Fair Value Measurements

12 Months Ended

Mar. 31, 2023

Note 21 — 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):

	March 31, 2023
	Fair		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Assets:
Prepaid expenses - common stock issued subject to market adjustment at settlement	$	140	$	140	$	-	$	-
Total	$	140	$	140	$	-	$	-

Liabilities:
Contingent consideration liability from Gramophone acquisition	$	174	$	-	$	-	$	174
Warrant liability on PodcastOne bridge loan		1,860		-		-		1,860
Bifurcated embedded derivative on PodcastOne bridge loan		1,288		-		-		1,288
Bifurcated embedded derivative on Series A Preferred Stock		376		-		-		376
	$	3,698	$	-	$	-	$	3,698

	March 31, 2022
	Fair		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Liabilities:
Contingent consideration liability from PodcastOne acquisition	$	2,965	$	-	$	-	$	2,965
Contingent consideration liability from CPS acquisition		174		-		-		174
Bifurcated embedded derivative on senior secured convertible notes payable		18		-		-		18
	$	3,157	$	-	$	-	$	3,157

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 April 1, 2021	$	5,067
Change in fair value of bifurcated embedded derivatives, reported in earnings		(113	)
Change in fair value of contingent consideration liabilities, reported in earnings		(145	)
Common stock settlement of contingent consideration liability from CPS acquisition		(1,826	)
Initial measurement of contingent consideration for Gramophone acquisition		174
Balance as of March 31, 2022		3,157
Embedded derivative and warrant issued in connection with PodcastOne bridge loan		2,845
Embedded derivative and warrant issued in connection with Series A Preferred Stock		173
Settlement of PodcastOne contingent consideration		(3,000	)
Change in fair value of bifurcated embedded derivatives, reported in earnings		523
Balance as of March 31, 2023	$	3,698

The settlement of the PodcastOne contingent consideration of $3.0 million consisted of 414,137 shares of our common stock issued with a fair value of $0.5 million, cash payment of $0.3 million and a gain of $2.2 million attributed to the former owners of PodcastOne forgiving the remaining balance of $2.2 million.

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:

	March 31,			March 31,
	2023			2022
Bifurcated embedded derivative on secured convertible notes payable:
Market yield		-	%		4.7	%

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 $0.2 million. The change in fair value of $0.2 million is recorded in other income (expense) on the Company’s consolidated statements of operations for the year ended March 31, 2022. The related notes payable were fully settled during the year ended March 31, 2023. nine month period ended March 31, 2022.

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):

	March 31, 2023
	Carrying		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Liabilities:
PodcastOne bridge loan	$	4,726	$	-	$	-	$	9,152

	March 31, 2022
	Carrying		Hierarchy Level
	Value		Level 1		Level 2		Level 3
Liabilities:
Secured convertible notes payable, net	$	13,650	$	-	$	-	$	15,448
Unsecured convertible notes payable related party, net		5,879		-		-		6,084

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of March 31, 2023 and March 31, 2022. 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:

	March 31,			March 31,
	2023			2022
Secured convertible notes payable, net (binomial lattice model):
Market yield		-	%		6.3	%

Unsecured convertible notes payable related party, net (yield model with a Black-Scholes-Merton option pricing model):
Market yield		-	%		6.6	%

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 and accrued expenses approximated their fair values as of March 31, 2023 and March 31, 2022.

The Company’s note payable is not publicly traded and fair value is estimated to equal carrying value. The Company’s senior secured line of credit, senior secured convertible notes 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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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