Note 17 - Stockholders' Equity

12 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Equity [Text Block]

Note 17 — Stockholders’ Equity 

Authorized Common Stock and Authority to Create Preferred Stock

The Company has the authority to issue up to 510,000,000 shares, consisting of 500,000,000 shares of the Company’s common stock, $0.001 par value per share, and 10,000,000 shares of the Company’s preferred stock, $0.001 par value per share (the “preferred stock”).

The Company may issue shares of preferred stock from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by the Company’s board of directors and will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Company’s board of directors.  The Company’s board of directors will have the power to increase or decrease the number of shares of preferred stock of any series after the issuance of shares of that series, but not below the number of shares of such series then outstanding.  In case the number of shares of any series shall be decreased, the shares constituting such decrease will resume the status of authorized but unissued shares of preferred stock.

It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the common stock until and unless the Company’s board of directors determines the specific rights of the holders of the preferred stock; however, these effects may include: restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock, or delaying or preventing a change in control of the Company without further action by the stockholders.

Stock Repurchase Program

In December 2020, the Company announced that its board of directors has authorized the repurchase of up to two million shares of its outstanding common stock from time to time. In November 2022, the Company announced that its board of directors has authorized it to expand its stock repurchase program by up to an additional $2,000,000 worth of shares of its common stock to be repurchased from time to time. The timing, price, and quantity of purchases under the program will be at the discretion of our management and will depend upon a variety of factors including share price, general and business market conditions, compliance with applicable laws and regulations, corporate and regulatory requirements, and alternative uses of capital. The program may be expanded, suspended, or discontinued by our board of directors at any time. Although our board of directors has authorized this stock repurchase program, there is no guarantee as to the exact number of shares, if any, that will be repurchased by us, and we may discontinue purchases at any time that management determines additional purchases are not warranted. We cannot guarantee that the program will be consummated, fully or all, or that it will enhance long-term stockholder value. The program could affect the trading price of our common stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our common stock. In addition, this program could diminish our cash reserves. The Company purchased 1,639,125 and 2,220,914 shares of its common stock under the stock repurchase program for the year ended March 31, 2024 and 2023, for a total of $2.6 million and $2.2 million, respectively. As of March 31, 2024, the Company has up to $1.1 million remaining to repurchase shares of its and/or PodcastOne’s outstanding common stock under the stock repurchase program, provided, that the Company’s management has authorized the repurchase of up to an additional $2.5 million worth of shares of the Company’s and/or PodcastOne’s outstanding common stock from time to time stock under the stock repurchase program, which $2.5 million is subject to approval of the Company’s board of directors.

Series A Preferred Stock

The Series A Preferred Stock is convertible at any time at a Holder’s option into shares of the Company’s common stock, at a price of $2.10 per share of common stock, bears a dividend of 12% per annum, is perpetual and has no maturity date. At the option of the Company, the dividend was to be paid in-kind until February 3, 2024, and thereafter, the Holders had the option to select whether subsequent dividend payments shall be paid in kind or in cash; provided, that as long as any Series A Preferred Stock is held by the Harvest Funds (as defined below), Trinad Capital shall receive the dividend solely in kind. The Series A Preferred Stock shall have no voting rights, except as set forth in the Certificate of Designation or as otherwise required by law.

The Company may, at its option (the “Optional Redemption Right”), on or before the Redemption Date (as defined herein), purchase up to $5,000,000 in aggregate of the then outstanding shares of Series A Preferred Stock held by the Harvest Funds at a cash redemption price per share of Series A Preferred Stock equal to the Stated Value (the “Redemption Price”). The Company is required on or before August 3, 2024 (the "Redemption Date”), and in any event if prior to the Redemption Date the Company consummated any financing transaction in which the Company, directly or indirectly, raised, in aggregate, gross proceeds of more than $20,000,000 of new capital, to purchase $5,000,000 in aggregate of the then outstanding shares of Series A Preferred Stock held by the Harvest Funds (the “Mandatory Redemption Amount”) at the Redemption Price (the “Mandatory Redemption”). If the Optional Redemption Right is exercised up to the full $5,000,000 amount, the Mandatory Redemption requirement was to be terminated; provided, that if the Optional Redemption Right is exercised in any amount less than $5,000,000, the Mandatory Redemption Amount was to be reduced by the amount that the Optional Redemption Right has been elected and exercised. Without the prior express consent of the majority of the votes entitled to be cast by the holders of Series A Preferred Stock outstanding at the time of such vote (the “Majority Holders”), the Company shall not authorize or issue any additional or other shares of its capital stock that are (i) of senior rank to the Series A Preferred Stock or (ii) of pari passu rank to the Series A Preferred Stock, in each case in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation. Pursuant to the Letter Agreements (as defined below), the Harvest Funds agreed (x) that any future dividends payable on the Series A Preferred Stock shall be paid in-kind or in cash at the option of the Company; provided, that as long as any Series A Preferred Stock is held by the Harvest Funds, Trinad Capital shall receive the dividend solely in kind, (y) to delete the Mandatory Redemption requirement.

Pursuant to the Exchange Agreements, the Company agreed that at any time that any of the shares of Series A Preferred Stock issued to the Harvest Funds are outstanding, (i) to directly or through its 100% owned subsidiaries (as applicable), to own on a fully diluted basis at least 66% of the total equity and voting rights of any and all classes of securities of each of PodcastOne, Slacker, PPV One, Inc., and LiveXLive Events, LLC subsidiaries of the Company, (ii) not to issue shares of its common stock or convertible equity securities at a price less than $2.10 per share (subject to certain exceptions), provided, that such consent shall not be required in connection with any merger, acquisition or other business combinations of the Company and/or any of its subsidiaries with any unaffiliated third party, (iii) not to raise more than an aggregate of $20,000,000 of capital in one or more offerings, including without limitation, one or more equity or debt offerings or a combination thereof, on an accumulated basis commencing after February 3, 2023 (the “Qualified Offering”); provided, that such consent shall not be required for any equity financing of the Company at a price of $2.25 per share or above, and (iv) if after February 3, 2023 the Company distributes any of its assets or any shares of its common stock or Common Stock Equivalents (as defined in the Exchange agreements) of any of its subsidiaries pro rata to the record holders of any class of shares of its common stock, the Company shall distribute to the Holders its pro rata portion of any such distribution (calculated on an as-converted basis with respect to the then outstanding Series A Preferred Stock) concurrently with the distribution to the then record holders of any class of its common stock (including an applicable distribution of shares of PodcastOne’s common stock to the Harvest Funds in connection with the Spin-Out and special dividend of PodcastOne’s common stock to the Company’s stockholders of record), in each case without the Majority Holders’ prior written consent. Any breach of the aforementioned covenants shall constitute a material breach, which if uncured, shall result in the issuance of an aggregate of 56,473 shares of the Company’s restricted common stock (the “Default Shares”) to the Holders for each five trading days (or pro rata thereof) after the date of the breach; provided, that if such breach is cured within the applicable cure period, no Default Shares shall be issued.

In accordance with ASC 480, the Company classified $5.0 million of its Series A Preferred Stock as temporary equity due to the Company’s obligation to redeem $5.0 million of the Series A Preferred Stock on or before 18 months after issuance for cash, which also contains a substantive conversion feature. The redemption feature was not deemed to be closely and clearly related to the equity-type host instrument. Accordingly, it was accounted for as a liability at inception based on its fair value of $0.2 million with subsequent changes in fair value included in earnings. The change in fair value of the embedded derivative included in the statement of earnings was a loss of $0.2 million and a gain of $0.2 million for the year ended March 31, 2024 and 2023, respectively.

In accordance with ASC 480, the Company classified $16.2 million of the Series A Preferred Stock as permanent equity in the financial statements as it was not subject to mandatory redemption at the option of the holder. The Company concluded that the Series A Preferred Stock is more akin to an equity-type instrument than a debt-type instrument, therefore the conversion features associated with the Series A preferred stock classified as permanent equity were deemed to be clearly and closely related to the host instrument and not a derivative under ASC 815. Accordingly the Series A Preferred Stock was not accreted to the redemption amount in effect on the balance sheet date.

Each share of Series A Preferred Stock is entitled to receive cumulative dividends payable at a rate per annum of 12% of the Stated Value. 

Issuance of Restricted Shares of Common Stock for Services to Consultants and Vendors  

During the year ended March 31, 2024 and 2023, the Company incurred $0.9 million and $0.7 million, respectively, in accounts payable and accrued liabilities for stock earned by its consultants, but not yet issued. The remaining unrecognized compensation cost of less than $0.1 million is expected to be recorded over the next year as the shares vest.

2016 Equity Incentive Plan

The Company’s board of directors and stockholders approved the Company’s 2016 Equity Incentive Plan, as amended (the “2016 Plan”) which reserved a total of 12,600,000 shares of the Company’s common stock for issuance. On September 17, 2020, the Company's stockholders approved the amendment to the 2016 Plan to increase the number of shares available for issuance under the plan by 5,000,000 shares increasing the total up to 17,600,000 shares which the Company formally increased on June 30, 2021. Incentive awards authorized under the 2016 Plan include, but are not limited to, nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and stock appreciation rights. If an incentive award granted under the 2016 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to the Company in connection with the exercise of an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2016 Plan.

The Company recognized share-based compensation expense of $7.9 million and $3.0 million during the years ended March 31, 2024 and 2023, respectively. The total tax benefit recognized related to share-based compensation expense was none for the years ended March 31, 2024 and 2023.

Share-based compensation expense during the year ended March 31, 2024 and 2023 includes the impact from differences in the timing of expense recognized in the statement of operations and the share issuances recorded in additional paid in capital, capitalization of internally developed software costs, and the benefit from the reversal of a previously accrued discretionary share-based award bonus of $1.1 million during the year ended March 31, 2022.

The maximum contractual term for awards is 10 years. As of March 31, 2024, there were 3,269,910 shares of common stock available for future issuance under the 2016 Plan.

PodcastOne 2022 Equity Plan

On December 15, 2022, PodcastOne’s board of directors and the Company as the sole stockholder, through its wholly owned subsidiary, LiveXLive PodcastOne, Inc., approved PodcastOne’s 2022 Equity Incentive Plan (the “2022 Plan”) which reserved a total of 2,000,000 shares of PodcastOne’s common stock for issuance. Incentive awards authorized under the 2022 Plan include, but are not limited to, nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Code and stock appreciation rights. If an incentive award granted under the 2022 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to PodcastOne in connection with the exercise of an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2022 Plan.

As of March 31, 2024, PodcastOne has granted incentive awards underlying 879,060 shares of PodcastOne's common stock under the 2022 Plan with a fair value of $3.64 per share. 287,500 of the awards had vested and none have been forfeited as of March 31, 2024. As of March 31, 2024, PodcastOne recognized $1.3 million of stock compensation for vested restricted stock units. Unrecognized compensation costs for unvested PodcastOne restricted stock units issued to employees was $1.9 million, which is expected to be recognized over a weighted-average service period of 0.97 years.

Non-Controlling Interest

On September 8, 2023, the Company completed its Spin-Out of its PodcastOne subsidiary, and as a result 4.3 million shares of PodcastOne's common stock were issued to holders outside of the Company resulting in a non-controlling interest in PodcastOne of 21.64%. The stock dividend of 4.3 million shares was a non-reciprocal transfer between PodcastOne and non-LiveOne shareholders. As a result, the transaction was recorded as a change in non-controlling interest under ASC 810, which resulted in an increase to non-controlling interest of $1.5 million for the year ended March 31, 2024. Subsequent to the Spin-Out, PodcastOne issued an additional 3.2 million shares of its common stock to non-Company holders as a result of the conversion of the then remaining PC1 Notes in full, which resulted in an aggregate non-controlling interest of 26.50%, resulting in an increase of $2.5 million to non-controlling interest within the accompanying  consolidated statement of stockholders' deficit and mezzanine equity. In addition, as a result of the completion of the Spin-Out and PodcastOne’s shares of common stock being publicly traded, the variability in the terms of PodcastOne’s warrants issued as part of the PC1 Bridge Loan was resolved so that such warrants were reclassified to equity and classified within non-controlling interest in the amount of $5.9 million.

Options Grants to Employees

Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant based on the closing market price of its common stock as reported on The Nasdaq Capital Market. The option awards generally vest over four years and are exercisable any time after vesting. The stock options expire ten years after the date of grant.

As of March 31, 2024, unrecognized compensation costs for unvested awards to employees was $0.1 million, which is expected to be recognized over a weighted-average service period of 0.89 years.

The following table provides information about our option grants made to employees during the last two fiscal years under the Company's 2016 Equity Plan:

	Year Ended March 31,
	2024		2023
Number of options granted		25,000		43,000
Weighted-average exercise price per share	$	1.75	$	1.10
Weighted-average grant date fair value per share	$	1.75	$	1.10

The grant date fair value of each of these option grants to employees was determined using the Black-Sholes-Merton option-pricing model with the following assumptions:

	Year Ended March 31,
	2024			2023
Expected volatility		88.57	%		78.20% - 83.10%
Dividend yield		-	%		-	%
Risk-free rate		4.12	%		3.11% - 3.14%
Expected term (in years)		5.18			5.36 - 6.94

The following table summarizes the activity of our options issued under the 2016 Equity Plan to employees during the years ended March 31, 2024 and 2023

				Weighted-Average
				Exercise Price per
	Number of Shares			Share
Outstanding as of April 1, 2022		3,565,191		$	3.78
Granted		43,000			1.10
Forfeited or expired		(1,191,524	)		3.71
Outstanding as of March 31, 2023		2,416,667			3.75
Granted		25,000			1.75
Exercised		(10,000	)		0.81
Forfeited or expired		(165,000	)		3.88
Outstanding as of March 31, 2024		2,266,667		$	3.73
Exercisable as of March 31, 2024		2,224,167		$	3.74

The weighted-average remaining contractual term for options to employees outstanding and options to employees exercisable as of March 31, 2024 was 4.13 years and 4.07 years, respectively. The intrinsic value of options to employees outstanding and options to employees exercisable was $0.1 million and none, respectively, at March 31, 2024. The intrinsic value of options exercised was none and none, respectively, at March 31, 2024 and 2023.

The fair value of stock options that were exercised during the year ended March 31, 2024 and 2023 was immaterial. The fair value of stock options that were forfeited during the year ended March 31, 2024 and 2023 was $0.6 million and $4.0 million, respectively. The fair value of stock options outstanding and exercisable at March 31, 2024 was $8.3 million and $8.5 million, respectively. The fair value of stock options outstanding and exercisable at March 31, 2023 was $9.1 million and $8.6 million, respectively.

Options Grants to Non-Employees

As of March 31, 2024, there were no unrecognized compensation costs for unvested awards to non-employees. There were no option grants to non-employees for the last two fiscal years. 

The following table summarizes the activity of our options issued to non-employees under the 2016 Equity Plan during the years ended March 31, 2024 and 2023:

			Weighted-Average
			Exercise Price per
	Number of Shares		Share
Outstanding as of April 1, 2022		25,000	$	4.00
Granted		-		-
Exercised		-		-
Forfeited or expired		-		-
Outstanding as of March 31, 2023		25,000		4.00
Granted		-		-
Exercised		-		-
Forfeited or expired		-		-
Outstanding as of March 31, 2024		25,000	$	4.00
Exercisable as of March 31, 2024		25,000	$	4.00

The weighted average remaining contractual term for options to non-employees outstanding as of March 31, 2024 was 3.9 years. The intrinsic value of options to non-employees outstanding and options to non-employees exercisable was none at March 31, 2024.

Restricted Stock Units Grants

As of March 31, 2024, unrecognized compensation costs for unvested awards to employees was $1.2 million, which is expected to be recognized over a weighted-average service period of 0.70 years.

The following table provides information about our restricted stock units grants made to employees during the last two fiscal years:

	Year Ended March 31,
	2024		2023
Number of units granted		2,075,756		1,172,380
Weighted-average grant date fair value per share	$	1.71	$	1.73

The following table summarizes the activity of our restricted stock units under the 2016 Equity Plan issued to employees during the years ended March 31, 2024 and 2023:

	Number of Shares
Outstanding as of April 1, 2022		3,064,285
Granted		1,172,380
Vested		(2,136,679	)
Cancelled		(429,011	)
Outstanding as of March 31, 2023		1,670,975
Granted		2,075,756
Vested		(1,850,576	)
Cancelled		(50,000	)
Outstanding as of March 31, 2024		1,846,155

The fair value of restricted stock units that vested during the year ended March 31, 2024 and 2023 was $4.0 million and $2.3 million, respectively. The fair value of restricted stock units that were forfeited during the year ended March 31, 2024 and 2023 was $0.1 million and $1.1 million, respectively.