CNVS 10-K & 10-Q changes, risk factors and insider trading

Strategic and financially appropriate acquisitions are a key component of our growth strategy. Although there are no acquisitions identified by us as probable at this time, we may make acquisitions of similar or complementary businesses or assets. Even if we identify appropriate acquisition candidates, we may be unable to successfully negotiate the terms of the acquisitions, finance them, integrate the acquired business into our then existingthen-existing business, obtain required regulatory approvals, and/or attract and retain customers. Completing an acquisition and integrating an acquired business may require a significant diversion of management time and resources and may involve assuming new liabilities. Any acquisition also involves the risks that the assets acquired may prove less valuable than expected and/orexpected, that we may assume unknown or unexpected liabilities, costs and problems.problems, and/or that the anticipated benefits of the acquired business, when integrated, are not realized. If we make one or more significant acquisitions in which any of the consideration consists of our capital stock, your equity interest in the Company could be diluted, perhaps significantly. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash or obtain additional financing to consummate them.

We are required under generally accepted accounting principles to review our goodwill and definite-lived intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill must be tested for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our reporting units and intangible assets may not be recoverable include, slower growth rates in our industry or our own operations, and/or other materially adverse events that have implications on the profitability of our business. In the prior fiscal year, we recognized $14 million of impairment. We may be required to record additional charges to earnings during any period in which further impairment of our goodwill or other intangible assets is determined that could adversely affect our results of operations.

We have incurred long-term losses and have financed our operations principally through equity investments and borrowings. As of March 31, 2025,2026, we had a positivenegative working capital, defined as current assets less current liabilities, of $3.6$(12.2) million, and cash and cash equivalents of $13.9$3.4 million, and total equity of $37.8$43.4 million. The Company generatedused $17.4$26.5 million of net positive cash flows fromfor its operations for the year ended March 31, 2025.2026.

Our success depends on the commercial success of media content, which is unpredictable. Operating in the motion picture and television industry involves a substantial degree of risk. Content is an individual artistic work, and inherently unpredictable audience reactions primarily determine commercial success. Generally, the popularity of content depends on many factors, including the critical acclaim they receive,received, the format of theirthe initial release, for example, theatrical or direct-to-streaming, the actors and other key talent, theirthe genre and theirthe specific subject matter. The commercial success of movies and television programs also depends upon the quality and acceptance of movies or programs that our competitors release into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure activities, general economic conditions and other tangible and intangible factors, many of which we do not control and all of which may change. We cannot predict the future effects of these factors with certainty, any of which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. In addition, because a theatrical movie or streaming content's performance in ancillary markets, such as branded consumer goods, is often directly related to its box office performance or television ratings, poor box office results or poor television ratings may negatively affect future revenue streams. Our success will depend on the experience and judgment of our management to select and develop new content acquisition and investment opportunities. We cannot make assurances that movies and streaming content will obtain favorable reviews or ratings, will perform well at the box office or in ancillary markets or that broadcasters will license the rights to broadcast any of our content in development or renew licenses to use programs in our library. The failure to achieve any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

As of March 31, 2026 and 2025, the Company had $19.2 million and $16.2 million of net operating loss carryforwards as a deferred tax asset. Under Section 382 of the Internal Revenue Code, if a corporation undergoes an ownership change (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss (“NOL”) carryforwards to offset its post-change income may be limited. Similar rules may apply under state tax laws. On November 1, 2017, we experienced an ownership change with respect to the acquisition by Bison acquisition.of our equity. Accordingly, our ability to utilize our NOL carryforwards attributable to periods prior to November 1, 2017, is subject to substantial limitations. These limitations could result in increased future tax payments, which could be material. We experienced subsequent ownership changes under Section 382 on September 15, 2020 and November 1, 2022, which resulted in additional limitations in our ability to utilize our NOL carryforwards attributable to periods prior to September 15, 2020 and November 2022, respectively. The limitations triggered by the September 15, 2020 and November 1, 2022 ownership changes were significantly less substantial than the limitation triggered by the November 1, 2017 ownership change, however.change.

The aggregate authorized offering price under our ATM Sales Agreement is $30 million. The market price for our Common Stock could decline, perhaps significantly, as a result of resales or issuances of a large number of shares of our Common Stock in the public market or even the perception that such resales or issuances could occur. In addition, we have outstanding a substantial number of optionsconvertible securities and warrants that are exercisableconvertible and exercisable, as applicable, for shares of our Common Stock that may be exercised in the future.Stock. These factors could also make it more difficult for us to raise funds through future offerings of our equity securities.

We have convertible notes and warrants currently outstanding which may be immediately converted or exercised to purchase 2.7 millionacquire shares of Common Stock. To the extent that these convertible notes or warrants are converted or exercised, as the case may be, or to the extent we issue additional shares of Common Stock in the future, as the case may be,future there will be further dilution to holders of shares of the Common Stock. In 2023, when stockholders approved a 20-for-1 reverse split of the Common Stock, stockholders did not approve proportionately reducing the number of authorized shares of Common Stock. Accordingly, we have 275,000,000 shares of Common Stock authorized for issuance and less than 10% of that number issued and outstanding, allowing for additional issuances that would result in significant dilution.

On March 31, 2023, the Company's share price was $8.40. It had declined to a share price of $1.39 as of March 31, 2024, but partially recovered to a share price of $3.16 as of March 31, 2025. Under ASC 350, Goodwill, a sustained decline in share price represents a triggering event which would require the Company to test for impairment and there may be a risk that the Company incurs expenses related to goodwill impairment. The Company incurred GoodwillNo impairment ofwas $14.0 millionrecognized during the year ended March 31, 2024. No impairment was recognized during the current year ended March 31, 2025, due to stock price recovery.2026. However, additional impairment may be incurred if there are future declines in the Company's share price.

Cineverse is a premier streaming technology and entertainment company with its core streaming business operating as (i) a portfolio of owned and operated streaming channels with enthusiast fan bases; (ii) a large-scale global aggregator and full-service distributor of feature films and television programs; and (iii) a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content distribution through subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts. Our streaming channels reach audiences in several distinct ways: direct-to-consumer, through these major application platforms, and through third-party distributors of content on platforms.

The Company’s streaming technology platform, known as Matchpoint™, is a software-based streaming operating platform which provides clients with AVOD, SVOD, transactional video on demand ("TVOD") and linear capabilities, automates the distribution of content, and features a robust data analytics platform. Through the integration of Giant Worldwide, Matchpoint™ has expanded its automated media services ecosystem by adding audience development, customer acquisition, and direct-to-consumer marketing capabilities supported by longstanding studio relationships and performance marketing expertise.

We have incurred net losses historically. For the year ended March 31, 2025,2026, we have net incomeloss attributable to common stockholders of $3.2$(9.2) million. As of March 31, 2025,2026, we had an accumulated deficit of $500.9$510.1 million and net cash providedused byin operations for the fiscal year ended March 31, 20252026 was $17.4$26.5 million. Although weWe have positivenegative working capital of $3.6$(12.2) million as of March 31, 2025,2026, we may continue to generate net losses for the foreseeable future.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025, with East West Bank (the "EWB") providing for a $12.5 million Line of Credit Facility") andcurrently expandableprovides for borrowings of up to $15.0$12.5 million,million guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets. The Linefacility ofincludes Creditprovisions Facilitythat bearsallow interestfor atan aincrease ratein equaltotal borrowing capacity up to 1.25%$15.0 abovemillion, the prime rate, equalsubject to 8.75%lender as of March 31, 2025. The Line of Credit Facility matures on April 8, 2028.approval.

As of March 31, 2025,2026, $0$9.4 million was outstanding on the Line of Credit Facility. Under the Line of Credit Facility, the Company is subject to certain financial and non-financial covenants including terms which require the Company to maintain certain metrics and ratios, to maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis. Please see Note 75 - Debt for further information regarding the Company's Line of Credit Facility.

On May 3, 2024, the Company entered into aan at-the-market, or ATM, Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners and The Benchmark Company, LLC (collectively, the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of its Class A common stock, par value $0.001 per share (the “Common Stock”). Shares of Common Stock may be offered and sold for an aggregate offering price of up to $15 million. The Sales Agents’ obligations to sell shares under the Sales Agreement are subject to satisfaction of certain conditions, including the continuing effectiveness of the Registration Statement on Form S-3 (Registration No. 333-273098) (the “Registration Statement”) filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) on June 30, 2023 and declared effective by the SEC on January 25, 2024, and other customary closing conditions. The Company will pay the Sales Agents a commission of 3.00% of the aggregate gross proceeds from each sale of shares and has agreed to provide the Sales Agents with customary indemnification and contribution rights. The Company has also agreed to reimburse the Sales Agents for certain specified expenses. The Company is not obligated to sell any shares under the Sales AgreementAgreement. During the year ended March 31, 2026, the Company sold 397 thousand shares for net proceeds of $1.0 million, after deduction of commissions and has not sold any shares through the date of this report.fees.

Our capital requirements will depend on many factors, and we may need to use existing capital resources and/or undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs. Management's plans with respect to the Company's recurring net losses and net operating cash outflows also include but are not limited to our effort in increasing revenue from existing services as well as offering new services, which may result in additional income from operations. Should management be unsuccessful in executing these plans, additional capital resources will be necessary. There can be no assurance that resources under our Line of Credit Facility or from additional debt or equity resources will be available on acceptable terms, if at all. We believe our cash and cash equivalents and availability under our Line of Credit Facility as of March 31, 20252026 will be sufficient to support our operations for at least twelve months from the filing of this report.

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

Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”) on the digital platforms, and shipment of DVDsphysical and Blu-ray Discs.products. 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.

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

We generally record a receivable related to revenue or an unbilled revenue (contract asset) when we have an unconditional right to invoice and receive payment. Unbilled revenue includes an accrued revenue, the right to which has been earned at the period end based on completed performance. We record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if the amounts are refundable. Deferred revenue includes payments related to the sale ofphysical DVDsgoods with future release dates or subscription dues paid in advance.

The increasedecrease of $19.6$8.1 million in Direct Operating Expenses for the year ended March 31, 2025,2026, primarily relates to lower royalty costs compared to the same period of 20242025, primarilywhich relatesincluded to$17 themillion impactroyalty ofexpenses for Terrifier 3. Specifically,This thewas increasepartially isoffset by increased payments due to thesupply net effectpartners of the$6.4 followingmillion, changes:as (i)well $16.9 million higher royalty expense, (ii) $0.9 million increase in marketing costs, (iii) $1.0 millionas theatrical distribution fees related to ourcurrent serviceyear provider, (iv) $1.8 millionreleases, higher licenselicensor participationscosts, and advertisingthe poolallowance impressionapplied costs,against offsetcertain bycontent (v) $1.5 million lower SaaS subscription fees.advances.

Amortization andincreased depreciationby expense$2.4 have remained relatively consistentmillion for the year ended March 31, 2025,2026, compared to the year ended March 31, 2024,2025, asprimarily thedue Company'sto intangibleincreased focusedcapitalized investmentcontent mixcosts hasand remainedinternally consistentdeveloped oversoftware theassets pastbeing year.placed into service.

Income TaxInterest Expense

Cineverse is a streamingpremier technology and entertainment company with its core streaming business operating as (i) a portfolio of owned and operated streaming channels with enthusiast fan bases; (ii) a large-scale global aggregator and full-service distributor of feature films and television programs; and (iii) a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content distribution through subscription video on demand ("SVOD"), dedicated ad-supported video on demand ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts. Our streaming channels reach audiences in several distinct ways: direct-to-consumer, through these major application platforms, and through third-party distributors of content on platforms.

The Company’s streaming technology platform, known as Matchpoint™, is a software-based streaming operating platform which provides clients with AVOD, SVOD, transactional video on demand ("TVOD") and linear capabilities, automates the distribution of content, and features a robust data analytics platform. Through the integration of Giant Worldwide, Matchpoint™ has expanded its automated media services ecosystem by adding audience development, customer acquisition, and direct-to-consumer marketing capabilities supported by longstanding studio relationships and performance marketing expertise.

As of DecemberJune 31,30, 2025,2026, the Company has an accumulated deficit of $(511.2)$515.9 million and negative working capital of $(1.418.9) million. For the three and nine months ended DecemberJune 31,30, 2025,2026, the Company had a net loss attributable to the Company's common stock holders of $(1.05.8) million and $(10.3) million, respectively.million. Net cash used in operating activities for the ninethree months ended DecemberJune 31,30, 20252026 was $23.3$1.0 million, which included $7.9$0.2 million of incremental investment in our content portfolio via advances or minimum guarantee payouts. We may continue to generate net losses for the foreseeable future. During the nine months ended December 31, 2025, 1.9 million warrants were exercised for net proceeds of $5.8 million.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025, with East West Bank (the "Line of Credit Facility") providingthat currently provides for borrowings of up to $12.5 million guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets. The facility includes provisions that allow for an increase in total borrowing capacity up to $15.0 million, subject to lender approval. As of DecemberJune 31,30, 2025,2026, $8.3$11.4 million was outstanding on the Line of Credit Facility.

The Company will continue to invest in content development and acquisitions,acquisitions from which it believes it will obtain an appropriate return on its investment. As of DecemberJune 31,30, 20252026 and March 31, 2025,2026, short-term content advances were $7.9$6.8 million and $6.7$7.5 million, respectively, and long-term content advances, net of current portion, were $9.2$8.5 million and $4.1$8.2 million, respectively.

Our capital requirements will depend on many factors, and we may need to use existing capital resources and/or undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs. We believe our cash and cash equivalents, availability under our Line of Credit Facility and ability to use our ATM as of DecemberJune 31,30, 20252026 will be sufficient to support our operations for at least twelve months from the filing of this report.

Results of Operations for the three months ended DecemberJune 31,30, 20252026 and 20242025 (unaudited) (in thousands):

For the three months ended DecemberJune 31,30, 20252026 compared to three months ended DecemberJune 31,30, 2024,2025, compensation expense decreasedincreased by $1.8$1.1 million primarily due to aan lowerincreased non-cash bonus accrual.accruals Corporate expenses increased by $0.8($0.6 million reflecting higher professional services) and legalseverance expenses($0.3 associatedmillion). withThe strategicincrease businessin share-based compensation was attributable to incremental share-based compensation granted from fiscal fourth quarter acquisitions. The increase in marketing expense related to the increase in spend from upcoming theatrical releases such as Air Bud Returns and contentPan's acquisitions.Labyrinth Marketing20th expenses increased by $2.0 million primarily due to Toxic Avenger. For the three months ended December 31, 2024, $0.6 million Marketing expenses were included in Direct operating expenses.Anniversary.

Amortization expense increased by $0.3$1.7 million during the three months ended DecemberJune 31,30, 20252026 compared to the prior year quarter primarily due to increasedthe capitalizedpurchase contentprice costs.accounting-related intangible asset additions from our IndiCue and Giant acquisitions in the fourth quarter of fiscal 2026.

For the three months ended DecemberJune 31,30, 2025,2026, compared with the same period in 2024,2025, interest expense decreasedincreased by $2.1$0.8 million to $0.2$0.6 millionmillion, primarily due to highera $(0.4) million reduction in interest participationexpense recognized in the priorprior-year yearperiod relatedresulting tofrom a discount on accrued interest provided by a financing arrangement for the T3film Loan,Terrifier which3 wasin obtainedexchange andfor repaidan expedited final payment, as well as higher average outstanding borrowings under the Line of Credit Facility during the priorcurrent fiscal year, lower borrowings under our line of credit, and lower interest rates.quarter.

(1) - Includes $129$44 thousand and $344$85 thousand of amortization included in direct operating expenses on our Condensed Consolidated Statements of Operations for the three and nine months ended DecemberJune 31,30, 2026 and 2025, respectively, and $85 thousand and $256 thousand for the three and nine months ended December 31, 2024, respectively.

For the ninethree months ended DecemberJune 31,30, 2025,2026, net cash used in operating activities was primarily drivenattributable byto the Company's loss from operations, excluding non-cash expenses such as depreciation, amortizationdepreciation and amortization, stock-based compensation, fair value adjustments related to acquisition-related deferred and otherearnout consideration, as well as changes in working capital. Specifically,Working thecapital adjustmentschanges arewere primarily driven by netan cash outflows related to content advances made to partners for which initial expenditures are generally recovered within six to twelve months and operating prepayments and a decreaseincrease in accounts payablereceivable resulting from the timing of customer collections, partially offset by an increase in accounts payable, accrued expenses, and accruedother expenses.liabilities. Operating cash flows are typically seasonally lower during the first two fiscal quarters and higher during the third and fourth fiscal quarters, primarily due to revenues generated during the holiday season.

Cash used in investing activities is primarily related toreflected expenditures towardsfor long-lived intangibleassets and fixedinternally assets,developed along with strategic acquisitions.software.

We are not a party to any off-balance sheet arrangements other than as discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, Basis of Presentation and Consolidation and Note 3 - Other Interests toon the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC; however, we are not the primary beneficiary of the VIE.10-Q.