10-Q 1 lvo20230930_10q.htm FORM 10-Q lvo20230930_10q.htm
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Table of Contents

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, 2023

 

or

 

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 17, 2023, there were 91,175,153 shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.

 

 

 

 
 
 

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

Page

Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and March 31, 2023 (audited)

F-1

   

Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2023 and 2022 (unaudited)

F-2

   

Condensed Consolidated Statements of Stockholders’ Deficit and Mezzanine Equity for the three and six months ended September 30, 2023 and 2022 (unaudited)

F-3

   

Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2023 and 2022 (unaudited)

F-4

   

Notes to the Condensed Consolidated Financial Statements (unaudited)

F-5

 

 

 

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Condensed Consolidated Balance Sheets

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

 

  

September 30,

  

March 31,

 
  

2023

  

2023

 
      

(Audited)

 

Assets

        

Current Assets

        

Cash and cash equivalents

 $3,606  $8,409 

Restricted cash

  205   240 

Accounts receivable, net

  17,184   13,658 

Inventories

  2,280   2,596 

Prepaid expense and other current assets

  2,959   2,823 

Total Current Assets

  26,234   27,726 

Property and equipment, net

  2,990   3,325 

Goodwill

  23,379   23,379 

Intangible assets, net

  12,640   11,035 

Other assets

  157   423 

Total Assets

 $65,400  $65,888 
         

Liabilities, Mezzanine Equity and Stockholders’ (Deficit)

        

Current Liabilities

        

Accounts payable and accrued liabilities

 $24,993  $22,772 

Accrued royalties

  13,092   12,826 

Notes payable, current portion

  694   15 

Deferred revenue

  880   992 

Senior secured line of credit

  7,000   - 

Bridge loan

  -   4,726 

Derivative liabilities

  -   3,148 

Total Current Liabilities

  46,659   44,479 

Senior secured line of credit

  -   7,000 

Notes payable, net

  1,055   148 

Lease liabilities, noncurrent

  -   161 

Derivative liabilities, noncurrent

  127   376 

Other long-term liabilities

  8,906   9,578 

Deferred income taxes

  332   332 

Total Liabilities

  57,079   62,074 
         

Commitments and Contingencies

          
         

Mezzanine Equity

        

Redeemable convertible preferred stock, $0.001 par value; 10,000,000 shares authorized; 5,000 and 5,000 shares issued and outstanding as of September 30, 2023 and March 31, 2023, respectively

  4,827   4,827 

Stockholders’ Equity (Deficit)

        

Preferred stock, $0.001 par value; 10,000,000 shares authorized; 17,230 and 16,177 shares issued and outstanding as of September 30, 2023 and March 31, 2023, respectively

  17,230   16,177 

Common stock, $0.001 par value; 500,000,000 shares authorized; 90,906,798 and 89,632,161 shares issued and outstanding, respectively

  91   90 

Additional paid in capital

  214,069   209,151 

Treasury stock

  (3,750)  (2,162)

Accumulated deficit

  (233,618)  (224,269)

Total LiveOne's stockholders’ deficit

  (5,978)  (1,013)

Non-controlling interest

  9,472   - 

Total equity (deficit)

  3,494   (1,013)

Total Liabilities, Mezzanine Equity and Stockholders’ Equity (Deficit)

 $65,400  $65,888 

 

 

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

 

 

 

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Condensed Consolidated Statements of Operations

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

 

  

Three Months Ended

  

Six Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 
                 

Revenue:

 $28,528  $23,532  $56,295  $46,755 
                 

Operating expenses:

                

Cost of sales

  20,547   13,742   39,748   29,125 

Sales and marketing

  2,253   2,362   4,157   4,727 

Product development

  1,439   1,240   2,685   2,857 

General and administrative

  6,352   4,475   11,760   6,685 

Impairment of intangible assets

  -   1,356   -   1,356 

Amortization of intangible assets

  452   1,344   699   2,755 

Total operating expenses

  31,043   24,519   59,049   47,505 

Loss from operations

  (2,515)  (987)  (2,754)  (750)
                 

Other income (expense):

                

Interest expense, net

  (780)  (2,576)  (2,198)  (3,573)

Other income (expense)

  (4,653)  183   (3,412)  2,289 

Total other expense, net

  (5,433)  (2,393)  (5,610)  (1,284)
                 

Loss before provision (benefit) for income taxes

  (7,948)  (3,380)  (8,364)  (2,034)
                 

Provision (benefit) for income taxes

  (21)  29   58   27 

Net loss

  (7,927)  (3,409)  (8,422)  (2,061)

Net loss attributable to non-controlling interest

  (347)  -   (347)  - 

Net loss attributed to LiveOne

 $(7,580) $(3,409) $(8,075) $(2,061)
                 

Net loss per share – basic and diluted

 $(0.09) $(0.04) $(0.11) $(0.02)

Weighted average common shares – basic and diluted

  87,222,168   84,709,971   87,097,201   84,189,970 

 

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

 

 

 

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Condensed Consolidated Statement of Stockholders Deficit and Mezzanine Equity

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

 

  

Mezzanine

                                         
  

Equity -

                                         
  

Redeemable

                                         
  

Convertible

                  

Additional

          

Common Stock in

  

Total

 
  

Preferred Stock

  

Preferred Stock

  

Common Stock

  

Paid in

  

Accumulated

  

Non-controlling

  

Treasury

  

Stockholders’

 
  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Deficit

  

Interest

  

Shares

  

Amount

  

Deficit

 

Balance as of March 31, 2023

  5,000  $4,827   16,177  $16,177   89,632,161  $90  $209,151  $(224,269) $-   (2,220,914) $(2,162) $(1,013)

Stock-based compensation

  -   -   -   -   -   -   484   -   -   -   -   484 

Shares issued pursuant to restricted stock units

  -   -   -   -   5,000   -   -   -   -   -   -   - 

Dividends on Series A preferred stock

  -   -   -   -   -   -   -   (626)  -   -   -   (626)

Common stock issued for services

  -   -   -   -   425,988   -   393   -   -   -   -   393 

Treasury stock purchases

  -   -   -   -   -   -   -   -   -   (694,315)  (1,013)  (1,013)

Net loss

  -   -   -   -   -   -   -   (515)  -   -   -   (515)

Balance as of June 30, 2023

  5,000  $4,827   16,177  $16,177   90,063,149  $90  $210,028  $(225,410) $-   (2,915,229) $(3,175) $(2,290)

Stock-based compensation

  -   -   -   -   -   -   1,767   -   -   -   -   1,767 

Shares issued pursuant to restricted stock units

  -   -   -   -   521,876   -   -   -   -   -   -   - 

Common stock issued for purchase of intangible assets

  -   -   -   -   -   -   917   -   -   -   -   917 

Dividends on Series A preferred stock

  -   -   -   -   -   -   -   (628)  -   -   -   (628)

Conversion of PC1 bridge loan

  -   -   -   -   -   -   4,752   -   -   -   -   4,752 

Dividends from spin-off of PodcastOne

  -   -   -   -   -   -   (1,513)  -   1,513   -   -   - 

Issuance of PodcastOne common stock

  -   -   -   -   -   -   (2,410)  -   2,410   -   -   - 

Reclassification of common stock warrants

  -   -   -   -   -   -   -   -   5,896   -   -   5,896 

Common stock issued for services

  -   -   -   -   311,773   1   520   -   -   -   -   521 

Exercise of stock options

  -   -   -   -   10,000   -   8   -   -   -   -   8 

Issuance of preferred stock dividends

  -   -   1,053   1,053   -   -   -   -   -   -   -   1,053 

Treasury stock purchases

  -   -   -   -   -   -   -   -   -   (315,429)  (575)  (575)

Net loss

  -   -   -   -   -   -   -   (7,580)  (347)  -   -   (7,927)

Balance as of September 30, 2023

  5,000  $4,827   17,230  $17,230   90,906,798  $91  $214,069  $(233,618) $9,472   (3,230,658) $(3,750) $3,494 

 

  

Mezzanine

                                         
  

Equity -

                                         
  

Redeemable

                                         
  

Convertible

                  

Additional

          

Common Stock in

  

Total

 
  

Preferred Stock

  

Preferred Stock

  

Common Stock

  

Paid in

  

Accumulated

  

Non-controlling

  

Treasury

  

Stockholders

 
  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Deficit

  

Interest

  

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)

Stock-based compensation

  -   -   -   -   384,155   -   1,396   -   -   -   -   1,396 

Issuance of shares pursuant to restricted stock units

  -   -   -   -   1,579,153   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

  -   -   -   -   -   -   -   -   -   (813,779)  (941)  (941)

Net loss

  -   -   -   -   -   -   -   (3,409)  -   -   -   (3,409)

Balance as of September 30, 2022

  -  $-   -  $-   87,559,322  $88  $207,615  $(215,914) $-   (2,000,000) $(1,938)  (10,149)

 

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

 

 

 

LiveOne, Inc.

LiveXLive Media, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

  

Six Months Ended

 
  

September 30,

 
  

2023

  

2022

 

Cash Flows from Operating Activities:

        

Net loss

 $(8,422) $(2,061)

Adjustments to reconcile net loss to net cash used in operating activities:

        

Depreciation and amortization

  2,298   4,611 

Interest paid in kind

  269   200 

Stock-based compensation

  3,594   2,184 

Amortization of debt discount

  1,110   1,261 

Change in fair value of bifurcated embedded derivatives

  3,977   (571)

Change in fair value of contingent consideration liability

  174   (2,220)

Settlement of accrued expenses

  -   (6,158)

Provision for credit loss

  132   - 

Impairment of intangible assets

  -   1,356 

Changes in operating assets and liabilities:

        

Accounts receivable

  (3,658)  729 

Prepaid expenses and other current assets

  (412)  (992)

Inventories

  316   (270)

Other assets

  221   155 

Deferred revenue

  (112)  (144)

Accounts payable and accrued liabilities

  (1,548)  (6,767)

Accrued royalties

  2,016   1,890 

Net cash used in operating activities

  (45)  (6,797)
         

Cash Flows from Investing Activities:

        

Purchases of property and equipment

  (1,264)  (1,254)

Purchases of intangible assets

  (536)  (24)

Net cash used in investing activities

  (1,800)  (1,278)
         

Cash Flows from Financing Activities:

        

Payment on PodcastOne bridge loan

  (3,000)  - 

Proceeds from notes payable

  1,700   - 

Payments on Capchase loan

  (113)  - 

Proceeds from PodcastOne bridge loan

  -   4,376 

Payment of contingent consideration

  -   (426)

Proceeds from notes payable - related party

  -   300 

Proceeds from exercise of stock options

  8   - 

Purchase of treasury stock

  (1,588)  (1,938)

Net cash (used in) provided by financing activities

  (2,993)  2,312 
         

Net change in cash, cash equivalents and restricted cash

  (4,838)  (5,763)

Cash, cash equivalents and restricted cash, beginning of period

  8,649   13,154 

Cash, cash equivalents and restricted cash, end of period

 $3,811  $7,391 
         

Supplemental disclosure of cash flow information:

        

Cash paid for income taxes

 $-  $- 

Cash paid for interest

 $641  $825 
         

Supplemental disclosure of non-cash investing and financing activities:

        

Conversion of the bridge loan into PodcastOne common stock

 $4,752  $- 

Fair value of warrant and derivative liability issued with debt instruments

 $-  $2,845 

Fair value of 414,137 shares of common stock issuable in connection with settlement of earnout

 $-  $493 

Fair value of 1,000,000 shares of common stock issuable in connection with the modification of debt instruments

 $-  $1,142 

Fair value of 1,397,918 shares of common stock issuable in connection with the settlement of accrued expenses and prepayment for services

 $-  $945 

PodcastOne warrants reclassified from liabilities to non-controlling interest

 $5,896  $1,604 

Common stock issued for prepaid services

 $322  $- 

Purchase of intangible assets accrued for at period end

 $851  $- 

Purchase of intangible assets with common stock

 $917  $- 

Fair value of options issued to employees, capitalized as internally-developed software

 $-  $26 

 

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

 

 

LiveOne, Inc.

(formerly LiveXLive Media, Inc.)

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended September 30, 2023 and 2022

 

 

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 PodcastOne, Inc. (formerly Courtside Group, Inc.) (“PodcastOne”). On September 8, 2023, PodcastOne completed a Qualified Event (its spin out from the Company to become a standalone publicly trading company (the “Spin-Out”)) as a result of its direct listing on The NASDAQ Capital Market on such date. On December 22, 2020, the Company through its wholly owned subsidiary LiveXLive Merchandising, Inc., acquired Custom Personalization Solutions, Inc. (“CPS”). On October 17, 2021, the Company through its wholly owned subsidiary LiveXLive PR, Inc., acquired Gramophone Media, Inc.

 

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, 2023, 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 and six months ended September 30, 2023. The results for the three and six months ended September 30, 2023 are not necessarily indicative of the results expected for the full fiscal year ending March 31, 2024 (“fiscal 2024”). The condensed consolidated balance sheet as of March 31, 2023 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, 2023 (the “2023 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 2023 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 $3.8 million as of September 30, 2023). As reflected in its interim unaudited condensed consolidated financial statements included elsewhere herein, the Company has a history of losses, incurred a net loss of $8.4 million for the six months ended September 30, 2023, and used cash of $0.1 million in operating activities for the six months ended September 30, 2023 and had a working capital deficiency of $20.4 million as of September 30, 2023. 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 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 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 2023 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, 2024. 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 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 December 31, 2021. In accordance with ASC 105-10-05-02, the Company analogized to International Financial Reporting Standards, 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. The Company received confirmation the credit would be approved and recognized the credit of $0.8 million as a reduction of payroll tax expense for the year ended March 31, 2023. 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.

 

F- 6

 

Use of Estimates

 

The preparation of the Company’s condensed consolidated financial statements in conformity with the United States of America (“US”) generally accepted accounting principles (“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, 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, inventory calculations and reserves, 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- 7

 

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  September 30, 2023 and 2022 was $3.6 million and $1.8 million, respectively. Barter revenue for the six months ended  September 30, 2023 and 2022 was $7.7 million and $3.1 million, respectively.

 

F- 8

 

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 accompanying condensed 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, 2023 and 2022 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 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- 9

 

Net Income (Loss) Per Share

 

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding during the period adjusted to addback dividends (declared or cumulative undeclared) applicable to the Series A Preferred Stock. 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.

 

Basic and diluted net income (loss) per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities such as our preferred stock. Under the two-class method, basic and diluted net income (loss) per share attributable to common stockholders is computed by dividing the basic and diluted net income (loss) attributable to common stockholders by the basic and diluted weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders adjusts basic net income per share for the potentially dilutive impact of stock options and restricted stock units ("RSUs").

 

The treasury stock method is used to calculate the potentially dilutive effect of stock options and RSUs. The if-converted method is used to calculate the potentially dilutive effect of the Preferred Stock. In both methods, diluted net income (loss) attributable to common stockholders and diluted weighted-average shares outstanding are adjusted to account for the impact of the assumed issuance of potential common shares that are dilutive, subject to dilution sequencing rules.

 

At September 30, 2023 and 2022, the Company had 2,281,667 and 3,525,191 options outstanding, respectively, 2,874,855 and 1,270,193 restricted stock units outstanding, respectively, 3,114,000 and 3,114,000 common stock warrants and none and 5,960,593 shares of common stock issuable, respectively, underlying the Company’s convertible debt. 

 

The following table shows the calculation of basic and diluted earnings per share for the periods Series A Preferred Stock was outstanding:

 

    
  

Three Months Ended

  

Six Months Ended

 

In thousands, except per share amounts

  September 30, 2023   September 30, 2023 

Net loss attributed to LiveOne

 $(7,580) $(8,075)

Dividends on preferred stock

  (628)  (1,254)

Net loss attributed to LiveOne

 $(8,208) $(9,329)

Basic and diluted weighted average number of shares outstanding

  87,222,168   87,097,201 

Shares used in computation of basic and diluted earnings per share

 $(0.09) $(0.11)

 

Cash, Cash Equivalents and Restricted Cash

 

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 six months ended  September 30, 2023 and 2022 (in thousands):

 

  

September 30, 2023

  

March 31, 2023

 

Cash and cash equivalents

 $3,606  $8,409 

Restricted cash

  205   240 

Total cash and cash equivalents and restricted cash

 $3,811  $8,649 

 

F- 10

 

 

Non- Controlling  Interest

 

The Company consolidates entities in which the Company has a controlling financial interest. The Company consolidates subsidiaries in which the Company holds, directly or indirectly, more than 50% of the voting rights. Non-controlling interests represent third-party equity ownership interests in the Company’s consolidated entities. The amount of net income (loss) attributable to non-controlling interests is disclosed in the accompanying condensed consolidated statements of operations.

 

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 September 30, 2023 and 2022, the Company had restricted cash of $0.2 million and $0.2 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 September 30, 2023, the Company had one customer that made up 29% of the total accounts receivable balance. At September 30, 2022, the Company had one customer that made up 23% of the total accounts receivable balance. 

 

The Company’s accounts receivable at  September 30, 2023 and March 31, 2023 is as follows (in thousands):

 

  

September 30,

  

March 31,

 
  

2023

  

2023

 

Accounts receivable, gross

 $17,886  $14,228 

Less: Allowance for doubtful accounts

  (702)  (570)

Accounts receivable, net

 $17,184  $13,658 

 

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.

 

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- 11

 

Recently Adopted 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. The Company adopted ASU 2016-13 on April 1, 2021 on a prospective basis. The adoption of this standard did not have an impact on the Company’s interim condensed consolidated financial statements.

 

Recently Issued Accounting Pronouncements

 

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires the recognition and measurement of contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. Considerations to determine the amount of contract assets and contract liabilities to record at the acquisition date include the terms of the acquired contract, such as timing of payment, identification of each performance obligation in the contract and allocation of the contract transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception. ASU 2021-08 is effective for the Company beginning in the first quarter of 2023. ASU 2021-08 should be applied prospectively for acquisitions occurring on or after the effective date of the amendments. Early adoption of the proposed amendments would be permitted, including adoption in an interim period. The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statements.

 

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 and six months ended  September 30, 2023 and 2022 (in thousands):

 

  

Three Months Ended

  

Six Months Ended

 
  

September 30,

  

September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Revenue

                

Membership Services

 $16,428  $12,788  $31,640  $24,872 

Advertising

  10,732   8,698   21,516   17,640 

Merchandising

  1,259   1,834   2,999   3,682 

Sponsorship and Licensing

  97   199   126   313 

Ticket/Event

  12   13   14   248 

Total Revenue

 $28,528  $23,532  $56,295  $46,755 

 

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- 12

 

For the three months ended September 30, 2023 and 2022, one customer accounted for 51% and 45% of the Company’s consolidated revenues, respectively. For the six months ended September 30, 2023 and 2022, one customer accounted for 52% and 44% of the Company’s consolidated revenues, respectively.

 

The following table summarizes the significant changes in the deferred revenue balances during the six months ended September 30, 2023 (in thousands):

 

  

Deferred

 
  

Revenue

 

Balance as of March 31, 2023

 $992 

Revenue recognized that was included in the contract liability at beginning of period

  (392)

Increase due to cash received, excluding amounts recognized as revenue during the period

  280 

Balance as of September 30, 2023

 $880 

  

 

Note 4 Property and Equipment

 

The Company’s property and equipment at September 30, 2023 and  March 31, 2023 was as follows (in thousands):

 

  

September 30,

  

March 31,

 
  

2023

  

2023

 

Property and equipment, net

        

Computer, machinery, and software equipment

 $6,509  $6,501 

Furniture and fixtures

  556   556 

Leasehold improvements

  531   531 

Capitalized internally developed software

  15,915   14,662 

Total property and equipment

  23,511   22,250 

Less accumulated depreciation and amortization

  (20,521)  (18,925)

Total property and equipment, net

 $2,990  $3,325 

 

Depreciation expense was $0.8 million and $1.6 million for the three and six months ended September 30, 2023, respectively, and $0.9 million and $1.8 million for the three and six months ended September 2022, respectively.

 

F- 13

  
 

Note 5 Goodwill and Intangible Assets

 

Goodwill

 

The following table presents the changes in the carrying amount of goodwill for the six months ended September 30, 2023 (in thousands):

 

  

Goodwill

 

Balance as of March 31, 2023

 $23,379 

Acquisitions

  - 

Impairment losses

  - 

Balance as of September 30, 2023

 $23,379 

 

Indefinite-Lived Intangible Assets

 

The following table presents the changes in the carrying amount of indefinite-lived brand and trade names intangible assets in the Company’s Audio Group segment for the six months ended September 30, 2023 (in thousands):

 

  

Tradenames

 

Balance as of March 31, 2023

 $4,637 

Acquisitions

  - 

Impairment losses

  - 

Balance as of September 30, 2023

 $4,637 

 

Finite-Lived Intangible Assets

 

The Company’s finite-lived intangible assets were as follows as of September 30, 2023 (in thousands):

 

  

Gross

      

Net

 
  

Carrying