PodcastOne Inc

Previous wording

As used herein,“PodcastOne,”* the*“Company,”* “we,” “our” or*“us”* and similar terms include PodcastOne, Inc. and its subsidiaries, unless the context indicates otherwise. The following discussion and analysis of our business and results of operations for the three and nine months ended December 31, 2023, and our financial conditions at that date, should be read in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this*“Quarterly Report”).

Current wording

As used herein,“PodcastOne,”* the*“Company,”* “we,” “our” or*“us”* and similar terms include PodcastOne, Inc. and its subsidiaries, unless the context indicates otherwise. The following discussion and analysis of our business and results of operations for the three months ended June 30, 2024, and our financial conditions at that date, should be read in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this*“Quarterly Report”).

Previous wording

We were incorporated in the State of Delaware on February 5, 2014 and are a leading podcast platform and publisher that makes our content available to audiences via all podcasting distribution platforms, including our website (www.podcastone.com), our PodcastOne app, Apple Podcasts, Spotify, Amazon Music and more. We were recently ranked #10 on the list of Top Podcast Publishers by the podcast metric company Podtrac.

Current wording

We incorporated in the State of Delaware on February 5, 2014 and are a leading podcast platform and publisher that makes our content available to audiences via all podcasting distribution platforms, including our website (www.podcastone.com), our PodcastOne app, Apple Podcasts, Spotify, Amazon Music and more. We were recently ranked #11 on the list of Top Podcast Publishers by the podcast metric company Podtrac.

Previous wording

After the completion of the spin-out of our Company from LiveOne, we became a standalone publicly traded company trading on The NASDAQ Capital Market. We remain a majority owned subsidiary of LiveOne, a Nasdaq listed company. We intend to mitigate risk by acquiring multiple assets over time and across a broad spectrum of podcast related media and companies. We intend to develop these assets to provide returns via organic growth, revenue production, out-licensing, sale or spin out.

Current wording

After the completion of the spin-out of our Company from LiveOne (the 'Spin-Out'), we became a standalone publicly traded company trading on The NASDAQ Capital Market under the symbol “PODC”. We remain a majority owned subsidiary of LiveOne, a Nasdaq listed company. We intend to mitigate risk by acquiring multiple assets over time and across a broad spectrum of podcast related media and companies. We intend to develop these assets to provide returns via organic growth, revenue production, out-licensing, sale or spin out.

Previous wording

We also produce vodcasts (video podcasts), branded podcasts, merchandise, and live events on behalf of our talent and clients. With a proven 360-degree advertiser solution for multiplatform integration opportunities and hyper-targeting, we deliver millions of monthly impressions, 4.8+ million monthly unique listeners, and 20+ million IAB monthly downloads. With content covering all verticals (i.e. sports, entertainment, true-crime, business, audio dramas, self-growth, etc.), we provide a platform for brands to reach their most sought after targeted audiences.

Current wording

We also produce vodcasts (video podcasts), branded podcasts, merchandise and live events on behalf of our talent and clients. With a proven 360-degree advertiser solution for multiplatform integration opportunities and hyper-targeting, we deliver millions of monthly impressions, 5.7+ million monthly unique listeners and 19+ million IAB monthly downloads. With content covering all verticals (i.e. sports, entertainment, true-crime, business, audio dramas, self-growth, etc.), we provide a platform for brands to reach their most sought after targeted audiences.

Previous wording

We have experienced significant growth in recent years driven by increased advertising activity. Our revenue was $31.6 million and $25.8 million for the nine months ended December 31, 2023 and 2022, respectively, representing year-over-year growth of 22%. For the years ended March 31, 2023 and 2022, our revenue was $34.6 million and $32.3 million and our net loss was $7.0 million and $3.6 million, respectively.

Current wording

We have experienced significant growth in recent years driven by increased advertising activity. Our revenue was $13.2 million and $10.6 million for the three months ended June 30, 2024 and 2023, respectively, representing year-over-year growth of 24%.

Previous wording

Our podcasts are available to users online alongside LiveOne’s digital Internet radio. Our users are able to listen to a variety of podcasts, from music, radio personalities, news, entertainment, comedy and sports. The podcasts are available on our platform, the LiveOne platforms and also on other leading podcast listening platforms, though various car manufacturers such as Apple Music, Spotify, and Amazon. We monetize podcasts through paid advertising. We own one of the largest networks of podcast content in North America, which has over 300 exclusive podcast shows that produces over 300 episodes per week and has generated over 2.48 billion downloads during the year ended March 31, 2023.

Current wording

Our podcasts are available to users online alongside LiveOne’s digital Internet radio. Our users are able to listen to a variety of podcasts, from music, radio personalities, news, entertainment, comedy and sports. The podcasts are available on our platform, the LiveOne platforms and also on other leading podcast listening platforms, though various car manufacturers such as Apple Music, Spotify, and Amazon. We monetize podcasts through paid advertising. We own one of the largest networks of podcast content in North America, which has over 300 exclusive podcast shows that produces over 182 episodes per week and has generated over 3.6 billion downloads during the year ended March 31, 2024.

Previous wording

In addition to our core business, it also built, owns and operates a solution for the growing number of independent podcasters, LaunchPadOne. LaunchPadOne is a self-publishing podcast platform, created to provide a low or no cost tool for independent podcasters without access to parent podcasting networks or state of the art equipment to create shows. LaunchPadOne serves as a talent pool for us to find new podcasts and talent.

Current wording

In addition to our core business, we also built, own and operate a solution for the growing number of independent podcasters, LaunchPadOne. LaunchPadOne is a self-publishing podcast platform, created to provide a low or no cost tool for independent podcasters without access to parent podcasting networks or state of the art equipment to create shows. LaunchPadOne serves as a talent pool for us to find new podcasts and talent.

Previous wording

We also expect to recognize certain expenses as part of our transition to a publicly-traded company, consisting of professional fees and other expenses. In the quarters leading up to the listing of our common stock, we expect to incur professional fees and expenses, and in the quarter of our listing we expect to incur fees paid to our financial advisor in addition to other professional fees and expenses related to such listing. Following the listing of our common stock, we expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC. In addition, as a public company, we expect to incur additional costs associated with accounting, compliance, insurance, and investor relations. As a result, we expect our general and administrative expenses to continue to increase in dollar amount for the foreseeable future but to generally decrease as a percentage of our revenue over the longer term, although the percentage may fluctuate from period to period depending on the timing and amount of our general and administrative expenses, including in the short term as we expect to incur increased compliance and professional service costs.

Current wording

We also recognized certain expenses as part of our transition to a publicly-traded company, consisting of professional fees and other expenses. In the quarters leading up to the listing of our common stock, we incurred professional fees and expenses, and in the quarter of our listing we incurred fees paid to our financial advisors in addition to other professional fees and expenses related to such listing. After the listing of our common stock, we continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). In addition, as a public company, we continue to incur additional costs associated with accounting, compliance, insurance, and investor relations. As a result, we expect our general and administrative expenses to continue to increase in dollar amount for the foreseeable future but to generally decrease as a percentage of our revenue over the longer term, although the percentage may fluctuate from period to period depending on the timing and amount of our general and administrative expenses, including in the short term as we expect to incur increased compliance and professional service costs.

Previous wording

Revenue increased $1.9 million, or 22%, to $10.4 million for the three months ended December 31, 2023, as compared to $8.6 million for the months ended December 31, 2022. The increase in revenue was primarily due to growth in barter revenue and advertising inventory.

Current wording

Revenue increased $2.5 million, or 24%, to $13.2 million for the three months ended June 30, 2024, as compared to $10.6 million for the months ended June 30, 2023. The increase in revenue was primarily due to growth in barter revenue and advertising inventory.

Previous wording

Cost of sales increased $2.3 million, or 33%, to $9.4 million for the three months ended December 31, 2023, as compared to $7.0 million for the months ended December 31, 2022. The increase was in line with our revenue growth as revenue share splits with our content creators remained consistent.

Current wording

Cost of sales increased $3.5 million, or 42%, to $11.7 million for the three months ended June 30, 2024, as compared to $8.2 million for the months ended June 30, 2023. The increase was in line with our revenue growth as revenue share splits with our content creators remained consistent.

Previous wording

Sales and Marketing expenses decreased by $0.4 million, or 34%, to $0.7 million for the three months ended December 31, 2023, as compared to $1.1 million for the three months ended December 31, 2022. The decrease was primarily due to a decrease in advertising spending as we were reducing spending on ads.

Current wording

Sales and Marketing expenses decreased by $0.4 million, or 32%, to $0.8 million for the three months ended June 30, 2024, as compared to $1.3 million for the three months ended June 30, 2023. The decrease was primarily due to a decrease in advertising spending as the amount of marketing programs was reduced.

Previous wording

Product development expenses decreased by $11,000, or 42%, to $15,000 for the three months ended December 31, 2023, as compared to $26,000 for the three months ended December 31, 2022, as no significant projects took place during both periods.

Current wording

Product development expenses decreased by $9,000, or 33%, to $18,000 for the three months ended June 30, 2024, as compared to $27,000 for the three months ended June 30, 2023, as no significant projects took place during both periods.

Previous wording

General and administrative expenses increased by $1.5 million, or 134%, to $2.6 million for the three months ended December 31, 2023, as compared to $1.1 million for the three months ended December 31, 2022, as we incurred additional cost for stock-based compensation, cost to complete its Spin-Out and related to the Finder's Fee Agreement.

Current wording

General and administrative expenses increased by $0.5 million, or 52%, to $1.4 million for the three months ended June 30, 2024, as compared to $0.9 million for the three months ended June 30, 2023, as we incurred additional cost for stock-based compensation.

Previous wording

Amortization of intangible assets increased by $0.3 million, or 1128%, to $0.3 million for the three months ended December 31, 2023 and 2022, as compared to $25,000 during the three months ended December 31, 2023. The increase can be attributed to the increase in content related intangibles associated with the acquisition of certain podcasts.

Current wording

Amortization of intangible assets increased by $0.4 million, or 1,408%, to $0.4 million for the three months ended June 30, 2024, as compared to $25,000 during the three months ended June 30, 2023. The increase can be attributed to the increase in content related intangibles associated with the acquisition of certain podcasts.

Previous wording

Total other expense decreased by $1.3 million, or 100%, to none for the three months ended December 31, 2023, as compared to $1.3 million for the three months ended December 31, 2022. The decrease is due to a decrease of $1.0 million of loss attributed to our warrant liability and derivative liability associated with the Bridge Loan (as defined below) and a decrease of $0.3 million in interest expense attributed to our Bridge Loan which began in July 2022.

Current wording

Total other expense decreased by $0.4 million, or 100%, to none for the three months ended June 30, 2024, as compared to $0.4 million for the three months ended June 30, 2023. The decrease is due to a decrease of $1.2 million of gain attributed to our warrant liability and derivative liability associated with the Bridge Loan (as defined below) and a decrease of $1.6 million in interest expense attributed to our Bridge Loan which was converted in September of 2023.

Previous wording

The following table sets forth the reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure for the three and nine months ended December 31, 2023 (in thousands):

Current wording

The following table sets forth the reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure for the three months ended June 30, 2024 (in thousands):

Previous wording

As of December 31, 2023, our principal sources of liquidity were our cash and cash equivalents in the amount of $1.4 million, which primarily are invested in cash in banking institutions in the U.S. The vast majority of our cash proceeds were received as a result of our operations, completed private placement offering (the “Bridge Loan”) of our unsecured convertible notes with an original issue discount of 10% (the “OID”) in the aggregate principal amount of $8.8 million (the “Bridge Notes”) and intercompany loans from our parent, LiveOne. As of December 31, 2023, we had a related party payable balance of $3.1 million. Our parent is required to maintain a minimum cash balance as a result of debt covenants on its debt.

Current wording

As of June 30, 2024, our principal sources of liquidity were our cash and cash equivalents in the amount of $0.9 million, which primarily are invested in cash in banking institutions in the U.S. The vast majority of our cash proceeds were received as a result of our operations, completed private placement offering (the “Bridge Loan”) of our unsecured convertible notes with an original issue discount of 10% (the “OID”) in the aggregate principal amount of $8.8 million (the “Bridge Notes”), which were converted in full in September 2023, and intercompany loans from our parent, LiveOne. As of June 30, 2024, we had a related party payable balance of $0.2 million. Our parent is required to maintain a minimum cash balance as a result of debt covenants on its debt.

Previous wording

On July 15, 2022, we completed a private placement offering of the Bridge Notes for gross proceeds of $8.0 million. In connection with the sale of the Bridge Notes, the holders of the Bridge Note received the Bridge Warrants, and we issued the Placement Agent Warrants to the placement agent. The Bridge Notes were scheduled to mature on July 15, 2023, subject to a one-time three-month extension at our election. We elected the extension and extended the maturity date to October 15, 2023. The Bridge Notes bore interest at a rate of 10% per annum payable on maturity. The Bridge Notes automatically convert into the securities of our Company sold in a Qualified Financing (an initial public offering of our securities on a national securities exchange) or a Qualified Event (a direct listing of our securities on a national securities exchange (the "Direct Listing")), as applicable, upon the closing of a Qualified Financing or Qualified Event, as applicable, at a price per share equal to the lesser of (i) the price equal to $60.0 million divided by the aggregate number of shares of our common stock outstanding immediately prior to the closing of a Qualified Financing or Qualified Event, as applicable (assuming full conversion or exercise of all convertible and exercisable securities of our Company then outstanding, subject to certain exceptions), and (ii) 70% of the offering price of the shares (or whole units, as applicable) in the Qualified Financing or 70% of the initial listing price of the shares on a national securities exchange in the Qualified Event, as applicable. Each holder of the Bridge Notes (other than LiveOne) may at such holder’s option require us to redeem up to 45% of the principal amount of such holder’s Bridge Notes (together with accrued interest thereon, but excluding the OID), in aggregate up to $3,000,000 for all of the Bridge Notes (other than those held by LiveOne), immediately prior to the completion of a Qualified Financing or a Qualified Event, as applicable, with such redemption to be made pro rata to the redeeming holders of the Bridge Notes (the “Optional Redemption”). Upon a holder’s redemption of any Bridge Notes pursuant to the Optional Redemption right, then a portion of such holder’s Bridge Warrants would be forfeited and cancelled in accordance with the following formula: for each $0.001 million of the principal amount of the Bridge Notes redeemed, the Bridge Warrants to purchase 100% of the Bridge Warrant shares issued per $0.001 million of the principal amount of the Bridge Notes shall be immediately forfeited and cancelled.

Current wording

On July 15, 2022, we completed a private placement offering of the Bridge Notes for gross proceeds of $8.0 million. In connection with the sale of the Bridge Notes, the holders of the Bridge Note received the Bridge Warrants, and we issued the Placement Agent Warrants to the placement agent. The Bridge Notes were scheduled to mature on July 15, 2023, subject to a one-time three-month extension at our election. We elected the extension and extended the maturity date to October 15, 2023. The Bridge Notes bore interest at a rate of 10% per annum payable on maturity. On September 8, 2023, we completed our direct listing on The NASDAQ Capital Market (our spin-out from LiveOne to become a standard publicly trading company) and as a result of the direct listing, all of the remaining Bridge Notes (including interest thereunder) in the aggregate amount of approximately $7.02 million converted into approximately 2,341,000 shares of our common stock.

Previous wording

As of December 31, 2023, LiveOne’s total outstanding consolidated indebtedness was $8.6 million, net of fees and discounts, which consisted of ABL Credit Facility and the Capchase Loan. The ABL Credit Facility documents contain a covenant that if a material adverse change occurs in its financial condition, or such lender reasonably believes the prospect of payment or performance of their loan is materially impaired, the lender at its option may immediately accelerate their debt and require LiveOne to repay all outstanding amounts owed thereunder. For example, if for any reason LiveOne fails to comply with the terms of its settlement agreement with SoundExchange, its senior credit facility provider may declare an event of default and at its option may immediately accelerate its debt and require LiveOne and/or us to repay all outstanding amounts owed under the senior credit facility, which would materially adversely impact our business, operating results and financial condition.

Current wording

As of June 30, 2024, LiveOne’s total outstanding consolidated indebtedness was $8.3 million, net of fees and discounts, which consisted of ABL Credit Facility and the Capchase Loan. The ABL Credit Facility documents contain a covenant that if a material adverse change occurs in its financial condition, or such lender reasonably believes the prospect of payment or performance of their loan is materially impaired, the lender at its option may immediately accelerate their debt and require LiveOne to repay all outstanding amounts owed thereunder. For example, if for any reason LiveOne fails to comply with the terms of its settlement agreement with SoundExchange, its senior credit facility provider may declare an event of default and at its option may immediately accelerate its debt and require LiveOne and/or us to repay all outstanding amounts owed under the senior credit facility, which would materially adversely impact our business, operating results and financial condition.

Previous wording

We are looking to secure additional interim financing in the immediate future after the completion of the Direct Listing, which is needed to continue our current level of operations in the future and satisfy our obligations. In the absence of additional sources of liquidity, management anticipates that existing cash resources will not be sufficient to meet current operating and liquidity needs beyond November 2024. There is no assurance that we will be able to obtain additional liquidity or be successful in raising additional funds or that such required funds, if available, will be available on attractive terms, or at all, or that they will not have a significant dilutive effect on our existing stockholders. In addition, management is unable to determine at this time whether any of these potential sources of liquidity will be adequate to support our future business operations. While we do not currently anticipate delays or hindrances to our current business operations and initiatives schedule due to liquidity constraints, without additional funding we may not be able to continue our current level of business operations in the future.

Current wording

We are looking to secure additional interim financing in the immediate future, which is needed to continue our current level of operations in the future and satisfy our obligations. In the absence of additional sources of liquidity, management anticipates that existing cash resources will not be sufficient to meet current operating and liquidity needs beyond August 2025. There is no assurance that we will be able to obtain additional liquidity or be successful in raising additional funds or that such required funds, if available, will be available on attractive terms, or at all, or that they will not have a significant dilutive effect on our existing stockholders. In addition, management is unable to determine at this time whether any of these potential sources of liquidity will be adequate to support our future business operations. While we do not currently anticipate delays or hindrances to our current business operations and initiatives schedule due to liquidity constraints, without additional funding we may not be able to continue our current level of business operations in the future.

Previous wording

As reflected in our consolidated financial statements included elsewhere in this Quarterly Report, we have a history of losses and used cash of $3.0 million in financing activities for the nine months ended December 31, 2023 and had working capital deficit of $1.3 million as of December 31, 2023. These factors, among others, raise substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued. In addition, our independent registered public accounting firm in their audit report to our financial statements for the fiscal year ended March 31, 2023 expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to execute our strategy and on our ability to raise additional funds through the sale of equity and/or debt securities via public and/or private offerings.

Current wording

As reflected in our consolidated financial statements included elsewhere in this Quarterly Report, we have a history of losses and had working capital of $0.9 million as of June 30, 2024. These factors, among others, raise substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued. In addition, our independent registered public accounting firm in their audit report to our financial statements for the fiscal year ended March 31, 2024 expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to execute our strategy and on our ability to raise additional funds through the sale of equity and/or debt securities via public and/or private offerings.

Previous wording

The following table provides information regarding our cash flows for the nine months ended December 31, 2023 and 2022 (in thousands):

Current wording

The following table provides information regarding our cash flows for the three months ended June 30, 2024 and 2023 (in thousands):

Previous wording

Net cash provided by our operating activities of $1.8 million for the nine months ended December 31, 2023 primarily resulted from our net loss during the period of $13.7 million, which included non-cash charges of $12.9 million largely comprised of depreciation and amortization, stock-based compensation, change in fair value of derivatives, amortization of debt discount and non-cash interest. The remainder of our sources of cash provided by operating activities of $2.6 million for the nine months ended December 31, 2023 was from changes in our working capital, primarily from timing of accounts receivable, accounts payable and accrued liabilities and deferred revenue.

Current wording

Net cash used in our operating activities of $0.5 million for the three months ended June 30, 2024 primarily resulted from our net loss during the period of $1.4 million, which included non-cash charges of $1.1 million largely comprised of depreciation and amortization, stock-based compensation and impairment of intangibles. The remainder of our sources of cash used operating activities of $0.2 million for the three months ended June 30, 2024 was from changes in our working capital, primarily from timing of accounts receivable, accounts payable and accrued liabilities and related party payable.

Previous wording

Net cash used in operating activities of $4.3 million for the nine months ended December 31, 2022 primarily resulted from our net loss during the period of $3.0 million, which included non-cash charges of $2.6 million largely comprised of depreciation and amortization, stock-based compensation, change in fair value of derivatives and amortization of debt discount. The remainder of our sources of cash used in operating activities of $3.9 million for the nine months ended December 31, 2022 was from changes in our working capital, primarily from timing of accounts receivable, accounts payable, and related party receivables/payables.

Current wording

Net cash used in operating activities of $46,000 for the three months ended June 30, 2023 primarily resulted from our net loss during the period of $0.2 million, which included non-cash charges of $0.5 million largely comprised of depreciation and amortization, stock-based compensation, change in fair value of derivatives and amortization of debt discount. The remainder of our sources of cash used in operating activities of $3.0 million for the three months ended June 30, 2023 was from changes in our working capital, primarily from timing of accounts receivable, accounts payable, and related party receivables/payables.

Previous wording

Net cash used in investing activities of $0.2 million for the nine months ended December 31, 2022 was for the purchase of capitalized internally developed software costs during such period.

Current wording

Net cash used in investing activities of $74,000 for the three months ended June 30, 2024 was for the purchase of fixed assets.

Previous wording

Net cash used in investing activities of $0.9 million for the nine months ended December 31, 2023 was for the purchase of capitalized internally developed software costs of $0.3 million and $0.7 million attributed to cash paid for acquired intangibles in the acquisition of certain podcasts during such period.

Current wording

Net cash used in investing activities of $48,000 for the three months ended June 30, 2023 was for the purchase of fixed assets.

Previous wording

Net cash provided by financing activities of $7.4 million for the nine months ended December 31, 2022 attributed to proceeds from the Bridge Loan.

Current wording

Net cash used in financing activities of $0.3 million for the three months ended June 30, 2023 attributed to repayments on the Bridge Loan.

Previous wording

As of December 31, 2023, LiveOne was in compliance with all covenants under the ABL Credit Facility and the Capchase Loan as of December 31, 2023.

Current wording

As of June 30, 2024, we did not have any debt covenants, and LiveOne was in compliance with all covenants under the ABL Credit Facility and the Capchase Loan.