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Stockholders’ Equity
 12 Months Ended
Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]  
Stockholders’ Equity

Note 17 — Stockholders’ Equity 

 

Issuance of Common Stock in Private Offerings

 

In July 2020, the Company issued directly to a certain institutional investor and another investor a total of 1,820,000 shares of the Company’s common stock for net proceeds of approximately $7.3 million after offering costs at a price per share of $4.14. The offering of the shares was made pursuant to the Shelf S-3 and a prospectus supplement related to the offering filed with the SEC on July 23, 2020.

   

Issuance of Restricted Shares of Common Stock for Services to Consultants and Vendors  

 

During the year ended March 31, 2022, the Company incurred $0.7 million in accounts payable and accrued liabilities for stock earned by its consultants, but not yet issued. The remaining unrecognized compensation cost of less than $0.1 million is expected to be recorded over the next year as the shares vest.

 

During year ended March 31, 2021, the Company issued 4,061,326 shares of its common stock and restricted common stock valued at $12.6 million to certain Company consultants and vendors of which $8.8 million related to shares issued to settle accounts payable which includes the shares issued to MBRG Investors, LLC and the shares issued to a certain music partner and $3.8 million relates to shares issued in exchange for services and is included in share-based compensation. Additionally, the Company incurred $1.2 million in accounts payable and accrued liabilities for stock earned by its consultants, but not yet issued. The remaining unrecognized compensation cost associated with restricted shares of common stock issued to consultants and vendors of $0.7 million was recorded during the year ended March 31, 2022.

 

Issuance of Common Stock to Certain Music Partner

 

In June 2020, the Company 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, the Company agreed to certain minimum yearly guarantee payments and issued 264,000 shares of its restricted common stock to such music partner in consideration of all payments due to the music partner prior the date of the agreement. These shares issued are included in the total number of shares issued to consultants and vendors above.  

 

In July 2020, the Company issued to a certain music licensor 2,415,459 shares (the “Shares”) of its common stock at a price of $3.28 per share, to satisfy the Company’s payment obligation in the amount of $10.0 million owed to such music licensor (the “Threshold Amount”). These shares issued are included in the total number of shares issued to consultants and vendors above.  In the event that the value of the Shares as of September 30, 2020 was less than the Threshold Amount, the Company agreed to make an additional cash payment to such music licensor in an amount equal to the difference between (i) the Threshold Amount and (ii) the sum of (x) the net proceeds of any sales of the Shares by the music licensor plus (y) the aggregate value of the Shares not sold by the music licensor as of such date. As of March 31, 2021, the Company accrued $1.8 million related to additional cash payment required which is included in Accrued Royalties in the consolidated balance sheet and classified as a current liability. The shares were issued pursuant to the Shelf S-3 and a prospectus supplement related to the offering of these shares filed with the SEC on July 22, 2020. The Company did not receive any cash proceeds from the offering of these shares. 

 

2016 Equity Incentive Plan

 

The Company’s board of directors and stockholders approved the Company’s 2016 Equity Incentive Plan, as amended (the “2016 Plan”) which reserved a total of 12,600,000 shares of the Company’s common stock for issuance. On September 17, 2020, our stockholders approved the amendment to the 2016 Plan to increase the number of shares available for issuance under the plan by 5,000,000 shares increasing the total up to 17,600,000 shares which the Company formally increased on June 30, 2021. Incentive awards authorized under the 2016 Plan include, but are not limited to, nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and stock appreciation rights. If an incentive award granted under the 2016 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to the Company in connection with the exercise of an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2016 Plan.

 

The Company recognized share-based compensation expense of $12.7 million and $11.3 million during the years ended March 31, 2022 and 2021, respectively. The total tax benefit recognized related to share-based compensation expense was $0 for the years ended March 31, 2022 and 2021.

 

Share-based compensation expense during the year ended March 31, 2022 and 2021 includes the impact from differences in the timing of expense recognized in the statement of operations and the share issuances recorded in additional paid in capital, capitalization of internally developed software costs, and the benefit from the reversal of a previously accrued discretionary share-based award bonus of $1.1 million during the year ended March 31, 2022.

 

The maximum contractual term for awards is 10 years. As of March 31, 2022, there were 4,484,713 shares of common stock available for future issuance under the 2016 Plan.

 

 Options Grants to Employees

 

Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant based on the closing market price of its common stock as reported on The Nasdaq Capital Market. The option awards generally vest over four years and are exercisable any time after vesting. The stock options expire ten years after the date of grant.

 

As of March 31, 2022, unrecognized compensation costs for unvested awards to employees was $1.1 million, which is expected to be recognized over a weighted-average service period of 5.83 years.

  

The following table provides information about our option grants made to employees during the last two fiscal years:

 

   Year Ended March 31, 
   2022   2021 
Number of options granted   205,000    350,000 
Weighted-average exercise price per share  $1.19   $4.11 
Weighted-average grant date fair value per share  $1.74   $1.85 

 

The grant date fair value of each of these option grants to employees was determined using the Black-Sholes-Merton option-pricing model with the following assumptions:

 

    Year Ended March 31,  
    2022     2021  
Expected volatility     77.36% - 84.98 %     53.97% - 73.61 %
Dividend yield     - %     - %
Risk-free rate     0.75% - 2.17 %     0.22% - 0.46 %
Expected term (in years)     5.09 – 6.87       5.25 - 7.00  

  

The following table summarizes the activity of our options issued to employees during the years ended March 31, 2022 and 2021:

 

   Number of Shares   Weighted-
Average
Exercise
Price per
Share		 
Outstanding as of April 1, 2020   4,403,334   $3.74 
Granted   350,000    4.11 
Exercised   (654,250)   3.90 
Forfeited or expired   (177,500)   4.00 
Outstanding as of March 31, 2021   3,921,584    3.74 
Granted   205,000    1.74 
Exercised   (400,460)   2.18 
Forfeited or expired   (160,933)   4.10 
Outstanding as of March 31, 2022   3,565,191    3.78 
Exercisable as of March 31, 2022   3,207,358    3.97 

  

The weighted-average remaining contractual term for options to employees outstanding and options to employees exercisable as of March 31, 2022 was 6.22 years and 5.83 years, respectively. The intrinsic value of options to employees outstanding and options to employees exercisable was none and none, respectively, at March 31, 2022. The intrinsic value of options exercised was $0.3 million and none, respectively, at March 31, 2022 and 2021.

 

The fair value of stock options that were exercised during the year ended March 31, 2022 and 2021 was $0.9 million and $2.6 million, respectively. The fair value of stock options that were forfeited during the year ended March 31, 2022 and 2021 was $0.7 million and $0.7 million, respectively. The fair value of stock options outstanding and exercisable at March 31, 2022 was $13.5 million and $12.7 million, respectively. The fair value of stock options outstanding and exercisable at March 31, 2021 was $14.8 million and $12.9 million, respectively.

 

On April 11, 2018, the Company granted options to purchase 1,326,667 shares of its common stock to 4 key executives. In fiscal 2021, the Board of Directors approved an amendment to the key executive’s employment agreement which modified the exercise periods associated with these options. The modified terms approved by the Board of Directors, which extended the original exercise period from 3 to 12 months, resulted in incremental fair value which was recognized as incremental share-based compensation expense of $0.9 million during the year ended March 31, 2021.

 

Options Grants to Non-Employees

 

As of March 31, 2022, there were no unrecognized compensation costs for unvested awards to non-employees. There were no option grants to non-employees for the last two fiscal years.

 

The following table summarizes the activity of our options issued to non-employees during the years ended March 31, 2022 and 2021:

 

   Number of Shares   Weighted-
Average
Exercise
Price per
Share		 
Outstanding as of April 1, 2020   25,000   $4.00 
Granted   
-
    
-
 
Exercised   
-
    
-
 
Forfeited or expired   
 
    4.00 
Outstanding as of March 31, 2021   25,000    4.00 
Granted   
-
    
-
 
Exercised   
-
    
-
 
Forfeited or expired   
-
    
-
 
Outstanding as of March 31, 2022   25,000    4.00 
Exercisable as of March 31, 2022   25,000    4.00 

 

The weighted average remaining contractual term for options to non-employees outstanding as of March 31, 2022 was 5.9 years. The intrinsic value of options to non-employees outstanding and options to non-employees exercisable was none at March 31, 2022.

 

Restricted Stock Units Grants

 

As of March 31, 2022, unrecognized compensation costs for unvested awards to employees was $2.1 million, which is expected to be recognized over a weighted-average service period of 0.96 years.

  

The following table provides information about our restricted stock units grants made to employees during the last two fiscal years:

 

   Year Ended March 31, 
   2022   2021 
Number of units granted   2,555,767    1,914,136 
Weighted-average grant date fair value per share  $3.77   $3.15 

 

The following table summarizes the activity of our restricted stock units issued to employees during the years ended March 31, 2022 and 2021:

 

   Number of Shares 
Outstanding as of April 1, 2020   4,530,705 
Granted   1,914,136 
Vested   (1,641,082)
Cancelled   (290,843)
Outstanding as of March 31, 2021   4,512,916 
Granted   2,555,767 
Vested   (2,518,791)
Cancelled   (1,485,517)
Outstanding as of March 31, 2022   3,064,375 

 

The fair value of restricted stock units that vested during the year ended March 31, 2022 and 2021 was $10.7 million and $5.8 million, respectively. The fair value of restricted stock units that were forfeited during the year ended March 31, 2022 and 2021 was $5.0 million and $0.6 million, respectively.

 

Restricted Stock Awards

 

The following table summarizes the activity of our restricted stock awards made to employees during the years ended March 31, 2022 and 2021: 

 

   Number of Shares 
Outstanding as of April 1, 2020   24,675 
Cancelled   (24,675)
Outstanding as of March 31, 2021   - 
Cancelled   - 
Outstanding as of March 31, 2022   - 

 

In April 2018, the Company granted 1,150,000 restricted stock units to two key executives. In fiscal year 2021 (“the Modification Date”), the Company’s board of directors approved an amendment to the key executives’ employment agreement which modified the vesting terms associated with these awards. The modified vesting terms approved by the Company’s board of directors, which modified the number of shares issued and the timing of vesting, resulted in an additional 464,557 units probable of vesting as of the Modification Date. This resulted in incremental share-based compensation expense of $0.3 million during the year ended March 31, 2021.

 

Issuance of Restricted Shares of Common Stock for Services to Employees

 

During each of the years ended March 31, 2022 and 2021, the Company issued no shares of its restricted common stock to employees. As of March 31, 2022 and 2021, there was no remaining unrecognized compensation cost related to these awards.

 

Warrants

   

The table below summarizes the Company’s warrant activities:

 

   Number of Warrants   Weighted Average Exercise
Price		   Weighted-
Average Remaining Contractual Term
(in years)		 
Balance outstanding, April 1, 2020   167,363   $4.01    0.94 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/expired   (167,363)   4.01    0.94 
Balance outstanding, March 31, 2021   
-
    
-
    
-
 
Granted   
-
    
-
    
-
 
Balance outstanding, March 31, 2022   
-
    
-
    
-
 
Exercisable, March 31, 2022   
-
    
-
    
-
 

 

Authorized Common Stock and Creation of Preferred Stock

 

The Company has the authority to issue up to 510,000,000 shares, consisting of 500,000,000 shares of the Company’s common stock and 10,000,000 shares of the Company’s preferred stock, $0.001 par value per share (the “preferred stock”).

 

The Company may issue shares of preferred stock from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by the Company’s board of directors and will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Company’s board of directors.  The Company’s board of directors will have the power to increase or decrease the number of shares of preferred stock of any series after the issuance of shares of that series, but not below the number of shares of such series then outstanding.  In case the number of shares of any series shall be decreased, the shares constituting such decrease will resume the status of authorized but unissued shares of preferred stock.

 

While the Company does not currently have any plans for the issuance of preferred stock, the issuance of such preferred stock could adversely affect the rights of the holders of common stock and, therefore, reduce the value of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the common stock until and unless the Company’s board of directors determines the specific rights of the holders of the preferred stock; however, these effects may include: restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock, or delaying or preventing a change in control of the Company without further action by the stockholders.

 

Stock Repurchase Program

 

In December 2020, we announced that our board of directors has authorized the repurchase up to two million shares of our outstanding common stock from time to time. The timing, price, and quantity of purchases under the program will be at the discretion of our management and will depend upon a variety of factors including share price, general and business market conditions, compliance with applicable laws and regulations, corporate and regulatory requirements, and alternative uses of capital. The program may be expanded, suspended, or discontinued by our board of directors at any time. Although our board of directors has authorized this stock repurchase program, there is no guarantee as to the exact number of shares, if any, that will be repurchased by us, and we may discontinue purchases at any time that management determines additional purchases are not warranted. We cannot guarantee that the program will be consummated, fully or all, or that it will enhance long-term stockholder value. The program could affect the trading price of our common stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our common stock. In addition, this program could diminish our cash reserves. The Company did not purchase any shares of its common stock under the stock repurchase program for the years ended March 31, 2022 and 2021, respectively.