Cineverse Corp

Previous wording

Cineverse is a premier streaming technology and entertainment company with its core business (i) across a portfolio of owned and operated enthusiast streaming channels with enthusiast fan bases; (ii) as a large-scale global aggregator and full-service distributor of feature films and television programs; and (iii) as 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. We distribute products for major brands such as Hallmark, ITV, Nelvana, ZDF, Konami, NFL and Highlander, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital content producers. We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, and Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

Current wording

We distribute products for major brands such as Hallmark, ITV, Nelvana, ZDF, Konami, NFL and Highlander, as well as leading international and domestic content creators, movie producers, television producers and other short-form digital content producers. We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, and Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

Previous wording

As of December 31, 2023, the Company has an accumulated deficit of $489.3 million and negative working capital of $0.4 million. For the three and nine months ended December 31, 2023, the Company had a net loss attributable to common stockholders of $(2,864) thousand and $(6.9) million, respectively. Net cash used in operating activities for the nine months ended December 31, 2023 was $9.3 million, which included $6.5 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.

Current wording

As of June 30, 2024, the Company has an accumulated deficit of $507.3 million and a working capital deficit of $0.9 million. For the three months ended June 30, 2024, the Company had a net loss attributable to the Company's common stock, par value $0.001 per share (the "Common Stock") holders of $3.2 million. Net cash used in operating activities for the three months ended June 30, 2024 was $1.7 million, which included $2.0 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.

Previous wording

The Company is party to a Loan, Guaranty, and Security Agreement with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $5.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets. The line of credit expires on September 15, 2024. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate, 10.00% as of December 31, 2023. As of December 31, 2023, $5.0 million was outstanding on the Line of Credit Facility, gross of issuance costs of $(69) thousand. On February 9, 2024, the Company expanded the Line of Credit Facility to $7.5 million at the same interest rate and with the same maturity date.

Current wording

The Company is party to a Loan, Guaranty, and Security Agreement, as amended to date, with East West Bank (“EWB”) providing for a revolving line of credit (the “Line of Credit Facility”) of $7.5 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and such subsidiaries’ assets. The Line of Credit Facility bears interest at a rate equal to 1.5% above the prime rate, equal to 10.00% as of June 30, 2024. The term of the Line of Credit

Previous wording

In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B. Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares. The Company is not obligated to sell any shares under the ATM Sales Agreement. Any sales of shares made under the ATM Sales Agreement will be made pursuant to an effective shelf registration statement, for an aggregate offering price of up to $30 million. During the first quarter of the fiscal year, the Company sold 177 thousand shares under the ATM Sales Agreement for $1.1 million in net proceeds, after deduction of commissions and fees. The ATM Sales Agreement has expired in accordance with its terms.

Current wording

In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B. Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company was able to offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares. For the twelve months ended March 31, 2024, the Company sold 177 thousand shares for $1.1 million in net proceeds, respectively, after deduction of commissions and fees. The ATM Sales Agreement expired in fiscal year 2024 in accordance with its terms.

Previous wording

On June 16, 2023, the Company closed on the sale of 2,150 thousand shares of Common Stock, 517 thousand pre-funded warrants, and warrants to purchase up to 2,667 thousand shares of Common Stock at a combined public offering price of $3.00 per share and accompanying warrant for aggregate gross proceeds of approximately $7.4 million, after deducting placement agent fees and other offering expenses in the amount of $0.6 million. The warrants had an exercise price of $3.00 per share, were exercisable immediately and will expire five years from the issuance. The Company received $2.999 per share for the pre-funded warrants, with the remaining $0.001 due at the time of exercise. All 516,667 pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand.

Current wording

On June 16, 2023, the Company closed on the sale of 2,150 thousand shares of Common Stock, 517 thousand pre-funded warrants, and warrants to purchase up to 2,667 thousand shares of Common Stock at a combined public offering price of $3.00 per share and accompanying warrant for aggregate gross proceeds of approximately $7.4 million, after deducting placement agent fees and other offering expenses in the amount of $0.6 million. The warrants had an exercise price of $3.00 per share, were exercisable immediately and will expire five years from the issuance. The Company received $2.999 per share for the pre-funded warrants, with the remaining $0.001 due at the time of exercise. All 517 thousand pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand.

Previous wording

The Company will continue to invest in content development and acquisition, from which it believes it will obtain an appropriate return on its investment.

Current wording

The Company will continue to invest in content development and acquisition, from which it believes it will obtain an appropriate return on its investment. As of June 30, 2024 and March 31, 2024, short term content advances were $12.2 million and $9.3 million, respectively, and content advances, net of current portion were, $1.7 million and $2.6 million, respectively.

Previous wording

We believe our cash and cash equivalents and our credit facility, as of December 31, 2023, will be sufficient to support our operations for at least twelve months from the filing of this report. The Company may also undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.

Current wording

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 equivalent balances as of June 30, 2024 will be sufficient to support our operations for at least twelve months from the filing of this report.

Previous wording

For the three months ended December 31, 2023, total revenue declined by $14.6 million, or 52% as compared to three months ended December 31, 2022. During this time, Streaming and Digital revenue for three months ended December 31, 2023, decreased by $2.1 million, driven by a decline in the Company's AVOD revenue of $1.7 million due to continued headwinds in the broader advertising market. This decrease was partially offset by a $0.5 million increase in SVOD revenue as the Company continues to see the benefits from its acquisitions which have contributed value-accretive libraries, distribution platforms and technologies, such as Screambox.

Current wording

For the three months ended June 30, 2024, total revenue declined by $3.9 million, or 30% as compared to three months ended June 30, 2023. During this time, Streaming and digital revenue for three months ended June 30, 2024, decreased by $2.4 million, driven by a $1.9 million decline in the Company's digital distribution revenue resulting from the impact of content release timing in the current quarter relative to the first quarter in fiscal 2024, as well as the recent change in and build-out of the Company's direct advertising sales team. This decrease was partially offset by a $0.2 million increase in SVOD revenue.

Previous wording

The Company's $5.3 million decline in Base Distribution revenue for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022 was primarily driven by a $3.8 million decline in theatrical revenue, in part due to the Terrifier 2 success in fiscal year 2023, a decline of $1.1 million in barter-related licensing deal in the third quarter of fiscal 2023, as well as a $0.8 million decline in DVD-related sales and related physical distribution revenue, as the Company's focus shifts away from physical sales.

Current wording

The Company's $0.8 million decline in Base distribution revenue for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was primarily driven by a decline in DVD-related sales and related physical distribution revenue, as the Company's focus shifts away from physical sales.

Previous wording

The $8.9 million decrease in Direct Operating Expenses for the three months ended December 31, 2023 is primarily driven by the variable costs associated with a 52% decrease in quarterly revenue, including reduced licensing, royalty and participation expenses of $3.6 million; reduced manufacturing, freight, and fulfillment charges of $3.4 million. In addition, the Company's reserve against advances provided to partners decreased by $1.1 million relative to the three months ended December 31, 2022 and a $0.5 million increase in acquired content-related preparation costs capitalized as a result of the Company's content investment initiative.

Current wording

The $2.5 million decrease in Direct operating expenses for the three months ended June 30, 2024 was primarily driven by the variable costs associated with the decline in comparative quarterly revenue, including reduced licensing, royalty and participation expenses of $1.7 million; reduced manufacturing, freight, and fulfillment charges of $0.1 million related to the decline of physical sales, and the Company's reserve against advances provided to partners increased by $0.2 million relative to the three months ended June 30, 2023.

Previous wording

Corporate expenses decreased by $1.0 million primarily related a reduction of $0.6 million in legal fees and $0.4 million in other consulting and service providers, as a result of the Company's savings initiatives.

Current wording

Corporate expenses decreased by $0.7 million primarily related to a reduction of $0.3 million in other consulting service providers, $0.2 million in legal fees, and $0.1 million in public relations fees, as a result of the Company's savings initiatives.

Previous wording

For the nine months ended December 31, 2023, net cash used in operating activities is primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization and stock-based compensation, and other changes in working capital. Specifically, the adjustments are primarily driven by net cash outflows related to content advances made to partners for which initial expenditures are generally recovered within six to twelve months and increases in accounts payable, accrued expenses, and other liabilities, partially offset by a decrease in accounts receivable and the unrealized loss from the Company's investment in Metaverse's stock. Operating cash flows are typically seasonally lower during the first two fiscal quarters and higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season.

Current wording

For the three months ended June 30, 2024, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization and stock-based compensation, and other changes in working capital. Specifically, the adjustments are primarily driven by net cash outflows related to content advances made to partners for which initial expenditures are generally recovered within six to twelve months and operating prepayments, partially offset by a decrease in unbilled revenue, the collection of the Company's ERTC claim, and an increase in accounts payable and accrued expenses. Operating cash flows are typically seasonally lower during the first two fiscal quarters and higher during our fiscal third and fourth quarters, resulting from revenues earned during the holiday season.

Previous wording

Cash provided by financing activities pertained to the draw and repayment of the Company's line of credit, payment of earnout consideration, and issuance of company equity, net of financing fees.

Current wording

Cash provided by financing activities pertained to the receipt of funds from the Company's Terrifier 3-related term loan, repayment of the Company's line of credit, payment of deferred consideration, and payment of financing fees.