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Fair Value Measurements
 9 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 18 — Fair Value Measurements

 

The following table presents the fair value of the Company's financial liabilities that are measured at fair value on a recurring basis (in thousands):

 

   December 31, 2020 
   Fair   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Contingent consideration liability from PodcastOne acquisition  $1,061   $     -   $     -   $1,061 
Initial measurement of contingent consideration from CPS acquisition   1,254    -    -    1,254 
Bifurcated embedded derivative on senior secured convertible notes payable   251    -    -    251 
Bifurcated embedded derivative on unsecured convertible note payable   30    -    -    30 
   $2,596   $-   $-   $2,596 

 

   March 31, 2020 
   Fair   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Bifurcated embedded derivative on senior secured convertible debentures  $524   $     -   $     -   $524 
Bifurcated embedded derivative on unsecured convertible note payable   141    -    -    141 
   $665   $-   $-   $665 

 

The following table presents a reconciliation of the Company's financial liabilities that are measured at Level 3 within the fair value hierarchy for the nine month period ended December 31, 2020 (in thousands):

 

   Amount 
Balance as of March 31, 2020  $665 
Initial measurement of contingent consideration from PodcastOne acquisition on July 1, 2020   1,100 
Initial measurement of contingent consideration from CPS acquisition on December 22, 2020   1,254 
Initial measurement of embedded derivatives on senior secured convertible notes issued on September 15, 2020   671 
Adjustments reported in loss on extinguishment of debt   (228)
Fair value adjustments reported in earnings   (866)
Balance as of December 31, 2020  $2,596 

 

The following table presents a reconciliation of the Company's financial liabilities that are measured at Level 3 within the fair value hierarchy for the nine months ended December 31, 2019 (in thousands):

 

   Amount 
Balance as of March 31, 2019  $586 
Total fair value adjustments reported in earnings   (189)
Balance as of December 31, 2019  $397 

 

Bifurcated embedded derivative on senior secured convertible debentures, senior secured convertible notes payable, unsecured convertible notes payable and contingent consideration 

 

The fair value of the bifurcated embedded derivatives on senior secured convertible debentures, senior secured convertible notes payable, unsecured convertible notes and contingent consideration was determined using the following significant unobservable inputs:

 

   December 31,   March 31, 
   2020   2020 
         
Bifurcated embedded derivative on senior secured convertible debentures Market yield   -    27.4%
Bifurcated embedded derivative on senior secured convertible notes payable Market yield   19.1%   - 
Bifurcated embedded derivative on unsecured convertible note payable Market yield   31.2%   43.9%
Contingent consideration Market yield   19.1%   - 

 

Significant increases or decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.

 

The Company determined that as of the assessment date, the fair value of the bifurcated embedded derivatives is $0.3 million. The changes in fair value of $(0.3) million and $(0.4) million are recorded in other income (expense) on the Company's consolidated statements of operations for the three-month and nine month periods ended December 31, 2020, respectively.

 

The Company did not elect the fair value measurement option for the following financial assets or liabilities. The fair values of certain financial instruments measured at amortized cost and the hierarchy level the Company used to estimate the fair values are shown below (in thousands):

 

   December 31, 2020 
   Carrying   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Assets:                
Cash and cash equivalents  $17,353   $17,353   $-   $- 
Restricted cash   235    235    -    - 
Liabilities:                    
Notes payable   2,996    -    -    2,996 
Senior secured convertible notes payable, net   12,830    -    -    17,370 
Unsecured convertible notes payable related party, net   5,393    -    -    6,485 
Unsecured convertible notes, payable net   1,887    -    -    1,996 

 

   March 31, 2020 
   Carrying   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Assets:                
Cash and cash equivalents  $5,702   $5,702   $-   $- 
Restricted cash   6,735    6,735    -    - 
Liabilities:                    
Note payable   331    -    -    331 
Senior secured convertible debentures, net   8,701    -    -    9,254 
Unsecured convertible notes payable related party, net   5,114              4,451 
Unsecured convertible note payable   1,539    -    -    1,338 

 

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of December 31, 2020 and March 31, 2020. The Company's estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

 

The fair value of the financial assets and liabilities, where the Company did not elect the fair value measurement option, were determined using the following significant unobservable inputs:

 

   December 31,   March 31, 
   2020   2020 
Senior secured convertible debentures, net (binomial lattice model):        
Market yield   -    27.4%
           
Senior secured convertible notes payable, net (binomial lattice model):   19.1%   - 
Market yield          
           
Unsecured convertible notes payable related party, net (yield model with a Black-Scholes-Merton option pricing model):          
Market yield   31.2%   41.6%
           
Unsecured convertible note payable (yield model with a Black-Scholes-Merton option pricing model):          
Market yield   29.17%   43.9%

 

Significant increases or decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.

 

Cash equivalents and restricted cash equivalents primarily consisted of short-term interest-bearing money market funds with maturities of less than 90 days and time deposits. The estimated fair values were based on available market pricing information of similar financial instruments.

 

Due to their short maturity, the carrying amounts of the Company's accounts receivable, accounts payable, accrued expenses and other long-term liabilities approximated their fair values as of December 31, 2020 and March 31, 2020.

 

The Company's outstanding debt is carried at cost, adjusted for discounts. The Company's note payable is not publicly traded and fair value is estimated to equal carrying value. The Company's senior convertible notes payable and unsecured convertible notes payable with fixed rates are not publicly traded and the Company has estimated fair values using a variety of valuation models and market rate assumptions detailed above. The senior convertible notes payable and unsecured convertible notes payable are valued using a binomial lattice model and a yield model with a Black-Scholes-Merton option pricing model, respectively.