UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal period ended: December 31, 2022
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-31810
Cinedigm Corp.
(Exact name of registrant as specified in its charter)
Delaware |
|
22-3720962 |
(State or Other Jurisdiction of |
|
(I.R.S. Employer |
|
|
|
244 Fifth Avenue, Suite M289, New York, . |
|
10001 |
(Address of principal executive offices) |
|
(Zip Code) |
(212) 206-8600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol |
|
Name of each exchange on |
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE |
|
CIDM |
|
NASDAQ CAPITAL MARKET |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
|
Accelerated filer ☐ |
|
Non-accelerated filer ☒ |
|
Smaller reporting company ☒ |
|
Emerging Growth Company ☐ |
☐ 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 Act). Yes ☐ No ☒
As of February 10, 2023, 179,092,441 shares of Class A Common Stock, $0.001 par value, were outstanding.
CINEDIGM CORP
TABLE OF CONTENTS
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Page |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets at December 31, 2022 (Unaudited) and March 31, 2022 (Audited) |
1 |
|
2 |
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3 |
|
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4 |
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6 |
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Notes to the Condensed Consolidated Financial Statements (Unaudited) |
8 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
28 |
Item 4. |
36 |
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Item 1. |
38 |
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Item 1A. |
38 |
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Item 2. |
38 |
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Item 3. |
38 |
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Item 4. |
38 |
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Item 5. |
38 |
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Item 6. |
38 |
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38 |
||
39 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CINEDIGM CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
|
|
As of |
|
|||||
|
|
December 31, |
|
|
March 31, |
|
||
|
|
(Unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
8,796 |
|
|
$ |
13,062 |
|
Accounts receivable, net of allowance of $2,780 and $2,921, respectively |
|
|
24,993 |
|
|
|
30,843 |
|
Unbilled revenue |
|
|
2,681 |
|
|
|
2,349 |
|
Employee retention tax credit |
|
|
2,475 |
|
|
|
— |
|
Prepaid and other current assets |
|
|
7,303 |
|
|
|
5,909 |
|
Total current assets |
|
|
46,248 |
|
|
|
52,163 |
|
Equity investment in Metaverse, a related party, at fair value |
|
|
5,200 |
|
|
|
7,028 |
|
Property and equipment, net |
|
|
1,695 |
|
|
|
1,980 |
|
Intangible assets, net |
|
|
18,864 |
|
|
|
20,034 |
|
Goodwill |
|
|
21,025 |
|
|
|
21,084 |
|
Other long-term assets |
|
|
1,863 |
|
|
|
2,347 |
|
Total assets |
|
$ |
94,895 |
|
|
$ |
104,636 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
$ |
40,719 |
|
|
$ |
52,025 |
|
Line of credit, including unamortized debt issuance costs of $133 and $0, respectively |
|
|
4,867 |
|
|
|
— |
|
Current portion of deferred consideration on purchase of business |
|
|
4,694 |
|
|
|
4,513 |
|
Other current liabilities |
|
|
467 |
|
|
|
454 |
|
Total current liabilities |
|
|
50,747 |
|
|
|
56,992 |
|
Deferred consideration on purchase of business – net of current portion |
|
|
5,940 |
|
|
|
6,203 |
|
Other long-term liabilities |
|
|
564 |
|
|
|
491 |
|
Total liabilities |
|
|
57,251 |
|
|
|
63,686 |
|
Stockholders’ Equity |
|
|
|
|
|
|
||
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; 7 shares issued and 7 shares outstanding at December 31, 2022 and March 31, 2022. Liquidation preference of $3,648 |
|
|
3,559 |
|
|
|
3,559 |
|
Class A Common stock, $0.001 par value; 275,000,000 shares authorized at December 31, 2022 and March 31, 2022, 180,225,330 and 176,629,435 shares issued and 178,909,479 and 175,313,584 shares outstanding at December 31, 2022 and March 31, 2022, respectively |
|
|
177 |
|
|
|
174 |
|
Additional paid-in capital |
|
|
526,402 |
|
|
|
522,601 |
|
Treasury stock, at cost; 1,315,851 shares |
|
|
(11,608 |
) |
|
|
(11,608 |
) |
Accumulated deficit |
|
|
(479,229 |
) |
|
|
(472,310 |
) |
Accumulated other comprehensive loss |
|
|
(389 |
) |
|
|
(163 |
) |
Total stockholders’ equity of Cinedigm Corp. |
|
|
38,912 |
|
|
|
42,253 |
|
Deficit attributable to noncontrolling interest |
|
|
(1,268 |
) |
|
|
(1,303 |
) |
Total equity |
|
|
37,644 |
|
|
|
40,950 |
|
Total liabilities and equity |
|
$ |
94,895 |
|
|
$ |
104,636 |
|
See accompanying Notes to Condensed Consolidated Financial Statements
1
CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenues |
|
$ |
27,882 |
|
|
$ |
14,084 |
|
|
$ |
55,478 |
|
|
$ |
39,202 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct operating |
|
|
14,411 |
|
|
|
6,459 |
|
|
|
29,859 |
|
|
|
14,423 |
|
Selling, general and administrative |
|
|
9,107 |
|
|
|
7,358 |
|
|
|
29,016 |
|
|
|
20,520 |
|
Depreciation and amortization |
|
|
924 |
|
|
|
1,031 |
|
|
|
2,908 |
|
|
|
3,663 |
|
Total operating expenses |
|
|
24,442 |
|
|
|
14,848 |
|
|
|
61,783 |
|
|
|
38,606 |
|
Operating income (loss) |
|
|
3,440 |
|
|
|
(764 |
) |
|
|
(6,305 |
) |
|
|
596 |
|
Interest expense |
|
|
(367 |
) |
|
|
(97 |
) |
|
|
(880 |
) |
|
|
(277 |
) |
Gain on forgiveness of PPP loan |
|
|
|
|
|
|
|
|
— |
|
|
|
2,178 |
|
||
Change in fair value of equity investment in Metaverse, a related party |
|
|
— |
|
|
|
453 |
|
|
|
(1,828 |
) |
|
|
1,453 |
|
Employee retention tax credit |
|
|
2,025 |
|
|
|
— |
|
|
|
2,475 |
|
|
|
— |
|
Other income (expense) |
|
|
(76 |
) |
|
|
(22 |
) |
|
|
(82 |
) |
|
|
69 |
|
Income (loss) before income taxes |
|
|
5,022 |
|
|
|
(430 |
) |
|
|
(6,620 |
) |
|
|
4,019 |
|
Income tax benefit |
|
|
— |
|
|
|
26 |
|
|
|
— |
|
|
|
576 |
|
Net income (loss) |
|
|
5,022 |
|
|
|
(404 |
) |
|
|
(6,620 |
) |
|
|
4,595 |
|
Net (income) loss attributable to noncontrolling interest |
|
|
(8 |
) |
|
|
19 |
|
|
|
(35 |
) |
|
|
23 |
|
Net income (loss) attributable to controlling interests |
|
|
5,014 |
|
|
|
(385 |
) |
|
|
(6,655 |
) |
|
|
4,618 |
|
Preferred stock dividends |
|
|
(88 |
) |
|
|
(89 |
) |
|
|
(264 |
) |
|
|
(267 |
) |
Net income (loss) attributable to common stockholders |
|
$ |
4,926 |
|
|
$ |
(474 |
) |
|
$ |
(6,919 |
) |
|
$ |
4,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per share attributable to common stockholders: |
|
|||||||||||||||
Basic |
|
$ |
0.03 |
|
|
$ |
(0.00 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.03 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
(0.00 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.03 |
|
Weighted average shares of common stock outstanding: |
|
|||||||||||||||
Basic |
|
|
178,899,605 |
|
|
|
173,167,450 |
|
|
|
177,077,803 |
|
|
|
169,413,873 |
|
Diluted |
|
|
178,899,605 |
|
|
|
173,167,450 |
|
|
|
177,077,803 |
|
|
|
173,017,364 |
|
See accompanying Notes to Condensed Consolidated Financial Statements
2
CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income (loss) |
|
|
5,022 |
|
|
$ |
(404 |
) |
|
$ |
(6,620 |
) |
|
$ |
4,595 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange translation |
|
|
88 |
|
|
|
(14 |
) |
|
|
(226 |
) |
|
|
(33 |
) |
Comprehensive income (loss) attributable to noncontrolling interest |
|
|
(8 |
) |
|
|
19 |
|
|
|
(35 |
) |
|
|
23 |
|
Comprehensive income (loss) |
|
$ |
5,102 |
|
|
$ |
(399 |
) |
|
$ |
(6,881 |
) |
|
$ |
4,585 |
|
See accompanying Notes to Condensed Consolidated Financial Statements
3
CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Nine Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net (loss) income |
|
$ |
(6,620 |
) |
|
$ |
4,595 |
|
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
2,908 |
|
|
|
3,663 |
|
Changes in fair value of equity investment in Metaverse |
|
|
1,828 |
|
|
|
(1,464 |
) |
Gain from forgiveness of PPP loan |
|
|
— |
|
|
|
(2,178 |
) |
Impairment of advances |
|
|
1,636 |
|
|
|
782 |
|
Provision (benefit) for doubtful accounts |
|
|
54 |
|
|
|
(397 |
) |
Amortization of debt issuance costs |
|
|
138 |
|
|
|
— |
|
Stock-based compensation |
|
|
3,906 |
|
|
|
3,278 |
|
Interest expense for deferred consideration & earnouts |
|
|
743 |
|
|
|
97 |
|
Non-monetary sale of content licenses |
|
|
(1,022 |
) |
|
|
— |
|
Other |
|
|
51 |
|
|
|
59 |
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
5,795 |
|
|
|
(8,164 |
) |
Unbilled revenue |
|
|
(332 |
) |
|
|
(1,449 |
) |
Prepaids and other current and long-term assets |
|
|
(2,747 |
) |
|
|
(1,320 |
) |
Employee retention tax credit |
|
|
(2,475 |
) |
|
|
— |
|
Accounts payable, accrued expenses, and other liabilities |
|
|
(11,764 |
) |
|
|
7,244 |
|
Net cash (used in) provided by operating activities |
|
|
(7,901 |
) |
|
|
4,746 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
(429 |
) |
|
|
(292 |
) |
Purchase of businesses |
|
|
— |
|
|
|
(4,750 |
) |
Sale of investment securities |
|
|
— |
|
|
|
11 |
|
Net cash used in investing activities |
|
|
(429 |
) |
|
|
(5,031 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Payments of notes payable and deferred consideration |
|
|
(665 |
) |
|
|
(7,786 |
) |
Proceeds from line of credit |
|
|
19,469 |
|
|
|
— |
|
Payments on line of credit |
|
|
(14,469 |
) |
|
|
(1,956 |
) |
Debt issuance costs |
|
|
(271 |
) |
|
|
— |
|
Issuance of common stock |
|
|
— |
|
|
|
12,378 |
|
Net cash provided by financing activities |
|
|
4,064 |
|
|
|
2,636 |
|
Net change in cash and cash equivalents |
|
|
(4,266 |
) |
|
|
2,351 |
|
Cash and cash equivalents at beginning of period |
|
|
13,062 |
|
|
|
17,849 |
|
Cash and cash equivalents at end of period |
|
$ |
8,796 |
|
|
$ |
20,200 |
|
See accompanying Notes to Condensed Consolidated Financial Statements
4
CINEDIGM CORP.
SUPPLEMENTAL CASH FLOW INFORMATION AND DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITY
(Unaudited)
(In thousands)
|
|
Nine Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash interest paid |
|
$ |
58 |
|
|
$ |
701 |
|
Income taxes paid |
|
|
— |
|
|
|
79 |
|
Noncash investing and financing activities: |
|
|
|
|
|
|
||
Accrued dividends on preferred stock |
|
|
88 |
|
|
|
89 |
|
Issuance of Class A common stock for payment of accrued preferred stock dividends |
|
|
264 |
|
|
|
267 |
|
Issuance of Class A common stock for business combination |
|
|
— |
|
|
|
4,824 |
|
Deferred consideration in purchase of business |
|
|
— |
|
|
|
1,980 |
|
Earnout consideration in purchase of a business |
|
|
— |
|
|
|
1,461 |
|
Earnout consideration paid with common shares of Company |
|
|
(238 |
) |
|
|
— |
|
Earnout consideration adjustment |
|
|
80 |
|
|
|
— |
|
Treasury shares acquired for withholding taxes |
|
|
— |
|
|
|
5 |
|
Issuance of common stock for Board of Director compensation |
|
|
3 |
|
|
|
— |
|
5
CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except share data)
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Treasury |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|
Non |
|
|
|
|
|||||||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
|
Interest |
|
|
Total |
|
||||||||||||
Balances as of March 31, 2021 (Audited) |
|
|
7 |
|
|
$ |
3,559 |
|
|
|
166,228,568 |
|
|
$ |
164 |
|
|
|
1,313,836 |
|
|
$ |
(11,603 |
) |
|
$ |
499,272 |
|
|
$ |
(474,080 |
) |
|
$ |
(68 |
) |
|
$ |
17,244 |
|
|
$ |
(1,362 |
) |
|
$ |
15,882 |
|
Foreign exchange translation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
(54 |
) |
|
|
(54 |
) |
|
|
|
|
|
(54 |
) |
||||||
Stock-based compensation |
|
|
— |
|
|
|
|
|
|
35,714 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
983 |
|
|
|
|
|
|
|
|
|
983 |
|
|
|
|
|
|
983 |
|
||||||
Issuance of common stock in connection with a business combination |
|
|
— |
|
|
|
|
|
|
1,483,129 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2,504 |
|
|
|
|
|
|
|
|
|
2,506 |
|
|
|
|
|
|
2,506 |
|
||||
Preferred stock dividends paid with common stock |
|
|
— |
|
|
|
|
|
|
53,278 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
89 |
|
|
|
(89 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
5,187 |
|
|
|
|
|
|
5,187 |
|
|
|
7 |
|
|
|
5,194 |
|
|||||
Balances as of June 30, 2021 |
|
|
7 |
|
|
$ |
3,559 |
|
|
|
167,800,689 |
|
|
$ |
166 |
|
|
|
1,313,836 |
|
|
$ |
(11,603 |
) |
|
$ |
502,848 |
|
|
$ |
(468,982 |
) |
|
$ |
(122 |
) |
|
$ |
25,866 |
|
|
$ |
(1,355 |
) |
|
$ |
24,511 |
|
Foreign exchange translation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
35 |
|
|
|
|
|
|
35 |
|
||||||
Stock-based compensation |
|
|
— |
|
|
|
|
|
|
132,630 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
946 |
|
|
|
|
|
|
|
|
|
946 |
|
|
|
|
|
|
946 |
|
||||||
Issuance of common stock in connection with business combinations |
|
|
— |
|
|
|
|
|
|
1,179,156 |
|
|
|
1 |
|
|
|
— |
|
|
|
|
|
|
2,317 |
|
|
|
|
|
|
|
|
|
2,318 |
|
|
|
|
|
|
2,318 |
|
|||||
Treasury stock in connection with taxes withheld from employees |
|
|
— |
|
|
|
|
|
|
(2,015 |
) |
|
|
|
|
|
2,015 |
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
(5 |
) |
||||||
Preferred stock dividends |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(89 |
) |
|
|
|
|
|
(89 |
) |
|
|
|
|
|
(89 |
) |
||||||
Net loss |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(184 |
) |
|
|
|
|
|
(184 |
) |
|
|
(11 |
) |
|
|
(195 |
) |
|||||
Balances as of September 30, 2021 |
|
|
7 |
|
|
$ |
3,559 |
|
|
|
169,110,460 |
|
|
$ |
167 |
|
|
|
1,315,851 |
|
|
$ |
(11,608 |
) |
|
$ |
506,111 |
|
|
$ |
(469,255 |
) |
|
$ |
(87 |
) |
|
$ |
28,887 |
|
|
$ |
(1,366 |
) |
|
$ |
27,521 |
|
Foreign exchange translation |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
|
|
(14 |
) |
|
|
|
|
|
(14 |
) |
|||||||
Stock-based compensation |
|
|
— |
|
|
|
|
|
|
147,712 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
1,349 |
|
|
|
|
|
|
|
|
|
1,349 |
|
|
|
|
|
|
1,349 |
|
||||||
Issuance of common stock in connection with equity line purchase commitment |
|
|
— |
|
|
|
|
|
|
210,084 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Preferred stock dividends |
|
|
— |
|
|
|
|
|
|
102,697 |
|
|
|
|
|
|
— |
|
|
|
|
|
178 |
|
|
|
|
|
|
|
|
|
178 |
|
|
|
|
|
|
178 |
|
|||||||
Issuance of common stock in connection with performance stock units |
|
|
— |
|
|
|
|
|
263 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Issuance of common stock in connection with equity line, net |
|
|
— |
|
|
|
|
|
|
5,300,000 |
|
|
|
7 |
|
|
|
— |
|
|
|
|
|
|
12,371 |
|
|
|
|
|
|
|
|
|
12,378 |
|
|
|
|
|
|
12,378 |
|
|||||
Preferred stock dividends accrued |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
89 |
|
|
|
(89 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(385 |
) |
|
|
|
|
|
(385 |
) |
|
|
(19 |
) |
|
|
(404 |
) |
|||||
Balances as of December 31, 2021 |
|
|
7 |
|
|
$ |
3,559 |
|
|
|
174,871,216 |
|
|
$ |
174 |
|
|
|
1,315,851 |
|
|
$ |
(11,608 |
) |
|
$ |
520,099 |
|
|
$ |
(469,729 |
) |
|
$ |
(101 |
) |
|
$ |
42,394 |
|
|
$ |
(1,385 |
) |
|
$ |
41,009 |
|
See accompanying Notes to Condensed Consolidated Financial Statements
6
CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except share data)
|
Preferred Stock |
|
|
Common Stock |
|
|
Treasury |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|
Non |
|
|
|
|
|||||||||||||||||||||
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
|
Interest |
|
|
Total |
|
||||||||||||
Balances as of March 31, 2022 (Audited) |
|
7 |
|
|
$ |
3,559 |
|
|
|
175,313,584 |
|
|
$ |
174 |
|
|
|
1,315,851 |
|
|
$ |
(11,608 |
) |
|
$ |
522,601 |
|
|
$ |
(472,310 |
) |
|
$ |
(163 |
) |
|
$ |
42,253 |
|
|
$ |
(1,303 |
) |
|
$ |
40,950 |
|
Foreign exchange translation |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
48 |
|
|
|
48 |
|
|
|
|
|
|
48 |
|
||||||
Stock-based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
980 |
|
|
|
|
|
|
|
|
|
980 |
|
|
|
|
|
|
980 |
|
||||||
Preferred stock dividends paid with common stock |
|
— |
|
|
|
|
|
|
108,024 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
|
|
88 |
|
|
|
|
|
|
88 |
|
||||||
Preferred stock dividends accrued |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(88 |
) |
|
|
|
|
|
(88 |
) |
|
|
|
|
|
(88 |
) |
||||||
Net income (loss) |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(6,005 |
) |
|
|
|
|
|
(6,005 |
) |
|
|
18 |
|
|
|
(5,987 |
) |
|||||
Balances as of June 30, 2022 |
|
7 |
|
|
$ |
3,559 |
|
|
|
175,421,608 |
|
|
$ |
174 |
|
|
|
1,315,851 |
|
|
$ |
(11,608 |
) |
|
$ |
523,669 |
|
|
$ |
(478,403 |
) |
|
$ |
(115 |
) |
|
$ |
37,276 |
|
|
$ |
(1,285 |
) |
|
$ |
35,991 |
|
Foreign exchange translation |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
(362 |
) |
|
|
(362 |
) |
|
|
|
|
|
(362 |
) |
||||||
Stock-based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
791 |
|
|
|
|
|
|
|
|
|
791 |
|
|
|
|
|
|
791 |
|
||||||
Preferred stock dividends paid with common stock |
|
— |
|
|
|
|
|
|
178,572 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
|
|
88 |
|
|
|
|
|
|
88 |
|
||||||
Issuance of common stock in connection with performance stock units and annual incentive awards, net of employee payroll taxes |
|
— |
|
|
|
|
|
|
2,066,879 |
|
|
|
2 |
|
|
|
— |
|
|
|
|
|
|
871 |
|
|
|
|
|
|
|
|
|
873 |
|
|
|
|
|
|
873 |
|
|||||
Issuance of common stock for BD Earnout commitment |
|
— |
|
|
|
|
|
|
334,037 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
238 |
|
|
|
|
|
|
|
|
|
238 |
|
|
|
|
|
|
238 |
|
||||||
Preferred stock dividends accrued |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(88 |
) |
|
|
|
|
|
(88 |
) |
|
|
|
|
|
(88 |
) |
||||||
Net income (loss) |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
(5,664 |
) |
|
|
|
|
|
(5,664 |
) |
|
|
9 |
|
|
|
(5,655 |
) |
||||
Balances as of September 30, 2022 |
|
7 |
|
|
$ |
3,559 |
|
|
|
178,001,096 |
|
|
$ |
176 |
|
|
|
1,315,851 |
|
|
$ |
(11,608 |
) |
|
$ |
525,657 |
|
|
$ |
(484,155 |
) |
|
$ |
(477 |
) |
|
$ |
33,152 |
|
|
$ |
(1,276 |
) |
|
$ |
31,876 |
|
Foreign exchange translation |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
88 |
|
|
|
88 |
|
|
|
|
|
|
88 |
|
||||||
Stock-based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
657 |
|
|
|
|
|
|
|
|
|
657 |
|
|
|
|
|
|
657 |
|
||||||
Preferred stock dividends paid with common stock |
|
— |
|
|
|
|
|
|
224,359 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
|
|
88 |
|
|
|
|
|
|
88 |
|
||||||
Issuance of common stock for Board of Director compensation |
|
— |
|
|
|
|
|
|
684,024 |
|
|
|
1 |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
1 |
|
|||||
Preferred stock dividends accrued |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(88 |
) |
|
|
|
|
|
(88 |
) |
|
|
|
|
|
(88 |
) |
||||||
Net income |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
5,014 |
|
|
|
|
|
|
5,014 |
|
|
|
8 |
|
|
|
5,022 |
|
|||||
Balances as of December 31, 2022 |
|
7 |
|
|
$ |
3,559 |
|
|
|
178,909,479 |
|
|
$ |
177 |
|
|
|
1,315,851 |
|
|
$ |
(11,608 |
) |
|
$ |
526,402 |
|
|
$ |
(479,229 |
) |
|
$ |
(389 |
) |
|
$ |
38,912 |
|
|
$ |
(1,268 |
) |
|
$ |
37,644 |
|
See accompanying Notes to Condensed Consolidated Financial Statements
7
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. NATURE OF OPERATIONS AND LIQUIDITY
Cinedigm Corp. (“Cinedigm,” the “Company,” “we,” “us,” or similar pronouns) was incorporated in Delaware on March 31, 2000. We are (i) a distributor and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of titles and episodes released across digital, physical, theatrical, home and mobile entertainment platforms (“Streaming”) and (ii) a servicer of digital cinema assets for movie screens in both North America and several international countries.
We report our financial results in two reportable segments as follows: (i) Cinema Equipment Business ("Cinema Equipment") and (ii) Content and Entertainment Business (“Content & Entertainment”). The Cinema Equipment segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North America. Our Content & Entertainment segment operates in: (i) ancillary market aggregation and distribution of entertainment content and (ii) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.
Financial Condition and Liquidity
As of December 31, 2022, the Company has an accumulated deficit of $479.2 million and negative working capital of $4.5 million. For the three and nine months ended December 31, 2022, the Company had net income (loss) attributable to common shareholders of $4.9 million and ($6.9) million, respectively. Net cash used in operating activities for the nine months ended December 31, 2022 was $7.9 million. We may continue to generate net losses for the foreseeable future.
The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate, 9.0% as of December 31, 2022. The Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion. As of December 31, 2022, $5.0 million was outstanding on the Line of Credit Facility.
We believe our cash and cash equivalent balances, and availability under our credit facility, as of December 31, 2022 will be sufficient to support our operations for at least twelve months from the filing of this report. The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying interim Condensed Consolidated Financial Statements of Cinedigm Corp. have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on July 1, 2022. These Condensed Consolidated Financial Statements are unaudited and have been prepared by the Company following the rules and regulations of the SEC.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations; however, the Company believes the disclosures are adequate to make the information presented not misleading.
8
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022. Interim results are not necessarily indicative of the results for a full year.
The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Significant items subject to such estimates and assumptions include revenue recognition, allowance for doubtful accounts, returns and recovery reserves, goodwill and intangible asset impairments, share-based compensation expense, valuation allowance for deferred income taxes and amortization of intangible assets. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On a regular basis, the Company evaluates the assumptions, judgments and estimates. Actual results may differ from these estimates.
We own an 85% interest in CON TV, LLC ("CONtv"), a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets. We evaluated the investment under the voting interest entity model and determined that the entity should be consolidated as we have a controlling financial interest in the entity through our ownership of outstanding voting shares, and that other equity holders do not have substantive voting, participating or liquidation rights. We recorded net loss attributable to noncontrolling interest in our Condensed Consolidated Statements of Operations equal to 11% of outstanding profit interest units retained by the noncontrolling interests.
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022.
Reclassifications
Certain amounts have been reclassified to conform to the current presentation.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits. We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal.
Accounts Receivable, Net
We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
Employee Retention Tax Credit
The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") provided an employee retention credit which was a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act (the "Appropriations Act") extended and expanded the availability of the employee retention credit through December 31, 2021. The Appropriations Act amended the employee retention credit to be equal to 70% of qualified wages paid to employees during the 2021 fiscal year.
9
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The Company qualified for the employee retention credit beginning in June 2020 for qualified wages through September 2021 and filed a cash refund claim during the three months ended September 30, 2022 and December 31, 2022 for $0.5 million and $2.0 million, respectively. During the three and nine months ended December 31, 2022, the Company recorded an employee retention credit totaling $2.0 million and $2.5 million, respectively, in the Employee retention tax credit line on the Company’s Condensed Consolidated Statements of Operations. As of December 31, 2022, the tax credit receivable has been included in the Employee retention tax credit line on the Company's Condensed Consolidated Balance Sheet.
Property and Equipment, Net
Property and equipment, net are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:
Computer equipment and software |
|
|
3 - 5 years |
|
Digital cinema projection systems |
|
|
10 years |
|
Machinery and equipment |
|
|
3 - 10 years |
|
Furniture and fixtures |
|
|
3 - 6 years |
|
Internal-Use Software |
|
|
5 years |
|
We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications. These capitalized costs are included in property and equipment, net and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over the useful life of the software. Post-configuration training and maintenance costs are expensed as incurred. We amortize internal-use software over its estimated useful life on a straight-line basis.
Impairment of Long-lived and Finite-lived Assets
We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. During the nine months ended December 31, 2022 and 2021, no impairment charges were recorded from operations for long-lived assets or finite-lived assets.
Intangible Assets, Net
Intangible assets are stated at cost less accumulated amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested annually for impairment or sooner if a triggering event occurs.
10
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Amortization lives of intangible assets are as follows:
Content Library |
|
|
3 – 20 years |
|
Advertiser Relationships and Channel |
|
|
3 – 13 years |
|
Customer Relationships |
|
|
5 – 13 years |
|
Software |
|
|
10 years |
|
Trademarks and Tradenames |
|
|
2 – 15 years |
|
Supplier Agreements |
|
|
2 years |
|
The Company’s intangible assets included the following (in thousands):
As of December 31, 2022 |
|
Cost Basis |
|
|
Accumulated |
|
|
Impairment |
|
|
Net |
|
||||
Content Library |
|
$ |
23,685 |
|
|
$ |
(21,038 |
) |
|
$ |
|
|
$ |
2,647 |
|
|
Advertiser Relationships and Channel |
|
|
11,104 |
|
|
|
(759 |
) |
|
|
|
|
|
10,345 |
|
|
Customer Relationships |
|
|
10,658 |
|
|
|
(7,531 |
) |
|
|
(1,968 |
) |
|
|
1,159 |
|
Software |
|
|
3,200 |
|
|
|
(480 |
) |
|
|
|
|
|
2,720 |
|
|
Trademark and Tradenames |
|
|
4,026 |
|
|
|
(2,033 |
) |
|
|
|
|
|
1,993 |
|
|
Total Intangible Assets |
|
$ |
52,673 |
|
|
$ |
(31,841 |
) |
|
$ |
(1,968 |
) |
|
$ |
18,864 |
|
As of March 31, 2022 |
|
Cost Basis |
|
|
Accumulated |
|
|
Impairment |
|
|
Net |
|
||||
Content Library |
|
$ |
23,685 |
|
|
$ |
(20,665 |
) |
|
$ |
|
|
$ |
3,020 |
|
|
Advertiser Relationships and Channel |
|
|
10,081 |
|
|
|
(161 |
) |
|
|
|
|
|
9,920 |
|
|
Customer Relationships |
|
|
10,658 |
|
|
|
(7,327 |
) |
|
|
(1,968 |
) |
|
|
1,363 |
|
Software |
|
|
3,200 |
|
|
|
(240 |
) |
|
|
|
|
|
2,960 |
|
|
Trademark and Tradenames |
|
|
4,026 |
|
|
|
(1,301 |
) |
|
|
|
|
|
2,725 |
|
|
Supplier Agreements |
|
|
11,430 |
|
|
|
(11,384 |
) |
|
|
|
|
|
46 |
|
|
Total Intangible Assets |
|
$ |
63,080 |
|
|
$ |
(41,078 |
) |
|
$ |
(1,968 |
) |
|
$ |
20,034 |
|
During the nine months ended December 31, 2022 and 2021, no impairment charge was recorded for intangible assets. During the three and nine months ended December 31, 2022, the Company had amortization expense of $0.7 million and $2.2 million, respectively. During the three and nine months ended December 31, 2021, the Company had amortization expense of $0.7 million and $2.2 million, respectively.
During the three months ended December 31, 2022, the Company entered into a non-monetary transaction for the purchase and sale of content licenses with an unrelated third-party. The fair value of the content licenses sold was determined to be $1.0 million which is included in Revenues in our Condensed Consolidated Statement of Operations for the three months ended December 31, 2022. The fair value of the content licenses purchased was determined to be $1.0 million and is recognized in Intangible Assets, Net on our Condensed Consolidated Balance Sheet as of December 31, 2022.
As of December 31, 2022, amortization expense is expected to be (in thousands):
|
|
Total |
|
|
Remainder of fiscal year 2023 |
|
$ |
1,252 |
|
2024 |
|
|
3,343 |
|
2025 |
|
|
2,137 |
|
2026 |
|
|
1,745 |
|
2027 |
|
|
1,269 |
|
Thereafter |
|
|
9,118 |
|
|
|
$ |
18,864 |
|
11
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Goodwill
Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.
Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.
The Company has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or to perform the quantitative impairment test. The Company reassessed goodwill impairment on its annual measurement date of March 31, 2022 by performing a qualitative analysis and determined that it was not more likely than not that the fair value of its reporting unit is less than its carrying amount. No goodwill impairment charge was recorded in the three and nine months ended December 31, 2022 and 2021.
Fair Value Measurements
The fair value measurement disclosures are grouped into three levels based on valuation factors:
The following tables summarize the levels of fair value measurements of our financial assets and liabilities (in thousands):
|
|
As of December 31, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity investment in Metaverse, at fair value |
|
$ |
|
|
$ |
|
|
$ |
5,200 |
|
|
$ |
5,200 |
|
||
|
|
$ |
|
|
$ |
|
|
$ |
5,200 |
|
|
$ |
5,200 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current portion of earnout consideration on purchase of a business |
|
$ |
|
|
$ |
|
|
$ |
768 |
|
|
$ |
768 |
|
||
Long-term portion of earnout consideration on purchase of a business |
|
|
|
|
|
|
|
|
676 |
|
|
|
676 |
|
||
|
|
$ |
|
|
$ |
|
|
$ |
1,444 |
|
|
$ |
1,444 |
|
12
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
|
|
As of March 31, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity investment in Metaverse, at fair value |
|
$ |
7,028 |
|
|
$ |
|
|
$ |
|
|
$ |
7,028 |
|
||
|
|
$ |
7,028 |
|
|
$ |
|
|
$ |
|
|
$ |
7,028 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current portion of earnout consideration on purchase of a business |
|
$ |
|
|
$ |
|
|
$ |
1,081 |
|
|
$ |
1,081 |
|
||
Long-term portion of earnout consideration on purchase of a business |
|
|
|
|
|
|
|
|
603 |
|
|
|
603 |
|
||
|
|
$ |
|
|
$ |
|
|
$ |
1,684 |
|
|
$ |
1,684 |
|
The Company's equity investment in A Metaverse Company ("Metaverse") is in Hong Kong dollars and was translated into US dollars as of December 31, 2022 and March 31, 2022 at an exchange rate of 7.8 Hong Kong Dollars to 1 US Dollar. The fair value of this equity investment was measured by the quoted market price of Metaverse on the Stock Exchange of Hong Kong (SEHK: 1616) as of March 31, 2022. On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange. As of December 31, 2022, Metaverse’s stock valuation is based on an independent valuation based on the market approach and is categorized as Level 3 based on unobservable inputs. The Company estimated the fair value based on the market approach based on the last known enterprise value adjusting for trends in value from comparable companies. The adjustment to fair value of this investment resulted in a loss of $1.8 million and gain of $1.5 million for the nine months ended December 31, 2022 and 2021, respectively. As the value of the investment in Metaverse is determined based on unobservable inputs, company and industry fluctuations, as well as general economic, political, regulatory and market conditions such as recessions, interest rate changes or international currency fluctuations, changes to these assumptions may have a significant impact on the fair value of our investment in Metaverse.
Our cash and cash equivalents, accounts receivable, unbilled revenue, accounts payable and accrued expenses are financial instruments and are recorded at cost in the Condensed Consolidated Balance Sheets. The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature.
Prepaid and Other Current Assets
Prepaid and other current assets consisted of the following (in thousands):
|
|
As of |
|
|||||
|
|
December 31, |
|
|
March 31, |
|
||
Advances |
|
$ |
3,244 |
|
|
$ |
2,117 |
|
Due from producers |
|
|
1,549 |
|
|
|
1,861 |
|
Other receivables |
|
|
1,134 |
|
|
|
826 |
|
Inventory |
|
|
209 |
|
|
|
116 |
|
Other prepaid expenses |
|
|
1,167 |
|
|
|
989 |
|
Total prepaid and other current assets |
|
$ |
7,303 |
|
|
$ |
5,909 |
|
Advances represent amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable. Impairments related to advances were $1.0 million and $0.4 million for the three months ended December 31, 2022 and 2021, respectively. Impairments related to advances were $1.6 million and $0.8 million for the nine months ended December 31, 2022 and 2021, respectively.
13
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following (in thousands):
|
|
As of |
|
|||||
|
|
December 31, |
|
|
March 31, |
|
||
Accounts payable |
|
$ |
17,720 |
|
|
$ |
34,177 |
|
Amounts due to producers |
|
|
15,967 |
|
|
|
10,430 |
|
Accrued compensation and benefits |
|
|
3,390 |
|
|
|
3,507 |
|
Accrued other expenses |
|
|
3,642 |
|
|
|
3,911 |
|
Total accounts payable and accrued expenses |
|
$ |
40,719 |
|
|
$ |
52,025 |
|
Revenue Recognition
Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less. We have in the past entered into arrangements in connection with activation fees due from our System deployments that had extended payment terms. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.
The following tables present the Company’s disaggregated revenue by segment and source (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cinema Equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deployment |
|
$ |
7,458 |
|
|
$ |
220 |
|
|
$ |
9,340 |
|
|
$ |
1,263 |
|
Services |
|
|
(316 |
) |
|
|
506 |
|
|
|
(88 |
) |
|
|
1,171 |
|
Digital system sales |
|
|
44 |
|
|
|
1,334 |
|
|
|
1,966 |
|
|
|
9,110 |
|
Total Cinema Equipment revenue |
|
$ |
7,186 |
|
|
$ |
2,060 |
|
|
$ |
11,218 |
|
|
$ |
11,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Content & Entertainment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Base distribution business |
|
$ |
8,121 |
|
|
$ |
3,668 |
|
|
$ |
11,145 |
|
|
$ |
6,368 |
|
OTT streaming and digital |
|
|
12,575 |
|
|
|
8,356 |
|
|
|
33,115 |
|
|
|
21,290 |
|
Total Content & Entertainment revenue |
|
$ |
20,696 |
|
|
$ |
12,024 |
|
|
$ |
44,260 |
|
|
$ |
27,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
27,882 |
|
|
$ |
14,084 |
|
|
$ |
55,478 |
|
|
$ |
39,202 |
|
Cinema Equipment Segment
Our Cinema Equipment segment consists of financing vehicles and administrators for Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).
We retain ownership of our Systems and the residual cash flows related to the Systems in Phase I Deployment after the end of the 10-year deployment payment period.
For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.
14
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The Cinema Equipment segment also provides monitoring, data collection, serial data verification and management services to this segment, as well as to exhibitors who purchase their own equipment, in order to collect Virtual Print Fees (“VPFs”) from distributors and Alternative Content Fees (“ACFs”) from alternative content providers, and to distribute those fees to theatrical exhibitors (collectively, “Services”).
VPFs are earned, net of administrative fees, pursuant to contracts with distributors, whereby amounts are payable by a distributor to Phase I Deployment and to Phase II Deployment when distributor's movies are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to us with respect to Phase I Deployment based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period the title first plays for general audience viewing in a digital projector equipped movie theatre. The Phase 1 Deployment’s and Phase 2 Deployment's performance obligations for revenue recognition are met at this time.
Phase II Deployment’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed; however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. The Company evaluated the constraining estimates related to the variable consideration and determined that it is not probable to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.
Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (i) return the Systems to us; (ii) renew their license agreement for successive one-year terms; or (iii) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the Systems and Cinedigm receives the sale proceeds. Such sales were originally contemplated as the conclusion of the digital cinema deployment plan.
The Cinema Equipment segment earns an administrative fee of approximately 5% of VPFs collected and, in addition, earns an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 Deployment. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at the time the related VPF fees are due which is at the time the movies are displayed on screens utilizing our Systems installed in movie theatres. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the distributors.
A limited number of systems from our Phase I deployment remain eligible for VPFs from certain distributors where Phase I exhibitors have renewed their term on an annual basis. We continue to pursue system sales for these remaining exhibitors. Our Phase II deployment currently consists of a limited number of exhibitors who purchased their own systems and have not yet reached recoupment or the end of their contractual term. We continue to administer VPFs for these limited systems from certain distributors.
During the three and nine months ended December 31, 2022, $7.4 million and $9.1 million of revenue was recognized that was included in the accounts payable balance as constrained variable consideration at the beginning of the year. The Company recognized the revenue once the uncertainty associated with the variable consideration was resolved. As of December 31, 2022, approximately $1.0 million remains on our balance sheet in accounts payable as constrained variable consideration.
15
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Content & Entertainment Segment
Content & Entertainment segment earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand (“VOD” or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”) on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the content is available for subscription on the digital platform (the Company’s digital content is considered functional IP), at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation.
Revenue from the sale of physical goods is recognized after deducting reserves for sales returns and other allowances. Reserves for potential sales returns of physical goods and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.
The Content & Entertainment segment also has contracts for the theatrical distribution of third-party feature movies and alternative content. The Content & Entertainment segment’s distribution fee revenue participation in box office receipts are recognized at the time a feature movie and alternative content are viewed. The Content & Entertainment segment has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third-party feature movie's or alternative content’s theatrical release date.
The Company follows the five-step model established by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), Revenue from contracts with customers ("ASC 606") when preparing its assessment of revenue recognition.
Principal Agent Considerations
Revenue earned by our Content & Entertainment segment from the delivery of digital content and physical goods may be recognized gross or net depending on the terms of the arrangement. We determine whether revenue should be reported on a gross or net basis based on each revenue stream. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:
Shipping and Handling
Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in direct operating expenses because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.
Credit Losses
We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
16
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Our Content & Entertainment segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances is variable consideration as part of the transaction price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.
During the three and nine months ended December 31, 2022 and 2021, we did not recognize any credit losses or reversals of previously recorded provisions, and did not have any write-offs charged against the allowance.
Contract Liabilities
We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.
Deferred revenue pertaining to our Content & Entertainment segment includes amounts related to the sale of DVDs with future release dates.
Deferred revenue relating to our Cinema & Equipment segment pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms.
The ending deferred revenue balance, including current and non-current balances as of March 31, 2022 and December 31, 2022 was $0.2 million and $0.4 million, respectively. For the three and nine months ended December 31, 2022, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.
Participations and royalties payable
When we use third-parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.
Concentrations
For the three months ended December 31, 2022, Iconic, Distribution Solutions, a division of Alliance Entertainment, Amazon.com, Inc., and Tubi represented 35%, 16%, 14% and 5%, respectively, of Content & Entertainment segment revenues, and approximately 16%, 7%, 14% and 6%, respectively, of our consolidated revenues.
For the nine months ended December 31, 2022, Iconic, Distribution Solutions, a division of Alliance Entertainment, Amazon.com, Inc., and Tubi, represented 27%, 19%, 25% and 10% respectively, of Content & Entertainment segment revenues, and approximately 8%, 5%, 11% and 5%, respectively, of our consolidated revenues.
For the three months ended December 31, 2021, Amazon.com, Inc., Distribution Solutions, a division of Alliance Entertainment and Tubi, represented 15%, 11% and 7%, respectively, of Content & Entertainment segment revenues and approximately 13%, 9% and 6%, respectively, of our consolidated revenues.
17
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
For the nine months ended December 31, 2021, Amazon.com, Inc. Distribution Solutions, a division of Alliance Entertainment and Roku, Inc., represented 24%, 9% and 10%, respectively, of Content & Entertainment segment revenues and approximately 17%, 6% and 7%, respectively, of our consolidated revenues.
Direct Operating Costs
Direct operating costs consist of cost of revenue, fulfillment expenses, shipping costs, property taxes and insurance on systems, royalty expenses, impairments of advances and marketing and direct personnel costs.
Stock-based Compensation
The Company issues stock-based awards to employees and non-employees, generally in the form of restricted stock, restricted stock units, stock appreciation rights ("SARs") and performance stock units ("PSUs"). The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) based on their fair values. The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair values of options and SARs are calculated as of the date of grant using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility, risk-free rate and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors. Forfeitures are recognized as they occur.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.
Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized. The Company is primarily subject to income taxes in the United States.
The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions as of December 31, 2022.
18
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Earnings per Share
Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include stock options and warrants outstanding during the period, using the treasury stock method. Potentially dilutive common shares are excluded from the computations of diluted income (loss) per share if their effect would be anti-dilutive. A net loss available to common stockholders causes all potentially dilutive securities to be anti-dilutive and are not included.
Basic and diluted net income (loss) per share are computed as follows (in thousands, except share and per share data):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Basic net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to common stockholders |
|
$ |
4,926 |
|
|
$ |
(474 |
) |
|
$ |
(6,919 |
) |
|
|
4,351 |
|
Shares used in basic computation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares of common stock outstanding |
|
|
178,899,605 |
|
|
|
173,167,450 |
|
|
|
177,077,803 |
|
|
|
169,413,873 |
|
Basic net income (loss) per share |
|
$ |
0.03 |
|
|
$ |
(0.00 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shares used in diluted computation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares of common stock outstanding |
|
|
178,899,605 |
|
|
|
173,167,450 |
|
|
|
177,077,803 |
|
|
|
169,413,873 |
|
Stock options and SARs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,603,491 |
|
Weighted-average number of shares |
|
|
178,899,605 |
|
|
|
173,167,450 |
|
|
|
177,077,803 |
|
|
|
173,017,364 |
|
Diluted net income (loss) per share |
|
$ |
0.03 |
|
|
$ |
(0.00 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.03 |
|
The following table summarizes the potential shares of common stock excluded from the diluted calculation (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||
SARs |
|
|
|
|
13,471,351 |
|
|
|
|
|
12,787,403 |
|
Stock options |
|
|
|
|
12,500 |
|
|
|
|
|
12,500 |
|
|
|
|
|
|
13,483,851 |
|
|
|
|
|
12,799,903 |
|
For the three and nine months ended December 31, 2021, 12,088,473 and 8,484,982, respectively, potentially dilutive shares have been excluded from the diluted loss per share as their impact would have been antidilutive.
Recently Issued Accounting Pronouncements
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The amendments in this ASU provide temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The ASU primarily includes relief related to contract modifications and hedging relationships, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity. This guidance is effective immediately and the amendments were originally to be applied prospectively through December 31, 2022. However, the FASB issued ASU 2022-06, deferring the sunset date to December 31, 2024. The adoption of this ASU is not expected to have a material impact on the Company's Condensed Consolidated Financial Statements.
19
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the guidance on ASC 815 on fair value hedge accounting of interest rate risk for portfolios and financial assets. Among other things, the amended guidance establishes the "last-of-layer" method for making the fair value hedge accounting for these portfolios more accessible and renames that method the "portfolio layer" method. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our Condensed Consolidated Financial Statements.
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326). The amendments in this ASU eliminate the guidance on troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulties. The ASU also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our Condensed Consolidated Financial Statements.
3. OTHER INTERESTS
Investment in CDF2 Holdings
We indirectly own 100% of the common equity of CDF2 Holdings, LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology. CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital technology by providing financing, equipment, installation and related ongoing services.
CDF2 Holdings is a Variable Interest Entity (“VIE”), as defined in ASC Topic 810 (“ASC 810”), Consolidation. ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE.
As of December 31, 2022 and March 31, 2022, our maximum exposure to loss, as it relates to the non-consolidated CDF2 Holdings entity, represents accounts receivable for service fees under a master service agreement with CDF2 Holdings. Such accounts receivable was $2.1 million and $0.8 million as of December 31, 2022 and March 31, 2022, respectively, which are included in accounts receivable, net on the accompanying Condensed Consolidated Balance Sheets.
The accompanying Condensed Consolidated Statements of Operations include $0.1 million and $0.2 million of digital cinema servicing revenue from CDF2 Holdings for the three months ended December 31, 2022 and 2021, respectively. The accompanying Condensed Consolidated Statements of Operations include $0.2 million and $0.5 million of digital cinema servicing revenue from CDF2 Holdings for the nine months ended December 31, 2022 and 2021, respectively.
Total Stockholders’ Deficit of CDF2 Holdings at December 31, 2022 and March 31, 2022 was $59.2 million and $55.6 million, respectively. We have no obligation to fund the operating loss or the stockholders’ deficit beyond our initial investment of $2.0 million and, accordingly, our investment in CDF2 Holdings as of December 31, 2022 and March 31, 2022 is carried at $0.
Investment in Roundtable
On March 15, 2022, the Company entered into a stock purchase agreement with Roundtable Entertainment Holdings, Inc. (“Roundtable”) pursuant to which the Company purchased 500 shares of Roundtable Series A Preferred Stock and warrants to purchase 100 shares of Roundtable Common Stock (together, the “Roundtable Securities”). The Company funded the purchase of the Roundtable Securities by issuing 316,937 shares of Common Stock to Roundtable. The Company recorded $0.2 million for the purchase of the Securities which is included in other long-term assets on the Condensed Consolidated Balance Sheets. The Roundtable investment was accounted for using the cost method and is included within other long-term assets.
20
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
4. STOCKHOLDERS’ EQUITY
COMMON STOCK
Authorized Common Stock
As of December 31, 2022, the number of shares of Common Stock authorized for issuance was 275,000,000 shares.
During the three months ended December 31, 2022, the Company issued 908,383 shares of Common Stock. This is comprised of 224,359 shares in payment of preferred stock dividends and 684,024 restricted shares issued in connection with Board of Director compensation.
During the nine months ended December 31, 2022, the Company issued 3,595,895 shares of Common Stock. This is comprised of 510,955 shares in payment of preferred stock dividends, 2,750,903 shares issued on August 18, 2022 in connection with the vesting of grants pursuant to the 2017 Equity Incentive Plan, and 334,037 shares issued in payment of the Bloody Disgusting earnout commitment.
During the nine months ended December 31, 2021, we issued 8,642,648 shares of Common Stock which consist of the sale of shares of our Class A common stock, issuance of Common Stock for business combination, the issuances of Common Stock in payment of preferred stock dividends and in payment of Board of Director retainer fees.
PREFERRED STOCK
Cumulative dividends in arrears on preferred stock were $0.1 million as of December 31, 2022 and 2021. In May, June and November 2022, we paid preferred stock dividends in arrears in the form of 510,955 shares of Class A Common Stock.
TREASURY STOCK
We have treasury stock, at cost, consisting of 1,315,851 shares of Common Stock at December 31, 2022 and March 31, 2022.
EQUITY INCENTIVE PLANS
Stock Based Compensation Awards
Awards issued under our 2000 Equity Incentive Plan (the “2000 Plan”) may be in any of the following forms (or a combination thereof) (i) stock option awards; (ii) SARs; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan provides for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Common Stock on the date of grant. ISOs granted to shareholders having more than 10% of the total combined voting power of the Company must have exercise prices of at least 110% of the fair market value of our Common Stock on the date of grant. ISOs and non-statutory stock options granted under the 2000 Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options are set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the initial equity investment in Cinedigm by Bison, as a result of which there was a change of control of the Company, all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable.
In connection with the grants of stock options and shares of restricted stock under the 2000 Plan, we and the participants have executed stock option agreements and notices of restricted stock awards setting forth the terms of the grants. The 2000 Plan provided for the issuance of up to 2,380,000 shares of Common Stock to employees, outside directors and consultants.
21
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Options outstanding and exercisable under the 2000 Plan are as follows:
|
|
As of December 31, 2022: |
|
|||||||||||||
Range of Prices |
|
Options |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
$1.16 - $7.40 |
|
|
5,000 |
|
|
|
2.50 |
|
|
$ |
7.40 |
|
|
$ |
— |
|
$13.70 - $24.40 |
|
|
207,037 |
|
|
|
0.78 |
|
|
|
14.63 |
|
|
|
— |
|
|
|
|
212,037 |
|
|
|
0.82 |
|
|
$ |
14.46 |
|
|
$ |
— |
|
|
|
As of March 31, 2022: |
|
|||||||||||||
Range of Prices |
|
Options |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
$7.40 |
|
|
5,000 |
|
|
|
3.25 |
|
|
$ |
7.40 |
|
|
$ |
— |
|
$14.00 - $24.40 |
|
|
212,337 |
|
|
|
1.50 |
|
|
|
14.65 |
|
|
|
— |
|
|
|
|
217,337 |
|
|
|
1.54 |
|
|
$ |
14.49 |
|
|
$ |
— |
|
In August 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan). The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provides for the issuance of up to 18,098,270 shares of Common Stock, in the form of various awards, including stock options, SARs, restricted stock, restricted stock units, PSUs and cash awards.
SARs outstanding under the 2017 Plan are as follows:
|
|
As of December 31, 2022: |
|
|||||||||||||
Range of Prices |
|
SARs Outstanding |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
$0.33 - $0.74 |
|
|
8,650,000 |
|
|
|
8.61 |
|
|
$ |
0.56 |
|
|
$ |
— |
|
$1.16 - $1.47 |
|
|
2,128,277 |
|
|
|
6.55 |
|
|
|
1.39 |
|
|
|
— |
|
$1.71 - $2.10 |
|
|
2,237,493 |
|
|
|
8.36 |
|
|
|
1.92 |
|
|
|
— |
|
$2.23 - $2.56 |
|
|
455,583 |
|
|
|
8.81 |
|
|
|
2.28 |
|
|
|
— |
|
|
|
|
13,471,353 |
|
|
|
|
|
|
|
|
$ |
— |
|
|
|
As of March 31, 2022: |
|
|||||||||||||
Range of Prices |
|
SARs Outstanding |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
$0.54 - $0.74 |
|
|
5,550,000 |
|
|
|
8.74 |
|
|
$ |
0.62 |
|
|
$ |
1,208 |
|
$1.16 - $1.47 |
|
|
2,283,610 |
|
|
|
7.90 |
|
|
|
1.37 |
|
|
|
— |
|
$1.71 - $2.10 |
|
|
2,455,738 |
|
|
|
8.91 |
|
|
|
1.97 |
|
|
|
— |
|
$2.23 - $2.56 |
|
|
604,250 |
|
|
|
9.60 |
|
|
|
2.32 |
|
|
|
— |
|
|
|
|
10,893,598 |
|
|
|
|
|
|
|
|
$ |
1,208 |
|
An analysis of all SARs exercisable under the 2017 Plan as of December 31, 2022 is presented below:
SARs Exercisable |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
|
5,448,345 |
|
|
|
7.75 |
|
|
$ |
1.13 |
|
|
$ |
|
22
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Total SARs outstanding are as follows:
|
|
Nine Months Ended December 31, 2022 |
|
|
SARs Outstanding - March 31, 2022 |
|
|
10,893,598 |
|
Issued |
|
|
3,100,000 |
|
Forfeited |
|
|
(522,245 |
) |
Total SARs Outstanding - December 31, 2022 |
|
|
13,471,353 |
|
The following weighted average assumptions were used to estimate the fair value of SARs granted as follows:
|
|
Nine Months Ended December 31, 2022 |
|
|
Expected dividend yield |
|
|
— |
|
Expected equity volatility |
|
|
111.89 |
% |
Expected term (years) |
|
|
6.50 |
|
Risk-free interest rate |
|
|
4.49 |
% |
Exercise price |
|
$ |
0.49 |
|
Market price per share |
|
$ |
0.49 |
|
Weighted average fair value per SAR |
|
$ |
0.43 |
|
The risk-free rates are based on the implied yield available on U.S. Treasury constant maturities with remaining terms equivalent to the respective expected terms of the options.
In addition, the Company has granted PSU awards under the 2017 Plan to employees. These awards vest upon certain performance goals being achieved as of March 31, 2022 and 2023 and can be settled in cash or equity upon vesting. During the three and nine months ended December 31, 2022, the Company issued 482,628 shares of common stock, net of 199,498 shares withheld to pay taxes, related to the vesting of 682,126 of PSU awards. As of December 31, 2022, there were 696,280 of PSU awards outstanding that vest as of March 31, 2023 subject to achieving certain performance goals. No additional PSU awards were granted during the three and nine months ended December 31, 2022. During the nine months ended December 31, 2022, 482,628 shares were issued for vested awards.
Employee and director stock-based compensation expense related to our stock-based awards was as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Selling, general and administrative |
|
$ |
708 |
|
|
$ |
1,349 |
|
|
$ |
3,906 |
|
|
$ |
3,278 |
|
There was $0.1 million of stock-based compensation expense for the three months ended December 31, 2022 and 2021, respectively, related to the Board. There was $0.3 million and $0.3 million of stock-based compensation for the nine months ended December 31, 2022 and 2021, respectively, related to Board of Directors compensation. During the nine months ended December 31, 2022, the Company issued 684,024 restricted shares to non-employee directors.
Options Granted Outside Cinedigm's Equity Incentive Plan
As of March 31, 2022, there were 12,500 options and 600,000 SARs granted to employees outside of Cinedigm's Equity Incentive Plan. During the three months ended December 31, 2022,100,000 SARs were granted as an inducement to a new employee.
23
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. LINE OF CREDIT FACILITY
On September 15, 2022, the Company entered into a Loan, Guaranty, and Security Agreement with EWB. The agreement provided for a Line of Credit Facility of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate, 9.0% as of December 31, 2022. The Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion. As of December 31, 2022, $5.0 million was outstanding on the Line of Credit Facility. Under the Line of Credit Facility, the Company is subject to certain financial and nonfinancial covenants including terms which require the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis. During the three and nine months ended December 31, 2022 the Company had interest expense of $0.1 million related to the Line of Credit Facility.
6. SEGMENT REPORTING
We operate in two reportable segments: Cinema Equipment and Content & Entertainment. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our Chief Operating Decision Maker ("CODM") to evaluate performance, which is generally the segment’s operating income (loss) before depreciation and amortization.
24
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Operations of: |
|
Products and services provided: |
Cinema Equipment |
|
Financing vehicles and administrators for 343 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 54 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”).
We retain ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements. For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.
Provides monitoring, collection, verification and management services as well as to exhibitors who purchase their own equipment, and also collects and disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”). |
Content & Entertainment |
|
Leading independent streaming company of content and channels. We collaborate with producers and other content owners to market, source, curate and distribute independent content to targeted and under-served audiences in theatres and homes, and via mobile and emerging platforms. |
The following tables present certain financial information related to our reportable segments and Corporate (in thousands):
|
|
As of December 31, 2022 |
|
|||||||||||||
|
|
Intangible |
|
|
Goodwill |
|
|
Total |
|
|
Line |
|
||||
Cinema Equipment |
|
$ |
|
|
$ |
|
|
$ |
7,977 |
|
|
$ |
|
|||
Content & Entertainment |
|
|
18,638 |
|
|
|
21,025 |
|
|
|
77,118 |
|
|
|
|
|
Corporate |
|
|
226 |
|
|
|
|
|
|
9,800 |
|
|
|
4,867 |
|
|
Total |
|
$ |
18,864 |
|
|
$ |
21,025 |
|
|
$ |
94,895 |
|
|
$ |
4,867 |
|
|
|
As of March 31, 2022 |
|
|||||||||||||
|
|
Intangible |
|
|
Goodwill |
|
|
Total |
|
|
Line |
|
||||
Cinema Equipment |
|
$ |
|
|
$ |
|
|
$ |
24,445 |
|
|
$ |
|
|||
Content & Entertainment |
|
|
19,946 |
|
|
|
21,084 |
|
|
|
68,873 |
|
|
|
|
|
Corporate |
|
|
88 |
|
|
|
|
|
|
11,318 |
|
|
|
|
||
Total |
|
$ |
20,034 |
|
|
$ |
21,084 |
|
|
$ |
104,636 |
|
|
$ |
|
|
|
Condensed Consolidated Statement of Operations |
|
|||||||||||||
|
|
Three Months Ended December 31, 2022 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues |
|
$ |
7,186 |
|
|
$ |
20,696 |
|
|
$ |
|
|
$ |
27,882 |
|
|
Direct operating |
|
|
89 |
|
|
|
14,322 |
|
|
|
|
|
|
14,411 |
|
|
Selling, general and administrative |
|
|
912 |
|
|
|
3,794 |
|
|
|
4,401 |
|
|
|
9,107 |
|
Allocation of corporate overhead |
|
|
88 |
|
|
|
2,407 |
|
|
|
(2,495 |
) |
|
|
— |
|
Depreciation and amortization |
|
|
82 |
|
|
|
734 |
|
|
|
108 |
|
|
|
924 |
|
Total operating expenses |
|
|
1,171 |
|
|
|
21,257 |
|
|
|
2,014 |
|
|
|
24,442 |
|
Operating income (loss) |
|
$ |
6,015 |
|
|
$ |
(561 |
) |
|
$ |
(2,014 |
) |
|
$ |
3,440 |
|
25
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows (in thousands):
|
|
Three Months Ended December 31, 2022 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Direct operating |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
708 |
|
|
|
708 |
|
||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
708 |
|
|
$ |
708 |
|
|
|
Condensed Consolidated Statement of Operations |
|
|||||||||||||
|
|
Three Months Ended December 31, 2021 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues |
|
$ |
2,060 |
|
|
$ |
12,024 |
|
|
$ |
|
|
$ |
14,084 |
|
|
Direct operating |
|
|
139 |
|
|
|
6,320 |
|
|
|
|
|
|
6,459 |
|
|
Selling, general and administrative |
|
|
99 |
|
|
|
3,720 |
|
|
|
3,539 |
|
|
|
7,358 |
|
Allocation of corporate overhead |
|
|
143 |
|
|
|
964 |
|
|
|
(1,107 |
) |
|
|
|
|
Depreciation and amortization |
|
|
196 |
|
|
|
831 |
|
|
|
4 |
|
|
|
1,031 |
|
Total operating expenses |
|
|
577 |
|
|
|
11,835 |
|
|
|
2,436 |
|
|
|
14,848 |
|
Operating income (loss) |
|
$ |
1,483 |
|
|
$ |
189 |
|
|
$ |
(2,436 |
) |
|
$ |
(764 |
) |
The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows (in thousands):
|
|
Three Months Ended December 31, 2021 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Direct operating |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative |
|
|
|
|
|
552 |
|
|
|
797 |
|
|
|
1,349 |
|
|
Total stock-based compensation |
|
$ |
|
|
$ |
552 |
|
|
$ |
797 |
|
|
$ |
1,349 |
|
|
|
Condensed Consolidated Statement of Operations |
|
|||||||||||||
|
|
Nine Months Ended December 31, 2022 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues |
|
$ |
11,218 |
|
|
$ |
44,260 |
|
|
$ |
|
|
$ |
55,478 |
|
|
Direct operating |
|
|
359 |
|
|
|
29,500 |
|
|
|
|
|
|
29,859 |
|
|
Selling, general and administrative |
|
|
2,553 |
|
|
|
11,452 |
|
|
|
15,011 |
|
|
|
29,016 |
|
Allocation of corporate overhead |
|
|
284 |
|
|
|
7,651 |
|
|
|
(7,935 |
) |
|
|
— |
|
Depreciation and amortization |
|
|
303 |
|
|
|
2,282 |
|
|
|
323 |
|
|
|
2,908 |
|
Total operating expenses |
|
|
3,499 |
|
|
|
50,885 |
|
|
|
7,399 |
|
|
|
61,783 |
|
Operating income (loss) |
|
$ |
7,719 |
|
|
$ |
(6,625 |
) |
|
$ |
(7,399 |
) |
|
$ |
(6,305 |
) |
26
CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows (in thousands):
|
|
Nine Months Ended December 31, 2022 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Direct operating |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
3,906 |
|
|
|
3,906 |
|
||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
3,906 |
|
|
$ |
3,906 |
|
|
|
Condensed Consolidated Statement of Operations |
|
|||||||||||||
|
|
Nine Months Ended December 31, 2021 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues |
|
$ |
11,544 |
|
|
$ |
27,658 |
|
|
$ |
|
|
$ |
39,202 |
|
|
Direct operating |
|
|
560 |
|
|
|
13,863 |
|
|
|
|
|
|
14,423 |
|
|
Selling, general and administrative |
|
|
856 |
|
|
|
10,081 |
|
|
|
9,583 |
|
|
|
20,520 |
|
Allocation of corporate overhead |
|
|
412 |
|
|
|
2,763 |
|
|
|
(3,175 |
) |
|
|
|
|
Depreciation and amortization |
|
|
1,001 |
|
|
|
2,658 |
|
|
|
4 |
|
|
|
3,663 |
|
Total operating expenses |
|
|
2,829 |
|
|
|
29,365 |
|
|
|
6,412 |
|
|
|
38,606 |
|
Operating income (loss) |
|
$ |
8,715 |
|
|
$ |
(1,707 |
) |
|
$ |
(6,412 |
) |
|
$ |
596 |
|
The following employee and director stock-based compensation expense related to our stock-based awards is included in the above amounts as follows (in thousands):
|
|
Nine Months Ended December 31, 2021 |
|
|||||||||||||
|
|
Cinema |
|
|
Content & Entertainment |
|
|
Corporate |
|
|
Consolidated |
|
||||
Direct operating |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative |
|
|
|
|
|
1,063 |
|
|
|
2,215 |
|
|
|
3,278 |
|
|
Total stock-based compensation |
|
$ |
|
|
$ |
1,063 |
|
|
$ |
2,215 |
|
|
$ |
3,278 |
|
7. INCOME TAXES
We calculate income tax expense upon an annual effective tax rate forecast, including estimates and assumptions. We recorded an income tax benefit (expense) of $0.0 million for the three and nine months ended December 31, 2022. We recorded an income tax benefit of approximately $0.0 million and $0.6 million for the three and nine months ended December 31, 2021, respectively. We have not recorded tax benefits on our loss before income taxes because we have provided for a full valuation allowance that offsets potential deferred tax assets resulting from net operating loss carry forwards, reflecting our inability to use such loss carry forwards.
Our effective tax rate for the three months ended December 31, 2022 and 2021 was 0% and 4%, respectively. Our effective tax rate for the nine months ended December 31, 2022 and 2021 was 0% and (14%), respectively.
27
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our historical Condensed Consolidated Financial Statements and the related notes included elsewhere in this report.
This report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,” and similar words. Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
OVERVIEW
Since our inception, we have played a significant role in the digital distribution revolution that continues to transform the media landscape. In addition to our pioneering role in transitioning approximately 12,000 movie screens from traditional analog film prints to digital distribution, we have become a leading distributor of independent content, both through organic growth and acquisitions. We distribute products for major brands such as Hallmark, Televisa, ITV, Nelvana, ZDF, Konami, NFL and Scholastic, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital content producers. We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, Tubi and most video-on-demand (“VOD”) and free ad-supported television (“FAST”) streaming platforms, as well as (ii) physical goods, including DVD and Blu-ray Discs.
We report our financial results in two reportable segments as follows: (i) Cinema Equipment Business ("Cinema Equipment") and (ii) Content and Entertainment Business (“Content & Entertainment”). The Cinema Equipment segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout North America. It also provides fee-based support to over 465 movie screens as well as directly to exhibitors and other third-party customers in the form of monitoring, billing, collection and verification services. Our Content & Entertainment segment operates in: (i) ancillary market aggregation and distribution of entertainment content and (ii) branded and curated over-the-top (“OTT”) digital network business providing entertainment channels and applications.
Beginning in December 2015, certain of our cinema equipment began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, Virtual Print Fee (“VPF”) revenues ceased to be recognized on such Systems, related to such distributors. Furthermore, because the Phase I Deployment installation period ended in November 2007, a majority of the VPF revenue associated with the Phase I Deployment Systems has ended. The reduction in VPF revenue on Cinema Equipment systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017.
Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time they have the option to: (i) return the Systems to us; (ii) renew their license agreement for successive one-year terms; or (iii) purchase the Systems from us at fair market value. As permitted by these agreements, we typically pursue the sale of the Systems to such exhibitors. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan.
We are structured so that our Cinema Equipment segment operates independently from our Content & Entertainment segment.
28
Financial Condition and Liquidity
As of December 31, 2022, the Company has an accumulated deficit of $479.2 million and negative working capital of $4.5 million. For the three and nine months ended December 31, 2022, the Company had net income (loss) attributable to common shareholders of $4.9 million and ($6.9) million, respectively. Net cash used in operating activities for the nine months ended December 31, 2022 was $7.9 million. We may continue to generate net losses for the foreseeable future.
The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate. The Line of Credit Facility expires on September 15, 2023 with a one-year extension available at EWB’s discretion. As of December 31, 2022, $5.0 million was outstanding on the Line of Credit Facility. Under the Line of Credit Facility, the Company is subject to certain financial and nonfinancial covenants including terms which require the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis.
We believe our cash and cash equivalent balances, and availability under our credit facility, as of December 31, 2022 will be sufficient to support our operations for at least twelve months from the filing of this report. The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.
Critical Accounting Estimates
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our Condensed Consolidated Financial Statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 2 – Summary of Significant Accounting Policies, of the Notes to the Condensed Consolidated Financial Statements, included in Item 1, Condensed Consolidated Financial Statements (Unaudited), of this Quarterly Report on Form 10-Q. Management believes that fair value estimates, revenue recognition, asset acquisitions and business combinations are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.
Results of Operations for the Three Months Ended December 31, 2022 and 2021 (in thousands):
Revenues
|
|
For the Three Months Ended December 31, |
|
|
Change Period over Period |
|
||||||||||||||||||
|
|
2022 |
|
|
% of Revenue |
|
|
2021 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
||||||
Content & Entertainment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Streaming and Digital |
|
$ |
12,576 |
|
|
|
45 |
% |
|
$ |
8,357 |
|
|
|
59 |
% |
|
$ |
4,219 |
|
|
|
50 |
% |
Base Distribution |
|
|
8,120 |
|
|
|
29 |
% |
|
|
3,667 |
|
|
|
26 |
% |
|
|
4,453 |
|
|
|
121 |
% |
Cinema Equipment |
|
|
7,186 |
|
|
|
26 |
% |
|
|
2,060 |
|
|
|
15 |
% |
|
|
5,126 |
|
|
|
249 |
% |
|
|
$ |
27,882 |
|
|
|
100 |
% |
|
$ |
14,084 |
|
|
|
100 |
% |
|
$ |
13,798 |
|
|
|
98 |
% |
29
Streaming and Digital experienced 79% growth in “FAST” and TV-VOD revenue due to the addition of six new streaming channels related to the Asian Media Rights, LLC d/b/a Digital Media Rights ("DMR") business acquisition and five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex. Additionally, Subscription revenue grew 38% primarily due to the Screambox platform performance driven by strong content acquisition strategies driving increasing subscriptions and the aforementioned DMR business acquisition. New releases such as Terrifier 2, MK Ultra, Chesapeake Shores, and continued success of Demon Slayer, Highlander and Short Circuit added to overall performance.
Revenue in Base Distribution increased by 121% for the three months ended December 31, 2022 compared to the three months ended December 31, 2021. The increase is driven by significant growth in box office theatrical performance bolstered by the Terrifier 2 release during the three months ended December 31, 2022.
Revenues generated by the Cinema Equipment business increased as a result of an increase in Phase II variable consideration of $7.4 million during the period offset by lower system revenue and eligible VPF systems. Total system revenue recognized was ($0.3) million and $1.3 million, during the three months ended December 31, 2022 and 2021, respectively. Blockbuster content released during the period ending December 31, 2022 was consistent with Studio output from the prior period, however VPF eligible theatres decreased significantly for the same period last year.
Direct Operating Expenses
|
|
For the Three Months Ended December 31, |
|
|
Change Period over Period |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
Content & Entertainment |
|
$ |
14,322 |
|
|
$ |
6,320 |
|
|
$ |
8,002 |
|
|
|
127 |
% |
Cinema Equipment |
|
|
89 |
|
|
|
139 |
|
|
|
(50 |
) |
|
|
36 |
% |
|
|
$ |
14,411 |
|
|
$ |
6,459 |
|
|
$ |
7,952 |
|
|
|
123 |
% |
The increase in direct operating expenses for the three months ended December 31, 2022 for the Content & Entertainment segment compared to the prior year was primarily due to $6.6 million higher content and licensing costs including royalties and distribution expenses related to the continued growth in revenue noted above, coupled with a $1.2 million increase related to DVD manufacturing and fulfillment.
Selling, General and Administrative Expenses
|
|
For the Three Months Ended December 31, |
|
|
Change Period over Period |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
Compensation expense |
|
$ |
5,135 |
|
|
$ |
3,881 |
|
|
$ |
1,254 |
|
|
|
32 |
% |
Public company expenses |
|
|
1,780 |
|
|
|
1,560 |
|
|
|
220 |
|
|
|
14 |
% |
Share-based compensation |
|
|
709 |
|
|
|
1,349 |
|
|
|
(640 |
) |
|
|
(47 |
)% |
Insurance expense |
|
|
625 |
|
|
|
391 |
|
|
|
234 |
|
|
|
60 |
% |
Other operating expenses |
|
|
858 |
|
|
|
177 |
|
|
|
681 |
|
|
|
385 |
% |
|
|
$ |
9,107 |
|
|
$ |
7,358 |
|
|
$ |
1,749 |
|
|
|
24 |
% |
Selling, general and administrative expenses for the three months ended December 31, 2022 increased by $1.7 million primarily due to a $1.3 million increase in compensation expense primarily from the acquisition of DMR partially offset by a reduction in payroll taxes in the prior year as a result of the CARES Act and $0.7 million increase in other operating expenses primarily from rent, direct marketing and subscriptions, offset by $0.6 million decrease related to stock-based compensation to management and employees.
Public company expenses include accounting, legal, audit, investor relations and other related public company costs.
30
Depreciation and Amortization Expense
|
|
For the Three Months Ended December 31, |
|
|
Change Period over Period |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
Amortization of Intangible Assets |
|
$ |
713 |
|
|
$ |
695 |
|
|
$ |
18 |
|
|
|
3 |
% |
Depreciation of Property and Equipment |
|
|
211 |
|
|
|
336 |
|
|
|
(125 |
) |
|
|
(37 |
)% |
|
|
$ |
924 |
|
|
$ |
1,031 |
|
|
$ |
(107 |
) |
|
|
(10 |
)% |
Depreciation expense decreased primarily due to the majority of our digital cinema projection systems reaching the conclusion of their ten-year useful lives during the three months ended December 31, 2022.
Interest expense, net
Interest expense, net increased by $0.3 million from $0.1 million for the three months ended December 31, 2021 to $0.4 million for the December 31, 2022 as a result of deferred and earnout consideration accretion related to the acquisitions of Bloody Disgusting, FoundationTV and DMR and interest expense associated with our new Line of Credit facility obtained in September 2022.
Employee retention tax credit
Employee retention tax credit was $2.0 million for the three months ended December 31, 2022 compared to no employee retention credit for the three months ended December 31, 2021. The employee retention tax credits were filed pursuant to the CARES Act.
Results of Operations for the Nine Months Ended December 31, 2022 and 2021
Revenues
|
|
For the Nine Months Ended December 31, |
|
|
Change Period over Period |
|
|||||||||||||||||||
|
|
2022 |
|
|
% of Revenue |
|
|
|
2021 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
||||||
Content & Entertainment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Streaming and Digital |
|
$ |
33,115 |
|
|
|
60 |
% |
|
|
$ |
21,292 |
|
|
|
54 |
% |
|
$ |
11,823 |
|
|
|
56 |
% |
Base Distribution |
|
|
11,145 |
|
|
|
20 |
% |
|
|
|
6,366 |
|
|
|
16 |
% |
|
|
4,779 |
|
|
|
75 |
% |
Cinema Equipment |
|
|
11,218 |
|
|
|
20 |
% |
|
|
|
11,544 |
|
|
|
30 |
% |
|
|
(326 |
) |
|
|
(3 |
)% |
|
|
$ |
55,478 |
|
|
|
100 |
% |
|
|
$ |
39,202 |
|
|
|
100 |
% |
|
$ |
16,276 |
|
|
|
42 |
% |
Streaming and Digital experienced 102% growth in “FAST” and TV-VOD revenue due to the addition of six new streaming channels related to the DMR business acquisition and five managed channel additions of The Country Network, Real Madrid TV, El Rey, The Elvis Presley Channel and The Only Way is Essex. Additionally, Subscription revenue grew 39% primarily due to the Screambox platform performance driven by strong content acquisition strategies driving increasing subscriptions and the aforementioned DMR business acquisition. Top performing titles, including new releases, such as the Terrifier 2, Demon Slayer, Boon, The Ravine, The Mulligan, Incarnation, 7 Days, Chesapeake Shores, When Calls the Heart and the classics, Short Circuit and Highlander added to overall performance.
Revenue in Base Distribution increased by 75% for the nine months ended December 31, 2022 compared to the nine months ended December 31, 2021. The increase is driven by significant growth in box office theatrical performance bolstered by the Terrifier 2 release during the nine months ended December 31, 2022.
31
Revenues generated by our Cinema Equipment business decreased slightly despite an increase in Phase II variable consideration of $9.1 million during the period. Total system revenue recognized was $2.0 million and $9.1 million during the nine months ended December 31, 2022 and 2021, respectively. Blockbuster content released during the period ending December 31, 2022 was consistent with Studio output from the prior period, however VPF eligible theatres decreased significantly for the same period last year.
Direct Operating Expenses
|
|
For the Nine Months Ended December 31, |
|
|
Change Period over Period |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
Content & Entertainment |
|
$ |
29,500 |
|
|
$ |
13,863 |
|
|
$ |
15,637 |
|
|
|
113 |
% |
Cinema Equipment |
|
|
359 |
|
|
|
560 |
|
|
|
(201 |
) |
|
|
(36 |
)% |
|
|
$ |
29,859 |
|
|
$ |
14,423 |
|
|
$ |
15,436 |
|
|
|
107 |
% |
The increase in direct operating expenses in the nine months ended December 31, 2022 for the Content & Entertainment segment was primarily due to $11.0 million higher content and licensing costs including royalties and distribution expenses related to the continued growth in revenue noted above, coupled with a $2.4 million increase related to DVD manufacturing and fulfillment, a $1.2 million increase in delivery, platform and Software as a service (“SaaS”) and platform expenses, primarily due to the additive DMR acquisition, $0.7 million related to film restoration and conversion and website content production costs.
The decrease in direct operating expenses in the nine months ended December 31, 2022 for the Equipment business compared to the prior period was primarily due to a decrease in property taxes as a result of system sales.
Selling, General and Administrative Expenses
|
|
For the Nine Months Ended December 31, |
|
|
Change Period over Period |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
Compensation expense |
|
$ |
14,864 |
|
|
$ |
10,369 |
|
|
$ |
4,495 |
|
|
|
43 |
% |
Public company expenses |
|
|
5,193 |
|
|
|
4,214 |
|
|
|
979 |
|
|
|
23 |
% |
Share-based compensation |
|
|
3,906 |
|
|
|
3,277 |
|
|
|
629 |
|
|
|
19 |
% |
Insurance expense |
|
|
2,048 |
|
|
|
1,181 |
|
|
|
867 |
|
|
|
73 |
% |
Other operating expenses |
|
|
3,005 |
|
|
|
1,479 |
|
|
|
1,526 |
|
|
|
103 |
% |
|
|
$ |
29,016 |
|
|
$ |
20,520 |
|
|
$ |
8,496 |
|
|
|
41 |
% |
Selling, general and administrative expenses for the nine months ended December 31, 2022 increased by $8.5 million primarily due to $2.2 million increase in compensation expense from the acquisitions of Fandor, DMR, and Bloody Disgusting, $1.6 million increase in bonus, severance and insurance expense related to management and employees, $1.0 million increase related to legal expense and $1.1 million increase in other operating expenses primarily from rent, direct marketing and subscriptions.
Public company expenses include accounting, legal, audit, investor relations and other related public company costs.
Depreciation and Amortization Expense
|
|
For the Nine Months Ended December 31, |
|
|
Change Period over Period |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
Amortization of Intangible Assets |
|
|
2,193 |
|
|
|
2,238 |
|
|
|
(45 |
) |
|
|
(2 |
)% |
Depreciation of Property and Equipment |
|
|
715 |
|
|
|
1,425 |
|
|
|
(710 |
) |
|
|
(50 |
)% |
|
|
$ |
2,908 |
|
|
$ |
3,663 |
|
|
$ |
(755 |
) |
|
|
(21 |
)% |
32
Depreciation expense decreased primarily due to the majority of our digital cinema projection systems reaching the conclusion of their ten-year useful lives during the nine months ended December 31, 2022.
Interest expense, net
Interest expense, net increased by $0.6 million to $0.9 million for the nine months ended December 31, 2022 as a result of deferred and earnout consideration accretion related to the acquisitions of Bloody Disgusting, FoundationTV and DMR and interest expense associated with our new Line of Credit facility obtained in September 2022.
Employee retention tax credit
Employee retention tax credit was $2.5 million for the nine months ended December 31, 2022 compared to no employee retention credit for the nine months ended December 31, 2021. The employee retention tax credits were filed pursuant to the CARES Act.
Changes in fair value in Metaverse
On April 1, 2022, trading of Metaverse’s ordinary shares was halted on the Hong Kong Stock Exchange. This investment was previously a level 1 investment as the shares were being actively traded in a marketplace, but with the trading of the shares being halted the Company needed to reassess the fair value level of the investment. Without an active market where the shares are being traded, the investment no longer qualifies as a level 1. The changes in the valuation resulted in a decrease in fair value of $1.8 million during the nine months ended December 31, 2022.
Adjusted EBITDA
We define Adjusted EBITDA to be earnings before interest, taxes, depreciation and amortization, other income, net, stock-based compensation and expenses, merger and acquisition costs, restructuring, transition and acquisitions expense, net, goodwill impairment and certain other items.
Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies. We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, we believe Adjusted EBITDA will also be useful to others, including our stockholders, as a valuable financial metric.
We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net income (loss) from continuing operations as an indicator of operating performance. We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors. We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.
We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net income (loss) from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to net income (loss) from operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with GAAP.
33
Following is the reconciliation of our consolidated net loss to Adjusted EBITDA:
|
|
For the Three Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net income (loss) |
|
$ |
5,022 |
|
|
$ |
(404 |
) |
Add Back: |
|
|
|
|
|
|
||
Income tax benefit |
|
|
— |
|
|
|
(26 |
) |
Depreciation and amortization |
|
|
924 |
|
|
|
1,031 |
|
Interest expense |
|
|
367 |
|
|
|
97 |
|
Change in fair value on equity investment in Metaverse |
|
|
— |
|
|
|
(453 |
) |
Other expense |
|
|
91 |
|
|
|
107 |
|
Provision (recovery) for doubtful accounts |
|
|
7 |
|
|
|
(378 |
) |
Stock-based compensation |
|
|
708 |
|
|
|
1,349 |
|
Employee retention tax credit |
|
|
(2,025 |
) |
|
|
— |
|
Net (income) loss attributable to noncontrolling interest |
|
|
(8 |
) |
|
|
19 |
|
Adjusted EBITDA |
|
$ |
5,086 |
|
|
$ |
1,342 |
|
|
|
|
|
|
|
|
||
Adjustments related to Cinema Equipment |
|
|
|
|
|
|
||
Depreciation and amortization |
|
$ |
(82 |
) |
|
$ |
(196 |
) |
Provision for doubtful accounts |
|
|
(7 |
) |
|
|
— |
|
Income from operations |
|
|
(5,948 |
) |
|
|
(1,483 |
) |
Adjusted EBITDA from non-Cinema Equipment |
|
$ |
(951 |
) |
|
$ |
(337 |
) |
|
|
For the Nine Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net income (loss) |
|
$ |
(6,620 |
) |
|
$ |
4,595 |
|
Add Back: |
|
|
|
|
|
|
||
Income tax benefit |
|
|
— |
|
|
|
(576 |
) |
Depreciation and amortization |
|
|
2,908 |
|
|
|
3,663 |
|
Gain on forgiveness of PPP loan |
|
|
— |
|
|
|
(2,178 |
) |
Interest expense |
|
|
880 |
|
|
|
277 |
|
Change in fair value on equity investment in Metaverse |
|
|
1,828 |
|
|
|
(1,453 |
) |
Other expense |
|
|
661 |
|
|
|
283 |
|
Provision (recovery) for doubtful accounts |
|
|
54 |
|
|
|
(418 |
) |
Stock-based compensation |
|
|
3,906 |
|
|
|
3,278 |
|
Employee retention tax credit |
|
|
(2,475 |
) |
|
|
— |
|
Net (income) loss attributable to noncontrolling interest |
|
|
(35 |
) |
|
|
23 |
|
Adjusted EBITDA |
|
$ |
1,107 |
|
|
$ |
7,494 |
|
|
|
|
|
|
|
|
||
Adjustments related to Cinema Equipment |
|
|
|
|
|
|
||
Depreciation and amortization |
|
$ |
(303 |
) |
|
$ |
(1,001 |
) |
Acquisition, integration and other expense |
|
|
— |
|
|
|
(11 |
) |
Provision (recovery) for doubtful accounts |
|
|
(54 |
) |
|
|
500 |
|
Income from operations |
|
|
(7,720 |
) |
|
|
(8,715 |
) |
Adjusted EBITDA from non-Cinema Equipment |
|
$ |
(6,970 |
) |
|
$ |
(1,733 |
) |
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements included herein.
34
Cash Flow
Changes in our cash flows were as follows:
|
|
For the Nine Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net cash (used in) provided by operating activities |
|
$ |
(7,901 |
) |
|
$ |
4,746 |
|
Net cash used in investing activities |
|
|
(429 |
) |
|
|
(5,031 |
) |
Net cash provided by financing activities |
|
|
4,064 |
|
|
|
2,636 |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
(4,266 |
) |
|
$ |
2,351 |
|
For the nine months ended December 31, 2022, net cash used in operating activities is primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, recovery for doubtful accounts and stock-based compensation, including other changes in working capital. Additionally, during the nine months ended December 31, 2022, the Company decreased accounts payable by $11.8 million to vendors. Cash received from VPFs decreased from the previous period in alignment with the decrease in eligible VPF systems. Prepaid and other current assets increased by $2.7 million. Operating cash flows from the Content & Entertainment segment are typically seasonally lower during the first two fiscal quarters and higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season. In addition, we made $1.1 million in advances for the nine months ended December 31, 2022, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twelve months.
For the nine months ended December 31, 2021, net cash provided by operating activities was primarily driven by income from operations, excluding non-cash expenses such as depreciation, amortization, provision for doubtful accounts and stock-based compensation, gain on extinguishment of note payable, including other changes in working capital. Additionally, during the nine months ended December 31, 2021, the Company paid down $32.6 million to vendors at both the Content & Entertainment segment and Corporate. Operating cash flows from the Content & Entertainment segment are typically higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season, and lower in the other two quarters as we pay royalties on such revenues. In addition, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twenty four months. For the nine months ended December 31, 2021 revenues from the sale of digital projections Systems was $9.1 million.
Off-balance sheet arrangements
We are not a party to any off-balance sheet arrangements other than as discussed in Note 2 – Summary of Significant Accounting Policies, Basis of Presentation and Consolidation and Note 3 - Other Interests to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC; however, we are not the primary beneficiary of the VIE.
35
Item 4. CONTROLS AND PROCEDURES
Definition and Limitations of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Evaluation of Disclosure Controls and Procedures
The management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in the Exchange Act), as of December 31, 2022. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, on a timely basis, and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures due to the material weaknesses identified in our internal control over financial reporting as of December 31, 2022.
Previously Reported Material Weakness on Internal Control Over Financial Reporting
In the Annual Report Form 10-K for the fiscal year ended March 31, 2022 filed with the SEC on July 1, 2022, management concluded that our internal control over financial reporting was not effective as of March 31, 2022. In the evaluation, management identified material weaknesses in the following:
a) Internal controls related to our financial close and reporting process;
b) Information and communication controls; and
c) Insufficient complement of corporate personnel with appropriate levels of accounting and controls knowledge and experience commensurate with our financial reporting requirements to appropriately analyze, record and disclose accounting matters completely and accurately.
As a result of this evaluation, management extensively used outside consultants who possessed the appropriate levels of accounting and controls knowledge.
Remediation. Following identification of this control deficiency, management has implemented modifications to better ensure that the Company has appropriate and timely reviews on all financial reporting analysis. In addition, as we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify our remediation plan. Management will test and evaluate the implementation of these modifications to ascertain whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material misstatement in the Company’s financial statements.
36
The steps we took to address the deficiencies identified included:
|
● |
we hired a new Chief Financial Officer; |
|
● |
we hired a new Executive Vice President (“EVP”) Finance & Accounting; |
|
● |
we have restructured accounting processes and revised organizational structures to enhance accurate accounting and appropriate financial reporting; |
|
● |
we have hired additional experienced accounting personnel in the corporate office to enhance the application of accounting standards and our financial closing and reporting process; |
|
● |
we have engaged external advisors to provide financial accounting and reporting assistance; |
|
● |
we have enhanced information and communication processes through information technology solutions to ensure that information needed for financial reporting is accurate, complete, relevant and reliable, and communicated in a timely manner; and |
|
● |
we have engaged external advisors to evaluate and document the design and operating effectiveness of our internal control over financial reporting and assist with the remediation and implementation of our internal control function. |
As noted above, we believe that, as a result of management’s in-depth review of its accounting processes, and the additional procedures management has implemented, there are no material inaccuracies or omissions of material fact in this Form 10-Q and, to the best of our knowledge, we believe that the Condensed Consolidated Financial Statements in this Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows in conformity with GAAP.
We and our Board treat the controls surrounding, and the integrity of, our financial statements with the utmost priority. Management is committed to the planning and implementation of remediation efforts to address control deficiencies and any other identified areas of risk. These remediation efforts are intended to both address the identified material weakness and to enhance our overall financial control environment. We are committed to maintaining a strong internal control environment, and we believe the measures described above will strengthen our internal control over financial reporting and remediate the material weakness we have identified. Our remediation efforts have begun, and we will continue to devote significant time and attention to these remedial efforts. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to strengthen controls or to modify the remediation plan described above, which may require additional implementation time.
Changes in Internal Control Over Financial Reporting
There have been no changes, other than our remediation efforts discussed above, in the Company’s internal control over financial reporting during the three months ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
37
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes to the Risk Factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 and Item 1A of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
EXHIBIT INDEX
Exhibit |
|
Description of Document |
4.1 |
|
|
4.2 |
|
|
10.1 |
|
|
31.1 |
|
|
31.2 |
|
|
32.1 |
|
|
32.2 |
|
|
101.INS |
|
Inline XBRL Instance Document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
CINEDIGM CORP. |
|
|
|
|
Date: February 14, 2023 |
By: |
/s/ Christopher J. McGurk |
|
|
Christopher J. McGurk |
|
|
|
Date: February 14, 2023 |
By: |
/s/ John K. Canning |
|
|
John K. Canning |
39
EXHIBIT 4.1
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS,
TRADEMARK APPLICATIONS AND TRADEMARK LICENSES)
As of September 15, 2022
WHEREAS, Cinedigm Corp. (“Borrower”) and the Guarantors referred to in the Loan Agreement (as defined below) (each a “Grantor” and collectively the “Grantors”) now own or hold and may hereafter adopt, acquire or hold Trademarks (defined as all of the following: all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade dress, logos, other source of business identifiers and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof or similar property rights, and all applications filed in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, or any state thereof or any other country or any political subdivision of any thereof, and all reissues, extensions or renewals thereof), including, without limitation, the Trademarks listed on Schedule A annexed hereto, as such Schedule may be amended from time to time by the addition of Trademarks subsequently registered or otherwise adopted, acquired or held by any Grantor;
WHEREAS, pursuant to that certain Amended and Restated Loan, Guaranty and Security Agreement dated as of even date herewith (as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time, the “Loan Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement), among Borrower, the Guarantors referred to therein and East West Bank (“Bank”), Bank has agreed to make Credit Extensions and extend other financial accommodations to Borrower;
WHEREAS, pursuant to the terms of the Loan Agreement, each Grantor has granted to Bank a security interest in and to all personal property of such Grantor, including, without limitation, all right, title and interest of the Grantors in, to and under all of such Grantor’s Trademarks and Trademark licenses (including, without limitation, those Trademark licenses listed on Schedule A hereto), whether now owned, presently existing or hereafter arising, adopted or acquired and whether or not in possession of such Grantor, together with the goodwill of the business connected with, and symbolized by, the Trademarks and all products and proceeds thereof and all income therefrom, including, without limitation, any and all causes of action that exist now or may exist in the future by reason of infringement or dilution thereof or injury to the associated goodwill, to secure the payment and performance of the Obligations; and
WHEREAS, Bank and the Grantors by this instrument seek to confirm and make a record of the grant of a security interest in the Trademarks and the goodwill associated therewith.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor does hereby grant to Bank, as security for the Obligations, a continuing security interest in all of such Grantor’s right, title and interest
in, to and under the following (all of the following items (i) through (iii) or types of property being collectively referred to herein as the “Trademark Collateral”), whether now owned, presently existing or hereafter arising, adopted or acquired and whether or not in possession of such Grantor:
Each Grantor hereby agrees to ensure that all registrations for Trademarks which remain in use by the relevant Grantor are kept in force for the duration of this Trademark Security Agreement, and to deliver updated copies of Schedule A and Schedule B to Bank at the end of any quarter in which such Grantor registers or otherwise adopts or acquires any Trademark not listed on Schedule A hereto or enters into any Trademark license not listed on Schedule B hereto, and to duly and promptly execute and deliver, or have duly and promptly executed and delivered, at the cost and expense of such Grantor, such further instruments or documents (in form and substance reasonably satisfactory to Bank), and promptly perform, or cause to be promptly performed, upon the request of Bank, any and all acts, in all cases, as may be necessary, proper or advisable from time to time, in the reasonable judgment of Bank, to carry out the provisions and purposes of the Loan Agreement and this Trademark Security Agreement, and to provide, perfect and preserve the liens of Bank granted pursuant to the Loan Agreement, this Trademark Security Agreement and the other Loan Documents in the Trademark Collateral or any portion thereof.
Each Grantor agrees that if any Person shall do or perform any act(s) that Bank reasonably believes constitutes an infringement of any Trademark owned or held by such Grantor, or violates or infringes any right of any Grantor or Bank in the Trademark Collateral, or if any Person shall do or perform any act(s) that Bank reasonably believes constitutes an unauthorized or unlawful use of the Trademark Collateral, then and in any such event, Bank may take such reasonable steps and institute such reasonable suits or proceedings as Bank may reasonably deem advisable or necessary to prevent such act(s) and/or conduct and to secure damages and other relief by reason thereof, and to generally take such steps as may be advisable or necessary or proper for the full protection of the rights of the parties in the Trademark Collateral if either (a) the applicable Grantor fails to take any action necessary to protect the rights of such Grantor or Bank in the Trademark Collateral within 30 days following its receipt of a written notice from Bank, or (b) there exists an ongoing Event of Default (in which event Bank may take such steps and institute such suits or proceedings without notice). Bank may take such steps or institute such suits or proceedings in its own name or in the name of any of the Grantors or in the names of the parties jointly. Bank hereby agrees to promptly give the Grantors notice of any steps taken, or any suits
2
or proceedings instituted, by Bank pursuant to this paragraph and each of the Grantors agrees to assist Bank with any steps taken, or any suits or proceedings instituted by Bank pursuant to this paragraph at the Grantors’ sole expense.
This security interest is granted in conjunction with the security interests granted to Bank pursuant to the Loan Agreement. Each of the Grantors and Bank do hereby further acknowledge and affirm that the rights and remedies of Bank with respect to the security interest made and granted hereby are subject to, and more fully set forth in, the Loan Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
This Trademark Security Agreement is made for collateral purposes only. At such time as Bank’s commitment to make Credit Extensions under the Loan Agreement have terminated and all Obligations have been paid in full and performed, Bank shall promptly execute and deliver to the Grantors, at the Grantors’ request and expense, without representation, warranty or recourse, all releases and reassignments, termination statements and other instruments as may be reasonably necessary or advisable to terminate the security interest of Bank in the Trademark Collateral, subject to any disposition thereof that may have been made by Bank pursuant to the terms hereof or of the Loan Agreement.
So long as no Event of Default shall have occurred and be continuing, and subject always to the various provisions of the Loan Agreement and the other Loan Documents to which it is a party, the Grantors may use, license and exploit the Trademark Collateral in any lawful manner permitted under the Loan Agreement and the other Loan Documents.
THIS TRADEMARK SECURITY AGREEMENT, AND ALL DISPUTES AND OTHER MATTERS RELATING HERETO OR ARISING HEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
This Trademark Security Agreement, and any modifications or amendments hereto may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original for all purposes, but all such counterparts taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Trademark Security Agreement by facsimile or transmitted electronically in a Tagged Image Format File (“TIFF”), Portable Document Format (“PDF”) or other electronic format sent by electronic mail shall be effective as delivery of a manually executed counterpart of this Trademark Security Agreement. This Trademark Security Agreement shall become effective when it shall have been executed by each party hereto. Any party delivering an executed counterpart of this Trademark Security Agreement by facsimile or by email shall also deliver a manually executed counterpart of this Trademark Security Agreement, but failure to do so shall not affect the validity, enforceability or binding effect of this Trademark Security Agreement, and the parties hereby waive any right they may have to object to said treatment.
3
All notices and other communications provided under this Trademark Security Agreement shall be delivered in such form, manner and address as provided in Section 13 of the Loan Agreement.
Any provision of this Trademark Security Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof, and any such invalidity, illegality or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
No amendment, modification, rescission, waiver or release of any provision of this Trademark Security Agreement, and no consent to any departure therefrom shall in any event be effective unless signed by Bank (whose signature shall be delivered only in accordance with the applicable provisions of the Loan Agreement) and Grantor. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given.
This Trademark Security Agreement shall bind and inure to the benefit of the parties hereto and their successors and permitted assigns (as determined pursuant to the Loan Agreement), but neither this Trademark Security Agreement nor any of the rights or interests hereunder shall be assigned by Grantor (including its successors and permitted assigns) without the prior written consent of Bank (which shall be provided only in accordance with the applicable provisions of the Loan Agreement), and any attempted assignment without such consent shall be null and void.
If any conflict or inconsistency exists between this Trademark Security Agreement and the Loan Agreement, the Loan Agreement shall govern.
[Signature Pages Follow]
4
IN WITNESS WHEREOF, each Grantor has caused this Trademark Security Agreement to be duly executed by its duly authorized signatory as of the date first set forth above.
GRANTORS:
CINEDIGM CORP.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President, Chief Operating Officer,
General Counsel and Secretary
CINEDIGM ENTERTAINMENT CORP.
CINEDIGM OTT HOLDINGS, LLC
CINEDIGM PRODUCTIONS, LLC
COMIC BLITZ II LLC
DOCURAMA, LLC
DOVE FAMILY CHANNEL, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Senior Vice President & Secretary
CINEDIGM ENTERTAINMENT HOLDINGS, LLC
CINEDIGM ENTERTAINMENT, LLC
CINEDIGM HOME ENTERTAINMENT, LLC
CON TV, LLC
VISTACHIARA PRODUCTIONS INC.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Secretary
ACCESS DIGITAL MEDIA, INC.
CHRISTIE/AIX, INC.
CINEDIGM DC HOLDINGS, LLC
CINEDIGM DIGITAL FUNDING I, LLC
FANDOR ACQUISITION LLC
FOUNDATIONTV, INC.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
ASIAN MEDIA RIGHTS LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer, General Counsel and Secretary
BLOODY DISGUSTING ACQUISITION LLC
SCREAMBOX ACQUISITION LLC
TFD ACQUISITION LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer and Secretary
VIEWSTER, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer
CINEDIGM INDIA PRIVATE LIMITED
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Authorized Person
6
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A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached and not the truthfulness, accuracy, or validity of that document.
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF _________________ )
)
COUNTY OF _______________ )
On _____________________, 201__, before me, ____________________________, Notary Public, personally appeared ____________________________________________ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of ___________ that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature [SEAL]
ACCEPTED:
BANK:
EAST WEST BANK
By: _________________________
Name:
Title:
Schedule A
to Trademark Security Agreement
TRADEMARKS
TRADEMARKS AND TRADEMARK APPLICATIONS
United States Trademarks and Applications
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
CINEDIGM
|
RN: 3934870 SN: 77618952 |
November 20, 2008 |
March 22, 2011 |
CINEDIGM DIGITAL CINEMA CORP. (Delaware Corp. |
(Int’l Class: 39) |
Registered March 22, 2011 |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
projection, and computer systems of others for technical purposes and providing back-up computer programs and facilities |
|
C and Design
|
RN: 4867456 SN: 85923259 |
May 3, 2013 |
December 8, 2015 |
Cinedigm Digital Cinema Corp. (Delaware Corp.) |
(Int’l Class: 35) |
Registered December 8, 2015 |
DOCURAMA
|
RN: 4710761 SN: 86227358 |
March 20, 2014 |
March 31, 2015 |
Cinedigm Entertainment Corp. (New York Corp.) |
(Int’l Class: 41) |
Section 8 & 15-Accepted and Acknowledged, July 17, 2021 |
DOCURAMA |
RN: 2723312 SN: |
August 7, 2001 |
June 10, 2003 |
Cinedigm Entertainment, |
(Int’l Class: 35) |
Renewed June 10, 2013 |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
76297101 |
|
|
Corp. (New York Corp.) |
stores featuring videos and dvd’s |
|
DOCURAMA
|
RN: 3444021 SN: 77188472 |
May 23, 2007 |
June 10, 2008 |
Cinedigm Entertainment, Corp. (New York Corp.) |
(Int’l Class: 41) |
Registered 8 & 15 May 22, 2014 |
EVERYTHING ELSE IS PURE FICTION |
RN: 2761077 SN: 76405134 |
May 10, 2002 |
September 9, 2003 |
Cinedigm Entertainment, Corp. (New York Corp.) |
(Int’l Class: 35) |
Renewed September 9, 2013 |
FLATIRON FILM COMPANY
|
RN: 3932071 SN: 77862410 |
November 2, 2009 |
March 15, 2011 |
Cinedigm Entertainment, Corp. |
(Int’l Class: 41) |
Registered March 15, 2011 |
NEW VIDEO |
RN: 2733929 SN: 76297100 |
August 7, 2001 |
July 8, 2003 |
Cinedigm Entertainment, Corp. |
(Int’l Class: 35) |
Renewed July 8, 2013 |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
and publishing of videos and dvds |
|
THE BIGGER PICTUREE |
RN: 6656066 SN: 90052822 |
July 14, 2020 |
March 1, 2022 |
The Bigger Picture Productions (Georgia Limited Liability Company) |
(Int’l Class: 41) |
Registered: 8&15 Due: March 1, 2028
Renewal Due: March 2, 2032 |
GREATEST HEROES AND LEGENDS OF THE BIBLE |
RN: 2336886 SN: 75606097 |
December 15, 1998 |
March 28, 2000 |
Cinedigm Home Entertainment, LLC (Delaware Limited Liability Company) |
(Int’l Class: 09) Series of prerecorded video programs featuring animated bible stories. |
Renweal Due: March 28, 2030 |
CONTV |
RN: 4740659 SN: 86276167 |
May 8, 2014 |
May 19, 2018 |
Con TV, LLC (Delaware Limited Liability Company) |
(Int’l Class: 38) Streaming of audiovisual and multimedia content via the internet; transmission and delivery of audiovisual and multimedia content via the internet; video-on-demand transmission services. |
Reneal Due: May 19, 2025 |
CONTV |
RN: 4740660 SN: 86276177 |
May 8, 2014 |
May 19, 2015 |
Con TV, LLC (Delaware Limited Liability Company) |
(Int’l Class 41) Entertainment and educational services, namely, providing non-downloadable movies and television shows |
Renewal Due: May 19, 2025 |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
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via a video-on-demand service, as well as information regarding movies and television shows; providing a website featuring non-downloadable television shows, movies, and multimedia entertainment content, as well as information regarding television shows, movies, and multimedia entertainment content. |
|
AFROCRUSH |
SN: 97497560 |
July 11, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, |
|
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
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|
adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
ASIANCRUSH |
SN: 97483223 |
June 30, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
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providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
BRINGING QUEER CINEMA OUT OF THE CLOSET |
SN: 97497549 |
July 11, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries |
|
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
C-CRUSH |
SN: 97483234 |
June 30, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
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|
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networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
CINEHOUSE |
SN: 97483231 |
June 30, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual |
|
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
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content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
CINEVERSE |
SN: 97168719 |
December 13, 2021 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
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|
sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
COCOPRO |
SN: 97491037 |
July 6, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
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|
|
networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
CRIME HUNTERS |
SN: 97497817 |
July 11, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual |
|
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
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|
|
content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
EL MANGO |
SN: 97491075 |
July 6, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
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|
adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
EL MANGO |
SN: 97491082 |
July 6, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
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|
electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
K-CRUSH |
SN: 97491066 |
July 6, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
KMTV |
SN: 97491092 |
July 6, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 09) Downloadable mobile software application for streaming |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
audiovisual and multimedia content via the internet and global communications networks; downloadable software for streaming audiovisual and multimedia content to mobile digital electronic devices |
|
LONESTAR |
RN: 6614805 SN: 90553479 |
March 1, 2021 |
January 11, 2022 |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 41) Entertainment services, namely, an ongoing series featuring western classics provided through television and web-based streaming media platforms |
Registered |
MATCHPOINT |
RN: 5856789 SN: 88308815 |
February 20, 2019 |
September 10, 2019 |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 42) Platform as a service (paas) featuring computer software platforms for distributing content and creating ott (over the top) and media subscription services, for use by content distributors, ott service operators, web publishers, and oems; software as a service (saas) featuring computer software |
Registered |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
platforms for distributing content and creating (over the top) and media subscription services, for use by content distributors, ott service operators, web publishers, and oems. |
|
MIDNIGHT PULP |
SN: 97493129 |
July 7, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
QTTV |
SN: 97497135 |
July 6, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
RETRO CRUSH |
SN: 97497521 |
July 11, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting, webcasting, streaming, and transmission of audio-visual media content and video-on-demand content via the internet and electronic communications networks; television broadcasting to mobile devices, namely, mobile phones, smartphones, laptops, and tablets. (Int’l Class 41) Education and entertainment services, namely, online services providing audio-visual content in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the fields of comedy, drama, action, adventure, sports, musicals, current events, entertainment news, and documentaries. |
|
RETROCRUSH – SHOUJO |
SN: 97497440 |
July 11, 2022 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 41) Education and entertainment services, namely, online services providing |
Pending Application |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
audio-visual content in the field of anime; entertainment services in the nature of providing non-downloadable entertainment content via the internet and electronic communications networks, namely, movies, television series, television programs, and video clips in the field of anime; providing a website featuring audio-visual content, specifically, movies, television series, television programs, and video clips in the field of anime |
|
BAMBOO |
SN: 88837517 |
March 17, 2020 |
N/A |
Cinedigm Entertainment Corp. (New York Corporation) |
(Int’l Class 38) Broadcasting and streaming of audio-visual media content in the fields of news, entertainment, sports, comedy, drama, music, documentaries and music videos via a global computer network; ott (over-the-top) digital subscription services, namely, |
Suspended |
1. Mark/Name |
2. App. No./Reg. No. |
3. App. Date |
4. Reg. Date |
5. Owner/Designations |
6. Full Goods/Services |
7. Status/Status Date |
|
|
|
|
|
electronic data transmission and streaming of digital media content in the fields of news, entertainment, sports, comedy, drama, music, documentaries and music videos. |
|
[End of Schedule A]
Schedule B
to Trademark Security Agreement
TRADEMARK LICENSES
Trademark |
Country |
Owner |
Licensee (Grantor) |
Application No. |
Date of Application |
Registration No. |
Date of Registration |
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[End of Schedule B]
EXHIBIT 4.2
COPYRIGHT SECURITY AGREEMENT
As of September 15, 2022
WHEREAS, Cinedigm Corp. (“Borrower”) and the Guarantors referred to in the Loan Agreement (as defined below) (collectively, the “Grantors”, and individually, each a “Grantor”) now own or hold or may hereafter acquire or hold certain copyrights and rights under copyright with respect to television product (including movies of the week, mini-series and series and any episode thereof), motion picture or other audiovisual product, in any case whether recorded on film, videotape, cassette, cartridge, disc or on or by any other means, method, process or device whether now known or hereafter developed, including, without limitation, those listed on Schedule 1 hereto (each of the foregoing items, including, without limitation, the scenario, screenplay, teleplay or script upon which such product is based, and all of the properties thereof, tangible and intangible, collectively referred to herein as the “Pictures” and each item individually as a “Picture”) as such Schedule may be amended from time to time by the addition of copyrights subsequently arising or acquired;
WHEREAS, pursuant to that certain Amended and Restated Loan, Guaranty and Security Agreement dated as of even date herewith (as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time, the “Loan Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement), among Borrower, the Guarantors referred to therein and East West Bank (“Bank”), Bank has agreed to make Credit Extensions and extend other financial accommodations to Borrower; and
WHEREAS, pursuant to the terms of the Loan Agreement, each Grantor has granted to Bank a security interest in all of such Grantor’s personal property, tangible and intangible, wherever located or situated and whether now owned, currently existing or hereafter acquired or created as further provided in the Loan Agreement and herein.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, each Grantor does hereby grant to Bank, as security for the payment and performance of the Obligations, a security interest in all personal property of such Grantor whether presently existing or hereafter created or acquired, and wherever located, including but limited to the following (collectively, the “Collateral”):
(i) all scenarios, screenplays, teleplays and/or scripts at every stage thereof;
(ii) all common law and/or statutory copyright and other rights in all literary and other properties (hereinafter called “said literary properties”) which form the basis of such Picture and/or which are or will be incorporated into such Picture, all component parts of such Picture consisting of said literary properties, all motion Picture, television program or other rights in and to the story, all treatments of said story and said literary properties, together with all preliminary and final screenplays used and to be used in connection with such Picture, and all other literary material upon which such Picture is based or from which it is adapted;
(iii) all rights for all media in and to all music and musical compositions used and to be used in such Picture, if any, including, each without limitation, all rights to record, re-record, produce, reproduce or synchronize all of said music and musical compositions, including, without limitation, reuse fees, royalties and all other amounts payable with respect to said music and musical compositions;
(iv) all tangible personal property relating to such Picture, including, without limitation, all exposed film, developed film, positives, negatives, prints, positive prints, answer prints, magnetic tapes and other digital or electronic storage media, special effects, preparing materials (including interpositives, duplicate negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and matrices, and all other forms of pre-print elements), sound tracks, cutouts, trims and any and all other physical properties of every kind and nature relating to such Picture whether in completed form or in some state of completion, and all masters, duplicates, drafts, versions, variations and copies of each thereof, in all formats whether on film, videotape, disk or other optical or electronic media or otherwise and all music sheets and promotional materials relating to such Picture (collectively, the “Physical Materials”);
(v) all collateral, allied, subsidiary and merchandising rights appurtenant or related to such Picture including, without limitation, the following rights: all rights to produce remakes, spin-offs, sequels or prequels to such Picture based upon such Picture, said literary properties or the theme of such Picture and/or the text or any part of said literary properties; all rights throughout the world to broadcast, transmit and/or reproduce by means of television (including commercially sponsored, sustaining and subscription or “pay” television) or by streaming video or by other means over the internet or any other open or closed physical or wireless network or by any process analogous to any of the foregoing, now known or hereafter devised, such Picture or any remake, spin-off, sequel or prequel to such Picture; all rights to produce primarily for television or similar use, a motion picture or series of motion pictures, or other Picture by use of film or any other recording device or medium now known or hereafter devised, based upon such Picture, said literary properties or any part thereof, including, without limitation, based upon any script, scenario or the like used in such Picture; all merchandising rights including, without limitation, all rights to use, exploit and license others to use and exploit any and all commercial tie-ups of any kind arising out of or connected with said literary properties, such Picture, the title or titles of such Picture, the characters of such Picture and/or said literary properties and/or the names or characteristics of said characters and including further, without limitation, any and all commercial exploitation in connection with or related to such Picture, any remake, spin-off, sequel or prequel thereof and/or said literary properties;
(vi) all statutory copyrights, domestic and foreign, obtained or to be obtained on such Picture, together with any and all copyrights obtained or to be obtained in connection with such Picture or any underlying or component elements of such Picture, including, in each case without limitation, all copyrights on the property described in subparagraphs (i) through (v) inclusive, of
this definition, together with the right to copyright (and all rights to renew or extend such copyrights, if applicable) and the right to sue in the name of such Grantor for past, present and future infringements of copyright;
(vii) all insurance policies and completion bonds connected with such Picture and all proceeds which may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the exhibition of and otherwise exploit and turn to account such Picture in all media (whether now known or hereafter developed), the Physical Materials, the motion picture, television program or other rights in and to the story and/or other literary material upon which such Picture is based or from which it is adapted, and the music and musical compositions used or to be used in such Picture;
(ix) any and all sums, claims, proceeds, money, products, profits or increases, including money profits or increases (as those terms are used in the UCC or otherwise) or other property obtained or to be obtained from the distribution, exhibition, sale or other uses or dispositions of such Picture or any part of such Picture in all media (whether now known or hereafter developed), including, without limitation, all sums, claims, proceeds, profits, products and increases, whether in money or otherwise, from a sale and leaseback or other sale, rental or licensing of such Picture and/or any of the elements of such Picture including, without limitation, from collateral, allied, subsidiary and merchandising rights, and further including, without limitation, all monies held in any collection account of such Grantor;
(x) the dramatic, nondramatic, stage, television, radio and publishing rights, title and interest in and to such Picture, and the right to obtain copyrights and renewals of copyrights therein, if applicable;
(xi) the name or title of such Picture and all rights of such Grantor to the use thereof, including, without limitation, rights protected pursuant to trademark, service mark, unfair competition and/or any other applicable statutes, common law, or other rule or principle of law;
(xii) any and all contract rights and/or chattel paper which may arise in connection with such Picture;
(xiii) all accounts and/or other rights to payment which such Grantor currently owns or which may arise in favor of such Grantor in the future, including, without limitation, any refund or rebate in connection with a completion bond or otherwise, any and all refunds in connection with any value added tax, all accounts and/or rights to payment due from Persons in connection with the distribution of such Picture, or from the exploitation of any and all of the collateral, allied, subsidiary, merchandising and other rights in connection with such Picture, including tax refunds and tax rebates received in connection with tax incentives;
(xiv) any and all “general intangibles” (as that term is defined in Section 9-102(42) of the UCC) not elsewhere included in this definition, including, without limitation, any and all general intangibles consisting of any right to payment which may arise in connection with the distribution or exploitation of any of the rights set out herein, and any and all general intangible rights in favor of such Grantor for services or other performances by any third parties, including actors, writers, directors, individual producers and/or any and all other performing or nonperforming artists in any way connected with such Picture, any and all general intangible rights in favor of such Grantor relating to licenses of sound or other equipment, or licenses for any photograph or photographic or other processes, and any and all general intangibles related to the distribution or exploitation of
such Picture including general intangibles related to or which grow out of the exhibition of such Picture and the exploitation of any and all other rights in such Picture set out in this definition;
(xv) any and all “goods” (as defined in Section 9-102(44) of the UCC) including, without limitation, “inventory” (as defined in Section 9-102(48) of the UCC) which may arise in connection with the creation, production or delivery of such Picture, which goods are owned by such Grantor pursuant to any production agreement or Distribution Agreement or otherwise;
(xvi) all and each of the rights, regardless of denomination, which arise in connection with the acquisition, creation, production, completion of production, delivery, distribution, or other exploitation of such Picture, including, without limitation, any and all rights in favor of such Grantor, the ownership or control of which are or may become necessary or desirable, in the reasonable opinion of Secured Party, in order to complete production of such Picture in the event that Secured Party exercises any rights it may have to take over and complete production of such Picture;
(xvii) any and all documents issued by any pledgeholder or bailee with respect to such Picture or any Physical Materials (whether or not in completed form) with respect thereto;
(xviii) any and all bank accounts established by such Grantor with respect to such Picture;
(xix) any and all rights of such Grantor under any distribution agreements relating to such Picture, including, without limitation, all rights to payment thereunder;
(xx) any and all rights of such Grantor under contracts relating to the production or acquisition of such Picture or otherwise, including, but not limited to, all such contracts which have been delivered to Bank pursuant to the Loan Agreement;
(xxi) any and all patents, patent rights, software, proprietary processes or other rights with respect to the creation or production of computer animated Pictures; and
(xxii) any rebates, credits, grants or other similar benefits relating to such Picture.
provided, that the Collateral shall in no event include the Excluded Accounts.
Each of the Grantors agrees that if any Person shall do or perform any act(s) which Bank reasonably believes constitute(s) a copyright infringement of any of the literary, dramatic or musical material contained in any Picture or upon which any Picture is based, or constitute(s) a plagiarism of any of the foregoing, or violate(s) or infringe(s) any right of any Grantor or Bank in any of the foregoing, or if any Person shall do or perform any act(s) which Bank reasonably believes constitute(s) an unauthorized or unlawful distribution, exhibition, or use thereof, then and in any such event, upon thirty (30) days’ prior written notice to the Grantors (or if an Event of Default is at the time continuing, then without notice), Bank may and shall have the right to take such steps and institute such suits or proceedings as Bank may reasonably deem advisable or necessary to prevent such act(s) and/or conduct and to secure damages and other relief by reason thereof, and to generally take such steps as may be reasonably advisable or necessary or proper for the full protection of the rights of the parties. Bank may take such steps or institute such suits or proceedings in its own name or in the name of any of the Grantors or in the names of the parties jointly. Bank hereby agrees to give the Grantors notice of any steps taken or any suits or proceedings instituted by Bank pursuant to this paragraph and the Grantors agree to assist Bank with any steps taken, or any suits or proceedings instituted by Bank pursuant to this paragraph at the Grantors’ sole expense.
The security interest granted to Bank hereunder is granted in conjunction with the security interests granted to Bank pursuant to the Loan Agreement. Each Grantor and Bank hereby further acknowledges and affirms that the rights and remedies of Bank with respect to the security interest made and granted hereby are subject to, and more fully set forth in, the Loan Agreement and are subject to the limitations set forth in the Loan Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.
This Copyright Security Agreement is made for collateral purposes only. At such time as Bank’s commitment to make Credit Extensions under the Loan Agreement have terminated and all Obligations have been paid in full and performed, Bank shall execute and deliver to the applicable Grantors, at the Grantors’ request and sole expense without representation, warranty or recourse, all releases and reassignments, termination statements and other instruments as may be necessary or proper to terminate the security interest of Bank in the Collateral, subject to any disposition thereof which may have been made by Bank pursuant to the terms hereof or of the Loan Agreement.
THIS COPYRIGHT SECURITY AGREEMENT, AND ALL DISPUTES AND OTHER MATTERS RELATING HERETO OR ARISING HEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
This Copyright Security Agreement, and any modifications or amendments hereto may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original for all purposes, but all such counterparts taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Copyright Security Agreement by facsimile or transmitted electronically in a Tagged Image Format File (“TIFF”), Portable Document Format (“PDF”) or other electronic format sent by electronic mail shall be effective as delivery of a manually executed counterpart of this Copyright Security Agreement. This Copyright Security Agreement shall become
effective when it shall have been executed by each party hereto. Any party delivering an executed counterpart of this Copyright Security Agreement by facsimile or by email shall also deliver a manually executed counterpart of this Copyright Security Agreement, but failure to do so shall not affect the validity, enforceability or binding effect of this Copyright Security Agreement, and the parties hereby waive any right they may have to object to said treatment.
All notices and other communications provided under this Copyright Security Agreement shall be delivered in such form, manner and address as provided in Section 13 of the Loan Agreement.
Any provision of this Copyright Security Agreement which is held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof, and any such invalidity, illegality or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
No amendment, modification, rescission, waiver or release of any provision of this Copyright Security Agreement, and no consent to any departure therefrom, shall in any event be effective unless signed by Bank (whose signature shall be delivered only in accordance with the applicable provisions of the Loan Agreement) and the Grantors. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given.
This Copyright Security Agreement shall bind and inure to the benefit of the parties hereto and their successors and permitted assigns (as determined pursuant to the Loan Agreement), but neither this Copyright Security Agreement nor any of the rights or interests hereunder shall be assigned by the Grantors (including their respective successors and permitted assigns) without the prior written consent of Bank (which shall be provided only in accordance with the applicable provisions of the Loan Agreement), and any attempted assignment without such consent shall be null and void.
If any conflict or inconsistency exists between this Copyright Security Agreement and the Loan Agreement, the Loan Agreement shall govern.
[Signature Page Follows]
IN WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement to be duly executed by its duly authorized signatory as of the date first set forth above.
GRANTORS:
CINEDIGM CORP.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President, Chief Operating Officer,
General Counsel and Secretary
CINEDIGM ENTERTAINMENT CORP.
CINEDIGM OTT HOLDINGS, LLC
CINEDIGM PRODUCTIONS, LLC
COMIC BLITZ II LLC
DOCURAMA, LLC
DOVE FAMILY CHANNEL, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Senior Vice President & Secretary
CINEDIGM ENTERTAINMENT HOLDINGS, LLC
CINEDIGM ENTERTAINMENT, LLC
CINEDIGM HOME ENTERTAINMENT, LLC
CON TV, LLC
VISTACHIARA PRODUCTIONS INC.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Secretary
ACCESS DIGITAL MEDIA, INC.
CHRISTIE/AIX, INC.
CINEDIGM DC HOLDINGS, LLC
CINEDIGM DIGITAL FUNDING I, LLC
FANDOR ACQUISITION LLC
FOUNDATIONTV, INC.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
ASIAN MEDIA RIGHTS LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer, General Counsel and Secretary
BLOODY DISGUSTING ACQUISITION LLC
SCREAMBOX ACQUISITION LLC
TFD ACQUISITION LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer and Secretary
VIEWSTER, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer
CINEDIGM INDIA PRIVATE LIMITED
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Authorized Person
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A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached and not the truthfulness, accuracy, or validity of that document.
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF _________________ )
)
COUNTY OF _______________ )
On _____________________, 201__, before me, ____________________________, Notary Public, personally appeared ____________________________________________ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of ___________ that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature [SEAL]
ACCEPTED:
EAST WEST BANK
By: /s/ Jeffrey Zaks
Name: Jeffrey Zaks
Title: Senior Vice President
SCHEDULE 1
Title |
Cinedigm Party |
2nd Chance for Christmas (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment, Corporation
|
4G0T10 (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
A brave heart: the Lizzie Velasquez story (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment, Corporation
|
Acceleration (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment, Corporation
|
Afternoon delight (Certificate of Recordation - Copyright Assignment |
Party 2: Cinedigm Entertainment, Corporation |
Amateur Night & 1 other (Certificate of Recordation - Copyright Assignment |
Party 2: Cinedigm Entertainment, Corporation |
American Violence & 1 other (Certificate of Recordation - Copyright Assignment |
Party 2: Cinedigm Entertainment Corporation
|
A New Christmas (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
Ant boy (Certificate of Recordation) |
Party 2: Cinedigm Home Entertainment LLC |
Arthur Newman: a.k.a. The other you, a.k.a. Arthur Newman Golf Pro (Certificate of Recordation) |
Party 2: Cinedigm Digital Cinema Corporation. |
Bunyan & Babe (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
Class rank (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation. |
Dark house (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation. |
Dear dictator : f.k.a. Coup D' etat (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation. |
The dog (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
English teacher (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Group. |
Extraordinary tales (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Group. |
The Falling (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
Full of grace (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
Gangster Land (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
A Genius leaves the hood & 001 A Genius leaves the hood. 002 Gunland. 003 The swirl. 004 Black church. 005 Bottom ups. 006 72%. 007 When the check stop coming in. 008 Bossip comedy series 1. 009 Bossip comedy series 2. 010 Bleaching black culture. 011 Knifed up. 012 Hating Obama. 013 Side piece. 014 Pop life (formerly Molly) 015 Father forgive him (formerly Eddie Long) 016 Dumb it down. 017 Where is the love. (Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
A girl like her (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
Paranormal Island (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
Penguin King (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Punk’s dead: SLC punk 2 (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Prey (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Savva: heart of the warrior & Savva: heart of the warrior : a.k.a. Hero quest (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Silencer (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Song one (Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation & Film Arcade, LLC |
Spy Intervention (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Stagecoach: the Texas Jack story (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Sunrise in Heaven and Sunrise in Heaven: a.k.a. In God's Hands (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Swell (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
Traded (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
The ultimate gift & 001 The ultimate gift. 002 The ultimate life. 003 The ultimate legacy. (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation
|
Visitors (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
War pigs (Certificate of Recordation - Copyright Assignment) |
Party 2: Cinedigm Entertainment Corporation |
[End of Schedule 1]
EXHIBIT 10.1
AMENDED AND RESTATED LOAN, GUARANTY AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN, GUARANTY AND SECURITY AGREEMENT (this “Agreement”) is entered into as of September 15, 2022, by and among East West Bank (“Bank”), Cinedigm Corp., a Delaware corporation (“Borrower’’), Vistachiara Productions Inc., d/b/a The Bigger Picture, a Delaware corporation (“Vistachiara Productions”), Cinedigm Entertainment Corp., a New York corporation (“Cinedigm Entertainment”), Cinedigm Entertainment Holdings, LLC, a Delaware limited liability company (“Cinedigm Entertainment Holdings”), Cinedigm Home Entertainment, LLC, a Delaware limited liability company (“Cinedigm Home Entertainment”), Docurama, LLC, a Delaware limited liability company (“Docurama”), Dove Family Channel, LLC, a Delaware limited liability company (“Dove”), Cinedigm OTT Holdings, LLC, a Delaware limited liability company (“Cinedigm OTT”), Cinedigm Productions, LLC, a Delaware limited liability company (“Cinedigm Productions”), Cinedigm DC Holdings, LLC, a Delaware limited liability company (“Cinedigm DC Holdings”), Access Digital Media, Inc., a Delaware corporation (“Access Digital Media”), Christie/AIX, Inc., a Delaware corporation (“Christie/AIX”), Cinedigm Digital Funding I, LLC, a Delaware limited liability company (“Cinedigm Digital Funding I”), FoundationTV, Inc., a Delaware corporation (“FoundationTV”), Asian Media Rights LLC, d/b/a Digital Media Rights, a New York limited liability company (“Asian Media Rights”), Con TV, LLC, a Delaware limited liability company (“Con TV”), Fandor Acquisition LLC, a Delaware limited liability company (“Fandor”), TFD Acquisition LLC, a Delaware limited liability company (“TFD Acquisition”), Screambox Acquisition LLC, a Delaware limited liability company (“Screambox Acquisition”), Bloody Disgusting Acquisition LLC, a Delaware limited liability company (“Bloody Disgusting Acquisition”), Comic Blitz II LLC, a Delaware limited liability company (“Comic Blitz II”), Viewster, LLC, a Delaware limited liability company (“Viewster”), and Cinedigm India Private Limited, an Indian limited company (“Cinedigm India”, and, together with Vistachiara Productions, Cinedigm Entertainment, Cinedigm Entertainment Holdings, Cinedigm Home Entertainment, Docurama, Dove, and Cinedigm OTT, Cinedigm Productions, Cinedigm DC Holdings, Access Digital Media, Christie/AIX, Cinedigm Digital Funding I, FoundationTV, Asian Media Rights, Con TV, Fandor, TFD Acquisition, Screambox Acquisition, Bloody Disgusting Acquisition, Comic Blitz II and Viewster, individually and collectively, the “Guarantor’’ and, together with the Borrower, collectively, the “Loan Parties”).
RECITALS
Borrower, certain of the Guarantors party hereto and Bank have entered into that certain Loan, Guaranty and Security Agreement dated as of March 30, 2018 (as amended, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Loan Agreement”).
Borrower has requested that Bank amend and restate the Prior Loan Agreement to, among other things, make additional Advances to Borrower.
Bank is willing to amend and restate the Prior Loan Agreement subject to the terms and conditions of this Agreement.
This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.
In consideration of the agreement of Bank to make the Advances to Borrower, each Guarantor is willing to guaranty the full payment and performance by Borrower of all of its obligations hereunder and under the other Loan Documents, all as further set forth herein.
Each Guarantor is a subsidiary of Borrower and will obtain substantial direct and indirect benefit from the Advances made by Bank to Borrower under the Loan Agreement.
AGREEMENT
The parties agree as follows:
Each Loan Party represents and warrants as follows:
Borrower and each other Loan Party covenants that, until payment in full of all outstanding Obligations, and for so long as Bank may have any commitment to make a Credit Extension hereunder, Borrower shall do all of the following:
Borrower may deliver to Bank on an electronic basis any certificates, reports or information required pursuant to this Section 9.2, and Bank shall be entitled to rely on the information contained in the electronic files, provided that Bank in good faith believes that the files were delivered by a Responsible Officer. If Borrower delivers this information electronically, it shall also deliver to Bank by U.S. Mail, reputable overnight courier service, hand delivery, facsimile or .pdf file within five (5) Business Days of submission of the unsigned electronic copy the certification of monthly financial statements, the Borrowing Base Certificate and the Compliance Certificate, each bearing the physical signature of the Responsible Officer.
Borrower and each other Loan Party covenants and agrees that, so long as any credit hereunder shall be available and until the outstanding Obligations are paid in full or for so long as Bank may have any commitment to make any Credit Extensions, Borrower and each such Loan Party will not do any of the following without Bank’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed:
Any one or more of the following events shall constitute an “Event of Default” by Borrower under this Agreement:
Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank’s designated officers, or employees) as Borrower’s true and lawful attorney to: (a) send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse Borrower’s name on any checks or other forms of payment or security that may come into Bank’s possession; (c) sign Borrower’s name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to Borrower’s policies of insurance; (f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; and (g) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in clause (g) above, regardless of whether an Event of Default has occurred. The appointment of Bank as Borrower’s attorney in fact, and each and every one of Bank’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Bank’s obligation to provide advances hereunder is terminated.
Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a nationally recognized overnight delivery service, certified mail, postage
prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses set forth below:
If to Borrower or Guarantor: Cinedigm Corp.
244 Fifth Avenue, Suite M289
New York, NY 10001
Attn: Chris McGurk, Chairman and Chief Executive Officer
With a copy to: Cinedigm Corp.
244 Fifth Avenue, Suite M289
New York, NY 10001
Attn: Gary S. Loffredo, Esq., President Digital Cinema & General Counsel
If to Bank: East West Bank
9378 Wilshire Blvd., Ste 100
Beverly Hills, CA 90212
Attn: Jeffrey Zaks
With a copy to: Paul Hastings LLP
1999 Avenue of the Stars, 27th Floor
Los Angeles, CA 90067
Attn: Susan Z. Williams
The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.
California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Los Angeles County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Each party expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each party hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to it at the address set forth in, or subsequently provided by it in accordance with, Section 13 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of such party’s actual receipt thereof or five (5) Business Days after deposit in the U.S. mails, proper first class postage prepaid.
IF AND ONLY TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IF PERMITTED BY APPLICABLE LAW, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or
controversies of any nature between them arising at any time shall be decided by a reference to a private judge, who is a former or retired judge of any California Federal or State Court, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638, sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Either party shall have the right to object to the decision of the private judge and to appeal as provided for in the California Code of Civil Procedure. Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
[Balance of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
BORROWER: Cinedigm Corp. By: /s/ Gary S. Loffredo General Counsel and Secretary GUARANTOR: Vistachiara Productions Inc. By: /s/ Gary S. Loffredo Cinedigm Entertainment Corp. By: /s/ Gary S. Loffredo Cinedigm Entertainment Holdings, LLC By: /s/ Gary S. Loffredo |
BANK: East West Bank: By: /s/ Jeffrey Zaks |
Cinedigm Entertainment, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Secretary
Cinedigm Home Entertainment, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Secretary
Docurama, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Senior Vice President & Secretary
Dove Family Channel, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Senior Vice President & Secretary
Cinedigm OTT Holdings, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Senior Vice President & Secretary
Cinedigm Productions, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Senior Vice President & Secretary
Cinedigm DC Holdings, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
Access Digital Media, Inc.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
Christie/AIX, Inc.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
Cinedigm Digital Funding I, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
FoundationTV, Inc.
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
Asian Media Rights, LLC, d/b/a Digital Media Rights
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer, General
Counsel and Secretary
Con TV, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Secretary
Fandor Acquisition LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: President
TFD Acquisition LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer & Secretary
Screambox Acquisition LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer & Secretary
Bloody Disgusting Acquisition LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer & Secretary
Comic Blitz II LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Senior Vice President & Secretary
Viewster, LLC
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title: Chief Operating Officer
Cinedigm India Private Limited
By: /s/ Gary S. Loffredo
Name: Gary S. Loffredo
Title:
EXHIBIT A
DEFINITIONS
“Accounts” means all presently existing and hereafter arising “accounts,” as such term is defined in Section 9102 of the Code, contract rights, instruments (including those evidencing indebtedness owed to Borrower by its affiliates), general intangibles, payment intangibles, chattel paper (including electronic chattel paper) and all other forms of obligations owing to Borrower arising out of the sale or lease of goods or inventory (including, without limitation, the licensing of digital content, software and other technology) or the rendering of services by Borrower and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.
“Advance” or “Advances” means a cash advance or cash advances under the Revolving Line.
“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person.
“Bank Expenses” means all reasonable out-of-pocket costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the preparation, negotiation, administration, amendment, and enforcement of the Loan Documents; reasonable out-of-pocket Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses (whether generated in-house or by outside counsel) incurred in enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.
“Borrower State” means Delaware, the state under whose laws Borrower is organized.
“Borrower’s Books” means all of Borrower’s books and records including: ledgers; records concerning Borrower’s assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.
“Borrowing Base” means, at any date for which the amount thereof is to be determined, an amount equal to the lesser of:
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of California or the State of New York are authorized or required to close.
“Cash” means Unrestricted Cash and Cash Equivalents that are not subject to any Lien other than Lien under the Loan Documents.
“Cash Equivalents” means (a) any readily-marketable securities (i) issued by, or directly, unconditionally and fully guaranteed or insured by the United States federal government or (ii) issued by any agency of the United States federal government the obligations of which are fully backed by the full faith and credit of the United States federal government, (b) any readily-marketable direct obligations issued by any other agency of the United States federal government, any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case having a rating of at least “A-1” from S&P or at least “P-1” from Moody’s, (c) any commercial paper rated at least “A-1” by S&P or “P-1” by Moody’s and
issued by any Person organized under the laws of any state of the United States, (d) any Dollar-denominated time deposit, certificate of deposit, overnight bank deposit or bankers’ acceptance issued or accepted by Bank or any commercial bank that is, in each case, rated investment grade by both S&P and Moody’s, (e) interests in any money market fund registered under the Investment Company Act of 1940 that (i) has substantially all of its assets invested continuously in the types of investments referred to in clause (a), (b), (c) or (d) above with maturities as set forth in the proviso below, (ii) has net assets in excess of $500,000,000 and (iii) has obtained from either S&P or Moody’s the highest rating obtainable for money market funds in the United States, and (f) other cash equivalents determined by the Bank to have a risk equivalent to items rated at least “A-1” by S&P or “P-1” by Moody’s and otherwise acceptable from time to time to the Bank; provided, however, that the maturities of all obligations specified in any of clauses (a) through (d) above shall not exceed 365 days.
“Change in Control” means any event or circumstance whereby (a) any person or group of persons acting in concert acquires control of Borrower (whether directly or indirectly); or (b) the majority of the seats (other than vacant seats) on the Board of Directors of Borrower cease to be occupied by persons who either (i) were members of the Board of Directors of Borrower as of the closing of the transactions contemplated hereby or (ii) were nominated for election by the Board of Directors of Borrower, a majority of whom were directors on the Closing Date or whose election or nomination for election was previously approved by a majority of such directors. For the purpose of this definition, “control” of Borrower means: (x) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the United States Securities and Exchange Commission thereunder as in effect on the date of the Closing) of stock representing 35% or more of the aggregate ordinary voting power represented by the issued and outstanding stock in Borrower; (y) the power to appoint or remove all or a majority of the members of the board of directors of Borrower or (z) otherwise directly or indirectly to direct or have the power to direct the affairs and policies of Borrower.
“Change in Management” means both Chris McGurk and Gary Loffredo shall cease to perform the functions and services substantially similar to those provided for Borrower as of the Closing Date and a replacement of at least one such individual proposed by Borrower and acceptable to Bank (such approval not to be unreasonably withheld) has not been retained within a period of one hundred twenty (120) days following the last day that such individual shall have ceased to serve in such capacity or to perform such functions and services as aforesaid. The parties hereto agree that during such one hundred twenty (120) day period until such time as a replacement has been approved by Bank, Bank shall not be required to make any Advances. The Bank and the Loan Parties agree that nothing herein shall preclude the board of directors of Borrower from performing its legal or fiduciary duties with respect to the employment of Chris McGurk or Gary Loffredo under applicable law.
“Chief Executive Office State” means California, where Borrower’s chief executive office is located.
“Closing Date” means the date of this Agreement.
“Code” means the California Uniform Commercial Code as amended or supplemented from time to time.
“Collateral” means the property described on Exhibit B attached hereto except (i) to the extent the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral; provided that in no case shall the definition of “Collateral” exclude any Accounts, proceeds of the disposition of any property, or general intangibles consisting of rights to payment, (ii) any leasehold property worth less than $1,000,000 in the aggregate, (iii) any motor vehicles and other assets subject to certificates of title, except to the extent perfection of a security interest therein may be accomplished by the filing of UCC financing statements or an equivalent thereof in appropriate form in the applicable jurisdiction, (iv) any commercial tort claim as to which the claim thereunder is less than $1,000,000, (v) any property if, for so long as and to the extent a security interest may not be granted in such assets as a matter of applicable law or without constituting a material breach of the terms of a lease, license, contract or other agreement or instrument or permitting any party to terminate such lease, license, contract, or other agreement or instrument, except, in each case under this clause (v) to the extent that such law or the terms in such lease, license, contract or other
agreement or instrument providing for such prohibition, breach, right of termination or default or requiring such consent, approval, license or authorization is ineffective under the UCC or other applicable law or principles of equity, provided further that this clause (v) shall not exclude proceeds thereof and Accounts arising therefrom the assignment of which is deemed effective under the UCC, (vi) any governmental licenses or permits or franchises, charters and authorizations of a Governmental Authority if, for so long as and to the extent the grant of a security interest therein is prohibited or restricted by applicable law, except, in each case under this clause (vii), to the extent that such prohibition or restriction is ineffective under the UCC or other applicable law or principles of equity, provided that this clause (vi) shall not exclude proceeds thereof and Accounts arising therefrom the assignment of which is deemed effective under the UCC, (vii) equity interests in any Excluded Subsidiary, (viii) any “intent to use” trademark application for which a statement of use has not been filed with the United States Patent and Trademark Office, but only to the extent that the grant of a security interest therein would invalidate such trademark application, (ix) any letter-of-credit rights (except to the extent constituting a supporting obligation of other Collateral as to which perfection of a security interest therein may be accomplished solely by the filing of a UCC financing statement in the applicable jurisdiction (it being understood that no actions shall be required to perfect a security interest in letter-of-credit rights, other than the filing of a UCC financing statement), (x) any equity interest in a first-tier foreign Subsidiary in excess of 65% of the issued and outstanding voting stock of any first-tier foreign Subsidiary of any Loan Party, (xi) any assets of a first-tier foreign Subsidiary; and (xii) Excluded Accounts.
“Collateral State” means the state or states where the Collateral is located.
“Collection Account” has the meaning set forth in Section 4.4.
“Consolidated Net Content Advances” means, with respect to the Borrower and its Subsidiaries on a consolidated basis as of any date of determination, the sum, without duplication, of (a) production costs capitalized during such period, net of capitalized production costs charged to income during such period, (b) advertising costs deferred during such period, net of deferred advertising costs charged to income during such period, (c) the net cash flow impact of advance payments made with respect to Distributed and Licensed Content pursuant to distribution agreements during such period, (d) advances or purchase consideration made to acquire feature films or other items of content for distribution as Owned Library Content, net of advances amortized and charged to income during such period, in each case as reported in Consolidated cash flow statements in accordance with GAAP and (e) Investments in, start-up expenses related to, and net operating losses incurred with respect to the Borrower’s subscription-based internet distribution services that are so identified in the Borrower’s financial reporting.
“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business or customary indemnity obligations entered into in connection with any acquisition or any disposition permitted hereunder. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.
“Copyright Security Agreement” means a Copyright Security Agreement, substantially in the form of Exhibit G(1) attached hereto, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time by delivery of a Copyright Security Agreement Supplement or otherwise.
“Copyright Security Agreement Supplement” means a Copyright Security Agreement Supplement, substantially in the form of Exhibit G(2) attached hereto.
“Credit Extension” means each Advance or any other extension of credit by Bank to or for the benefit of Borrower hereunder.
“Distributed and Licensed Content” means theatrical feature films, television productions and other traditional or non-traditional video content, for which a Loan Party obtains the rights via distribution agreements to be exploited in various manners, including one or more of theatrical distribution, DVDs, Blu-Ray, internet or digital distribution, pay-television, cable television and broadcast television.
“EBITDA” means annual earnings before interest, taxes, depreciation and amortization, calculated monthly on a trailing 12 month basis. EBITDA shall be calculated in accordance with GAAP.
“Entitlement Reserve Percentage” means, for any three month period, the percentage equal to the aggregate amount of third party entitlements to the Collections Amount during such period divided by the Collections Amount for such period.
“Environmental Laws” means all laws, rules, regulations, orders and the like issued by any federal state, local foreign or other Governmental Authority pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive or radioactive materials, asbestos or other similar materials.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
“Event of Default” has the meaning assigned in Article 11.
“Excluded Accounts” means any account which is exclusively used for trust, payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of employees.
“Excluded Subsidiaries” means Access Digital Cinema Phase 2 Corp.; Access Digital Cinema Phase 2 B/AIX Corp.; CDF2 Holdings, LLC; Cinedigm Digital Funding 2, LLC; Cinedigm Digital Cinema Australia Pty Ltd.; ADM Cinema Corporation d/b/a the Pavilion Theatre; Vistachiara Entertainment, Inc.; C&F Merger Sub, Inc.; and Matchpoint Digital, LLC.
“GAAP” means generally accepted accounting principles, consistently applied, as in effect from time to time.
“Governmental Authority” means any federal, state, municipal, national, supranational or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity, officer or examiner exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with the United States of America, any State thereof or the District of Columbia or a foreign entity or government.
“Hedge Agreement” means any agreement with respect to any swap, forward, future or derivative transaction, or any option or similar agreement, involving, or settled by reference to, one or more rates, currencies, commodities, prices of equity or debt securities or instruments, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value, or any similar transaction or combination of the foregoing transactions.
“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, but excluding trade payables in the ordinary course of business, (b) all obligations
evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations that have been or required to be accounted for as a capital lease on a balance sheet prepared in accordance with GAAP and (d) all Contingent Obligations, if any.
“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including general assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Investment” means any beneficial ownership of (including stock, partnership or limited liability company interest or other securities) any Person, or any loan, advance or capital contribution to any Person.
“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.
“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower, the Copyright Security Agreement, the Copyright Security Agreement Supplements, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended, restated, amended and restated, modified, supplemented or extended from time to time.
“Material Adverse Effect” means any event or circumstance that, (i) has a materially adverse effect on the business, assets, liabilities (actual or contingent), properties, operations or condition (financial or otherwise) of the Loan Parties, taken as a whole, (ii) materially impairs the legal right, power or authority of any Loan Party to perform its respective obligations under the Loan Documents to which it is a party, (iii) materially impairs the validity or enforceability of, or materially impairs the rights, remedies or benefits available to the Bank under the Loan Documents or (iv) has a materially adverse effect on the Collateral or the Bank’s security interests therein or the priority of such security interests; provided, however, that none of the following, either alone or in combination, will constitute, or be considered in determining whether there has been, a Material Adverse Effect: any event, change, circumstance, effect or other matter resulting from or related to (i) any outbreak or escalation of war or major hostilities or any act of terrorism, (ii) changes in laws, GAAP or enforcement or interpretation thereof, (iii) changes that generally affect the industries and markets in which Borrower and its Subsidiaries operate, (iv) changes in financial markets, general economic conditions (including prevailing interest rates, exchange rates, commodity prices and fuel costs) or political conditions, (v) any failure, in and of itself, of Borrower or any Subsidiary to meet any published or internally prepared projections, budgets, plans or forecasts of revenues, earnings or other financial performance measures or operating statistics (it being understood that the facts and circumstances underlying any such failure that are not otherwise excluded from the definition of a “Material Adverse Effect” may be considered in determining whether there has been a Material Adverse Effect), or (vi) any action taken or failed to be taken pursuant to or in accordance with the Loan Documents or at the request of, or consented to by, the Bank.
“Moody’s” means Moody’s Investors Service, Inc., or any successor to its rating agency business.
“Negotiable Collateral” means Collateral regarding which a security interest under the Code is or may be perfected by possession or control.
“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise.
“OFAC” means the Office of Foreign Asset Control of the United States Treasury Department.
“Operating Account” means a deposit account established at Bank in the name of Borrower and under the control of Bank for which certain amounts are to be deposited pursuant to the payment priorities in Section 4.4 of the Agreement.
“Owned Library Content” means theatrical feature films, television productions and other traditional or non-traditional video content, owned by a Loan Party and either (a) exploited by such Loan Party in various manners, including, but not limited to, one or more of theatrical distribution, DVDs, Blu-Ray, internet or digital distribution, pay-television, cable television, broadcast television and any other content distribution medium or otherwise or (b) licensed by the applicable Loan Party to a third party.
“Periodic Payments” means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.
“Permitted Indebtedness” means:
“Permitted Investments” means:
“Permitted Liens” means the following:
“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition by any Loan Party of:
“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.
“Prime Rate” means, for any particular day, the variable rate of interest, per annum, most recently announced by Bank, as its “prime rate,” whether or not such announced rate is the lowest rate available from Bank.
“Prohibited Territory” means any person or country listed by OFAC as to which transactions between a United States Person and that territory are prohibited.
“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Controller of Borrower.
“Revolving Line” means revolving Credit Extensions of up to Five Million Dollars ($5,000,000.00) in aggregate principal amount at any time outstanding.
“Revolving Maturity Date” means September 15, 2023; provided however that the Revolving Maturity Date may be extended for one successive period of one year at the sole discretion of the Bank so long as (i) no Event of Default has occurred and is continuing as of the then scheduled Revolving Maturity Date and (ii) provided that Borrower has given the Bank written notice of its intention to extend the Revolving Maturity Date at least ninety (90) days prior to the then scheduled Revolving Maturity Date. If the Borrower has given the Bank such a notice, the Bank shall notify the Borrower within thirty (30) days after receiving such notice as to whether the Revolving Maturity Date will be so extended.
“S&P” means S&P Global Ratings, or any successor to its rating agency business.
“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.
“SOS Reports” means the official reports from the Secretaries of State of each Collateral State, Chief Executive Office State and the Borrower State and other applicable federal, state or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.
“Subordinated Debt” means any debt now or hereafter incurred by Borrower that is subordinated in writing to the debt owing by Borrower to Bank on terms reasonably acceptable to Bank (and identified as being such by Borrower and Bank).
“Subsidiary” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest or (ii) more than fifty percent (50%) of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly or through a Subsidiary.
“Trademark Security Agreement” means a Trademark Security Agreement, substantially in the form of Exhibit H attached hereto.
“Unrestricted Cash” means cash that is not subject to any lien or security interest (other than the those granted pursuant to the this Agreement) and that is on deposit with Bank or its Affiliates in an account that is subject to a perfected security interest in favor of the Bank and in respect of which the relevant Loan Party has entered into an account control agreement reasonably satisfactory to the Bank.
EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT TO AMENDED AND RESTATED LOAN, GUARANTY AND SECURITY AGREEMENT
Except as set forth in the definition of “Collateral” in Exhibit A to this Agreement, all personal property of the Loan Parties (collectively, the “Debtor”) whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:
For the purposes of this Agreement, (i) “Picture” means any television product (including movies of the week, mini-series and series and any episode thereof), motion picture or other audiovisual product, in any case whether recorded on film, videotape, cassette, cartridge, disc or on or by any other means, method, process or device whether now known or hereafter developed, with respect to which a Loan Party (i) has an ownership interest in the copyright (in whole or in part) or (ii) acquires any direct or indirect equity interest or participation rights, or any distribution rights, sales agency rights or other rights (including rights as a production services entity) or (ii) acquires any distribution rights, (ii) “Books” means books and records (including each Debtor’s records indicating, summarizing, or evidencing Debtor’s assets (including the Collateral) or liabilities, Debtors records relating to Debtor’s business operations or financial condition, and Debtor’s goods or General Intangibles related to such information, including, without limitation, ledger sheets and cards, files, correspondence, books of accounts, business papers, computers, computer software and programs for general business use, tapes, disks, and other documents relating to Debtors assets, (iii) “Contracts” means all contracts or agreements to which Debtor is a party including, without limitation, (a) each partnership agreement, joint venture agreement, limited liability company agreement, shareholders agreement, operating agreement, voting trust, proxy agreement or other similar agreement to which Debtor is a party and (b) each lease, license or sublicense, evidence of Indebtedness, mortgage, indenture, security agreement, deed of trust or other contract, commitment or obligation to which Debtor is a party, in each case whether contingent or matured, in each case, to which Debtor is a party, and (iv) “Contract Rights” means all of the rights of Debtor (including, without limitation, all rights to payment) under any Contract.
EXHIBIT C
LOAN ADVANCE/PAYDOWN REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS Noon, P.S.T.
To: ______________________ |
DATE: _____________, 2022 |
TIME: ___________ |
FROM: CINEDIGM CORP. FROM: ____________________________ FROM: ____________________________ PHONE #: ____________________________ FROM ACCOUNT#: _____________________ TO ACCOUNT#: ____________________________ |
TELEPHONE REQUEST (For Bank Use Only): The following person is authorized to request the loan payment transfer/loan advance on the designated account and is known to me. __________________________________ __________________________________ __________________________________ |
REQUESTED TRANSACTION TYPE |
REQUESTED DOLLAR AMOUNT |
For Bank Use Only Date Rec’d: |
PRINCIPAL INCREASE* (ADVANCE) |
$ ________________________ |
|
PRINCIPAL PAYMENT (ONLY) |
$ ________________________ |
|
OTHER INSTRUCTIONS: |
||
|
||
|
||
|
All representations and warranties of Borrower stated in the Amended and Restated Loan, Guaranty and Security Agreement are true, correct and complete in all material respects as of the date of the telephone request for and advance confirmed by this Loan Advance/Paydown Request Form; provided, however, that those representations and warranties the date expressly referring to another date shall be true, correct and complete in all material respects as of such date.
*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE) |
YES |
NO |
If YES, the Outgoing Wire Transfer Instructions must be completed below. |
|
|
OUTGOING WIRE TRANSFER INSTRUCTIONS |
Fed Reference Number |
Bank Transfer Number |
|
The items marked with an asterisk (*) are required to be completed. |
|||
*Beneficiary Name |
|
||
*Beneficiary Account Number |
|
||
*Beneficiary Address |
|
||
*Currency Type |
US DOLLARS ONLY |
||
*ABA Routing Number (9 Digits) |
|
||
*Receiving Institution Name |
|
||
*Receiving Institution Address |
|
||
*Wire Amount |
$ |
EXHIBIT D
BORROWING BASE CERTIFICATE
Borrower: Cinedigm Corp. |
Bank: |
Commitment Amount: $5,000,000 from the Closing Date through the Revolving Maturity Date |
|
Borrowing Base Calculation |
Amount |
The Lesser of: |
|
(a) the difference of: |
|
i. the Commitment Amount; and |
$5,000,000 |
ii. the amount of Advances outstanding; and |
$[_______] |
TOTAL of (a) |
$[_______] |
(b) the difference of: |
|
i. the Collections Amount; and |
$[_______] |
ii. the product of: |
|
(x) the Collections Amount; and |
$[_______] |
(y) the Entitlement Reserve Percentage |
$[_______] |
TOTAL of (b) |
$[_______] |
TOTAL BORROWING BASE |
$[_______] |
The undersigned represents and warrants that the foregoing is true, complete and correct, and that the information reflected in this Borrowing Base Certificate complies with the representations and warranties set forth in the Amended and Restated Loan, Guaranty and Security Agreement between the undersigned and East West Bank.
Comments: |
BANK USE ONLY Rec’d By: ___________________________ |
|
[Attach supporting Schedules and other detail]
EXHIBIT E
COMPLIANCE CERTIFICATE
Please send all Required Reporting to: East West Bank
[_______________]
FROM: Cinedigm Corp. (“Borrower’’)
The undersigned authorized Officer of Cinedigm Corp., hereby certifies that in accordance with the terms and conditions of the Amended and Restated Loan, Guaranty and Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for the period ending ______________________________ with all required covenants, except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under “Complies” or “Applicable” column.
REPORTING COVENANTS |
REQUIRED |
COMPLIES |
Company Prepared Monthly F/S
Company Prepared Quarterly F/S
Compliance Certificate Company prepared
Audited and Unqualified F/S Borrowing Base Cert. |
Monthly, within 20 days of the end of such month Quarterly, within 45 days of the end of such FQ Monthly, within 20 days of the end of such month Annually, within 90 days of FYE Monthly, within 20 days of the end of such month
|
YES NO
YES NO
YES NO
YES NO YES NO |
FINANCIAL COVENANTS |
REQUIRED ACTUAL |
COMPLIES |
|
TO BE TESTED MONTHLY, UNLESS OTHERWISE NOTED: |
|
||
Minimum balance of cash and availability under Minimum EBITDA |
$2,000,000 |
$___________ |
YES NO |
>[[_]:1 |
__________: 1 |
YES NO |
Please Enter Below Comments Regarding Violations:
The Officer further acknowledges that at any time Borrower is not in compliance with all the terms set forth in the Agreement, including, without limitation, the financial covenants, no credit extensions will be made.
Very truly yours,
_________________________________
Authorized Signer
Name: Gary S. Loffredo
Title: President, Chief Operating Officer,
General Counsel and Secretary
EXHIBIT F
DISBURSEMENT LETTER
CINEDIGM CORP.
The undersigned duly elected and acting officers of CINEDIGM CORP. (“Borrower”) do hereby certify to EAST WEST BANK (“Bank”), in connection with that certain Amended and Restated Loan, Guaranty and Security Agreement dated as of ______ ___, 2022, by and among Borrower, the other Loan Parties thereto and Bank (as modified, amended and/or restated from time to time, the “Agreement”; with other capitalized terms used below having the meanings ascribed thereto in the Agreement) that:
[Balance of Page Intentionally Left Blank]
Loan Amount: $[_________________]
Less:
Net Proceeds of the Advance $ ___________
Prior Loan Agreement Expenses :
Bank Name: [___________]
Bank Address: [___________]
Account Number: [___________]
ASA Number: [___________]
Reference: Cinedigm Corp.
Bank Expenses (Paul Hastings LLP):
Bank Name: [___________]
Bank Address: [___________]
Account Name: [___________]
Account Number: [___________]
ASA Number: [___________]
Reference: [___________]
Balance - credited to Borrower’s account at East West Bank
[Balance of Page Intentionally Left Blank]
Dated as of the date first set forth above.
BORROWER:
CINEDIGM CORP.
By _______________________
Name: Gary S. Loffredo
Title: President, Chief Operating Officer,
General Counsel and Secretary
BANK:
EAST WEST BANK
By _______________________
Name: Jeffrey Zaks
Title: Senior Vice President
EXHIBIT G-1
COPYRIGHT SECURITY AGREEMENT
EXHIBIT G-2
COPYRIGHT SECURITY AGREEMENT SUPPLEMENT
EXHIBIT H
TRADEMARK SECURITY AGREEMENT
SCHEDULE OF EXCEPTIONS
Grant of Security Interest (Section 4.1)
None.
Prior Names (Section 6.4)
None.
Litigation (Section 6.5)
None.
Permitted Indebtedness (Exhibit A)
None.
Permitted Investments (Exhibit A)
Investments in the Excluded Subsidiaries in existence on the Closing Date.
Permitted Liens (Exhibit A)
Liens under the Prior Loan Agreement.
CORPORATE BORROWING CERTIFICATE
Borrower: CINEDIGM CORP. |
Date: _____________, 2022 |
I hereby certify as follows, as of the date set forth above:
RESOLVED, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:☐☐☐☐
Name |
Title |
Signature |
Authorized to Add or Remove Signatories |
____________________ |
___________________ |
|
|
____________________ |
___________________ |
|
|
____________________ |
___________________ |
|
|
____________________ |
___________________ |
|
|
RESOLVED FURTHER, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.
RESOLVED FURTHER, that such individuals may, on behalf of Borrower:
Borrow Money. Borrow money from East West Bank (“Bank”).
Execute Loan Documents. Execute any loan documents Bank requires.
Grant Security. Grant Bank a security interest in any of Borrower’s assets.
Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.
Letters of Credit. Apply for letters of credit from Bank.
Foreign Exchange Contracts. Execute spot or forward foreign exchange contracts.
Issue Warrants. Issue warrants for Borrower’s capital stock.
Further Acts. Designate other individuals to request advances, pay fees and costs and execute
other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) they believe to be necessary to effectuate such resolutions.
RESOLVED FURTHER, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.
CINEDIGM CORP.
By: ________________________
Name:
Title:
*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.
I, the _____________________ of Borrower, hereby certify as to paragraphs 1 through 5 above, as [print title] of the date set forth above. |
By: ________________________
Name:
Title:
EAST WEST BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Revolving Line)
Name: CINEDIGM CORP. Date: _________,2022
$ |
credited to deposit account No. ______________ when Advances are requested or disbursed to Borrower by cashier’s check or wire transfer |
Amounts paid to others on your behalf: |
|
$ |
to East West Bank for accounts receivable audit (estimate) |
$ |
to Bank counsel fees and expenses |
$ |
to ___________________ |
$ |
to ___________________ |
$ |
TOTAL (AMOUNT FINANCED) |
Upon consummation of this transaction, this document will also serve as the authorization for East West Bank to disburse the loan proceeds as stated above.
_________________________________ |
_________________________________ |
USA PATRIOT ACT
NOTICE
OF
CUSTOMER IDENTIFICATION
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
WHAT THIS MEANS FOR YOU: when you open an account, we will ask your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
EXHIBIT 31.1
CINEDIGM CORP.
CERTIFICATION
I, Christopher J. McGurk, certify that:
|
1. |
I have reviewed this Form 10-Q of Cinedigm Corp.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: February 14, 2023 |
By: |
/s/ Christopher J. McGurk |
|
|
Christopher J. McGurk |
EXHIBIT 31.2
CERTIFICATION
I, John K. Canning, certify that:
|
1. |
I have reviewed this Form 10-Q of Cinedigm Corp.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: |
February 14, 2023 |
|
By: |
/s/ John K. Canning |
|
|
|
|
John K. Canning |
|
|
|
|
Chief Financial Officer (Principal Financial Officer) |
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 Form 10-Q of Cinedigm Corp. (the “Company”) for the period ended December 31, 2022 as filed with the SEC (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: |
February 14, 2023 |
|
By: |
/s/ Christopher J. McGurk |
|
|
|
|
Christopher J. McGurk |
|
|
|
|
Chief Executive Officer and |
|
|
|
|
Chairman of the Board of Directors |
|
|
|
|
(Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Form 10-Q of Cinedigm Corp. (the “Company”) for the period ended December 31, 2022 as filed with the SEC (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: |
February 14, 2023 |
|
By: |
/s/ John K. Canning |
|
|
|
|
John K. Canning |
|
|
|
|
Chief Financial Officer |