10-Q 1 cidm-123119x10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal period ended: December 31, 2019
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-31810
___________________________________
Cinedigm Corp.
(Exact name of registrant as specified in its charter)
___________________________________

Delaware |  | 22-3720962
(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
45 West 36th Street, 7th Floor, New York, NY |  | 10018
(Address of principal executive offices) |  | (Zip Code)

(212) 206-8600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol | Name of each exchange on which registered
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE | CIDM | NASDAQ GLOBAL MARKET

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | Yes x No o
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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. |

Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting company x | Emerging Growth Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | Yes o No x |  |

o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
As of February 12, 2020, 40,290,640 shares of Class A Common Stock, $0.001 par value, were outstanding.

CINEDIGM CORP.
TABLE OF CONTENTS

| Page
| PART I - FINANCIAL INFORMATION |
Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3
| Condensed Consolidated Balance Sheets at December 31, 2019 (Unaudited) and March 31, 2019 | 3
| Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended December 31, 2019 and 2018 | 4
| Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months ended December 31, 2019 and 2018 | 5
| Unaudited Condensed Consolidated Statement of Deficit for the Three and Nine Months ended December 31, 2019 and 2018 | 6
| Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended December 31, 2019 and 2018 | 8
| Notes to the Condensed Consolidated Financial Statements (Unaudited) | 9
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 31
Item 4. | Controls and Procedures | 44
| PART II - OTHER INFORMATION |
Item 1. | Legal Proceedings | 45
Item 1A. | Risk Factors | 45
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 45
Item 3. | Defaults Upon Senior Securities | 45
Item 4. | Mine Safety Disclosures | 45
Item 5. | Other Information | 45
Item 6. | Exhibits | 45
Exhibit Index | 46
Signatures | 47

2

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CINEDIGM CORP.CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)

| December 31, 2019 |  | March 31, 2019
ASSETS | (Unaudited) |  |
Current assets |  |  |
Cash and cash equivalents | $ | 14,474 |  |  | $ | 17,872 |
Accounts receivable, net | 40,902 |  |  | 35,510 |
Inventory, net | 598 |  |  | 673 |
Unbilled revenue | 1,682 |  |  | 2,336 |
Prepaid and other current assets | 9,458 |  |  | 8,488 |
Total current assets | 67,114 |  |  | 64,879 |
Restricted cash | 1,000 |  |  | 1,000 |
Property and equipment, net | 9,442 |  |  | 14,047 |
Right-of-use assets | 1,765 |  |  | — |
Intangible assets, net | 7,518 |  |  | 9,686 |
Goodwill | 8,701 |  |  | 8,701 |
Other long-term assets | 171 |  |  | 526 |
Total assets | $ | 95,711 |  |  | $ | 98,839 |
LIABILITIES AND DEFICIT |  |  |
Current liabilities |  |  |
Accounts payable and accrued expenses | $ | 80,985 |  |  | $ | 68,707 |
Current portion of notes payable, including unamortized debt discount of $690 and $1,436 respectively (see Note 5) | 38,310 |  |  | 43,319 |
Operating lease liabilities | 926 |  |  | — |
Current portion of deferred revenue | 1,640 |  |  | 1,687 |
Total current liabilities | 121,861 |  |  | 113,713 |
Notes payable, non-recourse, net of current portion and unamortized debt issuance costs and debt discounts of $955 and $1,495 respectively (see Note 5) | 11,604 |  |  | 19,132 |
Operating lease liabilities, noncurrent | 918 |  |  | — |
Deferred revenue, net of current portion | 1,338 |  |  | 2,357 |
Other long-term liabilities | 127 |  |  | 205 |
Total liabilities | 135,848 |  |  | 135,407 |
Commitments and contingencies (see Note 7) |  |  |
Stockholders’ deficit |  |  |
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; and 7 shares issued and outstanding at December 31, 2019 and March 31, 2019. Liquidation preference of $3,648 | 3,559 |  |  | 3,559 |
Common stock, $0.001 par value; Class A stock 60,000,000 shares authorized at December 31, 2019 and March 31, 2019; 41,105,917 and 36,992,433 shares issued and 39,792,081 and 35,678,597 shares outstanding at December 31, 2019 and March 31, 2019, respectively | 40 |  |  | 36 |
Additional paid-in capital | 375,489 |  |  | 368,531 |
Treasury stock, at cost; 1,313,836 Class A common shares at December 31, 2019 and March 31, 2019 | (11,603 | ) |  | (11,603 | )
Accumulated deficit | (406,378 | ) |  | (395,814 | )
Accumulated other comprehensive income | 35 |  |  | 10 |
Total stockholders’ deficit of Cinedigm Corp. | (38,858 | ) |  | (35,281 | )
Deficit attributable to noncontrolling interest | (1,279 | ) |  | (1,287 | )
Total deficit | (40,137 | ) |  | (36,568 | )
Total liabilities and deficit | $ | 95,711 |  |  | $ | 98,839 |

See accompanying Notes to Condensed Consolidated Financial Statements
3

CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except for share and per share data)

| Three Months Ended December 31, |  | Nine Months Ended December 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Revenues | $ | 11,512 |  |  | $ | 14,643 |  |  | $ | 31,556 |  |  | $ | 41,465 |
Costs and expenses: |  |  |  |  |  |  |
Direct operating (excludes depreciation and amortization shown below) | 5,726 |  |  | 5,246 |  |  | 13,425 |  |  | 12,287 |
Selling, general and administrative | 2,997 |  |  | 6,425 |  |  | 13,834 |  |  | 19,455 |
(Recovery) provision for doubtful accounts | (5 | ) |  | 113 |  |  | 321 |  |  | 1,245 |
Depreciation and amortization of property and equipment | 1,594 |  |  | 2,074 |  |  | 4,977 |  |  | 6,239 |
Amortization of intangible assets | 589 |  |  | 1,397 |  |  | 2,178 |  |  | 4,187 |
Total operating expenses | 10,901 |  |  | 15,255 |  |  | 34,735 |  |  | 43,413 |
Income (loss) from operations | 611 |  |  | (612 | ) |  | (3,179 | ) |  | (1,948 | )
Interest expense, net | (1,618 | ) |  | (2,593 | ) |  | (5,713 | ) |  | (7,860 | )
Other expense, net | (1,019 | ) |  | (12 | ) |  | (1,187 | ) |  | (40 | )
Loss from operations before income taxes | (2,026 | ) |  | (3,217 | ) |  | (10,079 | ) |  | (9,848 | )
Income tax expense | (136 | ) |  | (55 | ) |  | (210 | ) |  | (194 | )
Net loss | (2,162 | ) |  | (3,272 | ) |  | (10,289 | ) |  | (10,042 | )
Net (income) loss attributable to noncontrolling interest | (7 | ) |  | 14 |  |  | (8 | ) |  | 38 |
Net loss attributable to controlling interests | (2,169 | ) |  | (3,258 | ) |  | (10,297 | ) |  | (10,004 | )
Preferred stock dividends | (89 | ) |  | (89 | ) |  | (267 | ) |  | (267 | )
Net loss attributable to common stockholders | $ | (2,258 | ) |  | $ | (3,347 | ) |  | $ | (10,564 | ) |  | $ | (10,271 | )
Net loss per Class A common stock attributable to common stockholders - basic and diluted: |  |  |  |  |  |  |
Net loss attributable to common stockholders | $ | (0.05 | ) |  | $ | (0.09 | ) |  | $ | (0.26 | ) |  | $ | (0.27 | )
Weighted average number of Class A common stock outstanding: basic and diluted | 42,418,641 |  |  | 38,033,756 |  |  | 40,745,114 |  |  | 37,793,845 |

See accompanying Notes to Condensed Consolidated Financial Statements
4

CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)

|  | Three Months Ended December 31, |  | Nine Months Ended December 31,
|  | 2019 |  | 2018 |  | 2019 |  | 2018
Net loss |  | $ | (2,162 | ) |  | $ | (3,272 | ) |  | $ | (10,289 | ) |  | $ | (10,042 | )
Other comprehensive income: foreign exchange translation |  | (3 | ) |  | 25 |  |  | 25 |  |  | 41 |
Comprehensive loss |  | (2,165 | ) |  | (3,247 | ) |  | (10,264 | ) |  | (10,001 | )
Less: comprehensive (income) loss attributable to noncontrolling interest |  | (7 | ) |  | 14 |  |  | (8 | ) |  | 38 |
Comprehensive loss attributable to controlling interests |  | $ | (2,172 | ) |  | $ | (3,233 | ) |  | $ | (10,272 | ) |  | $ | (9,963 | )

See accompanying Notes to Condensed Consolidated Financial Statements
5

CINEDIGM CORP.
CONSOLIDATED STATEMENTS OF DEFICIT
(Unaudited)
(In thousands, except share data)

|  | Series A Preferred Stock |  | Class A Common Stock | Treasury | Additional Paid-In Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income |  | Total Stockholders' Deficit |  | Non-Controlling Interest | Total Deficit
|  | Shares | Amount |  | Shares | Amount | Shares | Amount |  |  |  |
Balances as of March 31, 2019 |  | 7 |  | $ | 3,559 |  |  | 35,678,597 |  | $ | 36 |  | 1,313,836 |  | $ | (11,603 | ) | $ | 368,531 |  |  | $ | (395,814 | ) |  | $ | 10 |  |  | $ | (35,281 | ) |  | $ | (1,287 | ) |  | $ | (36,568 | )
Foreign exchange translation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | — |  |  | 6 |  |  | 6 |  |  | — |  |  | 6 |
Stock-based compensation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 11 |  |  | — |  |  | — |  |  | 11 |  |  | — |  |  | 11 |
Preferred stock dividends paid with common stock |  | — |  | — |  |  | 45,390 |  | — |  | — |  | — |  | 89 |  |  | (89 | ) |  | — |  |  | — |  |  | — |  |  | — |
Net loss |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | (5,033 | ) |  | — |  |  | (5,033 | ) |  | (6 | ) |  | (5,039 | )
Balances as of June 30, 2019 |  | 7 |  | 3,559 |  |  | 35,723,987 |  | 36 |  | 1,313,836 |  | (11,603 | ) | 368,631 |  |  | (400,936 | ) |  | 16 |  |  | (40,297 | ) |  | (1,293 | ) |  | (41,590 | )
Foreign exchange translation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | — |  |  | 22 |  |  | 22 |  |  | — |  |  | 22 |
Stock-based compensation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 178 |  |  | — |  |  | — |  |  | 178 |  |  | — |  |  | 178 |
Issuance of Class A common stock |  | — |  | — |  |  | 3,900,000 |  | 4 |  | — |  | — |  | 5,846 |  |  | — |  |  | — |  |  | 5,850 |  |  | — |  |  | 5,850 |
Preferred stock dividends paid with common stock |  | — |  | — |  |  | 65,749 |  | — |  | — |  | — |  | 89 |  |  | (89 | ) |  | — |  |  | — |  |  | — |  |  | — |
Fair value of conversion feature in connection with convertible note |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 478 |  |  | — |  |  | — |  |  | 478 |  |  | — |  |  | 478 |
Net (loss) income |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | (3,095 | ) |  | — |  |  | (3,095 | ) |  | 7 |  |  | (3,088 | )
Balances as of September 30, 2019 |  | 7 |  | 3,559 |  |  | 39,689,736 |  | 40 |  | 1,313,836 |  | (11,603 | ) | 375,222 |  |  | (404,120 | ) |  | 38 |  |  | (36,864 | ) |  | (1,286 | ) |  | (38,150 | )
Foreign exchange translation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | — |  |  | (3 | ) |  | (3 | ) |  | — |  |  | (3 | )
Stock-based compensation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 178 |  |  | — |  |  | — |  |  | 178 |  |  | — |  |  | 178 |
Preferred stock dividends paid with common stock |  | — |  | — |  |  | 102,345 |  | — |  | — |  | — |  | 89 |  |  | (89 | ) |  | — |  |  | — |  |  | — |  |  | — |
Net (loss) income |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | (2,169 | ) |  | — |  |  | (2,169 | ) |  | 7 |  |  | (2,162 | )
Balances as of December 31, 2019 |  | 7 |  | $ | 3,559 |  |  | 39,792,081 |  | $ | 40 |  | 1,313,836 |  | $ | (11,603 | ) | $ | 375,489 |  |  | $ | (406,378 | ) |  | $ | 35 |  |  | $ | (38,858 | ) |  | $ | (1,279 | ) |  | $ | (40,137 | )

See accompanying Notes to Condensed Consolidated Financial Statements
6

CINEDIGM CORP.
CONSOLIDATED STATEMENTS OF DEFICIT
(Unaudited)
(In thousands, except share data)

|  | Series A Preferred Stock |  | Class A Common Stock | Treasury | Additional Paid-In Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Loss |  | Total Stockholders' Deficit |  | Non-Controlling Interest | Total Deficit
|  | Shares | Amount |  | Shares | Amount | Shares | Amount |  |  |  |
Balances as of March 31, 2018 |  | 7 |  | $ | 3,559 |  |  | 34,948,139 |  | $ | 35 |  | 1,313,836 |  | $ | (11,603 | ) | $ | 366,223 |  |  | $ | (379,225 | ) |  | $ | (38 | ) |  | $ | (21,049 | ) |  | $ | (1,255 | ) |  | $ | (22,304 | )
Foreign exchange translation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | — |  |  | 4 |  |  | 4 |  |  | — |  |  | 4 |
Stock-based compensation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 86 |  |  | — |  |  | — |  |  | 86 |  |  | — |  |  | 86 |
Preferred stock dividends paid with common stock |  | — |  | — |  |  | 64,194 |  | — |  | — |  | — |  | 89 |  |  | (89 | ) |  | — |  |  | — |  |  | — |  |  | — |
Net loss |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | (3,267 | ) |  | — |  |  | (3,267 | ) |  | (16 | ) |  | (3,283 | )
Balances as of June 30, 2018 |  | 7 |  | 3,559 |  |  | 35,012,333 |  | 35 |  | 1,313,836 |  | (11,603 | ) | 366,398 |  |  | (382,581 | ) |  | (34 | ) |  | (24,226 | ) |  | (1,271 | ) |  | (25,497 | )
Foreign exchange translation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | — |  |  | 12 |  |  | 12 |  |  | — |  |  | 12 |
Stock-based compensation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 317 |  |  | — |  |  | — |  |  | 317 |  |  | — |  |  | 317 |
Preferred stock dividends paid with common stock |  | — |  | — |  |  | 56,869 |  | — |  | — |  | — |  | 89 |  |  | (89 | ) |  | — |  |  | — |  |  | — |  |  | — |
Net loss |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | (3,479 | ) |  | — |  |  | (3,479 | ) |  | (8 | ) |  | (3,487 | )
Balances as of September 30, 2018 |  | 7 |  | 3,559 |  |  | 35,069,202 |  | 35 |  | 1,313,836 |  | (11,603 | ) | 366,804 |  |  | (386,149 | ) |  | (22 | ) |  | (27,376 | ) |  | (1,279 | ) |  | (28,655 | )
Issuance of shares for asset acquisition |  | — |  | — |  |  | 137,667 |  | — |  | — |  | — |  | 106 |  |  | — |  |  | — |  |  | 106 |  |  | — |  |  | 106 |
Foreign exchange translation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | — |  |  | 25 |  |  | 25 |  |  | — |  |  | 25 |
Issuance of common stock for third party professional services |  | — |  | — |  |  | 225,862 |  | 1 |  | — |  | — |  | — |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | 1 |
Fair value of conversion feature in connection with convertible note |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 270 |  |  | — |  |  | — |  |  | 270 |  |  | — |  |  | 270 |
Stock-based compensation |  | — |  | — |  |  | — |  | — |  | — |  | — |  | 361 |  |  | — |  |  | — |  |  | 361 |  |  | — |  |  | 361 |
Issuance of restricted stock to employees |  | — |  | — |  |  | 10,000 |  | — |  | — |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Preferred stock dividends paid with common stock |  | — |  | — |  |  | 74,335 |  | — |  | — |  | — |  | 89 |  |  | (89 | ) |  | — |  |  | — |  |  | — |  |  | — |
Net loss |  | — |  | — |  |  | — |  | — |  | — |  | — |  | — |  |  | (3,258 | ) |  | — |  |  | (3,258 | ) |  | (14 | ) |  | (3,272 | )
Balances as of December 31, 2018 |  | 7 |  | $ | 3,559 |  |  | 35,517,066 |  | $ | 36 |  | 1,313,836 |  | $ | (11,603 | ) | $ | 367,630 |  |  | $ | (389,496 | ) |  | $ | 3 |  |  | $ | (29,871 | ) |  | $ | (1,293 | ) |  | $ | (31,164 | )

See accompanying Notes to Condensed Consolidated Financial Statements
7

CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

| Nine Months Ended December 31,
| 2019 |  | 2018
Cash flows from operating activities: |  |  |
Net loss | $ | (10,289 | ) |  | $ | (10,042 | )
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |
Depreciation and amortization of property and equipment and amortization of intangible assets | 7,155 |  |  | 10,426 |
Amortization of debt issuance costs included in interest expense | 992 |  |  | 1,377 |
Provision for doubtful accounts | 321 |  |  | 1,245 |
Recovery for inventory reserve | (460 | ) |  | (49 | )
Stock-based compensation and expenses | 367 |  |  | 764 |
Accretion and PIK interest expense added to note payable | 1,189 |  |  | 1,316 |
Changes in operating assets and liabilities; |  |  |
Accounts receivable | (5,713 | ) |  | (2,010 | )
Inventory | 535 |  |  | 209 |
Unbilled revenue | 654 |  |  | 4,853 |
Prepaids and other current assets | (381 | ) |  | 1,169 |
Accounts payable and accrued expenses | 12,014 |  |  | (1,718 | )
Deferred revenue | (1,066 | ) |  | (1,207 | )
Net cash provided by operating activities | 5,318 |  |  | 6,333 |
Cash flows from investing activities: |  |  |
Purchases of property and equipment | (367 | ) |  | (1,068 | )
Purchases of intangible assets | (10 | ) |  | (111 | )
Net cash used in investing activities | (377 | ) |  | (1,179 | )
Cash flows from financing activities: |  |  |
Payment of notes payable | (15,413 | ) |  | (18,539 | )
Proceeds under revolving credit agreement | 1,224 |  |  | 7,574 |
Proceeds from issuance of convertible note and notes payable | — |  |  | 5,000 |
Net proceeds from issuance of common stock | 5,850 |  |  | — |
Net cash used in financing activities | (8,339 | ) |  | (5,965 | )
Net change in cash and cash equivalents | (3,398 | ) |  | (811 | )
Cash, cash equivalents, and restricted cash at beginning of period | 18,872 |  |  | 18,952 |
Cash, cash equivalents, and restricted cash at end of period | $ | 15,474 |  |  | $ | 18,141 |

See accompanying Notes to Condensed Consolidated Financial Statements
8

CINEDIGM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share information)

1. | NATURE OF OPERATIONS AND LIQUIDITY

Cinedigm Corp. ("Cinedigm," the "Company," "we," "us," or similar pronouns) was incorporated in Delaware on March 31, 2000. We are (i) a leading distributor and aggregator of independent movie, television and other short form content managing a library of distribution rights to thousands of titles and episodes released across digital, physical, theatrical, home and mobile entertainment platforms and (ii) a leading servicer of digital cinema assets for over 12,000 movie screens in both North America and several international countries.
Liquidity
We have incurred net losses historically and have an accumulated deficit of $406.4 million and negative working capital of $54.7 million as of December 31, 2019. We may continue to generate net losses for the foreseeable future. In addition, we have significant debt-related contractual obligations as of December 31, 2019 and beyond.
The Second Lien Loans (as defined in Note 5 - Notes Payable) were to mature on June 30, 2019. On June 28, 2019, the Company entered into a consent agreement with lenders of the Second Lien Loans to an extension of the Second Lien Loans pursuant to which (i) the Company paid down a portion of the outstanding principal amount plus accrued interest to date, and (ii) the maturity date of the remaining outstanding principal amount of the Second Lien Loans was extended to September 30, 2019.
On July 30, 2019, one of the lenders, signed a waiver to defer the receipt of the portion of the outstanding principal amount on the Second Lien Loans agreed to be paid no later than September 30, 2019.
During the nine months ended December 31, 2019, the Company paid $3.4 million of the outstanding Second Lien Loans and expects to obtain additional capital from or through Bison Capital Holding Limited or an affiliate thereof ("Bison") for final payment of the remaining outstanding balances. On October 24, 2019, the Company entered into a consent agreement to extend the maturity date to November 30, 2019. On January 8, 2020, the Company entered into another consent agreement to extend the maturity date to February 17, 2020. There were no consent fees paid for these consent agreements. See Note 5 - Notes Payable and Note 10 - Subsequent Events.
The $10.0 million note payable ("2018 Loan") to Bison Global Investment SPC due July 20, 2019 is guaranteed by Bison Entertainment and Media Group ("BEMG"). On July 20, 2018, the Company also entered into a side letter (the “Letter”) with BEMG, where BEMG agreed to guarantee the payment directly to Bison Global of any amount due if (i) the 2018 Loan matures prior to June 28, 2021 or (ii) Bison Global demands payment of the 2018 Loan, in whole or in part, prior to maturity.
On July 12, 2019, the Company and Bison Global Investment SPC for and on behalf of Global Investment SPC-Bison Global No. 1, another affiliate of Bison (“Bison Global”), entered into a termination agreement (the “Termination Agreement”) with respect to the $10.0 million 2018 Loan. Contemporaneously with the Termination Agreement, the Company entered into a convertible promissory note (“Bison Convertible Note”) with Bison Global for $10.0 million.
The Bison Convertible Note has a term ending on March 4, 2020, and bears interest at 5% per annum. The principal is payable upon maturity, in cash or in shares of our Class A common stock, par value $0.001 per share (the “Common Stock” or "Class A common stock"), or a combination of cash and Common Stock, at the Company’s option. The Bison Convertible Note is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties. The proceeds of the Bison Convertible Note were used to repay the 2018 Loan. The Company expects to enter into an agreement with Bison to extend the Bison Convertible Note or convert it to equity in March 2020. See Note 5 - Notes Payable.
The Bison Convertible Note, offset by the concurrent payoff and termination of the 2018 Loan, did not result in any increase to the Company’s outstanding debt balance.
On July 9, 2019, the Company entered into a common stock purchase agreement (the “July Stock Purchase Agreement”) with BEMG where 2,000,000 shares of Common Stock (the “ July SPA Shares”), for an aggregate purchase price in cash of $3.0 million priced at $1.50 per share was sold to BEMG. The SPA Shares are subject to certain transfer restrictions. The proceeds of
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the sale of the July SPA Shares sold were used for working capital purposes and the repayment of Second Lien Loans (as defined in Note 5 - Notes Payable). In addition, the Company agreed to enter into a registration rights agreement for the resale of the July SPA Shares.
On August 2, 2019, the Company entered into another common stock purchase agreement (the "August Stock Purchase Agreement") with BEMG, where the Company sold to BEMG a total of 1,900,000 shares of Common Stock (the “August SPA Shares”), for an aggregate purchase price in cash of $2.9 million priced at $1.50 per share. The August SPA Shares are subject to certain transfer restrictions. The proceeds of the sale of the August SPA Shares sold were used for working capital purposes. In addition, the Company agreed to enter into a registration rights agreement for the resale of the August SPA Shares.
On October 9, 2018, the Company issued a subordinated convertible note (the “Convertible Note”) to MingTai Investment LP (the “Lender”) for $5.0 million. All proceeds from the Convertible Note were used to pay the $5.0 million 2013 Notes described above. See Note 5 - Notes Payable. The Convertible Note bears interest at 8% and matures on October 9, 2019 with one additional year extension at the Company's option. On October 9, 2019, the Company exercised its option to extend for an additional year. The new maturity date of the Convertible Note is October 9, 2020.
On July 3, 2019, the Company entered into an amendment (the “EWB Amendment”) to the Loan, Guaranty and Security Agreement, dated as of March 30, 2018, by and between the Company, East West Bank and the Guarantors named therein (the “EWB Credit Agreement”). The EWB Amendment reduced the size of the facility to $18.0 million, required certain prepayments and daily cash sweeps from collections of receivables to be made, changed in certain respects how the borrowing base is calculated, and extended the maturity date to June 30, 2020. In connection with the EWB Amendment, three of our subsidiaries became Guarantors under the EWB Credit Agreement.
On July 26, 2019, the previously announced Agreement and Plan of Merger, dated as of March 14, 2019, among the Company, C&F Merger Sub, Inc., a wholly-owned subsidiary of the Company, Future Today Inc, Alok Ranjan and Vikrant Mathur (individually and as Stockholder Representative) and the Company Stockholders identified therein, was amended (the “Merger Amendment”). Pursuant to the Merger Amendment, among other things, the parties (x) extended the End Date and exclusivity period to July 31, 2019, (y) provided for payment of a non-refundable deposit of $500,000 by the Company, and (z) provided the Company with the unilateral right to extend the End Date and exclusivity period to August 14, 2019 upon making an additional non-refundable deposit of $500,000. Any non-refundable deposit(s) made prior to closing will be credited against the purchase price at closing. On July 31, 2019, the Company exercised its right to extend to August 14, 2019. Effective January 1, 2020, the Agreement and Plan of Merger was terminated. See Note 10 - Subsequent Events. Because of the termination of the Merger Agreement, $1.0 million deposit of purchase price was forfeited and written off during the three months ended December 31, 2019.
On October 9, 2019, the Company elected to extend the term of the Convertible Note with Ming Tai Investment LP to mature the Convertible Note on October 9, 2020. The Convertible Note is for $5.0 million and bears interest at 8%. See Note 5 - Notes Payable.
On January 13, 2020, Bison Entertainment Investment Limited, the Company’s majority stockholder, signed a written consent approving the acquisition by the Company of shares of Starrise Media Limited, a leading Chinese entertainment company, from two of Starrise’s stockholders. The Company mailed a definitive information statement to its stockholders in late January. The Company closed on the purchase of 162,162,162 Starrise shares and issued 21,646,604 shares of Common Stock as consideration therefor on February 14, 2020, and expects to close on the remainder of the Starrise shares as soon as practicable.
We believe the combination of: (i) our cash and cash equivalent balances at December 31, 2019, (ii) expected cash flows from operations, and (iii) the support or availability of funding from Bison and its related parties and other capital resources and financing will be sufficient to satisfy our contractual obligations, operational and liquidity and capital requirements to February 2021. Our capital requirements will depend on many factors, and we may need to use capital resources and obtain additional capital. Failure to generate additional revenues, obtain additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations and liquidity.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying condensed consolidated financial statements are unaudited and include the accounts of the Company, its wholly owned and majority owned subsidiaries, and reflect all normal and recurring adjustments necessary for the fair presentation of its consolidated financial position, results of operations and cash flows. All material inter-company accounts and transactions have been eliminated in consolidation.
Investments in which we do not have a controlling interest or are not the primary beneficiary but have the ability to exert significant influence are accounted for under the equity method of accounting. Noncontrolling interests for which we have been determined to be the primary beneficiary are consolidated and recorded as net loss attributable to noncontrolling interest. See Note 3 - Other Interests to the Condensed Consolidated Financial Statements for a discussion of our noncontrolling and majority interests.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include the adequacy of accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, intangible asset impairment and estimated amortization lives and valuation allowances for income taxes. Actual results could differ from these estimates.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), although we believe that the disclosures are adequate to make the information presented not misleading. The results of operations for the respective interim periods are not necessarily indicative of the results expected for the full year. These Condensed Consolidated Financial Statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.
SIGNIFICANT ACCOUNTING POLICES
The significant accounting policies used in the preparation of these condensed consolidated financial statements for the three and nine months ended December 31, 2019 are consistent with those disclosed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended March 31, 2019 except as noted below.
RECLASSIFICATIONS
Certain amounts in the prior year consolidated balance sheet has been reclassified to conform to the presentation of the current period.
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
We consider all highly liquid investments with an original maturity of three months or less to be "cash equivalents." We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance Corporation’s insured limits. We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal. Our Prospect Loan (as defined below) requires that we maintain specified cash balances that are restricted to repayment of interest thereunder. See Note 5 - Notes Payable for information about our restricted cash balances.
Cash, cash equivalents, and restricted cash consisted of the following:
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| As of
(in thousands) | December 31, 2019 |  | March 31, 2019 |
Cash and Cash Equivalents | $ | 14,474 |  |  | $ | 17,872 |
Restricted Cash | 1,000 |  |  | 1,000 |
| $ | 15,474 |  |  | $ | 18,872 |

ACCOUNTS RECEIVABLE
We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
We record accounts receivable, long-term in connection with activation fees that we earn from Systems deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rates.
ADVANCES
Advances, which are recorded within prepaid and other current assets on the condensed consolidated balance sheets, represent amounts prepaid to studios or content producers for which we provide content distribution services. We evaluate advances regularly for recoverability and record impairment charges for amounts that we expect may not be recoverable as of the consolidated balance sheet date. Impairments and accelerated amortization related to advances were $0.3 million and $0.3 million, respectively for the three months ended December 31, 2019 and 2018. Impairments and accelerated amortization related to advances were $0.7 million and $0.9 million, respectively for the nine months ended December 31, 2019 and 2018.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

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

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leasehold improvements. Repair and maintenance costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized. Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss on disposal is included in the condensed consolidated statements of operations.
FAIR VALUE MEASUREMENTS
The fair value measurement disclosures are grouped into three levels based on valuation factors:

• | Level 1 – quoted prices in active markets for identical investments

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

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

Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities.
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The following tables summarize the levels of fair value measurements of our financial assets and liabilities as of December 31, 2019 and March 31, 2019:

(in thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Restricted cash |  | $ | 1,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,000 |

Our cash and cash equivalents, accounts receivable, unbilled revenue and accounts payable and accrued expenses are financial instruments and are recorded at cost in the condensed consolidated balance sheets. The estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature. At December 31, 2019 and March 31, 2019, the estimated fair value of our fixed rate debt approximated its carrying amounts. We estimated the fair value of debt based upon current interest rates available to us at the respective balance sheet dates for arrangements with similar terms and conditions. Based on borrowing rates currently available to us for loans with similar terms, the fair value of the variable rate debt is $13.1 million, and capital lease obligations approximates fair value.
IMPAIRMENT OF LONG-LIVED AND FINITE-LIVED ASSETS
We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the asset, the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset's fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. During the three months and nine months ended December 31, 2019 and 2018, no impairment charge was recorded from operations for long-lived assets or finite-lived assets.
GOODWILL
Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.
Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.
No goodwill impairment charge was recorded in the three and nine months ended December 31, 2019 and 2018.
Gross amounts of goodwill and accumulated impairment charges that we have recorded are as follows:

(In thousands) |  |
Goodwill |  | $ | 32,701 |
Accumulated impairment charges |  | (24,000 | )
Goodwill at December 31, 2019 and March 31, 2019 |  | $ | 8,701 |

REVENUE RECOGNITION
We determine revenue recognition by:

• | identifying the contract, or contracts, with the customer;

• | identifying the performance obligations in the contract;

• | determining the transaction price;

• | allocating the transaction price to performance obligations in the contract; and

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

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We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVDs and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and VOD services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities such as sales value-added taxes and other similar taxes.
Payment terms and conditions vary by customer and typically provide net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less. We have in the past entered into arrangements in connection with activation fees due from our digital cinema equipment (the “Systems”) deployments that had extended payment terms. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.
Cinema Equipment Business
Virtual print fees (“VPFs”) are earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio to Cinedigm Digital Funding I, LLC. ("Phase 1 DC") and to Access Digital Cinema Phase 2 Corp. (“Phase 2 DC”) when movies distributed by the studio are displayed on screens utilizing our Systems installed in movie theatres. VPFs are earned and payable to Phase 1 DC based on a defined fee schedule until the end of the VPF term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period in which the digital title first plays on a System for general audience viewing in a digitally equipped movie theatre, as Phase 1 DC’s and Phase 2 DC’s performance obligations have been substantially met at that time.
Phase 2 DC’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 2 DC may no longer collect VPFs once “cost recoupment,” as defined in the contracts with movie studios and distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase 2 DC have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter. Further, if cost recoupment occurs before the end of the eighth contract year, the studios will pay us a one-time “cost recoupment bonus.” The Company evaluated the constraining estimates related to the variable consideration, i.e. the one-time bonus and determined that it is not probable to conclude at this point in time, that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. As permitted by these agreements, we have begun, and expect to continue, to pursue the sale of the Systems to such exhibitors. Such sales were as originally contemplated as the conclusion of the digital cinema deployment plan. During the three and nine months ended December 31, 2019, there was $0.2 million and $1.2 million, respectively, of digital System sales revenue for the sale of 24 and 136 digital projection Systems, respectively.
Revenues earned in connection with up front exhibitor contributions are deferred and recognized over the expected cost recoupment period.
Exhibitors who purchased and own Systems using their own financing in the Cinema Equipment Business paid us an upfront activation fee of approximately $2.0 thousand per screen (the “Exhibitor-Buyer Structure”). Upfront activation fees were recognized in the period in which these Systems were delivered and ready for content, as we had no further obligations to the customer after that time and collection was reasonably assured. In addition, we recognize activation fee revenue of between $1.0 thousand and $2.0 thousand on Phase 2 DC Systems and for Systems installed by CDF2 Holdings, a related party (See Note 3 - Other Interests), upon installation and such fees are generally collected upfront upon installation. Our services segment manages and collects VPFs on behalf of exhibitors, for which it earns an administrative fee equal to 10% of the VPFs collected.
The Cinema Equipment Business earns an administrative fee of approximately 5% of VPFs collected and, in addition, earns an incentive service fee equal to 2.5% of the VPFs earned by Phase 1 DC. This administrative fee is related to the collection and remittance of the VPF’s and the performance obligation is satisfied at that time the related VPF fees are due which is at the time
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the movies are displayed on screens utilizing our Systems installed in movie theatres. The service fees are recognized as a point in time revenue when the corresponding VPF fees are due from the movie studios and distributors.
Content & Entertainment Business
CEG earns fees for the distribution of content in the home entertainment markets via several distribution channels, including digital, video on demand ("VOD"), and physical goods (e.g. DVD and Blu-ray Discs). Fees earned are typically based on the gross amounts billed to our customers less the amounts owed to the media studios or content producers under distribution agreements, and gross media sales of owned or licensed content. 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 subscription on the digital platform, shipment of DVD and Blu-ray Discs, or make available at point-of-sale for transactional and VOD services. Revenue is recognized at the point in time when the performance obligation is satisfied which is when the content is available for subscription on the digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation. Revenue is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.
Reserves for sales returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.
CEG also has contracts for the theatrical distribution of third party feature movies and alternative content. CEG’s distribution fee revenue and CEG's participation in box office receipts is recognized at the time a feature movie and alternative content are viewed. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third party feature movies’ or alternative content’s theatrical release date.
Principal Agent Considerations
We determine whether revenue should be reported on a gross or net basis based on each revenue stream. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:

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

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

Based on our evaluation of the above indicators, we concluded that there were no changes to our gross versus net reporting from legacy GAAP.
Shipping and Handling
Shipping and handling costs are incurred to move physical goods (e.g. DVD and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.
Contract Liabilities
We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.
We maintain reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
Our CEG segment recognizes accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that it recognizes revenue from a sale. Reserves for product returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required. Sales returns and allowances are reported as a reduction of revenues.
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We record accounts receivable, long-term in connection with activation fees that we earn from Systems deployments that have extended payment terms. Such accounts receivable are discounted to their present value at prevailing market rates. The outstanding balances on these arrangements are insignificant and hence the impact of significant financing would be insignificant.
Deferred revenue pertaining to our Content & Entertainment Business includes amounts related to the sale of DVDs with future release dates.
Deferred revenue relating to our Cinema Equipment Business pertains to revenues earned in connection with up front exhibitor contributions that are deferred and recognized over the expected cost recoupment period. It also includes unamortized balances in connection with activation fees due from the Systems deployments that have extended payment terms.
The ending deferred revenue balance, including current and non-current balances, as of December 31, 2019 was $3.0 million. For the three months ended December 31, 2019, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.
During the three and nine months ended December 31, 2019, $1.3 million and $3.4 million, respectively of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. As of December 31, 2019, the aggregate amount of contract revenue allocated to unsatisfied performance obligations was $3.0 million. We expect to recognize approximately $1.6 million of this balance over the next 12 months, and the remainder thereafter.
Disaggregation of Revenue
The Company disaggregates revenue into different revenue categories for the Cinema Equipment and CEG Businesses. The Cinema Equipment Business revenue categories are: Phase I Deployment revenue, Phase II Deployment revenue, Services, Digital System Sales, and the Content & Entertainment Business revenue categories are: Base Distribution Business and OTT Streaming and Digital.
The following tables present the Company's revenue categories for the three and nine months ended December 31, 2019:
(in thousands):

| Three Months Ended December 31, |  | Nine Months Ended December 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Cinema Equipment Business: |  |  |  |  |  |  |
Phase I Deployment | $ | 1,402 |  |  | $ | 2,156 |  |  | $ | 4,797 |  |  | $ | 7,424 |
Phase II Deployment | 444 |  |  | 1,754 |  |  | 1,326 |  |  | 8,191 |
Services | 1,043 |  |  | 1,410 |  |  | 3,378 |  |  | 4,311 |
Digital System Sales | 240 |  |  | — |  |  | 1,266 |  |  | — |
Total Cinema Equipment Business revenue | $ | 3,129 |  |  | $ | 5,320 |  |  | $ | 10,767 |  |  | $ | 19,926 |
Content & Entertainment Business: |  |  |  |  |  |  |
Base Distribution Business | $ | 5,286 |  |  | $ | 6,565 |  |  | $ | 11,944 |  |  | $ | 14,298 |
OTT Streaming and Digital | 3,097 |  |  | 2,758 |  |  | 8,845 |  |  | 7,241 |
Total Content & Entertainment Business revenue | $ | 8,383 |  |  | $ | 9,323 |  |  | $ | 20,789 |  |  | $ | 21,539 |

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

|  | Three Months Ended December 31, |  | Nine Months Ended December 31,
(In thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Selling, general and administrative |  | $ | 178 |  |  | $ | 361 |  |  | $ | 367 |  |  | $ | 763 |
|  | $ | 178 |  |  | $ | 361 |  |  | $ | 367 |  |  | $ | 763 |

During the three months and nine months ended December 31, 2019, the Company did not grant any stock appreciation rights ("SARs"). During the three months ended December 31, 2018, the Company granted 1,222,830 SARs to a Company executive. There were 2,277,830 SARs granted to our Chief Executive Officer and other executives during the nine months ended December 31, 2018 of which 815,220 SARs were forfeited due to the terminations of two executives during the year ended March 31, 2019.
The SARs were granted under the Company's 2017 Equity Incentive Plan (the "2017 Plan"). There was $111 thousand and $332 thousand of stock-based compensation recorded for the three and nine months ended December 31, 2019, respectively relating to these SARs. There was $178 thousand and $282 thousand stock-based compensation recorded for the three and nine months ended December 31, 2018.
Total SARs outstanding are as follows:

|  | Nine Months Ended December 31, 2019
SARs Outstanding March 31, 2019 |  | 1,462,610 |
Issued |  | — |
Forfeited |  | — |
Total SARs Outstanding December 31, 2019 |  | 1,462,610 |

On July 26, 2018, the Company granted 1,941,402 units of performance stock units ("PSUs") to certain executives and employees under the 2017 Plan. The total units represent the maximum number of units eligible to vest at the end of the performance period. The awards vest in two tranches; one at each of March 31, 2019 and March 31, 2020, based on the Company achieving certain financial targets at each period. The Company engaged an outside consulting firm to provide valuation services relating to estimating the fair value of these PSUs each reporting period. Based on their analysis as of December 31, 2019 using the Monte Carlo simulation technique, the estimated per unit fair value of the PSU's, was $0.00 based on the projections. The Company recorded a cumulative adjustment of $166 thousand of stock-based compensation in the nine months ended December 31, 2019.
The PSUs outstanding are as follows:

|  | Nine Months Ended December 31, 2019
PSUs Outstanding March 31, 2019 |  | 1,390,584 |
Forfeited |  | (29,275 | )
Total PSUs Outstanding December 31, 2019 |  | 1,361,309 |

There was $2 thousand and $4 thousand of stock-based compensation recorded in the three and nine months ended December 31, 2019, respectively, related to employees' restricted stock awards.
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INCOME TAXES
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.
Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized. The Company is primarily subject to income taxes in the United States.
The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is "more-likely-than-not" to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the "more-likely-than-not" threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions.
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS
Basic and diluted net loss per common share has been calculated as follows:

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

Shares issued and any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding.
We incurred net losses for the three and nine months ended December 31, 2019 and 2018, and therefore the impact of potentially dilutive common shares from outstanding stock options and warrants, totaling 4,066,172 shares and 5,043,341 shares as of December 31, 2019 and 2018, respectively, and 9,999,999 shares from the convertible notes issued on October 9, 2018 and on July 12, 2019, were excluded from the computations of loss per share, as their impact would have been anti-dilutive.
COMPREHENSIVE LOSS
As of the three and nine months ended December 31, 2019 and 2018, comprehensive loss consisted of net loss and foreign currency translation adjustments.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recently adopted
In February, 2016, the Financial Accounting Standards Board ("FASB") issued guidance amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. On April 1, 2019, the Company adopted the new leasing standard using the prospective transaction method. See Note 7- Commitments and Contingencies for further details.
In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods, with early adoption permitted. The Company adopted the guidance as of April 1, 2019 and it did not have a material impact on the Company’s consolidated financial statements.
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Not yet adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how the Company determines its allowance for estimated uncollectible receivables and evaluates its available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of 2023. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.
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 Accounting Standards Codification Topic 810 ("ASC 810"), “Consolidation." ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE. To be a primary beneficiary, an entity must have the power to direct the activities of a VIE that most significantly impact the VIE's economic performance, among other factors. Although we indirectly, wholly own CDF2 Holdings, we, a third party that also has a variable interest in CDF2 Holdings, and an independent third party manager must mutually approve all business activities and transactions that significantly impact CDF2 Holdings' economic performance. We have therefore assessed our variable interests in CDF2 Holdings and determined that we are not the primary beneficiary of CDF2 Holdings. As a result, CDF2 Holdings' financial position and results of operations are not consolidated in our financial position and results of operations. In completing our assessment, we identified the activities that we consider most significant to the economic performance of CDF2 Holdings and determined that we do not have the power to direct those activities, and therefore we account for our investment in CDF2 Holdings under the equity method of accounting.
As of December 31, 2019 and March 31, 2019, our maximum exposure to loss, as it relates to the non-consolidated CDF2 Holdings entity, represents accounts receivable for service fees under a master service agreement with CDF2 Holdings. Such accounts receivable was $0.5 million and $0.4 million as of December 31, 2019 and March 31, 2019 which are included in accounts receivable, net on the accompanying condensed consolidated balance sheets.
The accompanying Condensed Consolidated Statements of Operations include $0.3 million and $0.9 million of digital cinema servicing revenue from CDF2 Holdings for each of the three months and nine months ended December 31, 2019 and 2018, respectively.
Total Stockholders' Deficit of CDF2 Holdings at December 31, 2019 and March 31, 2019 was $30.1 million and $28.9 million, respectively. We have no obligation to fund the operating loss or the stockholders' deficit beyond our initial investment of $2.0 million and, accordingly, our investment in CDF2 Holdings as of December 31, 2019 and March 31, 2019 is carried at $0.
Majority Interest in CONtv
We own an 85% interest in CON TV, LLC, a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the Internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.
4. INCOME TAXES
We calculate income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions. For each of the three months ended December 31, 2019 and 2018, we recorded income tax expense of approximately $0.1 million. We calculate income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions. For each of the nine months ended December 31, 2019 and 2018, we recorded income tax expense of approximately $0.2 million. We have not recorded tax benefits on our loss before income taxes because we have provided for a full valuation allowance that
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offsets potential deferred tax assets resulting from net operating loss carry forwards, reflecting our inability to use such loss carry forwards.
Our effective tax rate for the nine months ended December 31, 2019 and 2018 was negative 2.0%.
5. NOTES PAYABLE
Notes payable consisted of the following:

|  | December 31, 2019 |  | March 31, 2019
(In thousands) |  | Current Portion |  | Long Term Portion |  | Current Portion |  | Long Term Portion
Prospect Loan |  | $ | — |  |  | $ | 12,559 |  |  | $ | — |  |  | $ | 20,627 |
Total non-recourse notes payable |  | — |  |  | 12,559 |  |  | — |  |  | 20,627 |
Less: Unamortized debt issuance costs and debt discounts |  | — |  |  | (955 | ) |  | — |  |  | (1,495 | )
Total non-recourse notes payable, net of unamortized debt issuance costs and debt discounts |  | $ | — |  |  | $ | 11,604 |  |  | $ | — |  |  | $ | 19,132 |
Bison Note Payable |  | $ | — |  |  | $ | — |  |  | $ | 10,000 |  |  | $ | — |
Bison Convertible Note |  | 10,000 |  |  |  |  |  |  |
Second Lien Loans |  | 8,113 |  |  | — |  |  | 11,132 |  |  | — |
Credit Facility |  | 15,887 |  |  | — |  |  | 18,623 |  |  | — |
Convertible Note |  | 5,000 |  |  | — |  |  | 5,000 |  |  | — |
Total recourse notes payable |  | 39,000 |  |  | — |  |  | 44,755 |  |  | — |
Less: Unamortized debt issuance costs and debt discounts |  | (690 | ) |  | — |  |  | (1,436 | ) |  | — |
Total recourse notes payable, net of unamortized debt issuance costs and debt discounts |  | $ | 38,310 |  |  | $ | — |  |  | $ | 43,319 |  |  | $ | — |
Total notes payable, net of unamortized debt issuance costs |  | $ | 38,310 |  |  | $ | 11,604 |  |  | $ | 43,319 |  |  | $ | 19,132 |

Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults, is limited to the value of the asset, which is collateral for the debt. Certain of our subsidiaries are liable with respect to, and their assets serve as collateral for, certain indebtedness for which our assets and the assets of our other subsidiaries that are not parties to the transaction are generally not liable. We have referred to this indebtedness as "non-recourse debt" because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan.
Prospect Loan
In February 2013, our DC Holdings, AccessDM and Phase 2 DC subsidiaries entered into a term loan agreement (the “Prospect Loan”) with Prospect Capital Corporation (“Prospect”), pursuant to which DC Holdings borrowed $70.0 million. The Prospect Loan bears interest at LIBOR plus 9.0% (with a 2.0% LIBOR floor), which is payable in cash, and at an additional 2.50% to be accrued as an increase to the aggregate principal amount of the Prospect Loan until the 2013 Credit Agreement is paid off, at which time all accrued interest will be payable in cash.
Collections of DC Holdings accounts receivable are deposited into accounts designated to pay certain operating expenses, principal, interest, fees, costs and expenses relating to the Prospect Loan. On a quarterly basis, if there is excess cash flow, it is used for prepayment of the Prospect Loan. We also maintain a debt service fund under the Prospect Loan for future principal and interest payments. As of December 31, 2019, and March 31, 2019, the debt service fund had a balance of $1.0 million, which is classified as part of restricted cash on our Condensed Consolidated Balance Sheets.
The Prospect Loan matures on March 31, 2021 and may be accelerated upon a change in control (as defined in the agreement) or other events of default as set forth therein and would be subject to mandatory acceleration upon insolvency of DC Holdings. We are permitted to pay the full outstanding balance of the Prospect Loan at any time after the second anniversary of the initial borrowing, subject to the following prepayment penalties:

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

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

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

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

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

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

The Prospect Loan is secured by, among other things, a first priority pledge of the stock of CDF2 Holdings, our wholly owned unconsolidated subsidiary, the stock of AccessDM, owned by DC Holdings, and the stock of our Phase 2 DC subsidiary, and is also guaranteed by AccessDM and Phase 2 DC. We provide limited financial support to the Prospect Loan not to exceed $1.5 million per year in the event financial performance does not meet certain defined benchmarks.
The Prospect Loan contains customary representations, warranties, affirmative covenants, negative covenants and events of default.
The following table summarizes the activity related to the Prospect Loan:

|  | As of
(In thousands) |  | December 31, 2019 |  | March 31, 2019
Prospect Loan, at issuance |  | $ | 70,000 |  |  | $ | 70,000 |
PIK Interest |  | 4,778 |  |  | 4,778 |
Payments to date |  | (62,219 | ) |  | (54,151 | )
Prospect Loan, net |  | 12,559 |  |  | 20,627 |
Less current portion |  | — |  |  | — |
Total long term portion |  | $ | 12,559 |  |  | $ | 20,627 |

Bison Note Payable
As discussed in Note 1 - Nature of Operations and Liquidity, the Company entered into a loan with Bison for $10.0 million and issued Warrants to purchase 1,400,000 shares of the Company's Class A common stock. See Note 6 - Stockholders' Deficit for further discussion of the warrants.
The loan was made in accordance with the Stock Purchase Agreement between the Company and Bison Entertainment Investment Limited, another affiliate of Bison, entered into on June 29, 2017.
On July 20, 2018, the Company entered into a term loan agreement (the “2018 Loan Agreement”) with Bison Global Investment SPC, pursuant to which the Company borrowed from Bison Global $10.0 million (the “2018 Loan”). The 2018 Loan has a one (1) year term that may be extended by mutual agreement of Bison Global and the Company and bears interest at 5% per annum, payable quarterly in cash. On July 12, 2019, we entered into a Termination Agreement for the 2018 Loan and at the same time entered into a $10.0 million Bison Convertible Note with Bison Global.
$10.0 Million Loan converted into Convertible Note
The Bison Convertible Note has a term ending on March 4, 2020, and bears interest at 5% per annum. The principal is due on March 4, 2020, in cash or in shares of Common Stock, or a combination of cash and Common Stock, at the Company’s option. The Bison Convertible Note is convertible at the Company's option, at any time prior to payment in full of the principal balance and all accrued interest of the note, to convert this note in whole or in part, into fully paid and nonassessable shares of the Company's Class A common stock. The Bison Convertible Note is Convertible into 6,666,666 shares of Company's Class A common stock, based on initial conversion price of $1.50 per share.
As a result of our cash conversion option, we separately accounted for the value of the embedded conversion option as a debt discount (with an offset to additional paid-in-capital) of $478 thousand. The value of the embedded conversion option was determined based on the estimated fair value of the debt without the conversion feature, which was determined using market comparables to estimate the fair value of similar non-convertible debt; the debt is being amortized to interest expense using the effective interest method over the term of the note.
The Bison Convertible Note is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties. The proceeds of the Bison Convertible Note were used to repay the 2018 Loan.
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The Bison Convertible Note, offset by the concurrent payoff and termination of the 2018 Loan, did not result in any increase to the Company’s outstanding debt balance. The Company expects to enter into an agreement with Bison to extend the Bison Convertible Note or convert it to equity in March 2020.
Second Lien Loans
On July 14, 2016, we entered into a Second Lien Loan Agreement (the “Second Lien Loan Agreement”), under which we may borrow up to $15.0 million (the “Second Lien Loans”), subject to certain limitations imposed on us regarding the number of shares that we may issue in connection with the loans. As of December 31, 2019 we have an outstanding balance of $8.1 million which includes $4.0 million borrowed from Ronald L. Chez, at that time a member of the Board of Directors. Mr. Chez resigned from the Board of Directors in April 2017, and became a strategic advisor to the Company. The Second Lien Loans bear interest at 12.75%, payable 7.5% in cash and 5.25% in cash or in kind at our option. Before the June 30, 2019 maturity date, on June 28, 2019, the Company entered into a consent agreement with lenders of the Second Lien Loans to an extension of the Second Lien Loans pursuant to which (i) the Company paid down a portion of the outstanding principal amount plus accrued interest to date, and (ii) the maturity date of the remaining outstanding principal amount of the Second Lien Loans was extended to September 30, 2019.
On July 30, 2019, one of the lenders, signed a waiver to defer the receipt of the portion of the outstanding principal amount and the Second Lien Loans agreed to be paid no later than September 30, 2019.
In addition, under the terms of the Second Lien Loan Agreement, we are required to issue 98,000 shares of our Class A common stock for every $1.0 million borrowed, subject to pro rata adjustments. As of December 31, 2019, we have issued 906,450 shares of Class A common stock cumulatively under the Second Lien Loan Agreement. There were no shares issued in the three and nine months ended December 31, 2019. The Second Lien Loans may be prepaid without premium or penalty and contain customary covenants, representations and warranties. The obligations under the Second Lien Loans are guaranteed by certain of our existing and future subsidiaries. We have pledged substantially all of our assets, except those assets related to our digital cinema deployment business, to secure payment on the Second Lien Loans.
During the nine months ended December 31, 2019, the Company paid $3.4 million of the outstanding Second Lien Loans and expects to obtain additional capital from or through Bison Capital Holding Limited or an affiliate thereof ("Bison") for final payment of the remaining outstanding balances of the Second Lien Loans. On October 24, 2019, the Company entered into a consent agreement to extend the maturity date to November 30, 2019. On January 8, 2020, the Company entered into another consent agreement to extend the maturity date to February 17, 2020. There were no consent fees paid for these consent agreements. See Note 10 - Subsequent Events.
Credit Facility and Cinedigm Revolving Loans
On March 30, 2018, the Company entered into a Credit Facility with a retail bank for a maximum of $19.0 million in revolving loans outstanding at any one time with a maturity date of March 31, 2020, which may be extended for two successive one-year periods at the sole discretion of the lender, subject to certain conditions.
Interest under the Credit Facility is due monthly at a rate elected by the Company of either 0.5% plus Prime Rate or 3.25% above LIBOR Rate established by the lender.
As of December 31, 2019 and March 31, 2019, there was $15.9 million and $18.6 million outstanding, respectively, and there was no additional availability, under the Credit Facility based on the Company's borrowing base as of December 31, 2019. On July 3, 2019, the Company entered into the EWB Amendment to the Loan, Guaranty and Security Agreement, dated as of March 30, 2018, by and between the Company, East West Bank and the Guarantors named therein. The EWB Amendment reduced the size of the facility to $18.0 million, required certain prepayments and daily cash sweeps from collections of receivables to be made, changed in certain respects how the borrowing base is calculated, and extended the maturity date to June 30, 2020. In connection with the EWB Amendment, three of our subsidiaries became Guarantors under the EWB Credit Agreement.
Convertible Note
On October 9, 2018, the Company issued a Convertible Note for $5.0 million. All proceeds from the Convertible Note were used to pay the $5.0 million 2013 Notes described below. The $5.0 million in aggregate principal bears interest at 8% and
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matures on October 9, 2019 with two one year extensions at the Company's option. On October 9, 2019, the Company extended the note for one additional year and the new maturity date of the Convertible Note is October 9, 2020. The Convertible Note is convertible into 3,333,333 shares of the Company's Class A common stock, based on initial conversion price of $1.50 per share.
The Convertible Note is convertible at the option of the Lender, or the Company, at any time prior to payment in full of the principal balance, and all accrued interest of this Convertible Note in whole, or in part, into fully paid and non-assessable shares of Company’s Class A common stock at the conversion rate of $1.50.
Upon conversion prior to maturity by the Lender, or the Company, we may elect to settle such conversion in shares of our Class A common stock, cash or a combination thereof. Upon the maturity date, the Company has the option to pay in Class A common shares convertible at the greater of the closing price of the Class A common stock or $1.10. As a result of our cash conversion option, we separately accounted for the value of the embedded conversion option as a debt discount (with an offset to additional paid-in capital) of $270 thousand. The value of the embedded conversion option was determined based on the estimated fair value of the debt without the conversion feature, which was determined using market comparables to estimate the fair value similar non-convertible debt; the debt discount is being amortized to interest expense using the effective interest method over the one year term of the Convertible Note.
6. STOCKHOLDERS’ DEFICIT
COMMON STOCK
During the nine months ended December 31, 2019, we issued 4,113,484 shares of Class A common stock in connection with the sale of 3,900,000 shares of our Class A common stock and the issuance of Class A common stock for preferred stock dividends. See Note - 8 Supplemental Cash Flow Disclosure.
PREFERRED STOCK
Cumulative dividends in arrears on preferred stock were $0.1 million as of December 31, 2019 and 2018. In January 2020, we paid the preferred stock dividends in arrears in the form of 124,622 shares of Class A common stock.
TREASURY STOCK
We have treasury stock, at a cost, consisting of 1,313,836 shares of Class A common stock at each of December 31, 2019 and March 31, 2019.
CINEDIGM’S EQUITY INCENTIVE PLANS
Stock Based Compensation Awards
Awards issued under our 2000 Equity Incentive Plan (the "2000 Plan") may be in any of the following forms (or a combination thereof) (i) stock option awards; (ii) stock appreciation rights; (iii) stock or restricted stock or restricted stock units; or (iv) performance awards. The 2000 Plan provides for the granting of incentive stock options (“ISOs”) with exercise prices not less than the fair market value of our Class A Common Stock on the date of grant. ISOs granted to shareholders having more than 10% of the total combined voting power of the Company must have exercise prices of at least 110% of the fair market value of our Class A Common Stock on the date of grant. ISOs and non-statutory stock options granted under the 2000 Plan are subject to vesting provisions, and exercise is subject to the continuous service of the participant. The exercise prices and vesting periods (if any) for non-statutory options are set at the discretion of our compensation committee. On November 1, 2017, upon the consummation of the transactions pursuant to the Stock Purchase Agreement, as a result of which there was a change of control of the Company, all stock options (incentive and non-statutory) and shares of restricted stock were vested immediately and the options became fully exercisable.
In connection with the grants of stock options and shares of restricted stock under the 2000 Plan, we and the participants have executed stock option agreements and notices of restricted stock awards setting forth the terms of the grants. The 2000 Plan provided for the issuance of up to 2,380,000 shares of Class A Common Stock to employees, outside directors and consultants.
As of December 31, 2019, there were 274,116 stock options outstanding in the Plan with weighted average exercise price of $15.00 and a weighted average contract life of 3.36 years. As of March 31, 2019, there were 300,315 shares outstanding in the Plan with weighted average exercise price of $14.87 and a weighted average contract life of 3.79 years.
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In August 2017, the Company adopted the 2017 Plan. The 2017 Plan replaced the 2000 Plan, and applies to employees and directors of, and consultants to, the Company. The 2017 Plan provided for the issuance of up to 2,108,270 shares of Class A common stock, in the form of various awards, including stock options, stock appreciation rights, stock, restricted stock, restricted stock units, performance awards and cash awards. The Compensation Committee of the Company’s Board of Directors (the “Board”) is authorized to administer the 2017 Plan and make grants thereunder. The approval of the 2017 Plan does not affect awards already granted under the 2000 Plan. On December 4, 2019, upon shareholder approval, the 2017 Plan was amended to increase the maximum number of shares of Class A common stock authorized for issuance thereunder from 2,108,270 shares to 4,098,270.
An analysis of all options outstanding under the 2000 Plan as of December 31, 2019 is as follows:

As of December 31, 2019
Range of Prices |  | Options Outstanding |  | Weighted Average Remaining Life in Years |  | Weighted Average Exercise Price |  | Aggregate Intrinsic Value (In thousands)
$1.16 - $7.40 |  | 5,000 |  |  | 5.50 |  | $ | 7.40 |  |  | $ | — |
$13.70 - $24.40 |  | 261,616 |  |  | 3.37 |  | 14.71 |  |  | — |
$30.00 - $ 50.00 |  | 7,500 |  |  | 1.63 |  | 30.00 |  |  | — |
|  | 274,116 |  |  |  |  |  |  | $ | — |

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

| Options Exercisable |  | Weighted Average Remaining Life in Years |  | Weighted Average Exercise Price |  | Aggregate Intrinsic Value (In thousands)
As of December 31, 2019 | 2,251,725 |  | 3.36 |  | $15.00 |  | $ | — |

OPTIONS GRANTED OUTSIDE CINEDIGM’S EQUITY INCENTIVE PLAN
In October 2013, we issued options outside of the Plan to 10 individuals who became employees as a result of a business combination. The employees received options to purchase an aggregate of 62,000 shares of our Class A Common Stock at an exercise price of $17.50 per share. The options are fully vested as of October 2017 and expire 10 years from the date of grant, if unexercised. As of December 31, 2019, 12,500 of such options remained outstanding.
In December 2010, we issued options to purchase 450,000 shares of Class A Common Stock outside of the Plan as part of our Chief Executive Officer's initial employment agreement with the Company. Such options have exercise prices per share between $15.00 and $50.00, were vested as of December 2013 and will expire in December 2020. As of December 31, 2019, all such options remained outstanding.
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WARRANTS
The following table presents information about outstanding warrants to purchase shares of our Class A common stock as of December 31, 2019. All of the outstanding warrants are fully vested and exercisable.

Recipient |  | Amount outstanding |  | Expiration |  | Exercise price per share
Strategic management service provider |  | 52,500 |  |  | July 2021 |  | $17.20 - $30.00
Warrants issued to Ronald L. Chez in connection with the Second Lien Loans |  | 206,768 |  |  | July 2023 |  | $1.34 - $1.57
Warrants issued in connection with Convertible Notes exchange transaction |  | 207,679 |  |  | December 2021 |  | $1.54
5-year Warrant issued to BEMG in connection with a term loan agreement |  | 1,400,000 |  |  | December 2022 |  | $1.80

The warrants issued in connection with the Second Lien Loans (See Note 5 - Notes Payable) to Ronald L. Chez, at the time a member of our Board of Directors, contain a cashless exercise provision and customary anti-dilution rights.
7. COMMITMENTS AND CONTINGENCIES
We operate from leased properties under non-cancelable operating lease agreements, certain of which contain escalating lease clauses.
During the first quarter of 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach with an effective date as of April 1, 2019. The Company did not apply the new standard to comparative periods and therefore, those amounts are not presented below.
The Company elected the package of three practical expedients. As such, the Company did not reassess whether expired or existing contracts are or contain a lease and did not need to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. The Company did not elect the hindsight practical expedient. The land easement practical expedient was not applicable to the Company. Also, the Company has elected to take the practical expedient to not separate lease and non-lease components for all asset classes. The Company made an accounting policy election to continue not to recognize leases with durations of twelve months or less on the consolidated balance sheet.
The Company leases office space under operating leases. The Company’s portfolio of leases is primarily related to real estate and since most of our leases do not provide a readily determinable implicit rate, the Company estimated its incremental borrowing rate to discount the lease payments based on information available at either the implementation date of Topic 842 or at lease commencement for leases entered into thereafter.
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The table below presents the lease-related assets and liabilities recorded on the balance sheet as of December 31, 2019

(In thousands) | Classification on the Balance Sheet |  | December 31, 2019
Assets |  |  |
Noncurrent | Operating lease right-of-use asset |  | $ | 1,765 |
Liabilities |  |  |
Current | Operating leases - current portion |  | $ | 926 |
Noncurrent | Operating leases - long -term portion |  | 918 |
Total operating lease liabilities |  |  | $ | 1,844 |
Weighted-average remaining lease term in years |  |  | 1.89 |
Weighted-average discount rate (1) |  |  | 5.10 | %
(1) Upon adoption of the new lease standard, discount rates used for existing leases were established at April 1, 2019. |  |

Lease Costs |  |  |
The table below presents certain information related to lease costs for leases: |  |
| Three Months Ended |  | Nine Months Ended
(In thousands) | December 31, 2019
Operating lease cost | $ | 319 |  |  | $ | 775 |
Total lease cost | $ | 319 |  |  | $ | 775 |

Other Information |  |  |
The table below presents supplemental cash flow information related to leases:
| Three Months Ended |  | Nine Months Ended
(In thousands) | December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities |  |  |
Operating cash flows used for operating leases | $ | 324 |  |  | $ | 767 |

Undiscounted Cash Flows |  |
The table below reconciles the undiscounted cash flows for the remaining years on the leases to the lease liabilities recorded on the balance sheet as of December 31, 2019.
(In thousands) |  | Operating Leases
2020 (remaining 3 months) |  | $ | 262 |
2021 |  | 1,053 |
2022 |  | 617 |
2023 |  | 13 |
Thereafter |  | — |
Total minimum lease payments |  | $ | 1,945 |
Less: Interest |  | (101 | )
Present value of lease liabilities |  | $ | 1,844 |

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8. SUPPLEMENTAL CASH FLOW INFORMATION

|  | Nine Months Ended December 31,
(In thousands) |  | 2019 |  | 2018
Cash interest paid |  | $ | 3,934 |  |  | $ | 6,627 |
Accrued dividends on preferred stock |  | 89 |  |  | 89 |
Issuance of Class A common stock for payment of preferred stock dividends |  | 267 |  |  | 267 |
Right-of-use assets and operating lease liability recorded upon adoption of ASU 842, net |  | 90 |  |  | — |
Amounts accrued in connection with addition of property and equipment |  | 232 |  |  | — |

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

Operations of: | Products and services provided:
Cinema Equipment Business | Financing vehicles and administrators for 3,367 Systems installed nationwide in our first deployment phase (“Phase I Deployment”) to theatrical exhibitors and for 4,976 Systems installed domestically and internationally in our second deployment phase (“Phase II Deployment”). We retain ownership of the Systems and the residual cash flows related to the Systems in Phase I Deployment after the repayment of all non-recourse debt at the expiration of exhibitor master license agreements. For certain Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements. The Cinema Equipment Business also provides monitoring, collection, verification and management services to this segment, as well as to exhibitors who purchase their own equipment, and also collects and disburses VPFs from motion picture studios, distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors (collectively, “Services”).
Content & Entertainment Business | Leading distributor of independent content, and collaborates with producers and other content owners to market, source, curate and distribute independent content to targeted and profitable audiences in theatres and homes, and via mobile and emerging platforms.

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

|  | As of December 31, 2019
(In thousands) |  | Intangible Assets, net |  | Goodwill |  | Total Assets |  | Notes Payable, Non-Recourse |  | Notes Payable | Operating lease liabilities
Cinema Equipment Business |  | $ | 34 |  |  | $ | — |  |  | $ | 37,939 |  |  | $ | 11,604 |  |  | $ | — |  | $ | 927 |
Content & Entertainment Business |  | 7,477 |  |  | 8,701 |  |  | 54,987 |  |  | — |  |  | — |  | 189 |
Corporate |  | 7 |  |  | — |  |  | 2,785 |  |  | — |  |  | 38,310 |  | 728 |
Total |  | $ | 7,518 |  |  | $ | 8,701 |  |  | $ | 95,711 |  |  | $ | 11,604 |  |  | $ | 38,310 |  | $ | 1,844 |

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|  | As of March 31, 2019
(In thousands) |  | Intangible Assets, net |  | Goodwill |  | Total Assets |  | Notes Payable, Non-Recourse |  | Notes Payable | Operating lease liabilities
Cinema Equipment Business |  | $ | 69 |  |  | $ | — |  |  | $ | 42,958 |  |  | $ | 19,132 |  |  | $ | — |  | $ | — |
Content & Entertainment Business |  | 9,607 |  |  | 8,701 |  |  | 51,531 |  |  | — |  |  | — |  | — |
Corporate |  | 10 |  |  | — |  |  | 4,350 |  |  | — |  |  | 43,319 |  | — |
Total |  | $ | 9,686 |  |  | $ | 8,701 |  |  | $ | 98,839 |  |  | $ | 19,132 |  |  | $ | 43,319 |  | $ | — |

|  |  | Statements of Operations
|  |  | Three Months Ended December 31, 2019
|  |  | (Unaudited, in thousands)
|  |  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Revenues |  |  | $ | 3,129 |  |  | $ | 8,383 |  |  | $ | — |  |  | $ | 11,512 |
Direct operating (exclusive of depreciation and amortization shown below) |  |  | 312 |  |  | 5,414 |  |  | — |  |  | 5,726 |
Selling, general and administrative |  |  | 536 |  |  | 2,294 |  |  | 167 |  |  | 2,997 |
Allocation of corporate overhead |  |  | 200 |  |  | 1,249 |  |  | (1,449 | ) |  | — |
Recovery for doubtful accounts |  |  | (5 | ) |  | — |  |  | — |  |  | (5 | )
Depreciation and amortization of property and equipment |  |  | 1,475 |  |  | 77 |  |  | 42 |  |  | 1,594 |
Amortization of intangible assets |  |  | 11 |  |  | 576 |  |  | 2 |  |  | 589 |
Total operating expenses |  |  | 2,529 |  |  | 9,610 |  |  | (1,238 | ) |  | 10,901 |
Income (loss) from operations |  |  | $ | 600 |  |  | $ | (1,227 | ) |  | $ | 1,238 |  |  | $ | 611 |

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

(In thousands) |  |  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Direct operating |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Selling, general and administrative |  |  | — |  |  | 26 |  |  | 152 |  |  | 178 |
Total stock-based compensation |  |  | $ | — |  |  | $ | 26 |  |  | $ | 152 |  |  | $ | 178 |

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|  | Statements of Operations
|  | Three Months Ended December 31, 2018
|  | (Unaudited, in thousands)
|  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Revenues |  | $ | 5,320 |  |  | $ | 9,323 |  |  | $ | — |  |  | $ | 14,643 |
Direct operating (exclusive of depreciation and amortization shown below) |  | 505 |  |  | 4,741 |  |  | — |  |  | 5,246 |
Selling, general and administrative |  | 448 |  |  | 3,499 |  |  | 2,478 |  |  | 6,425 |
Allocation of Corporate overhead |  | 378 |  |  | 989 |  |  | (1,367 | ) |  | — |
Provision (recovery) for doubtful accounts |  | 141 |  |  | (28 | ) |  | — |  |  | 113 |
Depreciation and amortization of property and equipment |  | 1,942 |  |  | 87 |  |  | 45 |  |  | 2,074 |
Amortization of intangible assets |  | 11 |  |  | 1,385 |  |  | 1 |  |  | 1,397 |
Total operating expenses |  | 3,425 |  |  | 10,673 |  |  | 1,157 |  |  | 15,255 |
Income (loss) from operations |  | $ | 1,895 |  |  | $ | (1,350 | ) |  | $ | (1,157 | ) |  | $ | (612 | )

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

(In thousands) |  |  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Direct operating |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Selling, general and administrative |  |  | 3 |  |  | 96 |  |  | 262 |  |  | 361 |
Total stock-based compensation |  |  | $ | 3 |  |  | $ | 96 |  |  | $ | 262 |  |  | $ | 361 |

|  | Statements of Operations
|  | Nine Months Ended December 31, 2019
|  | (Unaudited, in thousands)
|  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Revenues |  | $ | 10,767 |  |  | $ | 20,789 |  |  | $ | — |  |  | $ | 31,556 |
Direct operating (exclusive of depreciation and amortization shown below) |  | 908 |  |  | 12,517 |  |  | — |  |  | 13,425 |
Selling, general and administrative |  | 1,636 |  |  | 8,109 |  |  | 4,090 |  |  | 13,834 |
Allocation of corporate overhead |  | 605 |  |  | 3,785 |  |  | (4,390 | ) |  | — |
Provision (recovery) for doubtful accounts |  | 322 |  |  | (1 | ) |  | — |  |  | 321 |
Depreciation and amortization of property and equipment |  | 4,612 |  |  | 239 |  |  | 126 |  |  | 4,977 |
Amortization of intangible assets |  | 34 |  |  | 2,140 |  |  | 4 |  |  | 2,178 |
Total operating expenses |  | 8,117 |  |  | 26,789 |  |  | (170 | ) |  | 34,735 |
Income (loss) from operations |  | $ | 2,650 |  |  | $ | (6,000 | ) |  | $ | 170 |  |  | $ | (3,179 | )

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

(In thousands) |  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Direct operating |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Selling, general and administrative |  | (6 | ) |  | 29 |  |  | 344 |  |  | 367 |
Total stock-based compensation |  | $ | (6 | ) |  | $ | 29 |  |  | $ | 344 |  |  | $ | 367 |

|  | Statements of Operations
|  | Nine Months Ended December 31, 2018
|  | (Unaudited, in thousands)
|  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Revenues |  | $ | 19,926 |  |  | $ | 21,539 |  |  | $ | — |  |  | $ | 41,465 |
Direct operating (exclusive of depreciation and amortization shown below) |  | 1,227 |  |  | 11,060 |  |  | — |  |  | 12,287 |
Selling, general and administrative |  | 1,446 |  |  | 11,219 |  |  | 6,790 |  |  | 19,455 |
Allocation of Corporate overhead |  | 1,167 |  |  | 3,042 |  |  | (4,209 | ) |  | — |
Provision (recovery) for doubtful accounts |  | 1,384 |  |  | (139 | ) |  | — |  |  | 1,245 |
Depreciation and amortization of property and equipment |  | 5,844 |  |  | 256 |  |  | 139 |  |  | 6,239 |
Amortization of intangible assets |  | 34 |  |  | 4,149 |  |  | 4 |  |  | 4,187 |
Total operating expenses |  | 11,102 |  |  | 29,587 |  |  | 2,724 |  |  | 43,413 |
Income (loss) from operations |  | $ | 8,824 |  |  | $ | (8,048 | ) |  | $ | (2,724 | ) |  | $ | (1,948 | )

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

(In thousands) |  | Cinema Equipment Business |  | Content & Entertainment Business |  | Corporate |  | Consolidated
Direct operating |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Selling, general and administrative |  | 8 |  |  | 161 |  |  | 594 |  |  | 763 |
Total stock-based compensation |  | $ | 8 |  |  | $ | 161 |  |  | $ | 594 |  |  | $ | 763 |

10. SUBSEQUENT EVENTS
Effective January 1, 2020, the Company entered into a Second Amendment to the AVOD License Agreement (the “Second Amendment”) with Future Today, Alok Ranjan and Vikrant Mathur. Pursuant to the Second Amendment, (i) the Company and Future Today will expand their licensing relationship by adding new content to the existing agreement pursuant to which Future Today currently licenses content from Cinedigm Entertainment Corp., and (ii) the Agreement and Plan of Merger dated as of March 14, 2019 among the Company, C&F Merger Sub, Inc. (“C&F”), Future Today, Alok Ranjan and Vikrant Mathur (individually and as Stockholder Representative) and the Company Stockholders identified therein, as amended by Amendment No. 1 (the “Merger Agreement”) was terminated. Pursuant to the Merger Agreement, the Company had agreed to acquire Future Today through a merger with C&F. Because of the termination of the Merger Agreement, $1.0 million deposit of purchase price was forfeited and written off during the three months ended December 31, 2019.
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On January 8, 2020, the Company entered into a consent agreement with lenders of the Second Lien Loans to extend the maturity date to February 17, 2020.
On January 13, 2020, Bison Entertainment Investment Limited, the Company’s majority stockholder, signed a written consent approving the issuance of 54,850,103 shares of Common Stock in exchange for the acquisition by the Company of 410,901,000 shares of Starrise Media Limited, a leading Chinese entertainment company, from two of Starrise’s stockholders pursuant to a Stock Purchase Agreement dated December 27, 2019 (the "Starrise Agreement"). The Company mailed a definitive information statement to its stockholders in late January. On February 14, 2020, the parties to the Starrise Agreement amended it to provide for multiple closings. The Company closed on the purchase of 162,162,162 Starrise shares and issued 21,646,604 shares of Common Stock as consideration therefor on February 14, 2020, and expects to close on the remainder of the Starrise shares as soon as practicable.
On February 14, 2020, the Company filed a Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation, pursuant to which the number of shares of Class A common stock authorized for issuance was increased to 150,000,000 shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included elsewhere in this document.
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 over 12,000 movie screens from using traditional analog film prints to digital distribution, we have become a leading distributor of independent content, through both organic growth and acquisitions. We distribute products for major brands such as the Discovery Networks, National Geographic and Scholastic, as well as leading international and domestic content creators, movie producers, television producers and other short form digital content producers. We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to, iTunes, Amazon Prime, Netflix, Hulu, Xbox, PlayStation, and cable video-on-demand ("VOD"), and (ii) physical goods, including DVD and Blu-ray Discs.
We report our financial results in two primary segments as follows: (1) cinema equipment business and (2) media content and entertainment business (“Content & Entertainment” or "CEG"). The cinema equipment business segment consists of the non-recourse, financing vehicles and administrators for our digital cinema equipment (the “Systems”) installed in movie theatres throughout the United States and Canada and in Australia and New Zealand. It also provides fee-based support to over 12,000 movie screens as well as directly to exhibitors and other third party customers in the form of monitoring, billing, collection and verification services. Our Content & Entertainment segment is a market leader in: (1) ancillary market aggregation and distribution of entertainment content and; (2) branded and curated over-the-top ("OTT") digital network business providing entertainment channels and applications.
Beginning in December 2015, certain of our cinema equipment began to reach the conclusion of their 10-year deployment payment period with certain distributors and, therefore, Virtual Print Fees ("VPF") revenues ceased to be recognized on such Systems, related to such distributors. Furthermore, because the Phase I Deployment installation period ended in November 2007, a majority of the VPF revenue associated with the Phase I Deployment Systems has ended. As of December 31, 2019, all
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of our 3,384 systems from the Phase I Deployment phase of our cinema equipment business segment had ceased to earn a significant portion of VPF revenue from certain major studios, although various other studios, consisting mostly of small independent studios, will continue to pay VPFs through December 2020. We expect to continue to earn such ancillary revenue from the cinema equipment segment through December of 2020; however, such amounts are expected to be significantly less material to our consolidated financial statements. The reduction in VPF revenue on cinema equipment business systems approximately coincided with the conclusion of certain of our non-recourse debt obligations and, therefore, the reduced cash outflows related to such non-recourse debt obligations partially offset the reduced VPF revenue since November 2017.
Under the terms of our standard cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the licensing agreement, after which time, they have the option to: (1) return the Systems to us; (2) renew their license agreement for successive one-year terms; or (3) purchase the Systems from us at fair market value. As permitted by these agreements, we have begun, and expect to continue, to 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 cinema business segment operates independently from our Content & Entertainment business. As of December 31, 2019, we had approximately $12.6 million of non-recourse outstanding debt principal that relates to, and is serviced by, our cinema equipment business. We also have approximately $39.0 million of outstanding debt principal, as of December 31, 2019, that is attributable to our Content & Entertainment and Corporate segments.
On July 26, 2019, the previously announced Agreement and Plan of Merger, dated as of March 14, 2019, among the Company, C&F Merger Sub, Inc., a wholly-owned subsidiary of the Company, Future Today Inc, Alok Ranjan and Vikrant Mathur (individually and as Stockholder Representative) and the Company Stockholders identified therein, was amended. Pursuant to the Merger Amendment, among other things, the parties (x) extended the End Date and exclusivity period to July 31, 2019, (y) provided for payment of a non-refundable deposit of $500,000 by the Company, and (z) provided the Company with the unilateral right to extend the End Date and exclusivity period to August 14, 2019 upon making an additional non-refundable deposit of $500,000. Any non-refundable deposit(s) made prior to closing will be credited against the purchase price at closing. On July 31, 2019, the Company exercised its right to extend to August 14, 2019. On January 14, 2020, the Company terminated the Merger Agreement with Future Today. See Note 10 - Subsequent Events. Because of the termination of the Merger Agreement, $1.0 million deposit of purchase price was forfeited and written off during the three months ended December 31, 2019.
On January 13, 2020, Bison Entertainment Investment Limited, the Company’s majority stockholder, signed a written consent approving the issuance of 54,850,103 shares of Common Stock in exchange for the acquisition by the Company of 410,901,000 shares of Starrise Media Limited, a leading Chinese entertainment company, from two of Starrise’s stockholders pursuant to a Stock Purchase Agreement dated December 27, 2019 (the "Starrise Agreement"). The Company mailed a definitive information statement to its stockholders in late January. On February 14, 2020, the parties to the Starrise Agreement amended it to provide for multiple closings.The Company closed on the purchase of 162,162,162 Starrise shares and issued 21,646,604 shares of Common Stock as consideration therefor on February 14, 2020, and expects to close on the remainder of the Starrise shares as soon as practicable.
Results of Operations for the Three Months Ended December 31, 2019 and 2018
Revenues

| Three Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 3,129 |  |  | $ | 5,320 |  |  | $ | (2,191 | ) |  | (41 | )%
Content & Entertainment Business | 8,383 |  |  | 9,323 |  |  | (940 | ) |  | (10 | )%
| $ | 11,512 |  |  | $ | 14,643 |  |  | $ | (3,131 | ) |  | (21 | )%

Revenues generated by our Cinema Equipment Business segment decreased primarily as a result of the reduced number of Systems earning VPF revenue and commissions for Phase I and Phase II Deployment Systems. The Phase I Deployment Systems deployment period ended for major studios during the fiscal year ended March 31, 2018 and Phase II Deployment Systems deployment period for major studios ended in November 2018, which combined, contributed to the decrease in revenues.
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Revenues in the Content & Entertainment Business segment decreased mainly due to lower sales volume of owned and licensed products offset by higher distributed fees.
Direct Operating Expenses

| Three Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 312 |  |  | $ | 505 |  |  | $ | (193 | ) |  | (38 | )%
Content & Entertainment Business | 5,414 |  |  | 4,741 |  |  | 673 |  |  | 14 | %
| $ | 5,726 |  |  | $ | 5,246 |  |  | $ | 480 |  |  | 9 | %

Increase in direct operating expenses in the three months ended December 31, 2019 for the Content & Entertainment Business compared to the prior period was primarily due to an increase in our royalty and freight expenses. Royalty-based deals performed better than in the prior period which increased the royalty expense. Freight expense increased as we had an increase in liquidation sales compared to prior period. In addition, real estate taxes for the equipment in the Cinema Equipment Business went down, approximately $0.2 million, as a result of lower depreciated assets which resulted in lower direct operating costs.
Selling, General and Administrative Expenses

| Three Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 536 |  |  | $ | 448 |  |  | $ | 88 |  |  | 20 | %
Content & Entertainment Business | 2,294 |  |  | 3,499 |  |  | (1,205 | ) |  | (34 | )%
Corporate | 167 |  |  | 2,478 |  |  | (2,311 | ) |  | (93 | )%
| $ | 2,997 |  |  | $ | 6,425 |  |  | $ | (3,428 | ) |  | (53 | )%

Selling, general and administrative expenses for the three months ended December 31, 2019 decreased primarily due to a $0.8 million decrease in personnel related expenses, as a result of our cost cutting initiatives, a decrease of $1.1 million due to reversal of the bonus accrual, a decrease of $0.8 million in legal and consulting services as a result of cost cutting initiatives, and a decrease of $0.2 million each of stock based compensation and travel related expenses.
Depreciation and Amortization Expense on Property and Equipment

| Three Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 1,475 |  |  | $ | 1,942 |  |  | $ | (467 | ) |  | (24 | )%
Content & Entertainment Business | 77 |  |  | 87 |  |  | (10 | ) |  | (11 | )%
Corporate | 42 |  |  | 45 |  |  | (3 | ) |  | (7 | )%
| $ | 1,594 |  |  | $ | 2,074 |  |  | $ | (480 | ) |  | (23 | )%

Depreciation and amortization expense decreased in our Cinema Equipment Business segment as the majority of our digital cinema projection Systems reached the conclusion of their ten-year useful lives during fiscal years 2019 and 2018.
Interest expense, net

| Three Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 640 |  |  | $ | 1,160 |  |  | $ | (520 | ) |  | (45 | )%
Corporate | 978 |  |  | 1,433 |  |  | (455 | ) |  | (32 | )%
| $ | 1,618 |  |  | $ | 2,593 |  |  | $ | (975 | ) |  | (38 | )%

Interest expense in the Cinema Equipment Business segment decreased primarily as a result of reduced debt balances compared to the prior period, primarily due to the payoff of our KBC facilities, P2 Vendor Note, and the reduction of the Prospect Term
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Loan. Interest expense in our Corporate Segment decreased as a result of lower loan balances from our Credit Facility and Second Lien Loans.
Income Tax Expense
We recorded income tax expense of approximately $0.1 million for each of the three months ended December 31, 2019 and 2018 in our Cinema Equipment Business and Corporate segments for state income taxes.
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 (including the results of Cinema Equipment Business segment) for the three months ended December 31, 2019 decreased by $0.9 million, or 24%, compared to the three months ended December 31, 2018. Adjusted EBITDA loss from our non-cinema equipment business was $0.6 million for the three months ended December 31, 2019 compared to negative $0.3 million for the three months ended December 31, 2018. The decrease in Adjusted EBITDA compared to the prior period primarily reflects lower revenue in our cinema equipment business, offset by decrease in selling, general and administrative expense.
Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies. We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, we believe Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric.
We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net loss from continuing operations as an indicator of operating performance. We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors. We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.
We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net loss from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income from operations or net loss from continuing operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
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Following is the reconciliation of our consolidated net loss to Adjusted EBITDA:

|  | Three Months Ended December 31,
($ in thousands) |  | 2019 |  | 2018
Net loss |  | $ | (2,162 | ) |  | $ | (3,272 | )
Add Back: |  |  |  |  |  |
Income tax expense |  | 136 |  |  | 55 |
Depreciation and amortization of property and equipment |  | 1,594 |  |  | 2,074 |
Amortization of intangible assets |  | 589 |  |  | 1,397 |
Interest expense, net |  | 1,618 |  |  | 2,593 |
Other expense, net |  | 777 |  |  | 366 |
Stock-based compensation and expenses |  | 178 |  |  | 361 |
Net loss attributable to noncontrolling interest |  | (7 | ) |  | 14 |
Adjusted EBITDA |  | $ | 2,723 |  |  | $ | 3,588 |
Adjustments related to the Cinema Equipment Business |  |  |  |
Depreciation and amortization of property and equipment |  | $ | (1,475 | ) |  | $ | (1,942 | )
Amortization of intangible assets |  | (11 | ) |  | (11 | )
Stock-based compensation and expenses |  | — |  |  | (3 | )
Income from operations |  | (600 | ) |  | (1,895 | )
Adjusted EBITDA from non-cinema equipment business |  | $ | 637 |  |  | $ | (263 | )

Results of Operations for the Nine Months Ended December 31, 2019 and 2018
Revenues

| Nine Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 10,767 |  |  | $ | 19,926 |  |  | $ | (9,159 | ) |  | (46 | )%
Content & Entertainment Business | 20,789 |  |  | 21,539 |  |  | (750 | ) |  | (3 | )%
| $ | 31,556 |  |  | $ | 41,465 |  |  | $ | (9,909 | ) |  | (24 | )%

Revenues generated by our Cinema Equipment Business segment decreased primarily as a result of the reduced number of Systems earning VPF revenue and commissions for Phase I and Phase II Deployment Systems. The Phase I Deployment Systems deployment period ended for major studios during the fiscal year ended March 31, 2018 and Phase II Deployment Systems deployment period for major studios ended in November 2018, which combined, contributed to the decrease in revenues.
Revenues in the Content & Entertainment Business segment decreased mainly due to lower sales volume of owned and licensed products offset by higher distributed fees.
Direct Operating Expenses

| Nine Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 908 |  |  | $ | 1,227 |  |  | $ | (319 | ) |  | (26 | )%
Content & Entertainment Business | 12,517 |  |  | 11,060 |  |  | 1,457 |  |  | 13 | %
| $ | 13,425 |  |  | $ | 12,287 |  |  | $ | 1,138 |  |  | 9 | %

Increase in direct operating expenses in the nine months ended December 31, 2019 compared to the prior period was mainly due to an increase in royalty and freight expenses of approximately 1.1 million. Royalty-based deals performed better than the
35

prior period which increased the royalty expense. Freight expense increased as we had an increase in liquidation sales compared to prior period. In addition, real estate taxes for the equipment in the Cinema Equipment Business went down, approximately $0.3 million, as a result of lower depreciated assets which resulted in lower direct operating costs.
Selling, General and Administrative Expenses

| Nine Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 1,636 |  |  | $ | 1,446 |  |  | $ | 190 |  |  | 13 | %
Content & Entertainment Business | 8,108 |  |  | 11,219 |  |  | (3,111 | ) |  | (28 | )%
Corporate | 4,090 |  |  | 6,790 |  |  | (2,700 | ) |  | (40 | )%
| $ | 13,834 |  |  | $ | 19,455 |  |  | $ | (5,621 | ) |  | (29 | )%

Selling, general and administrative expenses for the nine months ended December 31, 2019 decreased primarily due to a $2.0 million decrease in personnel related expenses, as a result of our cost cutting initiatives, a decrease of $1.0 million due to a reversal of bonus accrual, a decrease of $0.7 million in legal and consulting services as a result of our cost cutting initiatives, a decrease of approximately $0.8 million in marketing spend in our OTT business, a decrease of $0.2 million in travel related expenses, and a decrease of $0.4 million in stock-based compensation.
Depreciation and Amortization Expense on Property and Equipment

| Nine Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 4,612 |  |  | $ | 5,844 |  |  | $ | (1,232 | ) |  | (21 | )%
Content & Entertainment Business | 239 |  |  | 256 |  |  | (17 | ) |  | (7 | )%
Corporate | 126 |  |  | 139 |  |  | (13 | ) |  | (9 | )%
| $ | 4,977 |  |  | $ | 6,239 |  |  | $ | (1,262 | ) |  | (20 | )%

Depreciation and amortization expense decreased in our Cinema Equipment Business segment as the majority of our digital cinema projection Systems reached the conclusion of their ten-year useful lives during fiscal years 2019 and 2018.
Interest expense, net

| Nine Months Ended December 31,
($ in thousands) | 2019 |  | 2018 |  | $ Change |  | % Change
Cinema Equipment Business | $ | 2,159 |  |  | $ | 3,786 |  |  | $ | (1,627 | ) |  | (43 | )%
Corporate | 3,554 |  |  | 4,074 |  |  | (520 | ) |  | (13 | )%
| $ | 5,713 |  |  | $ | 7,860 |  |  | $ | (2,147 | ) |  | (27 | )%

Interest expense in the Cinema Equipment Business segment decreased primarily as a result of reduced debt balances compared to the prior period, primarily due to the payoff of our KBC facilities, P2 Vendor Note, and the reduction of the Prospect Term Loan. Interest expense in our Corporate Segment decreased as a result of lower loan balances from our Credit Facility and Second Lien Loans.
Income Tax Expense
We recorded less than $0.2 million of income tax expense for the nine months ended December 31, 2019 and 2018 in our Cinema Equipment Business and Corporate segments for state income taxes.
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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 (including the results of Cinema Equipment Business segment) for the nine months ended December 31, 2019 decreased by $4.9 million, or 51%, compared to the nine months ended December 31, 2018. Adjusted EBITDA loss from our non-cinema equipment business was negative $2.6 million for the nine months ended December 31, 2019 compared to negative $5.1 million for the nine months ended December 31, 2018. The increase in Adjusted EBITDA compared to the prior period primarily reflects lower Selling, General and Administrative Expenses.
Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies. We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, we believe Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric.
We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net loss from continuing operations as an indicator of operating performance. We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors. We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.
We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net loss from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income from operations or net loss from continuing operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
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Following is the reconciliation of our consolidated net loss to Adjusted EBITDA:

|  | Nine Months Ended December 31,
($ in thousands) |  | 2019 |  | 2018
Net loss |  | (10,289 | ) |  | (10,042 | )
Add Back: |  |  |  |
Income tax expense |  | 210 |  |  | 194 |
Depreciation and amortization of property and equipment |  | 4,977 |  |  | 6,239 |
Amortization of intangible assets |  | 2,178 |  |  | 4,187 |
Interest expense, net |  | 5,713 |  |  | 7,860 |
Other expense, net |  | 1,536 |  |  | 394 |
Stock-based compensation and expenses |  | 367 |  |  | 763 |
Net loss attributable to noncontrolling interest |  | (8 | ) |  | 38 |
Adjusted EBITDA |  | $ | 4,684 |  |  | $ | 9,633 |
Adjustments related to the Cinema Equipment Business |  |  |  |
Depreciation and amortization of property and equipment |  | $ | (4,612 | ) |  | $ | (5,844 | )
Amortization of intangible assets |  | (34 | ) |  | (34 | )
Stock-based compensation and expenses |  | 7 |  |  | (8 | )
Income from operations |  | (2,650 | ) |  | (8,824 | )
Adjusted EBITDA from non-cinema equipment business |  | $ | (2,605 | ) |  | $ | (5,077 | )

Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K, filed with the SEC on July 16, 2019, except the accounting policy changes detailed in Note 2 of our condensed consolidated financial statements as a result of the adoption of the new leasing standard.
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies to our condensed consolidated financial statements included herein.
Liquidity and Capital Resources
We incurred consolidated net loss of $10.3 million and $10.0 million for the nine months ended December 31, 2019 and 2018, respectively. We have an accumulated deficit of $406.4 million, and negative working capital of $54.7 million, as of December 31, 2019. In addition, we have significant debt-related contractual obligations as of December 31, 2019 and beyond.
We have incurred net losses each year since we commenced our operations. Since our inception, we have financed our operations substantially through the private placement of shares of our common and preferred stock, the issuance of promissory notes, our initial public offering and subsequent private and public offerings, notes payable and common stock used to fund various acquisitions.
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We may continue to generate net losses in the future primarily due to depreciation and amortization, interest on notes payable, marketing and promotional activities and content acquisition and marketing costs. Certain of these costs, including costs of content acquisition, marketing and promotional activities, could be reduced if necessary. The restrictions imposed by our debt agreements may limit our ability to obtain financing, make it more difficult to satisfy our debt obligations or require us to dedicate a substantial portion of our cash flow to payments on our existing debt obligations. The Prospect Loan requires certain screen turn performance from certain of our Cinema Equipment Business subsidiaries. While such restrictions may reduce the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements, we do not have similar restrictions imposed upon our CEG business. We may seek to raise additional capital as necessary. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations or liquidity.
In accordance with the Stock Purchase Agreement, on December 29, 2017, the Company entered into a loan agreement with BEMG, pursuant to which the Company borrowed $10.0 million (the “2017 Loan”). The maturity date was June 28, 2021 with interest at 5% per annum, payable quarterly in cash. The 2017 Loan is unsecured and may be prepaid without premium or penalty, and contains customary covenants, representations and warranties. The proceeds of the 2017 Loan were used for working capital and general corporate purposes. As part of this 2017 Loan, the Company also issued warrants to BEMG to purchase 1,400,000 shares of the Company’s Class A common stock (the “Warrants”). The 2017 Loan was paid in full on July
20, 2018.
On July 20, 2018, we entered into the 2018 Loan. The 2018 Loan has a one (1) year term that may be extended by mutual agreement of Bison Global and the Company and bears interest at 5% per annum, payable quarterly in cash. On July 12, 2019, we entered into a Termination Agreement for the 2018 Loan and at the same time entered into a $10.0 million Convertible Promissory Note. See Note 5 - Notes Payable.
On October 9, 2018, the Company issued a subordinated convertible note (the “Convertible Note”) to MingTai Investment LP (the “Lender”) for $5.0 million from the Lender. All proceeds from the Convertible Note was used to pay the $5.0 million 2013 Notes described in Note 5 - Notes Payable.
On July 9, 2019, the Company entered into the July Stock Purchase Agreement with BEMG, an affiliate of Bison Capital Holding Company Limited, which, through an affiliate, is the majority holder of our Class A common stock, pursuant to which the Company agreed to sell to BEMG a total of 2,000,000 July SPA Shares, for an aggregate purchase price in cash of $3.0 million priced at $1.50 per share. The sale of the July SPA Shares was consummated on July 9, 2019. The July SPA Shares are subject to certain transfer restrictions. The proceeds of the sale of the July SPA Shares sold were used for working capital, including the repayment of Second Lien Loans (as defined in Note 5 - Notes Payable). In addition, the Company has agreed to enter into a registration rights agreement for the resale of the July SPA Shares.
On August 2, 2019, the Company entered into the August Stock Purchase Agreement with BEMG, pursuant to which the Company agreed to sell to BEMG a total of 1,900,000 August SPA Shares, for an aggregate purchase price in cash of $2.9 million priced at $1.50 per share. The sale of the August SPA Shares was consummated on August 2, 2019. The August SPA Shares are subject to certain transfer restrictions. The proceeds of the sale of the August SPA Shares sold were used for working capital. In addition, the Company has agreed to enter into a registration rights agreement for the resale of the August SPA Shares.
The Second Lien Loans (as defined in Note 5 - Notes Payable) were to mature on June 30, 2019. On June 28, 2019, the Company entered into a consent agreement with lenders of the Second Lien Loans to an extension of the Second Lien Loans pursuant to which (i) the Company paid down a portion of the outstanding principal amount plus accrued interest to date, and (ii) the maturity date of the remaining outstanding principal amount of the Second Lien Loans was extended to September 30, 2019. The Company paid a consent fee in total of $56 thousand to the lenders in connection with the consent.
On July 30, 2019, Ronald L. Chez, one of the lenders, signed a waiver to defer the receipt of the portion of his outstanding amount and agreed to be paid no later than September 30, 2019. The company paid him a consent fee of $80 thousand for this waiver.
During the nine months ended December 31, 2019, the Company paid $3.4 million of the outstanding Second Lien Loans and expects to obtain additional capital from or through Bison Capital Holding Limited or an affiliate thereof ("Bison") for final payment of the remaining outstanding balances of the Second Lien Loans. On October 24, 2019, the Company entered into a consent agreement to extend the maturity date to November 30, 2019. On January 8, 2020, the Company entered into another
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consent agreement to extend the maturity date to February 17, 2020. There were no consent fees paid for these consent agreements.
Non-Recourse Indebtedness
Our Cinema Equipment Business has historically been financed through a series of non-recourse loans. Certain of the subsidiaries that make up the Cinema Equipment Business have pledged their assets as collateral for, and are liable with respect to, certain indebtedness for which our other subsidiaries and their assets generally are not. We have referred to this indebtedness as "non-recourse debt" because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan, the KBC Facilities, the 2013 Term Loans, the P2 Vendor Note and the P2 Exhibitor Notes. The balance of our non-recourse debt, net of related debt issuance costs, as of December 31, 2019 was $11.6 million for our Cinema Equipment Business segment, which mature as presented in the Contractual Obligations table below. We continue to expect cash flows from our Cinema Equipment Business operations will be sufficient to satisfy our liquidity and contractual requirements that are linked to these operations. Cash flows from our Cinema Equipment Business segment are primarily used for repayment of debt in that segment, and are not readily available to the Company otherwise.
Revolving Credit Agreements
On March 30, 2018, the Company entered into a new Loan, Guaranty and Security Agreement, dated as of March 30, 2018, by and between the Company, East West Bank ("EWB") and the Guarantors named therein, which are certain subsidiaries of the Company (the "Loan Agreement"). The Loan Agreement provides for a credit facility (the “Credit Facility”) consisting of a maximum of $19.0 million in revolving loans at any one time outstanding and having a maturity date of March 31, 2020, which may be extended for two successive periods of one year each at the sole discretion of the lender so long as certain conditions are met.
Interest is due monthly on the last day of the month based on the rate determined by the Company in prior month of either 0.5% plus Prime Rate or 3.25% above LIBOR Rate established by EWB.
On March 30, 2018, the Company borrowed $8.2 million under the Credit Facility. The proceeds from the Credit Facility were used to pay the $7.8 million outstanding principal and accrued interest under the prior credit agreement. During the year ended March 31, 2019, the Company borrowed an additional $10.4 million under the Credit Facility. As of December 31, 2019, there was $14.7 million outstanding and there was no additional availability under the Credit Facility based on the Company's borrowing base.
On July 3, 2019, the Company entered into the EWB Amendment to the Loan, Guaranty and Security Agreement, dated as of March 30, 2018, by and between the Company, East West Bank and the Guarantors named therein. The EWB Amendment reduced the size of the facility to $18.0 million, required certain prepayments and daily cash sweeps from collections of receivables to be made, changed in certain respects how the borrowing base is calculated, and extended the maturity date to June 30, 2020. In connection with the EWB Amendment, three of our subsidiaries became Guarantors under the EWB Credit Agreement.
Other Indebtedness
In October 2013, we issued notes to certain investors in the aggregate principal amount of $5.0 million (the "2013 Notes") and warrants to purchase 150,000 shares of Class A Common Stock to such investors. The principal amount outstanding under the 2013 Notes is due on October 21, 2018 and the notes bore interest at 9.0% per annum, payable in quarterly installments. The 2013 Notes were paid in full on October 18, 2018, prior to their maturity date of October 21, 2018.
On October 9, 2018, the Company issued a subordinated convertible note (the “Convertible Note”) to MingTai Investment LP (the “Lender”) for $5.0 million. All proceeds from the Convertible Note were used to pay the $5.0 million 2013 Notes described above. See Note 5 - Notes Payable. The Convertible Note bears interest at 8% and matures on October 9, 20219 with one remaining year extension at the Company's option. On October 9, 2019, the Company extended the note for one additional year and the new maturity date of the Convertible Note is October 9, 2020.
The Convertible Note is convertible into 3,333,333 shares of the Company's Class A common stock, based on initial conversion price of $1.50 per share. The Convertible Note is convertible at the option of the Lender, or the Company, at any time prior to payment in full of the principal balance, and all accrued interest on the Convertible Note in whole, or in part, into fully paid and non-assessable shares of Company’s Class A common stock.
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Upon conversion by the Lender, we may elect to settle such conversion in shares of our Class A common stock, cash or a combination thereof. As a result of our cash conversion option, we separately accounted for the value of the embedded conversion option as a debt discount (with an offset to APIC) of $270 thousand. The value of the embedded conversion option was determined based on the estimated fair value of the debt without the conversion feature, which was determined using market comparables to estimate the fair value similar non-convertible debt; the debt discount is being amortized as additional non-cash interest expense using the effective interest method over the term of the Note.
The $10.0 million note payable to Bison Global Investment SPC due July 20, 2019 is guaranteed by Bison Entertainment and Media Group ("BEMG"). On July 20, 2018, the Company also entered into a side letter (the “Letter”) with BEMG, where BEMG agreed to guarantee the payment directly to Bison Global of any amount due if (i) the 2018 Loan matures prior to June 28, 2021 or (ii) Bison Global demands payment of the 2018 Loan, in whole or in part, prior to maturity.
On October 11, 2019, we received a notice (the “Bid Price Notice”) from the Staff indicating that, based upon the closing bid price of the Company’s Class A common stock for the last 30 consecutive business days, the Company no longer met the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5450(a)(1). The Bid Price Notice did not result in the immediate delisting of the Common Stock from the Nasdaq Global Market.
The Company actively monitors the price of the Common Stock and will consider all available options to regain compliance with the continued listing standards. The Company may elect to address the deficiency by implementing a reverse stock split if the Board of Directors determines that is the proper course of action. No decision has been made at this time.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided a period of 180 calendar days, or until April 8, 2020, in which to regain compliance with the deficiency. In order to regain compliance with the minimum bid price requirement, the closing bid price of the Common Stock must be at least $1 per share for a minimum of ten consecutive business days during this 180-day period. If the Company does not regain compliance with this requirement by April 8, 2020, the Company may be eligible for an additional 180 calendar day compliance period provided that it meets certain continued listing standards, and provides the Staff with written notice of its intention to cure the deficiency.
On December 18, 2019, we received a Notice from the Listing Qualifications staff of Nasdaq (the “Staff”) indicating that, the Company no longer meets the requirement to maintain a minimum market value of publicly held shares ("MVPHS") of $15.0 million, as set forth in Nasdaq Listing Rule 5450(b)(3)(C).
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until June 15, 2020, in which to regain compliance. In order to regain compliance with the MVPHS, requirement, our MVPHS must be at least $15.0 million for a minimum of ten consecutive business days during this 180-day period. If we do not regain compliance with the bid price requirement by June 15, 2020, we may be eligible for an additional 180 calendar day compliance period. If we do not regain compliance by June 15, 2020, or the termination of any subsequent compliance period, if applicable, the Staff will provide written notification that its common stock may be delisted. At such time, we would be afforded the opportunity for a hearing before a Nasdaq Listing Qualifications Panel (the “Panel”). A request for a hearing would stay any suspension or delisting action pending the issuance of a decision by the Panel following the hearing and the expiration of any extension period granted by the Panel. In that regard, the Panel would have the authority to grant us up to an additional 180-day period in which to regain compliance.
We intend to monitor the MVPHS for our common stock between now and June 15, 2020 and will consider the various available options if its common stock does not trade at a level that is likely to regain compliance.
On January 13, 2020, Bison Entertainment Investment Limited, the Company’s majority stockholder, signed a written consent approving the issuance of shares of Common Stock in exchange for the acquisition by the Company of shares of Starrise Media Limited, a leading Chinese entertainment company, from two of Starrise’s stockholders. The Company mailed a definitive information statement to its stockholders in late January. The Company closed on the purchase of 162,162,162 Starrise shares and issued 21,646,604 shares of Common Stock as consideration therefor on February 14, 2020, and expects to close on the remainder of the Starrise shares as soon as practicable.
In addition, as discussed in more detail in Note 5 - Notes Payable, our debt obligations include certain financial and liquidity covenants and capital requirements, and from time to time, we may need to use available capital resources and raise additional capital to satisfy these covenants and requirements.
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Cash Flows

|  | For the Nine Months Ended December 31,
($ in thousands) |  | 2019 |  | 2018
Net cash provided by operating activities |  | $ | 5,318 |  |  | $ | 6,333 |
Net cash used in investing activities |  | (377 | ) |  | (1,179 | )
Net cash used in financing activities |  | (8,339 | ) |  | (5,965 | )
Net change in cash and cash equivalents |  | $ | (3,398 | ) |  | $ | (811 | )

As of December 31, 2019, we had cash and restricted cash balances of $15.5 million.
Net cash provided by operating activities is primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, provision for doubtful accounts and stock-based compensation, offset by changes in working capital. Cash received from VPFs declined from the previous period as Phase I and Phase II Deployment Systems in our Cinema Equipment Business reached the conclusion of their deployment payment period with certain major studios. Changes in accounts receivable from our studio customers largely impact cash flows from operating activities and vary based on the seasonality of movie release schedules by the major studios. Operating cash flows from CEG are typically higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season, and lower in the other two quarters as we pay royalties on such revenues. In addition, we make advances on theatrical releases and to certain home entertainment distribution clients for which initial expenditures are generally recovered within six to twelve months.
Cash flows used in investing activities mainly consisted of purchases of property and equipment.
For the nine months ended December 31, 2019, cash flows used in financing activities reflects payments of $8.1 million for the 2013 Prospect Loan, net payments of approximately $2.7 million for the Credit Facility, and $3.3 million for the Second Lien Loans offset by $5.8 million received in connection with the sale of 3,900,000 shares of our Common Stock.
We may continue to generate net losses for the foreseeable future primarily due to depreciation and amortization, interest on our debt obligations, marketing and promotional activities and content acquisition and marketing costs. Certain of these costs, including costs of content acquisition, marketing and promotional activities, could be reduced if necessary. The restrictions imposed by the terms of our debt obligations may limit our ability to obtain financing, make it more difficult to satisfy our debt obligations or require us to dedicate a substantial portion of our cash flow to payments on our existing debt obligations. We feel we are adequately financed for at least the next twelve months; however we may need to raise additional capital for working capital as deemed necessary. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations or liquidity.
Seasonality
Revenues from our Cinema Equipment Business segment derived from the collection of VPFs from motion picture studios are seasonal, coinciding with the timing of releases of movies by the motion picture studios. Generally, motion picture studios release the most marketable movies during the summer and the winter holiday season. The unexpected emergence of a hit movie during other periods can alter the traditional trend. The timing of movie releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other quarter. Our CEG segment benefits from the winter holiday season, and as a result, revenues in the segment are typically highest in our fiscal third quarter; however, we believe the seasonality of motion picture exhibition is becoming less pronounced as the motion picture studios are releasing movies more evenly throughout the year.
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Off-balance sheet arrangements
We are not a party to any off-balance sheet arrangements, other than operating leases in the ordinary course of business, which are disclosed above in the table of our significant contractual obligations, and CDF2 Holdings, LLC ("CDF2 Holdings"), our wholly-owned unconsolidated subsidiary. As discussed further in Note 3 - Other Interests to the Condensed Consolidated Financial Statements included in Item 1 of this Report on Form 10-Q, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC; however, we are not the primary beneficiary of the VIE.
Impact of Inflation
The impact of inflation on our operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse impact on our operating results.
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Item 4. CONTROLS AND PROCEDURES
A control system, no matter how well conceived and operated, can provide only reasonable assurance, not absolute assurance, that the objective of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. Because of the inherent limitations in a cost-effective control system, misstatement due to error or fraud may occur and not be detected. However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.
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 Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of December 31, 2019. 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 are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes in the Company’s internal control over financial reporting during this fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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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, 2019.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The 21,646,604 shares of Common Stock issued as consideration for the acquisition of Starrise ordinary shares on February 14, 2020 were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The exhibits are listed in the Exhibit Index on page 46 herein.
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EXHIBIT INDEX

Exhibit Number |  | Description of Document
3.1 | ‑‑ | Fifth Amended and Restated Certificate of Incorporation, as amended.
10.1 | ‑‑ | Stock Purchase Agreement, dated as of December 27, 2019, by and among Cinedigm Corp. BeiTai Investment LP and Aim Right Ventures Limited.
10.2 | ‑‑ | Amendment No. 1, dated February 14, 2020, to Stock Purchase Agreement among Cinedigm Corp., BeiTai Investment LP and Aim Right Ventures Limited.
31.1 | ‑‑ | Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | ‑‑ | Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 | ‑‑ | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 | ‑‑ | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS | ‑‑ | XBRL Instance Document.
101.SCH | ‑‑ | XBRL Taxonomy Extension Schema.
101.CAL | ‑‑ | XBRL Taxonomy Extension Calculation.
101.DEF | ‑‑ | XBRL Taxonomy Extension Definition.
101.LAB | ‑‑ | XBRL Taxonomy Extension Label.
101.PRE | ‑‑ | XBRL Taxonomy Extension Presentation.

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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, 2020 | By: | /s/ Christopher J. McGurk
|  |  | Christopher J. McGurk Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)
Date: | February 14, 2020 | By: | /s/ Gary S. Loffredo
|  |  | Gary S. Loffredo Chief Operating Officer, President Digital Cinema, General Counsel and Secretary (Principal Financial Officer)

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