| Summary of Significant Accounting Policies | Note 2 — Summary of Significant Accounting
Policies There have been no material
changes in the Company’s significant accounting policies from those previously disclosed in the consolidated financial statements
included in the 2022 Form 10-K, other than those included below. COVID-19 In March 2020, the World Health
Organization declared the outbreak of the novel coronavirus disease (“COVID-19”) as a pandemic. The global impact of the COVID-19
pandemic has had a negative effect on the global economy, disrupting the financial markets creating increasing volatility and overall
uncertainty. The Company began to experience modest adverse impacts of the COVID-19 pandemic in the fourth quarter of fiscal year ended
March 31, 2020 and became more adverse throughout the fiscal year ended March 31, 2021 and up to the third quarter of fiscal year ended
March 31, 2022. Although the impact has subsided, the Company expects to continue experiencing modest adverse impacts throughout the fiscal
year ending March 31, 2023. The Company’s event and programmatic advertising revenues were directly impacted throughout the 2022
and 2021 fiscal years with all on-premise in-person live music festivals and events postponed in 2021 fiscal year and mixed demand from
historical advertising partners in 2022 fiscal year. Further, one of the Company’s larger customers also experienced a temporary
halt to its production as a result of COVID-19, which negatively impacted the Company’s near-term membership growth in the 2021
fiscal year. During the fiscal year ended March 31, 2021, the Company enacted several initiatives to counteract these near-term challenges,
including salary reductions, obtaining a Paycheck Protection Program (“PPP”) loan (see Note 8 - Notes Payable) and pivoting
its live music production to 100% digital. The Company began producing, curating, and broadcasting digital music festivals and events
across its platform which has resulted in the growth in the number of live events streamed, related sponsorship revenue and overall viewership.
The Company also launched a new pay-per-view (“PPV”) offering in May 2020, enabling new forms of artist revenue including
digital tickets, tipping, digital meet and greet and merchandise sales. However, there is uncertainty as to the duration and overall impact
of the COVID-19 pandemic, which could result in an adverse material change in a future period to the Company’s results of operations,
financial position and liquidity. On March 27, 2020, the Coronavirus
Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the United States. The CARES Act provides numerous
tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses
and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. The Company evaluated
the provisions of the CARES Act and determined it is eligible for Employee Retention Credits related to payroll taxes paid during the
quarter ended September 30, 2021. In accordance with ASC 105-10-05-02, the Company analogized to International Financial Reporting Standards
(“IFRS”), specifically International Accounting Standards (“IAS”) 20, Accounting for Government Grants and
Disclosures of Government Assistance, On December 29, 2020, the
Consolidated Appropriations Act (“CAA”) was enacted in the United States. The CAA provides numerous tax provisions and
most notably for the Company changes the tax treatment of those expenses paid for with a PPP loan from non-deductible to deductible.
The Company is in the process of evaluating the provisions of the CAA including obtaining a second draw Paycheck Protection Program loans
and applying for the potential eligibility for Employee Retention Credits and does not anticipate the provisions included will have a
material impact on its provision for income taxes. 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, inventory calculations and reserves, the assigned value of acquired
assets and assumed and contingent liabilities associated with business combinations and the related purchase price allocation, 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 debt 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. Given the overall uncertainty surrounding
the COVID-19 pandemic, there is a reasonable possibility that actual results could differ from those estimates and such differences could
be material to the financial position and results of operations, specifically in assessing when the collectability of revenue related
consideration is probable, and the impairment assessment of goodwill, indefinite lived assets or long-lived assets that are depreciated
or amortized. 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 membership 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 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
and is evaluated on a transaction-by-transaction basis. 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 membership service, sponsorship, and merchandising streams and
may act as principal or agent for its ticketing/live events, advertising and licensing revenue streams. The Company’s revenue is principally derived
from the following services: Membership Services Membership services revenue
substantially consist of monthly to annual recurring membership 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 membership fees collected in advance and recognizes
them in the period earned. Membership revenue is recognized in the period of services rendered. The Company’s membership 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 membership 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 membership revenue straight-line
through the membership period. Membership Services consist
of: Direct member, mobile service provider and
mobile app services The Company generates revenue
for membership services on both a direct basis and through memberships sold through certain third-party mobile service providers and mobile
app services (collectively the “Mobile Providers”). For memberships sold through the Mobile Providers, the member executes
an on-line agreement with Slacker outlining the terms and conditions between Slacker and the member upon purchase of the membership. The
Mobile Providers promote the Slacker app through their e-store, process payments for memberships, 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 member is Slacker’s customer in
the contract and Slacker controls the service prior to the transfer to the member. Membership revenues from monthly memberships 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 membership is sold on a direct basis or through Mobile Providers. Memberships sold on a direct basis require
payment before the services are delivered to the customer. The payment terms for memberships sold through Mobile Providers vary but are
generally payable within 30 days. Third-Party Original Equipment Manufacturers The Company generates revenue
for membership services through memberships sold through a third-party Original Equipment Manufacturer (the “OEM”). For memberships
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 membership. 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
signed up for a paid membership. The number of customers, or the variable consideration, is reported by OEMs and resolved on a monthly
basis. The Company’s payment terms with 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. Additionally, following the acquisition of PodcastOne, the Company began deriving revenue from podcast advertising. PodcastOne
earns advertising revenues primarily for fees earned from advertisement placement purchased by the customer during the time the podcast
is delivered to the viewing audience, under the terms and conditions as set forth in the applicable podcasting agreement calculated using
impressions. From time to time the Company
enters into barter transactions involving advertising provided in exchange for goods and services. Revenue from barter transactions is
recognized based on delivery of impressions and in the same manner as described above. Services received are charged to expense when received
or utilized. If services are received prior to the delivery of impressions, a liability is recorded. If delivery of impressions has occurred
before the receipt of goods or services, a receivable is recorded. Barter revenue for the three months ended September 30, 2022 and 2021
was $1.8 million and $1.5 million, respectively. Barter revenue for the six months ended September 30, 2022 and 2021 was $3.1 million
and $3.1 million, respectively. Licensing Revenue Licensing revenue primarily
consists of sales of licensing rights to digitally stream the Company’s live music services. 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. Sponsorship
Revenue Sponsorship revenue primarily
consists of sales of sponsorship programs that provide sponsors with opportunities to reach the Company’s customers. Sponsorship
revenue is recognized as the event airs. Any sponsorship fees collected in advance of the contract term (typically an event) are deferred
until the event airs. The Company reports sponsorship revenue on a gross basis as the Company acts as the principal in the underlying
transactions. Merchandising
Revenue Revenue is recognized upon
the transfer of control to the customer. The Company recognizes revenue and measures the transaction price net of taxes collected from
customers and remitted to governmental authorities. Sales also include shipping and handling charges billed to customers, with the related
freight costs included in cost of goods sold. Sales commissions are expensed as incurred and are recorded in sales and marketing expenses
in the consolidated statements of operations. The Company’s customer contracts do not have a significant financing component due
to their short durations, which are typically effective for one year or less and have payment terms that are generally 30 to 60 days.
Wholesale revenue is generally recognized when products are shipped, depending on the applicable contract terms. The Company records a
refund liability for expected returns based on prior returns history, recent trends, and projections for returns on sales in the current
period. The refund liability at September 30, 2022 and 2021 was less than $0.1 million, respectively. Ticket/Event Revenue Ticket/Event
revenue is primarily from the sale of tickets and promoter fees earned from venues or other co-promoters under one of several formulas,
including a fixed guaranteed amount and/or a percentage of ticket sales or event profits. Revenue from the promotion
or production of an event is recognized at a point in time when the show occurs. Revenue collected in advance of the event is recorded
as deferred revenue until the event occurs. Revenue collected from sponsorship agreements, which is not related to a single event, is
classified as deferred revenue and recognized over the term of the agreement or operating season as the benefits are provided to the sponsor. Revenue from the Company’s
ticketing operations primarily consists of service fees charged at the time a ticket for an event is sold in either the primary or secondary
markets, including both online pay-per-view (“PPV”) tickets as well as ticket physically purchased through a ticket sale vendor. For
primary tickets sold to the Company’s PPV and festival events the revenue for the associated ticket service charges collected in
advance of the event is recorded as deferred revenue until the event occurs. For PPV arrangements that include multiple performance obligations,
i.e., delivery of the online stream, sponsorships, digital meet and greet, or physical merchandise, the Company allocates the total contract
consideration to each performance obligation using the standalone selling price. If the standalone selling price is not readily determinable,
it is estimated using observable inputs including an adjusted market-based approach, expected cost plus margin, or the residual approach. Net Income (Loss) Per Share Basic earnings (loss) per
share is 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 and convertible notes would be excluded from the
diluted earnings per share calculation because their effect is anti-dilutive. At September 30, 2022
and 2021, the Company had 3,525,191 and 3,621,124 options outstanding,
respectively, 1,270,193 and 5,212,732 restricted stock units outstanding, respectively,
and 5,960,593 and 5,806,321 shares of common stock issuable, respectively, underlying the Company’s
convertible debt. Basic earnings per share is
calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding
common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net
loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect. 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, estimates of terminal values, and royalty rates. 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 six months ended September 30, 2022 and 2021 (in thousands):
2022 2021
Cash and cash equivalents $ 7,151 $ 16,478
Restricted cash 240 260
Total cash and cash equivalents and restricted cash $ 7,391 $ 16,738 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 September 30, 2022 and March 31, 2022, the Company had restricted cash of $0.2 million and $0.3 million, respectively. 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. 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 membership receivables. On September 30, 2022, the Company had one customer that made up 28% of the total accounts
receivable balance. On March 31, 2022, the Company had one customer that made up 24% of the total accounts receivable balance. The Company’s accounts
receivable at September 30, 2022 and March 31, 2022 is as follows (in thousands): September 30, March 31, 2022 2022 Accounts receivable, gross $ 13,592 $ 14,404 Less: Allowance for doubtful accounts (634 ) (717 ) Accounts receivable, net $ 12,958 $ 13,687 Inventories Inventories, principally raw
materials awaiting final customization process, are stated at the lower of cost or net realizable value. Inventories are relieved on a
first-in, first-out basis. The carrying value of inventories
is reduced for any excess and obsolete inventory. Excess and obsolete reductions are determined based on currently available information,
including the likely method of disposition, such as through sales to individual customers and liquidations, and the age of inventory. Notes Payable – Paycheck Protection Program (“PPP”)
Loans In response to the COVID-19
pandemic, the PPP was established under the CARES Act and administered by the U.S. Small Business Administration (“SBA”).
Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans provided by local lenders, which supports
payroll, rent and utility expenses (“qualified expenses”). If the loan proceeds are fully utilized to pay qualified expenses
over the covered period, as further defined by the PPP, the full principal amount of the PPP loan may qualify for loan forgiveness, subject
to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared
to a baseline period. During the year ended March 31, 2022, the Company received confirmation from the SBA that $3.1 million in PPP loans
(see Note 8 – Notes Payable) were forgiven. As the loans were forgiven
and we were released from being the primary obligor, the Company recognized income in the amount forgiven in accordance with ASC 470-20.
The Company recognized a gain on forgiveness of the PPP loans of none and $2.5 million during the six months ended September 30, 2022
and 2021, respectively, and is included in total other expense, net in the accompanying condensed consolidated statements of operations. 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. Debt with Warrants In accordance with ASC Topic
470-20-25, when the Company issues debt with warrants, the Company treats the warrants as a debt discount, recorded as a contra-liability
against the debt, and amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated
statements of operations. The offset to the contra-liability is recorded as a liability in the Company’s consolidated balance sheets.
The Company determines the value of the warrants using a Monte-Carlo Simulation. If the debt is retired early, the associated debt discount
is then recognized immediately as amortization of debt discount expense in the consolidated statements of operations. The debt is treated
as conventional debt. Convertible Debt – Derivative Treatment When the Company issues debt
with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative, as
follows: (a) one or more underlyings, typically the price of our common stock; (b) one or more notional amounts or payment provisions
or both, generally the number of shares upon conversion; (c) no initial net investment, which typically excludes the amount borrowed;
and (d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily
sold for cash. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host
instrument if the component qualifies for the scope exception for certain contracts involving an issuer’s own equity. The scope
exception applies if the contract is both (a) indexed to its own stock; and (b) classified in stockholders’ equity in its balance
sheet. If the conversion feature
within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative
using the Monte Carlo Method upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value
of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative
is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The convertible
debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement
of operations. The debt discount is amortized through interest expense over the life of the debt. Debt Modifications and Extinguishments When the Company modifies
or extinguishes debt, it first evaluates whether the modification qualifies as a troubled debt restructuring (TDR) under ASC Topic 470-60,
which requires debt modifications to be evaluated if (1) the borrow is experiencing financial difficulty, and (2) the lender grants the
borrower a concession. If a TDR is determined not to have occurred, the Company evaluates the modification in accordance with ASC Topic
470-50-40, which requires modification to debt instruments to be evaluated to assess whether the modifications are considered “substantial
modifications”. A substantial modification of terms shall be accounted for like an extinguishment. Based on the guidance relied
upon and the analysis performed, if the Company believes the embedded conversion feature has no fair value on the date of issuance (measurement
date) and the embedded conversion feature has no beneficial conversion feature, the embedded conversion feature does not meet the criteria
in ASC 470-50-40-10 or 470-20-25 and the issuance of the convertible note payable is considered a modification, and not an extinguishment
that would require the recognition of a gain or loss. If the Company determines the change in terms meet the criteria for substantial
modification under ASC 470 it will treat the modification as extinguishment and recognize a loss from debt extinguishment.
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 In August 2020, the FASB issued
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s
Own Equity (Subtopic 815-40). Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did
not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statement
presentation or disclosures. |
