$	—

NOTE 14. COMMITMENTS AND CONTINGENCIES

In the normal course of business, we are subject to proceedings, lawsuits and other claims, including proceedings under government laws and regulations relating to content ownership, copyright and employment matters. While it is not possible to predict the outcome of these matters, it is the opinion of management, based on consultations with legal counsel, that the ultimate disposition of known proceedings will not have a material adverse impact on our financial position, results of operations or liquidity. Accordingly, we record a charge to earnings based on the probability of settlement and determination of an estimated amount. These charges were not material to our results.

As of June 30, 2018, we have entered into contracts for certain professional services to respond to AMC’s merger proposal (see Note 16, Subsequent Events). For the three and six months ended June 30, 2018, we recognized $1.0 million and $1.1 million, respectively, of expense, which is included in other (expense) income, net, related to these contracts. These contracts provide for a contingent transaction fee of approximately $1.2 million, which is payable by us upon the closing of an AMC transaction.

As of June 30, 2018, we had entered into a contract with a supplier for marketing-related services in which we are obligated to pay $3.0 million in $0.1 million monthly installments through March 2020.

24

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

NOTE 15. RELATED PARTY TRANSACTIONS

Equity Investment in Affiliate

During the six months ended June 30, 2017, we paid ACL $0.1 million, for distribution rights for three titles, two of which were released as of December 31, 2016 and one which was released in 2017. As we recognize revenues from these titles, and all other titles, we amortize our content advances resulting in the recognition of content amortization and royalty expense. For the three and six months ended June 30, 2018, we recognized content amortization and royalty expense of $0.1 million in each period. For the three and six months ended June 30, 2017, we recognized content amortization and royalty expense of $0.1 million and $0.2 million, respectively. This amortization is included in our cost of sales as content amortization and royalties. As of June 30, 2018, our remaining unamortized content advance is $1.4 million.

ACL paid dividends to RLJE Ltd. of $2.7 million and $3.1 million during the three and six months ended June 30, 2018, respectively. ACL paid dividends to RLJE Ltd. of $1.2 million during the three and six months ended June 30, 2017. Dividends received were recorded as a reduction to the ACL investment account.

Foreign Currency

We recognize foreign currency gains and losses, as a component of other expense, on amounts lent by Acorn Media to RLJE UK and RLJE Australia. As of June 30, 2018, Acorn Media had lent its U.K. subsidiaries approximately $4.0 million and its Australian subsidiary approximately $3.4 million. Amounts lent will be repaid in U.S. dollars based on available cash. Movement in exchange rates between the U.S. dollar and the functional currencies (which are the British Pound Sterling and the Australian dollar) of those subsidiaries that were lent the monies will result in foreign currency gains and losses. During the three and six months ended June 30, 2018, we recognized foreign currency losses of $0.4 million for each period. During the three and six months ended June 30, 2017, we recognized foreign currency gains of $0.2 million and $0.5 million.

The RLJ Companies, LLC

In June 2013, The RLJ Companies, LLC (whose sole manager and voting member is the chairman of our board of directors) purchased from one of our vendors $3.5 million of contract obligations that we owed to the vendor. These purchased liabilities, which are now owed to The RLJ Companies, are included in accrued royalties and distribution fees in the accompanying consolidated balance sheets. During the three and six months ended June 30, 2018, we made payments totaling $0.5 million and $1.0 million, respectively, to The RLJ Companies, which reduced our remaining obligation to $1.5 million.

Debt, Preferred Stock and Warrants

On January 2, 2018, we made a dividend payment of $0.4 million to our preferred shareholders, which includes AMC. Since AMC holds more than 10% of the outstanding shares of our common stock, they are considered a related party. On April 2, 2018, we made a dividend payment of $0.4 million to our preferred shareholders.

On January 2, 2018, we issued AMC 418,255 shares of common stock in payment of $1.3 million of interest on $78.0 million of principal outstanding under the AMC Credit Agreement. On April 2, 2018, we issued AMC 409,162 shares of common stock in payment of $1.2 million of interest on $78.0 million of principal outstanding under the AMC Credit Agreement.

NOTE 16. SUBSEQUENT EVENTS

On July 2, 2018, we made a dividend payment of $0.4 million to our preferred shareholders.

On July 2, 2018, we issued AMC 413,709 shares of common stock in payment of $1.3 million of interest on $78.0 million of principal outstanding under the AMC Credit Agreement.

On July 13, 2018, our subsidiary, APL, entered into a loan facility with a U.K. bank to partially fund the production of series one and two of the television program London Kills. The maximum principal amount of borrowings under the facility is £2.4 million or approximately $3.1 million. The loan matures on June 30, 2019. Interest is payable quarterly on the outstanding principal amount of the loan at an annual rate that is 2.1% above the bank’s cost of funding rate or other mutually agreed upon rate. The loan is secured against intercompany distribution agreements and a third-party licensee distribution agreement.

25

RLJ Entertainment, Inc.

Notes To Consolidated Financial Statements

(Unaudited)

On August 7, 2018, AMC agreed in principle to further reduce our minimum cash balance requirement (see Note 8, Debt). We are currently drafting an amendment to the AMC Credit Agreement to formalize this change.

AMC Merger Agreement

On July 30, 2018, we announced that we have entered into a definitive agreement whereby AMC will acquire RLJE in a going-private merger. The aggregate enterprise transaction value is approximately $274.0 million, and pursuant to the merger agreement, AMC will pay, in cash, an aggregate of approximately $65.0 million to holders of our outstanding common stock, preferred stock and warrants not currently owned by AMC, Robert L. Johnson and their respective affiliates. Upon completion of the merger, RLJE will become an indirect subsidiary of AMC, with Mr. Johnson and his affiliates owning a stake of 17%.

In the merger, outstanding shares of our common stock (other than shares owned by Mr. Johnson, AMC and their respective affiliates) will be converted into the right to receive $6.25 per share in cash, without interest; the holders of our outstanding preferred stock (other than affiliates of AMC) will be offered the opportunity to elect to receive $7.8125 in cash for each underlying “as converted” share of our common stock in accordance with the terms of such preferred stock; and the holders of warrants (other than Mr. Johnson, AMC and their respective affiliates) will be paid the excess of the $6.25 per share merger consideration over the per share exercise price of their warrants. In accordance with its terms, holders of preferred stock who decline to accept the $7.8125 cash offer for their shares will be entitled to receive for each share of preferred stock a new share of preferred stock to be issued by RLJE after the merger.

Concurrently with the execution of the merger agreement, Mr. Johnson and his affiliates have entered into a voting and transaction support agreement with AMC and Digital Entertainment Holdings LLC, a wholly owned subsidiary of AMC (or DEH), whereby Mr. Johnson and his affiliates have agreed to vote, at a special meeting of RLJE’s stockholders, all their shares of RLJE common stock “for” the approval of the merger agreement and the merger. Mr. Johnson and his affiliates currently own approximately 43.7% of our outstanding common stock. AMC has also entered into separate arrangements with Mr. Johnson related to the contribution of his RLJE securities to DEH immediately prior to the closing of the transaction at the $6.25 per share merger consideration and governance matters following the closing of the transaction.

Prior to the effective time of the merger, DEH intends to exercise, in full, all warrants to purchase RLJE common stock that it currently owns in exchange for debt we owe to DEH. Immediately following such exercise, AMC will beneficially own at least 50.1% of our then-outstanding shares of common stock on a fully diluted basis. AMC, through DEH, currently owns approximately 30.1% of our outstanding common stock.

The transaction has been approved by a special committee of RLJE’s independent directors (the Special Committee). Following AMC’s initial $4.25 per share merger proposal announced on February 26, 2018, the Special Committee was constituted by our Board of Directors with the plenary authority of the full Board to evaluate, on behalf of the non-affiliate holders of our common stock, and to definitively approve or disapprove, AMC’s proposal. Having evaluated, structured, negotiated and documented with AMC the terms of the current transaction, the Special Committee, in consultation with its legal and financial advisors, has determined that the merger agreement, the merger and the transactions contemplated thereby, are advisable, fair to and in the best interest of the non-affiliate holders of our outstanding common stock.

Consummation of the merger is subject to customary closing conditions, including the approval of the merger agreement by a vote of the majority of the outstanding shares of our common stock as of the record date for a special meeting of our common stockholders that will be held to consider and vote on the transaction. The parties expect the transaction to close during the fourth quarter of 2018.

26

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

The following discussion and analysis of our financial condition and results of operations contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As described at the beginning of this Quarterly Report under the heading “Forward-Looking Statements,” our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could contribute to such differences include those discussed elsewhere in this Quarterly Report under the heading “Forward-Looking Statements.” You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. Except as may be required under federal law, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur.

You should read the following discussion and analysis in conjunction with our consolidated financial statements and related footnotes included in Item 1 of this Quarterly Report and with our audited consolidated financial statements and notes thereto, and with the information under the headings entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K filed on March 16, 2018.

OVERVIEW

General

RLJ Entertainment, Inc. (RLJE or the Company) was incorporated in Nevada in April 2012. On October 3, 2012, we completed the business combination of RLJE, Image Entertainment, Inc. (or Image) and Acorn Media Group, Inc. (or Acorn Media), which is referred to herein as the “Business Combination.” Acorn Media includes its United Kingdom (or U.K.) subsidiaries RLJ Entertainment Ltd (or RLJE Ltd.), Acorn Media Enterprises Limited (or AME), Acorn Global Enterprises Limited (or AGE), Acorn Productions Ltd (or APL), and RLJE International Ltd (collectively, RLJE UK), as well as RLJ Entertainment Australia Pty Ltd (or RLJE Australia). In February 2012, Acorn Media acquired a 64% ownership of Agatha Christie Limited (or ACL). References to Image include its wholly-owned subsidiary Image/Madacy Home Entertainment, LLC. “We,” “our” or “us” refers to RLJE and its subsidiaries unless otherwise noted. Our principal executive offices are located in Silver Spring, Maryland, with an additional location in Woodland Hills, California. We also have international offices in London, England and Sydney, Australia.

We are a premium digital channel company serving distinct audiences through our proprietary subscription-based video on demand (or SVOD) digital channels (or Digital Channels segment), Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and International mysteries and dramas. UMC showcases superior black television programs and films including original series, drama, romance, comedy, thrillers, stage plays, documentaries and other exclusive content for African-American and urban audiences.

We also exclusively control, co-produce, and own a large library of content primarily consisting of British mysteries and dramas, independent feature films and urban content. In addition to supporting our Digital Channels segment, we monetize our library through intellectual property (or IP) rights that we own, produce, and then exploit worldwide (our IP Licensing segment) and through distribution operations across all available wholesale windows of exploitation (our Wholesale Distribution segment). Our IP Licensing segment consists of our investment in ACL and owned intellectual property that is either owned or created by us and licensed for exploitation worldwide. Our Wholesale Distribution segment consists of worldwide exploitation of exclusive content in various formats through third party media and retail outlets in the United States of America (or U.S.), Canada, U.K. and Australia. We work closely with our wholesale partners to outline and implement release and promotional campaigns customized to the different audiences we serve and the program genres we exploit.

On July 30, 2018, we announced that we have entered into a definitive agreement whereby AMC Networks Inc. (or AMC) will acquire RLJE in a going-private merger. The aggregate enterprise transaction value is approximately $274.0 million, and pursuant to the merger agreement, AMC will pay, in cash, an aggregate of approximately $65.0 million to holders of our outstanding common stock, preferred stock and warrants not currently owned by AMC, Robert L. Johnson and their respective affiliates. Upon completion of the merger, RLJE will become an indirect subsidiary of AMC, with Mr. Johnson and his affiliates owning a stake of 17%. For more information about the merger and the agreement, please see our Current Report on Form 8-K, filed July 30, 2018, and our Preliminary Proxy Statement on Schedule 14A expected to be filed on or about August 17, 2018.

27

HIGHLIGHTS

Highlights and significant events for the three months ended June 30, 2018 and 2017 are as follows:

• Digital Channels paying subscribers increased 49.1% from the second quarter of 2017 to over 820,000. Digital Channels segment revenues increased 46.0% to $9.4 million from $6.4 million in second quarter 2017.

• Revenues increased 14.0% to $21.5 million, primarily driven by a $3.0 million increase in Digital Channels segment revenues.

• Gross profit increased 15.3% to $11.2 million and gross margin increased approximately 60 basis points to 52.3%in the second quarter 2018 from last year. Continued growth in our Digital Channels segment, which represents a larger portion of total revenues, drove the improvements in gross profit and gross margin.

• Equity earnings from Agatha Christie Limited (ACL) increased 48.2% year-over-year to $1.3 million driven by ACL’s film and publishing business segments.

• Net loss was $2.0 million compared to $0.9 million in the second quarter of 2017 as a result of our higher investment in content and marketing expenses, as well as $1.0 million of transaction costs incurred to respond to AMC’s merger proposal offset by the improvement in gross profit generated by our Digital Channels segment.

• Adjusted EBITDA increased to $4.5 million from $3.9 million in the second quarter of 2017 primarily due to the growth of higher-margin Digital Channels segment revenues.

Highlights and significant events for the six months ended June 30, 2018 and 2017are as follows:

• Revenues increased 22.4% to $40.1 million, primarily driven by a $5.7 million increase in Digital Channels segment revenues as a result of continued subscriber growth and a $1.6 million increase in Wholesale Distribution segment revenues primarily due to increased digital sales and increased demand for content released in 2018.

• Gross profit increased 38.1% to $20.0 million and gross margin increased approximately 6 percentage points to 50.0%in the first half of 2018 from last year primarily driven by growth in Digital Channels segment revenues as well as revenue growth and gross margin expansion in Wholesale Distribution.

• Equity earnings from Agatha Christie Limited (ACL) increased 45.9% year-over-year to $2.1 million driven by ACL’s film and publishing business segments.

• Net loss was $8.5 million compared to $7.0 million in the first half of 2017 as a result of our higher investment in content and marketing expenses, as well as $1.1 million of transaction costs incurred to respond to AMC’s merger proposal offset by the improvement in gross profit generated by our Digital Channels segment.

• Adjusted EBITDA increased to $6.0 million from $4.0 million in the first half of 2017 primarily due to the growth of higher-margin Digital Channels segment revenues and Wholesale Distribution segment revenues and gross margin.

The highlights above and the discussion below are intended to identify some of our more significant results and transactions during the three and six months ended June 30, 2018 and should be read in conjunction with our consolidated financial statements and related discussions within this Quarterly Report. Adjusted EBITDA is defined and reconciled to net loss below in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Adjusted EBITDA.

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RESULTS OF OPERATIONS

A summary of our results of operations for the three and six months ended June 30, 2018 and 2017, as disclosed in our consolidated financial statements in Item 1, Financial Statements, is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Revenues	$	21,474		$	18,833		$	40,056		$	32,720
Costs of sales		10,240			9,090			20,022			18,210
Gross profit		11,234			9,743			20,034			14,510
Operating expenses		10,574			8,495			21,035			16,175
Income (Loss) from operations		660			1,248			(1,001	)		(1,665	)
Equity in earnings of affiliate		1,288			869			2,072			1,420
Interest expense, net		(2,362	)		(2,152	)		(4,653	)		(4,038	)
Change in fair value of stock warrants and other derivatives		(471	)		(491	)		(3,438	)		(3,383	)
(Loss) Gain on extinguishment of debt		—			(425	)		—			470
Other (expense) income, net		(1,414	)		161			(1,591	)		445
Benefit (Provision) for income taxes		285			(76	)		145			(237	)
Net loss	$	(2,014	)	$	(866	)	$	(8,466	)	$	(6,988	)

Revenues

A summary of revenues by segment for the three and six months ended June 30, 2018 and 2017 is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Digital Channels	$	9,402	$	6,439	$	18,075	$	12,404
IP Licensing		17		2		36		4
Wholesale Distribution:
U.S.		9,876		8,619		16,947		14,029
International		2,179		3,773		4,998		6,283
Total Wholesale Distribution		12,055		12,392		21,945		20,312
Total Revenues	$	21,474	$	18,833	$	40,056	$	32,720

Revenues increased $2.6 million for the three months ended June 30, 2018 compared to the same period in 2017. The increase in revenues is primarily driven by our Digital Channels segment, which increased by $3.0 million, partially offset by our Wholesale Distribution segment, which decreased by $0.3 million. The increase in revenues from our Digital Channels segment was driven by a 49.1% growth in paying subscribers. We increased our marketing efforts beginning in the third quarter of 2017 to support subscriber growth. In addition, we are continually featuring new content on our digital channels, which we believe is a key factor in attracting new subscribers for all our channels. Revenues from our Digital Channels segment continues to represent a growing and more meaningful portion of our consolidated revenues. Revenues from these channels for the three months ended June 30, 2018 account for 43.8%, as compared to 34.2% for the three months ended June 30, 2017. Our Wholesale Distribution segment’s revenue decrease is primarily attributable to decreases in International revenues of $1.6 million for the three months ended June 30, 2018, offset by a $1.3 million increase in U.S. revenues. The International Wholesale Distribution revenues decreased primarily due to the release of two strong performing releases during the second quarter of 2017. The Wholesale Distribution segment’s U.S. revenue increase is primarily attributable to increased digital sales and demand for content being released during the current period.

Revenues increased $7.3 million for the six months ended June 30, 2018 compared to the same period in 2017. The increase in revenues is primarily driven by our Digital Channels segment, which increased by $5.7 million, and our Wholesale Distribution segment, which increased by $1.6 million. The increase in revenues from our Digital Channels segment was driven by a 49.1% growth in paying subscribers. Revenues from these channels for the six months ended June 20, 2018 account for 45.1% of our total revenues as compared to 37.9% for the six months ended June 30, 2017. Our Wholesale Distribution segment’s revenue increase is primarily attributable to increases in U.S. revenues of $2.9 million for the six months ended June 30, 2018. The Wholesale Distribution segment’s U.S. revenue increase is primarily attributable to increased digital sales and demand for content being released during the current period. This increase was offset by a $1.3 million decrease in revenues from the International Wholesale Distribution segment due to the release of two strong performing releases during the second quarter of 2017.

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Cost of Sales (“COS”) and Gross Margins

A summary of COS by segment and overall gross margins for the three and six months ended June 30, 2018 and 2017 is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Digital Channels	$	2,398		$	1,698		$	4,653		$	3,205
Wholesale Distribution		7,842			7,392			15,369			15,005
Total COS	$	10,240		$	9,090		$	20,022		$	18,210
Gross Margin	$	11,234		$	9,743		$	20,034		$	14,510
Gross Margin %		52.3	%		51.7	%		50.0	%		44.3	%

COS increased by $1.2 million to $10.2 million for the three months ended June 30, 2018 compared to the same period in 2017. The increase in COS is primarily attributable to an increase in royalty expenses within our Digital Channels segment. This increase is due to the release of new content on the channels. COS increased by $0.5 million within our Wholesale Distribution segment primarily due to an increasing proportion of revenues coming from digital distribution which carries a higher royalty rate than generated by sales of physical content. Our step-up amortization was $0.2 million and $0.4 million for the three months ended June 30, 2018 and 2017, respectively. The decrease in step-up amortization is attributable to lower revenues from titles that were acquired prior to our Business Combination. As time passes, we expect that step-up amortization will continue to decrease.

COS increased by $1.8 million to $20.0 million for the six months ended June 30, 2018 compared to the same period in 2017. The increase in COS is primarily attributable to an increase in royalty expenses within our Digital Channels segment. This increase is due to the release of new content on the channels. Within our Wholesale Distribution segment, impairment charges recorded for content investments and inventories total $0.7 million and $1.1 million for the six months ended June 30, 2018 and 2017, respectively. Impairment charges decreased due to improved performance of our released content relative to our estimation of future revenues. Our step-up amortization was $0.7 million and $1.3 million for the six months ended June 30, 2018 and 2017, respectively. The decrease in step-up amortization is attributable to lower revenues from titles that were acquired prior to our Business Combination. As time passes, we expect that step-up amortization will continue to decrease.

As a percentage of revenues, our gross margin improved to 52.3% for the three months ended June 30, 2018 as compared to 51.7% for the same period last year. As a percentage of revenues, our gross margin improved to 50.0% for the six months ended June 30, 2018 as compared to 44.3% for the same period last year. The improvement is primarily attributable to lower impairments and step-up amortization within our Wholesale Distribution segment, as well as, revenue growth of our proprietary digital channels, which generates a higher gross margin than our other business segments.

Operating Expenses (“SG&A”)

A summary of the components of SG&A for the three and six months ended June 30, 2018 and 2017 is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Selling expenses	$	4,776	$	2,875	$	9,041	$	5,159
General and administrative expenses		5,093		4,716		10,404		9,239
Depreciation and amortization		705		904		1,590		1,777
Total operating expenses	$	10,574	$	8,495	$	21,035	$	16,175

For the three and six months ended June 30, 2018, SG&A increased by $2.1 million and $4.9 million, respectively, compared to the same period last year. The increase is attributable to targeted marketing expenses that increased $1.9 million and $3.9 million, respectively, during the three and six months ended June 30, 2018, primarily due to increased marketing related to our Digital Channels segment. For the three and six months ended June 30, 2018, General and administrative expenses increased $0.4 million and $1.2 million, respectively, primarily due to increased incentive compensation costs including increased expenses associated with share-based compensation for executives and employees.

Equity Earnings of Affiliate

Equity earnings of affiliate (which is ACL) increased $0.4 million and $0.7 million, respectively, for the three and six months ended June 30, 2018 when compared to the same periods in 2017. During 2018, ACL’s gross profit and its income from operations are

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higher when compared to the same period in 2017 due to higher publishing revenues, as a percent of its total revenues, which generate higher margins when compared to its other operations.

Interest Expense, Net

Interest expense increased $0.2 million and $0.6 million, respectively, for the three and six months ended June 30, 2018 as compared to the same period in 2017. The increase is primarily a result of higher average outstanding debt balances during the three and six months ended June 30, 2018 as compared to the same period in 2017.

Change in Fair Value of Stock Warrants and Other Derivatives

The change in the fair value of our warrant and other derivative liabilities impacts the statement of operations. A decrease in the fair value of the liabilities results in the recognition of income, while an increase in the fair value of the liabilities results in the recognition of expense. Changes in fair value are primarily driven by changes in our common stock price and its volatility. For the three months ended June 30, 2018 and 2017, we recognized expense of $0.5 million in each period due to changes in the fair value of our stock warrants and other derivative liabilities. For the six months ended June 30, 2018 and 2017, we recognized expense of $3.4 million in each period due to changes in the fair value of our stock warrants and other derivative liabilities.

Other (Expense) Income

Other (expense) income mostly consists of foreign currency gains and losses resulting from advances and loans by our U.S. subsidiaries to our foreign subsidiaries that have not yet been repaid. Our foreign currency gains and losses are primarily impacted by changes in the exchange rate of the British Pound Sterling (or the Pound) relative to the U.S. dollar. As the Pound strengthens relative to the U.S. dollar, we recognize other income; and as the Pound weakens relative to the Dollar, we recognize other expense. During the three and six months ended June 30, 2018, we recognized foreign currency losses of $0.4 million on intercompany loans with our foreign subsidiaries for each period. During the three and six months ended June 30, 2017, we recognized foreign currency gains of $0.2 million and $0.5 million.

During the three and six months ended June 30, 2018, other expenses also included $1.0 million and $1.1 million, respectively, of transaction costs incurred to respond to AMC’s merger proposal.

Income Taxes

We have fully reserved our net U.S. deferred tax assets, and such tax assets may be available to reduce future income taxes payable should we have U.S. taxable income in the future. To the extent such deferred tax assets relate to net operating losses (or NOL) carryforwards, the ability to use our NOL carryforwards against future earnings will be subject to applicable carryforward periods and limitations subsequent to a change in ownership.

We recorded income tax benefit of $0.3 million for the three months ended June 30, 2018. We recorded income tax expense of $0.1 million for the three months ended June 30, 2017. We recorded income tax benefit of $0.1 million for the six months ended June 30, 2018. We recorded income tax expense of $0.2 million for the six months ended June 30, 2017. Our tax provision consists primarily of a deferred tax provision for certain deferred tax liabilities and a current tax provision for our U.K. operations. We are recording a deferred tax provision and liability for our equity earnings of affiliate (ACL) after deducting distributions received. The earnings in excess of distributions received will be taxable in the U.K., when and if we dispose of our investment. We are providing current income tax expense on pre-tax income from our consolidated U.K. subsidiaries at an effective tax rate of approximately 19%. We are not providing a current tax provision (benefit) on our U.S. operations, other than for certain state minimum taxes, which are not material.

Adjusted EBITDA

Management defines Adjusted EBITDA as earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.

Management believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material non-cash items that allows investors to analyze the operating performance of the business using the same metric management uses. The exclusion of non-cash items better reflects our ability to make investments in the business and meet obligations. Presentation of Adjusted EBITDA is a non-GAAP

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financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. Management uses this measure to assess operating results and performance of our business, perform analytical comparisons, identify strategies to improve performance and allocate resources to our business segments. While management considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with US GAAP. Not all companies calculate Adjusted EBITDA in the same manner and the measure, as presented, may not be comparable to similarly-titled measures presented by other companies.

The following table includes the reconciliation of our consolidated US GAAP net loss to our consolidated Adjusted EBITDA:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Net loss	$	(2,014	)	$	(866	)	$	(8,466	)	$	(6,988	)
Interest expense		2,362			2,152			4,653			4,038
Provision for income tax		(285	)		76			(145	)		237
Depreciation and amortization		705			904			1,590			1,777
Basis-difference amortization in equity earnings of    affiliate		121			114			246			225
Change in fair value of stock warrants and other    derivatives		471			491			3,438			3,383
Stock-based compensation		638			358			1,327			512
Restructuring		1,097			423			1,321			(192	)
Foreign currency exchange gain on intercompany    accounts		381			(192	)		388			(475	)
Dividends received from affiliate in excess of    equity earnings of affiliate		824			—			824			—
Non-cash royalty expense		228			476			824			1,516
Adjusted EBITDA	$	4,528		$	3,936		$	6,000		$	4,033

For the three and six months ended June 30, 2018, our Adjusted EBITDA improved by $0.6 million and $2.0 million compared to the same period last year. The increase reflects our improved operating results from continuing operations after adjusting for the above non-cash expenses. The improved performance primarily results from the growth of our Digital Channels segment, which is becoming a larger portion of our business and is contributing a higher profit margin. Adjusted EBITDA also improved due to the improved performance of our Wholesale Distribution segment during the six months ended June 30, 2018 as compared to the same period in 2017. The 2018 restructuring adjustment primarily consists of $1.1 million of non-recurring transaction costs incurred to respond to AMC’s merger proposal. The 2017 restructuring adjustment for the six months ended June 30, 2017 primarily includes our net gain on extinguishment of debt and certain non-recurring transaction costs totaling $0.4 million.

BALANCE SHEET ANALYSIS

Assets

Total assets at June 30, 2018 and December 31, 2017, were $146.9 million and $151.8 million, respectively. The decrease of $4.9 million in assets is primarily attributed to decreases in cash of $2.8 million, accounts receivable of $7.9 million, equity investment in ACL of $1.5 million, and other intangible assets of $0.7 million; offset by increases in investments in content of $8.2 million. The decrease in cash is primarily due to increased investments in content, the use of cash for incentive compensation and payments and to reduce vendor payables, offset by net cash received from the collection of accounts receivable and cash dividends received from ACL of $3.1 million. Our equity investment in ACL decreased due to the receipt of cash dividends partially offset by the improved operating performance at ACL. Our accounts receivable decreased due to the seasonal nature of our Wholesale Distribution business and follows the decline in our Wholesale Distribution segment revenues.

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A summary of assets by segment is as follows:

	June 30,		December 31,
(In thousands)	2018		2017
Digital Channels	$	16,427	$	11,148
IP Licensing		25,585		23,981
Wholesale Distribution		100,291		109,178
Corporate		4,596		7,473
Total Assets	$	146,899	$	151,780

Liabilities and Equity

The decrease of liabilities and equity of $4.9 million to $146.9 million is primarily due to a decrease in our account payable and accrued liabilities of $3.0 million, primarily resulting from payments to vendors and incentive compensation payments; and a decrease in retained earnings of $9.2 million primarily attributable to our net loss during the quarter. These decreases were offset by increases in the fair value of our stock warrants of $3.4 million, the accretion of debt discount of $2.2 million, additional paid-in capital of $3.4 million, primarily from stock-based compensation and the issuance of common stock for interest.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

A summary of our cash flow activities is as follows:

	Six Months Ended June 30,
(In thousands)	2018			2017
Net cash used in operating activities	$	(871	)	$	(4,272	)
Net cash used in investing activities		(969	)		(816	)
Net cash (used in) provided by financing activities		(708	)		9,339
Effect of exchange rate changes on cash		(214	)		162
Net (decrease) increase in cash		(2,762	)		4,413
Cash at beginning of period		6,215			7,834
Cash at end of period	$	3,453		$	12,247

During the six months ended June 30, 2018, our cash position was impacted by the following:

• We used cash for operating activities of $0.9 million compared to $4.3 million for the same period last year. We used more cash for operating activities in 2017 due to increasing our investments in content to expand our program library and to reducing our royalty liabilities. We continue to experience liquidity constraints as we have several competing demands on our available cash and cash that may be generated from operations. We continue to have short-term vendor debts, that are past due and which we are in the process of paying off by making increased cash payments or modifying payment terms in the short term. Bringing our vendor trade payables current continues to constrain our liquidity.

• Our quarterly results are typically affected by: (a) the timing and release dates of key productions, (b) the seasonality of our Wholesale Distribution business which is 32% to 35% weighted to the fourth quarter and (c) the increased investment in content during the first half of the year, yet investments at times may be impacted by liquidity constraints.

Growth of our Digital Channels segment has the potential to improve our liquidity. We continue to realize significant growth in our Digital Channels segment. Our Digital Channels segment revenues increased 45.7% to $18.1 million during the six months ended June 30, 2018 as compared to the same period in 2017. After cost of sales and operating expenses, our Digital Channels segment contributed $5.3 million of income from operations during the six months ended June 30, 2018 compared to $4.9 million last year. Our expectation is that our Digital Channels segment will continue to grow, however there is no assurance that this will occur.

We believe that our current cash at June 30, 2018, and cash to be generated from operations will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt repayments (none due until 2020) for at least one year from the date of issuance of this Quarterly Report. However, there can be no assurances that we will be successful in realizing improved results from operations including improved Adjusted EBITDA, generating sufficient cash flows from operations or agreeing with vendors on revised payment terms.

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Capital Resources

Cash

As of June 30, 2018 we had cash of $3.5 million, as compared to $6.2 million as of December 31, 2017.

Senior Term Notes

On October 14, 2016, we entered into a $65.0 million Credit and Guaranty Agreement (the AMC Credit Agreement) with Digital Entertainment Holdings LLC, a wholly owned subsidiary of AMC. Concurrent with entering into the AMC Credit Agreement, we also issued AMC three warrants (the AMC Warrants) to acquire a total of 20.0 million shares of our common stock at $3.00 per share. The entering of the AMC Credit Agreement, the issuance of the AMC Warrants and the associated transactions are referred to as the AMC Transaction.

Initially, the AMC Credit Agreement consisted of (i) a term loan tranche in the principal amount of $5.0 million (or Tranche A Loan), which was due on October 14, 2017, and (ii) a term loan tranche in the principal amount of $60.0 million (or Tranche B Loan) of which 25% is due after five years, 50% is due after six years and the remaining 25% is due after seven years. The Tranche A Loan bears interest at a rate of 7.0% per annum and the Tranche B Loan bears interest at a rate of 6.0% per annum. Interest was payable quarterly whereby 4.0% was payable in cash and the balance was payable in shares of common stock determined using a per-share value of $3.00. The loan is secured by a lien on substantially all of our consolidated assets.

On January 30, 2017, to repay prior debt obligations under the subordinated notes payable we amended the AMC Credit Agreement and borrowed an additional $8.0 million, thereby increasing our Tranche A Loan from $5.0 million to $13.0 million. We also extended the maturity date for our Tranche A Loan from October 14, 2017 to June 30, 2019. When doing so, we did not incur a prepayment penalty.

On June 16, 2017, to fuel the growth of our business, we expanded the AMC Credit Agreement and borrowed an additional $10.0 million, thereby increasing our Tranche A Loan from $13.0 million to $23.0 million. Further, we extended the maturity date for our Tranche A Loan from June 30, 2019 to beginning on June 30, 2020. We also amended the payment provisions regarding interest whereby all interest is now settled with shares of common stock at $3.00 per share beginning as of April 1, 2017. This amendment also changed certain debt covenant ratios to reflect the extended maturity date and the increase of the Tranche A Loan balance.

Concurrent with the June 2017 amendment, RLJ SPAC Acquisition, LLC (a related party) converted all of its preferred stock holdings into shares of common stock and AMC exercised a portion of their warrants that resulted in the Tranche B Loan principal reduction of $5.0 million.

Subject to certain customary exceptions, the AMC Credit Agreement requires mandatory prepayments if we were to receive proceeds from asset sales, insurance, debt issuance or the exercise of warrants. We may also make voluntary prepayments. Prepayments of the Tranche B Loan (either voluntary or mandatory) are subject to a prepayment premium of 3.0% if principal is repaid on or before October 14, 2018, and 1.5% if principal is repaid after October 14, 2018 but on or before October 14, 2019. No prepayment premium is due for amounts prepaid after October 14, 2019, and for mandatory prepayments made from proceeds received from the exercise of warrants. The Tranche A Loan is not subject to prepayment penalties.

The AMC Credit Agreement contains certain financial and non-financial covenants. Financial covenants are assessed annually and are based on Consolidated Adjusted EBITDA, as defined in the AMC Credit Agreement. Financial covenants vary by fiscal year and generally become more restrictive over time.

Financial covenants include the following:

	December 31, 2017	December 31, 2018	Thereafter
Leverage Ratios:
Senior debt-to-Adjusted EBITDA	5.75 : 1.00	4.00 : 1.00	Ranges from 3.75 : 1.00 to 2.50 : 1.00
Total debt-to-Adjusted EBITDA	6.00 : 1.00	5.00 : 1.00	4.00 : 1.00
Fixed charge coverage ratio	1.00 : 1.00	2.00 : 1.00	2.00 : 1.00

The AMC Credit Agreement contains events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross defaults to certain other contracts (including, for example, business arrangements with our U.S. distribution facilitation partner and other material contracts) and indebtedness and events constituting a change of control or a material adverse effect in any of our results

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of operations or conditions (financial or otherwise). The occurrence of an event of default would increase the applicable rate of interest and could result in the acceleration of our obligations under the AMC Credit Agreement.

The AMC Credit Agreement imposes restrictions on such items as encumbrances and liens, payments of dividends to common stockholders, other indebtedness, stock repurchases, capital expenditures and entering into new lease obligations. Additional covenants restrict our ability to make certain investments, such as loans and equity investments, or investments in content that are not in the ordinary course of business. Pursuant to the AMC Credit Agreement, we must maintain at all times a cash balance of $3.5 million for all years beginning after 2017, except for a four-month period ending September 30, 2018 whereby the minimum cash balance requirement was reduced to $2.0 million. On August 7, 2018, AMC agreed in principle to further reduce our minimum cash balance requirement. We are currently drafting an amendment to the AMC Credit Agreement to formalize this change. As of June 30, 2018, we were in compliance with all covenants as stipulated in the amended AMC Credit Agreement.

Concurrent with entering into the AMC Transaction, we issued the AMC Warrants to acquire shares of our common stock. The first warrant is for 5.0 million shares of common stock, of which 1.7 million shares were exercised in June 2017, and expires on October 14, 2021. The second warrant is for 10.0 million shares of common stock and expires on October 14, 2022. The third warrant is for 5.0 million shares of common stock, subject to adjustment, and expires on October 14, 2023. The AMC Warrants are subject to certain standard anti-dilution provisions and may be exercised on a non-cash basis at AMC’s discretion.

The third warrant (the AMC Tranche C Warrant) contains a provision that may increase the number of shares acquirable upon exercising, for no additional consideration payable by AMC, such that the number of shares acquirable upon exercise is equal to the sum of (i) at least 50.1% of our then outstanding shares of common stock, determined on a fully diluted basis, less (ii) the sum of 15.0 million shares and the equity interest shares issued in connection with the AMC Credit Agreement. This provision provides AMC the ability to acquire at least 50.1% of our common stock for $60.0 million, provided that all warrants are exercised and AMC elects not to exercise on a non-cash basis.

Preferred Stock

On May 20, 2015, we closed a transaction in which we sold 31,046 shares of preferred stock and warrants to acquire 3.1 million shares of common stock (the 2015 Warrants) for $22.5 million in cash and the exchange of $8.5 million in subordinated notes. Of the preferred shares and warrants sold, 16,500 shares of preferred stock and warrants to acquire 1.7 million shares of common stock were sold to certain board members or their affiliated companies.

On October 14, 2016 and concurrent with the close of our AMC Credit Agreement, we amended our preferred stock such that we were able to classify our preferred stock and its embedded conversion feature within our shareholders’ equity. Prior to the amendment, our preferred stock and its embedded conversion feature were recorded on our consolidated balance sheet outside of shareholders’ equity. The amended terms are disclosed below.

The preferred stock has the following rights and preferences:

• Rank – the preferred stock ranks higher than other company issued equity securities in terms of distributions, dividends and other payments upon liquidation.

• Dividends – the preferred stockholders are entitled to cumulative dividends at a rate of 8% per annum of a preferred share’s stated value ($1,000 per share plus any unpaid dividends). The first dividend payment was made on July 1, 2017 and payments have been made quarterly thereafter. At our discretion, dividend payments are payable in either cash, or if we satisfy certain equity issuance conditions, in shares of common stock. Pursuant to the October 14, 2016 amended terms, if we don’t satisfy equity issuance conditions, then we may elect to accrue the value of the dividend and add it to the preferred share’s stated value.

• Conversion – at the preferred stockholder’s discretion, each share of preferred stock is convertible into 333.3 shares of our common stock, subject to adjustment for any unpaid dividends. Prior to the October 14, 2016 amendment, the conversion rate was subject to anti-dilution protection for offerings consummated at a per-share price of less than $3.00 per common share. This down-round provision was removed as part of the October 14, 2016 amendment.

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• Mandatory Redemption – unless previously converted, on May 20, 2020, at our option we will either redeem the preferred stock with (a) cash equal to $1,000 per share plus any unpaid dividends (Redemption Value), or (b) shares of common stock determined by dividing the Redemption Value by a conversion rate equal to the lower of (i) the conversion rate then in effect (which is currently $3.00) or (ii) 85% of the then trading price, as defined, of our common stock. As part of the October 14, 2016 amendment, a floor was established for all but 16,500 shares of preferred stock such that the redemption ratio cannot be below $0.50 per common share. For the 16,500 shares of preferred stock, a floor of $2.49 was already in place and remained unchanged. If we were to redeem with shares of common stock, the actual number of shares that would be issued upon redemption is not determinable as the number is contingent upon the then trading price of our common stock. Generally, if we were to redeem with shares, the number of common shares needed for redemption increases as our common stock price decreases. Because of the October 14, 2016 amendment, the maximum number of common shares issuable upon redemption is determinable given the redemption conversion floors. If we elect to redeem with shares of common stock, and we fail to meet certain conditions with respect to the issuance of equity, then we would be subject to a 20% penalty of the maturity redemption price, payable in either cash or shares of common stock. This penalty is subject to, and therefore possibly limited by, a $0.50 per share floor.

• Voting – except for certain matters that require the approval of the preferred stockholders, such as changes to the rights and preferences of the preferred stock, the preferred stock does not have voting rights. However, the holders of the preferred stock are entitled to appoint two board members and, under certain circumstances, appoint a third member.

We are adjusting the carrying balance of our preferred stock to its Redemption Value using the effective interest-rate method over a period of time beginning from the issuance date of May 20, 2015 to the required redemption date of May 20, 2020. During the six months ended June 30, 2018 and 2017, we recognized accretion of $0.4 million and $0.8 million, respectively. Accretion includes cumulative preferred dividends. Pursuant to the October 14, 2016 amendment, accumulated unpaid dividends from the issuance date through April 1, 2017 were added to the stated value of the preferred stock. Subsequently, we began making quarterly dividend payments. As of June 30, 2018, the accumulated unpaid dividends on preferred stock were $0.4 million. During the six months ended June 30, 2018, we made cash dividend payments of $0.7 million. No dividend payments were made during the six months ended June 30, 2017. During the six months ended June 30, 2018 there was no change in accumulated dividends.

During June 2017, the largest preferred shareholder (RLJ SPAC Acquisition, LLC) converted a total of 15,000 shares of preferred stock and $2.7 million of accumulated dividends into 5.9 million shares of common stock.

On July 30, 2018, we announced that we have entered into a definitive agreement whereby AMC will acquire RLJE in a going-private merger. In the merger, outstanding shares of our common stock (other than shares owned by Mr. Johnson, AMC and their respective affiliates) will be converted into the right to receive $6.25 per share in cash, without interest; the holders of our outstanding preferred stock (other than affiliates of AMC) will be offered the opportunity to elect to receive $7.8125 in cash for each underlying “as converted” share of our common stock in accordance with the terms of such preferred stock; and the holders of warrants (other than Mr. Johnson, AMC and their respective affiliates) will be paid the excess of the $6.25 per share merger consideration over the per share exercise price of their warrants. In accordance with its terms, holders of preferred stock who decline to accept the $7.8125 cash offer for their shares will be entitled to receive for each share of preferred stock a new share of preferred stock to be issued by RLJE after the merger.

In 2015, we filed a registration statement with the Securities and Exchange Commission to register the shares issuable upon conversion of the preferred stock and exercise of the 2015 Warrants. The registration statement was declared effective in July 2015 and amended in 2016. If we are in default of the registration rights agreement, and as long as the event of default is not cured, then we are required to pay, in cash, partial liquidation damages, which in total are not to exceed 6% of the aggregated subscription amount of $31.0 million. We will use our best efforts to keep the registration statement effective.

RELATED PARTY TRANSACTIONS

In the ordinary course of business, we enter into transactions with related parties, primarily our equity method investee and entities owned and controlled by the Chairman of our Board of Directors. Information regarding transactions and amounts with related parties is discussed in Note 15, Related Party Transactions of our consolidated financial statements in Item 1, Financial Statements.

OTHER ITEMS

Off-Balance Sheet Arrangements

We typically acquire content via separately executed licensing or distribution agreements with content suppliers. These contracts generally require that we make advance payments before the content is available for exploitation. Advance payments are generally due prior to and upon delivery of the related content. To the extent payment is not due until delivery has occurred, we do not recognize our payment obligations under our licensing and distribution agreements prior to the content being delivered. As of June 30, 2018, we had

36

entered into licensing and distribution agreements for which we are obligated to pay $9.9 million once the related content has been delivered.

Critical Accounting Policies and Procedures

There have been no significant changes in the critical accounting policies disclosed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed on March 16, 2018.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3, Quantitative and Qualitative Disclosures about Market Risk is not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act. Disclosure controls and procedures refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We have evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Accounting Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, our Chief Executive Officer and our Chief Accounting Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we are subject to proceedings, lawsuits and other claims, including proceedings under government laws and regulations relating to employment and tax matters. While it is not possible to predict the outcome of these matters, it is the opinion of management, based on consultations with legal counsel, that the ultimate disposition of known proceedings will not have a material adverse impact on our financial position, results of operations or liquidity.

ITEM 1A. RISK FACTORS

Our results of operations and financial condition are subject to numerous risks and uncertainties described in our Annual Report on Form 10-K filed on March 16, 2018. You should carefully consider these risk factors in conjunction with the other information contained in this Quarterly Report. Should any of these risks materialize, our business, financial condition and future prospects could be negatively impacted. As of June 30, 2018, other than with respect to the risk factors set forth below, there have been no material changes to the risk factors set forth in that Form 10-K.

Risks Related to the Merger with AMC

Our pending potential merger with AMC is not guaranteed to occur. Compliance with the terms of the Merger Agreement in the interim could adversely affect our business. If the merger does not occur, it could have a material adverse effect on our business, results of operations and our stock price. On July 29, 2018, we entered into an Agreement and Plan of Merger (the Merger Agreement) with AMC Networks Inc., a Delaware corporation (AMC), Digital Entertainment Holdings LLC, a Delaware limited liability company and wholly owned subsidiary of AMC (Parent), and River Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Parent (Merger Sub), providing for the merger of Merger Sub with and into RLJE (the Merger), with RLJE surviving the Merger as a wholly-owned subsidiary of Parent.

The obligation of the parties to consummate the Merger is subject to customary closing conditions, including, among other things, the approval of the Merger Agreement and the Merger by our stockholders at a special meeting of stockholders convened for such purpose and the absence of legal restraints and prohibitions against the Merger and the other transactions contemplated by the Merger Agreement. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct to the extent specified in the Merger Agreement, the other party having performed in all material respects its obligations under the Merger Agreement and, in the case of Parent and Merger Sub, RLJE not having suffered a material adverse effect. There is no financing condition to the Merger.

As a result of the Merger Agreement, the following may occur:

• the attention of management and employees may be diverted from day to day operations as they focus on matters relating to preparation for integrating our operations with those of Parent;

• the restrictions and limitations on our conduct of business pending the Merger may disrupt or otherwise adversely affect our business and our relationships with our customers;

• our ability to retain our existing employees may be adversely affected due to the uncertainties created by the Merger; and

• our ability to maintain existing customer relationships, or to establish new ones, may be adversely affected. Any delay in consummating the Merger may exacerbate these issues.

There can be no assurance that all of the conditions to closing will be satisfied, or where possible, waived, or that the Merger will become effective. If the Merger does not become effective because all conditions to closing are not satisfied, or because one of the parties or all of the parties mutually terminate the Merger Agreement, then, among other possible adverse effects:

• our stockholders will not receive the consideration which Parent has agreed to pay;

• our stock price may decline significantly;

• our business may have been adversely affected; and

• we will have incurred significant transaction costs.

The pendency of the Merger could materially adversely affect our operations and the future of our business or result in a loss of employees. In connection with the pending Merger, it is possible that some customers, suppliers and other persons with whom we have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or

38

renegotiate their relationship with us as a result of the Merger, which could negatively impact our revenues, earnings and cash flows, regardless of whether the Merger is completed. Similarly, current and prospective employees may experience uncertainty about their future roles with us following completion of the Merger, which may materially adversely affect our ability to attract and retain key employees.

Failure to complete the Merger could negatively impact our stock price and our future businesses and financial results. If the Merger is not completed, our ongoing business may be adversely affected and we will be subject to several risks and consequences, including the following:

• grant security interests in any property;

• under the Merger Agreement, we may be required, under certain circumstances, to pay a termination fee of either $6.75 million or up to $3.0 million (depending on the circumstances):

• we will be required to pay certain costs relating to the Merger if the Merger is not completed, such as legal, accounting, financial advisor and printing fees;

• under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger that may adversely affect our ability to execute certain of our business strategies; and

• matters relating to the Merger may require our management to devote substantial commitments of time and resources, which could otherwise have been devoted to other opportunities that may have been beneficial to us.

In addition, if the Merger is not completed, we may experience negative reactions from the financial markets and from our customers and employees. We also could be subject to litigation related to, among other things, breach of fiduciary duties, any failure to complete the Merger or to enforcement proceedings commenced against us to attempt to force us to perform our obligations under the Merger Agreement.

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

As reported in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, the AMC Credit Agreement requires us to settle all interest payments with shares of common stock. The shares are issuable at $3.00 per share. During the quarter ended June 30, 2018, we issued AMC 409,162 shares of common stock in payment of $1.2 million of interest on the outstanding principal of $78.0 million. The issuance of the shares was exempt from registration pursuant to Securities Act Section 4(a)(2) as a transaction not involving a public offering.

ITEM 6. EXHIBITS

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer.
32.1	Section 1350 Certification of Chief Executive Officer and Chief Accounting Officer.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

39

SIGNATURES

Pursuant to the requirements 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.

		RLJ ENTERTAINMENT, INC.
Date:	August 9, 2018	By:	/S/ MIGUEL PENELLA
			Miguel Penella
			Chief Executive Officer
			(Principal Executive Officer)
Date:	August 9, 2018	By:	/S/ MARK NUNIS
			Mark Nunis
			Chief Accounting Officer
			(Principal Financial and Accounting Officer)

40

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Miguel Penella, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RLJ Entertainment, Inc.;

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 officer 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 officer 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: August 9, 2018	/s/ MIGUEL PENELLA
	Miguel Penella
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Mark Nunis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RLJ Entertainment, Inc.;

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 officer 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 officer 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: August 9, 2018	/s/ MARK NUNIS
	Mark Nunis
	Chief Accounting Officer

EX-32.1

EXHIBIT 32.1

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 the Quarterly Report of RLJ Entertainment, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Miguel Penella, Chief Executive Officer and Mark Nunis, Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

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

Date:	August 9, 2018	/s/ MIGUEL PENELLA
		Miguel Penella
		Chief Executive Officer

Date:	August 9, 2018	/s/ MARK NUNIS
		Mark Nunis
		Chief Accounting Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 02, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	RLJ ENTERTAINMENT, INC.
Entity Trading Symbol	RLJE
Entity Central Index Key	0001546381
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		15,614,607
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018

XML

CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	[1]
ASSETS
Cash	$ 3,453	$ 6,215
Accounts receivable, net	16,989	24,926
Inventories, net	4,599	4,448
Investments in content, net	78,660	70,483
Prepaid expenses and other assets	1,022	1,197
Property, equipment and improvements, net	1,049	1,185
Equity investment in affiliate	20,135	21,589
Other intangible assets, net	7,081	7,752
Goodwill	13,911	13,985
Total assets	146,899	151,780
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities	13,755	16,707
Accrued royalties and distribution fees	46,584	47,414
Deferred revenue	3,388	2,859
Debt, net of discounts and debt issuance costs	54,854	52,639
Deferred tax liability	367	518
Stock warrant and other derivative liabilities	17,123	13,685
Total liabilities	136,071	133,822
Commitments and contingencies (see Note 14)
Shareholders' Equity
Redeemable convertible preferred stock, $0.001 par value, 1,000,000 shares authorized; 31,046 shares issued; 15,198 shares outstanding at June 30, 2018 and December 31, 2017; liquidation preference of $17,993 at June 30, 2018 and $17,997 at December 31, 2017	18,887	19,563
Common stock, $0.001 par value, 250,000,000 shares authorized, 15,138,250 shares issued and 15,127,138 shares outstanding at June 30, 2018; and 14,071,423 shares issued and outstanding at December 31, 2017	15	14
Additional paid-in capital	135,844	132,422
Accumulated deficit	(140,055)	(130,842)
Accumulated other comprehensive loss	(3,863)	(3,199)
Total shareholders' equity	10,828	17,958
Total liabilities and shareholders' equity	$ 146,899	$ 151,780

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

XML

CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Shareholders' Equity
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	31,046	31,046
Preferred stock, shares outstanding (in shares)	15,198	15,198
Preferred stock, liquidation preference (in dollars)	$ 17,993	$ 17,997
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	15,138,250	14,071,423
Common stock, shares outstanding (in shares)	15,127,138	14,071,423
Treasury shares (in shares)	11,112	0

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues	$ 21,474	$ 18,833	$ 40,056	$ 32,720
Type of Revenue [Extensible List]	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember
Cost of sales
Total cost of sales	$ 10,240	$ 9,090	$ 20,022	$ 18,210
Gross profit	11,234	9,743	20,034	14,510
Selling expenses	4,776	2,875	9,041	5,159
General and administrative expenses	5,093	4,716	10,404	9,239
Depreciation and amortization	705	904	1,590	1,777
Total operating expenses	10,574	8,495	21,035	16,175
INCOME (LOSS) FROM OPERATIONS	660	1,248	(1,001)	(1,665)
Equity earnings of affiliate	1,288	869	2,072	1,420
Interest expense, net	(2,362)	(2,152)	(4,653)	(4,038)
Change in fair value of stock warrants and other derivatives	(471)	(491)	(3,438)	(3,383)
(Loss) Gain on extinguishment of debt		(425)		470
Other (expense) income, net	(1,414)	161	(1,591)	445
LOSS FROM OPERATIONS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES	(2,299)	(790)	(8,611)	(6,751)
Benefit (Provision) for income taxes	285	(76)	145	(237)
NET LOSS	(2,014)	(866)	(8,466)	(6,988)
Accretion on preferred stock	(193)	(379)	(386)	(756)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ (2,207)	$ (1,245)	$ (8,852)	$ (7,744)
Net loss per common share attributable to common shareholders:
Basic and diluted net loss per common share attributable to common shareholders	$ (0.15)	$ (0.20)	$ (0.60)	$ (1.36)
Weighted average shares outstanding:
Basic and diluted	15,031	6,196	14,730	5,691
Content Amortization And Royalties
Cost of sales
Total cost of sales	$ 7,562	$ 6,261	$ 14,258	$ 12,329
Manufacturing And Fulfillment
Cost of sales
Total cost of sales	$ 2,678	$ 2,829	$ 5,764	$ 5,881

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (2,014)	$ (866)	$ (8,466)	$ (6,988)
Other comprehensive income (loss):
Foreign currency translation (loss) gain	(2,074)	810	(664)	923
Total comprehensive loss	$ (4,088)	$ (56)	$ (9,130)	$ (6,065)

XML

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($) $ in Thousands		Total	AMC [Member]	Preferred Stock [Member]	Common Stock [Member]		Common Stock [Member] AMC [Member]	Additional Paid-in Capital [Member]	Additional Paid-in Capital [Member] AMC [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]
Balance (Revised) at Dec. 31, 2017	[1]	$ 17,958		$ 19,563	$ 14			$ 132,422		$ (130,842)	$ (3,199)
Balance (Revised) at Dec. 31, 2017		14,071,423			14,071,000	[1]
Adjustment to adopt new revenue standard		$ (747)								(747)
Issuance of restricted common stock for services (in shares)					240,000
Issuance of common stock for interest			$ 2,482				$ 1		$ 2,481
Issuance of common stock for interest (in shares)							827,000
Forfeiture of restricted common stock (in shares)					(11,000)							11,000
Accretion on preferred stock				386				(386)
Preferred stock dividends paid		(708)		(708)
Preferred stock dividends accrued		(354)		(354)
Stock-based compensation		1,327						1,327
Foreign currency translation		(664)									(664)
Net loss		(8,466)								(8,466)
Balance at Jun. 30, 2018		$ 10,828		$ 18,887	$ 15			$ 135,844		$ (140,055)	$ (3,863)
Balance (in shares) at Jun. 30, 2018		15,127,138			15,127,000							11,000

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (8,466,000)	$ (6,988,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity earnings of affiliate	(2,072,000)	(1,420,000)
Content amortization and royalties	14,258,000	12,329,000
Depreciation and amortization	1,590,000	1,777,000
Foreign currency exchange loss (gain)	388,000	(475,000)
Fair value adjustment of stock warrant and other derivative liabilities	3,438,000	3,383,000
Non-cash interest expense	4,653,000	3,221,000
Deferred tax liability	(145,000)	(239,000)
Gain on extinguishment of debt		(470,000)
Stock-based compensation expense	1,327,000	512,000
Dividends received from affiliate	3,133,000	1,243,000
Changes in assets and liabilities:
Accounts receivable, net	7,893,000	8,859,000
Inventories, net	(196,000)	416,000
Investments in content, net	(23,237,000)	(25,584,000)
Prepaid expenses and other assets	171,000	(494,000)
Accounts payable and accrued liabilities	(3,078,000)	(373,000)
Deferred revenue	(528,000)	31,000
Net cash used in operating activities	(871,000)	(4,272,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(969,000)	(816,000)
Net cash used in investing activities	(969,000)	(816,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants		28,000
Dividend payments to preferred stockholders	(708,000)	0
Repayment of debt		(8,618,000)
Payment of debt modification costs		(71,000)
Net cash (used in) provided by financing activities	(708,000)	9,339,000
Effect of exchange rate changes on cash	(214,000)	162,000
NET (DECREASE) INCREASE IN CASH:	(2,762,000)	4,413,000
Cash at beginning of period	6,215,000	7,834,000
Cash at end of period	$ 3,453,000	12,247,000
Senior Debt [Member]
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from AMC		$ 18,000,000

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Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

RLJ Entertainment, Inc. (RLJE or the Company) was incorporated in Nevada in April 2012. On October 3, 2012, we completed the business combination of RLJE, Image Entertainment, Inc. (or Image) and Acorn Media Group, Inc. (or Acorn Media), which is referred to herein as the “Business Combination.” Acorn Media includes its United Kingdom (or U.K.) subsidiaries RLJ Entertainment Ltd (or RLJE Ltd.), Acorn Media Enterprises Limited (or AME), Acorn Global Enterprises Limited (or AGE), Acorn Productions Ltd (or APL), and RLJE International Ltd (collectively, RLJE UK), as well as RLJ Entertainment Australia Pty Ltd (or RLJE Australia). In February 2012, Acorn Media acquired a 64% ownership of Agatha Christie Limited (or ACL). References to Image include its wholly-owned subsidiary Image/Madacy Home Entertainment, LLC. “We,” “our” or “us” refers to RLJE and its subsidiaries unless otherwise noted. Our principal executive offices are located in Silver Spring, Maryland, with an additional location in Woodland Hills, California. We also have international offices in London, England and Sydney, Australia.

We are a premium digital channel company serving distinct audiences through our proprietary subscription-based video on demand (or SVOD) digital channels (or Digital Channels segment), Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and International mysteries and dramas. UMC showcases superior black television programs and films including original series, drama, romance, comedy, thrillers, stage plays, documentaries and other exclusive content for African-American and urban audiences.

We also exclusively control, co-produce, and own a large library of content primarily consisting of British mysteries and dramas, independent feature films and urban content. In addition to supporting our Digital Channels segment, we monetize our library through intellectual property (or IP) rights that we own, produce, and then exploit worldwide (our IP Licensing segment) and through distribution operations across all available wholesale windows of exploitation (our Wholesale Distribution segment). Our IP Licensing segment consists of our investment in ACL and owned intellectual property that is either owned or created by us and licensed for exploitation worldwide. Our Wholesale Distribution segment consists of worldwide exploitation of exclusive content in various formats through third party media and retail outlets in the United States of America (or U.S.), Canada, U.K. and Australia. We work closely with our wholesale partners to outline and implement release and promotional campaigns customized to the different audiences we serve and the program genres we exploit.

Basis of Presentation

Unaudited Interim Financial Statements

The consolidated financial information presented in the accompanying unaudited interim consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017 has been prepared in accordance with accounting principles generally accepted in the United States (or US GAAP) and with the Securities and Exchange Commission’s (or SEC) instructions for interim financial reporting for the Form 10-Q and Article 10 of Regulation S‑X of the SEC. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements.

In management’s opinion, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Due to the seasonal nature of our business, with a disproportionate amount of sales occurring in the fourth quarter and other factors, including our content release schedule, interim results are not necessarily indicative of the results that may be expected for the entire fiscal year. The accompanying unaudited financial information should, therefore, be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K filed on March 16, 2018 (or 2017 Form 10‑K). Note 2, Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2017 Form 10‑K contains a summary of our significant accounting policies. As of June 30, 2018, we have made no material changes to our significant accounting policies disclosed in our 2017 Form 10 K, except for the adoption of the new revenue recognition standard.

Correction of Immaterial Misstatements in Prior Period Financial Statements

In connection with the preparation of our unaudited condensed consolidated financial statements for the six months ended June 30, 2018, we identified an error as of December 31, 2017 that caused an overstatement of our previously reported deferred tax liability. Through 2017, we were tax affecting our ACL equity earnings and accumulating a deferred tax liability, which in theory would become payable when we disposed of our equity investment. As of December 31, 2017, our deferred tax liability was $2.9 million. In addition to recognizing equity earnings, we also receive distributions from ACL periodically, and when received, those distributions are not taxable nor does our foreign tax basis in ACL change. Therefore, we should have been tax affecting our ACL equity earnings after deducting distributions received.  Had we done this, our deferred tax liability at December 31, 2017 would have been $0.5 million. In addition to overstating our deferred tax liability, we were also overstating our provision for income taxes within our consolidated statement of operations. In 2017 and 2016, we reported a total provision for income taxes of $1.2 million and $0.2 million, respectively, and this provision was overstated by $0.4 million for each period.

In accordance with Staff Accounting Bulletin (SAB) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the error and determined that the impact was not material to the results of operations or financial position for the years ended December 31, 2017 and 2016. We have elected to revise the 2017 financial statements when they are subsequently issued and accordingly, we have corrected the balance sheet as of December 31, 2017 in this filing. We will correct the statement of operations for 2017 the next time those statements are filed. We reduced our previously reported deferred tax liability as of December 31, 2017 by $2.4 million and increased, on a net basis, our shareholders’ equity by the same amount.

(In thousands)	December 31, 2017
Liabilities and Shareholders' Equity	As previously reported			Adjustment			As revised
Deferred tax liability	$	2,933		$	(2,415	)	$	518
Total liabilities		132,046			1,776			133,822
Accumulated deficit		(133,514	)		2,672			(130,842	)
Accumulated other comprehensive loss		(2,942	)		(257	)		(3,199	)
Total shareholders' equity		15,543			2,415			17,958
Total liabilities and shareholders' equity		147,589			4,191			151,780

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (or FASB) issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. Subsequent to the issuance of the May 2014 guidance, several clarifications and updates have been issued by the FASB on this topic, the most recent of which was issued in December 2016. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. We adopted Topic 606 as of January 1, 2018 using the modified retrospective method. See Note 2, Revenues, for further details.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required by lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of the pending adoption of this new standard on our financial statements and we have yet to determine the overall impact this ASU is expected to have. The likely impact will be one of presentation only on our consolidated balance sheets. Our leases currently consist of operating leases with varying expiration dates through 2023 and our future minimum lease commitments before sub-lease income total $4.0 million as of June 30, 2018.

Principles of Consolidation

The operations of ACL are subject to oversight by ACL’s Board of Directors. The investment in ACL is accounted for using the equity method of accounting given the voting control of the Board of Directors by the minority shareholder. We have included our share of ACL’s operating results as a separate line item in our consolidated financial statements.

Our consolidated financial statements include the accounts of all majority-owned subsidiary companies, except for ACL. We carry our investment in ACL as a separate asset on our consolidated balance sheet at cost adjusted for our share of the equity in undistributed earnings. Except for dividends and changes in ownership interest, we report changes in equity in undistributed earnings of ACL as “Equity earnings of affiliate” in our consolidated statements of operations. All intercompany transactions and balances have been eliminated.

Fair Value of Financial Instruments

The carrying amount of our financial instruments, which principally include cash, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relative short maturity of such instruments. The carrying amount of our debt under our senior credit agreement approximates its fair value as it bears interest at market rates of interest after taking into consideration its debt discount. Our recurring fair value measurements of stock warrants and other derivative liabilities and our non-recurring fair value measurements of investments in content are disclosed in Note 11, Fair Value Measurements.

Earnings (Loss) per Common Share

Basic earnings (loss) per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the combination of dilutive common share equivalents and the weighted-average shares outstanding during the period. For the periods reporting a net loss, diluted loss per share is equivalent to basic loss per share, as inclusion of common share equivalents would be anti-dilutive.

Income Taxes

We account for income taxes pursuant to the provisions of ASC 740, Income Taxes, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and the future tax benefits derived from operating loss and tax credit carryforwards. We provide a valuation allowance on our deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. We have a valuation allowance against 100% of our net deferred tax assets.

ASC 740 requires that we recognize in the consolidated financial statements the effect of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The first step is to determine whether or not a tax benefit should be recognized. A tax benefit will be recognized if the weight of available evidence indicates that the tax position is more likely than not to be sustained upon examination by the relevant tax authorities. The recognition and measurement of benefits related to our tax positions requires significant judgment as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. Differences between actual results and our assumptions, or changes in our assumptions in future periods, are recorded in the period they become known. For tax liabilities, we recognize accrued interest related to uncertain tax positions as a component of income tax expense, and penalties, if incurred, are recognized as a component of operating expense.

In December 2017, SAB No. 118 was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (the Act). In accordance with SAB No. 118, our previously reported provisions for income taxes and our deferred tax assets and liabilities were provisional. During the second quarter of 2018, we completed our analysis and our updated assessment is that the Act has no further impact on our previously reported income tax provisions or our deferred tax assets or liabilities. These amounts are no longer provisional.

Our foreign subsidiaries are subject to income taxes in their respective countries, as well as U.S. Federal and state income taxes. The income tax payments they make outside the U.S. may give rise to foreign tax credits that we may use to offset taxable income in the U.S.

Liquidity

At June 30, 2018, our cash balance was $3.5 million. For the six months ended June 30, 2018, we recognized a net loss of $8.5 million and we used $0.9 million of cash for operating activities. At June 30, 2018, we had $54.9 million of term debt outstanding (see Note 8, Debt). We continue to experience liquidity constraints as we have several competing demands on our available cash and cash that may be generated from operations. We continue to have past-due vendor payables. These past-due payables are largely a result of past-due vendor payables acquired in 2012 when purchasing Image. As we work to catch up on the acquired past-due payables, we have fallen behind on other payables. We continue to work with our vendors to make payment arrangements that are agreeable with them and that give us flexibility in terms of when payments will be made. Additionally, we must maintain a certain level of expenditures for marketing to support subscriber growth and for the acquisition of new content that allows us to generate revenues and margins sufficient to meet our obligations.

Growth of our Digital Channels segment has the potential to improve our liquidity. We continue to realize significant growth in our Digital Channels segment. Our Digital Channels segment revenues increased 46.0% to $9.4 million during the three months ended June 30, 2018 as compared to the same period in 2017. Our Digital Channels segment revenues increased 45.7% to $18.1 million during the six months ended June 30, 2018 as compared to the same period in 2017 (see Note 3, Segment Information).

We believe that our current cash at June 30, 2018, and cash generated from operations will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditure and debt repayments (none until 2020) for at least one year from the date of issuance of these consolidated financial statements. However, there can be no assurances that we will be successful in realizing improved results from operations, including improved Adjusted EBITDA, generating sufficient cash flows from operations or agreeing with vendors on revised payment terms. We define Adjusted EBITDA as earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.

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Revenues

6 Months Ended

Jun. 30, 2018

Revenue From Contract With Customer [Abstract]

Revenues

NOTE 2. REVENUES

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to all contracts as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded a net increase to opening accumulated deficit of $0.7 million as of January 1, 2018 due to the cumulative impact to revenues and cost of sales of adopting Topic 606, with the impact primarily related to renewals for licensing agreements within our Wholesale Distribution segment. Under the new standard, renewals are a separate deliverable for which revenue should generally be deferred and recognized when the renewal period begins. Under the prior standards, renewals were generally recognized as revenue when entering into an amendment.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606, Revenue — Revenue from Contracts with Customers were as follows:

(In thousands)	Balance at						Balance at
Liabilities and Shareholders' Equity	December 31, 2017			Adjustment Due to Topic 606			January 1, 2018
Accrued royalties and distribution fees	$	47,414		$	(310	)	$	47,104
Deferred revenue		2,859			1,057			3,916
Accumulated deficit (Revised)(1)		(130,842	)		(747	)		(131,589	)

⁽¹⁾See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

The impact of adoption on our current period statement of operations was as follows:

(In thousands)	Three Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	21,474	$	21,417	$	57
Content amortization and royalties		7,562		7,561		1

(In thousands)	Six Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	40,056	$	39,328	$	728
Content amortization and royalties		14,258		13,919		339

Within our Wholesale Distribution segment, we estimate certain non-physical revenues each reporting period and we adjust our estimate when additional information becomes available, which includes the receipt of actual statements from our wholesalers. For the three months ended June 30, 2018, we recognized a decrease in revenues of $0.1 million, as actual information received was less than our prior period estimates. For the three months ended June 30, 2017, we recognized an increase in revenues of $0.1 million, as actual information received exceeded our prior period estimates. For the six months ended June 30, 2018 and 2017, we recognized an increase in revenues of $0.1 million and $0.2 million, respectively, as actual information received exceeded our prior period estimates.

Digital Channels segment revenues are recognized over time as subscription services are delivered. Wholesale Distribution segment revenues are generally recognized at a point in time when a sales transaction is completed. As of June 30, 2018, our deferred revenue of $3.4 million is comprised of prepaid subscriptions within our Digital Channels segment of $2.8 million, payments received within our Wholesale Distribution segment of $0.1 million for content not yet delivered or available due to certain restrictions, and $0.5 million for the license of our tradenames. Deferred revenue will be recognized over time as revenue upon delivery of subscription services or content, or upon the removal of restrictions whereby the wholesaler will be free to exploit the delivered content. Deferred revenue associated with the tradename license will be recognized in equal monthly amounts over the license term beginning in April 2018 through March 2020. We estimate that all deferred revenue amounts that are not associated with the tradename license will be recognized as revenue within the next 12 months.

Upon adoption of the new revenue standards, we also made certain other reclassifications within our consolidated balance sheet, which pertained to sales of physical product within our Wholesale Distribution segment, as follows:

• We estimate a certain amount of inventory that will be received when processing sales returns. This amount of inventory to be received had been included within our inventory balance. This amount is now included within prepaid expenses and other assets. As of December 31, 2017, the inventory balance reclassified was $0.5 million. The impact of this reclassification to our previously reported balances as of December 31, 2017, was for prepaid expenses and other assets to increase and inventories to decrease.

• We have reclassified our sales return reserve from accounts receivable to accounts payable and accrued liabilities, which had the impact of increasing the previously reported balances as of December 31, 2017, for both accounts. Our sales return reserve as of December 31, 2017 was $4.2 million.

Included in our accounts payable and other accrued liabilities are accruals for both sales returns and market development funds that total $2.5 million and $6.8 million as of June 30, 2018 and December 31, 2017, respectively. These accruals require the exercise of judgement and affect the reported revenues and net earnings. In determining these accruals, we analyze historical returns, pricing and other credit data; current economic trends; and changes in customer demand and acceptance of our products, including reorder activity. Based on this information, we determine our best estimates, which we believe is fair value, and accrue a percentage of each dollar of product sales where the customer has the right to either return the product and receive a credit or reduce their purchase price. Actual returns and reductions could differ from our estimates.

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Segment Information

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Segment Information

NOTE 3. SEGMENT INFORMATION

In accordance with the requirements of ASC 280 “Segment Reporting,” selected financial information regarding our reportable business segments, Digital Channels, IP Licensing and Wholesale Distribution, is presented below. Our reportable segments are determined based on the distinct nature of their operations. Each segment is a strategic business unit that is managed separately and either exploits our content over a different business model (subscription based vs. transactional) or acquires content differently. Our Digital Channels segment includes the subscription-based sale of film and television content directly and through third-party distribution to consumers through our digital channels, Acorn TV and UMC. Our IP Licensing segment includes intellectual property (or content) that we own, produce and then license for exploitation worldwide. The IP Licensing segment also includes our investment in ACL. Our Wholesale Distribution segment consists of the acquisition and worldwide exploitation of exclusive content in various formats, including digital (download-to-rent and electronic sell-through, or EST), television video on demand (VOD) through cable and satellite, broadcast, streaming, and DVD and Blu-ray through third party media and retail outlets. Our Wholesale Distribution segment also includes our U.K. mail-order catalog and ecommerce businesses.

Management currently evaluates segment performance based primarily on revenues and operating income (loss), including earnings from ACL. Operating costs and expenses attributable to our Corporate segment include only those expenses incurred by us at the parent corporate level, which are not allocated to our reporting segments and include costs associated with our corporate functions such as finance and accounting, human resources, legal and information technology departments. Interest expense, change in the fair value of stock warrants and other derivatives, other income (expense) and provision for income taxes are evaluated by management on a consolidated basis and are not allocated to our reportable segments.

Operating costs and expenses exclude costs related to depreciation and amortization which are separately presented in the tables below.

The tables below summarize the segment contribution for the three months ended June 30, 2018 and 2017.

	Three Months Ended June 30, 2018
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	9,402		$	17		$	12,055		$	—		$	21,474
Operating costs and expenses		(6,240	)		(195	)		(10,252	)		(3,422	)		(20,109	)
Depreciation and amortization		(291	)		(19	)		(294	)		(101	)		(705	)
Share in ACL earnings		—			1,288			—			—			1,288
Segment contribution income (loss)	$	2,871		$	1,091		$	1,509		$	(3,523	)	$	1,948

	Three Months Ended June 30, 2017
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	6,439		$	2		$	12,392		$	—		$	18,833
Operating costs and expenses		(3,965	)		(136	)		(9,856	)		(2,724	)		(16,681	)
Depreciation and amortization		(227	)		(31	)		(498	)		(148	)		(904	)
Share in ACL earnings		—			869			—			—			869
Segment contribution income (loss)	$	2,247		$	704		$	2,038		$	(2,872	)	$	2,117

The tables below summarize the segment contribution for the six months ended June 30, 2018 and 2017.

	Six Months Ended June 30, 2018
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	18,075		$	36		$	21,945		$	—		$	40,056
Operating costs and expenses		(12,155	)		(313	)		(19,935	)		(7,064	)		(39,467	)
Depreciation and amortization		(654	)		(52	)		(686	)		(198	)		(1,590	)
Share in ACL earnings		—			2,072			—			—			2,072
Segment contribution income (loss)	$	5,266		$	1,743		$	1,324		$	(7,262	)	$	1,071

	Six Months Ended June 30, 2017
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	12,404		$	4		$	20,312		$	—		$	32,720
Operating costs and expenses		(7,079	)		(229	)		(19,412	)		(5,888	)		(32,608	)
Depreciation and amortization		(430	)		(63	)		(991	)		(293	)		(1,777	)
Share in ACL earnings		—			1,420			—			—			1,420
Segment contribution income (loss)	$	4,895		$	1,132		$	(91	)	$	(6,181	)	$	(245	)

A reconciliation of total segment contribution income (loss) to loss from operations before provision for income taxes is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Total segment contribution income (loss)	$	1,948		$	2,117		$	1,071		$	(245	)
Interest expense, net		(2,362	)		(2,152	)		(4,653	)		(4,038	)
Change in fair value of stock warrants and    other derivatives		(471	)		(491	)		(3,438	)		(3,383	)
(Loss) Gain on extinguishment of debt		—			(425	)		—			470
Other (expense) income		(1,414	)		161			(1,591	)		445
Loss from operations before provision    for income taxes	$	(2,299	)	$	(790	)	$	(8,611	)	$	(6,751	)

Total assets for each segment primarily include accounts receivable, inventory and investments in content. The Corporate segment primarily includes assets not fully allocated to any other segment including consolidated cash accounts, certain prepaid assets and fixed assets used across all segments.

Total assets by segment are as follows:

	June 30,		December 31,
(In thousands)	2018		2017
Digital Channels	$	16,427	$	11,148
IP Licensing		25,585		23,981
Wholesale Distribution		100,291		109,178
Corporate		4,596		7,473
Total Assets	$	146,899	$	151,780

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Equity Earnings of Affiliate

6 Months Ended

Jun. 30, 2018

Equity Method Investments And Joint Ventures [Abstract]

Equity Earnings of Affiliate

NOTE 4. EQUITY EARNINGS OF AFFILIATE

In February 2012, Acorn Media acquired a 64% interest in ACL for total purchase consideration of £13.7 million or approximately $21.9 million excluding direct transaction costs. The acquisition gave Acorn Media a majority ownership of ACL’s extensive works including a variety of short story collections, more than 80 novels, 19 plays and a film library of over 100 made-for-television films.

We account for our investment in ACL using the equity method of accounting because (1) Acorn Media is only entitled to appoint one-half of ACL’s board members and (2) in the event the board is deadlocked, the chairman of the board, who is appointed by the directors elected by the minority shareholders, casts a deciding vote.

As of the Business Combination, our 64% share of the difference between ACL’s fair value and the amount of underlying equity in ACL’s net assets was approximately $18.7 million. This step-up basis difference is primarily attributable to the fair value of ACL’s copyrights, which expire in 2046. We are amortizing the basis difference through 2046 using the straight-line method. Basis difference amortization is recorded against our share of ACL’s net income in our consolidated statements of operations; however, this amortization is not included within ACL’s financial statements.

The following summarized financial information is derived from the unaudited financial statements of ACL:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Revenues	$	12,129		$	3,094		$	15,269		$	6,954
Film cost amortization		(146	)		(183	)		(146	)		(1,915	)
General, administrative and other expenses		(9,247	)		(989	)		(10,605	)		(1,830	)
Income from operations	$	2,736		$	1,922		$	4,518		$	3,209
Net income	$	2,203		$	1,535		$	3,623		$	2,561

ACL's functional currency is the British Pound Sterling (the Pound). Amounts have been translated from the Pound to U.S. dollar using the average exchange rate for the periods presented.

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Accounts Receivable

6 Months Ended

Jun. 30, 2018

Accounts Receivable Net [Abstract]

Accounts Receivable

NOTE 5. ACCOUNTS RECEIVABLE

Accounts receivable for our Digital Channels segment are primarily derived from subscription revenues, which are processed by merchant banks or our channel partners such as Amazon that have not cleared our bank as of period end. Accounts receivable for our Wholesale Distribution segment are primarily derived from (1) video content we license to broadcast, cable/satellite providers and digital subscription platforms like Netflix, and (2) the sale of physical content to retailers and wholesale distributors and U.K. ecommerce and catalog sales. Our accounts receivable typically trends with retail seasonality.

	June 30,			December 31,
(In thousands)	2018			2017
Digital Channels	$	3,516		$	2,864
Wholesale Distribution		13,542			22,133
Accounts receivable before allowances and reserves		17,058			24,997
Less: allowance for doubtful accounts		(69	)		(71	)
Accounts receivable, net	$	16,989		$	24,926

Wholesale Distribution receivables are partially billed and collected by our U.S. distribution facilitation partner, SPHE. Each month, SPHE preliminarily settles their portion of our wholesale receivables assuming a timing lag on collections and an average-return rate. When actual returns differ from the amounts previously estimated, adjustments are made that give rise to payables and receivables between us and SPHE. Amounts vary and tend to be seasonal following our sales activity. Receivables due from SPHE are reported net of amounts we owe for distribution services as these amounts are offset against each other when settling receivables in accordance with the contract.

As of June 30, 2018, the net Wholesale Distribution payables with SPHE were $2.8 million, which is included in accounts payable and accrued liabilities. As of December 31, 2017, the net Wholesale Distribution receivables with SPHE were $4.3 million, which is included in accounts receivable.

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Inventories

6 Months Ended

Jun. 30, 2018

Inventory Disclosure [Abstract]

Inventories

NOTE 6. INVENTORIES

Inventories are summarized as follows:

	June 30,		December 31,
(In thousands)	2018		2017
Packaged discs	$	3,975	$	3,652
Packaging materials		438		611
Other merchandise		186		185
Inventories, net	$	4,599	$	4,448

For each reporting period, we review the value of inventories on hand to estimate the recoverability through future sales. Values in excess of anticipated future sales are booked as obsolescence reserve. Our obsolescence reserve was $7.2 million as of June 30, 2018 and $10.2 million as of December 31, 2017. We reduce our inventories with adjustments for lower of cost or market valuation, shrinkage, excess quantities and obsolescence. During the three months ended June 30, 2018 and 2017 we recorded impairment charges of $0.1 million, for each period. During the six months ended June 30, 2018 and 2017, we recorded impairment charges of $0.1 million and $0.5 million, respectively. These charges are included in cost of sales as manufacturing and fulfillment cost.

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Investments in Content

6 Months Ended

Jun. 30, 2018

Entertainment [Abstract]

Investments in Content

NOTE 7. INVESTMENTS IN CONTENT

	June 30,		December 31,
(In thousands)	2018		2017
Released	$	65,409	$	60,660
Completed, not released		5,864		3,773
In-production		7,387		6,050
Investments in content, net	$	78,660	$	70,483

Investments in content are stated at the lower of unamortized cost or estimated fair value (See Note 11, Fair Value Measurements). The valuation of investments in content is reviewed on a title-by-title basis when an event or change in circumstances indicates that the fair value of content is less than its unamortized cost. Impairment charges for the three months ended June 30, 2018 and 2017, were $0.3 million for each period. Impairment charges for the six months ended June 30, 2018 and 2017, were $0.6 million for each period. Impairment charges are included in cost of sales as part of content amortization and royalties.

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Debt

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Debt

NOTE 8. DEBT

Debt consists of the following:

	Maturity	Interest	June 30,			December 31,
(In thousands)	Date	Rate	2018			2017
Senior secured term notes    with AMC:
Tranche A Loan	Beginning June 30, 2020	7.0%	$	23,000		$	23,000
Tranche B Loan	Beginning October 14, 2021	6.0%		54,999			54,999
Less: debt discount				(23,145	)		(25,360	)
Debt, net of discount			$	54,854		$	52,639

Future minimum principal payments, exclusive of debt discount, as of June 30, 2018 are as follows:

(In thousands)	Senior Notes
Remainder of 2018	$	—
2019		—
2020		13,000
2021		25,000
2022		30,000
2023		9,999
	$	77,999

Senior Term Notes

On October 14, 2016, we entered into a $65.0 million Credit and Guaranty Agreement (the AMC Credit Agreement) with Digital Entertainment Holdings LLC, a wholly owned subsidiary of AMC Networks Inc. (or AMC). Concurrent with entering into the AMC Credit Agreement, we also issued AMC three warrants (the AMC Warrants) to acquire a total of 20.0 million shares of our common stock at $3.00 per share. The entering of the AMC Credit Agreement, the issuance of the AMC Warrants and the associated transactions are referred to as the AMC Transaction.

Initially, the AMC Credit Agreement consisted of (i) a term loan tranche in the principal amount of $5.0 million (or Tranche A Loan), which was due on October 14, 2017, and (ii) a term loan tranche in the principal amount of $60.0 million (or Tranche B Loan) of which 25% is due after five years, 50% is due after six years and the remaining 25% is due after seven years. The Tranche A Loan bears interest at a rate of 7.0% per annum and the Tranche B Loan bears interest at a rate of 6.0% per annum. Interest was payable quarterly whereby 4.0% was payable in cash and the balance was payable in shares of common stock determined using a per-share value of $3.00. The loan is secured by a lien on substantially all of our consolidated assets.

On January 30, 2017, to repay prior debt obligations under the subordinated notes payable we amended the AMC Credit Agreement and borrowed an additional $8.0 million, thereby increasing our Tranche A Loan from $5.0 million to $13.0 million. We also extended the maturity date for our Tranche A Loan from October 14, 2017 to June 30, 2019. When doing so, we did not incur a prepayment penalty.

On June 16, 2017, to fuel the growth of our business, we expanded the AMC Credit Agreement and borrowed an additional $10.0 million, thereby increasing our Tranche A Loan from $13.0 million to $23.0 million. Further, we extended the maturity date for our Tranche A Loan from June 30, 2019 to beginning on June 30, 2020. We also amended the payment provisions regarding interest whereby all interest is now settled with shares of common stock at $3.00 per share beginning as of April 1, 2017. This amendment also changed certain debt covenant ratios to reflect the extended maturity date and the increase of the Tranche A Loan balance.

On January 2, 2018, we issued AMC 418,255 shares of common stock in payment of $1.3 million of interest on the principal outstanding under the AMC Credit Agreement. On April 2, 2018, we issued AMC 409,162 shares of common stock in payment of $1.2 million of interest on the principal outstanding under the AMC Credit Agreement.

Concurrent with the June 2017 amendment, RLJ SPAC Acquisition, LLC (a related party) converted all of its preferred stock holdings into shares of common stock (see Note 9, Redeemable Convertible Preferred Stock and Equity) and AMC exercised a portion of their warrants (see Note 10, Stock Warrants) that resulted in the Tranche B Loan principal reduction of $5.0 million.

Subject to certain customary exceptions, the AMC Credit Agreement requires mandatory prepayments if we were to receive proceeds from asset sales, insurance, debt issuance or the exercise of warrants (see Note 10, Stock Warrants). We may also make voluntary prepayments. Prepayments of the Tranche B Loan (either voluntary or mandatory) are subject to a prepayment premium of 3.0% if principal is repaid on or before October 14, 2018, and 1.5% if principal is repaid after October 14, 2018 but on or before October 14, 2019. No prepayment premium is due for amounts prepaid after October 14, 2019, and for mandatory prepayments made from proceeds received from the exercise of warrants. The Tranche A Loan is not subject to prepayment penalties.

The AMC Credit Agreement contains certain financial and non-financial covenants. Financial covenants are assessed annually and are based on Consolidated Adjusted EBITDA, as defined in the AMC Credit Agreement. Financial covenants vary by fiscal year and generally become more restrictive over time.

Financial covenants include the following:

	December 31, 2017	December 31, 2018	Thereafter
Leverage Ratios:
Senior debt-to-Adjusted EBITDA	5.75 : 1.00	4.00 : 1.00	Ranges from 3.75 : 1.00 to 2.50 : 1.00
Total debt-to-Adjusted EBITDA	6.00 : 1.00	5.00 : 1.00	4.00 : 1.00
Fixed charge coverage ratio	1.00 : 1.00	2.00 : 1.00	2.00 : 1.00

The AMC Credit Agreement contains events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross defaults to certain other contracts (including, for example, business arrangements with our U.S. distribution facilitation partner and other material contracts) and indebtedness and events constituting a change of control or a material adverse effect in any of our results of operations or conditions (financial or otherwise). The occurrence of an event of default would increase the applicable rate of interest and could result in the acceleration of our obligations under the AMC Credit Agreement.

The AMC Credit Agreement imposes restrictions on such items as encumbrances and liens, payments of dividends to common stockholders, other indebtedness, stock repurchases, capital expenditures and entering into new lease obligations. Additional covenants restrict our ability to make certain investments, such as loans and equity investments, or investments in content that are not in the ordinary course of business. Pursuant to the AMC Credit Agreement, we must maintain at all times a cash balance of $3.5 million for all years beginning after 2017 except for a four-month period ending September 30, 2018 whereby the minimum cash balance requirement was reduced to $2.0 million per a waiver executed during June 2018. This requirement is being further amended after June 30, 2018 (see Note 16, Subsequent Events). As of June 30, 2018, we were in compliance with all covenants as set forth in the amended AMC Credit Agreement.

Concurrent with entering into the AMC Transaction, we issued the AMC Warrants to acquire shares of our common stock. The first warrant is for 5.0 million shares of common stock, of which 1.7 million shares were exercised in June 2017, and expires on October 14, 2021. The second warrant is for 10.0 million shares of common stock and expires on October 14, 2022. The third warrant is for 5.0 million shares of common stock, subject to adjustment, and expires on October 14, 2023. The AMC Warrants are subject to certain standard anti-dilution provisions and may be exercised on a non-cash basis at AMC’s discretion.

The third warrant (the AMC Tranche C Warrant)contains a provision that may increase the number of shares acquirable upon exercising, for no additional consideration payable by AMC, such that the number of shares acquirable upon exercise is equal to the sum of (i) at least 50.1% of our then outstanding shares of common stock, determined on a fully diluted basis, less (ii) the sum of 15.0 million shares and the equity interest shares issued in connection with the AMC Credit Agreement. This provision provides AMC the ability to acquire at least 50.1% of our common stock for $60.0 million, provided that all warrants are exercised and AMC elects not to exercise on a non-cash basis. The third warrant with this guarantee provision is being accounted for as a derivative liability.

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Redeemable Convertible Preferred Stock and Equity

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Redeemable Convertible Preferred Stock and Equity

NOTE 9. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY

Redeemable Convertible Preferred Stock and 2015 Warrants

On May 20, 2015, we closed a transaction in which we sold 31,046 shares of preferred stock and warrants to acquire 3.1 million shares of common stock (the 2015 Warrants) for $22.5 million in cash and the exchange of $8.5 million in subordinated notes. Of the preferred shares and warrants sold, 16,500 shares of preferred stock and warrants to acquire 1.7 million shares of common stock were sold to certain board members or their affiliated companies.

On October 14, 2016 and concurrent with the close of our AMC Credit Agreement, we amended our preferred stock such that we were able to classify our preferred stock and its embedded conversion feature within our shareholders’ equity. Prior to the amendment, our preferred stock and its embedded conversion feature were recorded on our consolidated balance sheet outside of shareholders’ equity. The amended terms are disclosed below.

The preferred stock has the following rights and preferences:

• Rank – the preferred stock ranks higher than other company issued equity securities in terms of distributions, dividends and other payments upon liquidation.

• Dividends – the preferred stockholders are entitled to cumulative dividends at a rate of 8% per annum of a preferred share’s stated value ($1,000 per share plus any unpaid dividends). The first dividend payment was made on July 1, 2017 and payments have been made quarterly thereafter. At our discretion, dividend payments are payable in either cash, or if we satisfy certain equity issuance conditions, in shares of common stock. Pursuant to the October 14, 2016 amended terms, if we don’t satisfy equity issuance conditions, then we may elect to accrue the value of the dividend and add it to the preferred share’s stated value.

• Conversion – at the preferred stockholder’s discretion, each share of preferred stock is convertible into 333.3 shares of our common stock, subject to adjustment for any unpaid dividends. Prior to the October 14, 2016 amendment, the conversion rate was subject to anti-dilution protection for offerings consummated at a per-share price of less than $3.00 per common share. This down-round provision was removed as part of the October 14, 2016 amendment.

• Mandatory Redemption – unless previously converted, on May 20, 2020, at our option we will either redeem the preferred stock with (a) cash equal to $1,000 per share plus any unpaid dividends (Redemption Value), or (b) shares of common stock determined by dividing the Redemption Value by a conversion rate equal to the lower of (i) the conversion rate then in effect (which is currently $3.00) or (ii) 85% of the then trading price, as defined, of our common stock. As part of the October 14, 2016 amendment, a floor was established for all but 16,500 shares of preferred stock such that the redemption ratio cannot be below $0.50 per common share. For the 16,500 shares of preferred stock, a floor of $2.49 was already in place and remained unchanged. If we were to redeem with shares of common stock, the actual number of shares that would be issued upon redemption is not determinable as the number is contingent upon the then trading price of our common stock. Generally, if we were to redeem with shares, the number of common shares needed for redemption increases as our common stock price decreases. Because of the October 14, 2016 amendment, the maximum number of common shares issuable upon redemption is determinable given the redemption conversion floors. If we elect to redeem with shares of common stock, and we fail to meet certain conditions with respect to the issuance of equity, then we would be subject to a 20% penalty of the maturity redemption price, payable in either cash or shares of common stock. This penalty is subject to, and therefore possibly limited by, a $0.50 per share floor.

• Voting – except for certain matters that require the approval of the preferred stockholders, such as changes to the rights and preferences of the preferred stock, the preferred stock does not have voting rights. However, the holders of the preferred stock are entitled to appoint two board members and, under certain circumstances, appoint a third member.

We are adjusting the carrying balance of our preferred stock to its Redemption Value using the effective interest-rate method over a period of time beginning from the issuance date of May 20, 2015 to the required redemption date of May 20, 2020. During the six months ended June 30, 2018 and 2017, we recognized accretion of $0.4 million and $0.8 million, respectively. Accretion includes cumulative preferred dividends. Pursuant to the October 14, 2016 amendment, accumulated unpaid dividends from the issuance date through April 1, 2017 were added to the stated value of the preferred stock. Subsequently, we began making quarterly dividend payments. As of June 30, 2018, the accumulated unpaid dividends on preferred stock were $0.4 million. During the six months ended June 30, 2018, we made cash dividend payments of $0.7 million. No dividend payments were made during the six months ended June 30, 2017.

During June 2017, the largest preferred shareholder (RLJ SPAC Acquisition, LLC) converted a total of 15,000 shares of preferred stock and $2.7 million of accumulated dividends into 5.9 million shares of common stock.

In 2015, we filed a registration statement with the Securities and Exchange Commission to register the shares issuable upon conversion of the preferred stock and exercise of the 2015 Warrants (see Note 10, Stock Warrants). The registration statement was declared effective in July 2015 and amended in 2016. If we are in default of the registration rights agreement, and as long as the event of default is not cured, then we are required to pay, in cash, partial liquidation damages, which in total are not to exceed 6% of the aggregated subscription amount of $31.0 million. We will use our best efforts to keep the registration statement effective.

Share-Based Compensation

Our share-based compensation consists of awards of restricted stock, restricted stock units, performance stock units and stock options. The restricted stock-based awards are fair valued using the closing price of the common stock on the grant date. The restricted stock-based awards generally vest over a three to four-year period for executive officers and a one-year period for directors. The restricted stock units generally vest over a three-year period for employees. The vesting of restricted stock awards and restricted stock units is subject to certain service criteria. The awards may be subject to further forfeitures if the employee or director terminates his or her service during the vesting period. All shares of restricted stock participate in dividends, if declared prior to their vesting date.

The option grants in 2017 include an option to purchase 0.7 million shares of common stock with an exercise price of $2.66 per share cliff vesting in two years and an option to purchase 0.7 million shares of common stock with an exercise price of $3.00 per share cliff vesting in four years.

For the three and six months ended June 30, 2018 and 2017, share-based compensation expense is classified within our statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Cost of Sales — Manufacturing and fulfillment	$	5	$	1	$	10	$	3
Selling expenses		33		6		78		13
General and administrative expenses		600		351		1,239		496
Total share-based compensation	$	638	$	358	$	1,327	$	512

As of June 30, 2018, unrecognized share-based compensation expense relating to restricted stock-based service awards of $1.3 million is expected to be expensed ratably over the remaining weighted-average vesting period of 1.2 years. Unrecognized compensation expense relating to restricted stock-based performance awards of $1.0 million is expected to be expensed ratably over the remaining weighted-average vesting period of 1.5 years. Unrecognized compensation expense relating to unvested stock options of $1.4 million is expected to be expensed ratably over the remaining weighted-average vesting period of 1.7 years. Expense associated with our performance award is contingent upon achieving specified financial criteria and upon certification by the Compensation Committee of the satisfaction of the performance criteria based upon our audited financial statements for 2017, 2018, 2019 and 2020. The above unrecognized stock-based compensation expense assumes that the performance awards will vest at 130% (or 0.7 million shares). However, the possible range of vesting is between zero and 1.0 million shares.

Assuming 100% vesting for all service awards and 130% vesting of all performance awards, we expect to recognize $2.0 million of compensation expense over the next 12 months.

A summary of our restricted stock unit activity during the six months ended June 30, 2018 is presented below:

	Service Shares					Performance Shares
(In thousands, except per share data)	Shares			Weighted- AverageGrant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Unvested restricted stock units outstanding at    January 1, 2018		627		$	3.02		500	$	2.40
Granted		—		$	—		—	$	—
Vested		(158	)	$	3.18		—	$	—
Forfeited		(28	)	$	4.00		—	$	—
Unvested restricted stock units outstanding at    June 30, 2018		441		$	2.90		500	$	2.40

During the six months ended June 30, 2018, we issued 233,000 shares of common stock for restricted units, including 75,000 shares issued for restricted stock units that vested on December 31, 2017.

A summary of our restricted stock award activity during six months ended June 30, 2018 is presented below.

(In thousands, except per share data)	Shares			Weighted- AverageGrant Date Fair Value
Unvested restricted stock awards outstanding at January 1, 2018		130		$	2.66
Granted		7		$	4.43
Vested		(42	)	$	1.92
Forfeited		(11	)	$	1.92
Unvested restricted stock awards outstanding at June 30, 2018		84		$	3.27

A summary of our stock option activity during six months ended June 30, 2018 is presented below.

(In thousands, except per share data)	Options		Weighted- Average Exercise Price
Stock options outstanding at January 1, 2018		1,400	$	2.83
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Stock options outstanding at June 30, 2018		1,400	$	2.83

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Stock Warrants

6 Months Ended

Jun. 30, 2018

Stock Warrants [Abstract]

Stock Warrants

NOTE 10. STOCK WARRANTS

We have the following unregistered warrants outstanding:

	June 30, 2018
(In thousands, except per share data)	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Life
AMC Warrants		18,333	$	3.00	4.4 years
2015 Warrants		2,999	$	2.29	1.9 years
		21,332

Concurrent with entering into the AMC Credit Agreement, we issued the AMC Warrants to acquire shares of our common stock at $3.00 per share. The first warrant is for 5.0 million shares of common stock, of which 1.7 million shares were exercised in June 2017, and expires on October 14, 2021. The second warrant is for 10.0 million shares of common stock and expires on October 14, 2022. The third warrant is for 5.0 million shares of common stock, subject to adjustment, and expires on October 14, 2023. The AMC Warrants are subject to certain standard anti-dilution provisions and may be exercised on a non-cash basis at AMC’s discretion.

The AMC Tranche C Warrant contains a provision that may increase the number of shares acquirable upon exercising, for no additional consideration payable by AMC, such that the number of shares acquirable upon exercise is equal to the sum of (i) at least 50.1% of our then outstanding shares of common stock, determined on a fully diluted basis, less (ii) the sum of 15.0 million shares and the equity interest shares issued in connection with the AMC Credit Agreement. This provision provides AMC the ability to acquire at least 50.1% of our common stock for $60.0 million, provided that all warrants are exercised and AMC elects not to exercise on a non-cash basis. The third warrant with this guarantee provision is being accounted for as a derivative liability.

On May 20, 2015 and concurrent with our preferred stock placement, we issued the 2015 Warrants to our preferred stock holders to acquire 3.1 million shares of our common stock. The 2015 Warrants have a term of five years. On October 14, 2016 and in connection with the AMC Credit Agreement, we amended the anti-dilution and redemption provisions of the 2015 Warrants to conform to the terms of the amended preferred stock. Because of the AMC transaction and the then-existing terms of the 2015 Warrants, the warrant exercise price was reduced from $4.50 to $3.00; however, the exercise price was further reduced down to $1.50 for warrants to acquire 1.5 million shares of common stock, and down to $2.37 for warrants to acquire 150,000 shares of common stock. Because of the October 14, 2016 amendment, we began accounting for the 2015 Warrants as equity awards and reclassified the carrying balance of the 2015 Warrants to shareholders’ equity.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

NOTE 11. FAIR VALUE MEASUREMENTS

Warrant Liability

Stock Warrant and Other Derivative Liabilities

We account for our AMC Tranche C Warrant to acquire 5.0 million shares of common stock as a derivative liability, which requires us to carry it on our consolidated balance sheet at its fair value.

We determined the fair value of the AMC Tranche C warrant using a lattice model, which is classified as Level 3 within the fair-value hierarchy. Inputs to the model include our publicly-traded stock price, our stock volatility, the risk-free interest rate and contractual terms of the warrant (which are remaining life of the warrant, exercise price and assumptions pertaining to increasing the number of acquirable shares of common stock to achieve 50.1% ownership). We use the closing stock price of our common stock to compute stock volatility. To quantify and value the possibility of increasing the number of acquirable shares, management took into consideration its current capital structure, the impact of the 20% penalty if we were to fail to meet certain equity issuance conditions, and management’s best estimates of the likelihood of being subject to the 20% penalty. The AMC Tranche C warrant was valued at $17.1 million as of June 30, 2018 and $13.7 million as of December 31, 2017. During the current year, the AMC Tranche C warrant increased in value as a result of an increase in our common stock price.

The following table represents the carrying amount, valuation and a roll-forward of activity for our warrant classified within Level 3 of the fair-value hierarchy:

	Estimated Fair Value Measurements Using Unobservable Inputs (Level 3)
	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Carrying amount of stock warrants, beginning of period	$	16,652	$	12,655	$	13,685	$	9,763
Change in fair value		471		491		3,438		3,383
Carrying amount of stock warrants, end of period	$	17,123	$	13,146	$	17,123	$	13,146

Investments in Content

When events and circumstances indicate that investments in content are impaired, we determine the fair value of the investment; and if the fair value is less than the carrying amount, we recognize additional amortization expense equal to the excess. The following fair value hierarchy tables present information about our assets and liabilities measured at fair value on a non-recurring basis:

	Estimated Fair Value Measurement Using Unobservable Inputs (Level 3)				Loss
	As of June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Investments in content	$	1,164	$	778	$	564	$	595

During the six months ended June 30, 2018 and 2017, the investments in content were impaired by $0.6 million, for each period. In determining the fair value of our investments in content, we employ a discounted cash flow (or DCF) methodology. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement.

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Net Loss per Common Share

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Net Loss per Common Share

NOTE 12. NET LOSS PER COMMON SHARE

We had outstanding warrants to acquire 21.3 million and 30.1 million shares of common stock as of June 30, 2018 and 2017, respectively, which are not included in the computation of diluted net loss per common share as the effect would be anti-dilutive.

During periods of reported net losses from operations after adjusting for accretion on preferred stock, all reported net losses are allocated to our unrestricted common stock. This has the effect of excluding our outstanding restricted common stock from the computation of our net loss per common share. For the three months ended June 30, 2018 and 2017, we have weighted average unvested shares of 2.4 million and 1.3 million, respectively, of compensatory stock options and restricted share-based awards, that were not included in the computation of diluted net loss per common share as the effect would be anti-dilutive. For the six months ended June 30, 2018 and 2017, we have weighted average unvested shares of 2.5 million and 0.9 million, respectively, of compensatory stock options and restricted share-based awards, that were not included in the computation of diluted net loss per common share as the effect would be anti-dilutive

When dilutive, we include in our computation of diluted loss per share the number of shares of common stock that is acquirable upon conversion of the preferred stock by applying the as-converted method per ASC 260, Earnings per Share. For the three months ended June 30, 2018 and 2017, we excluded 5.9 million shares of common stock that are acquirable upon conversion of the preferred stock as they were anti-dilutive. For the six months ended June 30, 2018 and 2017, we excluded 5.9 million and 11.2 million shares of common stock that are acquirable upon conversion of the preferred stock as they were anti-dilutive.

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Statements of Cash Flows

6 Months Ended

Jun. 30, 2018

Supplemental Cash Flow Elements [Abstract]

Statements of Cash Flows

NOTE 13. STATEMENTS OF CASH FLOWS

Supplemental Disclosures

	Six Months Ended June 30,
(In thousands)	2018		2017
Cash paid during the period for:
Interest	$	—	$	1,592
Income taxes	$	11	$	30
Non-cash investing and financing activities:
Accretion on preferred stock	$	386	$	756
Common stock issued to AMC as payment for    prior year interest expense	$	—	$	158
Conversion of preferred stock into shares of common	$	—	$	19,592
Exercise of AMC warrant and reduction of senior debt	$	—	$	2,847
Capital expenditures accrued for in accounts payable and    accrued liabilities	$	158	$	400
Preferred stock dividends accrued for in accounts payable    and accrued liabilities	$	354	$	—

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 14. COMMITMENTS AND CONTINGENCIES

In the normal course of business, we are subject to proceedings, lawsuits and other claims, including proceedings under government laws and regulations relating to content ownership, copyright and employment matters. While it is not possible to predict the outcome of these matters, it is the opinion of management, based on consultations with legal counsel, that the ultimate disposition of known proceedings will not have a material adverse impact on our financial position, results of operations or liquidity. Accordingly, we record a charge to earnings based on the probability of settlement and determination of an estimated amount. These charges were not material to our results.

As of June 30, 2018, we have entered into contracts for certain professional services to respond to AMC’s merger proposal (see Note 16, Subsequent Events). For the three and six months ended June 30, 2018, we recognized $1.0 million and $1.1 million, respectively, of expense, which is included in other (expense) income, net, related to these contracts. These contracts provide for a contingent transaction fee of approximately $1.2 million, which is payable by us upon the closing of an AMC transaction.

As of June 30, 2018, we had entered into a contract with a supplier for marketing-related services in which we are obligated to pay $3.0 million in $0.1 million monthly installments through March 2020.

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 15. RELATED PARTY TRANSACTIONS

Equity Investment in Affiliate

During the six months ended June 30, 2017, we paid ACL $0.1 million, for distribution rights for three titles, two of which were released as of December 31, 2016 and one which was released in 2017. As we recognize revenues from these titles, and all other titles, we amortize our content advances resulting in the recognition of content amortization and royalty expense. For the three and six months ended June 30, 2018, we recognized content amortization and royalty expense of $0.1 million in each period. For the three and six months ended June 30, 2017, we recognized content amortization and royalty expense of $0.1 million and $0.2 million, respectively. This amortization is included in our cost of sales as content amortization and royalties. As of June 30, 2018, our remaining unamortized content advance is $1.4 million.

ACL paid dividends to RLJE Ltd. of $2.7 million and $3.1 million during the three and six months ended June 30, 2018, respectively. ACL paid dividends to RLJE Ltd. of $1.2 million during the three and six months ended June 30, 2017. Dividends received were recorded as a reduction to the ACL investment account.

Foreign Currency

We recognize foreign currency gains and losses, as a component of other expense, on amounts lent by Acorn Media to RLJE UK and RLJE Australia. As of June 30, 2018, Acorn Media had lent its U.K. subsidiaries approximately $4.0 million and its Australian subsidiary approximately $3.4 million. Amounts lent will be repaid in U.S. dollars based on available cash. Movement in exchange rates between the U.S. dollar and the functional currencies (which are the British Pound Sterling and the Australian dollar) of those subsidiaries that were lent the monies will result in foreign currency gains and losses. During the three and six months ended June 30, 2018, we recognized foreign currency losses of $0.4 million for each period. During the three and six months ended June 30, 2017, we recognized foreign currency gains of $0.2 million and $0.5 million.

The RLJ Companies, LLC

In June 2013, The RLJ Companies, LLC (whose sole manager and voting member is the chairman of our board of directors) purchased from one of our vendors $3.5 million of contract obligations that we owed to the vendor. These purchased liabilities, which are now owed to The RLJ Companies, are included in accrued royalties and distribution fees in the accompanying consolidated balance sheets. During the three and six months ended June 30, 2018, we made payments totaling $0.5 million and $1.0 million, respectively, to The RLJ Companies, which reduced our remaining obligation to $1.5 million.

Debt, Preferred Stock and Warrants

On January 2, 2018, we made a dividend payment of $0.4 million to our preferred shareholders, which includes AMC. Since AMC holds more than 10% of the outstanding shares of our common stock, they are considered a related party. On April 2, 2018, we made a dividend payment of $0.4 million to our preferred shareholders.

On January 2, 2018, we issued AMC 418,255 shares of common stock in payment of $1.3 million of interest on $78.0 million of principal outstanding under the AMC Credit Agreement. On April 2, 2018, we issued AMC 409,162 shares of common stock in payment of $1.2 million of interest on $78.0 million of principal outstanding under the AMC Credit Agreement.

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Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

NOTE 16. SUBSEQUENT EVENTS

On July 2, 2018, we made a dividend payment of $0.4 million to our preferred shareholders.

On July 2, 2018, we issued AMC 413,709 shares of common stock in payment of $1.3 million of interest on $78.0 million of principal outstanding under the AMC Credit Agreement.

On July 13, 2018, our subsidiary, APL, entered into a loan facility with a U.K. bank to partially fund the production of series one and two of the television program London Kills. The maximum principal amount of borrowings under the facility is £2.4 million or approximately $3.1 million. The loan matures on June 30, 2019. Interest is payable quarterly on the outstanding principal amount of the loan at an annual rate that is 2.1% above the bank’s cost of funding rate or other mutually agreed upon rate. The loan is secured against intercompany distribution agreements and a third-party licensee distribution agreement.

On August 7, 2018, AMC agreed in principle to further reduce our minimum cash balance requirement (see Note 8, Debt). We are currently drafting an amendment to the AMC Credit Agreement to formalize this change.

AMC Merger Agreement

On July 30, 2018, we announced that we have entered into a definitive agreement whereby AMC will acquire RLJE in a going-private merger. The aggregate enterprise transaction value is approximately $274.0 million, and pursuant to the merger agreement, AMC will pay, in cash, an aggregate of approximately $65.0 million to holders of our outstanding common stock, preferred stock and warrants not currently owned by AMC, Robert L. Johnson and their respective affiliates. Upon completion of the merger, RLJE will become an indirect subsidiary of AMC, with Mr. Johnson and his affiliates owning a stake of 17%.

In the merger, outstanding shares of our common stock (other than shares owned by Mr. Johnson, AMC and their respective affiliates) will be converted into the right to receive $6.25 per share in cash, without interest; the holders of our outstanding preferred stock (other than affiliates of AMC) will be offered the opportunity to elect to receive $7.8125 in cash for each underlying “as converted” share of our common stock in accordance with the terms of such preferred stock; and the holders of warrants (other than Mr. Johnson, AMC and their respective affiliates) will be paid the excess of the $6.25 per share merger consideration over the per share exercise price of their warrants. In accordance with its terms, holders of preferred stock who decline to accept the $7.8125 cash offer for their shares will be entitled to receive for each share of preferred stock a new share of preferred stock to be issued by RLJE after the merger.

Concurrently with the execution of the merger agreement, Mr. Johnson and his affiliates have entered into a voting and transaction support agreement with AMC and Digital Entertainment Holdings LLC, a wholly owned subsidiary of AMC (or DEH), whereby Mr. Johnson and his affiliates have agreed to vote, at a special meeting of RLJE’s stockholders, all their shares of RLJE common stock “for” the approval of the merger agreement and the merger. Mr. Johnson and his affiliates currently own approximately 43.7% of our outstanding common stock. AMC has also entered into separate arrangements with Mr. Johnson related to the contribution of his RLJE securities to DEH immediately prior to the closing of the transaction at the $6.25 per share merger consideration and governance matters following the closing of the transaction.

Prior to the effective time of the merger, DEH intends to exercise, in full, all warrants to purchase RLJE common stock that it currently owns in exchange for debt we owe to DEH. Immediately following such exercise, AMC will beneficially own at least 50.1% of our then-outstanding shares of common stock on a fully diluted basis. AMC, through DEH, currently owns approximately 30.1% of our outstanding common stock.

The transaction has been approved by a special committee of RLJE’s independent directors (the Special Committee). Following AMC’s initial $4.25 per share merger proposal announced on February 26, 2018, the Special Committee was constituted by our Board of Directors with the plenary authority of the full Board to evaluate, on behalf of the non-affiliate holders of our common stock, and to definitively approve or disapprove, AMC’s proposal. Having evaluated, structured, negotiated and documented with AMC the terms of the current transaction, the Special Committee, in consultation with its legal and financial advisors, has determined that the merger agreement, the merger and the transactions contemplated thereby, are advisable, fair to and in the best interest of the non-affiliate holders of our outstanding common stock.

Consummation of the merger is subject to customary closing conditions, including the approval of the merger agreement by a vote of the majority of the outstanding shares of our common stock as of the record date for a special meeting of our common stockholders that will be held to consider and vote on the transaction. The parties expect the transaction to close during the fourth quarter of 2018.

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Description of Business and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Description of Business

Description of Business

RLJ Entertainment, Inc. (RLJE or the Company) was incorporated in Nevada in April 2012. On October 3, 2012, we completed the business combination of RLJE, Image Entertainment, Inc. (or Image) and Acorn Media Group, Inc. (or Acorn Media), which is referred to herein as the “Business Combination.” Acorn Media includes its United Kingdom (or U.K.) subsidiaries RLJ Entertainment Ltd (or RLJE Ltd.), Acorn Media Enterprises Limited (or AME), Acorn Global Enterprises Limited (or AGE), Acorn Productions Ltd (or APL), and RLJE International Ltd (collectively, RLJE UK), as well as RLJ Entertainment Australia Pty Ltd (or RLJE Australia). In February 2012, Acorn Media acquired a 64% ownership of Agatha Christie Limited (or ACL). References to Image include its wholly-owned subsidiary Image/Madacy Home Entertainment, LLC. “We,” “our” or “us” refers to RLJE and its subsidiaries unless otherwise noted. Our principal executive offices are located in Silver Spring, Maryland, with an additional location in Woodland Hills, California. We also have international offices in London, England and Sydney, Australia.

We are a premium digital channel company serving distinct audiences through our proprietary subscription-based video on demand (or SVOD) digital channels (or Digital Channels segment), Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and International mysteries and dramas. UMC showcases superior black television programs and films including original series, drama, romance, comedy, thrillers, stage plays, documentaries and other exclusive content for African-American and urban audiences.

We also exclusively control, co-produce, and own a large library of content primarily consisting of British mysteries and dramas, independent feature films and urban content. In addition to supporting our Digital Channels segment, we monetize our library through intellectual property (or IP) rights that we own, produce, and then exploit worldwide (our IP Licensing segment) and through distribution operations across all available wholesale windows of exploitation (our Wholesale Distribution segment). Our IP Licensing segment consists of our investment in ACL and owned intellectual property that is either owned or created by us and licensed for exploitation worldwide. Our Wholesale Distribution segment consists of worldwide exploitation of exclusive content in various formats through third party media and retail outlets in the United States of America (or U.S.), Canada, U.K. and Australia. We work closely with our wholesale partners to outline and implement release and promotional campaigns customized to the different audiences we serve and the program genres we exploit.

Basis of Presentation

Basis of Presentation

Unaudited Interim Financial Statements

The consolidated financial information presented in the accompanying unaudited interim consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017 has been prepared in accordance with accounting principles generally accepted in the United States (or US GAAP) and with the Securities and Exchange Commission’s (or SEC) instructions for interim financial reporting for the Form 10-Q and Article 10 of Regulation S‑X of the SEC. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements.

In management’s opinion, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Due to the seasonal nature of our business, with a disproportionate amount of sales occurring in the fourth quarter and other factors, including our content release schedule, interim results are not necessarily indicative of the results that may be expected for the entire fiscal year. The accompanying unaudited financial information should, therefore, be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K filed on March 16, 2018 (or 2017 Form 10‑K). Note 2, Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2017 Form 10‑K contains a summary of our significant accounting policies. As of June 30, 2018, we have made no material changes to our significant accounting policies disclosed in our 2017 Form 10 K, except for the adoption of the new revenue recognition standard.

Correction of Immaterial Misstatements in Prior Period Financial Statements

In connection with the preparation of our unaudited condensed consolidated financial statements for the six months ended June 30, 2018, we identified an error as of December 31, 2017 that caused an overstatement of our previously reported deferred tax liability. Through 2017, we were tax affecting our ACL equity earnings and accumulating a deferred tax liability, which in theory would become payable when we disposed of our equity investment. As of December 31, 2017, our deferred tax liability was $2.9 million. In addition to recognizing equity earnings, we also receive distributions from ACL periodically, and when received, those distributions are not taxable nor does our foreign tax basis in ACL change. Therefore, we should have been tax affecting our ACL equity earnings after deducting distributions received.  Had we done this, our deferred tax liability at December 31, 2017 would have been $0.5 million. In addition to overstating our deferred tax liability, we were also overstating our provision for income taxes within our consolidated statement of operations. In 2017 and 2016, we reported a total provision for income taxes of $1.2 million and $0.2 million, respectively, and this provision was overstated by $0.4 million for each period.

In accordance with Staff Accounting Bulletin (SAB) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the error and determined that the impact was not material to the results of operations or financial position for the years ended December 31, 2017 and 2016. We have elected to revise the 2017 financial statements when they are subsequently issued and accordingly, we have corrected the balance sheet as of December 31, 2017 in this filing. We will correct the statement of operations for 2017 the next time those statements are filed. We reduced our previously reported deferred tax liability as of December 31, 2017 by $2.4 million and increased, on a net basis, our shareholders’ equity by the same amount.

(In thousands)	December 31, 2017
Liabilities and Shareholders' Equity	As previously reported			Adjustment			As revised
Deferred tax liability	$	2,933		$	(2,415	)	$	518
Total liabilities		132,046			1,776			133,822
Accumulated deficit		(133,514	)		2,672			(130,842	)
Accumulated other comprehensive loss		(2,942	)		(257	)		(3,199	)
Total shareholders' equity		15,543			2,415			17,958
Total liabilities and shareholders' equity		147,589			4,191			151,780

Recently Adopted/Issue Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (or FASB) issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. Subsequent to the issuance of the May 2014 guidance, several clarifications and updates have been issued by the FASB on this topic, the most recent of which was issued in December 2016. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. We adopted Topic 606 as of January 1, 2018 using the modified retrospective method. See Note 2, Revenues, for further details.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required by lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of the pending adoption of this new standard on our financial statements and we have yet to determine the overall impact this ASU is expected to have. The likely impact will be one of presentation only on our consolidated balance sheets. Our leases currently consist of operating leases with varying expiration dates through 2023 and our future minimum lease commitments before sub-lease income total $4.0 million as of June 30, 2018.

Principles of Consolidation

Principles of Consolidation

The operations of ACL are subject to oversight by ACL’s Board of Directors. The investment in ACL is accounted for using the equity method of accounting given the voting control of the Board of Directors by the minority shareholder. We have included our share of ACL’s operating results as a separate line item in our consolidated financial statements.

Our consolidated financial statements include the accounts of all majority-owned subsidiary companies, except for ACL. We carry our investment in ACL as a separate asset on our consolidated balance sheet at cost adjusted for our share of the equity in undistributed earnings. Except for dividends and changes in ownership interest, we report changes in equity in undistributed earnings of ACL as “Equity earnings of affiliate” in our consolidated statements of operations. All intercompany transactions and balances have been eliminated.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amount of our financial instruments, which principally include cash, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relative short maturity of such instruments. The carrying amount of our debt under our senior credit agreement approximates its fair value as it bears interest at market rates of interest after taking into consideration its debt discount. Our recurring fair value measurements of stock warrants and other derivative liabilities and our non-recurring fair value measurements of investments in content are disclosed in Note 11, Fair Value Measurements.

Earnings (Loss) per Common Share

Earnings (Loss) per Common Share

Basic earnings (loss) per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the combination of dilutive common share equivalents and the weighted-average shares outstanding during the period. For the periods reporting a net loss, diluted loss per share is equivalent to basic loss per share, as inclusion of common share equivalents would be anti-dilutive.

Income Taxes

Income Taxes

We account for income taxes pursuant to the provisions of ASC 740, Income Taxes, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and the future tax benefits derived from operating loss and tax credit carryforwards. We provide a valuation allowance on our deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. We have a valuation allowance against 100% of our net deferred tax assets.

ASC 740 requires that we recognize in the consolidated financial statements the effect of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The first step is to determine whether or not a tax benefit should be recognized. A tax benefit will be recognized if the weight of available evidence indicates that the tax position is more likely than not to be sustained upon examination by the relevant tax authorities. The recognition and measurement of benefits related to our tax positions requires significant judgment as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. Differences between actual results and our assumptions, or changes in our assumptions in future periods, are recorded in the period they become known. For tax liabilities, we recognize accrued interest related to uncertain tax positions as a component of income tax expense, and penalties, if incurred, are recognized as a component of operating expense.

In December 2017, SAB No. 118 was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (the Act). In accordance with SAB No. 118, our previously reported provisions for income taxes and our deferred tax assets and liabilities were provisional. During the second quarter of 2018, we completed our analysis and our updated assessment is that the Act has no further impact on our previously reported income tax provisions or our deferred tax assets or liabilities. These amounts are no longer provisional.

Our foreign subsidiaries are subject to income taxes in their respective countries, as well as U.S. Federal and state income taxes. The income tax payments they make outside the U.S. may give rise to foreign tax credits that we may use to offset taxable income in the U.S.

Liquidity

Liquidity

At June 30, 2018, our cash balance was $3.5 million. For the six months ended June 30, 2018, we recognized a net loss of $8.5 million and we used $0.9 million of cash for operating activities. At June 30, 2018, we had $54.9 million of term debt outstanding (see Note 8, Debt). We continue to experience liquidity constraints as we have several competing demands on our available cash and cash that may be generated from operations. We continue to have past-due vendor payables. These past-due payables are largely a result of past-due vendor payables acquired in 2012 when purchasing Image. As we work to catch up on the acquired past-due payables, we have fallen behind on other payables. We continue to work with our vendors to make payment arrangements that are agreeable with them and that give us flexibility in terms of when payments will be made. Additionally, we must maintain a certain level of expenditures for marketing to support subscriber growth and for the acquisition of new content that allows us to generate revenues and margins sufficient to meet our obligations.

Growth of our Digital Channels segment has the potential to improve our liquidity. We continue to realize significant growth in our Digital Channels segment. Our Digital Channels segment revenues increased 46.0% to $9.4 million during the three months ended June 30, 2018 as compared to the same period in 2017. Our Digital Channels segment revenues increased 45.7% to $18.1 million during the six months ended June 30, 2018 as compared to the same period in 2017 (see Note 3, Segment Information).

We believe that our current cash at June 30, 2018, and cash generated from operations will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditure and debt repayments (none until 2020) for at least one year from the date of issuance of these consolidated financial statements. However, there can be no assurances that we will be successful in realizing improved results from operations, including improved Adjusted EBITDA, generating sufficient cash flows from operations or agreeing with vendors on revised payment terms. We define Adjusted EBITDA as earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to all contracts as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded a net increase to opening accumulated deficit of $0.7 million as of January 1, 2018 due to the cumulative impact to revenues and cost of sales of adopting Topic 606, with the impact primarily related to renewals for licensing agreements within our Wholesale Distribution segment. Under the new standard, renewals are a separate deliverable for which revenue should generally be deferred and recognized when the renewal period begins. Under the prior standards, renewals were generally recognized as revenue when entering into an amendment.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606, Revenue — Revenue from Contracts with Customers were as follows:

(In thousands)	Balance at						Balance at
Liabilities and Shareholders' Equity	December 31, 2017			Adjustment Due to Topic 606			January 1, 2018
Accrued royalties and distribution fees	$	47,414		$	(310	)	$	47,104
Deferred revenue		2,859			1,057			3,916
Accumulated deficit (Revised)(1)		(130,842	)		(747	)		(131,589	)

⁽¹⁾See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

The impact of adoption on our current period statement of operations was as follows:

(In thousands)	Three Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	21,474	$	21,417	$	57
Content amortization and royalties		7,562		7,561		1

(In thousands)	Six Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	40,056	$	39,328	$	728
Content amortization and royalties		14,258		13,919		339

Within our Wholesale Distribution segment, we estimate certain non-physical revenues each reporting period and we adjust our estimate when additional information becomes available, which includes the receipt of actual statements from our wholesalers. For the three months ended June 30, 2018, we recognized a decrease in revenues of $0.1 million, as actual information received was less than our prior period estimates. For the three months ended June 30, 2017, we recognized an increase in revenues of $0.1 million, as actual information received exceeded our prior period estimates. For the six months ended June 30, 2018 and 2017, we recognized an increase in revenues of $0.1 million and $0.2 million, respectively, as actual information received exceeded our prior period estimates.

Digital Channels segment revenues are recognized over time as subscription services are delivered. Wholesale Distribution segment revenues are generally recognized at a point in time when a sales transaction is completed. As of June 30, 2018, our deferred revenue of $3.4 million is comprised of prepaid subscriptions within our Digital Channels segment of $2.8 million, payments received within our Wholesale Distribution segment of $0.1 million for content not yet delivered or available due to certain restrictions, and $0.5 million for the license of our tradenames. Deferred revenue will be recognized over time as revenue upon delivery of subscription services or content, or upon the removal of restrictions whereby the wholesaler will be free to exploit the delivered content. Deferred revenue associated with the tradename license will be recognized in equal monthly amounts over the license term beginning in April 2018 through March 2020. We estimate that all deferred revenue amounts that are not associated with the tradename license will be recognized as revenue within the next 12 months.

Upon adoption of the new revenue standards, we also made certain other reclassifications within our consolidated balance sheet, which pertained to sales of physical product within our Wholesale Distribution segment, as follows:

• We estimate a certain amount of inventory that will be received when processing sales returns. This amount of inventory to be received had been included within our inventory balance. This amount is now included within prepaid expenses and other assets. As of December 31, 2017, the inventory balance reclassified was $0.5 million. The impact of this reclassification to our previously reported balances as of December 31, 2017, was for prepaid expenses and other assets to increase and inventories to decrease.

• We have reclassified our sales return reserve from accounts receivable to accounts payable and accrued liabilities, which had the impact of increasing the previously reported balances as of December 31, 2017, for both accounts. Our sales return reserve as of December 31, 2017 was $4.2 million.

Included in our accounts payable and other accrued liabilities are accruals for both sales returns and market development funds that total $2.5 million and $6.8 million as of June 30, 2018 and December 31, 2017, respectively. These accruals require the exercise of judgement and affect the reported revenues and net earnings. In determining these accruals, we analyze historical returns, pricing and other credit data; current economic trends; and changes in customer demand and acceptance of our products, including reorder activity. Based on this information, we determine our best estimates, which we believe is fair value, and accrue a percentage of each dollar of product sales where the customer has the right to either return the product and receive a credit or reduce their purchase price. Actual returns and reductions could differ from our estimates.

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Description of Business and Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2018

Description Of Business And Basis Of Presentation [Abstract]

Schedule of Error Corrections and Prior Period Adjustments

(In thousands)	December 31, 2017
Liabilities and Shareholders' Equity	As previously reported			Adjustment			As revised
Deferred tax liability	$	2,933		$	(2,415	)	$	518
Total liabilities		132,046			1,776			133,822
Accumulated deficit		(133,514	)		2,672			(130,842	)
Accumulated other comprehensive loss		(2,942	)		(257	)		(3,199	)
Total shareholders' equity		15,543			2,415			17,958
Total liabilities and shareholders' equity		147,589			4,191			151,780

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Revenues (Tables) - ASC Topic 606 [Member]

6 Months Ended

Jun. 30, 2018

Cumulative Effect of Changes in Balance sheet for Adoption of Topic 606, Revenue

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606, Revenue — Revenue from Contracts with Customers were as follows:

(In thousands)	Balance at						Balance at
Liabilities and Shareholders' Equity	December 31, 2017			Adjustment Due to Topic 606			January 1, 2018
Accrued royalties and distribution fees	$	47,414		$	(310	)	$	47,104
Deferred revenue		2,859			1,057			3,916
Accumulated deficit (Revised)(1)		(130,842	)		(747	)		(131,589	)

Impact of Adoption on Current Period Statement of Operations

The impact of adoption on our current period statement of operations was as follows:

(In thousands)	Three Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	21,474	$	21,417	$	57
Content amortization and royalties		7,562		7,561		1

(In thousands)	Six Months Ended June 30, 2018
Statement of Operations	As Reported		Balances Without Adoption of Topic 606		Effect of Change
Revenues	$	40,056	$	39,328	$	728
Content amortization and royalties		14,258		13,919		339

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Summary of Segment Performance

The tables below summarize the segment contribution for the three months ended June 30, 2018 and 2017.

	Three Months Ended June 30, 2018
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	9,402		$	17		$	12,055		$	—		$	21,474
Operating costs and expenses		(6,240	)		(195	)		(10,252	)		(3,422	)		(20,109	)
Depreciation and amortization		(291	)		(19	)		(294	)		(101	)		(705	)
Share in ACL earnings		—			1,288			—			—			1,288
Segment contribution income (loss)	$	2,871		$	1,091		$	1,509		$	(3,523	)	$	1,948

	Three Months Ended June 30, 2017
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	6,439		$	2		$	12,392		$	—		$	18,833
Operating costs and expenses		(3,965	)		(136	)		(9,856	)		(2,724	)		(16,681	)
Depreciation and amortization		(227	)		(31	)		(498	)		(148	)		(904	)
Share in ACL earnings		—			869			—			—			869
Segment contribution income (loss)	$	2,247		$	704		$	2,038		$	(2,872	)	$	2,117

The tables below summarize the segment contribution for the six months ended June 30, 2018 and 2017.

	Six Months Ended June 30, 2018
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	18,075		$	36		$	21,945		$	—		$	40,056
Operating costs and expenses		(12,155	)		(313	)		(19,935	)		(7,064	)		(39,467	)
Depreciation and amortization		(654	)		(52	)		(686	)		(198	)		(1,590	)
Share in ACL earnings		—			2,072			—			—			2,072
Segment contribution income (loss)	$	5,266		$	1,743		$	1,324		$	(7,262	)	$	1,071

	Six Months Ended June 30, 2017
(In thousands)	Digital Channels			IP Licensing			Wholesale Distribution			Corporate			Total
Revenues	$	12,404		$	4		$	20,312		$	—		$	32,720
Operating costs and expenses		(7,079	)		(229	)		(19,412	)		(5,888	)		(32,608	)
Depreciation and amortization		(430	)		(63	)		(991	)		(293	)		(1,777	)
Share in ACL earnings		—			1,420			—			—			1,420
Segment contribution income (loss)	$	4,895		$	1,132		$	(91	)	$	(6,181	)	$	(245	)

Reconciliation of Total Segment Contribution Income (Loss) to Loss from Operations Before Provision for Income Taxes

A reconciliation of total segment contribution income (loss) to loss from operations before provision for income taxes is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Total segment contribution income (loss)	$	1,948		$	2,117		$	1,071		$	(245	)
Interest expense, net		(2,362	)		(2,152	)		(4,653	)		(4,038	)
Change in fair value of stock warrants and    other derivatives		(471	)		(491	)		(3,438	)		(3,383	)
(Loss) Gain on extinguishment of debt		—			(425	)		—			470
Other (expense) income		(1,414	)		161			(1,591	)		445
Loss from operations before provision    for income taxes	$	(2,299	)	$	(790	)	$	(8,611	)	$	(6,751	)

Total Assets by Segment

Total assets by segment are as follows:

	June 30,		December 31,
(In thousands)	2018		2017
Digital Channels	$	16,427	$	11,148
IP Licensing		25,585		23,981
Wholesale Distribution		100,291		109,178
Corporate		4,596		7,473
Total Assets	$	146,899	$	151,780

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Equity Earnings of Affiliate (Tables)

6 Months Ended

Jun. 30, 2018

Equity Method Investments And Joint Ventures [Abstract]

Summarized Financial Information of ACL

The following summarized financial information is derived from the unaudited financial statements of ACL:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Revenues	$	12,129		$	3,094		$	15,269		$	6,954
Film cost amortization		(146	)		(183	)		(146	)		(1,915	)
General, administrative and other expenses		(9,247	)		(989	)		(10,605	)		(1,830	)
Income from operations	$	2,736		$	1,922		$	4,518		$	3,209
Net income	$	2,203		$	1,535		$	3,623		$	2,561

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Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2018

Accounts Receivable Net [Abstract]

Accounts Receivable

Our accounts receivable typically trends with retail seasonality.

	June 30,			December 31,
(In thousands)	2018			2017
Digital Channels	$	3,516		$	2,864
Wholesale Distribution		13,542			22,133
Accounts receivable before allowances and reserves		17,058			24,997
Less: allowance for doubtful accounts		(69	)		(71	)
Accounts receivable, net	$	16,989		$	24,926

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Inventories (Tables)

6 Months Ended

Jun. 30, 2018

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventories are summarized as follows:

	June 30,		December 31,
(In thousands)	2018		2017
Packaged discs	$	3,975	$	3,652
Packaging materials		438		611
Other merchandise		186		185
Inventories, net	$	4,599	$	4,448

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Investments in Content (Tables)

6 Months Ended

Jun. 30, 2018

Entertainment [Abstract]

Investment in Content

	June 30,		December 31,
(In thousands)	2018		2017
Released	$	65,409	$	60,660
Completed, not released		5,864		3,773
In-production		7,387		6,050
Investments in content, net	$	78,660	$	70,483

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Debt (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Debt Outstanding

Debt consists of the following:

	Maturity	Interest	June 30,			December 31,
(In thousands)	Date	Rate	2018			2017
Senior secured term notes    with AMC:
Tranche A Loan	Beginning June 30, 2020	7.0%	$	23,000		$	23,000
Tranche B Loan	Beginning October 14, 2021	6.0%		54,999			54,999
Less: debt discount				(23,145	)		(25,360	)
Debt, net of discount			$	54,854		$	52,639

Future Minimum Principal Payments, Exclusive of Debt Discount

Future minimum principal payments, exclusive of debt discount, as of June 30, 2018 are as follows:

(In thousands)	Senior Notes
Remainder of 2018	$	—
2019		—
2020		13,000
2021		25,000
2022		30,000
2023		9,999
	$	77,999

Schedule of Future Leverage Ratio Requirements

Financial covenants include the following:

	December 31, 2017	December 31, 2018	Thereafter
Leverage Ratios:
Senior debt-to-Adjusted EBITDA	5.75 : 1.00	4.00 : 1.00	Ranges from 3.75 : 1.00 to 2.50 : 1.00
Total debt-to-Adjusted EBITDA	6.00 : 1.00	5.00 : 1.00	4.00 : 1.00
Fixed charge coverage ratio	1.00 : 1.00	2.00 : 1.00	2.00 : 1.00

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Redeemable Convertible Preferred Stock and Equity (Tables)

6 Months Ended

Jun. 30, 2018

Summary of Share Based Compensation

For the three and six months ended June 30, 2018 and 2017, share-based compensation expense is classified within our statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Cost of Sales — Manufacturing and fulfillment	$	5	$	1	$	10	$	3
Selling expenses		33		6		78		13
General and administrative expenses		600		351		1,239		496
Total share-based compensation	$	638	$	358	$	1,327	$	512

Summary of Stock Option Activity

A summary of our stock option activity during six months ended June 30, 2018 is presented below.

(In thousands, except per share data)	Options		Weighted- Average Exercise Price
Stock options outstanding at January 1, 2018		1,400	$	2.83
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Stock options outstanding at June 30, 2018		1,400	$	2.83

Restricted Stock Units (RSUs) [Member]

Restricted Stock Units and Award Activity

A summary of our restricted stock unit activity during the six months ended June 30, 2018 is presented below:

	Service Shares					Performance Shares
(In thousands, except per share data)	Shares			Weighted- AverageGrant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Unvested restricted stock units outstanding at    January 1, 2018		627		$	3.02		500	$	2.40
Granted		—		$	—		—	$	—
Vested		(158	)	$	3.18		—	$	—
Forfeited		(28	)	$	4.00		—	$	—
Unvested restricted stock units outstanding at    June 30, 2018		441		$	2.90		500	$	2.40

Restricted Stock [Member]

Restricted Stock Units and Award Activity

A summary of our restricted stock award activity during six months ended June 30, 2018 is presented below.

(In thousands, except per share data)	Shares			Weighted- AverageGrant Date Fair Value
Unvested restricted stock awards outstanding at January 1, 2018		130		$	2.66
Granted		7		$	4.43
Vested		(42	)	$	1.92
Forfeited		(11	)	$	1.92
Unvested restricted stock awards outstanding at June 30, 2018		84		$	3.27

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Stock Warrants (Tables)

6 Months Ended

Jun. 30, 2018

Stock Warrants [Abstract]

Summary of Unregistered Stock Warrants Outstanding

We have the following unregistered warrants outstanding:

	June 30, 2018
(In thousands, except per share data)	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Life
AMC Warrants		18,333	$	3.00	4.4 years
2015 Warrants		2,999	$	2.29	1.9 years
		21,332

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Roll-forward Activity for Warrant

The following table represents the carrying amount, valuation and a roll-forward of activity for our warrant classified within Level 3 of the fair-value hierarchy:

	Estimated Fair Value Measurements Using Unobservable Inputs (Level 3)
	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Carrying amount of stock warrants, beginning of period	$	16,652	$	12,655	$	13,685	$	9,763
Change in fair value		471		491		3,438		3,383
Carrying amount of stock warrants, end of period	$	17,123	$	13,146	$	17,123	$	13,146

Assets and Liabilities Measured at Fair Value on Non-recurring Basis

The following fair value hierarchy tables present information about our assets and liabilities measured at fair value on a non-recurring basis:

	Estimated Fair Value Measurement Using Unobservable Inputs (Level 3)				Loss
	As of June 30,				Six Months Ended June 30,
(In thousands)	2018		2017		2018		2017
Investments in content	$	1,164	$	778	$	564	$	595

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Statements of Cash Flows (Tables)

6 Months Ended

Jun. 30, 2018

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Disclosures

	Six Months Ended June 30,
(In thousands)	2018		2017
Cash paid during the period for:
Interest	$	—	$	1,592
Income taxes	$	11	$	30
Non-cash investing and financing activities:
Accretion on preferred stock	$	386	$	756
Common stock issued to AMC as payment for    prior year interest expense	$	—	$	158
Conversion of preferred stock into shares of common	$	—	$	19,592
Exercise of AMC warrant and reduction of senior debt	$	—	$	2,847
Capital expenditures accrued for in accounts payable and    accrued liabilities	$	158	$	400
Preferred stock dividends accrued for in accounts payable    and accrued liabilities	$	354	$	—

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Description of Business and Basis of Presentation - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017		Dec. 31, 2016	Feb. 29, 2012
Description Of Business And Basis Of Presentation [Line Items]
Deferred tax liability	$ 367		$ 367		$ 518	[1]
Adjustments related to tax effect of equity earnings deferred tax liability					500
Provision for income taxes	(285)	$ 76	(145)	$ 237	1,200		$ 200
Provision for income taxes overstated					400		$ 400
Future minimum lease commitments before sub-lease income	$ 4,000		$ 4,000
Valuation allowance as a percentage of deferred tax assets (in hundredths)	100.00%		100.00%
Adjustment [Member]
Description Of Business And Basis Of Presentation [Line Items]
Deferred tax liability					(2,415)
Agatha Christie Limited Company [Member]
Description Of Business And Basis Of Presentation [Line Items]
Ownership interest in ACL								64.00%
Deferred tax liability					$ 2,900
Acorn Media Group Inc [Member]
Description Of Business And Basis Of Presentation [Line Items]
Ownership interest in ACL								64.00%

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

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Description of Business and Basis of Presentation - Schedule of Error Corrections and Prior Period Adjustments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Description Of Business And Basis Of Presentation [Line Items]
Deferred tax liability	$ 367	$ 518	[1]
Total liabilities	136,071	133,822	[1]
Accumulated deficit	(140,055)	(130,842)	[1]
Accumulated other comprehensive loss	(3,863)	(3,199)	[1]
Total shareholders' equity	10,828	17,958	[1]
Total liabilities and shareholders' equity	$ 146,899	151,780	[1]
As Previously Reported [Member]
Description Of Business And Basis Of Presentation [Line Items]
Deferred tax liability		2,933
Total liabilities		132,046
Accumulated deficit		(133,514)
Accumulated other comprehensive loss		(2,942)
Total shareholders' equity		15,543
Total liabilities and shareholders' equity		147,589
Adjustment [Member]
Description Of Business And Basis Of Presentation [Line Items]
Deferred tax liability		(2,415)
Total liabilities		1,776
Accumulated deficit		2,672
Accumulated other comprehensive loss		(257)
Total shareholders' equity		2,415
Total liabilities and shareholders' equity		$ 4,191

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

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Description of Business and Basis of Presentation - Liquidity - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	[1]
Description Of Business And Basis Of Presentation [Abstract]
Cash balance	$ 3,500		$ 3,500
Net loss	(2,014)	$ (866)	(8,466)	$ (6,988)
Net cash (used) generated from operating activities			(871)	$ (4,272)
Term debt outstanding	$ 54,854		$ 54,854		$ 52,639
Percentage of revenue increased	46.00%		45.70%
Increase in revenues	$ 9,400		$ 18,100

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

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Revenues - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jan. 01, 2018	Dec. 31, 2017
Disaggregation Of Revenue [Line Items]
Accumulated deficit	$ (140,055)		$ (140,055)			$ (130,842)	[1]
Deferred revenue	$ 3,388		$ 3,388			2,859	[1]
Revenue recognition method, description			Deferred revenue associated with the tradename license will be recognized in equal monthly amounts over the license term beginning in April 2018 through March 2020. We estimate that all deferred revenue amounts that are not associated with the tradename license will be recognized as revenue within the next 12 months
Revenue, remaining performance obligation, expected timing of satisfaction, period	12 months		12 months
Reclassified inventory	$ 4,599		$ 4,599			4,448	[1]
License of Trade Names [Member]
Disaggregation Of Revenue [Line Items]
Deferred revenue	500		500
Wholesale Distribution [Member]
Disaggregation Of Revenue [Line Items]
Deferred revenue	100		100
Digital Channels [Member]
Disaggregation Of Revenue [Line Items]
Deferred revenue	2,800		2,800
ASC Topic 606 [Member]
Disaggregation Of Revenue [Line Items]
Accumulated deficit					$ (131,589)
Deferred revenue					3,916
ASC Topic 606 [Member] | Wholesale Distribution [Member]
Disaggregation Of Revenue [Line Items]
Reclassified inventory						500
Sales return reserves						4,200
ASC Topic 606 [Member] | Wholesale Distribution [Member] | Accounts Payable and Other Accrued Liabilities [Member]
Disaggregation Of Revenue [Line Items]
Sales returns and market development fund reserves	2,500		2,500			$ 6,800
Effect of Change [Member] | ASC Topic 606 [Member]
Disaggregation Of Revenue [Line Items]
Accumulated deficit					(747)
Deferred revenue					1,057
Effect of Change [Member] | ASC Topic 606 [Member] | Wholesale Distribution [Member]
Disaggregation Of Revenue [Line Items]
Accumulated deficit					$ (700)
Increase (decrease) in revenues	$ (100)	$ 100	$ 100	$ 200

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

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Revenues - Cumulative Effect of Changes in Balance sheet for Adoption of Topic 606, Revenue (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017	[1]
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued royalties and distribution fees	$ 46,584		$ 47,414
Deferred revenue	3,388		2,859
Accumulated deficit (Revised)	$ (140,055)		$ (130,842)
ASC Topic 606 [Member]
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued royalties and distribution fees		$ 47,104
Deferred revenue		3,916
Accumulated deficit (Revised)		(131,589)
Adjustment Due to Topic 606 [Member] | ASC Topic 606 [Member]
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued royalties and distribution fees		(310)
Deferred revenue		1,057
Accumulated deficit (Revised)		$ (747)

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

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Revenues - Impact of Adoption on Current Period Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation Of Revenue [Line Items]
Revenues	$ 21,474	$ 18,833	$ 40,056	$ 32,720
Total cost of sales	10,240	9,090	20,022	18,210
Content Amortization And Royalties
Disaggregation Of Revenue [Line Items]
Total cost of sales	7,562	$ 6,261	14,258	$ 12,329
Balances without Adoption of Topic 606 [Member] | ASC Topic 606 [Member]
Disaggregation Of Revenue [Line Items]
Revenues	21,417		39,328
Balances without Adoption of Topic 606 [Member] | Content Amortization And Royalties | ASC Topic 606 [Member]
Disaggregation Of Revenue [Line Items]
Total cost of sales	7,561		13,919
Effect of Change [Member] | ASC Topic 606 [Member]
Disaggregation Of Revenue [Line Items]
Revenues	57		728
Effect of Change [Member] | Content Amortization And Royalties | ASC Topic 606 [Member]
Disaggregation Of Revenue [Line Items]
Total cost of sales	$ 1		$ 339

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Segment Information - Additional Information (Details)	6 Months Ended
	Jun. 30, 2018 Segment
Segment Reporting [Abstract]
Number of reportable segments	3

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Segment Information - Summary of Segment Performance (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Segment Reporting Information [Line Items]
Revenues	$ 21,474	$ 18,833	$ 40,056	$ 32,720
Type of Revenue [Extensible List]	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember
Operating costs and expenses	$ (20,109)	$ (16,681)	$ (39,467)	$ (32,608)
Depreciation and amortization	(705)	(904)	(1,590)	(1,777)
Share in ACL earnings	1,288	869	2,072	1,420
Segment contribution income (loss)	1,948	2,117	1,071	(245)
Reportable Segments [Member] | Digital Channels [Member]
Segment Reporting Information [Line Items]
Revenues	$ 9,402	$ 6,439	$ 18,075	$ 12,404
Type of Revenue [Extensible List]	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember
Operating costs and expenses	$ (6,240)	$ (3,965)	$ (12,155)	$ (7,079)
Depreciation and amortization	(291)	(227)	(654)	(430)
Segment contribution income (loss)	2,871	2,247	5,266	4,895
Reportable Segments [Member] | IP Licensing [Member]
Segment Reporting Information [Line Items]
Revenues	$ 17	$ 2	$ 36	$ 4
Type of Revenue [Extensible List]	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember
Operating costs and expenses	$ (195)	$ (136)	$ (313)	$ (229)
Depreciation and amortization	(19)	(31)	(52)	(63)
Share in ACL earnings	1,288	869	2,072	1,420
Segment contribution income (loss)	1,091	704	1,743	1,132
Reportable Segments [Member] | Wholesale Distribution [Member]
Segment Reporting Information [Line Items]
Revenues	$ 12,055	$ 12,392	$ 21,945	$ 20,312
Type of Revenue [Extensible List]	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember	rlje:ProductAndServiceMember
Operating costs and expenses	$ (10,252)	$ (9,856)	$ (19,935)	$ (19,412)
Depreciation and amortization	(294)	(498)	(686)	(991)
Segment contribution income (loss)	1,509	2,038	1,324	(91)
Corporate [Member]
Segment Reporting Information [Line Items]
Operating costs and expenses	(3,422)	(2,724)	(7,064)	(5,888)
Depreciation and amortization	(101)	(148)	(198)	(293)
Segment contribution income (loss)	$ (3,523)	$ (2,872)	$ (7,262)	$ (6,181)

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Segment Information - Reconciliation of Total Segment Contribution Income (Loss) to Loss from Operations Before Provision for Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Reconciliation of total segment contribution to income (loss) before provision for income taxes [Abstract]
Total segment contribution income (loss)	$ 1,948	$ 2,117	$ 1,071	$ (245)
Interest expense, net	(2,362)	(2,152)	(4,653)	(4,038)
Change in fair value of stock warrants and other derivatives	(471)	(491)	(3,438)	(3,383)
(Loss) Gain on extinguishment of debt		(425)		470
Other (expense) income	(1,414)	161	(1,591)	445
LOSS FROM OPERATIONS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES	$ (2,299)	$ (790)	$ (8,611)	$ (6,751)

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Segment Information - Total Assets by Segment (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Total assets by segment [Abstract]
Total Assets	$ 146,899	$ 151,780	[1]
Reportable Segments [Member] | Digital Channels [Member]
Total assets by segment [Abstract]
Total Assets	16,427	11,148
Reportable Segments [Member] | IP Licensing [Member]
Total assets by segment [Abstract]
Total Assets	25,585	23,981
Reportable Segments [Member] | Wholesale Distribution [Member]
Total assets by segment [Abstract]
Total Assets	100,291	109,178
Corporate [Member]
Total assets by segment [Abstract]
Total Assets	$ 4,596	$ 7,473

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

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Equity Earnings of Affiliate - Additional Information (Details) £ in Millions, $ in Millions	1 Months Ended
	Feb. 29, 2012 USD ($)	Feb. 29, 2012 GBP (£)	Jun. 30, 2018 Novel Play Film	Feb. 28, 2012 USD ($)
Schedule of Equity Method Investments [Line Items]
Number of novels and short story collections | Novel			80
Number of plays | Play			19
Number of television films | Film			100
Agatha Christie Limited Company [Member]
Schedule of Equity Method Investments [Line Items]
Purchase consideration	$ 21.9	£ 13.7
Ownership interest in ACL	64.00%	64.00%
Agatha Christie Limited Company [Member] | Agatha Christie Limited [Member] | Bank Term Loan [Member]
Schedule of Equity Method Investments [Line Items]
Difference between fair value and the amount of underlying equity in net assets of investee | $				$ 18.7

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Equity Earnings of Affiliate - Summarized Financial Information of ACL (Details) - Agatha Christie Limited [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Schedule of Equity Method Investments [Line Items]
Revenues	$ 12,129	$ 3,094	$ 15,269	$ 6,954
Film cost amortization	(146)	(183)	(146)	(1,915)
General, administrative and other expenses	(9,247)	(989)	(10,605)	(1,830)
Income from operations	2,736	1,922	4,518	3,209
Net income	$ 2,203	$ 1,535	$ 3,623	$ 2,561

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Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable before allowances and reserves	$ 17,058	$ 24,997
Less: allowance for doubtful accounts	(69)	(71)
Accounts receivable, net	16,989	24,926	[1]
Digital Channels [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable before allowances and reserves	3,516	2,864
Wholesale Distribution [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable before allowances and reserves	$ 13,542	$ 22,133

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

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Accounts Receivable - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Distribution Partner [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable net of amounts owed to distributors	$ 2.8	$ 4.3

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Inventories - Schedule of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Packaged discs	$ 3,975	$ 3,652
Packaging materials	438	611
Other merchandise	186	185
Inventories, net	$ 4,599	$ 4,448	[1]

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

XML

Inventories - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Inventory Disclosure [Abstract]
Obsolescence reserve	$ 7.2		$ 7.2		$ 10.2
Impairment charges	$ 0.1	$ 0.1	$ 0.1	$ 0.5

XML

Investments in Content - Summary of Investments in Content (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Theatrical Film Costs [Abstract]
Released	$ 65,409	$ 60,660
Completed, not released	5,864	3,773
In-production	7,387	6,050
Investments in content, net	$ 78,660	$ 70,483	[1]

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

XML

Investments in Content - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Produced And Acquired Content [Abstract]
Investments in content impaired	$ 300	$ 300	$ 564	$ 595

XML

Debt - Debt Outstanding (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Debt, net of discount	$ 54,854	$ 52,639	[1]
Tranche A Loan [Member]
Debt Instrument [Line Items]
Interest rate	7.00%
Debt	$ 23,000	23,000
Tranche B Loan [Member]
Debt Instrument [Line Items]
Interest rate	6.00%
Debt	$ 54,999	54,999
Senior Debt [Member]
Debt Instrument [Line Items]
Debt	77,999
Less: debt discount	$ (23,145)	$ (25,360)
Senior Debt [Member] | Tranche A Loan [Member]
Debt Instrument [Line Items]
Maturity Date	Jun. 30, 2020
Senior Debt [Member] | Tranche B Loan [Member]
Debt Instrument [Line Items]
Beginning Maturity Date	Oct. 14, 2021

[1] See Note 1 — “Correction of Immaterial Misstatements in Prior Period Financial Statements”.

XML

Debt - Future Minimum Principal Payments, Exclusive of Debt Discount (Details) - Senior Debt [Member] $ in Thousands	Jun. 30, 2018 USD ($)
Future Minimum Principal Payments [Abstract]
Remainder of 2018	$ 0
2019	0
2020	13,000
2021	25,000
2022	30,000
2023	9,999
Long-term Debt, Gross	$ 77,999

XML

Debt - Additional Information (Details)						4 Months Ended	6 Months Ended
	Apr. 02, 2018 USD ($) shares	Jan. 02, 2018 USD ($) shares	Apr. 02, 2017 $ / shares	Jan. 30, 2017 USD ($)	Oct. 14, 2016 USD ($) Warrant $ / shares shares	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($) $ / shares shares	Jun. 30, 2017 shares	Jun. 16, 2017 USD ($)
Debt Instrument [Line Items]
Warrants, common stock price per share | $ / shares							$ 3.00
Debt instrument early repayment penalty				$ 0
First warrant [Member]
Debt Instrument [Line Items]
Number of shares called by warrant | shares							5,000,000	5,000,000
Number of shares warrants exercised | shares								1,700,000
Investment warrants expiration date							Oct. 14, 2021
Second Warrant [Member]
Debt Instrument [Line Items]
Number of shares called by warrant | shares							10,000,000
Investment warrants expiration date							Oct. 14, 2022
Third Warrant [Member]
Debt Instrument [Line Items]
Number of shares called by warrant | shares							5,000,000
Investment warrants expiration date							Oct. 14, 2023
Additional consideration payable for shares acquirable upon exercise							$ 0
Percentage of shares acquirable upon exercise							50.10%
AMC Credit Agreement [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity					$ 65,000,000
Number of warrants issued | Warrant					3
Number of shares called by warrant | shares					20,000,000
Warrants, common stock price per share | $ / shares					$ 3.00
Additional borrowing capacity				8,000,000					$ 10,000,000
Interest on principal paid through stock issuance	$ 1,200,000	$ 1,300,000
Minimum cash balance requirements year beginning after 2017 except for a four-month period ending September 30, 2018					$ 3,500,000
AMC Credit Agreement [Member] | Third Warrant [Member]
Debt Instrument [Line Items]
Percentage of shares acquirable upon exercise							50.10%
Equity interests shares issued upon exercise of warrant | shares							15,000,000
Value of Shares Acquirable Upon Exercise of Warrants							$ 60,000,000
AMC Credit Agreement [Member] | Scenario, Forecast [Member]
Debt Instrument [Line Items]
Reduction in debt covenant minimum cash balance requirements						$ 2,000,000
AMC Credit Agreement [Member] | Common Stock [Member]
Debt Instrument [Line Items]
Shares issued in payment of interest | shares	409,162	418,255
AMC Credit Agreement [Member] | Tranche A Loan [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity				$ 13,000,000	$ 5,000,000				23,000,000
Maturity Date				Jun. 30, 2019	Oct. 14, 2017
Stated interest rate					7.00%
Debt instrument, share price used to pay interest in common stock | $ / shares			$ 3.00
Debt instrument early repayment penalty							$ 0
Beginning Maturity Date							Jun. 30, 2020
AMC Credit Agreement [Member] | Tranche B Loan [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity					$ 60,000,000
Debt instrument percentage of debt due after five years					25.00%
Debt instrument percentage of debt due after six years					50.00%
Debt instrument percentage of debt due after seven years					25.00%
Stated interest rate					6.00%
Debt instrument interest rate percentage portion payable in cash					4.00%
Debt instrument, share price used to pay interest in common stock | $ / shares					$ 3.00
Principal reduction of line of credit									$ 5,000,000
Prepayment penalty as a percentage of principal- payment is made on or prior to Oct 14, 2018					3.00%
Prepayment penalty as a percentage of principal- payment is made after Oct 14, 2018					1.50%

XML

Debt - Schedule of Future Leverage Ratio Requirements (Details) - AMC Credit Agreement [Member]	Jun. 30, 2018
Senior debt-to-Adjusted EBITDA [Member]
Debt Instrument [Line Items]
Leverage ratios for fiscal year ending December 31, 2017	575.00%
Leverage ratios for fiscal year ending December 31, 2018	400.00%
Senior debt-to-Adjusted EBITDA [Member] | Minimum [Member]
Debt Instrument [Line Items]
Leverage ratios for fiscal year ending December 31, 2019 and thereafter	375.00%
Senior debt-to-Adjusted EBITDA [Member] | Maximum [Member]
Debt Instrument [Line Items]
Leverage ratios for fiscal year ending December 31, 2019 and thereafter	250.00%
Total debt-to-Adjusted EBITDA [Member]
Debt Instrument [Line Items]
Leverage ratios for fiscal year ending December 31, 2017	600.00%
Leverage ratios for fiscal year ending December 31, 2018	500.00%
Leverage ratios for fiscal year ending December 31, 2019 and thereafter	400.00%
Fixed charge coverage ratio [Member]
Debt Instrument [Line Items]
Leverage ratios for fiscal year ending December 31, 2017	100.00%
Leverage ratios for fiscal year ending December 31, 2018	200.00%
Leverage ratios for fiscal year ending December 31, 2019 and thereafter	200.00%

XML

Redeemable Convertible Preferred Stock and Equity - Additional Information (Details) - USD ($)		1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	May 20, 2015	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2015	Oct. 14, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Proceeds from issuance of preferred stock and warrants	$ 22,500,000
Debt conversion, original debt amount	$ 8,500,000
Preferred stock dividend percentage					8.00%
Preferred stock dividend stated value (in dollars per share)					$ 1,000
Preferred stock dividend payment due date					Jul. 01, 2017
Number of shares issued upon conversion			333.3		333.3
Trading price percentage			85.00%		85.00%
Preferred stock shares								16,500
Addition to conversion rate floor								$ 0.50
Conversion rate floor								$ 2.49
Penalty percentage to maturity redemption price								20.00%
Accreted value of dividends			$ 193,000	$ 379,000	$ 386,000	$ 756,000
Accumulated unpaid dividends on preferred stock			354,000		354,000
Dividend payments to preferred stockholders					708,000	$ 0
Aggregated subscription amount							$ 31,000,000
Unrecognized compensation expense related to restricted stock-based awards			1,300,000		$ 1,300,000
Remaining weighted-average vesting period					1 year 2 months 12 days
Unrecognized stock-based compensation expense, vesting percentage					100.00%
Compensation expense, recognize					$ 2,000,000
Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation expense related to restricted stock-based awards			$ 1,000,000		$ 1,000,000
Remaining weighted-average vesting period					1 year 6 months
Unrecognized stock-based compensation expense, vesting percentage					130.00%
Unrecognized stock-based compensation expense, Vesting (shares)			700,000		700,000
Unvested Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock based compensation, options granted (in shares)					0
Remaining weighted-average vesting period					1 year 8 months 12 days
Unrecognized compensation expense			$ 1,400,000		$ 1,400,000
RLJ SPAC Acquisition, LLC [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Amount of accreted dividends converted to common stock		$ (2,700,000)
Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Preferred stock conversion price (in dollars per share)					$ 3.00
Payment of partial liquidation damages percentage on aggregated subscription amount							6.00%
Maximum [Member] | Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation expense, Vesting (shares)			1,000,000		1,000,000
Minimum [Member] | Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation expense, Vesting (shares)			0		0
Unregistered Warrants [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares called by warrant			21,332,000		21,332,000
Certain Board Members or their Affiliated Companies [Member] | Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock awards vesting period					1 year
Executive Officer [Member] | Maximum [Member] | Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock awards vesting period					4 years
Executive Officer [Member] | Minimum [Member] | Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock awards vesting period					3 years
Employees [Member] | Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock awards vesting period					3 years
Chief Executive Officer [Member] | Vesting Option One [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock awards vesting period					2 years
Stock based compensation, options granted (in shares)					0.7
Stock based compensation, exercise price					$ 2.66
Chief Executive Officer [Member] | Vesting Option Two [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock awards vesting period					4 years
Stock based compensation, options granted (in shares)					0.7
Stock based compensation, exercise price					$ 3.00
Preferred Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Preferred stock shares issued (in shares)	31,046
Preferred Stock [Member] | RLJ SPAC Acquisition, LLC [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares converted		15,000
Preferred Stock [Member] | Certain Board Members or their Affiliated Companies [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Preferred stock shares issued (in shares)	16,500
Common Stock [Member] | Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares issued					233,000
Common Stock [Member] | Restricted Stock Units (RSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares issued					75,000
Common stock vested period					Dec. 31, 2017
Common Stock [Member] | RLJ SPAC Acquisition, LLC [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares issued upon conversion		5,900,000		5,900,000		5,900,000
Common Stock [Member] | 2015 Warrants [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares called by warrant	3,100,000
Common Stock [Member] | 2015 Warrants [Member] | Certain Board Members or their Affiliated Companies [Member] | Unregistered Warrants [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares called by warrant	1,700,000

XML

Redeemable Convertible Preferred Stock and Equity - Summary of Share Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total share-based compensation	$ 638	$ 358	$ 1,327	$ 512
Cost of Sales — Manufacturing and Fulfillment [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total share-based compensation	5	1	10	3
Selling Expenses [member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total share-based compensation	33	6	78	13
General and Administrative Expenses [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total share-based compensation	$ 600	$ 351	$ 1,239	$ 496

XML

Redeemable Convertible Preferred Stock and Equity - Restricted Stock Unit Activity (Details) shares in Thousands	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Restricted Stock, Service Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock outstanding at the beginning of the period (in shares) | shares	627
Granted (in shares) | shares	0
Vested (in shares) | shares	(158)
Forfeited (in shares) | shares	(28)
Unvested restricted stock outstanding at the ending of the period (in shares) | shares	441
Unvested restricted stock outstanding at the beginning of the period, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 3.02
Granted, Weighted average grant date fair value (in dollars per share) | $ / shares	0
Vested, Weighted average grant date fair value (in dollars per share) | $ / shares	3.18
Forfeited, Weighted average grant date fair value (in dollars per share) | $ / shares	4.00
Unvested restricted stock outstanding at the ending of the period, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 2.90
Restricted Stock, Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock outstanding at the beginning of the period (in shares) | shares	500
Granted (in shares) | shares	0
Vested (in shares) | shares	0
Forfeited (in shares) | shares	0
Unvested restricted stock outstanding at the ending of the period (in shares) | shares	500
Unvested restricted stock outstanding at the beginning of the period, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 2.40
Granted, Weighted average grant date fair value (in dollars per share) | $ / shares	0
Vested, Weighted average grant date fair value (in dollars per share) | $ / shares	0
Forfeited, Weighted average grant date fair value (in dollars per share) | $ / shares	0
Unvested restricted stock outstanding at the ending of the period, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 2.40

XML

Redeemable Convertible Preferred Stock and Equity - Summary of Restricted Stock Award Activity (Details) - Restricted Stock [Member] shares in Thousands	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock outstanding at the beginning of the period (in shares) | shares	130
Granted (in shares) | shares	7
Vested (in shares) | shares	(42)
Forfeited (in shares) | shares	(11)
Unvested restricted stock outstanding at the ending of the period (in shares) | shares	84
Unvested restricted stock outstanding at the beginning of the period, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 2.66
Granted, Weighted average grant date fair value (in dollars per share) | $ / shares	4.43
Vested, Weighted average grant date fair value (in dollars per share) | $ / shares	1.92
Forfeited, Weighted average grant date fair value (in dollars per share) | $ / shares	1.92
Unvested restricted stock outstanding at the ending of the period, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 3.27

XML

Redeemable Convertible Preferred Stock and Equity - Summary of Stock Option Activity (Details) - Stock Option [Member] shares in Thousands	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options outstanding at the beginning of the period, Options (in shares) | shares	1,400
Granted, Options (in shares) | shares	0
Vested, Options (in shares) | shares	0
Forfeited, Options (in shares) | shares	0
Stock options outstanding at the ending of the period, Options (in shares) | shares	1,400
Stock options outstanding at the beginning of the period, Weighted-average exercise price (in dollars per share) | $ / shares	$ 2.83
Granted, Weighted-average exercise price (in dollars per share) | $ / shares	0
Vested, Weighted-average exercise price (in dollars per share) | $ / shares	0
Forfeited, Weighted-average exercise price (in dollars per share) | $ / shares	0
Stock options outstanding at the ending of the period, Weighted-average exercise price (in dollars per share) | $ / shares	$ 2.83

XML

Stock Warrants - Summary of Unregistered Stock Warrants Outstanding (Details) - Unregistered Warrants [Member]	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant	21,332,000
AMC Warrants [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant	18,333,000
Weighted-Average Exercise Price of Warrants | $ / shares	$ 3.00
Weighted-Average Remaining Life	4 years 4 months 24 days
2015 Warrants [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant	2,999,000
Weighted-Average Exercise Price of Warrants | $ / shares	$ 2.29
Weighted-Average Remaining Life	1 year 10 months 24 days

XML

Stock Warrants - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions		6 Months Ended
	May 20, 2015	Jun. 30, 2018	Jun. 30, 2017	Oct. 14, 2016
Class Of Warrant Or Right [Line Items]
Warrants, common stock price per share		$ 3.00
First warrant [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant		5,000,000	5,000,000
Number of shares warrants exercised			1,700,000
Investment warrants expiration date		Oct. 14, 2021
Second Warrant [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant		10,000,000
Investment warrants expiration date		Oct. 14, 2022
Third Warrant [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant		5,000,000
Investment warrants expiration date		Oct. 14, 2023
Percentage of shares acquirable upon exercise		50.10%
Third Warrant [Member] | AMC Credit Agreement [Member]
Class Of Warrant Or Right [Line Items]
Shares and equity interest shares issued		15,000,000
Percentage of shares acquirable upon exercise		50.10%
Value of Shares Acquirable Upon Exercise of Warrants		$ 60.0
2015 Warrants [Member]
Class Of Warrant Or Right [Line Items]
Term of warrants	5 years
2015 Warrants [Member] | Common Stock [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant	3,100,000
Preferred Stock and 2015 Warrants [Member]
Class Of Warrant Or Right [Line Items]
Exercise price of warrants issued with preferred stock	$ 4.50			$ 3.00
Preferred Stock and 2015 Warrants [Member] | After AMC transaction and existing terms of 2015 Warrants Group 1 [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant				1,500,000
Exercise price of warrants issued with preferred stock				$ 1.50
Preferred Stock and 2015 Warrants [Member] | After AMC transaction and existing terms of 2015 Warrants Group 2 [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant				150,000
Exercise price of warrants issued with preferred stock				$ 2.37

XML

Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Oct. 14, 2016
Class Of Warrant Or Right [Line Items]
Penalty percentage to maturity redemption price						20.00%
Investments in content impaired	$ 300	$ 300	$ 564	$ 595
AMC Credit Agreement [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant						20,000,000
Tranche C [Member] | AMC Credit Agreement [Member] | Level 3 [Member]
Class Of Warrant Or Right [Line Items]
Percentage of shares acquirable upon exercise	50.10%		50.10%
Penalty percentage to maturity redemption price	20.00%		20.00%
Fair value of warrants	$ 17,100		$ 17,100		$ 13,700
Common Stock [Member] | Tranche C [Member]
Class Of Warrant Or Right [Line Items]
Number of shares called by warrant	5,000,000		5,000,000

XML

Fair Value Measurements - Roll-forward Activity for Warrant (Details) - Recurring [Member] - Level 3 [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Fair value liability [Roll Forward]
Carrying amount of stock warrants, beginning of period	$ 16,652	$ 12,655	$ 13,685	$ 9,763
Change in fair value	471	491	3,438	3,383
Carrying amount of stock warrants, end of period	$ 17,123	$ 13,146	$ 17,123	$ 13,146

XML

Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Non-recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in content, Loss	$ 300	$ 300	$ 564	$ 595
Nonrecurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments in content	$ 1,164	$ 778	$ 1,164	$ 778

XML

Net Loss per Common Share - Additional Information (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Warrants [Member]
Earnings Per Share Basic [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)			21.3	30.1
Stock Options And Restricted Share-Based Awards [Member]
Earnings Per Share Basic [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	2.4	1.3	2.5	0.9
Convertible Securities [Member]
Earnings Per Share Basic [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	5.9	5.9	5.9	11.2

XML

Statements of Cash Flows - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Cash paid during the period for:
Interest				$ 1,592
Income taxes			$ 11	30
Non-cash investing and financing activities:
Accretion on preferred stock	$ 193	$ 379	386	756
Conversion of preferred stock into shares of common				19,592
Exercise of AMC warrant and reduction of senior debt				2,847
Capital expenditures accrued for in accounts payable and accrued liabilities			158	400
Preferred stock dividends accrued for in accounts payable and accrued liabilities	$ 354		$ 354
AMC Credit Agreement [Member]
Non-cash investing and financing activities:
Common stock issued to AMC as payment for prior year interest expense				$ 158

XML

Commitments and Contingencies - Additional Information (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)
Marketing Related Services [Member]
Commitments And Contingencies Disclosure [Line Items]
Purchase obligation, payable to supplier	$ 3.0	$ 3.0
Purchase obligation, installment payment		$ 0.1
Purchase obligation, maturity date		Mar. 31, 2020
AMC Merger Agreement [Member]
Commitments And Contingencies Disclosure [Line Items]
Success fee provision		$ 1.2
AMC Merger Agreement [Member] | Other (expense) income, net
Commitments And Contingencies Disclosure [Line Items]
Recognized expense on purchase of common stock	$ 1.0	$ 1.1

XML

Related Party Transactions - Additional Information (Details) - USD ($)			3 Months Ended		6 Months Ended
	Apr. 02, 2018	Jan. 02, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2013
Related Party Transaction [Line Items]
Foreign currency exchange gain (losses)					$ (388,000)	$ 475,000
Dividend payments to preferred stockholders					708,000	0
AMC Credit Agreement [Member]
Related Party Transaction [Line Items]
Dividend payments to preferred stockholders	$ 400,000	$ 400,000
Interest on principal paid through stock issuance	1,200,000	1,300,000
Debt instrument principal outstanding	$ 78,000,000	$ 78,000,000
AMC Credit Agreement [Member] | Common Stock [Member]
Related Party Transaction [Line Items]
Shares issued in payment of interest	409,162	418,255
AMC Credit Agreement [Member] | Common Stock [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Related party ownership percentage on outstanding shares		10.00%
United Kingdom Subsidiary [Member]
Related Party Transaction [Line Items]
Loans to subsidiaries			$ 4,000,000		4,000,000
Australian Subsidiary [Member]
Related Party Transaction [Line Items]
Loans to subsidiaries			3,400,000		3,400,000
Agatha Christie Limited [Member]
Related Party Transaction [Line Items]
Dividends paid to parent entity			2,700,000	$ 1,200,000	3,100,000	1,200,000
Agatha Christie Limited [Member] | Distribution Rights to Three Titles [Member]
Related Party Transaction [Line Items]
Payment for advance due for distribution rights						100,000
Recognized content amortization and royalty expense			100,000	100,000	100,000	200,000
Remaining unamortized content advance			1,400,000		1,400,000
Acorn Media [Member]
Related Party Transaction [Line Items]
Foreign currency exchange gain (losses)			(400,000)	$ 200,000	(400,000)	$ 500,000
The RLJ Companies, LLC [Member]
Related Party Transaction [Line Items]
Contract obligations remaining amount							$ 3,500,000
Contract obligations made payment			500,000		1,000,000
Contract remaining obligation			$ 1,500,000		$ 1,500,000

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Subsequent Events - Additional Information (Details)						6 Months Ended
	Jul. 30, 2018 USD ($) $ / shares	Jul. 13, 2018 USD ($)	Jul. 02, 2018 USD ($) shares	Apr. 02, 2018 USD ($) shares	Jan. 02, 2018 USD ($) shares	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jul. 13, 2018 GBP (£)	Feb. 26, 2018 $ / shares	Oct. 14, 2016 USD ($)
Subsequent Event [Line Items]
Dividend payments to preferred stockholders						$ 708,000	$ 0
AMC Merger Agreement [Member]
Subsequent Event [Line Items]
Business combination, price per share | $ / shares									$ 4.25
AMC Credit Agreement [Member]
Subsequent Event [Line Items]
Dividend payments to preferred stockholders				$ 400,000	$ 400,000
Interest on principal paid through stock issuance				1,200,000	1,300,000
Debt instrument principal outstanding				$ 78,000,000	$ 78,000,000
Maximum borrowing capacity										$ 65,000,000
AMC Credit Agreement [Member] | Common Stock [Member]
Subsequent Event [Line Items]
Shares issued in payment of interest | shares				409,162	418,255
Subsequent Event [Member]
Subsequent Event [Line Items]
Dividend payments to preferred stockholders			$ 400,000
Subsequent Event [Member] | AMC Credit Agreement [Member] | Maximum [Member]
Subsequent Event [Line Items]
Ownership percentage on outstanding common stock	50.10%
Subsequent Event [Member] | AMC Merger Agreement [Member]
Subsequent Event [Line Items]
Date of merger agreement	Jul. 30, 2018
Aggregate enterprise transaction value	$ 274,000,000
Cash payable pursuant to the merger agreement	$ 65,000,000
Ownership interest in ACL	17.00%
Subsequent Event [Member] | APL [Member]
Subsequent Event [Line Items]
Maximum borrowing capacity		$ 3,100,000						£ 2,400,000
Maturity Date		Jun. 30, 2019
Debt Instrument, interest periodic payment		quarterly
Debt Instrument, interest rate		2.10%						2.10%
Subsequent Event [Member] | Digital Entertainment Holdings LLC [Member] | AMC Credit Agreement [Member]
Subsequent Event [Line Items]
Ownership percentage on outstanding common stock	30.10%
Subsequent Event [Member] | Common Stock [Member] | AMC Merger Agreement [Member]
Subsequent Event [Line Items]
Business combination, price per share | $ / shares	$ 6.25
Subsequent Event [Member] | Common Stock [Member] | Digital Entertainment Holdings LLC [Member] | AMC Credit Agreement [Member]
Subsequent Event [Line Items]
Business combination, price per share | $ / shares	$ 6.25
Ownership percentage on outstanding common stock	43.70%
Subsequent Event [Member] | Preferred Stock [Member] | AMC Merger Agreement [Member]
Subsequent Event [Line Items]
Business combination, price per share | $ / shares	$ 7.8125
Subsequent Event [Member] | Warrants [Member] | AMC Merger Agreement [Member]
Subsequent Event [Line Items]
Business combination amount in excess of exercise price per share | $ / shares	$ 6.25
Subsequent Event [Member] | AMC Credit Agreement [Member]
Subsequent Event [Line Items]
Interest on principal paid through stock issuance			1,300,000
Debt instrument principal outstanding			$ 78,000,000
Subsequent Event [Member] | AMC Credit Agreement [Member] | Common Stock [Member]
Subsequent Event [Line Items]
Shares issued in payment of interest | shares			413,709