LiveOne, Inc. (formerly LiveXLive Media, Inc.) — Q1 FY2022 Form 10-Q
Reporting period: Three months ended June 30, 2021, compared with the three months ended June 30, 2020. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted. The quarter is the company’s first fiscal quarter of FY2022. PodcastOne and CPS were included for the full quarter in 2021 but not in the prior-year comparison, limiting comparability.
Business context and operating highlights
The company operates a platform for livestream and on-demand audio, video, podcasts, live events, and merchandise. During the quarter it livestreamed 33 events, featuring 96 artists across 174 hours of programming; Social Gloves: Battle of the Platforms generated more than 15.6 million live views. Paid music-platform subscribers were approximately 1.162 million, up 32% from approximately 878,000 a year earlier.
Financial results and liquidity
| Metric | Q1 FY2022 | Prior-year quarter |
|---|---|---|
| Revenue | $38.767 million | $10.507 million |
| Gross profit (revenue less cost of sales) | $7.827 million; 20.2% margin | $2.846 million; 27.1% margin |
| Operating loss | $(9.959) million; 25.7% of revenue | $(5.822) million; 55.4% of revenue |
| Net loss | $(8.051) million | $(7.532) million |
| Cash from operating activities | $0.832 million | $4.412 million |
| Cash used in investing activities | $(1.103) million | $(0.705) million |
| Cash from financing activities | $6.210 million | $0.982 million |
Revenue increased 269%, driven principally by event and ticket revenue, advertising, merchandising, and sponsorship and licensing. Revenue by category was subscriptions $9.084 million (up 2%), advertising $7.937 million, merchandising $3.660 million, sponsorship and licensing $5.136 million, and ticket/event $12.950 million. Advertising and merchandising growth largely reflects the PodcastOne and CPS acquisitions; ticket/event and sponsorship growth was substantially associated with Social Gloves.
Cash and cash equivalents were $24.574 million at June 30, 2021, with restricted cash of $0.135 million. Current assets were $42.845 million and current liabilities $54.981 million, a reported working-capital deficiency of $12.1 million. Total liabilities were $85.873 million and stockholders’ equity $6.512 million. Operating cash flow declined year over year despite positive cash generation; working-capital timing, including accounts payable and accrued liabilities, materially affected the quarter.
At quarter-end, debt included $15.0 million principal of secured convertible notes, $7.7 million of unsecured convertible notes (carrying value), a $6.0 million revolving-credit draw, and $1.1 million of notes payable. In June, the company established a $7.0 million secured revolving facility, bearing interest at prime plus 0.5%, and drew $6.0 million. The Harvest secured notes’ maturity was extended to June 3, 2023; the notes carry an 8.5% rate and are secured by substantially all company assets, subject to exceptions. The company reported compliance with debt covenants at June 30, 2021.
Material changes and unusual items
- Cost of sales rose to $30.940 million from $7.661 million; gross margin fell to 20.2% from 27.1%. Management attributed higher costs to expanded acquired businesses and event production, including approximately $6.2 million of Social Gloves production costs.
- Operating expenses increased, including general and administrative expense to $9.377 million from $3.985 million. Stock-based compensation was $5.086 million, compared with $2.882 million.
- Other income included a $2.511 million gain from forgiveness of PPP loans. This non-recurring gain helped reduce the net loss relative to the operating loss; interest expense was $1.060 million.
- The company spent $1.018 million on property and equipment and $0.085 million on intangible assets. Its cash increase during the quarter was principally supported by the $6.0 million credit-facility draw.
Outlook, risks, and contingencies
The filing provides no quantified revenue or earnings guidance. Management said it expects to gradually increase in-person event production as pandemic conditions and government restrictions ease, while continuing to monetize digital events. It also expects substantial investment in product and engineering over the next 12 to 24 months and describes growth, subscriber expansion, and improved margins as dependent on execution, content, sponsorships, and cost control.
Going concern: The company reported a history of losses, an $8.1 million quarterly net loss, and a $12.1 million working-capital deficiency. Management concluded these conditions raise substantial doubt about the company’s ability to continue as a going concern within one year of filing. Continued operations depend on executing its strategy and obtaining additional capital; the company cautioned financing may be unavailable or dilutive or restrictive. It reported $121.5 million remaining under its $150 million shelf registration statement.
Key risks: Revenue concentration includes an OEM customer (identified in the risk factors as Tesla); the filing reports this customer generated $6.9 million of quarterly revenue. The business also depends on music-content licenses, advertising and podcast growth, subscriber retention, event economics, and the ability to finance and service substantial debt. COVID-19 remained a source of uncertainty for live events and advertising.
Legal matters: The company is defending the Schnaier/Wantickets litigation, which seeks approximately $26.7 million; management said a loss was not probable but that the uncertain potential exposure could be material. A July 2021 complaint by Simply Greatness Productions alleged contract and misrepresentation claims relating to Social Gloves. LiveOne filed a separate complaint seeking at least $100 million against SGP and others. The filing also discloses a past-due professional-services note of approximately $0.4 million, for which the holder obtained judgments and a lien.
Controls and subsequent events: Management concluded disclosure controls were ineffective due to material weaknesses identified in the FY2021 Form 10-K; remediation was in progress. On August 11, 2021, Trinad Capital, a related party, extended its notes’ maturity to May 31, 2023 in exchange for 33,654 shares.
Important facts for investors to verify
- Reconcile inconsistencies within the filing: the financial statements report basic and diluted loss per share of $(0.10) and weighted-average shares of 76,982,057, while MD&A reports $(0.12) and 69,040,055.
- Confirm the Social Gloves production-customer revenue: the filing gives $6.4 million in several disclosures but $5.1 million in one MD&A overview passage.
- Assess the company’s near-term funding needs, working-capital shortfall, debt maturities and terms, collateral, covenants, and ability to access additional capital.
- Evaluate event-level economics and cash collection for Social Gloves, including the related litigation and any effect on receivables or future event activity.
- Track progress remediating the material weaknesses and monitor customer concentration, music-license obligations, and the return of in-person events.