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 September 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 November 15, 2022, there were 87,454,892 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		1

Item 1.	Financial Statements	1

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II — OTHER INFORMATION		25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

	Signatures	38

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

		Page
Condensed Consolidated Balance Sheets as of September 30, 2022 and March 31, 2022 (unaudited)		F-1

Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2022 and 2021 (unaudited)		F-2

Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the six months ended September 30, 2022 and 2021 (unaudited)		F-3

Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2022 and 2021 (unaudited)		F-4

Notes to the Condensed Consolidated Financial Statements (unaudited)		F-5 – F-37

LIVEONE, INC.

Condensed Consolidated Balance Sheets

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

	September 30,			March 31,
	2022			2022
				(Audited)
Assets
Current Assets
Cash and cash equivalents	$	7,151		$	12,894
Restricted cash		240			260
Accounts receivable, net		12,958			13,687
Inventories		2,869			2,599
Prepaid expense and other current assets		2,201			1,868
Total Current Assets		25,419			31,308
Property and equipment, net		4,091			4,688
Goodwill		23,379			23,379
Intangible assets, net		12,622			16,720
Other assets		579			728
Total Assets	$	66,090		$	76,823

Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts payable and accrued liabilities	$	29,364		$	45,418
Accrued royalties		9,193			13,530
Notes payable, current portion		315			12
Bridge Loan		2,634			-
Deferred revenue		1,014			1,157
Derivative liabilities		2,274			-
Total Current Liabilities		44,794			60,117
Senior secured convertible notes, net		13,734			13,650
Unsecured convertible notes, net - related party		5,297			5,879
Senior secured revolving line of credit, net		7,000			6,965
Notes payable, net		148			148
Lease liabilities, noncurrent		320			468
Other long-term liabilities		4,608			174
Deferred income taxes		338			338
Total Liabilities		76,239			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; 85,559,322 and 82,546,189 shares issued and outstanding, respectively		88			83
Additional paid in capital		207,615			202,854
Treasury stock		(1,938	)		-
Accumulated deficit		(215,914	)		(213,853	)
Total stockholders’ equity (deficit)		(10,149	)		(10,916	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	66,090		$	76,823

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

F-1

LIVEONE, INC.

Condensed Consolidated Statements of Operations

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

	Three Months Ended September 30,						Six Months Ended September 30,
	2022			2021			2022			2021

Revenue:	$	23,532		$	21,924		$	46,755		$	60,691

Operating expenses:
Cost of sales		13,742			16,051			29,125			46,990
Sales and marketing		2,362			2,599			4,727			7,348
Product development		1,240			2,178			2,857			4,333
General and administrative		4,475			9,246			6,685			18,623
Impairment of intangible assets		1,356			-			1,356			-
Amortization of intangible assets		1,344			1,517			2,755			3,023
Total operating expenses		24,519			31,591			47,505			80,317
Loss from operations		(987	)		(9,667	)		(750	)		(19,626	)

Other income (expense):
Interest expense, net		(2,576	)		(1,068	)		(3,573	)		(2,128	)
Loss on extinguishment of debt		-			(4,321	)		-			(4,321	)
Forgiveness of PPP loans		-			-			-			2,511
Other income (expense)		183			(176	)		2,289			284
Total other expense, net		(2,393	)		(5,565	)		(1,284	)		(3,654	)

Loss before provision for income taxes		(3,380	)		(15,232	)		(2,034	)		(23,280	)

Provision for income taxes		(29	)		(4	)		(27	)		(7	)
Net loss	$	(3,409	)	$	(15,236	)	$	(2,061	)	$	(23,287	)

Net loss per share – basic and diluted	$	(0.04	)	$	(0.19	)	$	(0.02	)	$	(0.30	)
Weighted average common shares – basic and diluted		84,709,971			78,351,655			84,189,970			77,670,598

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

F-2

LIVEONE, 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		519,425		-		2,184		-			-			-			2,184
Issuance of shares pursuant to restricted stock units		1,681,653		2		-		-			-			-			2
Issuance of shares for modification of debt instruments		1,000,000		2		1,140		-			-			-			1,142
Issuance of shares for settlement of earnout		414,137		-		493		-			-			-			493
Issuance of shares for settlement of accrued expenses		1,397,918		1		944		-			-			-			945
Treasury stock purchases		-		-		-		-			(2,000,000	)		(1,938	)		(1,938	)
Net loss		-		-		-		(2,061	)		-			-			(2,061	)
Balance as of September 30, 2022		87,559,322	$	88	$	207,615	$	(215,914	)		(2,000,000	)	$	(1,938	)	$	(10,149	)

	Common Stock				Additional Paid in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance as of March 31, 2021		76,807,898	$	77	$	178,000	$	(169,941	)	$	8,136
Stock-based compensation		536,770		1		10,365		-			10,366
Vested employee restricted stock units		536,641		-		-		-			-
Interest paid in kind		-		-		35		-			35
Exercise of employee stock options		235,460		-		602		-			602
Shares issued for CPS acquisition		791,398		1		1,825		-			1,826
Purchase price adjustment in connection with CPS acquisition		-		-		301		-			301
Unsecured convertible note premium		-		-		4,199		-			4,199
Shares issued on amendment of unsecured and secured convertible notes		93,654		-		442		-			442
Net loss		-		-		-		(23,287	)		(23,287	)
Balance as of September 30, 2021		79,001,821	$	79	$	195,769	$	(193,228	)	$	2,620

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

F-3

LIVEONE, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	Six Months Ended September 30,
	2022			2021
Cash Flows from Operating Activities:
Net loss	$	(2,061	)	$	(23,287	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,611			4,794
Interest paid in kind		200			35
Stock-based compensation		2,184			9,931
Amortization of debt discount		1,261			673
Change in fair value of bifurcated embedded derivatives		(571	)		(110	)
Change in fair value of contingent consideration liability		(2,220	)		(213	)
Settlement of accrued expenses		(6,158	)		-
Impairment of intangibles		1,356			-
Forgiveness of PPP Loans		-			(2,511	)
Loss on extinguishment of debt		-			4,321
Changes in operating assets and liabilities:
Accounts receivable		729			(4,470	)
Prepaid expenses and other current assets		(992	)		(3,793	)
Inventories		(270	)		(352	)
Other assets		155			183
Deferred revenue		(144	)		2,718
Accounts payable and accrued liabilities		(4,877	)		5,100
Net cash used in operating activities		(6,797	)		(6,981	)

Cash Flows from Investing Activities:
Purchases of property and equipment		(1,254	)		(1,957	)
Purchases of intangible assets		(24	)		(85	)
Net cash used in investing activities		(1,278	)		(2,042	)

Cash Flows from Financing Activities:
Repayment of note payable		-			(351	)
Proceeds from PodcastOne bridge loan		4,376			-
Payment of contingent consideration		(426	)		-
Payments on capital lease liability		-			(225	)
Purchase of treasury stock		(1,938	)		-
Proceeds from exercise of employee stock options		-			602
Proceeds from drawdown on senior secured revolving line of credit		-			6,965
Proceeds from notes payable – related party		300			-
Net cash provided by financing activities		2,312			6,991

Net change in cash, cash equivalents and restricted cash		(5,763	)		(2,032	)
Cash, cash equivalents and restricted cash, beginning of period		13,154			18,770
Cash, cash equivalents and restricted cash, end of period	$	7,391		$	16,738

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	825		$	695

Supplemental disclosure of non-cash investing and financing activities:
Fair value of options issued to employees, capitalized as internally developed software	$	26		$	148
Fair value of 1,397,918 shares of common stock issuable in connection with the settlement of accrued expenses and prepayment for services	$	1,604		$	-
Fair value of 1,000,000 shares of common stock issuable in connection with the modification of debt instruments	$	1,142		$	-
Fair value of 414,137 shares of common stock issuable in connection with the settlement of earnout	$	493		$	-
Fair value of 60,000 shares of common stock issued in connection with Secured Convertible Notes	$	-		$	320
Fair value of 33,654 shares of common stock issued in connection with Unsecured Convertible Notes	$	-		$	122
Fair value of warrant and derivative liability issued with debt instruments	$	2,845		$	-
Fair value of shares issued in connection with CPS acquisition	$	-		$	2,127
Fair value of unsecured convertible note premium	$	-		$	4,199

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

F-4

LIVEONE, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended September 30, 2022 and 2021

Note 1 — Organization and Basis of Presentation

Organization

LiveOne, 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 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 six months ended September 30, 2022. The results for the six months ended September 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 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 2022 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 $7.4 million as of September 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 $19.4 million as of September 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-5

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.

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 Form 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 membership 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-6

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 debt 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.

F-7

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.

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.

F-8

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 has occurred before the receipt of goods or services, a receivable is recorded. Barter revenue for the three months ended September 30, 2022 and 2021 was $1.8 million and $1.5 million, respectively. Barter revenue for the six months ended September 30, 2022 and 2021 was $3.1 million and $3.1 million, respectively.

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 September 30, 2022 and 2021 was less than $0.1 million, respectively.

SEC Form 10-Q filed by LiveOne Inc.