UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number: 001-38249

LIVEONE, INC.

(Exact name of registrant as specified in its charter)

Delaware		98-0657263
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

269 S. Beverly Dr., Suite #1450 Beverly Hills, California		90212
(Address of principal executive offices)		(Zip Code)

(310) 601-2505

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.001 par value per share		LVO		The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant is required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 12, 2022, there were 84,287,964 shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.

LIVEONE, INC.

TABLE OF CONTENTS

			Page
PART I — FINANCIAL INFORMATION			F-1

	Item 1.	Financial Statements	F-1

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13

	Item 4.	Controls and Procedures	13

PART II — OTHER INFORMATION			15

	Item 1.	Legal Proceedings	15

	Item 1A.	Risk Factors	15

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults Upon Senior Securities	24

	Item 4.	Mine Safety Disclosures	24

	Item 5.	Other Information	24

	Item 6.	Exhibits	25

		Signatures	27

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

	Page
Condensed Consolidated Balance Sheets as of June 30, 2022 and March 31, 2022 (unaudited)	F-2

Condensed Consolidated Statements of Operations for the three months ended June 30, 2022 and 2021 (unaudited)	F-3

Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the three months ended June 30, 2022 and 2021 (unaudited)	F-4

Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2022 and 2021 (unaudited)	F-5

Notes to the Condensed Consolidated Financial Statements (unaudited)	F-6 – F-31

F-1

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share amounts)

	June 30,			March 31,
	2022			2022
Assets				(Audited)
Current Assets
Cash and cash equivalents	$	11,086		$	12,894
Restricted cash		260			260
Accounts receivable, net		12,714			13,687
Inventories		2,718			2,599
Prepaid expense and other current assets		1,688			1,868
Total Current Assets		28,466			31,308
Property and equipment, net		4,555			4,688
Goodwill		23,379			23,379
Intangible assets, net		15,321			16,720
Other assets		655			728
Total Assets	$	72,376		$	76,823

Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts payable and accrued liabilities	$	36,301		$	45,418
Accrued royalties		16,897			13,530
Notes payable, current portion		13			12
Deferred revenue		981			1,157
Total Current Liabilities		54,192			60,117
Senior secured convertible notes, net		13,938			13,650
Unsecured convertible notes, net – related party		5,968			5,879
Senior secured line of credit		7,000			6,965
Notes payable, net		148			148
Lease liabilities, noncurrent		395			468
Other long-term liabilities		174			174
Deferred income taxes		338			338
Total Liabilities		82,153			87,739

Commitments and Contingencies

Stockholders’ Equity (Deficit)
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding		-			-
Common stock, $0.001 par value; 500,000,000 shares authorized; 81,597,738 and 82,546,189 shares issued and outstanding, respectively		83			83
Additional paid in capital		203,642			202,854
Treasury stock		(997	)		-
Accumulated deficit		(212,505	)		(213,853	)
Total stockholders’ equity (deficit)		(9,777	)		(10,916	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	72,376		$	76,823

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share amounts)

	Three Months Ended June 30,
	2022			2021
Revenue:	$	23,222		$	38,767

Operating expenses:
Cost of sales		15,382			30,940
Sales and marketing		2,366			4,748
Product development		1,617			2,155
General and administrative		2,209			9,377
Amortization of intangible assets		1,411			1,506
Total operating expenses		22,985			48,726
Income (loss) from operations		237			(9,959	)

Other income (expense):
Interest expense, net		(997	)		(1,060	)
Forgiveness of PPP loans		-			2,511
Other income		2,105			459
Total other income (expense), net		1,108			1,910

Income (loss) before income taxes		1,345			(8,049	)

(Benefit from) provision for income taxes		(3	)		2
Net income (loss)	$	1,348		$	(8,051	)

Net income (loss) per share - basic	$	0.02		$	(0.10	)
Net income (loss) per share – diluted	$	0.02		$	(0.10	)
Weighted average common shares – basic		82,072,822			76,982,057
Weighted average common shares – diluted		82,126,622			76,982,057

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

(Unaudited, in thousands, except share and per share amounts)

	Common Stock				Additional Paid in		Accumulated			Common Stock in Treasury						Total Stockholders’
	Shares		Amount		Capital		Deficit			Shares			Amount			Deficit
Balance as of March 31, 2022		82,546,189	$	83	$	202,854	$	(213,853	)		-		$	-		$	(10,916	)
Stock-based compensation		135,270		-		788		-			-			-			788
Shares issued pursuant to restricted stock units		102,500		-		-		-			-			-			-
Treasury stock purchases		-		-		-		-			(1,186,221	)		(997	)		(997	)
Net income		-		-		-		1,348			-			-			1,348
Balance as of June 30, 2022		82,783,959	$	83	$	203,642	$	(212,505	)		(1,186,221	)	$	(997	)	$	(9,777	)

	Common Stock				Additional Paid in		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Deficit			(Deficit)
Balance as of March 31, 2021		76,807,898	$	77	$	178,000	$	(169,941	)	$	8,136
Stock-based compensation		416,216		-		5,457		-			5,457
Interest paid in kind		-		-		26		-			26
Purchase price adjustment in connection with CPS acquisition		-		-		301		-			301
Shares issued in connection with Secured Convertible Notes		60,000		-		321		-			321
Shares issued pursuant to restricted stock units		61,290		-		-		-			-
Shares issued upon exercise of stock options		80,460		-		322		-			322
Net loss		-		-		-		(8,051	)		(8,051	)
Balance as of June 30, 2021		77,425,864	$	77	$	184,427	$	(177,992	)	$	6,512

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

LiveOne, Inc.

LiveXLive Media, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	Three Months Ended June 30,
	2022			2021
Cash Flows from Operating Activities:
Net income (loss)	$	1,348		$	(8,051	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		2,316			2,379
Interest paid in kind		-			26
Stock-based compensation		788			5,086
Amortization of debt discount		393			371
Change in fair value of bifurcated embedded derivatives		20			(103	)
Change in fair value of contingent consideration liability		(2,220	)		(357	)
Forgiveness of PPP Loans		-			(2,511	)
Changes in operating assets and liabilities:
Accounts receivable		973			(2,187	)
Prepaid expenses and other current assets		177			208
Inventories		(119	)		179
Other assets		101			91
Deferred revenue		(176	)		574
Accrued royalties		3,367			30
Accounts payable and accrued liabilities		(6,994	)		5,097
Net cash (used in) provided by operating activities		(26	)		832

Cash Flows from Investing Activities:
Purchases of property and equipment		(773	)		(1,018	)
Purchases of intangible assets		(12	)		(85	)
Net cash used in investing activities		(785	)		(1,103	)

Cash Flows from Financing Activities:
Payments on capital lease liability		-			(112	)
Proceeds from exercise of stock options		-			322
Proceeds from drawdown on senior secured revolving line of credit		-			6,000
Purchase of treasury stock		(997	)		-
Net cash (used in) provided by financing activities		(997	)		6,210

Net change in cash, cash equivalents and restricted cash		(1,808	)		5,939
Cash, cash equivalents and restricted cash, beginning of period		13,154			18,770
Cash, cash equivalents and restricted cash, end of period	$	11,346		$	24,709

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	320		$	319

Supplemental disclosure of non-cash investing and financing activities:
Fair value of options issued to employees, capitalized as internally-developed software	$	26		$	94
Fair value of 60,000 shares of common stock issued in connection with Secured Convertible Notes	$	-		$	321
Fair value of shares issued in connection with CPS acquisition	$	-		$	301

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-5

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended June 30, 2022 and 2021

Note 1 — Organization and Basis of Presentation

Organization

LiveOne, Inc. (formerly LiveXLive Media, Inc.) together with its subsidiaries (“we,” “us,” “our”, the “Company” or “LiveOne”) is a Delaware corporation headquartered in Beverly Hills, California. The Company is a creator-first, music, entertainment and technology platform focused on delivering premium experiences and content worldwide through memberships, live and virtual events.

The Company was reincorporated in the State of Delaware on August 2, 2017, pursuant to a reincorporation merger of Loton, Corp (“Loton”) with and into LiveXLive Media, Inc., Loton’s wholly owned subsidiary at the time. As a result of the reincorporation merger, Loton ceased to exist as a separate entity, with LiveXLive Media, Inc. being the surviving entity. Effective as of October 5, 2021, the Company changed its name to LiveOne, Inc. On December 29, 2017, the Company acquired Slacker, Inc. (“Slacker”), an Internet music and radio streaming service incorporated in the state of Delaware, and it became a wholly owned subsidiary of LiveOne. On February 5, 2020, the Company acquired (i) React Presents, LLC a Delaware limited liability company (“React Presents”), and it became a wholly owned subsidiary of LiveXLive Events, LLC, a wholly owned subsidiary of the Company and (ii) indirectly Spring Awakening, LLC, which is a wholly owned subsidiary of React Presents, a producer, promoter and manager of in person live music festivals and events. On July 1, 2020, the Company through its wholly owned subsidiary, LiveXLive PodcastOne, Inc., acquired Courtside Group, Inc. (dba PodcastOne) (“PodcastOne”) (see Note 4 – Business Combinations). On December 22, 2020, the Company through its wholly owned subsidiary LiveXLive Merchandising, Inc., acquired Custom Personalization Solutions, Inc. (“CPS”) (see Note 4 – Business Combinations). On October 17, 2021, the Company through its wholly owned subsidiary LiveXLive PR, Inc., acquired Gramophone Media, Inc. (“Gramophone”) (see Note 4 – Business Combinations).

Basis of Presentation

The presented financial information includes the financial information and activities of Gramophone for the three months ended June 30, 2022 (91 days) and for the three months ended June 30, 2021 (0 days).

The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2022, and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s unaudited condensed consolidated financial statements for the three months ended June 30, 2022. The results for the three months ended June 30, 2022 are not necessarily indicative of the results expected for the full fiscal year ending March 31, 2023 (“fiscal 2023”). The condensed consolidated balance sheet as of March 31, 2022 has been derived from the Company’s audited balance sheet included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 29, 2022 (the “2022 Form 10-K”).

The interim unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete audited financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the 2021 Form 10-K.

Going Concern and Liquidity

The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

The Company’s principal sources of liquidity have historically been its debt and equity issuances and its cash and cash equivalents (which cash, cash equivalents and restricted cash amounted to $11.3 million as of June 30, 2022). As reflected in its condensed consolidated financial statements included elsewhere herein, the Company has a history of losses, with the exception of net income of $1.3 million during the quarter ended June 30, 2022 and had a working capital deficiency of $25.7 million as of June 30, 2022. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date that these financial statements are filed. The Company’s condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

F-6

The Company’s ability to continue as a going concern is dependent on its ability to execute its growth strategy and on its ability to raise additional funds. The Company filed a new universal shelf Registration Statement on Form S-3 (the “New Shelf S-3”) with the SEC, which was declared effective by the SEC on February 17, 2022. Under the New Shelf S-3, the Company has the ability to raise up to $150.0 million in cash from the sale of its equity, debt and/or other financial instruments. The continued spread of COVID-19 and uncertain market conditions may limit the Company’s ability to access capital, may reduce demand for its services and may negatively impact its ability to retain key personnel. Management may seek additional funds, primarily through the issuance of equity and/or debt securities for cash to operate the Company’s business. No assurance can be given that any future financing will be available or, if available, that it be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain terms that result in undue restrictions on its operations, in the case of debt financing or cause substantial dilution for its stockholders, in case of equity and/or convertible debt financing. If the Company is unable to obtain sufficient financing when needed, the Company may also have to reduce certain overhead costs through the reduction of salaries and other means and settle liabilities through negotiation. There can be no assurance that management’s attempts at any or all of these endeavors will be successful.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Acquisitions are included in the Company’s condensed consolidated financial statements from the date of the acquisition. The Company uses purchase accounting for its acquisitions, which results in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in the Company’s previously issued financial statements have been reclassified to conform to the current year presentation.

Note 2 — Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies from those previously disclosed in the consolidated financial statements included in the 2022 10-K, other than those included below.

COVID-19

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID-19”) as a pandemic. The global impact of the COVID-19 pandemic has had a negative effect on the global economy, disrupting the financial markets creating increasing volatility and overall uncertainty. The Company began to experience modest adverse impacts of the COVID-19 pandemic in the fourth quarter of fiscal year ended March 31, 2020 and became more adverse throughout the fiscal year ended March 31, 2021 and up to the third quarter of fiscal year ended March 31, 2022. Although the impact has subsided, the Company expects to continue experiencing modest adverse impacts throughout the fiscal year ending March 31, 2023. The Company’s event and programmatic advertising revenues were directly impacted throughout the 2022 and 2021 fiscal years with all on-premise in-person live music festivals and events postponed in 2021 fiscal year and mixed demand from historical advertising partners in 2022 fiscal year. Further, one of the Company’s larger customers also experienced a temporary halt to its production as a result of COVID-19, which negatively impacted the Company’s near-term member growth in the 2021 fiscal year. During the fiscal year ended March 31, 2021, the Company enacted several initiatives to counteract these near-term challenges, including salary reductions, obtaining a Paycheck Protection Program (“PPP”) loan (see Note 8 - Notes Payable) and pivoting its live music production to 100% digital. The Company began producing, curating, and broadcasting digital music festivals and events across its platform which has resulted in the growth in the number of live events streamed, related sponsorship revenue and overall viewership. The Company also launched a new pay-per-view (“PPV”) offering in May 2020, enabling new forms of artist revenue including digital tickets, tipping, digital meet and greet and merchandise sales. However, there is uncertainty as to the duration and overall impact of the COVID-19 pandemic, which could result in an adverse material change in a future period to the Company’s results of operations, financial position and liquidity.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the United States. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. The Company evaluated the provisions of the CARES Act and determined it is eligible for Employee Retention Credits related to payroll taxes paid during the quarter ended September 30, 2021. In accordance with ASC 105-10-05-02, the Company analogized to International Financial Reporting Standards (“IFRS”), specifically International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosures of Government Assistance, and determined that the payroll tax credit will be recognized as a reduction to the payroll tax expense when it is reasonably assured that the credit will be received. As of March 31, 2022, the Company received confirmation the credit would be approved and recognized the credit of $1.2 million as a reduction of payroll tax expense for the year ended March 31, 2022. The Company does not anticipate the associated impacts of the other provisions, if any, will have a material effect on its provision for income taxes.

On December 29, 2020, the Consolidated Appropriations Act (“CAA”) was enacted in the United States. The CAA provides numerous tax provisions and most notably for the Company changes the tax treatment of those expenses paid for with a PPP loan from non-deductible to deductible. The Company is in the process of evaluating the provisions of the CAA including obtaining a second draw Paycheck Protection Program loans and applying for the potential eligibility for Employee Retention Credits and does not anticipate the provisions included will have a material impact on its provision for income taxes.

F-7

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include revenue, allowance for doubtful accounts, inventory calculations and reserves, the assigned value of acquired assets and assumed and contingent liabilities associated with business combinations and the related purchase price allocation, useful lives and impairment of property and equipment, intangible assets, goodwill and other assets, the fair value of the Company’s equity-based compensation awards and convertible debt and debenture instruments, fair values of derivatives, and contingencies. Actual results could differ materially from those estimates. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. Given the overall uncertainty surrounding the COVID-19 pandemic, there is a reasonable possibility that actual results could differ from those estimates and such differences could be material to the financial position and results of operations, specifically in assessing when the collectability of revenue related consideration is probable, and the impairment assessment of goodwill, indefinite lived assets or long-lived assets that are depreciated or amortized.

Revenue Recognition Policy

The Company accounts for a contract with a customer when an approved contract exists, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and the collectability of substantially all of the consideration is probable. Revenue is recognized when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company uses the expected value method to estimate the value of variable consideration on advertising and with original equipment manufacturer contracts to include in the transaction price and reflect changes to such estimates in periods in which they occur. Variable consideration for these services is allocated to and recognized over the related time period such advertising and membership services are rendered as the amounts reflect the consideration the Company is entitled to and relate specifically to the Company’s efforts to satisfy its performance obligation. The amount of variable consideration included in revenue is limited to the extent that it is probable that the amount will not be subject to significant reversal when the uncertainty associated with the variable consideration is subsequently resolved.

Practical Expedients

The Company elected the practical expedient and recognized the incremental costs of obtaining a contract, if any, as an expense when incurred if the amortization period of the asset that would have been recognized is one year or less.

Gross Versus Net Revenue Recognition

The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction and is evaluated on a transaction by transaction basis. To the extent the Company acts as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service prior to transfer to the customer. Where applicable, the Company has determined that it acts as the principal in all of its membership service, sponsorship, and merchandising streams and may act as principal or agent for its ticketing/live events, advertising and licensing revenue streams.

F-8

The Company’s revenue is principally derived from the following services:

Membership Services

Membership services revenue substantially consist of monthly to annual recurring membership fees, which are primarily paid in advance by credit card or through direct billings arrangements. The Company defers the portions of monthly to annual recurring membership fees collected in advance and recognizes them in the period earned. Membership revenue is recognized in the period of services rendered. The Company’s membership revenue consists of performance obligations that are satisfied over time. This has been determined based on the fact that the nature of services offered are membership based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. As a result, the Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure. The Company recognizes membership revenue straight-line through the membership period.

Membership Services consist of:

Direct member, mobile service provider and mobile app services

The Company generates revenue for membership services on both a direct basis and through memberships sold through certain third-party mobile service providers and mobile app services (collectively the “Mobile Providers”). For memberships sold through the Mobile Providers, the member executes an on-line agreement with Slacker outlining the terms and conditions between Slacker and the member upon purchase of the membership. The Mobile Providers promote the Slacker app through their e-store, process payments for memberships, and retain a percentage of revenue as a fee. The Company reports this revenue gross of the fee retained by the Mobile Providers, as the member is Slacker’s customer in the contract and Slacker controls the service prior to the transfer to the member. Membership revenues from monthly memberships sold directly through Mobile Providers are subject to such Mobile Providers’ refund or cancellation terms. Revenues from Mobile Providers are recognized net of any such adjustments for variable consideration, including refunds and other fees. The Company’s payment terms vary based on whether the membership is sold on a direct basis or through Mobile Providers. Memberships sold on a direct basis require payment before the services are delivered to the customer. The payment terms for memberships sold through Mobile Providers vary, but are generally payable within 30 days.

Third-Party Original Equipment Manufacturers

The Company generates revenue for membership services through memberships sold through a third-party Original Equipment Manufacturer (the “OEM”). For memberships sold through the OEM, the OEM executes an agreement with Slacker outlining the terms and conditions between Slacker and the OEM upon purchase of the membership. The OEM installs the Slacker app in their equipment and provides the Slacker service to the OEM’s customers. The monthly fee charged to the OEM is based upon a fixed rate per vehicle, multiplied by the variable number of total vehicles which have signed up for a paid membership. The number of customers, or the variable consideration, is reported by OEMs and resolved on a monthly basis. The Company’s payment terms with OEM are up to 30 days.

Advertising Revenue

Advertising revenue primarily consist of revenues generated from the sale of audio, video, and display advertising space to third-party advertising exchanges. Revenues are recognized based on delivery of impressions over the contract period to the third-party exchanges, either when an ad is placed for listening or viewing by a visitor or when the visitor “clicks through” on the advertisement. The advertising exchange companies report the variable advertising revenue performed on a monthly basis which represents the Company’s efforts to satisfy the performance obligation. Additionally, following the acquisition of PodcastOne, the Company began deriving revenue from podcast advertising. PodcastOne earns advertising revenues primarily for fees earned from advertisement placement purchased by the customer during the time the podcast is delivered to the viewing audience, under the terms and conditions as set forth in the applicable podcasting agreement calculated using impressions.

From time to time the Company enters into barter transactions involving advertising provided in exchange for goods and services. Revenue from barter transactions is recognized based on delivery of impressions and in the same manner as described above. Services received are charged to expense when received or utilized. If services are received prior to the delivery of impressions, a liability is recorded. If delivery of impressions have occurred before the receipt of goods or services, a receivable is recorded. Barter revenue for the three months ended June 30, 2022 and 2021 was $1.3 million and $1.5 million, respectively.

F-9

Licensing Revenue

Licensing revenue primarily consists of sales of licensing rights to digitally stream the Company’s live music services. Licensing revenue is recognized when the Company satisfies its performance obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, which is typically when the live event has aired. Any license fees collected in advance of an event are deferred until the event airs.

Sponsorship Revenue

Sponsorship revenue primarily consists of sales of sponsorship programs that provide sponsors with opportunities to reach the Company’s customers. Sponsorship revenue is recognized as the event airs. Any sponsorship fees collected in advance of the contract term (typically an event) are deferred until the event airs. The Company reports sponsorship revenue on a gross basis as the Company acts as the principal in the underlying transactions.

Merchandising Revenue

Revenue is recognized upon the transfer of control to the customer. The Company recognizes revenue and measures the transaction price net of taxes collected from customers and remitted to governmental authorities. Sales also include shipping and handling charges billed to customers, with the related freight costs included in cost of goods sold. Sales commissions are expensed as incurred and are recorded in sales and marketing expenses in the consolidated statements of operations. The Company’s customer contracts do not have a significant financing component due to their short durations, which are typically effective for one year or less and have payment terms that are generally 30 to 60 days. Wholesale revenue is generally recognized when products are shipped, depending on the applicable contract terms. The Company records a refund liability for expected returns based on prior returns history, recent trends, and projections for returns on sales in the current period. The refund liability at June 30, 2022 and 2021 was less than $0.1 million, respectively.

Ticket/Event Revenue

Ticket/Event revenue is primarily from the sale of tickets and promoter fees earned from venues or other co-promoters under one of several formulas, including a fixed guaranteed amount and/or a percentage of ticket sales or event profits.

Revenue from the promotion or production of an event is recognized at a point in time when the show occurs. Revenue collected in advance of the event is recorded as deferred revenue until the event occurs. Revenue collected from sponsorship agreements, which is not related to a single event, is classified as deferred revenue and recognized over the term of the agreement or operating season as the benefits are provided to the sponsor.

Revenue from the Company’s ticketing operations primarily consists of service fees charged at the time a ticket for an event is sold in either the primary or secondary markets, including both online pay-per-view (“PPV”) tickets as well as ticket physically purchased through a ticket sale vendor. For primary tickets sold to the Company’s PPV and festival events the revenue for the associated ticket service charges collected in advance of the event is recorded as deferred revenue until the event occurs. For PPV arrangements that include multiple performance obligations, i.e. delivery of the online stream, sponsorships, digital meet and greet, or physical merchandise, the Company allocates the total contract consideration to each performance obligation using the standalone selling price. If the standalone selling price is not readily determinable, it is estimated using observable inputs including an adjusted market based approach, expected cost plus margin, or the residual approach.

F-10

Net Income (Loss) Per Share

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of stock options issued to employees, directors and consultants, restricted stock units, warrants issued to third parties and accounted for as equity instruments and convertible notes would be excluded from the diluted earnings per share calculation because their effect is anti-dilutive.

At June 30, 2022 and 2021, the Company had 3,152,874 and 3,901,124 options outstanding, respectively, 2,817,292 and 5,836,146 restricted stock units outstanding, respectively, and 5,960,593 and 5,764,719 shares of common stock issuable, respectively, underlying the Company’s convertible debt.

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.

The following table shows the calculation of diluted shares:

	Three Months Ended June 30,
	2022		2021
Shares used in computation of basic earnings per share		82,072,822		76,982,057
Total dilutive effect of outstanding stock awards		53,800		—
Shares used in computation of diluted earnings per share		82,126,622		76,982,057

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the underlying net tangible and intangible assets acquired, based on their respective fair values. The excess of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interests requires management’s judgment and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of customer turnover rates, estimates of terminal values, and royalty rates.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with original maturities, when purchased, of three months or less.

The following table provides amounts included in cash, cash equivalents and restricted cash presented in the Company’s condensed consolidated statements of cash flows for the three months ended June 30, 2022 and 2021 (in thousands):

	2022		2021
Cash and cash equivalents	$	11,086	$	24,574
Restricted cash		260		135
Total cash and cash equivalents and restricted cash	$	11,346	$	24,709

F-11

Restricted Cash and Cash Equivalents

The Company maintains certain letters of credit agreements with its banking provider, which are secured by the Company’s cash for periods of less than one year. As of June 30, 2022 and March 31, 2022, the Company had restricted cash of $0.3 million and $0.3 million, respectively.

Allowance for Doubtful Accounts

The Company evaluates the collectability of its accounts receivable based on a combination of factors. Generally, it records specific reserves to reduce the amounts recorded to what it believes will be collected when a customer’s account ages beyond typical collection patterns, or the Company becomes aware of a customer’s inability to meet its financial obligations.

The Company believes that the credit risk with respect to trade receivables is limited due to the large and established nature of its largest customers and the nature of its membership receivables. At June 30, 2022, the Company had one customer that made up 23% of the total accounts receivable balance. At March 31, 2022, the Company had one customer that made up 24% of the total accounts receivable balance.

The Company’s accounts receivable at June 30, 2022 and March 31, 2022 is as follows (in thousands):

	June 30,			March 31,
	2022			2022
Accounts receivable, gross	$	13,628		$	14,404
Less: Allowance for doubtful accounts		(914	)		(717	)
Accounts receivable, net	$	12,714		$	13,687

Inventories

Inventories, principally raw materials awaiting final customization process, are stated at the lower of cost or net realizable value. Inventories are relieved on a first-in, first-out basis.

The carrying value of inventories is reduced for any excess and obsolete inventory. Excess and obsolete reductions are determined based on currently available information, including the likely method of disposition, such as through sales to individual customers and liquidations, and the age of inventory.

Paycheck Protection Program Loans

In response to the COVID-19 pandemic, the PPP was established under the CARES Act and administered by the U.S. Small Business Administration (“SBA”). Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans provided by local lenders, which supports payroll, rent and utility expenses (“qualified expenses”). If the loan proceeds are fully utilized to pay qualified expenses over the covered period, as further defined by the PPP, the full principal amount of the PPP loan may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared to a baseline period. During the year ended March 31, 2022, the Company received confirmation from the SBA that $3.1 million in PPP loans (see Note 8 – Notes Payable) were forgiven.

As the loans were forgiven and we were released from being the primary obligor, the Company recognized income in the amount forgiven in accordance with ASC 470-20. The Company recognized a gain on forgiveness of the PPP loans of none and $2.5 million during the three months ended June 30, 2022 and 2021, respectively, and is included in total other expense, net in the accompanying condensed consolidated statement of operations.

Concentration of Credit Risk

The Company maintains cash balances at commercial banks. Cash balances commonly exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to any significant credit risk with respect to such cash and cash equivalents.

F-12

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in more timely recognition of credit losses. The guidance is effective for fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, and interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB issued this ASU to address issues identified as a result of the complexity associated with GAAP for certain financial instruments with characteristics of liabilities and equity. Complexity associated with the accounting is a significant contributing factor to numerous financial statement restatements and results in complexity for users attempting to understand the results of applying the current guidance. In addressing the complexity, the FASB focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The FASB concluded that eliminating certain accounting models simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners, and improves the decision usefulness and relevance of the information provided to financial statement users. In addition to eliminating certain accounting models, the FASB also decided to enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance on the basis of feedback from financial statement users. The FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB decided to allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently evaluating the impact this ASU will have on its financial statements and related disclosures, as well as the timing of adoption and the application method.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statement presentation or disclosures.

Note 3 — Revenue

The following table represents a disaggregation of revenue from contracts with customers for the three months ended June 30, 2022 and 2021 (in thousands):

	Three Months Ended June 30,
	2022		2021
Revenue
Membership Services	$	12,082	$	9,084
Advertising		8,942		7,937
Merchandising		1,849		3,660
Sponsorship and Licensing		114		5,136
Ticket/Event		235		12,950
Total Revenue	$	23,222	$	38,767

For some contracts, the Company may invoice up front for services recognized over time or for contracts in which the Company has unsatisfied performance obligations. Payment terms and conditions vary by contract type, although terms generally cover monthly payments. In the circumstances where the timing of invoicing differs from the timing of revenue recognition, the Company has determined its contracts do not include a significant financing component. The Company has elected to apply the practical expedient under ASC 606-10-50-14 and not provide disclosure of the amount and timing of performance obligations as the performance obligations are part of a contract that has an original expected duration of one year or less.

F-13

For the three months ended June 30, 2022 and 2021, one customer accounted for 43% and 18%, and a second customer accounted for none and 16% of the Company’s consolidated revenues, respectively.

The following table summarizes the significant changes in the deferred revenue balances during the three months ended June 30, 2022 (in thousands):

	Contract Liabilities
Balance as of March 31, 2022	$	1,157
Revenue recognized that was included in the contract liability at beginning of period		(506	)
Increase due to cash received, excluding amounts recognized as revenue during the period		330
Balance as of June 30, 2022	$	981

Note 4 — Business Combinations

Gramophone

On October 17, 2021, the Company’s wholly owned subsidiary, LiveXLive PR, Inc., acquired 100% of the equity interests of Gramophone for net consideration of $0.4 million consisting of 79,365 shares of the Company’s common stock with a fair value of $0.1 million net of a 25% discount for lack of marketability described below, contingent consideration with a fair value of $0.2 million comprised of shares held in escrow and a cash earnout, and cash of $0.2 million. The shares of the Company’s common stock were subject to a twelve-month lock-up period and remain subject to sales volume restrictions.

Fair Value of Consideration Transferred:
Cash	$	150
Common stock		89
Contingent consideration		174
Total	$	413

Contingent consideration in the form of a cash earnout of $0.3 million will be paid to the seller of Gramophone if, during the period commencing June 1, 2021 and ending on May 31, 2022 (“First Year Target”), Gramophone reports GAAP revenues of $1.4 million and EBITDA (as defined in the purchase agreement) of $0.3 million. If the First Year Target is not met, the cash earnout will be paid to the seller of Gramophone if, during the period commencing June 1, 2022 and ending on May 31, 2023 (“Second Year Target”), Gramophone reports GAAP revenues of $2 million and EBITDA of $0.5 million. Based on their likelihood of achievement management’s current estimate of the value of the contingent consideration related to the cash earnout was valued at $0.2 million. The contingent consideration liability of $0.2 million is classified within Other Long-Term Liabilities in the accompanying condensed consolidated balance sheets at March 31, 2022 (see Note 14 – Other Long-Term Liabilities). The remaining contingent consideration included in the purchase price was not material and is included in Other Long-Term Liabilities in the accompanying condensed consolidated balance sheet at March 31, 2022. There was no change in the contingent liability balance attributed to Gramophone during the three months ended June 30, 2022.

Goodwill resulted from acquisition as it is intended to augment and diversify the Company’s single reportable segment. The Company accounted for the acquisition as a business combination. As a result of the acquisition of the stock of Gramophone, the goodwill is not deductible for tax purposes.

F-14

The following table summarizes the fair value of the assets assumed in the Gramophone acquisition (in thousands):

Asset Type	Amortization Period (Years)		Fair Value
Cash and cash equivalents			$	4
Accounts receivable				4
Trade name		5		73
Customer list		2		94
Goodwill				459
Deferred revenue				(51	)
Deferred tax liability				(41	)
Accrued liabilities				(129	)
Net assets acquired			$	413

The Company incurred less than $0.1 million in transaction costs associated with the Gramophone acquisition, which were expensed and included in General and Administrative in the consolidated statement of operations for fiscal year ended March 31, 2022. No transaction cost were incurred during the three months ended June 30, 2022.

PodcastOne

On July 1, 2020, the Company’s wholly owned subsidiary, LiveXLive PodcastOne, Inc., acquired 100% of the equity interests of PodcastOne for net consideration of $16.1 million consisting of 5,363,636 shares of the Company’s common stock with a fair value of $14.6 million net of a 24% discount for lack of marketability described below, contingent consideration with a fair value of $1.1 million and an additional true-up of 203,249 shares during the third quarter of fiscal 2021 valued at $0.4 million, net of a 24% discount for lack of marketability described below, that was issued as part of the final purchase price consideration. The shares of the Company’s common stock were subject to a twelve-month lock-up period and remains subject to sales volume restrictions.

Fair Value of Consideration Transferred:
Common stock	$	14,991
Contingent consideration		1,100
Total	$	16,091

If, during the period commencing after May 7, 2020 and ending on July 1, 2022, for five consecutive trading days the closing market price of the Company’s common stock exceeds $5.00 per share, an additional aggregate payment of $3.0 million in cash shall be paid to the sellers of PodcastOne in accordance with their respective pro rata percentage within five business days of the second anniversary of the closing date (July 1, 2022). The fair value of this contingent consideration liability on the closing date of July 1, 2020 was estimated at $1.1 million using a Monte Carlo simulation and the significant unobservable input included a credit yield of 21.9%. During March 2021, the closing price of the Company’s common stock exceeded $5.00 per share for the requisite five consecutive days. During the three months ended June 30, 2022 the Company settled the contingent liability with the sellers for $0.4 million of cash and committed to issue 414,137 shares with an accounting value of $0.4 million, which was recorded in accrued expenses, therefore a gain of $2.2 million was recognized in other income during the three months ended June 30, 2022 attributed to the settlement of the contingent consideration liability (See Note 20 – Subsequent Events).

Goodwill resulted from acquisition as it is intended to augment and diversify the Company’s single reportable segment. The Company accounted for the acquisition as a business combination. As a result of the acquisition of the stock of PodcastOne, the goodwill is not deductible for tax purposes.

The following table summarizes the fair value of the assets assumed in the PodcastOne acquisition (in thousands):

Asset Type	Weighted Average Amortization Period (Years)	Fair Value
Cash and cash equivalents		$	1,286
Accounts receivable			3,951
Prepaid expense and other assets			316
Property and equipment			119
Content creator relationships	1.6		772
Trade name	10		1,010
Goodwill			12,042
Accounts payable and accrued liabilities			(2,934	)
Deferred tax asset			972
Allowance for deferred tax asset			(972	)
Note payable			(471	)
Net assets acquired		$	16,091

F-15

The fair value of the assets acquired includes accounts receivable of $4.0 million. The gross amount due under contracts is $4.2 million, of which $0.2 million is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisition of PodcastOne.

CPS

On December 22, 2020, the Company’s wholly owned subsidiary, LiveXLive Merchandising, Inc., acquired 100% of the equity interests of CPS for total consideration of 2,230,769 shares of the Company’s restricted common stock with a fair value of $6.4 million net of a 25% discount for lack of marketability described below. The shares of the Company’s common stock issued to the sellers were subject to a twelve-month lock-up period from the closing date, which expired on December 22, 2021.

The Company agreed to also issue up to approximately 577,000 additional shares of its restricted common stock, classified as contingent consideration, as CPS reported GAAP revenue of at least $20.0 million and $1.0 million of EBITDA (as defined in the purchase agreement) for its fiscal year ended December 31, 2020. Based on their likelihood of achievement this number of shares reflected management’s current estimate and were valued at $1.7 million based on the Company’s stock price on the date of acquisition, net of a 25% discount for lack of marketability. On July 7, 2021, the Company issued 576,923 shares of its restricted common stock to the sellers of CPS as consideration for CPS having satisfied such targets. Accordingly, the Company recorded a $0.2 million benefit to other income (expense) which is included in the consolidated statement of operations for the year ended March 31, 2022.

The Company further agreed to issue up to approximately 214,000 additional shares of its restricted common stock to the extent CPS’ final working capital as determined by the parties exceeds $4.0 million. This number of shares is based on actual achievement under the terms of the purchase agreement and mutual agreement with the sellers. These additional shares were valued at $0.6 million based on the Company’s stock price on the date of acquisition, net of a 25% discount for lack of marketability. Included in the total amount of $0.6 million is a purchase price adjustment of $0.3 million related to the resolution of provisional amounts previously recorded based on estimates, which was accounted for as a purchase price adjustment within the measurement period as an increase to goodwill related to the CPS acquisition. On July 7, 2021, the Company issued 214,475 shares of its restricted common stock to the sellers of CPS as consideration for CPS having satisfied such target.

Fair Value of Consideration Transferred:
Common stock	$	6,391
Additional paid-in capital – common stock to be issued		615
Contingent consideration		1,654
Total	$	8,660

Goodwill resulted from acquisition as it is intended to augment and diversify the Company’s single reportable segment. The Company accounted for the acquisition as a business combination. As a result of the acquisition of the stock of CPS, the goodwill is not deductible for tax purposes.

The following table summarizes the fair value of the assets assumed in the CPS acquisition (in thousands):

Asset Type	Weighted Average Amortization Period (Years)		Fair Value
Cash and cash equivalents			$	1,132
Accounts receivable				6,153
Inventories				2,600
Prepaid expense				29
Property and equipment				585
Wholesale relationship		6		2,500
Domain name		10		400
Customer list		5		172
Goodwill				1,207
Other assets				53
Right of use asset				1,086
Lease liability				(1,086	)
Accounts payable				(5,067	)
Deferred tax liability				(388	)
Other liabilities				(716	)
Net assets acquired			$	8,660

The fair value of the assets acquired includes accounts receivable of $6.2 million. The gross amount due under contracts is $6.5 million, of which $0.3 million is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisition of CPS.

F-16

Supplemental Pro Forma Information (Unaudited)

The pro forma financial information as presented below is for informational purposes only and is not indicative of the Company’s operations that would have been achieved from the acquisitions had they taken place at the beginning of the fiscal years ended March 31, 2022.

The following table presents the revenues, net loss and earnings per share of the combined company for the three months ended June 30, 2021 as if the acquisition of Gramophone had been completed on April 1, 2021 (in thousands, except per share data).

	Three Months Ended June 30, (unaudited)
	2021

Revenues	$	39,031
Net loss		(7,974	)
Net loss per share – basic and diluted	$	(0.10	)

The Company’s unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflect amortization of intangible assets as a result of the acquisition. The pro forma results are not necessarily indicative of the results that would have been realized had the acquisitions been consummated as of the beginning of the periods presented. The pro forma amounts include the historical operating results of the Company, with adjustments directly attributable to the acquisition which included amortization of acquired intangible assets of $0.1 million during the three months ended June 30, 2021.

Note 5 — Property and Equipment

The Company’s property and equipment at June 30, 2022 and March 31, 2022 was as follows (in thousands):

	June 30,			March 31,
	2022			2022
Property and equipment, net
Computer, machinery, and software equipment	$	6,623		$	6,609
Furniture and fixtures		557			556
Leasehold improvements		531			531
Capitalized internally developed software		13,101			12,344
Total property and equipment		20,812			20,040
Less accumulated depreciation and amortization		(16,257	)		(15,352	)
Total property and equipment, net	$	4,555		$	4,688

Depreciation expense was $0.9 million and $0.9 million for the three months ended June 30, 2022 and 2021, respectively.

F-17

Note 6 — Goodwill and Intangible Assets

Goodwill

The Company currently has one reporting unit. The following table presents the changes in the carrying amount of goodwill for the three months ended June 30, 2022 (in thousands):

	Goodwill
Balance as of March 31, 2022	$	23,379
Acquisitions		-
Balance as of June 30, 2022	$	23,379

Indefinite-Lived Intangible Assets

The following table presents the changes in the carrying amount of indefinite-lived intangible assets in the Company’s reportable segment for the three months ended June 30, 2022 (in thousands):

	Tradenames
Balance as of March 31, 2022	$	4,637
Acquisitions		-
Impairment losses		-
Balance as of June 30, 2022	$	4,637

Finite-Lived Intangible Assets

The Company’s finite-lived intangible assets were as follows as of June 30, 2022 (in thousands):

	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Software	$	19,281	$	17,353	$	1,928
Intellectual property (patents)		5,366		1,610		3,756
Customer relationships		6,570		6,308		262
Content creator relationships		772		772		-
Domain names		527		101		426
Brand and trade names		2,643		506		2,137
Non-compete agreement		250		201		49
Customer lists		2,998		872		2,126
Total	$	38,406	$	27,722	$	10,684

The Company’s finite-lived intangible assets were as follows as of March 31, 2022 (in thousands):

	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Software	$	19,281	$	16,389	$	2,892
Intellectual property (patents)		5,366		1,520		3,846
Customer relationships		6,570		6,177		393
Content creator relationships		772		772		-
Domain names		514		83		431
Brand and trade names		2,643		454		2,189
Non-compete agreement		250		181		69
Customer lists		2,998		735		2,263
Total	$	38,394	$	26,311	$	12,083

F-18

The Company’s amortization expense on its finite-lived intangible assets was $1.4 million and $1.5 million for the three months ended June 30, 2022 and 2021, respectively.

The Company expects to record amortization of intangible assets for fiscal years ending March 31, 2023 and future fiscal years as follows (in thousands):

For Years Ending March 31,
2023 (remaining nine months)	$	3,136
2024		1,074
2025		1,074
2026		1,074
2027		1,074
Thereafter		3,252
	$	10,684

Note 7 — Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at June 30, 2022 and March 31, 2022 were as follows (in thousands):

	June 30,		March 31,
	2022		2022
Accounts payable	$	23,527	$	29,640
Accrued liabilities		12,501		15,505
Lease liabilities, current		273		273
	$	36,301	$	45,418

Note 8 — Notes Payable

	June 30,			March 31,
	2022			2022
SBA loan	$	161		$	160
		161			160
Less: Current portion of Notes payable		(13	)		(12	)
Notes payable	$	148		$	148

SBA Loan

On June 17, 2020, the Company received the proceeds from a loan in the amount of less than $0.2 million from the SBA. Installment payments, including principal and interest, begin 12-months from the date of the promissory note. The balance is payable 30-years from the date of the promissory note, and bears interest at a rate of 3.75% per annum. The Company was in compliance with all debt covenants associated with the SBA loan as of June 30, 2022.

PPP Loans

In April 2020, the Company received proceeds of $2.0 million from a PPP loan. In April 2021, the Company received confirmation from the SBA that the entire balance of such PPP loan was forgiven as a result of the Company’s application and acceptance under the terms of the CARES Act. On July 1, 2020, the Company acquired PodcastOne that had previously obtained a PPP loan, which had a balance of $0.5 million as of March 31, 2021. On May 11, 2021, the Company received confirmation from the SBA that the entire balance of such PPP loans were forgiven as a result of the Company’s application and acceptance under the terms of the CARES Act.

On March 20, 2021, the Company received proceeds of $0.6 million from a second loan (the “Second PPP Loan”) under the PPP of the CARES Act, which the Company intends to use to retain employees and for other qualifying expenses. The Second PPP Loan matures on March 20, 2026 and bears annual interest at a rate of 1.0%. In March 2022, the Company received confirmation from the SBA that the entire balance of the Second PPP Loan was forgiven as a result of the Company’s application and acceptance under the terms of the CARES Act.

The Company recognized a $2.5 million gain on forgiveness of PPP loans, included in total other expense, net in the accompanying condensed consolidated statement of operations as a result of the balance of the first PPP loan being forgiven during the three months ended June 30, 2021.

F-19

Note 9 — Unsecured Convertible Notes

The Company’s unsecured convertible notes payable at June 30, 2022 and March 31, 2022 were as follows (in thousands):

	June 30, 2022		March 31, 2022
Unsecured Convertible Notes - Related Party
8.5% Unsecured Convertible Note - Due June 3, 2024	$	4,777	$	4,702
8.5% Unsecured Convertible Notes - Due June 3, 2024		1,191		1,177
Net		5,968		5,879
Less: Unsecured Convertible Notes, Current		-		-
Unsecured Convertible Notes, Net, Long-term	$	5,968	$	5,879

The Company incurred interest expense of $0.1 million and $0.2 million attributed to its unsecured convertible notes for the three months ended June 30, 2022 and 2021, respectively. Total principal maturities of the Company’s unsecured convertible notes are $6.0 million for the year ending March 31, 2024.

Unsecured Convertible Notes – Related Party

As of June 30, 2022 and March 31, 2022, the Company had outstanding 8.5% unsecured convertible notes payable (the “Trinad Notes”) issued to Trinad Capital Master Fund Ltd. (“Trinad Capital”), a fund controlled by Mr. Ellin, the Company’s Chief Executive Officer, Chairman, director and principal stockholder, as discussed below. The Trinad Notes are convertible into shares of the Company’s common stock at a fixed conversion price of $3.00 per share.

The first Trinad Note was issued on February 21, 2017, to convert aggregate principal and interest of $3.6 million under the first senior promissory note and second senior promissory note with Trinad Capital previously issued on December 31, 2014 and April 8, 2015, respectively. The first Trinad Note was due on March 31, 2018 and was extended to May 31, 2023, and in July 2022 the Trinad Notes were extended until July 1, 2024 (See Note 20 – Subsequent Events). At June 30, 2022, the balance due of $6.0 million, which included $1.5 million of accrued interest, was outstanding under the first Trinad Note. At March 31, 2022, the balance due of $5.9 million, which included $1.4 million of accrued interest, was outstanding under the first Trinad Note.

Between October 27, 2017 and December 18, 2017, the Company issued six unsecured convertible notes payable to Trinad Capital for aggregate total principal amount of $1.1 million and were charged an 8.5% interest rate. The notes were due on various dates through December 31, 2018 and were extended to May 31, 2023 and in July 2022 the Trinad Notes were extended until July 1, 2024 (See Note 20 – Subsequent Events). As of June 30, 2022 and March 31, 2022, $0.4 million and $0.3 million of accrued interest was included in the principal balance, respectively.

On August 11, 2021, the Company entered into an Amendment of Notes Agreement (the “Amendment Agreement”) with Trinad Capital pursuant to which the maturity date of all of the Trinad Notes was extended to May 31, 2023, and in consideration of such extension, the Company issued to Trinad Capital 33,654 shares of its common stock. The Company evaluated the Amendment Agreement and the amendment was required to be accounted for as an extinguishment under ASC 470-50, Debt – Modifications and Extinguishment. As a result, we recorded the amended debt instrument at fair value which included the consideration in common stock transferred. The resulting loss on extinguishment recorded of $4.3 million is included in loss on extinguishment of debt in the Company’s condensed consolidated statement of operations for the year ended March 31, 2022. In addition, the Company recorded a $4.2 million benefit to additional paid in capital as a result of the excess of the deemed fair value of the Trinad Notes over the principal and accrued interest outstanding at the time of extinguishment.

The Company may not redeem any of the Trinad Notes prior to maturity without Trinad Capital’s consent.

Unsecured Convertible Promissory Note

On February 5, 2020, React Presents issued a two-year $2 million Convertible Promissory Note (the “Note”), bearing annual interest at 8%. The purpose of the Note was to fund the acquisition of React Presents. All unpaid and outstanding principal and any unpaid and accrued interest was due on February 5, 2022. At issuance, the Note was convertible by the holder at any time prior to maturity in part or in whole with the unpaid interest and principal convertible at a conversion price equal to $4.50 per share of the Company’s common stock, subject to certain protective adjustments. The Note may be prepaid in whole or in part in cash without penalty at any time prior to maturity. Any such prepayment will be applied to accrued interest first and then the principal.

F-20

At June 30, 2021, the Company performed a fair value analysis using a binomial lattice calculation on the derivative instruments using the following assumptions: Coupon Rate: 8.0%, Term: 0.6 years, Volatility: 85.2%, Market Rate: 5.1% and Probability of Default: 7.1%. The Company determined that as of the assessment date, the fair value is $0.1 million. The change in fair value of less than $0.1 million is recorded in other income (expense) on the Company’s consolidated statements of operations for the three months ended June 30, 2021.

Effective December 31, 2021, the Note holder converted the Note in whole pursuant to an exchange agreement entered into during the year ended March 31, 2022, which provided for an exchange of the Note into shares of the Company’s common stock at a price of $2.10 per share, resulting in 1,155,143 shares issued upon the exchange. As a result of the effective exchange incentives offered to the Note holder, the Company recorded a $0.8 million expense to Other Income (expense) in the condensed consolidated statement of operations for the year ended March 31, 2022.

Note 10 — Secured Convertible Notes

The Company’s senior secured convertible notes at June 30, 2022 and March 31, 2022 were as follows (in thousands):

	June 30, 2022			March 31, 2022
Secured Convertible Notes	$	15,000		$	15,000
Fair value of embedded derivatives		38			18
Less: Discount		(1,100	)		(1,368	)
Net		13,938			13,650
Less: Current Portion, accrued interest		-			-
Secured Convertible Notes, long-term	$	13,938		$	13,650

On September 15, 2020 (the “Closing Date”), the Company issued two-year senior secured convertible notes in the aggregate principal amount of $15.0 million (the “Harvest Notes”) to Harvest Small Cap Partners, L.P. and Harvest Small Cap Partners, Ltd. (collectively, the “Purchaser”). The Purchaser are funds affiliated with No Street Capital, a San Francisco-based investment firm.

The Harvest Notes, as amended, mature on June 3, 2024, accrue interest at 8.5% per year with interest payable quarterly in cash in arrears, and are convertible into shares of the Company’s common stock at a conversion price of $4.50 per share at the applicable Purchaser’s option, subject to certain customary adjustments such as stock splits, stock dividends and stock combinations (the “Conversion Price”). The Company does not have the right to prepay any or all of the Harvest Notes prior to their maturity.

The current portion of accrued interest related to the Harvest Notes is included in Accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets.

The Company’s obligations under the Harvest Notes may be accelerated upon the occurrence of certain customary events of default (as defined in the Harvest Notes) and are guaranteed under a Subsidiary Guarantee, dated as of the Closing Date (the “Subsidiary Guarantee”), entered into by all of the Company’s subsidiaries (the “Guarantors”) in favor of the Purchaser. The Company’s obligations under the Harvest Notes and the Guarantors’ obligations under the Subsidiary Guarantee are secured under a Security Agreement, dated as of the Closing Date (the “Security Agreement”), and an Intellectual Property Security Agreement, dated as of the Closing Date (the “IP Security Agreement”), by a lien on all of the Company’s and the Guarantors’ assets and intellectual property, subject to certain exceptions. The Harvest Notes require the Company to maintain aggregate cash deposits of $7.0 million until the Harvest Notes are paid in full. In May 2021 and in connection with the Company entering into a $7 million secured revolving credit facility, the holders of the Harvest Notes subordinated their security interest and extended the maturity date of the notes to June 3, 2023. In consideration of the above, the Company issued 60,000 shares of its common stock valued at $0.3 million to the Purchaser. In July 2022, the holders of the Harvest Notes extended the maturity date of the notes to June 3, 2024.

In May 2021, the Company evaluated this agreement and determined that it was required to be accounted for as troubled debt restructuring under ASC 470-60, Troubled Debt Restructurings by Debtors. As a result, the Company recorded the shares of common stock issued to the Purchaser as an increase to Additional Paid In Capital and a corresponding debt discount included in Secured Convertible Notes, net in the accompanying condensed consolidated balance sheets.

F-21

The Company and the Purchaser also entered into a Registration Rights Agreement, dated as of the Closing Date (the “RRA”), which granted the Assignees “demand” and “piggyback” registration rights to register the shares of Common Stock issuable upon the conversion of the Notes and the Shares (collectively, the “Registrable Securities”) with the SEC for resale or other disposition. Pursuant to the RRA, the Company filed a resale Registration Statement on Form S-3 on October 14, 2020, and it was declared effective by the SEC on October 21, 2020. The Company also agreed to keep the initial Registration Statement continuously effective until the earliest to occur of (i) the date on which all of the Registrable Securities registered thereunder have been sold and (ii) the date on which all of the Registrable Securities covered by such Registration Statement may be sold without volume restriction pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”).

In connection with the SPA, and the Harvest Notes subsequent extension, Robert S. Ellin, the Company’s CEO, Chairman, director and principal stockholder, agreed not to dispose of any equity securities of the Company owned by Mr. Ellin or any entity of which he is the beneficial owner and not to cease to be the beneficial owner of any other equity securities of the Company of which Mr. Ellin was the beneficial owner as of June 3, 2021 until the Harvest Notes are paid in full (subject to certain customary exceptions), without the Purchaser’s prior written consent.

The Harvest Notes and the Shares were issued in private placement transaction that was not registered under the Securities Act, in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.

The Company recorded $0.3 million and $0.3 million in interest expense associated with the Harvest Notes for the three months ended June 30, 2022 and 2021, respectively, of which $0.1 million and $0.1 million was attributed to the accretion of the debt discount associated with the senior secured convertible notes.

The Company was in compliance with all debt covenants associated with their senior secured convertible debt as of June 30, 2022.

Note 11 — Senior Secured Revolving Line of Credit

On June 2, 2021, the Company entered into a Business Loan Agreement with East West Bank (the “Senior Lender”), which provides for a revolving credit facility collateralized by all of the assets of the Company and its subsidiaries. In connection with the Business Loan Agreement, the Company entered into a Promissory Note with the Senior Lender and established the revolving line of credit in the amount of $7.0 million (the “Revolving Credit Facility”), maturing on June 2, 2023. Subsequent to June 30, 2022 the Revolving Credit Facility maturity was extended to June 2024 as described in Note 20 – Subsequent Events. Under the terms of the Promissory Note, the Revolving Credit Facility bears interest at a variable rate equal to the Wall Street Journal Prime Rate, plus 0.5%. The interest rate for the period ended June 30, 2022 was 5.25%

The principal balance under the Revolving Credit Facility as of June 30, 2022 was $7.0 million. The Company was in compliance with all debt covenants associated with the senior secured revolving line of credit as of June 30, 2022.

Note 12 — Related Party Transactions

As of June 30, 2022 and March 31, 2022, the Company had unsecured convertible Trinad Notes outstanding which were issued to Trinad Capital as described in Note 9 – Unsecured Convertible Notes.

F-22

Note 13 — Leases

The Company leases a space at a location under a non-cancellable operating lease with a remaining lease term of 1 year, which originally expired in fiscal year 2022 and was renewed for an additional year. On December 22, 2020, the Company acquired CPS which included the assumption of an operating lease for a 55,120 square foot light manufacturing facility located in Addison Illinois, expiring June 30, 2024.

The Company leases several office locations with lease terms that are less than 12 months or are on month to month terms. Rent expense for these leases totaled less than $0.1 million for the three months ended June 30, 2022 and 2021, respectively. Operating leases with lease terms of greater than 12 months are capitalized in operating lease right-of-use assets and operating lease liabilities in the accompanying condensed consolidated balance sheets. Rent expense for these operating leases totaled $0.2 million during each of the three months ended June 30, 2022 and 2021, respectively.

Operating lease costs for the three months ended June 30, 2022 and 2021 consisted of the following (in thousands):

	Three Months Ended June 30,		Three Months Ended June 30,
	2022		2021
Fixed rent cost	$	106		228
Short term lease cost		48		68
Total operating lease cost	$	154		296

Supplemental balance sheet information related to leases was as follows (in thousands):

Operating leases	June 30, 2022		March 31, 2022
Operating lease right-of-use assets	$	655		728

Operating lease liability, current	$	273		273
Operating lease liability, noncurrent		395		468
Total operating lease liabilities	$	668		741

The operating lease right-of-use assets are included in other assets and current operating lease liabilities are included in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets.

Maturities of operating lease liabilities as of June 30, 2022 were as follows (in thousands):

For Years Ending March 31,
2023 (remaining nine months)	$	279
2024		320
2025		93
Total lease payments		692
Less: imputed interest		(24	)
Present value of operating lease liabilities	$	668

Significant judgments

Discount rate – the Company’s lease is discounted using the Company’s incremental borrowing rate of 8.5% as the rate implicit in the lease is not readily determinable.

Options – the lease term is the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs.

Lease and non-lease components – Non lease components were considered and determined not to be material

F-23

Note 14 — Other Long-Term Liabilities

The amount included in Other long-term liabilities is comprised of a contingent consideration liability resulting from the business combination with Gramophone (Note 4 - Business Combinations) and is carried at fair value (see Note 19 - Fair Value Measurements).

Note 15 — Commitments and Contingencies

Promotional Rights

Certain of the Company’s content acquisition agreements contain minimum guarantees, and require that the Company makes upfront minimum guarantee payments. As of June 30, 2022, the Company has licenses, production and/or distribution agreements to make guaranteed payments as follows: $0.1 million for the fiscal year ending March 31, 2023. These agreements also provide for a revenue share that ranges between 35% and 50% of net revenues. In addition, there are other licenses, production and/or distribution agreements that provide for a revenue share of 50% on net revenues; however, without a requirement to make future minimum guaranteed payments irrespective to the execution and results of the planned events.

Contractual Obligations

As of June 30, 2022, the Company is obligated under agreements with Content Providers and other contractual obligations to make guaranteed payments as follows: $3.7 million for the fiscal year ending March 31, 2023, $0.5 million for the fiscal year ending March 31, 2024, $0.3 million for the fiscal year ending March 31, 2025 and $0.2 million for the fiscal year ending March 31, 2026.

On a quarterly basis, the Company records the greater of the cumulative actual content acquisition costs incurred or the cumulative minimum guarantee based on forecasted usage for the minimum guarantee period. The minimum guarantee period is the period of time that the minimum guarantee relates to, as specified in each agreement, which may be annual or a longer period. The cumulative minimum guarantee, based on forecasted usage, considers factors such as listening hours, revenue, members and other terms of each agreement that impact the Company’s expected attainment or recoupment of the minimum guarantees based on the relative attribution method.

Several of the Company’s content acquisition agreements also include provisions related to the royalty payments and structures of those agreements relative to other content licensing arrangements, which, if triggered, could cause the Company’s payments under those agreements to escalate. In addition, record labels, publishers and performing rights organizations with whom the Company has entered into direct license agreements have the right to audit the Company’s content acquisition payments, and any such audit could result in disputes over whether the Company has paid the proper content acquisition costs. However, as of June 30, 2022, the Company does not believe it is probable that these provisions of its agreements discussed above will, individually or in the aggregate, have a material adverse effect on its business, financial position, results of operations or cash flows.

Employment Agreements

As of June 30, 2022, the Company has employment agreements with three named executive officers (“Section 16 Officers”) that provide salary payments of $0.5 million and target bonus compensation of up to $0.5 million on an annual basis. Furthermore, such employment agreements contain severance clauses that could require severance payments in the aggregate amount of $10.5 million (excluding the value of potential payouts of discretionary bonuses, pro-rata bonuses, and potential accelerated vesting of equity awards granted to such executive officers).

Legal Proceedings

On April 10, 2018, Joseph Schnaier, Danco Enterprises, LLC (an entity solely owned by Mr. Schnaier, “Danco”), Wantmcs Holdings, LLC (Mr. Schnaier is the managing member) and Wantickets (Mr. Schnaier is the 90% beneficial owner) filed a complaint in the Supreme Court of the State of New York, County of New York against the Company, LiveXLive Tickets, Inc. (“LXL Tickets”), Robert S. Ellin and certain other defendants. Plaintiffs subsequently voluntarily dismissed all claims against the other defendants. The complaint alleged multiple causes of action arising out of Schnaier’s investment (through Danco) into the Company in 2016, LXL Tickets’ purchase of certain operating assets of Wantickets pursuant to the Asset Purchase Agreement, dated as of May 5, 2017, and Mr. Schnaier’s employment with LXL Tickets, including claims for fraudulent inducement, breach of contract, conversion, and defamation. Based on the remaining claims, plaintiffs are seeking damages of approximately $10.0 million as shall be determined at trial, if any, plus interest, attorneys’ fees and costs and other such relief as the court may award. The Company has denied and continue to deny plaintiffs’ claims. The Company believes that the complaint is an intentional act by the plaintiffs to publicly tarnish the Company’s and its senior management’s reputations through the public domain in an effort to obtain by threat of litigation certain results for Mr. Schnaier’s self-serving and improper purposes. The Company is vigorously defending this lawsuit and believes that the allegations are without merit and that it has strong defenses. On June 26, 2018, the Company and LXL Tickets, filed counterclaims against the plaintiffs for breach of contract (including under the Asset Purchase Agreement), fraudulent inducement, and other causes of action, seeking injunctive relief, damages, attorneys’ fees and expenses and such other relief as the court may award. In October 2018, pursuant to the terms of the APA, the Company submitted a formal demand to Wantickets, Mr. Schnaier and Danco to indemnify the Company, among other things, for its costs and expenses incurred in connection with this matter. In November 2021, the court denied the Company’s summary judgment motion to dismiss plaintiffs’ fraudulent inducement claim, and dismissed plaintiff’s breach of the employment agreement claim with respect to the Company. As of June 30, 2022, all of plaintiffs’ claims other than fraudulent inducement were dismissed or addressed by the parties or the court. The Company expects the trial to commence sometime during the fiscal year ending March 31, 2023. Trial date is expected to be set by the court on August 30, 2022. The Company intends to continue to vigorously defend all remaining defendants against any liability to the plaintiffs with respect to the remaining claims, and the Company believes that the allegations are without merit and that it has strong defenses. As of June 30, 2022, while the Company has assessed that the likelihood of a loss, if any, is not probable, the outcome of this lawsuit is inherently uncertain and the potential range of loss could have a material adverse effect on the Company’s business, financial condition and results of operations.

F-24

On June 28, 2022, SoundExchange, Inc. (“SX”) filed a complaint in the U.S. District Court, Central District of California, against the Company and Slacker. The complaint alleges that the defendants have failed to make the necessary music royalty payments and corresponding late fees required under the Digital Millennium Copyright Act late allegedly due to SX. SX filed an application for an order to file the complaint under seal. The Company believes it has already adequately reserved for the amounts due to SX in the Company’s financial statements included in this Quarterly Report. The Company is currently negotiating with SX to resolve this matter and if necessary, intends to hire counsel to defend the defendants in this matter.

During each of the quarters ended June 30, 2022 and 2021, the Company recorded legal settlement expenses relating to potential claims arising in connection with litigation brought against the Company by certain third-parties were not material and were included in general and administrative expenses in the accompanying condensed consolidated statement of operations.

From time to time, the Company is involved in legal proceedings and other matters arising in connection with the conduct of its business activities. Many of these proceedings may be at preliminary stages and/or seek an indeterminate amount of damages. In the opinion of management, after consultation with legal counsel, such routine claims and lawsuits are not significant and we do not currently expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity.

Note 16 — Employee Benefit Plan

The Company sponsors a 401(k) plan (the “401(k) Plan”) covering all employees. Prior to March 31, 2019, only Slacker employees were eligible to participate in the 401(k) Plan. Employees are eligible to participate in the 401(k) Plan the first day of the calendar month following their date of hire. The Company may make discretionary matching contributions to the 401(k) Plan on behalf of its employees up to a maximum of 100% of the participant’s elective deferral up to a maximum of 5% of the employees’ annual compensation. The Company’s matching contributions were not material to the financial statements for the three month periods ended June 30, 2022 and 2021.

Note 17 — Stockholders’ Deficit

Issuance of Restricted Shares of Common Stock for Services to Consultants and Vendors

During the three months ended June 30, 2022, the Company incurred $0.7 million in accounts payable and accrued liabilities for stock earned by its consultants, but not yet issued. The remaining unrecognized compensation cost of $0.2 million is expected to be recorded over the next year as the shares vest.

2016 Equity Incentive Plan

The Company’s board of directors and stockholders approved the Company’s 2016 Equity Incentive Plan, as amended (the “2016 Plan”) which reserved a total of 12,600,000 shares of the Company’s common stock for issuance. On September 17, 2020, our stockholders approved the amendment to the 2016 Plan to increase the number of shares available for issuance under the plan by 5,000,000 shares increasing the total up to 17,600,000 shares which the Company formally increased on June 30, 2021. Incentive awards authorized under the 2016 Plan include, but are not limited to, nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and stock appreciation rights. If an incentive award granted under the 2016 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to the Company in connection with the exercise of an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2016 Plan.

The Company recognized share-based compensation expense of $0.8 million and $5.1 million during the three months ended June 30, 2022 and 2021, respectively. The total tax benefit recognized related to share-based compensation expense was $0 for the three months ended June 30, 2022 and 2021.

F-25

Authorized Common Stock and Authority to Create Preferred Stock

The Company has the authority to issue up to 510,000,000 shares, consisting of 500,000,000 shares of the Company’s common stock, $0.001 par value per share, and 10,000,000 shares of the Company’s preferred stock, $0.001 par value per share (the “preferred stock”).

The Company may issue shares of preferred stock from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by the Company’s board of directors and will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Company’s board of directors. The Company’s board of directors will have the power to increase or decrease the number of shares of preferred stock of any series after the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased, the shares constituting such decrease will resume the status of authorized but unissued shares of preferred stock.

While the Company does not currently have any plans for the issuance of preferred stock, the issuance of such preferred stock could adversely affect the rights of the holders of common stock and, therefore, reduce the value of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the common stock until and unless the Company’s board of directors determines the specific rights of the holders of the preferred stock; however, these effects may include: restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock, or delaying or preventing a change in control of the Company without further action by the stockholders.

Stock Repurchase Program

In December 2020, we announced that our board of directors has authorized the repurchase up to two million shares of our outstanding common stock from time to time. The timing, price, and quantity of purchases under the program will be at the discretion of our management and will depend upon a variety of factors including share price, general and business market conditions, compliance with applicable laws and regulations, corporate and regulatory requirements, and alternative uses of capital. The program may be expanded, suspended, or discontinued by our board of directors at any time. Although our board of directors has authorized this stock repurchase program, there is no guarantee as to the exact number of shares, if any, that will be repurchased by us, and we may discontinue purchases at any time that management determines additional purchases are not warranted. We cannot guarantee that the program will be consummated, fully or all, or that it will enhance long-term stockholder value. The program could affect the trading price of our common stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our common stock. In addition, this program could diminish our cash reserves. The Company purchased 1,186,221 and no shares of its common stock under the stock repurchase program for the three months ended June 30, 2022 and 2021, for a total of $1.0 million and none, respectively.

Note 18 — Business Segment and Geographic Reporting

The Company determined its operating segments in accordance with ASC 280, “Segment Reporting” (“ASC 280”).

Management has determined that the Company has one operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker (“CODM”) reviews results and allocates resources. The CODM reviews operating segment performance exclusive of: share-based compensation expense, amortization of intangible assets, depreciation, and other expenses (including legal fees, expenses, and accruals) related to acquisitions, associated integration activities, and certain other non-cash charges.

The Company’s single operating segment is also consistent with our internal organizational structure, the way we assess operating performance and allocate sources.

Customers

The Company has one and two external customers that accounts for more than 10% of its revenue during the three months ended June 30, 2022 and 2021, respectively. Such customers included an original equipment manufacturer (the “OEM”) who provides premium Slacker service in all of their new vehicles and a production customer in connection with the June 2021 Social Gloves event. In the three months ended June 30, 2022 and 2021, total revenue from the OEM was $10.0 million and $6.9 million, respectively. In the three months ended June 30, 2022 and 2021, total revenue from the production customer was none and $6.4 million, respectively.

F-26

Geographic Information

All material revenues of the Company are derived from the United States. All long-lived assets of the Company are located in the United States.

Note 19 — Fair Value Measurements

The following table presents the fair value of the Company’s financial liabilities that are measured at fair value on a recurring basis (in thousands):

	June 30, 2022
	Fair		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Liabilities:
Contingent consideration liability from Gramophone acquisition	$	174	$	-	$	-	$	174
Bifurcated embedded derivative on senior secured convertible note payable		38		-		-		38
	$	212	$	-	$	-	$	212

	March 31, 2022
	Fair		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Liabilities:
Contingent consideration liability from PodcastOne acquisition	$	2,965	$	-	$	-	$	2,965
Contingent consideration liability from Gramophone acquisition		174		-		-		174
Bifurcated embedded derivative on senior secured convertible note payable		18		-		-		18
	$	3,157	$	-	$	-	$	3,157

The following table presents a reconciliation of the Company’s financial liabilities that are measured at Level 3 within the fair value hierarchy (in thousands):

	Amount
Balance as of March 31, 2022	$	3,157
Change in fair value of bifurcated embedded derivatives, reported in earnings		20
Settlement of PodcastOne contingent consideration		(3,000	)
Change in fair value of contingent consideration liabilities, reported in earnings		35
Balance as of June 30, 2022	$	212

F-27

Bifurcated embedded derivative on senior secured convertible notes payable and unsecured convertible notes payable

The fair value of the bifurcated embedded derivatives on senior secured convertible notes payable and unsecured convertible notes payable was determined using the following significant unobservable inputs:

	June 30,			March 31,
	2022			2022
Bifurcated embedded derivative on secured convertible notes payable:
Market yield		11.6	%		4.7	%

Significant increases or decreases in the inputs noted above in isolation could result in a significantly lower or higher fair value measurement.

The Company determined that as of the assessment date, the fair value of the bifurcated embedded derivatives is less than $0.1 million. The change in fair value of $0.1 million and $0.1 million is recorded in other income (expense) on the Company’s condensed consolidated statements of operations for the three-month period ended June 30, 2022 and 2021, respectively.

The Company did not elect the fair value measurement option for the following financial assets or liabilities. The fair values of certain financial instruments measured at amortized cost and the hierarchy level the Company used to estimate the fair values are shown below (in thousands):

	June 30, 2022
	Carrying		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Liabilities:
Senior secured convertible notes payable, net	$	13,938	$	-	$	-	$	14,670
Unsecured convertible notes payable related party, net		5,968		-		-		5,867

	March 31, 2022
	Carrying		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Liabilities:
Senior secured convertible notes payable, net		13,650		-		-		15,448
Unsecured convertible notes payable related party, net		5,879		-		-		6,084

F-28

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of June 30, 2022 and March 31, 2022. The Company’s estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

The fair value of the financial assets and liabilities, where the Company did not elect the fair value measurement option, were determined using the following significant unobservable inputs:

	June 30,			March 31,
	2022			2022
Senior secured convertible notes payable, net (binomial lattice model):
Market yield		11.6	%		6.3	%

Unsecured convertible notes payable related party, net (yield model with a Black-Scholes-Merton option pricing model):
Market yield		12.5	%		6.6	%

Significant increases or decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.

Cash equivalents and restricted cash equivalents primarily consisted of short-term interest-bearing money market funds with maturities of less than 90 days and time deposits. The estimated fair values were based on available market pricing information of similar financial instruments.

Due to their short maturity, the carrying amounts of the Company’s accounts receivable, accounts payable, accrued expenses and other long-term liabilities approximated their fair values as of June 30, 2022 and March 31, 2022.

The Company’s note payable is not publicly traded and fair value is estimated to equal carrying value. The Company’s senior secured line of credit, senior secured convertible notes and unsecured convertible notes payable with fixed rates are not publicly traded and the Company has estimated fair values using a variety of valuation models and market rate assumptions detailed above. The senior secured convertible notes payable and unsecured convertible notes are valued using a binomial lattice model and a yield model with a Black-Scholes-Merton option pricing model, respectively. The Company has estimated the fair value of contingent consideration related to the acquisitions of PodcastOne, CPS and Gramophone based on the number of shares issuable based on the achievement of certain provisions within the purchase agreement, as detailed in Note 4 – Business Combinations, using the quoted price of the Company’s common stock. The inputs used to fair value the contingent consideration on the date of acquisition were also used as of the balance sheet date.

Note 20 — Subsequent Events

PodcastOne’s Private Placement

On July 15, 2022 (the “Closing Date”), Courtside Group, Inc. (dba PodcastOne) (“PodcastOne”), a wholly owned subsidiary of the Company, completed a private placement offering (the “Financing”) of PodcastOne’s unsecured convertible notes with an original issue discount of 10% (the “OID”) in the aggregate principal amount of $8,838,500 (the “Notes”) to certain accredited investors and institutional investors (collectively, the “Purchasers”), for gross proceeds of $8,035,000 pursuant to the Subscription Agreements entered into with the Purchasers (the “Subscription Agreements”). In connection with the sale of the Notes, the Purchasers received warrants (the “Warrants”) to purchase a number of shares (the “Warrant Shares”) of PodcastOne’s common stock, par value $0.00001 per share, as more fully discussed below. The Notes and the Warrants were issued as restricted securities in a private placement transaction exempt from the registration requirements of the Securities Act. As part of the Financing, the Company purchased $3 million worth of Notes. PodcastOne intends to use the net proceeds of the Financing for working capital and general corporate purposes.

F-29

SEC Form 10-Q filed by LiveOne Inc.