| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND CONSOLIDATION Our consolidated financial statements include
the accounts of Cinedigm and its wholly owned and majority owned subsidiaries. All intercompany transactions and balances 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 at fair value
where we have elected the fair value option. 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 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 digital revenue,
accounts receivable reserves, return reserves, inventory reserves, recovery of advances, assessment of goodwill impairment, intangible
asset impairment and estimated amortization lives, fair value for asset acquisitions and business combinations, valuation allowances for
income taxes and stock awards. Actual results could differ from these estimates. 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 required that we maintain specified cash balances that are restricted
to repayment of interest thereunder. See Note 5- Notes Payable Cash, cash equivalents, and restricted cash consisted of the following:
As of
(in thousands) March 31, March 31,
Cash and Cash Equivalents $ 13,062 $ 16,849
Restricted Cash - 1,000
$ 13,062 $ 17,849 EQUITY INVESTMENT IN A METAVERSE COMPANY, A RELATED PARTY On February 14, 2020, the Company acquired an
approximately 11.5% interest in A Metaverse Company (“Metaverse”), a leading publicly traded Chinese entertainment company,
formerly Starrise Media Holdings Limited, On April 10, 2020, the Company purchased an additional
15% interest in Metaverse in a private transaction from shareholders of Metaverse that are affiliated with the major shareholder of the
Company. The Company recorded an additional equity investment of approximately $28.2 million, which is the fair market value of the
Metaverse shares on the transaction date on the Stock Exchange of Hong Kong, in exchange for the Company’s common stock of $11.0 million,
valued at the date of the issuance of the Common Stock of the Company. The difference in the value of shares received in Metaverse and
shares issued by the Company is deemed as contributed capital and recorded in additional paid-in capital. This transaction was also recorded
as an equity investment in Metaverse. The Company has accounted for these investments
under the equity method of accounting as the Company can exert significant influence over Metaverse with its direct ownership and affiliation
with the Company’s majority shareholders. The Company has made an irrevocable election to apply the fair value option under ASC
825-10, Financial Instruments During the years ended March 31, 2022 and March 31, 2021, the Company
sold 680,000 shares of Metaverse shares for net proceeds of approximately $12.3 thousand and 8,370,000 of Metaverse shares for net proceeds
of approximately $0.8 million, respectively, which resulted in a loss on sale of approximately $1 thousand and $73 thousand,
respectively. As of March, 31, 2022 and 2021, the value of our equity investment
in Metaverse, using the readily determinable fair value method from the quoted trading price of the Stock Exchange of Hong Kong, was approximately
$7.03 million and $6.44 million, respectively, resulting in a change in fair value of approximately $0.59 million for the year ended March
31, 2022. At March 31, 2022, the Company owned 362,307,397 shares or 17% of Metaverse. Equity Investment in Metaverse, a related party transaction On December 27, 2019, the Company
entered into, and on February 14, 2020 amended, (see Note 2 - Summary of Significant Accounting Policies On April 10, 2020, the Company
entered into another stock purchase agreement (the “April Metaverse Stock Purchase Agreement”) with five (5) shareholders
of Metaverse - Bison Global Investment SPC - Bison Global No. 1 SP, Huatai Investment LP, Antai Investment LP, Mingtai Investment LP and
Shangtai Asset Management LP, all of which are related parties to the Company to buy - an aggregate of 223,380,000 outstanding Metaverse
ordinary shares from them and for the Company to issue to them an aggregate of 29,855,081 shares of its Common Stock as consideration
therefor (the “April Metaverse Share Acquisition”). On April 15, 2020, the April Metaverse Share Acquisition was consummated
and this transaction was also recorded as an equity investment in Metaverse. Metaverse’s ordinary shares
(HK 1616) are listed on the main board of the Stock Exchange of Hong Kong Limited. Based on the closing price of .152 per share on March
31, 2022, calculated at an exchange rate of 7.83 Hong Kong Dollars to 1 US dollar, the market value of Cinedigm’s ownership in Metaverse
ordinary shares was approximately $7.03 million. On April 1, 2022, trading of Metaverse’s ordinary shares was halted. (See
Note 11) NON-MONETARY TRANSACTIONS During the
year ended March 31, 2020, the Company entered into agreements with certain vendors to transfer 5,139,762 and 14,184,765 Metaverse
ordinary shares to satisfy outstanding liabilities with these vendors. Upon the sale of the Metaverse shares by the vendors, with certain
restrictions on sales unless the Company gave consent to sell, if the proceeds did not satisfy the amount due to the vendor, the Company
was liable for the balance owed. Pursuant to such agreements, the Company reduced the amount payable to its vendors by $0.8 million
as of March 31, 2021. There were no such transactions during the year ended March 31, 2022. There was no gain or loss resulting
from these transactions for the year ended March 31, 2022 and 2021. 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 our Systems deployments that have extended payment terms. Such accounts receivable are discounted
to their present value at prevailing market rate. ADVANCES Advances, which are recorded within prepaid and other current assets
on the 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 $1.2 million and $0.3 million, for
the years ended March 31, 2022 and 2021, respectively. 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
Internal use software 5 years
Digital cinema projection systems 10 years
Machinery and equipment 3 - 10 years
Furniture and fixtures 3 - 6 years We capitalize costs associated with software developed
or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly
enhanced capabilities and modifications. These capitalized costs are included in property and equipment and include external direct cost
of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly
associated with, and who devote time to internal-use software projects. Capitalization of these costs ceases once the project is substantially
complete and the software is ready for its intended use. Once the software is ready for its intended use, the costs are amortized over
the useful life of the software. Post-configuration training and maintenance costs are expensed as incurred. 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 consolidated statements of operations. 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 years ended March 31,
2022 and 2021, the Company assessed the future performance of titles included in the customer list intangible asset, which resulted in
an impairment charge of $2.0 million and $0 was recorded from operations for long-lived assets or finite-lived assets. INTANGIBLE ASSETS Intangible assets are stated at cost less accumulated amortization.
For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives
of the related assets. For intangible assets with indefinite lives, the assets are tested annually for impairment or sooner if a triggering
event occurs. During the years ended March 31, 2022 and 2021, we recorded an impairment of $2.0 million and $0 for our customer relationships,
respectively. Amortization expense is recorded using the straight-line method over
the estimated useful lives of the respective assets as follows:
Trademark 3 years
Content Library 3 – 20 years
Customer Relationships 5 – 13 years
Tradename 2 – 15 years
Theatre Relationship 12 years
Patents 3 years
Supplier Agreements 2 years
Intangible Assets 3-4 years
Software 10 years The Company’s intangible assets include the following on March
31, 2022:
Cost Basis Accumulated Impairment Net
Trademark $ 1,925 $ (776 ) $ - 1,149
Content Library 23,685 (20,665 ) - 3,020
Customer Relationships 10,658 (7,327 ) (1,968 ) 1,363
Tradename 2,101 (525 ) - 1,576
Theatre Relationship 550 (550 ) - -
Patents 17 (17 ) - -
Supplier Agreements 11,430 (11,384 ) - 46
Intangible Assets 10,081 (161 ) - 9,920
Software 3,200 (240 ) - 2,960
Total Intangible Assets $ 63,647 $ (41,645 ) $ (1,968 ) 20,034 The Company’s intangible assets include
the following on March 31, 2021:
Cost Basis Accumulated Impairment Net
Trademark $ 2,839 $ (382 ) $ - 2,457
Content Library 23,148 (20,272 ) - 2,876
Customer Relationships 22,137 (17,610 ) - 4,527
Theatre Relationship 550 (550 ) - -
Total Intangible Assets $ 48,674 $ (38,814 ) $ - 9,860 Below is the amortization expense
per year for the intangible assets:
Total
2023 $ 2,734
2024 2,562
2025 1,730
2026 1,651
2027 1,651
Thereafter 9,706
Total $ 20,034 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. The equity investment in Metaverse is in Hong Kong dollars and was
translated into US dollars as of March 31, 2022 and 2021 at an exchange rate of 7.8 and 7.8 Hong Kong Dollars to 1 US Dollar, respectively.
The fair value of this equity investment is measured by the quoted market price of Metaverse on the Stock Exchange of Hong Kong. The adjustment
to fair value of this investment resulted in a gain of $585 and loss of $4,518 for the years ended March 31, 2022 and 2021, respectively. The following tables summarize the levels of fair
value measurements of our financial assets and liabilities as of March 31, 2022 and, 2021: As of
March 31, 2022
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Equity investment in Metaverse, at fair value $ 7,028 $ — $ — $ 7,028
$ 7,028 $ — $ — $ 7,028
Liabilities:
Current portion of earnout consideration on purchase of a business $ — $ — $ 1,081 $ 1,081
Long term portion of earnout consideration on purchase of a business — — 603 603
$ — $ — $ 1,684 $ 1,684 As of March 31, 2021
(in thousands) Level 1 Level 2 Level 3 Total
Restricted cash $ 1,000 $ — $ — $ 1,000
Equity investment in Metaverse, at fair value 6,443 — — 6,443
$ 7,443 $ — $ — $ 7,443 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 consolidated balance sheets. The
estimated fair values of these financial instruments approximate their carrying amounts because of their short-term nature. ASSET ACQUISITIONS An asset acquisition is an acquisition of an asset, or a group of assets,
that does not meet the definition of a business. Asset acquisitions are accounted for by using the cost accumulation model whereby the
cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. GOODWILL Goodwill is the
excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on
an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value,
also known as impairment indicators. Inherent
in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s
interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations.
To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding
whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect
on our consolidated financial position or results of operations. The Company
has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than
not that the fair value of a reporting unit is less than its carrying amount or to perform the quantitative impairment test. The Company
reassessed goodwill impairment on its annual measurement date of March 31, 2022 by performing a qualitative analysis and determined that
it was not more likely than not that the fair value of its reporting unit is less than its carrying amount. No goodwill impairment charge
was recorded in the years ended March 31, 2022 and 2021. Gross amounts
of goodwill and accumulated impairment charges that we have recorded are as follows:
(In thousands)
Goodwill at March 31, 2021 $ 8,701
Goodwill from business combinations – see Note 4 12,383
Goodwill at March 31, 2022 $ 21,084 ACCOUNTS
PAYABLE AND ACCRUED EXPENSES Accounts
payable and accrued expenses consisted of the following:
As of
(In thousands) March 31, March 31,
Accounts payable $ 34,177 $ 30,111
Amounts due to producers, net 10,430 10,557
Accrued compensation and benefits 3,507 2,995
Accrued taxes (refund) payable (78 ) (99 )
Interest payable - 10
Accrued other expenses 3,989 3,053
Total accounts payable and accrued expenses $ 52,025 $ 46,627 PREPAID
AND OTHER CURRENT ASSETS Prepaid
and other current assets consisted of the following:
As of
(In thousands) March 31, March 31,
Non-trade accounts receivable $ 826 $ 413
Advances 2,117 1,841
Due from producers 1,861 589
Prepaid insurance 169 409
Other prepaid expenses 820 405
Total prepaid and other current assets $ 5,793 $ 3,657 Impairments and accelerated amortization related
to advances were $1.2 million and $0.3 million, for the years ended March 31, 2022 and 2021, respectively. REVENUE RECOGNITION Payment terms and conditions vary by customer and typically provide
net 30 to 90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when
we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for
that product or service will be one year or less. We have in the past entered into arrangements in connection with activation fees due
from our System deployments that had extended payment terms. The outstanding balances on these arrangements are insignificant and hence
the impact of significant financing would be insignificant. Cinema Equipment Business We retain
ownership of our Systems and the residual cash flows related to the Systems in Phase I Deployment after the end of the 10-year deployment
payment period. For certain
Phase II Deployment Systems, we do not retain ownership of the residual cash flows and digital cinema equipment in Phase II Deployment
after the completion of cost recoupment and at the expiration of the exhibitor master license agreements. The Cinema
Equipment Business also provides monitoring, data collection, serial data verification and management services to this segment, as well
as to exhibitors who purchase their own equipment, in order to collect virtual print fees (“VPFs”) from motion picture studios
and distributors and Alternative Content Fees (“ACFs”) from alternative content providers, and to distribute those fees to
theatrical exhibitors (collectively, “Services”). VPFs are
earned, net of administrative fees, pursuant to contracts with movie studios and distributors, whereby amounts are payable by a studio
to Phase I Deployment and to Phase II Deployment when movies distributed by the studio are displayed on screens utilizing our Systems
installed in movie theatres. VPFs are earned and payable to Phase I Deployment based on a defined fee schedule until the end of the VPF
term. One VPF is payable for every digital title initially displayed per System. The amount of VPF revenue is dependent on the number
of movie titles released and displayed using the Systems in any given accounting period. VPF revenue is recognized in the period the
title first plays for general audience viewing in a digital projector equipped movie theatre. The Phase 1 Deployment’s and Phase
2 Deployments performance obligations for revenue recognition are met at this time. Phase II Deployment’s agreements
with distributors require the payment of VPFs, according to a defined fee schedule, for ten years from the date each system is installed;
however, Phase II Deployment may no longer collect VPFs once “cost recoupment,” as defined in the contracts with movie studios
and distributors, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase II Deployment
have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and
ongoing costs”, as defined, and including service fees, subject to maximum agreed upon amounts during the three-year rollout period
and thereafter. 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, that it is not probable
to conclude at this point in time that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty
associated with the variable consideration is subsequently resolved. Under the terms of our standard
cinema equipment licensing agreements, exhibitors will continue to have the right to use our Systems through the end of the term of the
licensing agreement, after which time, they have the option to: (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 typically pursue the sale
of the Systems to such exhibitors. Cinedigm recognizes revenue once the customer takes possession of the Systems and Cinedigm received
the sale proceeds. Such sales were originally contemplated as the conclusion of the digital cinema deployment plan. Total system sales
executed was $6.1 million and $6.7 million, during the year ended March
31, 2022 and 2021, 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 Phase II of 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 II Deployment Systems and for Systems installed by CDF2 Holdings, a related party, (See Note 3 - Other Interests 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 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”
or “OTT Streaming and Digital”), and physical goods (e.g., DVDs and Blu-ray Discs) (“Physical Revenue” or “Base
Distribution Business”). Fees earned are typically a percentage based on the net amounts received from our customers. Depending
upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance
obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”)
on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the content is available
for subscription on the digital platform (the company’s digital content is considered functional IP), at the time of shipment for
physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred
to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation.
Physical revenue from the sale of physical goods is recognized after deducting the reserves for sales returns and other allowances, which
are accounted for as variable consideration. Reserves for potential sales
returns of physical goods and other allowances are recorded based upon historical experience. If actual future returns and allowances
differ from past experience, adjustments to our allowances may be required. 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 are 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. The Company follows the five-step model established by ASC 606 when
preparing its assessment of revenue recognition Principal Agent Considerations Revenue earned by our CEG business from the delivery of digital content
and physical goods may be recognized gross or net depending on the terms of the arrangement. We determine whether revenue should be reported
on a gross or net basis based on each revenue stream. Key indicators that we use in evaluating gross versus net treatment include, but
are not limited to, the following:
● 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. Shipping and Handling Shipping and handling costs are incurred to move physical goods (e.g.,
DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in cost of goods sold because we are
responsible for delivery of the product to our customers prior to transfer of control to the customer. Credit
Losses We maintain
reserves for potential credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad
debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. 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 is variable consideration as part of the transaction
price. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required. 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. Contract Liabilities We generally
record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue
(contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable. Deferred
revenue pertaining to our Content & Entertainment 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 March 31, 2022 was $0.2 million. For the year ended March 31, 2022, the additions to our deferred revenue balance were
primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions to our deferred
revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were
in the ordinary course of business. For year ended March 31, 2022 and March 31, 2021, there was $11,792,210 and $14,433,054, respectively,
included in accounts payable that represents a refund liability, a portion or all of which may be recognized as revenue upon completion
of audit periods. During the year ended March 31, 2022, $813 thousand of revenue was
recognized that was included in the deferred revenue balance at the beginning of the year. During the year ended March 31, 2022, $3.9
million of revenue was recognized that was included in the accounts payable balance as constrained variable consideration at the beginning
of the year. The Company recognized the revenue related once the uncertainty associated with the variable consideration was resolved. Participations
and royalties payable When we
use third parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor
under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to
studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any
expenses that are to be reimbursed to us by such studios or content producers. 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, and 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 years ended March 31, 2022 and 2021 (in thousands):
Year Ended
2022 2021
Cinema Equipment Business:
Phase I Deployment $ 654 $ 552
Phase II Deployment 4,810 1,531
Services 1,428 539
Digital System Sales 11,267 600
Total Cinema Equipment Business revenue $ 18,159 $ 3,222
Content & Entertainment Business:
Physical Goods $ 10,447 $ 10,230
OTT Streaming and Digital 27,448 17,967
Total Content & Entertainment Business revenue $ 37,895 $ 28,197 Concentrations For the fiscal year ended March 31, 2022, two customers, Amazon
and Distribution Solutions each represented 18% and 25% respectively of CEG’s revenues and approximately 6% and 8%, respectively,
of our consolidated revenues. For the fiscal year ended March 31, 2021, Amazon and Distribution Solutions
represented 15% and 22% respectively of CEG’s revenues and approximately 9% and 13%, respectively, of our consolidated Revenues. DIRECT OPERATING COSTS Direct operating costs consist of operating
costs such as cost of revenue, fulfillment expenses, shipping costs, property taxes and insurance on Systems, royalty expenses, impairments
of advances, and marketing and direct personnel costs. STOCK-BASED COMPENSATION The Company issues stock-based awards to employees
and non-employees, generally in the form of restricted stock, restricted stock units, stock appreciation rights and performance stock
units. The Company accounts for its stock-base |
