LIVEONE, INC. Forward-Looking Statements
We make forward-looking statements in this Annual Report and the documents incorporated by reference herein within the meaning of the Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including without limitation our earnings, revenues, expenses or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words "may," "might," "will," "will likely result," "should," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "continue," "target" or similar expressions. These forward-looking statements are based on information available to us as of the date of this Annual Report and on our current expectations, forecasts and assumptions, and involve substantial risks and uncertainties. Actual results may vary materially from those expressed or implied by the forward-looking statements herein due to a variety of factors, including: our reliance on one key customer for a substantial percentage of its revenue; our ability to consummate any proposed financing, acquisition, spin-out, distribution or transaction, the timing of the closing of such proposed event, including the risks that a condition to closing would not be satisfied within the expected timeframe or at all, or that the closing of any proposed financing, acquisition, spin-out, distribution or transaction will not occur or whether any such event will enhance shareholder value; our ability to continue as a going concern; our ability to attract, maintain and increase the number of its users and paid members; our identifying, acquiring, securing and developing content; our intent to repurchase shares of our common stock from time to time under our announced stock repurchase program and the timing, price, and quantity of repurchases, if any, under the program; our ability to maintain compliance with certain financial and other covenants; successfully implementing our growth strategy, including relating to our technology platforms and applications; management's relationships with industry stakeholders; the effects of the global Covid-19 pandemic; changes in economic conditions; competition; risks and uncertainties applicable to the businesses of our subsidiaries; and other risks, uncertainties and factors set forth in "Item 1A. Risk Factors" of this Annual Report. We do not undertake any obligation to update forward-looking statements as a result of as a result of new information, future events or developments or otherwise. The following discussion and analysis of our business and results of operations for the fiscal year endedMarch 31, 2022 , and our financial conditions at that date, should be read in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report. As used herein, "LiveOne ," the "Company," "we," "our" or "us" and similar terms refer collectively toLiveOne, Inc. (formerly known asLiveXLive Media, Inc. ) and its subsidiaries, unless
the context indicates otherwise. Overview of the Company
We are a pioneer in the acquisition, distribution and monetization of live music, Internet radio, podcasting and music-related streaming and video content. Our principal operations and decision-making functions are located inNorth America . We manage and report our businesses as a single operating segment. Our senior management regularly reviews our operating results, principally to make decisions about how we allocate our resources and to measure our segment and consolidated operating performance. In prior fiscal years we generated a majority of our revenue primarily through membership services from our streaming radio and music services, and to a lesser extent through advertising and licensing across our music platform. In the fourth quarter of our fiscal year endedMarch 31, 2020 , we began generating ticketing, sponsorship, and promotion-related revenue from live music events through ourFebruary 2020 acquisition of React Presents. InMay 2020 , we launched a new pay-per-view ("PPV") offering enabling new forms of artist revenue including digital tickets, tipping, digital meet and greets, merchandise sales and sponsorship. InJuly 2020 , we entered the podcasting business with the acquisition of PodcastOne and inDecember 2020 , we entered the merchandising business with the acquisition of CPS. InOctober 2021 , we entered artist and brand development and music-related press relations business through our acquisition of Gramophone.
For the fiscal years ended
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Fiscal 2022 Significant Transactions
Acquisition of Gramophone OnOctober 17, 2021 , our wholly owned subsidiary,LiveXLive PR, Inc. , acquired 100% of the equity interests of Gramophone for net consideration of$0.4 million consisting of 79,365 shares of our common stock with a fair value of$0.1 million net of a 25% discount for lack of marketability, contingent consideration with a fair value of$0.2 million comprised of shares held in escrow and a cash earnout, and cash of$0.2 million . The shares of our common stock are subject to a twelve-month lock-up period and will thereafter remain subject to sales volume restrictions.
Unsecured Convertible Promissory Note
EffectiveDecember 31, 2021 , the Note holder converted the Note in whole pursuant to an exchange agreement which provided for an exchange of the Note into shares of our common stock at a price of$2.10 per share, resulting in 1,155,143 shares issued upon the exchange. As a result of the incentives offered to the Note holder, we recorded a$0.8 million expense to Other Income (expense). Extinguishment of Debt We had outstanding 8.5% unsecured convertible notes payable (the "Trinad Notes") issued toTrinad Capital Master Fund Ltd. ("Trinad Capital "), a fund controlled byMr. Ellin , our Chief Executive Officer, Chairman, director and principal stockholder. The Trinad Notes are convertible into shares of our common stock at a fixed conversion price of$3.00 per share. OnAugust 11, 2021 , we entered into an Amendment of Notes Agreement (the "Amendment Agreement") withTrinad Capital pursuant to which the maturity date of all of the Trinad Notes was extended toMay 31, 2023 , and in consideration of such extension, we issued toTrinad Capital 33,654 shares of our common stock. We determined that the amendment should be accounted for as an extinguishment and recorded the amended debt instrument at fair value which included the consideration in common stock transferred. The resulting loss on extinguishment recorded of$4.3 million is included in "Loss on extinguishment of debt".
We may not redeem any of the Trinad Notes prior to
Senior Secured Revolving Line of Credit
OnJune 2, 2021 , we entered into a Business Loan Agreement withEast West Bank (the "Senior Lender"), which provides for a revolving credit facility collateralized by all of the assets of our Company and our subsidiaries. In connection with the Business Loan Agreement, we entered into a Promissory Note with the Senior Lender and established the revolving line of credit in the amount of$7.0 million (the "Revolving Credit Facility"), maturing onJune 2, 2023 . Under the terms of the Promissory Note, the Revolving Credit Facility bears interest at a variable rate equal to the Wall Street Journal Prime Rate, plus 0.5%. CEO Salary In calendar 2022, our Chief Executive Officer, Chairman, director and significant stockholder,Robert S. Ellin , desiring to continue to demonstrate confidence in our Company and to assist our objective to achieve annual cost and expense reductions, agreed to forego his monthly cash base salary through at leastDecember 31, 2022 in exchange for shares of our common stock that are anticipated to vest in full in calendar year 2023, and will vest, be calculated and issued subject to our board of directors' approval. 86 Basis of Presentation
Our consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the fiscal year endedMarch 31, 2021 , and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our consolidated financial statements for the year endedMarch 31, 2022 . The presented financial information for the fiscal year endedMarch 31, 2022 includes the financial information and activities ofLiveOne , PodcastOne and CPS for the full year and Gramophone from the effective date of the acquisition.
Opportunities, Challenges and Risks
For our fiscal year endedMarch 31, 2022 , we derived 35% of our revenue from paid memberships and the remainder from advertising, ticketing, sponsorship, merchandising and licensing. During fiscal year endedMarch 31, 2022 , we (i) acquired Gramophone (effectiveOctober 17, 2021 ), (ii) delivered live events digitally live streamed across our platform, (iii) increased our sponsorship revenue from live events when compared to prior fiscal years and (iv) had revenue from our PPV platform for an entire year, allowing us to charge customers directly to access and watch certain live events digitally on our music platform. As a result of these actions, our revenue for the fiscal year endedMarch 31, 2022 was comprised of 35% from paid members, 29% from advertising, 13% from merchandise, 17% from ticketing and 6% from sponsorship and licensing. Conversely, the COVID-19 pandemic adversely impacted our on-premise live events, concerts and festivals through React Presents and our programmatic advertising as more fully discussed below. As the impact of COVID-19 eases around the world and related government actions are relaxed in the markets in which we operate, we expect to gradually increase our production of on-premise live music events and generate revenue through co-promotion fees, sponsorships, food and beverage and ticket sales of on-premise live events
in the near term.
We believe there is substantial near and long-term value in our live music content. We believe the monetary value of broadcasting live music will follow a similar evolution to live sporting events such as theNational Football League , MajorLeague Baseball and theNational Basketball Association , whereby sports broadcasting rights became more valuable as the demand for live sporting events increased over the past 20 years. As a thought leader in live music, we plan to acquire the broadcasting rights to as many of the top live music events and festivals that are available to us. During the fiscal year endedMarch 31, 2022 , we livestreamed 126 major festivals and live music events compared to 146 in the prior fiscal year. In the near term, we will continue aggregating our digital traffic across these festivals and monetizing the live broadcasting of these events through advertising, brand sponsorships and licensing of certain broadcasting rights outside ofNorth America . The long-term economics of any future agreement involving festivals, programming, production, broadcasting, streaming, advertising, sponsorships, and licensing could positively or negatively impact our liquidity, growth, margins, relationships, and ability to deploy and grow our future services with current or future customers, and are heavily dependent upon the easing and elimination of the COVID-19 pandemic. With the acceleration of our live events, we have also begun to package, produce and broadcast our live music content on a 24/7/365 basis across our music platform and grow our paid members. Recently, we have entered into distribution relationships with a variety of platforms, including Roku, AppleTV, Amazon Fire, linear OTT platforms such as STIRR and XUMO. As we continue to have more distribution channels, rights and viewership and expand our original programming capabilities, we believe there is a substantial opportunity to increase our brand, advertising, viewership and membership capabilities and corresponding revenue, domestically and globally. We believe our operating results and performance are, and will continue to be, driven by various factors that affect the music industry. Our ability to attract, grow and retain users to our platform is highly sensitive to rapidly changing public music preferences and technology and is dependent on our ability to maintain the attractiveness of our platform, content and reputation to our customers. Beyond fiscal year 2022, the future revenue and operating growth across our music platform will rely heavily on our ability to grow our member base in a cost effective manner, continue to develop and deploy quality and innovative new music services, provide unique and attractive content to our customers, continue to grow the number of listeners on our platform and live music festivals we stream, grow and retain customers and secure sponsorships to facilitate future revenue growth from advertising and e-commerce across our
platform.
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As our music platform continues to evolve, we believe there are opportunities to
expand our services by adding more content in a greater variety of formats such
as podcasts and vodcasts, extending our distribution to include pay television,
OTT and social channels, deploying new services for our members, artist
merchandise and live music event ticket sales, and licensing user data across
our platform. Our acquisitions of PodcastOne, CPS and Gramophone are reflective
of our flywheel operating model. Conversely, the evolution of technology
presents an inherent risk to our business. Today, we see large opportunities to
expand our music services within North America and other parts of the world
where we will need to make substantial investments to improve our current
service offerings. As a result, and during the fiscal year ending March 31,
2022 , we will continue to invest in product and engineering to further develop
our future music apps and services, and we expect to continue making significant
product development investments to our existing technology solutions over the
next 12 to 24 months to address these opportunities.
As our platform matures, we also expect our Contribution Margins, Adjusted
Earnings before income tax, depreciation and amortization ("EBITDA") and
Adjusted EBITDA Margins to improve in the near and long term, which are non-GAAP
measures as defined in section following below titled, "Non-GAAP Measures".
Historically, our live events business has not generated enough direct revenue
to cover the costs to produce such events, and as a result generated negative
Contribution Margins, Adjusted EBITDA and Adjusted EBITDA Margins and operating
losses. Beginning in late March 2020 , the COVID-19 pandemic had an adverse
impact on on-premise live music events and festivals. Historically, we produced
and digitally distributed the live music performances of many of these large
global music events to fans all around the world. With the elimination of any
fan-attended music events, festivals and concerts, we shifted our operating
model beginning in April 2020 towards self-producing live music events that were
100% digital (e.g., artists not performing in front of live fans and solely for
digital distribution). In April 2020 , we also launched our first all-digital
music festival, Music Lives, which aired continuously for over 48 straight
hours, with nearly 100 artists and generated over 50 million livestreams and
over 6.5 billion video views of the of hashtag #musiclives across TikTok . Music
Lives was simulcast across our platform and on TikTok's platform, who also
sponsored the event. In March 2021 , we held our second annual Music Lives
festival, which featured 130 artists performing over 72 continuous hours
generating nearly 28 million livestreams.
Growth in our music services is also dependent upon the number of customers that
use and pay for our services, the attractiveness of our music platform to
sponsors and advertisers and our ability to negotiate favorable economic terms
with music labels, publishers, artists and/or festival owners, and the number of
consumers who use our services. Growth in our margins is heavily dependent on
our ability to grow the membership base in a cost-efficient manner, coupled with
the managing the costs associated with implementing and operating our services,
including the costs of licensing music with the music labels, producing,
streaming and distributing video and audio content and sourcing and distributing
personalized products and gifts. Our ability to attract and retain new and
existing customers will be highly dependent on our abilities to implement and
continually improve upon our technology and services on a timely basis and
continually improve our network and operations as technology changes and as we
experience increased network capacity constraints as we continue to grow.
For the majority of our agreements with festival owners, we acquire the global
broadcast rights. Moreover, the digital rights we acquire principally include
any format and screen, and future rights to VR and AR. For the years ended March
31, 2022 and 2021, all material amounts of our revenue were derived from
customers located in the United States and moreover, one of our customers
accounted for 28% and 36% of our consolidated revenue. This significant
concentration of revenue from one customer poses risks to our operating results,
and any change in the means this customer utilizes our services beyond March 31,
2022 could cause our revenue to fluctuate significantly. In the long term, we
plan to expand our business further internationally in places such as Europe ,
Asia Pacific and Latin America , and as a result will continue to incur
significant incremental upfront expenses associated with these growth
opportunities.
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Effects of COVID-19
An outbreak of a novel strain of coronavirus, COVID-19 in December 2019
subsequently became a pandemic after spreading globally, including the United
States . 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. We 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, we expect to continue experiencing modest
adverse impacts throughout the fiscal year ending March 31, 2023 . Our event and
programmatic advertising revenues were directly impacted throughout the 2021
fiscal year and mid-way through the 2022 fiscal year with all on-premise
in-person live music festivals and events postponed and mixed demand from
historical advertising partners. Further, one of our larger customers also
experienced a temporary halt to its production as a result of COVID-19, which
negatively impacted our near-term member growth in the 2021 fiscal year. During
the fiscal year ended March 31, 2021 , we enacted several initiatives to
counteract these near-term challenges, including salary reductions, obtaining a
Paycheck Protection Program 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. We also launched a new 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 our results of operations, financial positionand liquidity. The extent to which COVID-19 impacts our results will depend on future developments, including new information which may emerge concerning the severity of the coronavirus and the actions taken by us and our partners to contain the coronavirus or treat its impact, among others. The impact of the suspension or cancellation of in-person live festivals, concerts or other live events, and any other continuing effects of COVID-19 on our business operations (such as general economic conditions and impacts on the advertising, sponsorship and ticketing marketplace and our partners), may result in a decrease in our revenues, and if the global COVID-19 epidemic continues for an extended period, our business, financial condition and results of operations could be materially adversely
affected. Non-GAAP Measures Contribution margin
Contribution Margin is a non-GAAP financial measure that we define as Revenue less Cost of Sales.
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation, and amortization
("Adjusted EBITDA") is a non-GAAP financial measure that we define as net income
(loss) before (a) non-cash GAAP purchase accounting adjustments for certain
deferred revenue and costs, (b) legal, accounting and other professional fees
directly attributable to acquisition activity, (c) employee severance payments
and third party professional fees directly attributable to acquisition or
corporate realignment activities, (d) certain non-recurring expenses associated
with legal settlements or reserves for legal settlements in the period that
pertain to historical matters that existed at acquired companies prior to their
purchase date, (e) depreciation and amortization (including goodwill impairment,
if any), and (f) certain stock-based compensation expense. We use Adjusted
EBITDA to evaluate the performance of our operating segment. We believe that
information about Adjusted EBITDA assists investors by allowing them to evaluate
changes in the operating results of our business separate from non-operational
factors that affect net income (loss), thus providing insights into both
operations and the other factors that affect reported results. Adjusted EBITDA
is not calculated or presented in accordance with GAAP. A limitation of the use
of Adjusted EBITDA as a performance measure is that it does not reflect the
periodic costs of certain amortizing assets used in generating revenue in our
business. Accordingly, Adjusted EBITDA should be considered in addition to, and
not as a substitute for, operating income (loss), net income (loss), and other
measures of financial performance reported in accordance with GAAP. Furthermore,
this measure may vary among other companies; thus, Adjusted EBITDA as presented
herein may not be comparable to similarly titled measures of other companies.
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Adjusted EBITDA Margin
Adjusted EBITDA Margin is a non-GAAP financial measure that we define as the ratio of Adjusted EBITDA to Revenue.
The following table sets forth the reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure for the year endedMarch 31 (in thousands): Non-Recurring Provision for Acquisition and Other (benefit Depreciation and Stock-Based Realignment (income) from) income Adjusted Net Loss Amortization Compensation Costs expense taxes EBITDA
2022
Operations$ (15,020 ) $ 9,587$ 4,167 $ 443$ (33 ) $ -$ (856 ) Corporate (28,892 ) 37 8,536 1,664 5,909 183 (12,563 ) Total$ (43,912 ) $ 9,624$ 12,703 $ 2,107$ 5,876 $ 183$ (13,419 )
2021
Operations$ (21,199 ) $ 8,756$ 6,093 $
1,107
14 5,189 2,371 7,130 47 (5,870 )
Total $ (41,820 ) $ 8,770 $ 11,282 $
3,478 $ 12,795 $ (345 ) $ (5,840 ) The following table sets forth the reconciliation of Contribution Margin to Revenue, the most comparable GAAP financial measure (in thousands):
Year Ended
March 31,
2022 2021
Revenue: $ 117,019 $ 65,230
Less:
Cost of sales (92,980 ) (48,987 )Amortization of developed technology (3,856 ) (3,856 ) Gross Profit 20,183 12,387 Add back amortization of developed technology: 3,856 3,856 Contribution Margin$ 24,039 $ 16,243 90
Consolidated Results of Operations
The following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results (in thousands):
Year Ended Year Ended
March 31, March 31,
2022 2021
Revenue: $ 117,019 $ 65,230
Operating expenses:
Cost of sales 92,980 48,987
Sales and marketing 14,114 9,517
Product development 8,092 9,680
General and administrative 33,681 20,831Amortization of intangible assets 6,005
5,585 Total operating expenses 154,872 94,600 Loss from operations (37,853 ) (29,370 ) Other income (expense): Interest expense, net (4,123 ) (5,303 )
Loss on extinguishment of debt (4,321 )
(5,180 ) Forgiveness of PPP loans 3,110 - Other expense (542 ) (2,312 ) Total other expense, net (5,876 ) (12,795 ) Loss before income taxes (43,729 ) (42,165 )
Income tax provision (benefit) 183 (345 ) Net loss$ (43,912 ) $
(41,820 )
Net loss per share - basic and diluted$ (0.56 ) $
(0.61 )
Weighted average common shares - basic and diluted 79,084,930 69,040,055
The following table provides the depreciation expense included in the above line
items (in thousands):
% Change
Year Ended March 31, 2022 vs.
2022 2021 2021
Depreciation expense
Cost of sales $ 65 $ 47 38 %
Sales and marketing 164 200 -18 %
Product development 2,770 2,188 27 %
General and administrative 620 750 -17 %
Total depreciation expense $ 3,619 $ 3,185 14 %
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The following table provides the stock-based compensation expense included in the above line items (in thousands):
% Change
Year Ended March 31, 2022 vs.
2022 2021 2021
Stock-based compensation expense:
Cost of sales $ 708 $ 820 -14 %
Sales and marketing 2,022 2,358 -14 %
Product development 417 2,135 -80 %
General and administrative 9,556 5,969 60 %Total stock-based compensation expense$ 12,703 $ 11,282
13 %
The following table provides our results of operations, as a percentage of revenue, for the periods presented:
Year Ended March 31,
2022 2021
Revenue 100 % 100 %
Operating expenses
Cost of sales 80 % 75 %
Sales and marketing 12 % 15 %
Product development 7 % 15 %
General and administrative 29 % 32 %
Amortization of intangible assets 5 % 9 %
Total operating expenses 133 % 145 %
Loss from operations -33 % -45 %
Other expense -5 % -20 %
Loss before income taxes -38 % -65 %
Income tax provision (benefit) - % -1 %
Net loss -38 % -64 %
Revenue
Revenue was as follows (in thousands):
% Change
Year Ended March 31, 2022 vs.
2022 2021 2021
Membership services $ 41,264 $ 33,577 23 %
Advertising 33,739 20,779 62 %
Merchandising 15,447 5,168 199 %
Sponsorship and licensing 7,051 3,878 82 %
Ticket/Event 19,518 1,828 968 %
Total Revenue $ 117,019 $ 65,230 79 %
Membership Revenue
Membership revenue increased by$7.7 million , or 23%, to$41.3 million for the year endedMarch 31, 2022 , as compared to$33.6 million for the year endedMarch 31, 2021 . The increase was primarily as a result of member growth with our
largest OEM customer.
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Advertising Revenue
Advertising revenue increased by $13.0 million , or 62%, to $33.7 million during
the year ended March 31, 2022 , as compared to $20.8 million the year ended March
31, 2021 , which is primarily due to growth in advertising at PodcastOne
year-over-year.
Merchandising
Merchandising revenue increased by
Sponsorship and Licensing Sponsorship and licensing revenue increased by$3.2 million , or 82%, to$7.1 million from$3.9 million for the year endedMarch 31, 2022 as compared to the year endedMarch 31, 2021 . The increase was primarily driven by the sponsorship and licensing revenues earned related to the Social Gloves event held during the fiscal year endedMarch 31, 2022 , with no comparable event held during the
prior year. Ticket/Event
Ticket/Event revenue increased by$17.7 million , or 968%, to$19.5 million for the year endedMarch 31, 2022 , as compared to$1.8 million for the year endedMarch 31, 2021 . The increase was due to PPV ticket fees and production revenues earned related to the Social Gloves event held during the fiscal year endedMarch 31, 2022 , in addition to ticket sales from the Spring Awakening music festival inOctober 2021 , with no comparable events held during the prior year comparable period. Cost of Sales
Cost of sales was as follows (in thousands):
% Change
Year Ended March 31, 2022 vs.
2022 2021 2021
Membership $ 26,200 $ 20,449 28 %
Advertising 30,579 17,146 78 %
Production 24,928 8,226 203 %
Merchandising 11,273 3,166 256 %
Total Cost of Sales $ 92,980 $ 48,987 90 %
Membership
Membership cost of sales increased by $5.8 million , or 28%, to $26.2 million for
the year ended March 31, 2022 , as compared to $20.4 million for the year ended
March 31, 2021 . The increase was in line with the higher subscription revenues
noted above.
Advertising
Advertising cost of sales increased by $13.4 million , or 78%, to $30.6 million
for the year ended March 31, 2022 , as compared to $17.1 million for the year
ended March 31, 2021 . The increase was in line with the higher advertising
revenues noted above.
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Production
Production cost of sales increased by $16.7 million , or 203%, to $24.9 million
for the year ended March 31, 2022 , as compared to $8.2 million for the year
ended March 31, 2021 . The increase was primarily due to production costs related
to the Social Gloves event held in June 2021 in addition to production and
ticketing costs related to the Spring Awakening music festival held in October
2021 , with no comparable events in the prior year.
Merchandising
Merchandising cost of sales increased to
Other Operating Expenses
Other operating expenses were as follows (in thousands):
% Change
Year Ended March 31, 2022 vs.
2022 2021 2021Sales and marketing expenses$ 14,114 $ 9,517 48 % Product development 8,092 9,680 -16 % General and administrative 33,681 20,831 62 % Amortization of intangible assets 6,005 5,585 8 % Total Other Operating Expenses$ 61,892 $ 45,613 36
%
Sales and Marketing Expenses
Sales and marketing expenses increased by$4.6 million , or 48%, to$14.1 million for the year endedMarch 31, 2022 , as compared to$9.5 million for the year endedMarch 31, 2021 . The increase was largely due to higher salaries and wages of$2.1 million and increased sales and marketing costs related to the two tentpole events during the current year, including Social Gloves and the Spring Awakening music festival, with no comparable events during the prior year.
Product Development Product development expenses decreased by$1.6 million , or 16%, to$8.1 million for the year endedMarch 31, 2022 , as compared to$9.7 million for the year endedMarch 31, 2021 . The decrease was primarily driven by a$1.7 million decrease in stock compensation expense due to a benefit related to the release of a discretionary share-based award bonus previously accrued. General and Administrative
General and administrative expenses increased by$12.9 million , or 62%, to$33.7 million for the year endedMarch 31, 2022 , as compared to$20.8 million for the year endedMarch 31, 2021 . The increase was largely due to an increase in share-based compensation of$3.6 million and salaries and benefits of$3.8 million , partially driven by the addition of corporate personnel to support future expected growth and the timing of vesting of share-based awards.
Amortization of Intangible Assets
Amortization of intangible assets increased by$0.4 million , or 8%, to$6.0 million for the year endedMarch 31, 2022 , as compared to$5.6 million for the year endedMarch 31, 2021 . The increase was due to intangible assets acquired in the acquisition CPS, which was acquired near the end of the prior year along with the acquisition of Gramophone in the current year. 94 Total Other Expense, Net % Change Year Ended March 31, 2022 vs. 2022 2021 2021 Total other expense, net$ (5,876 ) $ (12,795 ) -54 %
Total other expense, net decreased by$6.9 million , or 54%, to$5.9 million for the year endedMarch 31, 2022 , as compared to$12.8 million for the year endedMarch 31, 2021 . The decrease was primarily a result of the gain on forgiveness of PPP loans of$3.1 million during the fiscal year endedMarch 31, 2022 , with no comparable gain in the prior year. Additionally, interest expense, net decreased by$1.2 million driven by the interest rate on the Harvest Notes of 8.5% during the fiscal year endedMarch 31, 2022 , when compared to the interest rate on the senior secured debentures of 12.5% which were outstanding during the fiscal year endedMarch 31, 2021 . In addition, there was a decrease in the loss on extinguishment of debt of$4.3 million recorded during the fiscal year endedMarch 31, 2022 , when compared to the loss on extinguishment recorded during the fiscal year endedMarch 31, 2021 of$5.2 million . Business Operations Results Operations Our operating results were, and discussions of significant variances are, as follows (in thousands): % Change Year Ended March 31, 2022 vs. 2022 2021 2021 Revenue$ 117,019 $ 65,230 79 % Cost of Sales 92,980 48,987 90 %
Sales & Marketing, Product Development and G&A 33,087 26,867
23 %
Intangible Asset Amortization 6,005 5,585 8 %
Operating Loss $ (15,053 ) $ (16,209 ) -7 %
Operating Margin -13 % -25 % - %
Adjusted EBITDA* $ (856 ) $ 30 2,934 %
Adjusted EBITDA Margin* -1 % 0 % - %
* See "-Non-GAAP Measures" above for the definition and reconciliation of
Adjusted EBITDA and Adjusted EBITDA Margin
Fiscal Year 2022 Compared to Fiscal Year 2021
Revenue Revenue increased by$51.8 million , or 79% to$117.0 million during the year endedMarch 31, 2022 , as compared to$65.2 million for the year endedMarch 31, 2021 , primarily due to increased membership revenue of$7.7 million as a result of member growth with our largest OEM customer, increased advertising revenue of$13.0 million as a result of growth in advertising at PodcastOne, increased merchandising revenue of$10.3 million due to the acquisition of CPS near the end of the prior year, an increase of$3.2 million in sponsorship and licensing due to an increase in members and events, and an increase of$17.7 million in Ticket/Event revenues driven by the Social Gloves event and Spring Awakening music festival in the current year, with no comparable events in the prior
year.
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Operating Loss
Operating loss decreased
Adjusted EBITDA Adjusted EBITDA decreased by$0.9 million , to$(0.9) million for the year endedMarch 31, 2022 as compared to$30,000 for the year endedMarch 31, 2021 . This was largely due to the increase in sales & marketing, product development, and G&A expenses for the year endedMarch 31, 2022 as compared to the same period inMarch 31, 2021 . Corporate
Our Corporate operating results were, and discussions of significant variances are, as follows (in thousands):
%
Change
Year Ended March 31, 2022 vs.
2022 2021 2020
Sales & Marketing, Product Development, and G&A
73 %
Operating Loss $ (22,800 ) $ (13,161 ) 73 %
Operating Margin N/A N/A - %
Adjusted EBITDA* $ (12,563 ) $ (5,870 ) 114 %
* See "-Non-GAAP Measures" above for the definition and reconciliation of
Adjusted EBITDA Operating Loss
Operating loss increased by$9.6 million , or 73%, to$22.8 million for the year endedMarch 31, 2022 , as compared to$13.2 million for the year endedMarch 31, 2021 largely due to the addition of corporate personnel. Adjusted EBITDA Corporate Adjusted EBITDA increased$6.7 million , or 114%, to$(12.6) million for the year endedMarch 31, 2022 as compared to$(5.9) million for the year endedMarch 31, 2021 . The increase was largely due to the addition of corporate personnel as mentioned above.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States . The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe that the assumptions and estimates associated with our revenue recognition, allowance for doubtful accounts, the assigned value of acquired tangible and intangible assets and assumed and contingent liabilities associated with business combinations, provision for legal settlements, useful lives and impairment of property and equipment, intangible assets, goodwill and other assets, the fair value of our equity-based compensation awards and convertible debt instruments, and valuation of deferred income tax assets and liabilities, have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. 96 Revenue Recognition
We account 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 we satisfy our obligation by transferring control of the goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We use 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 we are entitled to and relate specifically to our efforts to satisfy our 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. We report revenue on a gross or net basis based on management's assessment of whether we act as a principal or agent in the transaction. To the extent we act as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable. The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer. Where applicable, we have determined that we act as the principal in all of its membership service streams and may act as principal or agent for our advertising and licensing revenue streams.
Our revenue is principally derived from the following services:
Memberships 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. We defer the portion of monthly to annual recurring membership fees collected in advance and recognize them in the period earned. Membership revenue is recognized in the period of services rendered. Our 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, we have concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure. We recognize membership revenue straight-line through the membership period.
Membership Services consist of:
Direct members, mobile service provider and mobile app services
We generate 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. We report 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. Our 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.
97
Third-Party Original Equipment Manufacturers
We generate 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 the Slacker application installed. The number of customers, or the variable consideration, is reported by OEMs and resolved on a monthly basis. Our payment terms with OEM are up to 30 days. The OEM does not charge the car owners a
fee for the Slacker service. 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 on a monthly basis. Merchandise Revenue Revenue is recognized upon the transfer of control to the customer. We recognize revenue and measure the transaction price net of taxes collected from customers and remitted to governmental authorities. Sales commissions are expensed as incurred and are recorded in sales and marketing expenses in the consolidated statements of operations. Our 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 30-60 days. Wholesale revenue is generally recognized when products are shipped, depending on the applicable contract terms. We record 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 atMarch 31, 2022 and 2021, was less than$0.1 million , respectively. Licensing Revenue Licensing revenue primarily consists of sales of licensing rights to digitally stream its live music services in certain geographies (e.g.China ). Licensing revenue is recognized when we satisfy our performance obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which we expect 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. We report our licensing revenue on a gross basis as we act as the principal in the underlying transactions. 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 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 our ticketing operations primarily consists of service fees charged at the time a ticket for an event is sold. For tickets sold to our festival events the revenue for the tickets and associated ticket service charges collected in advance of the event is recorded as deferred revenue until the event occurs.
98
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the fair
value of the award and is recognized as expense over the requisite service
period, which is the vesting period, on a straight-line basis. We use the
Black-Scholes-Merton option pricing model to determine the grant date fair value
of stock options. This model requires us to estimate the expected volatility and
the expected term of the stock options which are highly complex and subjective
variables. The variables take into consideration, among other things, actual and
projected employee stock option exercise behavior. We use a predicted volatility
of its stock price during the expected life of the options that is based on the
historical performance of our stock price as well as including an estimate using
guideline companies. Expected term is computed using the simplified method as
the Company's best estimate given its lack of actual exercise history. We have
selected a risk-free rate based on the implied yield available on U.S. Treasury
securities with a maturity equivalent to the expected term of the stock.
Stock-based awards are comprised principally of stock options, restricted stock
and restricted stock units ("RSUs"). Forfeitures are recognized as incurred.
Stock option awards issued to non-employees are accounted for at the grant date
fair value determined using the Black-Scholes-Merton option pricing model.
Management believes that the fair value of the stock options is more reliably
measured than the fair value of the services received. We record the fair value
of these equity-based awards and expense at their cost ratably over relatedvesting periods. Business Combinations We account for business combinations using the purchase method of accounting where the cost is allocated to the underlying net tangible and intangible assets acquired, based on their respective fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability.Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interests requires management's judgment and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of customer turnover rates and estimates of terminal values. Commitments and Contingencies From time to time, we are involved in legal proceedings and other matters arising in connection with the conduct of our business activities. Many of these proceedings may be at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of our commitments and contingencies in which we are involved to (i) assess whether a material loss is probable or there is at least a reasonable possibility that a material loss or an additional material loss in excess of a recorded accrual may have been incurred and (ii) determine if financial accruals are required when appropriate. We record an expense accrual for any commitments and loss contingency when we determine that a loss is probable and the amount of the loss can be reasonably estimated. If an expense accrual is not appropriate, we further evaluate each matter to assess whether an estimate of possible loss or range of loss can be made and whether or not any such matter requires additional disclosure. There can be no assurance that any proceeding against us will be resolved in amounts that will not differ from the amounts of estimated exposures. Legal fees and other costs of defending litigation are expensed as incurred. Non-Income Tax Contingencies We do not collect and remit sales and use or similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable or legally required. 99 TheJune 2018 U.S. Supreme Court ruling inSouth Dakota v. Wayfair, Inc., No. 17-494, along with the application of existing, new or future rulings and laws, could have adverse effects on our business, prospects and operating results.
Long-lived Assets,
We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination, and allocate the purchase price of each acquired business to its respective net tangible and intangible assets. Acquired intangible assets principally comprise of customer relationships and technology. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits is expected to be consumed.Goodwill represents the excess of the purchase consideration of an acquired entity over the fair value of the acquired net assets.Goodwill is tested for impairment annually or when events or circumstances change that would indicate that goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends or significant under-performance relative to expected historical or projected future results of operations. We evaluate the recoverability of our intangible assets, and other long-lived assets with finite useful lives for impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. These trigger events or changes in circumstances include, but are not limited to a significant decrease in the market price of a long-lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being used, significant adverse changes in legal factors, including changes that could result from our inability to renew or replace material agreements with certain of our partners such asTesla Motors on favorable terms, significant adverse changes in the business climate including changes which may result from adverse shifts in technology in our industry and the impact of competition, a significant adverse deterioration in the amount of revenue or cash flows we expect to generate from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of our long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. We perform impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In making this determination, we consider the specific operating characteristics of the relevant long-lived assets, including (i) the nature of the direct and any indirect revenues generated by the assets; (ii) the interdependency of the revenues generated by the assets; and (iii) the nature and extent of any shared costs necessary to operate the assets in their intended use. An impairment test would be performed when the estimated undiscounted future cash flows expected to result from the use of the asset group is less than its carrying amount. Impairment is measured by assessing the usefulness of an asset by comparing its carrying value to its fair value. If an asset is considered impaired, the impairment loss is measured as the amount by which the carrying value of the asset group exceeds its estimated fair value. Fair value is determined based upon estimated discounted future cash flows. The key estimates applied when preparing cash flow projections relate to revenue, operating margins, economic lives of assets, overheads, taxation and discount rates. To date, we have not recognized any such impairment loss associated
with
our long-lived assets.
100
Goodwill is tested for impairment at the reporting unit level, which is the same or one level below an operating segment. In any year we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or we decide to bypass the qualitative assessment, we perform a quantitative analysis. The quantitative analysis is used to identify both the existence of impairment and the amount of the impairment loss by comparing the estimated fair value of a reporting unit with its carrying value, including goodwill. The estimated fair value is based on internal projections of expected future cash flows and operating plans, as well as market conditions relative to the operations of our reporting units. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired; otherwise, an impairment loss is recognized within our consolidated statements of operations in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
Fair Value of Convertible Debt
As of the date of this Annual Report we have several debt instruments outstanding which are convertible into shares of our common stock that include embedded derivatives. Refer to Note 9 - Unsecured Convertible Notes and Note 10 - Senior Secured Convertible Notes, to our consolidated financial statements included elsewhere in this Annual Report. We measure the embedded derivatives associated with the convertible debt instruments at fair value, as described in the aforementioned notes to the consolidated financial statements. We have estimated the fair value of the convertible debt instruments to be equal to their carrying values and have not elected the fair value option for these instruments. The fair value of the embedded derivatives, which are carried at fair value, was estimated using a yield method, including assumptions of probabilities of default and recovery rates. The fair value of the convertible debt instruments, which are carried at amortized cost, was estimated using a binomial lattice model, including assumptions of volatility and risk-free rates. For further discussion see Note 20 - Fair Value Measurements to our consolidated financial statements included elsewhere in this Annual Report.
Liquidity and Capital Resources
Current Financial Condition
As ofMarch 31, 2022 , our principal sources of liquidity were our cash and cash equivalents, including restricted cash balances in the amount of$13.2 million , which primarily are invested in cash in banking institutions in theU.S. The vast majority of our cash proceeds were received as a result of operations, the issuance of convertible notes, public offerings of our common shares, and PPP loans. As ofMarch 31, 2022 , we had a senior secured line of credit of$7.0 million , secured convertible notes with aggregate principal amount of$13.7 million and unsecured convertible notes with aggregate principal balances of$5.9 million and a notes payable balance of$0.2 million . As reflected in our consolidated financial statements included elsewhere in this Annual Report, we have a history of losses and incurred a net loss of$43.9 million and utilized cash of$9.1 million in operating activities for the year endedMarch 31, 2022 and had a working capital deficiency of$28.8 million as ofMarch 31, 2022 . These factors, among others, raise substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued. Our 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 we be unable to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to execute our strategy and on our ability to raise additional funds through the sale of equity and/or debt securities via public and/or private offerings. Our long-term ability to continue as a going concern is dependent upon our ability to increase revenue, reduce costs, achieve a satisfactory level of profitable operations, and obtain additional sources of suitable and adequate financing. Our ability to continue as a going concern is also dependent its ability to further develop and execute on our business plan. We 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.
101
Sources of Liquidity
InApril 2020 , we received approximately$2.0 million loan (the "PPP Loan") pursuant to the PPP promulgated under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The PPP Loan's original maturity wasApril 13, 2022 and bears interest at a rate of 1% per annum. Commencing inNovember 2020 , we were required to pay the lender equal monthly payments of principal and interest as required to fully amortize by the maturity date the principal amount outstanding on the PPP Loan as of such date. All or a portion of the PPP Loan may be forgiven by theU.S. Small Business Administration ("SBA") upon our application and upon documentation of expenditures in accordance with the SBA requirements. OnApril 24, 2021 , we received confirmation that the entire balance of the loan was forgiven. InJune 2020 , we entered into a new two-year license agreement with a certain Music Partner which owns and license rights to Slacker to certain sound recordings. Pursuant to this agreement, we agreed to certain minimum yearly guarantee payments and issued 264,000 shares of our common stock so such Music Partner in consideration of all payments due to the Music Partner prior the
date of the agreement. OnJuly 1, 2020 , we acquired PodcastOne and the$0.8 million PPP loan originally obtained by PodcastOne. Monthly payments including principal and interest begin 12 months from the date of the promissory noteApril 26, 2020 . The balance is payable 2 years from the date of the promissory note, and bears interest at a rate of 1% per annum. OnMay 11, 2021 , we received confirmation that the entire balance of the loan was forgiven. InJuly 2020 , we completed a registered offering with an existing institutional investor, another investor and a music partner pursuant to which we sold 1,820,000 shares of our common stock to the investors for net cash proceeds of$7.3 million and issued 2,415,459 shares of our common stock to partially satisfy a$10.0 million vendor payment obligation to such music partner, each at a price of$3.28 per share (the "July 2020 Offering"). TheJuly 2020 Offering was made pursuant to our then existing shelf Registration Statement on Form S-3 (File No. 333-228909). OnAugust 31, 2020 , we fully repaid the senior secured convertible debentures. In connection with such repayment, all of the agreements among us, our subsidiary guarantors and the senior lenders and their collateral agent were terminated, provided, that our indemnification obligations in the Securities Purchase Agreement, dated as ofJune 20, 2018 , as amended, between us and the senior lenders survive on the terms therein. Additionally, a prepayment penalty of 8% was paid on repayment of the senior secured convertible debentures in the amount of$0.7 million as interest expense in the accompanying consolidated statement of operations for the year endedMarch 31, 2021 . InSeptember 2020 , we entered into a Securities Purchase Agreement with a certain existing institutional investor pursuant to which we sold two of our 8.5% Subordinated Secured Convertible Note in the aggregate principal amount of$15.0 million . In connection with such financing, we agreed to issue to such investor's designees 800,000 shares of our common stock. The note matures onJune 3, 2023 (as a result of theJune 2021 note extension, in which we also agreed to issue 60,000 shares of our common stock to the noteholders), accrues interest at 8.5% per year, payable quarterly in cash in arrears, and is convertible into shares of our common stock at a conversion price of$4.50 per share at the investor's option, subject to certain customary adjustments such as stock splits, stock dividends and stock combinations. OnDecember 22, 2020 , we acquired 100% of the equity interests of CPS for total consideration of 2,230,769 shares of our restricted common stock with a fair value of$6.4 million net of a 25% discount for lack of marketability, an additional 577,000 shares of our restricted common stock if CPS reports GAAP revenue of$20.0 million and$1.0 million of EBITDA for its fiscal year endedDecember 31, 2020 , and an additional 214,000 shares of our restricted common stock to the extent CPS' final working capital as determined by the parties exceeds$4.0 million with a dollar-for-dollar reduction with respect to each such shortfall with no duplication. We issued an additional 791,398 shares of restricted common stock based on working capital adjustments and GAAP revenue being achieved during fiscal 2022. 102 OnJanuary 11, 2021 , we entered into an Amendment of Notes Agreement withTrinad Capital , a related party, pursuant to which the maturity date of all of the Trinad Notes issued toTrinad Capital was extended toMay 31, 2022 , and in consideration of such extension, the interest rate payable under such notes increased to 8.5%, and we issued toTrinad Capital 280,000 shares of our common stock. InMarch 2021 , we obtained an additional PPP loan totaling$0.6 million through the Consolidated Appropriations Act ("CAA"). The terms of this loan is on comparable terms to the prior PPP loans obtained under the CARES Act. InMarch 2022 , we received confirmation that the entire balance of the loan was forgiven. OnJune 2, 2021 , we entered into a Business Loan Agreement withEast West Bank (the "Senior Lender"), which provides for a revolving credit facility collateralized by all of the assets of our Company and its subsidiaries. In connection with the Business Loan Agreement, we entered into a Promissory Note with the Senior Lender and established the revolving line of credit in the amount of$7.0 million (the "Revolving Credit Facility"), maturing onJune 2, 2023 . Under the terms of the Promissory Note, the Revolving Credit Facility bears interest at a variable rate equal to the Wall Street Journal Prime Rate, plus 0.5%. As ofMarch 31, 2022 , we have borrowed$7.0 million under the Revolving Credit Facility and$7.0 million is owed by us to the Senior Lender under the facility as of such date. OnAugust 11, 2021 , we entered into an Amendment of the Notes Agreement withTrinad Capital pursuant to which the maturity date of all of the Trinad Notes issued toTrinad Capital was extended toMay 31, 2023 , and in consideration of such extension, we issued toTrinad Capital 33,654 shares of its common stock. Our cash flows from operating activities are significantly affected by our cash-based investments in our operations, including acquiring live music events and festivals rights, our working capital, and corporate infrastructure to support our ability to generate revenue and conduct operations through cost of services, product development, sales and marketing and general and administrative activities. Cash used in investing activities has historically been, and is expected to be, impacted significantly by our investments in business combinations, our platform, and our infrastructure and equipment for our business offerings, and sale of our investments. We expect to make additional strategic acquisitions to further grow our business, which may require significant investments, capital raising and/or acquisition of additional debt in the near and long term. Over the next twelve to eighteen months, our net use of our working capital could be substantially higher or lower depending on the number and timing of new live festivals and paid members that we add to our businesses. Subject to applicable limitations in the instruments governing our outstanding indebtedness, we may from time to time repurchase our debt, including the unsecured convertible notes, in the open market, through tender offers, through exchanges for debt or equity securities, in privately negotiated transactions or otherwise. In the future, we may utilize additional commercial financings, bonds, debentures, lines of credit and term loans with a syndicate of commercial banks or other bank syndicates and/or issue equity securities (publicly or privately) for general corporate purposes, including acquisitions and investing in our intangible assets, music equipment, platform and technologies. We may also use our current cash and cash equivalents to repurchase some or all of our unsecured convertible notes, and pay down our debt, in part or in full, subject to repayment limitation set forth in the credit agreement. Management plans to fund its operations over the next twelve months through the combination of improved operating results, spending rationalization, and the ability to access sources of capital such as through the issuance of equity and/or debt securities. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. We filed a new universal shelf Registration Statement on Form S-3 (the "New Shelf S-3") with theSEC , which was declared effective by theSEC onFebruary 17, 2022 . Under the New Shelf S-3, we will have the ability to raise up to$150.0 million in cash from the sale of our equity, debt and/or other financial instruments. 103
Credit Agreement and Other Debt
For additional information regarding our credit agreement and other debt, see "Contractual Obligations" in this Item 7 below and in the footnotes to the Consolidated Financial Statements (Notes 8, 9, 10, and 11 to our financial statements included elsewhere in this Annual Report).
Sources and Uses of Cash
The following table provides information regarding our cash flows for the fiscal
years ended
Year Ended March 31,
2022 2021Net cash used in operating activities$ (9,123 ) $ (9,508 ) Net cash used in investing activities (3,979 ) (791 ) Net cash provided by financing activities 7,486
16,632
Net change in cash and cash equivalents and restricted cash
Cash Used In Operating Activities
Net cash used in our operating activities for 2022 of$9.1 million primarily resulted from our net loss during the period of$43.9 million , which included non-cash charges of$25.5 million largely comprised of depreciation and amortization, stock-based compensation and loss of extinguishment of debt. This was offset by$3.1 million attributed to forgiveness of our PPP loan. The remainder of our sources of cash provided by operating activities of$9.3 million was from changes in our working capital, including$3.1 million offset from timing of accounts receivable and$11.1 million from timing of accounts payable and accrued liabilities.
Cash Flows Used In Investing Activities
Net cash used in investing activities for 2022 of$4.0 million was principally due to the$3.7 million cash used for the purchase of property and equipment during the year endedMarch 31, 2022 , and cash used in the acquisitions of Gramophone of$0.2 million .
Cash Flows Provided By Financing Activities
Net cash provided by financing activities for 2022 of$7.5 million was primarily due to proceeds of$7.0 million from the draw down on our line of credit and$0.9 million from the exercise of stock options, partially offset by the repayment of senior secured convertible debentures of$0.4 million .
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