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Fair Value Measurements
 9 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 20 — 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, 2022 
   Fair   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Assets:                
Prepaid expenses - common stock issued subject to market adjustment at settlement  $15   $15   $
  -
   $
-
 
Total  $15   $15   $
-
   $
-
 
                     
Liabilities:                    
Contingent consideration liability from Gramophone acquisition  $174   $
-
   $
-
   $174 
Warrant liability on PodcastOne bridge loan   1,224    
-
    
-
    1,224 
Bifurcated embedded derivative on PodcastOne bridge loan   932    
-
    
-
    932 
Bifurcated embedded derivative on senior unsecured convertible note payable   149    
-
    
-
    149 
Bifurcated embedded derivative on senior secured convertible note payable   88    
-
    
-
    88 
   $2,567   $
-
   $
-
   $2,567 

 

   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 Gramophone acquisition   174    
-
    
-
    174 
Bifurcated embedded derivative on senior secured convertible note 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 March 31, 2022  $3,157 
Embedded derivative and warrant issued in connection with PodcastOne bridge loan   3,966 
Change in fair value of bifurcated embedded derivatives, reported in earnings   (1,750)
Settlement of PodcastOne contingent consideration   (3,000)
Change in fair value of contingent consideration liabilities, reported in earnings   194 
Balance as of December 31, 2022  $2,567 

 

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, 
   2022   2022 
Bifurcated embedded derivative on secured convertible notes payable:        
Market yield   4.7%   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 condensed consolidated statements of operations for the nine month period ended December 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):

 

   December 31, 2022 
   Carrying   Hierarchy Level 
   Value   Level 1   Level 2   Level 3 
Liabilities:                
Secured convertible notes payable, net  $13,719   $
   -
   $
   -
   $15,519 
Unsecured convertible notes payable related party, net   5,580    
-
    
-
    5,941 
PodcastOne bridge loan   3,774    
-
    
-
    5,541 

 

   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 December 31, 2022 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:

 

   December 31,   March 31, 
   2022   2022 
Secured convertible notes payable, net (binomial lattice model):        
Market yield   11.4%   6.3%
           
Unsecured convertible notes payable related party, net (yield model with a Black-Scholes-Merton option pricing model):          
Market yield   11.86%   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, accrued expenses and other long-term liabilities approximated their fair values as of December 31, 2022 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. 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.