Cineverse Corp. (NASDAQ:CNVS) Q1 2024 Results Conference Call August 14, 2023 4:30 PM ET Company Participants Gary Loffredo - Chief Legal Officer, Secretary and Senior Advisor Chris McGurk - Chairman and CEO Erick Opeka - President and Chief Strategy Officer John Canning - CFO Yolanda Macias - Chief Content Officer Conference Call Participants Dan Kurnos - Benchmark Shervin Z. - Alliance Global Partners Operator Good day, everyone. Welcome to Cineverse's First Quarter Fiscal 2024 Financial Results Conferenc ...

Adjusted EBITDA We define Adjusted EBITDA to be earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, 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 performanc ...

8. INCOME TAXES Net deferred taxes consisted of the following (in thousands): the deferred tax asset related to the net operating loss carryforward and other temporary differences. We will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results. The differences between the U.S. statutory federal tax rate and our effective tax rate are as follows: 9. SUBSEQUENT EVENTS On May 5, 2023, the Company entered i ...

Cinedigm Corp. (CIDM) Q3 2023 Earnings Conference Call February 14, 2023 4:30 PM ET Company Participants Gary Loffredo - Chief Operating Officer and General Counsel Chris McGurk - Chairman and Chief Executive Officer John Canning - Chief Financial Officer Yolanda Macias - Chief Content Officer Erick Opeka - Chief Strategy Officer and President, Cinedigm Networks Tony Huidor - Chief Technology and Product Officer Mark Lindsey - Executive Vice President, Finance and Accounting Conference Call Participants Dan ...

PART I - FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited financials as of December 31, 2022, present **$94.9 million** total assets, **$57.3 million** total liabilities, and a **$6.6 million** net loss for the nine months ended Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$94,895** | **$104,636** | | Total Current Assets | $46,248 | $52,163 | | Goodwill | $21,025 | $21,084 | | Intangible assets, net | $18,864 | $20,034 | | **Total Liabilities** | **$57,251** | **$63,686** | | Total Current Liabilities | $50,747 | $56,992 | | **Total Equity** | **$37,644** | **$40,950** | Condensed Consolidated Statements of Operations (in thousands) | Metric | Nine Months Ended Dec 31, 2022 | Nine Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Revenues | $55,478 | $39,202 | | Total operating expenses | $61,783 | $38,606 | | Operating income (loss) | $(6,305) | $596 | | Net income (loss) | $(6,620) | $4,595 | | Net income (loss) attributable to common stockholders | $(6,919) | $4,351 | | Diluted EPS | $(0.04) | $0.03 | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Dec 31, 2022 | Nine Months Ended Dec 31, 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 | $2,636 | | **Net change in cash and cash equivalents** | **$(4,266)** | **$2,351** | [Note 1. Nature of Operations and Liquidity](index=10&type=section&id=Note%201.%20Nature%20of%20Operations%20and%20Liquidity) Operating in Cinema Equipment and Content & Entertainment, the company reports an accumulated deficit of **$479.2 million** and negative working capital of **$4.5 million**, yet expects sufficient liquidity - The company reports through two segments: **Cinema Equipment** (servicing digital cinema assets) and **Content & Entertainment** (distributing independent content and operating OTT channels)[106](index=106&type=chunk)[107](index=107&type=chunk) - As of December 31, 2022, the company had an accumulated deficit of **$479.2 million** and negative working capital of **$4.5 million**, with net cash used in operations for the nine months ended totaling **$7.9 million**[108](index=108&type=chunk) - The company has a **$5.0 million** revolving line of credit with East West Bank (EWB), fully drawn as of December 31, 2022, expiring September 15, 2023, with a potential one-year extension[109](index=109&type=chunk) [Note 2. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note details U.S. GAAP financial statement preparation, key accounting policies for revenue recognition, intangible assets, goodwill, and stock-based compensation, noting **43%** revenue concentration from four customers - **Cinema Equipment** VPF revenue is recognized upon first movie display, with Phase II Deployment VPFs subject to a "cost recoupment" cap, recognized once uncertainty is resolved[154](index=154&type=chunk)[155](index=155&type=chunk)[159](index=159&type=chunk) - **Content & Entertainment** revenue from digital platforms and physical goods is recognized when control transfers to the customer, with gross or net reporting based on the company's role as principal or agent[161](index=161&type=chunk)[165](index=165&type=chunk) - The company recorded an employee retention tax credit of **$2.0 million** and **$2.5 million** for the three and nine months ended December 31, 2022, respectively, under the CARES Act[125](index=125&type=chunk) - For the three months ended December 31, 2022, **43%** of consolidated revenues came from four customers: Iconic (**16%**), Distribution Solutions (**7%**), Amazon.com, Inc. (**14%**), and Tubi (**6%**)[175](index=175&type=chunk) [Note 3. Other Interests](index=23&type=section&id=Note%203.%20Other%20Interests) The company holds a **100%** equity interest in CDF2 Holdings, a non-consolidated VIE with **$2.1 million** maximum loss exposure, and a cost-method investment in Roundtable Entertainment Holdings, Inc - The company owns **100%** of CDF2 Holdings, a VIE, but does not consolidate it, carrying the investment at **$0** with a maximum loss exposure of **$2.1 million** in accounts receivable as of December 31, 2022[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - On March 15, 2022, the company purchased preferred stock and warrants in Roundtable Entertainment Holdings, Inc. for **316,937** shares of its common stock, valued at **$0.2 million** using the cost method[197](index=197&type=chunk) [Note 4. Stockholders' Equity](index=24&type=section&id=Note%204.%20Stockholders%27%20Equity) As of December 31, 2022, **275 million** common shares were authorized, with **3.6 million** issued for preferred dividends, equity vesting, and earnouts, resulting in **$0.1 million** cumulative preferred stock dividends in arrears - During the nine months ended December 31, 2022, the company issued approximately **3.6 million** shares of common stock for preferred dividends, equity incentive vesting, and the Bloody Disgusting earnout commitment[201](index=201&type=chunk) - Cumulative dividends in arrears on preferred stock were **$0.1 million** as of December 31, 2022[203](index=203&type=chunk) Stock-Based Compensation Expense (in thousands) | Period | Selling, general and administrative | | :--- | :--- | | Three Months Ended Dec 31, 2022 | $708 | | Nine Months Ended Dec 31, 2022 | $3,906 | [Note 5. Line of Credit Facility](index=27&type=section&id=Note%205.%20Line%20of%20Credit%20Facility) On September 15, 2022, the company secured a **$5.0 million** revolving line of credit with East West Bank, fully drawn at year-end with a **9.0%** interest rate, subject to various covenants - The company entered into a **$5.0 million** Line of Credit Facility with EWB on September 15, 2022, which expires on September 15, 2023[218](index=218&type=chunk) - The facility's interest rate is **1.5%** above the prime rate, which was **9.0%** as of December 31, 2022, with the full **$5.0 million** outstanding at period-end[218](index=218&type=chunk) [Note 6. Segment Reporting](index=27&type=section&id=Note%206.%20Segment%20Reporting) The company operates two segments: Cinema Equipment, generating **$11.2 million** revenue and **$7.7 million** operating income, and Content & Entertainment, with **$44.3 million** revenue and a **$6.6 million** operating loss for the nine months ended December 31, 2022 Segment Financials for Nine Months Ended Dec 31, 2022 (in thousands) | Segment | Revenues | Direct Operating Expenses | Operating Income (Loss) | | :--- | :--- | :--- | :--- | | Cinema Equipment | $11,218 | $359 | $7,719 | | Content & Entertainment | $44,260 | $29,500 | $(6,625) | | Corporate | $— | $— | $(7,399) | | **Consolidated** | **$55,478** | **$29,859** | **$(6,305)** | Segment Financials for Three Months Ended Dec 31, 2022 (in thousands) | Segment | Revenues | Direct Operating Expenses | Operating Income (Loss) | | :--- | :--- | :--- | :--- | | Cinema Equipment | $7,186 | $89 | $6,015 | | Content & Entertainment | $20,696 | $14,322 | $(561) | | Corporate | $— | $— | $(2,014) | | **Consolidated** | **$27,882** | **$14,411** | **$3,440** | [Note 7. Income Taxes](index=30&type=section&id=Note%207.%20Income%20Taxes) The company's effective tax rate was **0%** for both the three and nine months ended December 31, 2022, due to a full valuation allowance against deferred tax assets, reflecting inability to utilize net operating loss carryforwards - The effective tax rate for the three and nine months ended December 31, 2022 was **0%**, compared to **4%** and **(14%)** for the respective periods in 2021[7](index=7&type=chunk) - The company has not recorded tax benefits on its losses due to a full valuation allowance offsetting potential deferred tax assets from net operating loss carryforwards[229](index=229&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting **98%** Q3 and **42%** nine-month revenue growth driven by Content & Entertainment, increased operating expenses, a **$5.0 million** Q3 net income, and **$5.1 million** Q3 Adjusted EBITDA [Overview](index=31&type=section&id=OVERVIEW) The company operates in Cinema Equipment and Content & Entertainment segments, serving as a leading digital media distributor for independent content across various digital platforms and physical media - The company is a leading distributor of independent content for major brands such as **Hallmark**, **Televisa**, **NFL**, and **Scholastic**[9](index=9&type=chunk) - Distribution channels include digital platforms such as **Apple iTunes**, **Amazon Prime**, **Netflix**, **Hulu**, **VOD**, and **FAST**, alongside physical goods like **DVD** and **Blu-ray**[9](index=9&type=chunk) - A majority of Virtual Print Fee (VPF) revenue from the Phase I Deployment has ended as equipment reached the conclusion of its 10-year payment period[10](index=10&type=chunk) [Financial Condition and Liquidity](index=32&type=section&id=Financial%20Condition%20and%20Liquidity) The company has a fully drawn **$5.0 million** revolving line of credit, and despite an accumulated deficit and negative working capital, management believes current liquidity is sufficient for the next twelve months - The company has a **$5.0 million** Line of Credit Facility with East West Bank, expiring September 15, 2023, with **$5.0 million** outstanding as of December 31, 2022[12](index=12&type=chunk) - As of December 31, 2022, the company had an accumulated deficit of **$479.2 million** and negative working capital of **$4.5 million**[236](index=236&type=chunk) - Management believes cash and credit facility availability will be sufficient to support operations for at least twelve months from the report filing date[237](index=237&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) For the three months ended December 31, 2022, total revenues increased **98%** to **$27.9 million**, driven by Cinema Equipment and Content & Entertainment growth, with nine-month revenues up **42%** to **$55.5 million**, accompanied by increased operating expenses Revenues by Segment - Three Months Ended Dec 31 (in thousands) | Revenue Source | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Streaming and Digital | $12,576 | $8,357 | $4,219 | 50% | | Base Distribution | $8,120 | $3,667 | $4,453 | 121% | | Cinema Equipment | $7,186 | $2,060 | $5,126 | 249% | | **Total** | **$27,882** | **$14,084** | **$13,798** | **98%** | - Q3 Streaming and Digital revenue growth was driven by a **79%** increase in **FAST** and TV-VOD revenue from the DMR acquisition and new channels, and a **38%** increase in subscription revenue from the Screambox platform, boosted by content like 'Terrifier 2'[16](index=16&type=chunk) Revenues by Segment - Nine Months Ended Dec 31 (in thousands) | Revenue Source | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Streaming and Digital | $33,115 | $21,292 | $11,823 | 56% | | Base Distribution | $11,145 | $6,366 | $4,779 | 75% | | Cinema Equipment | $11,218 | $11,544 | $(326) | (3)% | | **Total** | **$55,478** | **$39,202** | **$16,276** | **42%** | - For the nine months ended Dec 31, 2022, SG&A expenses increased by **$8.5 million (41%)**, primarily due to higher compensation from acquisitions, increased legal expenses, and other operating costs like rent and marketing[57](index=57&type=chunk) [Adjusted EBITDA](index=36&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA, a non-GAAP measure, was **$5.1 million** for the three months ended December 31, 2022, a significant increase from **$1.3 million** in the prior year, while the nine-month Adjusted EBITDA was **$1.1 million** - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, M&A costs, and other certain items[65](index=65&type=chunk) Adjusted EBITDA Reconciliation - Three Months Ended Dec 31 (in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income (loss) | $5,022 | $(404) | | **Adjusted EBITDA** | **$5,086** | **$1,342** | Adjusted EBITDA Reconciliation - Nine Months Ended Dec 31 (in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income (loss) | $(6,620) | $4,595 | | **Adjusted EBITDA** | **$1,107** | **$7,494** | [Cash Flow](index=38&type=section&id=Cash%20Flow) For the nine months ended December 31, 2022, net cash used in operating activities was **$7.9 million**, a significant shift from **$4.7 million** provided in the prior year, primarily due to operating loss and a decrease in accounts payable Cash Flow Summary - Nine Months Ended Dec 31 (in thousands) | Activity | 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 | $2,636 | | **Net increase (decrease) in cash** | **$(4,266)** | **$2,351** | - The **$7.9 million** use of cash from operations in the nine months to Dec 31, 2022, was driven by the operating loss and an **$11.8 million** decrease in accounts payable to vendors[38](index=38&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of December 31, 2022, disclosure controls and procedures were ineffective due to material weaknesses in financial close, information controls, and insufficient accounting personnel, with remediation efforts underway - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were **not effective**[41](index=41&type=chunk) - Material weaknesses were identified in internal controls for financial close and reporting, information and communication controls, and insufficient personnel with appropriate accounting knowledge[42](index=42&type=chunk)[74](index=74&type=chunk) - Remediation steps include hiring a new CFO and EVP Finance & Accounting, restructuring accounting processes, hiring additional personnel, and engaging external advisors to improve internal controls[52](index=52&type=chunk)[50](index=50&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) There are no legal proceedings to report for the period - None[55](index=55&type=chunk) [Item 1A. Risk Factors](index=41&type=page&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022, or the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 - No material changes to the Risk Factors have occurred since previous filings[44](index=44&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[75](index=75&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - None[25](index=25&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[26](index=26&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the report, including security agreements, loan agreements, officer certifications, and XBRL data files - The exhibit index lists various agreements and certifications filed with the report, such as the Amended and Restated Loan, Guaranty and Security Agreement with East West Bank, and Officer's Certificates pursuant to the Sarbanes-Oxley Act[32](index=32&type=chunk)

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Cinedigm Corp. (CIDM) Q2 2023 Earnings Conference Call November 15, 2022 12:00 PM ET Company Participants Gary Loffredo - President, Chief Operating Officer and General Counsel Chris McGurk - Chairman and CEO John Canning - Chief Financial Officer Yolanda Macias - Chief Content Officer Erick Opeka - Chief Strategy Officer and President, Cinedigm Networks Tony Huidor - Chief Technology and Product Officer Conference Call Participants Dan Kurnos - Benchmark Brian Kinstlinger - Alliance Global Partners Terry H ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Delaware 22-3720962 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) Title of each class Trading Symbol Name of each exchange on which registered CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE CIDM NASDAQ CAPITAL MARKET 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: September 30, 2022 ☐ TRANSITION REP ...

Financial Data and Key Metrics Changes - For the fiscal year ending March 31, 2022, the company reported consolidated revenues of $56.1 million, an increase of 78% year-over-year, with streaming revenues leading the growth [6][7] - In the first fiscal quarter of 2023, consolidated revenue was $13.6 million, down from $15 million in the prior year quarter, primarily due to a $4.8 million reduction in legacy Digital Cinema equipment sales [23] - Adjusted EBITDA for the current quarter was negative $2.2 million compared to positive $5.5 million in the prior year quarter, largely due to the absence of Digital Cinema equipment sales [25] - The net loss was $6.1 million or negative $0.03 per share, compared to net income of $5.1 million or positive $0.03 per share in the prior year quarter [26] Business Line Data and Key Metrics Changes - Streaming revenue increased by 98% to $8.1 million, driven by a 131% increase in ad-supported revenue and a 43% increase in subscription revenue [24] - Overall content and entertainment revenue was $12.2 million, growing by 38% due to organic user growth and increasing market demand [24] Market Data and Key Metrics Changes - The company reported a total streaming audience of approximately 89.6 million monthly viewers, up nearly 300% year-over-year [39] - Total streaming minutes rose to approximately 2.31 billion, an increase of 68.7% over the prior year quarter [39] Company Strategy and Development Direction - The company aims to achieve $150 million in annual revenues within two to four years, targeting at least 50% annual revenue growth in streaming [26][30] - The company is focusing on four key internal growth initiatives: Cineverse, Cinedigm Advertising Solutions, Cinedigm Podcast Network, and Matchpoint 2.0, which are expected to generate over $50 million in high-margin revenues at steady state [15][76] - The company plans to continue its acquisition strategy, having integrated seven companies in the last couple of years, which has significantly increased its global headcount [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustainable profitability by the end of the fiscal year, despite macroeconomic pressures affecting stock prices [81] - The company remains optimistic about its growth trajectory, with strong performance in ad sales and streaming revenue, indicating resilience in the face of industry challenges [21][82] Other Important Information - The company has fully eliminated its debt, achieving a strong balance sheet with $12 million in cash [27][11] - The legacy Digital Cinema business is nearing its end, with expectations of minimal contributions to revenue moving forward [29] Q&A Session Summary Question: Follow-up on monetization strategy and ecosystem evolution - Management discussed the complexities of the advertising ecosystem and the importance of targeted campaigns over programmatic advertising [49][50] Question: Content strategy and monetization of the umbrella channel - Management highlighted the focus on high-quality content and the importance of new releases to attract viewers [55][56] Question: DMR revenue contribution and advertising monetization - Management indicated that DMR is expected to contribute around $10 million in revenues, with improvements in advertising monetization through their technology [61][64] Question: Reception of the Elvis channel and distribution efforts - Management reported strong performance for the Elvis channel, particularly within the Amazon ecosystem, and ongoing discussions with major platforms for distribution [67][68] Question: Cost structure and operational expenditures - Management explained that increased operational expenditures were related to content investments and integration costs from acquisitions, with expectations of achieving $7.5 million in annual cost savings [69][70]

PART I - FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Cinedigm reported a $6.0 million net loss for Q2 2022, reversing prior-year net income due to decreased revenue and increased operating expenses [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $94.2 million as of June 30, 2022, primarily due to reduced cash and receivables, with total equity falling to $36.0 million Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Items | June 30, 2022 | March 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $11,519 | $13,062 | | Accounts receivable, net | $25,215 | $30,843 | | Total current assets | $44,081 | $52,163 | | Total assets | $94,223 | $104,636 | | **Liabilities & Equity** | | | | Total current liabilities | $51,651 | $56,992 | | Total liabilities | $58,232 | $63,686 | | Total equity | $35,991 | $40,950 | | Total liabilities and equity | $94,223 | $104,636 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2022 revenues decreased 9.5% to $13.6 million, resulting in a $4.6 million operating loss and a $6.1 million net loss, reversing prior-year profitability Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Revenues | $13,590 | $15,015 | | Total operating expenses | $18,174 | $12,241 | | Income (loss) from operations | $(4,584) | $2,774 | | Net income (loss) | $(5,987) | $5,194 | | Net income (loss) attributable to common stockholders | $(6,093) | $5,098 | | Net income (loss) per Class A common stock - basic | $(0.03) | $0.03 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company used $1.2 million in cash from operations for Q2 2022, reversing prior-year positive cash flow, resulting in a $1.5 million overall cash decrease Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,198) | $3,621 | | Net cash used in investing activities | $(61) | $(791) | | Net cash used in financing activities | $(284) | $(6,324) | | Net change in cash | $(1,543) | $(3,494) | | Cash at end of period | $11,519 | $14,355 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail two operating segments, revaluation of A Metaverse Company equity, revenue disaggregation showing CEG growth, and significant customer concentration - The company operates in two primary segments: Cinema Equipment Business and Content & Entertainment Business (CEG)[25](index=25&type=chunk) - The equity investment in A Metaverse Company was reclassified from Level 1 to Level 3 fair value as of June 30, 2022, after trading of its shares was halted on the Hong Kong Stock Exchange. The valuation is now based on an offer from an independent third party[38](index=38&type=chunk)[52](index=52&type=chunk) Revenue by Business Segment (in thousands) | Segment/Category | Q1 FY2023 (ended June 30, 2022) | Q1 FY2022 (ended June 30, 2021) | | :--- | :--- | :--- | | **Cinema Equipment Business** | **$1,427** | **$6,231** | | Digital System Sales | $1,194 | $5,575 | | **Content & Entertainment Business** | **$12,163** | **$8,784** | | OTT Streaming and Digital | $9,958 | $7,006 | | Physical Revenue | $2,205 | $1,778 | - For the quarter ended June 30, 2022, three customers accounted for a significant portion of consolidated revenues: Amazon.com, Inc. (**19%**), Distribution Solutions (**13%**), and Roku, Inc. (**9%**)[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the transition from legacy Cinema to growing CEG, reporting a 9% revenue decline, net loss, and negative Adjusted EBITDA, affirming sufficient liquidity [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Total revenue decreased 9% to $13.6 million due to a 77% drop in Cinema Equipment, despite 38% CEG growth, alongside significant increases in operating and SG&A expenses Revenue by Segment (in thousands) | Segment | Q1 FY2023 | Q1 FY2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cinema Equipment Business | $1,427 | $6,231 | $(4,804) | (77)% | | Content & Entertainment Business | $12,163 | $8,784 | $3,379 | 38% | | **Total** | **$13,590** | **$15,015** | **$(1,425)** | **(9)%** | - Direct operating expenses increased by **59%** (**$2.7 million**) YoY, driven by higher license/royalty costs, content production, and SaaS expenses from the DMR acquisition[211](index=211&type=chunk) - Selling, general and administrative (SG&A) expenses increased by **62%** (**$3.7 million**) YoY, primarily due to a **$2.2 million** increase in personnel costs from acquisitions, **$0.7 million** in legal expenses, and **$0.5 million** in professional consulting services[212](index=212&type=chunk) [Adjusted EBITDA](index=38&type=section&id=Adjusted%20EBITDA) Consolidated Adjusted EBITDA was a $2.2 million loss, a $7.7 million decrease year-over-year, attributed to lower system sales and higher operating expenses Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net income (loss) | $(5,987) | $5,194 | | Adjustments | $3,750 | $285 | | **Adjusted EBITDA** | **$(2,237)** | **$5,479** | - Consolidated Adjusted EBITDA decreased by **$7.7 million** year-over-year, primarily due to a decrease in system sales and higher operating expenses in the Content & Entertainment business[223](index=223&type=chunk) [Liquidity and Cash Flow](index=39&type=section&id=Liquidity%20and%20Cash%20Flow) Cash and cash equivalents decreased to $11.5 million, with $1.2 million used in operating activities, though management affirms sufficient liquidity for the next twelve months Quarterly Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,198) | $3,621 | | Net cash used in investing activities | $(61) | $(791) | | Net cash used in financing activities | $(284) | $(6,324) | - The company had cash and cash equivalents of **$11.5 million** at June 30, 2022[230](index=230&type=chunk) - Management believes the combination of cash balances and expected cash flow from operations will be sufficient for capital needs for at least the next twelve months[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to material weaknesses in financial reporting and insufficient personnel, with remediation efforts actively underway - Management concluded that the Company's disclosure controls and procedures were **not effective** as of June 30, 2022[243](index=243&type=chunk) - Material weaknesses were identified in internal controls related to the financial close and reporting process and an insufficient complement of personnel with appropriate accounting and controls knowledge[244](index=244&type=chunk) - Remediation efforts are underway, including the hiring of a new Chief Financial Officer and a new Executive Vice-President of Accounting, restructuring processes, and engaging external advisors[246](index=246&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[252](index=252&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the prior Annual Report on Form 10-K - There have been no material changes to the Risk Factors disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2022[253](index=253&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits including officer certifications and Inline XBRL financial data files - The report includes officer certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as well as Inline XBRL instance and taxonomy documents[260](index=260&type=chunk)