LiveXLive Media, Inc. — FY2021 Form 10-K
Period and scope: The filing is for the fiscal year ended March 31, 2021, compared with FY2020. Although the request specifies “2020 Q4,” this 10-K reports annual results; it does not provide a clear standalone Q4 financial summary. The filing issuer is LiveXLive Media, Inc., not LiveOne, Inc.
Business context
LiveXLive operates a digital music and entertainment business spanning Slacker-powered subscriptions, livestreamed events and pay-per-view (PPV), PodcastOne, and personalized merchandise through CPS. The company reports one operating segment. During FY2021 it acquired PodcastOne (July 2020) and CPS (December 2020), while React Presents, acquired in February 2020, contributed a full year of operations. COVID-19 halted most in-person events, prompting a shift toward digital programming.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $65.2 million | $38.7 million | Up 69%; acquisitions were major contributors |
| Cost of sales | $49.0 million | $32.8 million | Up 49% |
| Gross profit (revenue less cost of sales) | $16.2 million | $5.9 million | Gross margin approximately 24.9%, versus 15.2% |
| Operating loss | $29.4 million | $36.0 million | Loss narrowed; operating margin improved to approximately -45% from -93% |
| Net loss | $41.8 million | $38.9 million | Loss widened, primarily reflecting higher other expense |
| Net loss per share | $0.61 | $0.69 | Basic and diluted |
| Operating cash flow | $(9.5) million | $(4.9) million | Cash use increased |
| Capital expenditures | $3.2 million | $2.6 million | Primarily property, equipment and software |
| Cash, including restricted cash | $18.8 million | $12.4 million | Includes $18.6 million unrestricted cash and $0.1 million restricted cash at FY2021 year-end |
| Working capital | $(15.7) million | — | Deficiency at March 31, 2021 |
| Total liabilities | $77.6 million | $61.2 million | Net assets were $8.1 million at FY2021 year-end |
Revenue mix shifted materially: subscriptions were $33.6 million, down 6%; advertising was $20.8 million, up from $2.2 million, largely due to PodcastOne; merchandise contributed $5.2 million from CPS; sponsorship and licensing were $3.9 million; and ticket/event revenue was $1.8 million. Advertising cost of sales also rose substantially with PodcastOne. FY2021 adjusted operating loss, a non-GAAP measure, was $5.8 million versus $12.6 million in FY2020; operations alone reported adjusted operating loss of $0.3 million versus $8.0 million.
Debt totaled approximately $24.1 million net of fees and discounts at March 31, 2021. It included $15.0 million principal of 8.5% senior secured convertible notes due September 2022, unsecured convertible notes including related-party notes, and other notes payable. Contractual debt maturities were $4.7 million in FY2022, $19.9 million in FY2023, and $0.6 million thereafter. The notes are secured by substantially all assets and contain covenants. Subsequent to year-end, the company obtained a secured revolving facility of up to $7.0 million and extended the senior secured notes’ maturity to June 2023.
Material changes versus FY2020
- Revenue increased primarily due to PodcastOne advertising, CPS merchandise, and greater livestream sponsorship and licensing. Subscription revenue declined amid a dispute concerning certain subscribers tied to the largest customer; the company did not recognize revenue for those subscribers.
- Livestreamed 146 events and reported approximately 150 million views, compared with 42 events and more than 69 million views in FY2020. The company also launched PPV in May 2020.
- Operating loss narrowed, but net loss increased due in part to $5.2 million of debt-extinguishment loss, higher interest expense, and acquisition-related contingent consideration charges.
- Cash from operations was more negative. Financing cash flow was positive, supported by $15.0 million of convertible-note proceeds and equity issuance, partly offset by repayment of prior secured debentures.
- The largest customer represented 36% of FY2021 revenue versus 60% in FY2020, although customer revenue was approximately $23.3 million versus $23.1 million. The company identifies this customer as Tesla.
Outlook, risks and unusual items
- Going concern: Management and the auditor state that recurring losses, operating cash outflows, and the working-capital deficit raise substantial doubt about the company’s ability to continue as a going concern within one year of issuance. Management expects to rely on improved results, cost reductions, and additional equity or debt financing; there is no assurance these plans will succeed.
- Outlook: No formal numeric revenue or earnings guidance is provided. Management expected modest COVID-19 effects to continue into FY2022, anticipated more meaningful merchandise contribution and growth in PPV, and expected event and sponsorship revenue to increase as in-person events returned. It also planned significant product and engineering investment over the following 12–24 months and international expansion. These expectations are uncertain and depend on pandemic conditions, execution, and financing.
- COVID-19: In-person events were cancelled or postponed, including React Presents events; advertising demand and rates were affected. Digital event production and monetization grew, but the filing says it was unclear when fan-attended events would resume regularly.
- Concentration and metrics: Dependence on Tesla remains material; the agreement may be terminated for convenience, and Tesla offers other music services. The reported more than 1.07 million paid subscribers include subscribers subject to a contractual dispute for whom revenue is not recognized. The filing also cautions that user metrics are internally estimated and may be inaccurate.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective at March 31, 2021 because of material weaknesses involving financial-statement accuracy and classification, complex debt/equity accounting, business combinations, and acquired-company revenue and inventory controls. Remediation was underway; timing was not certain.
- Other notable items: The company recorded acquisition-related contingent consideration liabilities for PodcastOne and CPS. A major Wantickets-related lawsuit seeks approximately $26.7 million plus other relief; management assessed a loss as not probable but described the outcome and potential range as uncertain and potentially material. The company also reported a past-due promissory note with a judgment lien. Certain PPP loans were forgiven after year-end; a $0.6 million loan and other subsidiary borrowing were not clearly confirmed forgiven in the year-end statements.
Important facts for investors to verify
- Whether the going-concern funding plan and post-year-end $7.0 million revolving facility provide adequate liquidity, and the facility’s availability, covenants, and outstanding borrowings.
- Current status of the Tesla relationship, disputed subscriber count and revenue treatment, and the extent of customer concentration after FY2021.
- Whether FY2021 subscriber, MAU, viewership, and advertising metrics are comparable and independently supportable.
- Progress in remediating the disclosed material weaknesses, including acquired-business revenue, inventory, debt accounting, and financial close controls.
- Debt maturities, conversion and dilution exposure, covenant compliance, related-party Trinad notes, and the terms of the subsequent refinancing and maturity extension.
- Outcome and potential exposure from the Wantickets litigation, the past-due promissory note, and any remaining PPP repayment or forgiveness obligations.
- Acquisition accounting estimates and contingent consideration, including CPS earnout conditions and PodcastOne obligations; the filing identifies these valuations as critical audit matters.