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Fair Value Measurements
 9 Months Ended
Dec. 31, 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):

 

   December 31,
2021		 
   Fair   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Contingent consideration liability from PodcastOne acquisition  $2,937   $
-
   $
-
   $2,937 
Contingent consideration from Gramophone acquisition   174    
-
    
-
    174 
Bifurcated embedded derivative on secured convertible notes payable   21    
-
    
-
    21 
Bifurcated embedded derivative on unsecured convertible note payable   
-
    
-
    
-
    
-
 

 

   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 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   (110)
Change in fair value of contingent consideration liabilities, reported in earnings   (173)
Settlement of contingent consideration liability from CPS acquisition   (1,826)
Initial measurement of contingent consideration from Gramophone acquisition   174 
Balance as of December 31, 2021  $3,132 

 

The following table presents a reconciliation of the Company’s derivative instruments 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 

 

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

 

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

 

   December 31,   March 31, 
   2021   2021 
Bifurcated embedded derivative on secured convertible notes payable:        
Market yield   4.7%   17.0%
           
Bifurcated embedded derivative on unsecured convertible note payable:          
Market yield   
N/A
    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 nine month period ended December 31, 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):

 

    December 31,
2021		  
    Carrying     Hierarchy Level  
    Value     Level 1     Level 2     Level 3  
Liabilities:                        
Secured convertible notes payable, net   $ 13,395     $
          -
     $
         -
     $ 16,132  
Unsecured convertible notes payable related party, net     5,786      
-
      
-
       6,418  
Unsecured convertible note payable    
-
      
-
      
-
      
-
  

 

   March 31,
2021		 
   Carrying   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
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 December 31, 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:

 

   December 31,   March 31, 
   2021   2021 
Secured convertible notes payable, net (binomial lattice model):        
Market yield      4.7%     17.0%
           
Unsecured convertible notes payable related party, net (yield model with a Black-Scholes-Merton
option pricing model):		          
Market yield   4.9%   23.0%
           
Unsecured convertible note payable (yield model with a Black-Scholes-Merton option pricing model):          
Market yield   
-
%   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 December 31, 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 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, CPS, and Gramophone 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.