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Business Combinations

12 Months Ended

Mar. 31, 2022

Business Combinations [Abstract]

Business Combinations

Note 4 — Business Combinations

Gramophone

On October 17, 2021, the Company’s 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 the Company’s common stock with a fair value of $0.1 million net of a 25% discount for lack of marketability described below, 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 the Company’s common stock were subject to a twelve-month lock-up period and remain subject to sales volume restrictions.

Fair Value of Consideration Transferred:
Cash		$	150
Common stock			89
Contingent consideration			174
Total		$	413

Contingent consideration in the form of a cash earnout of $0.3 million will be paid to the seller of Gramophone if, during the period commencing June 1, 2021 and ending on May 31, 2022 (“First Year Target”), Gramophone reports GAAP revenues of $1.4 million and EBITDA (as defined in the purchase agreement) of $0.3 million. If the First Year Target is not met, the cash earnout will be paid to the seller of Gramophone if, during the period commencing June 1, 2022 and ending on May 31, 2023 (“Second Year Target”), Gramophone reports GAAP revenues of $2 million and EBITDA of $0.5 million. Based on their likelihood of achievement management’s current estimate of the value of the contingent consideration related to the cash earnout was valued at $0.2 million. The contingent consideration liability of $0.2 million is classified within Other Long-Term Liabilities in the accompanying consolidated balance sheets at March 31, 2022 (see Note 14 – Other Long-Term Liabilities). The remaining contingent consideration included in the purchase price was not material and is included in Other Long-Term Liabilities in the accompanying consolidated balance sheet at March 31, 2022.

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 Gramophone, the goodwill is not deductible for tax purposes.

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

Asset Type		Amortization Period (Years)		Fair Value
Cash and cash equivalents				$	4
Accounts receivable					4
Trade name		5			73
Customer list		2			94
Goodwill					459
Deferred revenue					(51	)
Deferred tax liability					(41	)
Accrued liabilities					(129	)
Net assets acquired				$	413

Revenue of $0.4 million and net loss of $0.1 million was included in the Company’s consolidated statements of operations from the date of acquisition for the fiscal year ended March 31, 2022 for Gramophone.

The Company incurred less than $0.1 million in transaction costs associated with the Gramophone acquisition, which were expensed and included in General and Administrative in the consolidated statement of operations for fiscal year ended March 31, 2022.

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 $16.1 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 true-up of 203,249 shares during the third quarter of fiscal 2021 valued at $0.4 million, net of a 24% discount for lack of marketability described below, that was issued as part of the final purchase price consideration. The shares of the Company’s common stock are subject to a twelve-month lock-up period and sales volume restrictions.

Fair Value of Consideration Transferred:
Common stock		$	14,991
Contingent consideration			1,100
Total		$	16,091

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%. During March 2021, the closing price of the Company’s common stock exceeded $5.00 per share for the requisite five consecutive days. The Company recorded a $1.3 million charge to Other income (expense) in the consolidated statement of operations during the year ended March 31, 2021. The contingent consideration liability of $2.9 million and $2.4 million is classified within Other Long-term Liabilities in the accompanying consolidated balance sheet at March 31, 2022 and 2021, respectively (see Note 14 – 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 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					12,042
Accounts payable and accrued liabilities					(2,934	)
Deferred tax asset					972
Allowance for deferred tax asset					(972	)
Note payable					(471	)
Net assets acquired				$	16,091

The fair value of the assets acquired includes accounts receivable of $4.0 million. The gross amount due under contracts is $4.2 million, of which $0.2 million is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisition of PodcastOne.

CPS

On December 22, 2020, the Company’s wholly owned subsidiary, LiveXLive Merchandising, Inc., acquired 100% of the equity interests of CPS for total consideration of 2,230,769 shares of the Company’s restricted common stock with a fair value of $6.4 million net of a 25% discount for lack of marketability described below. The shares of the Company’s common stock issued to the sellers were subject to a twelve-month lock-up period from the closing date, which expired on December 22, 2021.

The Company agreed to also issue up to approximately 577,000 additional shares of its restricted common stock, classified as contingent consideration, as CPS reported GAAP revenue of at least $20.0 million and $1.0 million of EBITDA (as defined in the purchase agreement) for its fiscal year ended December 31, 2020. Based on their likelihood of achievement this number of shares reflected management’s current estimate and were valued at $1.7 million based on the Company’s stock price on the date of acquisition, net of a 25% discount for lack of marketability. On July 7, 2021, the Company issued 576,923 shares of its restricted common stock to the sellers of CPS as consideration for CPS having satisfied such targets. Accordingly, the Company recorded a $0.2 million benefit to other income (expense) which is included in the accompanying consolidated statement of operations for the year ended March 31, 2022.

The Company further agreed to issue up to approximately 214,000 additional shares of its restricted common stock to the extent CPS’ final working capital as determined by the parties exceeds $4.0 million. This number of shares is based on actual achievement under the terms of the purchase agreement and mutual agreement with the sellers. These additional shares were valued at $0.6 million based on the Company’s stock price on the date of acquisition, net of a 25% discount for lack of marketability. Included in the total amount of $0.6 million is a purchase price adjustment of $0.3 million related to the resolution of provisional amounts previously recorded based on estimates, which was accounted for as a purchase price adjustment within the measurement period as an increase to goodwill related to the CPS acquisition. On July 7, 2021, the Company issued 214,475 shares of its restricted common stock to the sellers of CPS as consideration for CPS having satisfied such target. These amounts are included in additional paid in capital in the accompanying consolidated balance sheets.

Fair Value of Consideration Transferred:
Common stock		$	6,391
Additional paid-in capital – common stock to be issued			615
Contingent consideration			1,654
Total		$	8,660

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 CPS, the goodwill is not deductible for tax purposes.

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

Asset Type		Weighted Average Amortization Period (Years)		Fair Value
Cash and cash equivalents				$	1,132
Accounts receivable					6,153
Inventories					2,600
Prepaid expense					29
Property and equipment					585
Wholesale relationship		6			2,500
Domain name		10			400
Customer list		5			172
Goodwill					1,207
Other assets					53
Right of use asset					1,086
Lease liability					(1,086	)
Accounts payable					(5,067	)
Deferred tax liability					(388	)
Other liabilities					(716	)
Net assets acquired				$	8,660

The fair value of the assets acquired includes accounts receivable of $6.2 million. The gross amount due under contracts is $6.5 million, of which $0.3 million is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisition of CPS.

The Company is required to establish a deferred tax liability for book tax basis differences of acquired assets and liabilities which would result in the utilization of available net operating losses. The decrease in valuation allowance resulted in a tax benefit of $0.4 million which was recorded in the Company’s consolidated statement of operations for fiscal year ended March 31, 2021.

Revenue of $15.7 million and $5.2 million and net loss of $3.1 million and $0.3 million was included in the Company’s consolidated statements of operations from the date of acquisition for the fiscal year ended March 31, 2022 for PodcastOne and CPS, respectively.

The Company incurred less than $0.1 million in transaction costs associated with the PodcastOne and CPS acquisitions, respectively, which were expensed and included in General and Administrative in the consolidated statement of operations for fiscal year ended March 31, 2021.

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 years ended March 31, 2022 and 2021, respectively.

The following table presents the revenues, net loss and earnings per share of the combined company for the year ended March 31, 2021 as if the acquisition of CPS had been completed on April 1, 2020 (in thousands, except per share data).

		Year Ended March 31, (unaudited)
		2021

Revenues		$	83,050
Net loss			(41,801	)
Net loss per share – basic and diluted		$	(0.61	)

The following table presents the revenues, net loss and earnings per share of the combined company for the year ended March 31, 2021 as if the acquisition of PodcastOne had been completed on April 1, 2020 (in thousands, except per share data).

		Year Ended March 31, (unaudited)
		2021

Revenues		$	69,953
Net loss			(42,656	)
Net loss per share – basic and diluted		$	(0.62	)

The following table presents the revenues, net loss and earnings per share of the combined company for the years ended March 31, 2022 and 2021 as if the acquisition of Gramophone had been completed on April 1, 2020 (in thousands, except per share data).

		Year Ended March 31, (unaudited)
		2022				2021

Revenues		$	117,623			$	66,098
Net loss			(43,592	)			(41,985	)
Net loss per share – basic and diluted		$	(0.55	)		$	(0.61	)

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. 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 $0.1 million and $1.7 million in the year ended March 31, 2022 and 2021, respectively, and transaction costs of $0.1 million and $0.1 million included in the year ended March 31, 2022 and 2021, respectively.