CIDM Cinedigm Corporation

PROPOSAL ONE
APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION TO EFFECT

A REVERSE STOCK SPLIT OF THE COMPANY’S CLASS A COMMON STOCK,

SUBJECT TO THE BOARD’S DISCRETION

The Board has approved and adopted, and is hereby soliciting stockholder approval of, an amendment to the Certificate of Incorporation to effect a reverse stock split of the Company’s Class A Common Stock at a ratio of not less than one-for-two and not more than one-for-twenty (with the exact ratio determined by the Board), subject to the Board’s discretion to determine, without any further action by the stockholders, not to proceed with a reverse stock split if it determines that a reverse stock split is no longer in the best interest of the Company and its stockholders. The language of the new Section 4.1 of the Certificate of Incorporation which would be contained in an amendment is set forth in Appendix A to this Proxy Statement (the “Reverse Stock Split Amendment”). A vote for this Proposal One will constitute approval of the Reverse Stock Split Amendment providing for the combination of any whole number of shares of Class A Common Stock between and including two and twenty into one share of Class A Common Stock and will grant the Board the authority to select which of the approved exchange ratios within that range will be implemented. If the stockholders approve this Proposal One, the Board will have the authority, but not the obligation, in its sole discretion and without further action on the part of the stockholders, to select one of the approved reverse stock split ratios and effect the approved reverse stock split by filing the Reverse Stock Split Amendment with the Secretary of State of the State of Delaware at any time after the approval of the Reverse Stock Split Amendment; provided, however, that, if the Reverse Stock Split Amendment is approved by stockholders and has not been filed with the Secretary of State of the State of Delaware by the close of business on the first anniversary of the date on which the stockholders approved it, the Board will abandon the Reverse Stock Split Amendment without further action on the part of the stockholders. The number of shares of Class A Common Stock authorized under the Certificate of Incorporation, and the par value of the Class A Common Stock, will not be affected by a reverse stock split, if implemented. However the Board is seeking approval of Proposal Two which would reduce the number of authorized shares of Class A Common Stock if the Reverse Split Proposal is adopted. See Proposal Two below. Except for any changes as a result of the treatment of fractional shares, each stockholder will hold the same percentage of Class A Common Stock outstanding immediately following the reverse stock split as such stockholder held immediately prior to the reverse stock split.

The Board believes that stockholder approval of an exchange ratio range (rather than an exact exchange ratio) provides the Board with maximum flexibility to achieve the purposes of the reverse stock split. If the stockholders approve this Proposal One, the reverse stock split will be effected, if at all, only upon a determination by the Board that the reverse stock split is in the Company’s and its stockholders’ best interests at that time. In connection with any determination to effect the reverse stock split, the Board will set the time for such a split and select a specific ratio within the range approved by the Board. These determinations will be made by the Board with the intention to create the greatest marketability for our Class A Common Stock based upon prevailing market conditions at that time.

The Board reserves its right to elect to abandon the reverse stock split if it determines, in its sole discretion and without further action on the part of the stockholders, that this Proposal One is no longer in the best interest of the Company and its stockholders.

Purpose of the Reverse Stock Split Amendment

To Increase the Per Share Value of the Class A Common Stock and Meet Nasdaq Continued Listing Requirements

The purpose of the reverse stock split is to increase the per share trading value of the Class A Common Stock. The Board intends to effect the proposed reverse stock split only if it believes that a decrease in the number of shares outstanding is likely to improve the trading price for the Class A Common Stock, and only if the implementation of a reverse stock split is determined by the Board to be in the best interests of the Company and its stockholders. The Board may exercise its sole discretion not to implement a reverse stock split.

On April 4, 2022, the Company received a letter (the “Notice”) from the Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Class A Common Stock for the preceding 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). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a period of 180 calendar days, or until October 3, 2022, in which to regain compliance (which may be extended under certain conditions). In order to regain compliance with the minimum bid price requirement, the closing bid price of the Company’s Class A Common Stock must be at least $1 per share for a minimum of ten consecutive business days during such 180-day period. On October 4, 2022, Nasdaq approved an additional 180 calendar day compliance period, until April 3, 2023, during which the Company may cure the deficiency. On April 5, 2023, the Company received a notice of delisting as of April 14, 2023 from Nasdaq,

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and on April 12, 2023, the Company requested a hearing to appeal the delisting notice. Such hearing is scheduled for May 11, 2023. This request automatically stays any delisting or suspension action pending the issuance of a final decision by Nasdaq and the expiration of any further extension granted by Nasdaq. The Board believes that a reverse stock split may be the best option for the Company to bring the bid price for the Class A Common Stock above the $1 threshold in accordance with Nasdaq Listing Rule 5450(a)(1). If, based on the appeal, Nasdaq agrees to an additional extension of time during which the Company may effect a reverse stock split and this Proposal One is approved by stockholders, the Company expects to regain compliance with Nasdaq rules.

To potentially improve the marketability and liquidity of our common stock

The Board believes that a reverse stock split would allow a broader range of institutions to invest in the Class A Common Stock (namely, funds that are prohibited from buying stocks with a price below a certain threshold), potentially increasing the trading volume and liquidity of the Class A Common Stock. A reverse stock split would also help increase analyst and broker interest in the Class A Common Stock, as their policies can discourage them from following or recommending companies with lower stock prices. Because of the trading volatility often associated with lower-priced stock, many brokerage houses and institutional investors have adopted internal policies and practices that either prohibit or discourage them from investing in such stocks or recommending them to their customers. Some of those policies and practices may also function to make the processing of trades in lower-priced stocks economically unattractive to brokers.

Impact of the Reverse Stock Split Amendment if Implemented

If approved and effected, the reverse stock split will be effected simultaneously and in the same ratio for all of the Class A Common Stock. The reverse stock split will affect all holders of the Class A Common Stock uniformly and will not affect any stockholder’s percentage ownership interest, or voting power, in the Company (subject to the treatment of fractional shares). As described below, holders of Class A Common Stock otherwise entitled to a fractional share as a result of the reverse stock split will receive a cash payment in lieu of such fractional share. These cash payments will reduce the number of post-reverse stock split holders of the Class A Common Stock to the extent there are, at the time the reverse stock split is effected, stockholders who would otherwise receive less than one share of Class A Common Stock after the reverse stock split. In addition, the reverse stock split will not affect any stockholder’s proportionate voting power (subject to the treatment of fractional shares).

The principal effects of the Reverse Stock Split Amendment will be that:

The table below illustrates the effect (without giving effect to a reduction in the number of authorized shares of Class A Common Stock if Proposal Two is approved), as of April 5, 2023, of a reverse stock split at certain ratios on (i) the shares of Class A Common Stock outstanding; (ii) the shares of Class A Common Stock reserved for issuance, (iii) the number of total authorized shares of Class A Common Stock under the Certificate of Incorporation, and (iv) the resulting number of shares of Class A Common Stock available for issuance:

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1 Assuming Proposal Two is not approved. See Proposal Two for the number of authorized shares if Proposal Two passes.

Certain Risks Associated with the Reverse Stock Split

The Board intends to effect the reverse stock split only if it believes that a decrease in the number of shares is likely to improve the trading price of the Class A Common Stock and if the implementation of the reverse stock split is determined by the Board to be in the best interests of the Company and its stockholders.

Effective Time

The proposed reverse stock split would become effective as of 11:59 p.m., Eastern Time (the “Effective Time”), on the date of filing the Reverse Stock Split Amendment with the office of the Secretary of State of the State of Delaware. Except as explained below with respect to fractional shares, at the Effective Time, all shares of the Class A Common Stock issued and outstanding immediately prior thereto will be combined, automatically and without any action on the part of stockholders, into a lesser number of shares of the Class A Common Stock calculated in accordance with the reverse stock split ratio determined by the Board. Certificates previously representing shares of Class A Common Stock will represent the number of shares into which the shares previously represented by the stock certificate were combined as a result of the Reverse Split Amendment.

After the Effective Time, the Class A Common Stock will have a new committee on uniform securities identification procedures (“CUSIP”) number, which is a number used to identify the Company’s equity securities, and when presented for transfer, stock certificates with the older CUSIP number will be exchanged for stock certificates with the new CUSIP number by following the procedures described below.

After the Effective Time, the Company will continue to be subject to periodic reporting and other requirements of the Exchange Act. The Class A Common Stock will continue to be listed on the Nasdaq Capital Market under the symbol “CIDM”, although Nasdaq will add the letter “D” to the end of the trading symbol for a period of 20 trading days after the Effective Date to indicate that the reverse stock split has occurred.

Board Discretion to Implement the Reverse Stock Split Amendment

If the Reverse Stock Split Amendment is approved by the Company’s stockholders, it will be effected, if at all, only upon a determination by the Board that a reverse stock split (at the ratio between two and twenty determined by the Board as described above) is in the best interests of the Company and the stockholders. The Board’s determination as to whether the reverse stock split will be effected and, if so, at what ratio, will be based upon certain factors, including existing and expected marketability and liquidity of the Class A Common Stock, prevailing market conditions and the likely effect on the market price of the Class A Common Stock. If the Board determines to effect the reverse stock split, the Board will consider various factors in selecting the reverse split ratio between two and twenty including the overall market conditions at the time and the recent trading history of the Class A Common Stock.

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Fractional Shares

Stockholders will not receive fractional post-reverse stock split shares in connection with the reverse stock split. Instead, the Company’s transfer agent for the registered stockholders will aggregate all fractional shares of Class A Common Stock and arrange for them to be sold as soon as practicable after the Effective Time at the then prevailing prices on the open market on behalf of those stockholders who would otherwise be entitled to receive a fractional share. The Company expects that the transfer agent will cause the sale to be conducted in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares of Class A Common Stock. After completing the sale, stockholders will receive a cash payment from the transfer agent in an amount equal to the stockholder’s pro rata share of the total net proceeds of these sales. No transaction costs will be assessed on the sale. However, the proceeds will be subject to certain taxes as discussed below. In addition, stockholders will not be entitled to receive interest for the period of time between the Effective Time and the date a stockholder receives payment for the cashed-out shares. The payment amount will be paid to the stockholder in the form of a check in accordance with the procedures outlined below.

After the reverse stock split, stockholders will have no further interests in the Company with respect to their cashed-out fractional shares. A person otherwise entitled to a fractional interest will not have any voting, dividend or other rights except to receive payment as described above.

Effect on Beneficial Holders of Class A Common Stock (i.e., stockholders who hold in “street name”)

Upon the reverse stock split, we intend to treat shares held by stockholders in “street name,” through a bank, broker or other nominee, in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding the Class A Common Stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split and making payment for fractional shares. If a stockholder holds shares of the Class A Common Stock with a bank, broker or other nominee and has any questions in this regard, stockholders are encouraged to contact their bank, broker or other nominee.

Effect on Certificated Shares

Dematerialization is the digital process of eliminating physical certificates for securities and other negotiable instruments. Dematerialized instruments are recorded electronically, maintained in the form of entries in the books (known as “book entry”) of stock transfer agents, registrars and depositories, and are evidenced by account statements or similar records. The goal of dematerialization is to facilitate paperless transactions, which streamlines processing, lowers cost, reduces the risks associated with lost, stolen or counterfeit certificates, and helps conserve natural resources. Dematerialization is accomplished in connection with the Direct Registration System (“DRS”), which was developed at the direction of the SEC as an alternative to physical certificates. The Company recently determined to implement dematerialization and make all future issuances of Class A Common Stock in book entry, as permitted by Delaware law.

Stockholders holding shares of Class A Common Stock in certificate form will be sent a transmittal letter by the transfer agent after the Effective Time. The letter of transmittal will contain instructions on how a stockholder should surrender their certificate(s) representing shares of the Class A Common Stock (“Old Certificates”), to the transfer agent in exchange for book entry accounts reflecting the appropriate number of whole shares of post-reverse stock split Class A Common Stock (“New Shares”). No New Share will be issued to a stockholder until such stockholder has surrendered all Old Certificates, together with a properly completed and executed letter of transmittal, to the transfer agent. No stockholder will be required to pay a transfer or other fee to exchange their Old Certificates.

Stockholders holding shares of Class A Common Stock both in certificate form and in book entry will receive a transmittal letter and must surrender all Old Certificates, together with a properly completed and executed letter of transmittal, to the transfer agent, in order to exchange both their certificated and book entry shares.

Stockholders will then receive a DRS account statement representing the number of whole New Shares to which they are entitled as a result of the reverse stock split. Until surrendered, the Company will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of whole shares of post-reverse stock split Class A Common Stock, as applicable, to which these stockholders are entitled.

Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for New Shares in book entry. If an Old Certificate has a restrictive legend on its back, the account reflecting the New Shares will have a notation with the same restrictive legend that is on the back of the Old Certificate. If a stockholder is entitled to a payment in lieu of any fractional share interest, such payment will be made as described above under “Fractional Shares.”

Effect on Registered “Book-Entry” Holders of Class A Common Stock (i.e., stockholders that are registered on the transfer agent’s books and records but do not hold stock certificates)

Certain of the Company’s registered holders of Class A Common Stock may hold their shares electronically in book-entry form with the transfer agent. These stockholders do not have stock certificates evidencing their ownership of the Class A Common Stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts.

If a stockholder holds registered shares only in book-entry form with the transfer agent, no action needs to be taken to receive post-reverse stock split shares or cash payment in lieu of any fractional share interest, if applicable. If a stockholder is entitled to post-reverse stock split shares, a transaction statement will automatically be sent to the

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stockholder’s address of record indicating the number of shares of Class A Common Stock held following the reserve stock split.

If a stockholder is entitled to a payment in lieu of any fractional share interest, a check will be mailed to the stockholder’s registered address as soon as practicable after the Effective Time. By signing and cashing the check, stockholders will warrant that they owned the shares of Class A Common Stock for which they received a cash payment. The cash payment is subject to applicable federal and state income tax and state abandoned property laws. In addition, stockholders will not be entitled to receive interest for the period of time between the Effective Time of the reverse stock split and the date payment is received.

STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.

Accounting Matters

The reverse stock split will not affect the par value of a share of the Class A Common Stock. As a result, as of the Effective Time of the reverse stock split, the stated capital attributable to Class A Common Stock on the Company’s balance sheet will be reduced proportionately based on the reverse stock split ratio (including a retroactive adjustment of prior periods), and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. Reported per share net income or loss will be higher because there will be fewer shares of Class A Common Stock outstanding.

No Appraisal Rights

Under the Delaware General Corporation Law, stockholders are not entitled to appraisal rights with respect to the reverse stock split, and the Company will not independently provide stockholders with any such right.

Certain United States Federal Income Tax Considerations

The following is a summary of certain U.S. federal income tax consequences of the reverse stock split to holders of the Class A Common Stock. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, judicial authorities, published positions of the Internal Revenue Service (the “IRS”) and other applicable authorities, all as currently in effect and all of which are subject to change or differing interpretations (possibly with retroactive effect). This discussion is limited to U.S. holders (as defined below) that hold their shares of Class A Common Stock as capital assets for U.S. federal income tax purposes (generally, assets held for investment). This discussion does not address all of the tax consequences that may be relevant to a particular stockholder or to stockholders that are subject to special treatment under U.S. federal income tax laws, such as:

If a partnership or other entity taxed as a partnership holds Class A Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partners and the activities of the partnership. Partnerships and partners in such a partnership should consult their tax advisors about the tax consequences of the reverse stock split to them.

This discussion does not address the tax consequences of the reverse stock split under state, local or foreign tax laws. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.

Holders of the Class A Common Stock are urged to consult with their own tax advisors as to the tax consequences of the reverse stock split in their particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local or foreign and other tax laws and of changes in those laws.

For purposes of this section, the term “U.S. holder” means a beneficial owner of the Class A Common Stock that for U.S. federal income tax purposes is:

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Tax Consequences of the Reverse Stock Split Generally

Except as provided below with respect to cash received in lieu of fractional shares, a U.S. holder will not recognize any gain or loss as a result of the reverse stock split.

Cash Received in Lieu of Fractional Shares

A U.S. holder that receives cash in lieu of a fractional share of Class A Common Stock in the reverse stock split will generally be treated as if the U.S. holder had participated in a redemption to the extent of the cash. The tax treatment of the receipt of cash could depend in part on the percentage of the Company’s stock owned by the U.S. holder before and after the reverse stock split, and it is therefore possible that the tax treatment of the receipt of the cash by some U.S. holders will differ from the tax treatment of the receipt of the cash by other U.S. holders. Some U.S. holders may recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the portion of the basis of the pre-reverse stock split Class A Common Stock allocable to the fractional interest. Such gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period in the Class A Common Stock exchanged therefor was greater than one year as of the date of the exchange. In the case of other U.S. holders, the cash might instead be treated as a return of capital or, if the Company has current or accumulated earnings and profits, a dividend. U.S. holders should consult with their own tax advisors to determine the proper tax treatment of the receipt of cash in lieu of a fractional share.

Tax Basis and Holding Period

A U.S. holder’s aggregate tax basis in the Class A Common Stock received in the reverse stock split will equal such stockholder’s aggregate tax basis in the Class A Common Stock surrendered in the reverse stock split reduced by any amount allocable to a fractional share of post-reverse stock split Class A Common Stock for which cash is received. The holding period for the shares of the Class A Common Stock received in the reverse stock split generally will include the holding period for the shares of the Class A Common Stock exchanged therefor.

The Company does not have any plans, proposals or arrangements to issue for any purpose, including future acquisitions and/or financings, any of the authorized shares of Class A Common Stock that would become newly available for issuance following the reverse stock split.