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Business Combinations

6 Months Ended

Sep. 30, 2020

Note 4 — Business Combinations

PodcastOne

On July 1, 2020, the Company's wholly owned subsidiary, LiveXLive PodcastOne, Inc., acquired 100% of the equity interests of PodcastOne for net consideration of $15.9 million consisting of 5,363,636 shares of the Company's common stock with a fair value of $14.6 million net of a 24% discount for lack of marketability described below, contingent consideration with a fair value of $1.1 million and an additional amount of $0.2 million relating to 89,613 shares of the Company's common stock that will be issued as part of the final purchase price consideration that is included in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheet as of September 30, 2020. The shares of the Company's common stock are subject to a twelve-month lock-up period and sales volume restrictions and as a result, the fair value reflects a 24% discount for a lack of marketability.

If, during the period commencing after May 7, 2020 and ending on July 1, 2022, for five consecutive trading days the closing market price of the Company's common stock exceeds $5.00 per share, an additional aggregate payment of $3.0 million in cash shall be paid to the sellers of PodcastOne in accordance with their respective pro rata percentage within five business days of the second anniversary of the closing date (July 1, 2022). The fair value of this contingent consideration liability on the closing date of July 1, 2020 was estimated at $1.1 million using a Monte Carlo simulation and the significant unobservable input included a credit yield of 21.9%. In the future, the fair value of the contingent consideration liability will be remeasured on each balance sheet reported by the Company or on the settlement date of the contingent consideration liability, with changes in fair value reflected in earnings. The contingent consideration liability is classified within Other Long-term Liabilities in the accompanying condensed consolidated balance sheet at September 30, 2020 (see Note 13 - Other Long-term Liabilities).

Goodwill resulted from acquisition as it is intended to augment and diversify the Company's single reportable segment. The Company accounted for the acquisition as a business combination. As a result of the acquisition of the stock of PodcastOne, the goodwill is not deductible for tax purposes. The initial accounting for the PodcastOne acquisition is incomplete and subject to change, which may be significant. The Company recorded provisional amounts and may allocate additional value to identified intangible assets.

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

Asset Type	Weighted Average Amortization Period (Years)	Fair Value
Cash and cash equivalents		$	1,286
Accounts receivable			3,951
Prepaid expense and other assets			316
Property and equipment			119
Content creator relationships	1.6		772
Trade name	10		1,010
Goodwill			11,845
Accounts payable and accrued liabilities			(2,932	)
Deferred tax asset			972
Allowance for deferred tax asset			(972	)
Note payable			(471	)
Earn-out liability			(1,100	)
Net assets acquired		$	14,796

Since the acquisition date, the amount of revenue for PodcastOne included in the Company's consolidated statements of operations for the three and six months ended September 30, 2020 was $5.3 million. The net income for PodcastOne included in the Company's condensed consolidated statements of operations for the three and six months ended September 30, 2020 was $0.1 million. The Company incurred less than $0.2 million in transaction costs associated with the PodcastOne acquisition which were expensed and included in General and Administrative in the condensed consolidated statement of operations for the six months ended September 30, 2020.

Supplemental Pro Forma Information (Unaudited)

The pro forma financial information as presented below is for informational purposes only and is not indicative of operations that would have been achieved from the acquisitions had they taken place at the beginning of the fiscal year ended March 31, 2019.

The following table presents the revenues, net loss and earnings per share of the combined company for the three and six months ended September 30, 2020 and 2019 as if the acquisition of PodcastOne had been completed on April 1, 2019 (in thousands, except per share data).

	Three Months Ended September 30, (unaudited)
	2020			2019

Revenues	$	14,559		$	14,306
Net loss		(10,189	)		(11,758	)
Net loss per share – basic and diluted	$	(0.15	)	$	(0.21	)

	Six Months Ended September 30, (unaudited)
	2020			2019

Revenues	$	29,812		$	28,680
Net loss		(18,904	)		(23,481	)
Net loss per share – basic and diluted	$	(0.29	)	$	(0.43	)

The Company's unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflect amortization of intangible assets as a result of the acquisition along with interest expense associated with the promissory note issued as consideration. The pro forma results are not necessarily indicative of the results that would have been realized had the acquisitions been consummated as of the beginning of the periods presented. The pro forma amounts include the historical operating results of the Company, with adjustments directly attributable to the acquisition which included amortization of acquired intangible assets of $0.2 million and $0.3 million in the three and six months ended September 30, 2019, respectively and transaction costs of $0.2 million included in the three and six months ended September 30, 2019.

Fiscal 2020 Transactions

None