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Fair Value Measurements
 3 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 19 — 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):

 

   June 30, 2021 
   Fair   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Contingent consideration liability from PodcastOne acquisition  $2,528   $
-
   $
-
   $2,528 
Contingent consideration liability from CPS acquisition   2,048    
-
    
-
    2,048 
Bifurcated embedded derivative on secured convertible notes payable   30    
-
    
-
    30 
Bifurcated embedded derivative on unsecured convertible note payable   1    
-
    
-
    1 

 

   March 31, 2021 
   Fair   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Contingent consideration liability from PodcastOne acquisition  $2,423   $
    -
   $
    -
   $2,423 
Contingent consideration liability from CPS acquisition   2,513    
-
    
-
    2,513 
Bifurcated embedded derivative on senior secured convertible debentures   118    
-
    
-
    118 
Bifurcated embedded derivative on unsecured convertible note payable   13    
-
    
-
    13 

 

The following table presents a reconciliation of the Company’s financial liabilities that are measured at Level 3 within the fair value hierarchy (in thousands):

 

   Amount 
Balance as of March 31, 2021  $5,067 
Change in fair value of bifurcated embedded derivatives, reported in earnings   (100)
Change in fair value of contingent consideration liabilities, reported in earnings   (360)
Balance as of June 30, 2021  $4,607 

 

The following table presents a reconciliation of the Company’s derivative instruments for the three-month period ended June 30, 2020 (in thousands):

 

   Amount 
Balance as of March 31, 2020  $665 
Total fair value adjustments reported in earnings   (371)
Balance as of June 30, 2020  $294 

 

Bifurcated embedded derivative on senior secured convertible notes payable and unsecured convertible notes payable 

 

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

 

   June 30,   March 31, 
   2021   2021 
Bifurcated embedded derivative on secured convertible notes payable:          
Market yield   4.6%   17.0%
           
Bifurcated embedded derivative on unsecured convertible note payable:          
Market yield   5.1%   26.5%

 

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 less than $0.1 million. The change in fair value of $0.1 million is recorded in other income (expense) on the Company’s condensed consolidated statements of operations for the three-month period ended June 30, 2021.

 

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):

 

   June 30, 2021 
   Carrying   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Senior secured convertible notes payable, net  $12,922   $
   -
   $
   -
   $23,976 
Unsecured convertible notes payable related party, net   5,595    
-
    
-
    10,146 
Unsecured convertible note payable   2,073    
-
    
-
    2,339 

 

   March 31, 2021 
   Carrying   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Senior secured convertible notes payable, net  $13,047   $
   -
   $
   -
   $20,228 
Unsecured convertible notes payable related party, net   5,501    
-
    
-
    9,216 
Unsecured convertible note payable   1,976    
-
    
-
    2,167 

 

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of June 30, 2021 and March 31, 2021. 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:

 

   June 30,   March 31, 
   2021   2021 
Senior secured convertible notes payable, net (binomial lattice model):          
Market yield   4.6%   17.0%
           
Unsecured convertible notes payable related party, net (yield model with a Black-Scholes-Merton option pricing model):          
Market yield   4.7%   23.0%
           
Unsecured convertible note payable (yield model with a Black-Scholes-Merton option pricing model):          
Market yield   5.1%   26.5%

 

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 June 30, 2021 and March 31, 2021.

 

The Company’s note payable is not publicly traded and fair value is estimated to equal carrying value. The Company’s debentures 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 are valued using a binomial lattice model and a yield model with a Black-Scholes-Merton option pricing model, respectively. The Company has estimated the fair value of contingent consideration related to the acquisitions of PodcastOne and CPS based on the number of shares issuable based on the achievement of certain provisions within the purchase agreement, as detailed in Note 4 – Business Combinations, using the quoted price of the Company’s common stock on the balance sheet date.