| Summary of Significant Accounting Policies | Note 2 — Summary of Significant Accounting Policies
Use of Estimates The preparation of
the Company's condensed consolidated financial statements in conformity with GAAP requires the Company's management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting
period. Significant items subject to such estimates and assumptions include revenue, allowance for doubtful accounts, the assigned
value of acquired assets and assumed and contingent liabilities associated with business combinations and the related purchase
price allocation, valuation of media content, useful lives and impairment of property and equipment, intangible assets, goodwill
and other assets, the fair value of the Company's equity-based compensation awards and convertible debt and debenture instruments,
fair values of derivatives, and contingencies. Actual results could differ materially from those estimates. On an ongoing basis,
the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about
the carrying value of assets and liabilities. Revenue Recognition Policy The Company accounts
for a contract with a customer when an approved contract exists, the rights of the parties are identified, payment terms are identified,
the contract has commercial substance and the collectability of substantially all of the consideration is probable. Revenue is
recognized when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount
that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company
uses the expected value method to estimate the value of variable consideration on advertising and with original equipment manufacturer
contracts to include in the transaction price and reflect changes to such estimates in periods in which they occur. Variable consideration
for these services is allocated to and recognized over the related time period such advertising and subscription services are rendered
as the amounts reflect the consideration the Company is entitled to and relate specifically to the Company's efforts to satisfy
its performance obligation. The amount of variable consideration included in revenue is limited to the extent that it is probable
that the amount will not be subject to significant reversal when the uncertainty associated with the variable consideration is
subsequently resolved. Practical Expedients The Company elected
the practical expedient and did not restate contracts that began and were completed within the same annual reporting period. The Company elected
the practical expedient and recognized the incremental costs of obtaining a contract, if any, as an expense when incurred if the
amortization period of the asset that would have been recognized is one year or less. Gross Versus Net Revenue Recognition The Company reports
revenue on a gross or net basis based on management's assessment of whether the Company acts as a principal or agent in the
transaction. To the extent the Company acts as the principal, revenue is reported on a gross basis net of any sales tax from customers,
when applicable. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation
of whether the Company controls the good or service prior to transfer to the customer. Where applicable, the Company has determined
that it acts as the principal in all of its subscription service streams and may act as principal or agent for its advertising
and licensing revenue streams. The Company's
revenue is principally derived from the following services: Subscription Services Subscription services
revenue substantially consist of monthly to annual recurring subscription fees, which are primarily paid in advance by credit card
or through direct billings arrangements. The Company defers the portions of monthly to annual recurring subscription fees collected
in advance and recognizes them in the period earned. Subscription revenue is recognized in the period of services rendered. The
Company's subscription revenue consists of performance obligations that are satisfied over time. This has been determined
based on the fact that the nature of services offered are subscription based where the customer simultaneously receives and consumes
the benefit of the services provided regardless of whether the customer uses the services or not. As a result, the Company has
concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based
measure. The Company recognizes subscription revenue straight-line through the subscription period. Subscription Services
consist of: Direct subscriber,
mobile service provider and mobile app services The Company generates
revenue for subscription services on both a direct basis and through subscriptions sold through certain third-party mobile service
providers and mobile app services (collectively the "Mobile Providers"). For subscriptions sold through the Mobile
Providers, the subscriber executes an on-line agreement with Slacker, Inc., the Company's wholly owned subsidiary that provides
an internet music and radio streaming service ("Slacker"), outlining the terms and conditions between Slacker and the
subscriber upon purchase of the subscription. The Mobile Providers promote the Slacker app through their e-store, process payments
for subscriptions, and retain a percentage of revenue as a fee. The Company reports this revenue gross of the fee retained by the
Mobile Providers, as the subscriber is Slacker's customer in the contract and Slacker controls the service prior to the transfer
to the subscriber. Subscription revenues from monthly subscriptions sold directly through Mobile Providers are subject to such
Mobile Providers' refund or cancellation terms. Revenues from Mobile Providers are recognized net of any such adjustments
for variable consideration, including refunds and other fees. The Company's payment terms vary based on whether the subscription
is sold on a direct basis or through Mobile Providers. Subscriptions sold on a direct basis require payment before the services
are delivered to the customer. The payment terms for subscriptions sold through Mobile Providers vary, but are generally payable
within 30 days. Third-Party Original
Equipment Manufacturers The Company generates
revenue for subscription services through subscriptions sold through a third-party Original Equipment Manufacturer (the "OEM").
For subscriptions sold through the OEM, the OEM executes an agreement with Slacker outlining the terms and conditions between Slacker
and the OEM upon purchase of the subscription. The OEM installs the Slacker app in their equipment and provides the Slacker service
to the OEM's customers. The monthly fee charged to the OEM is based upon a fixed rate per vehicle, multiplied by the variable
number of total vehicles which have the Slacker application installed. The number of customers, or the variable consideration,
is reported by the OEM and resolved on a monthly basis. The Company's payment terms with the OEM are up to 30 days. Advertising Revenue Advertising revenue
primarily consist of revenues generated from the sale of audio, video, and display advertising space to third-party advertising
exchanges. Revenues are recognized based on delivery of impressions over the contract period to the third-party exchanges, either
when an ad is placed for listening or viewing by a visitor or when the visitor "clicks through" on the advertisement.
The advertising exchange companies report the variable advertising revenue performed on a monthly basis which represents the Company's
efforts to satisfy the performance obligation. Licensing Revenue Licensing revenue primarily
consists of sales of licensing rights to digitally stream its live music services in certain geographies (e.g. China). Licensing
revenue is recognized when the Company satisfies its performance obligation by transferring control of the goods or services to
its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods
or services, which is typically when the live event has aired. Any license fees collected in advance of an event are deferred until
the event airs. The Company reports licensing revenue on a gross basis as the Company acts as the principal in the underlying transactions. Cost of Sales Cost of Sales principally
consists of royalties paid for the right to stream video, music and non-music content to the Company's customers and the
cost of securing the rights and producing and streaming live events from venues and promoters. Royalties are calculated using negotiated
and regulatory rates documented in content license agreements and are based on usage measures or revenue earned. Music royalties
to record labels, professional rights organizations and music publishers primarily relate to the consumption of music listened
to on Slacker's radio services. As of December 31, 2019 and March 31, 2019, the Company accrued $12.4 million and $9.9 million
of royalties, respectively. Sales and Marketing Sales and Marketing
include the direct and indirect costs related to the Company's product and event advertising and marketing. Product Development Product development
costs primarily are expenses for research and development, product and content development activities, including internal software
development and improvement costs which have not been capitalized by the Company. Stock-Based Compensation Stock-based compensation
cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service
period, which is the vesting period, on an accelerated basis. The Company accounts for awards with graded vesting as if each vesting
tranche is valued as a separate award. The Company uses the Black-Scholes-Merton option pricing model to determine the grant date
fair value of stock options. This model requires the Company to estimate the expected volatility and the expected term of the stock
options which are highly complex and subjective variables. The variables take into consideration, among other things, actual and
projected employee stock option exercise behavior. The Company uses a predicted volatility of its stock price during the expected
life of the options that is based on the historical performance of the Company's stock price as well as including an estimate
using guideline companies. The expected term is computed using the simplified method as the Company's best estimate given
its lack of actual exercise history. The Company has selected a risk-free rate based on the implied yield available on U.S. Treasury
securities with a maturity equivalent to the expected term of the stock. Stock-based awards are comprised principally of stock
options, restricted stock, restricted stock units ("RSUs"), restricted stock awards ("RSAs") and warrant
grants. Forfeitures are recognized as incurred. Stock option awards
issued to non-employees are accounted for at grant date fair value determined using the Black-Scholes-Merton option pricing model.
Management believes that the fair value of the stock options is more reliably measured than the fair value of the services received.
The Company records the fair value of these equity-based awards and expense at their cost ratably over related vesting periods.
Income Taxes The Company accounts
for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced
by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the Company's Statements of Operations in the period that includes the enactment date. Net Income (Loss) Per Share Basic earnings (loss)
per share are computed using the weighted-average number of common shares outstanding during the period. Diluted earnings (loss)
per share is computed using the weighted-average number of common shares and the dilutive effect of contingent shares outstanding
during the period. Potentially dilutive contingent shares, which primarily consist of stock options issued to employees, directors
and consultants, restricted stock units, warrants issued to third parties and accounted for as equity instruments, convertible
debentures and convertible notes have been excluded from the diluted loss per share calculation because their effect is anti-dilutive. At December 31, 2019
and 2018, the Company had 167,363 warrants outstanding, 4,640,001 and 5,111,668 options outstanding, respectively, 3,878,287 and
673,408 restricted stock units outstanding, respectively, 24,675 and 0 restricted stock awards outstanding, respectively and 3,912,671
and 2,662,267 shares of common stock issuable underlying the Company's convertible notes and convertible debentures, respectively. Business Combinations The Company accounts
for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the underlying
net tangible and intangible assets acquired, based on their respective fair values. The excess of the purchase consideration over
the estimated fair values of the net assets acquired is recorded as goodwill. Identifiable assets acquired, liabilities assumed
and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally,
any contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized
to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling
interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining
the fair value of assets acquired, liabilities assumed and noncontrolling interests requires management's judgment and often
involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation
methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of customer
turnover rates and estimates of terminal values. Cash and Cash Equivalents Cash and cash equivalents
include all highly liquid investments with original maturities, when purchased, of three months or less. The following table
provides amounts included in cash, cash equivalents and restricted cash presented in the Company's condensed consolidated
statements of cash flows for the nine months ended December 31, (in thousands):
2019 2018
Cash and cash equivalents $ 13,965 $ 14,294
Restricted cash 235 235
Total cash and cash equivalents and restricted cash $ 14,200 $ 14,529 Restricted Cash and Cash Equivalents The Company maintains
certain letters of credit agreements with its banking provider, which are secured by the Company's cash for periods of less
than one year. As of December 31, 2019 and March 31, 2019, the Company had restricted cash of $0.2 million. Accounts Receivable and Allowance for Doubtful Accounts The Company evaluates
the collectability of its accounts receivable based on a combination of factors. Generally, it records specific reserves to reduce
the amounts recorded to what it believes will be collected when a customer's account ages beyond typical collection patterns,
or the Company becomes aware of a customer's inability to meet its financial obligations. There were no impairment losses
recorded on receivables for the three and nine months ended December 31, 2019 and 2018. The Company believes
that the credit risk with respect to trade receivables is limited due to the large and established nature of its largest customers
and the nature of its subscription receivables. At December 31, 2019, the Company had two customers that made up 16% and 56% of
the total gross accounts receivable balance. At March 31, 2019, the Company had three customers that made up 10%, 26% and 36% of
the total gross accounts receivable balance. The Company's
accounts receivable at December 31, 2019 and March 31, 2019 is as follows (in thousands):
December 31, March 31,
2019 2019
Accounts receivable, gross $ 3,681 $ 4,318
Less: Allowance for doubtful accounts (4 ) (4 )
Accounts receivable, net $ 3,677 $ 4,314 Property and Equipment Property and equipment
are recorded at cost. Costs of improvements that extend the economic life or improve service potential are also capitalized. Capitalized
costs are depreciated over their estimated useful lives. Costs for normal repairs and maintenance are expensed as incurred. Depreciation is recorded
using the straight-line method over the assets' estimated useful lives, which are generally as follows: buildings and improvements
(5 years), furniture and equipment (3 to 5 years) and computer equipment and software (3 to 5 years). Leasehold improvements are
depreciated over the shorter of the estimated useful life, based on the estimates above, or the lease term. The Company evaluates
the carrying value of its property and equipment if there are indicators of potential impairment. If there are indicators of potential
impairment, the Company performs an analysis to determine the recoverability of the asset group carrying value by comparing the
expected undiscounted future cash flows to the net book value of the asset group. If it is determined that the expected undiscounted
future cash flows are less than the net book value of the asset group, the excess of the net book value over the estimated fair
value is recorded in the Company's consolidated statements of operations. Fair value is generally estimated using valuation
techniques that consider the discounted cash flows of the asset group using discount and capitalization rates deemed reasonable
for the type of assets, as well as prevailing market conditions, appraisals, recent similar transactions in the market and, if
appropriate and available, current estimated net sales proceeds from pending offers. Capitalized Internal-Use Software The Company capitalizes
certain costs incurred to develop software for internal use. Costs incurred in the preliminary stages of development are expensed
as incurred. Once software has reached
the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially
complete and ready for its intended use. The Company also capitalizes costs related to specific upgrades and enhancements when
it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and
equipment. Costs related to minor enhancements, maintenance and training are expensed as incurred. Capitalized internal-use
software costs are amortized on a straight-line basis over their three- to five-year estimated useful lives. The Company evaluates
the useful lives of these assets and test for impairment whenever events or changes in circumstances occur that could impact the
recoverability of these assets. During the nine months ended December 31, 2019 and 2018, the Company capitalized $2.0 million and
$2.1 million of internal use software, respectively. Goodwill Goodwill represents
the excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired in
a business combination. The Company evaluates goodwill for impairment on an annual basis or whenever events and changes in circumstances
suggest that the carrying amount may not be recoverable. The Company conducts its annual impairment analysis in the fourth quarter
of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit's carrying
amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting
units, future performances, results of the Company's operations and comparability of its market capitalization and net book
value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and an
impairment loss is measured by the resulting amount. Because the Company has one reporting unit, as part of the Company's
qualitative assessment an entity-wide approach to assess goodwill for impairment is utilized. No impairment losses have been recorded
in the three and nine months ended December 31, 2019 and 2018. Intangible Assets with Indefinite Useful Lives The Company's
indefinite-lived intangible assets consist of trademarks and trade names. The Company evaluates indefinite-lived intangible assets
for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable.
The Company conducts its annual impairment analysis in the fourth quarter of each fiscal year. Intangible Assets with Finite Useful Lives The Company has certain
finite-lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets
consist of Trademarks/Trade Names, Intellectual Property, Customer Relationships, and Capitalized Software Development Costs resulting
from business combinations. Intangible assets with finite useful lives are amortized using the straight-line method over their
respective estimated useful lives, which are generally as follows: Intellectual Property (15 years), Customer Relationships (1.5-5
years), Domain Names (5 years), and Software (5 years). The Company reviews
all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable.
If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value
over the fair value in its consolidated statements of operations. No impairment losses have been recorded in the three and nine
months ended December 31, 2019 and 2018. Deferred Revenue and Costs Deferred revenue consists
substantially of amounts received from customers in advance of the Company's performance service period. Deferred revenue
is recognized as revenue on a systematic basis that is proportionate to the period that the underlying services are rendered, which
in certain arrangements is straight line over the remaining contractual term or estimated customer life of an agreement. In the event the Company
receives cash in advance of providing its music services and music streaming services, the Company will defer an amount of such
future royalty and costs to 3rd party music labels, publishers and other providers on its balance sheets. Deferred costs are amortized
to expense concurrent with the recognition of the related revenue and the expense is included in cost of sales. Fair Value Measurements - Valuation Hierarchy Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
on the measurement date (i.e., an exit price). The Company uses the three-level valuation hierarchy for classification of fair
value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability
as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability.
Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use
in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs
that reflect the Company's own assumptions about the data market participants would use in pricing the asset or liability
developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized below:
Level 1 Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.
Level 3 Valuation is based upon other unobservable inputs that are significant to the fair value measurement. The classification
of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair
value measurement in its entirety. Proper classification of fair value measurements within the valuation hierarchy is considered
each reporting period. The use of different market assumptions or estimation methods may have a material effect on the estimated
fair value amounts. Concentration of Credit Risk The Company maintains
cash balances at commercial banks. Cash balances commonly exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation.
The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to any significant
credit risk with respect to such cash and cash equivalents. Adoption of New Accounting Pronouncements In February 2016, the
FASB issued ASU No. 2016-02, Leases Leases (Topic 842): Targeted Improvements The Company elected
and applied the available transition practical expedients. By electing these practical expedients, the Company did:
a. not reassess whether expired or existing contracts contain leases under the new definition of a lease;
b. not reassess lease classification for expired or existing leases; and
c. not reassess whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. Recently Issued Accounting
Pronouncements In June 2016, the FASB
issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected
credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. In
November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses.
The amendments in this ASU align the implementation date for nonpublic entities' annual financial statements with the implementation
date for their interim financial statements. In addition, the amendment clarifies that receivables arising from operating leases
are not within the scope of Subtopic 326-20; instead impairment of receivables arising from operating leases should be accounted
for in accordance with Topic 842: Leases. This ASU is effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial
Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments. The amendments in this ASU
further clarify certain aspects of ASU No. 2016-13. For entities that have not yet adopted ASU No. 2016-13, this ASU is effective
for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In May 2019, the FASB
issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. The amendments in this ASU
provide transition relief for ASU No. 2016-13 by providing an option to irrevocably elect the fair value option for certain financial
assets measured at an amortized cost basis. For entities that have not yet adopted ASU No. 2016-13, this ASU is effective for fiscal
years beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, the
FASB issued ASU 2019-10 which amends the effective dates for the accounting standard, and ASU 2019-11 which clarifies narrow issues
within the new credit losses standard. The Company has evaluated
the impact this ASU will have on its financial statements and related disclosures and determined that adoption of ASC 326 is not
expected to have a material impact on the financial statements and disclosures of the Company. In December 2019, the
FASB issued ASU No. 2019-12. Simplifying the Accounting for Income Taxes. In August 2018, the
FASB issued ASU No. 2018-15. Intangibles - Goodwill and Other – Internal-Use Software, In November 2018, the
FASB issued ASU 2018-18 which clarified the interaction between Topic 808 and Topic 606, which makes targeted improvements for
collaborative arrangements as follows: a) clarifies that certain transactions between collaborative arrangement participants are
within the scope of ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account. b)
adds unit-of-account (i.e., distinct good or service) guidance to ASC 808 to align with the guidance in ASC 606 to determine whether
the collaborative arrangement, or a part of the arrangement, is within the scope of ASC 606. And c) specifies that in a transaction
with a collaborative arrangement participant that is not directly related to sales to third parties, if the collaborative arrangement
participant is not a customer, an entity is precluded from presenting the transaction together with revenue recognized under ASC
606. The ASU is effective for public business entities for fiscal years ending after December 15, 2019. For all other entities,
the ASU is effective for annual reporting periods ending after December 15, 2020. Early adoption is permitted. The Company is currently
evaluating the impact this ASU will have on its financial statements and related disclosures, as well as the timing of adoption
and the application method. In March 2019, the
FASB issued ASU 2019-01, Codification Improvements, which clarifies three specific issues within ASC 842, Leases. Issue 1: Determining
the Fair Value of the Underlying Asset by Lessors That Are Not Manufacturers or Dealers provides an exception for lessors that
are not manufacturers or dealers for determining fair value of an underlying asset. Specifically, those lessors will use their
cost, reflecting any volume or trade discounts that may apply, as the fair value of the underlying asset. However, if significant
time lapses between the acquisition of the underlying asset and lease commencement, those lessors will be required to apply the
definition of fair value (exit price) in ASC 820. Issue 2: Presentation on the Statement of Cash Flows specifies that lessors that
are depository and lending institutions within the scope of ASC 942 will present all "principal payments received under leases"
within investing activities on the statement of cash flows. Other lessors will continue to apply the guidance in ASC 842 that requires
presentation of all cash receipts from leases within operating activities. Issue 3: Transition Disclosures Related to Topic 250,
Accounting Changes and Error Corrections provides an exception to the paragraph 250-10-50-3 interim disclosure requirements in
the ASC 842 transition disclosure requirements. The ASU is effective for public business entities for fiscal years beginning after
December 15, 2019, and interim periods within those years. For all other entities, the effective date is for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years be |
