UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from __________________ to __________________
Commission File Number:
LIVEONE, INC.
(Exact name of registrant as specified in its charter)
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(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 | ||
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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.
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).
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 | ☐ | |
| | ☒ | 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
As of November 17, 2023, there were
LIVEONE, INC.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I — FINANCIAL INFORMATION
(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 | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expense and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Mezzanine Equity and Stockholders’ (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accrued royalties | ||||||||
| Notes payable, current portion | ||||||||
| Deferred revenue | ||||||||
| Senior secured line of credit | ||||||||
| Bridge loan | ||||||||
| Derivative liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Senior secured line of credit | ||||||||
| Notes payable, net | ||||||||
| Lease liabilities, noncurrent | ||||||||
| Derivative liabilities, noncurrent | ||||||||
| Other long-term liabilities | ||||||||
| Deferred income taxes | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Mezzanine Equity | ||||||||
| Redeemable convertible preferred stock, $par value; shares authorized; and shares issued and outstanding as of September 30, 2023 and March 31, 2023, respectively | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $par value; shares authorized; and shares issued and outstanding as of September 30, 2023 and March 31, 2023, respectively | ||||||||
| Common stock, $par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Treasury stock | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total LiveOne's stockholders’ deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total equity (deficit) | ( | ) | ||||||
| Total Liabilities, Mezzanine Equity and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
(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: | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Product development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Impairment of intangible assets | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ( | ) | ( | ) | ||||||||||||
| Total other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before provision (benefit) for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision (benefit) for income taxes | ( | ) | ||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net loss attributed to LiveOne | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
(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 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to restricted stock units | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on Series A preferred stock | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to restricted stock units | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for purchase of intangible assets | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends on Series A preferred stock | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of PC1 bridge loan | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends from spin-off of PodcastOne | - | - | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of PodcastOne common stock | - | - | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||||
| Reclassification of common stock warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock dividends | ||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | 135,270 | - | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to restricted stock units | ||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | 384,155 | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to restricted stock units | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for modification of debt instruments | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for settlement of earnout | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for settlement of accrued expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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 | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Interest paid in kind | ||||||||
| Stock-based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Change in fair value of bifurcated embedded derivatives | ( | ) | ||||||
| Change in fair value of contingent consideration liability | ( | ) | ||||||
| Settlement of accrued expenses | ( | ) | ||||||
| Provision for credit loss | ||||||||
| Impairment of intangible assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Other assets | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Accrued royalties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases of intangible assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Payment on PodcastOne bridge loan | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Payments on Capchase loan | ( | ) | ||||||
| Proceeds from PodcastOne bridge loan | ||||||||
| Payment of contingent consideration | ( | ) | ||||||
| Proceeds from notes payable - related party | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Purchase of treasury stock | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Conversion of the bridge loan into PodcastOne common stock | $ | $ | ||||||
| Fair value of warrant and derivative liability issued with debt instruments | $ | $ | ||||||
| Fair value of shares of common stock issuable in connection with settlement of earnout | $ | $ | ||||||
| Fair value of shares of common stock issuable in connection with the modification of debt instruments | $ | $ | ||||||
| Fair value of shares of common stock issuable in connection with the settlement of accrued expenses and prepayment for services | $ | $ | ||||||
| PodcastOne warrants reclassified from liabilities to non-controlling interest | $ | $ | ||||||
| Common stock issued for prepaid services | $ | $ | ||||||
| Purchase of intangible assets accrued for at period end | $ | $ | ||||||
| Purchase of intangible assets with common stock | $ | $ | ||||||
| Fair value of options issued to employees, capitalized as internally-developed software | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
(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 $
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 $
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 $
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.
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 $
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 $
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.
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
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 | $ | ( | ) | $ | ( | ) | ||
| Dividends on preferred stock | ( | ) | ( | ) | ||||
| Net loss attributed to LiveOne | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average number of shares outstanding | ||||||||
| Shares used in computation of basic and diluted earnings per share | $ | ( | ) | $ | ( | ) | ||
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 | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and cash equivalents and restricted cash | $ | $ | ||||||
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 $
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 customer that made up
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 | $ | $ | ||||||
| Less: Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
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.
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 | $ | $ | $ | $ | ||||||||||||
| Advertising | ||||||||||||||||
| Merchandising | ||||||||||||||||
| Sponsorship and Licensing | ||||||||||||||||
| Ticket/Event | ||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||
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.
For the three months ended September 30, 2023 and 2022, customer accounted for
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 | $ | |||
| Revenue recognized that was included in the contract liability at beginning of period | ( | ) | ||
| Increase due to cash received, excluding amounts recognized as revenue during the period | ||||
| Balance as of September 30, 2023 | $ | |||
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 | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Capitalized internally developed software | ||||||||
| Total property and equipment | ||||||||
| Less accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation expense was $
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 | $ | |||
| Acquisitions | ||||
| Impairment losses | ||||
| Balance as of September 30, 2023 | $ | |||
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 | $ | |||
| Acquisitions | ||||
| Impairment losses | ||||
| Balance as of September 30, 2023 | $ | |||
Finite-Lived Intangible Assets
The Company’s finite-lived intangible assets were as follows as of September 30, 2023 (in thousands):
| Gross | Net | |||||||||||
| Carrying | Accumulated | Carrying | ||||||||||
| Value | Amortization | Value | ||||||||||
| Software | $ | $ | $ | |||||||||
| Intellectual property (patents) | ||||||||||||
| Customer relationships | ||||||||||||
| Content creator relationships | ||||||||||||
| Domain names | ||||||||||||
| Brand and trade names | ||||||||||||
| Customer list | ||||||||||||
| Total | $ | $ | $ | |||||||||
The Company’s finite-lived intangible assets were as follows as of March 31, 2023 (in thousands):