Annual Report for Fiscal Year Ending 03-31, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements contained in this Annual Report that are not statements of historical fact constitute "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995, notwithstanding that such statements are not specifically identified. These forward-looking statements relate to expectations or forecasts for future events, including without limitation our earnings, revenues, expenses or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words "may," "might," "will," "would," "could," "should," "will likely result," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "continue," "target" or the negative or other variations thereof or comparable terminology. These forward-looking statements are not guarantees of future performance and are based on information available to us as of the date of this Annual Report and on our current expectations, forecasts and assumptions, and involve substantial risks and uncertainties. Actual results may vary materially from those expressed or implied by the forward-looking statements herein due to a variety of factors, including: LiveOne's reliance on its largest OEM customer for a substantial percentage of its revenue; LiveOne's and our ability to consummate any proposed financing, acquisition, merger, distribution or other transaction, the timing of the consummation of any such proposed event, including the risks that a condition to the consummation of any such event would not be satisfied within the expected timeframe or at all, or that the consummation of any proposed financing, acquisition, merger, special dividend, distribution or transaction will not occur or whether any such event will enhance shareholder value; our ability to continue as a going concern; our ability to attract, maintain and increase the number of its listeners; PodcastOne identifying, acquiring, securing and developing content; LiveOne's intent to repurchase shares of its and/or our common stock from time to time under LiveOne's stock repurchase program and the timing, price, and quantity of repurchases, if any, under the program; LiveOne's ability to maintain compliance with certain financial and other covenants; PodcastOne successfully implementing its growth strategy, including relating to its technology platforms and applications; management's relationships with industry stakeholders; LiveOne's ability to repay its indebtedness when due; LiveOne's ability to satisfy the conditions for closing on its announced additional convertible debentures financing; LiveOne's ability to implement its digital assets treasury strategy and/or purchase digital assets from time to time pursuant to such strategy, including for up to the maximum announced amount, and other risks related to such strategy; uncertain and unfavorable outcomes in legal proceedings and/or our and/or LiveOne's ability to pay any amounts due in connection with any such legal proceedings; changes in economic conditions; competition; risks and uncertainties applicable to the businesses of our Company, LiveOne and/or LiveOne's other subsidiaries; and other risks, uncertainties and factors including, but not limited to, those described in Part II - Item 1A of this Annual Report and in our other filings and submissions with the SEC. Except as required by law, we do not undertake any obligation to update forward-looking statements as a result of as a result of new information, future events or developments or otherwise.

The following discussion and analysis of our business and results of operations for the fiscal year ended March 31, 2026, and our financial conditions at that date, should be read in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report. As used herein, "PodcastOne," the "Company," "we," "our" or "us" and similar terms refer collectively to PodcastOne, Inc. and its subsidiaries, unless the context indicates otherwise.

Overview

We 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), Apple Podcasts, Spotify, Amazon Music and more. We are a majority owned subsidiary of LiveOne, Inc., a Delaware corporation and a Nasdaq-listed company ("LiveOne"). We have recently been ranked as high as #8 on the list of Top Podcast Publishers by the podcast metric company Podtrac, as a leading podcast publisher.

On September 8, 2023, we completed our spin-out from LiveOne and our direct listing on The Nasdaq Capital Market (the "Spin-Out") and our shares of common stock began trading on the Nasdaq under the symbol of "PODC". On September 21, 2023, we changed our corporate name to "PodcastOne, Inc." After the completion of the Spin-Out, we became a standalone publicly traded company trading on The Nasdaq Capital Market. We remain a majority owned subsidiary of LiveOne.

We 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, 6.0+ million monthly unique listeners and 17+ 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. We intend to continue to acquire 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.

Our operating model is focused on offering white glove service to our shows, talent, and advertising clients. With an in-house sales, production, marketing, and tech team, we believe PodcastOne delivers more to clients and talent than any other publisher in the marketplace. This allows us to scale our operations while attracting talent who bring in brand advertisers and revenue. We earn revenue through the sale of embedded host read ads, dynamic ads (host read and otherwise), segment sponsorships, and programmatic monetization channels. We also provide the opportunity for clients to have 100% share of voice with branded podcast episodes or series as well as live tours, merch, and IP ownership for original programming.

In addition to our core business, we also build, own and operate a solution for the growing number of independent podcasters, LaunchpadOne. LaunchpadOne is a free innovative self-publishing podcast hosting, distribution, and monetization platform that provides an end-to-end podcast solution, 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.

We have experienced significant growth in recent years driven by increased advertising activity. For the years ended March 31, 2026 and 2025, our revenue was $61.7 million and 52.1 million, respectively, representing year-over-year growth of 18%.

We are more than a podcast company. We are in the relationship business. Brands and creators partner with us to reach consumers who will purchase, listen and subscribe to their favorite PodcastOne podcasts across the audio landscape. We offer content for every type of listener with verticals including reality TV, sports, true crime self-help, and business. The visibility and reach of our network is evident with shows which consistently rank in the top 100 on the Apple Charts.

Our Business Model

We are an Ad-Supported Service that provides free content to listeners via their mobile and desktop devices. We generate revenue from the sale of audio, video and social advertising delivered through advertising impressions. We generally enter into arrangements with advertising agencies that purchase advertising on our platform on behalf of the agencies' clients. These advertising arrangements typically specify the type of advertising product, pricing, insertion dates, and number of impressions in a stated period. Revenue for our Ad-Supported segment is affected primarily by the number of a show's listeners and our ability to provide innovative advertising products that are relevant to our Ad-Supported Users and enhance returns for our advertising partners. Our advertising strategy centers on the belief that advertising products that are based on content and are relevant to the Ad-Supported User can enhance Ad-Supported Users' experiences and provide even greater returns for advertisers through the strength of our host-read embedded promos. According to a Audacy Inc. Survey in 2025, an estimated 68% of listeners believe the hosts actually use the products and services they recommend and 76% of podcast listeners say they have bought something from hearing a podcast ad. Offering advertisers additional ways to purchase advertising on a programmatic basis is another key way that we expand our portfolio of advertising products and enhance advertising revenue. Furthermore, we continue to focus on analytics and measurement tools to evaluate, demonstrate, and improve the effectiveness of advertising campaigns on our platform.

When we are onboard new talent both parties have the common interest of creating content that advertisers want to purchase. We craft our deals with a percentage split of the advertising revenue (host-read embedded ads, DAI and programmatic) which strengthens our partnerships because when advertisers spend, we all win.

Key Factors Affecting Our Performance

We believe that the growth and future success of our business depends on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations.

Impressions

The digital advertising industry is introducing new ways to measure and price advertising inventory. For example, a significant portion of advertisers are in the process of moving from purchasing advertisement impressions based on the number of advertisements served by the applicable ad server to a new "viewable" impression standard (based on number of pixels in view and duration) for select products. In the absence of a uniform industry standard, agencies and advertisers have adopted several different measurement methodologies and standards. In addition, measurement services may require technological integrations, which are still being evaluated by the advertising industry without an agreed-upon industry standard metric. As these trends in the industry continue to evolve, our advertising revenue may be adversely affected by the availability, accuracy, and utility of the available analytics and measurement technologies as well as our ability to successfully implement and operationalize such technologies and standards.

Further, the digital advertising industry is shifting to data-driven technologies and advertising products, such as automated buying. These data-driven advertising products and automated buying technologies allow publishers and advertisers to use data to target advertising toward specific groups of users who are more likely to be interested in the advertising message delivered to them. These advertising products and programmatic technologies are currently more developed in terms of advertising technology and industry adoption on the web than they are on mobile or on other software applications, and may not integrate with our desktop software version of the ad-supported services. Because the majority of our ad-supported user hours occur on mobile devices, if we are unable to deploy effective solutions to monetize the mobile device usage by our ad-supported user base, our ability to attract advertising spend, and ultimately our advertising revenue, may be adversely affected by this shift. In addition, we rely on third-party advertising technology platforms to participate in automated buying, and if these platforms cease to operate or experience instability in their business models, it also may adversely affect our ability to capture advertising spend.

We generate revenue by charging a CPM based on the volume of purchased digital ads that we measure on behalf of these customers. If the volume of impressions we measure does not continue to grow or decreases for any reason, our business will suffer. For example, if digital ad spending remains constant and our advertiser customers transition to higher CPM ad inventory, overall impression volumes may decrease, which may result in fewer impressions for us to verify and a corresponding decline in our revenues.

Podcast Services

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 the LiveOne platforms and also on other leading podcast listening platforms 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 200 exclusive podcast shows that produces over 300 episodes per week and has generated over 200 million downloads to date.

In addition to our core business, we have also build, 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.

Key Business Metric

We review various operating and financial metrics, including the number of podcasts downloaded to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. However, while we believe that other than the number of podcasts downloaded on our platform, such metrics do not materially help to evaluate our business, measure our performance or provide a better understanding of our results, our management uses its experience and understanding of the podcasting and advertising industry to evaluate such metrics, as well as CPM and various underlying podcast agreement terms (such as minimum guarantee payments, term, marketing spend) and others, such as advertiser engagement with a show, on a show by show basis and in totality across all shows on our network to predict our future business and financial performance. Accordingly, we are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies who may calculate similarly-titled metrics in a different way, and provide the number of podcasts downloaded on our platform as the metric that we believe provides the best understanding of our results, as more fully discussed below.

		Year Ended
		March 31,
		2026				2025				YoY Growth
Number of podcast downloads			228,770,500				204,709,000				12	%

The increase in the number of podcast downloads can be attributed to the increase in the number of podcasts in our podcast network.

Number of Podcast Downloads

We are an Ad-Supported Service that provides free content to listeners via their mobile and desktop devices. We generate revenue from the sale of audio, video and social advertising delivered through advertising impressions. We generally enter into arrangements with advertising agencies that purchase advertising on our platform on behalf of the agencies' clients. These advertising arrangements typically specify the type of advertising product, pricing, insertion dates, and number of impressions in a stated period. Revenue for our Ad-Supported segment is affected primarily by the number of a show's listeners and our ability to provide innovative advertising products that are relevant to our Ad-Supported Users and enhance returns for our advertising partners. Therefore we believe our ability to grow and measure our effectiveness of advertisers is dependent on tracking the number of podcast downloaded on our platform.

Basis of Presentation

Our results of operations and financial position are consolidated with LiveOne's financial statements and these financial statements have been derived as if we had operated on a standalone basis during the years ended March 31, 2026 and 2025. The amounts recorded for related party transactions with LiveOne may not be considered arm's length transactions and therefore, the financial statements may not necessarily reflect our results of operations, financial position and cash flows had we engaged in such transactions with an unrelated third party during the years ended March 31, 2026 and 2025. Accordingly, our historical financial information is not necessarily indicative of what our results of operations, financial position and cash flows will be in the future, if and when we contract at arm's length with unrelated third parties for services they receive from LiveOne.

Limitations and Reconciliations of Non-GAAP Financial Measures

Non-GAAP financial measures are presented for supplemental informational purposes only. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under U.S. GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under U.S. GAAP. For example, other companies in our industry may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance. In addition, free cash flow does not reflect our future contractual commitments and the total increase or decrease of our cash balance for a given period. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures and to not rely on any single financial measure to evaluate our business.

Components of Results of Operations

Revenue

We generate revenue primarily 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 our efforts to satisfy the performance obligation. We earn 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.

Cost of Sales

Cost of sales consists of direct costs comprised of revenue sharing expenses owed to content creators and commissions.

Operating Expenses

Our operating expenses consist of cost of sales, product development, sales and marketing, and general and administrative expenses. Personnel-related expenses are the most significant component of operating expenses and consist of salaries, benefits, stock-based compensation expense, and, in the case of sales and marketing expenses, sales commissions. Operating expenses also include an allocation of overhead costs for facilities and shared IT-related expenses. As we continue to invest in our business, we expect our operating expenses to continue to increase in dollar amount, and although we believe our operating expenses as a percentage of revenue will decrease over the longer term, we expect operating expenses as a percentage of revenue will increase in the short term as we invest in product innovation and sales growth and incur additional professional services and compliance costs as we operate as a public company.

Sales and Marketing

Sales and Marketing include direct and indirect costs related to our advertising and marketing. Additionally, sales and marketing include merchandising advertising and royalty costs. Advertising expenses to promote our services are expensed as incurred.

Product Development

Product development costs not capitalized are primarily expenses for research and development, product and content development activities, including internal software development and improvement costs which have not been capitalized by us.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for our finance, human resources, information technology, and legal organizations. These expenses also include non-personnel costs, such as outside legal, accounting, and other professional fees, software subscriptions, as well as certain tax, license, and insurance-related expenses, and allocated overhead costs.

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.

Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

		Year Ended
		March 31,
		2026				2025
Revenue:		$	61,671			$	52,119
Operating expenses:
Cost of sales			54,101				47,394
Sales and marketing			3,239				3,479
Product development			46				52
General and administrative			6,354				6,205
Impairment of intangible and fixed assets			-				334
Amortization of intangible assets			573				1,089
Total operating expenses			64,313				58,553
Loss from operations			(2,642	)			(6,434	)
Other income (expense):
Other expense			(2	)			-
Total other expense, net			(2	)			-
Loss before provision for income taxes			(2,644	)			(6,434	)
Provision for income taxes			-				24
Net loss		$	(2,644	)		$	(6,458	)
Net loss per share - basic and diluted		$	(0.10	)		$	(0.26	)
Weighted average common shares - basic and diluted			26,648,322				24,381,613

The following table provides the depreciation expense included in the above line items (in thousands):

		Year Ended
		March 31,
		2026				2025				% Change
Depreciation expense
Cost of sales		$	32			$	145				(78	)%
Sales and marketing			20				85				(76	)%
General and administrative			(8	)			20				(140	)%
Total depreciation expense		$	44			$	250				(82	)%

The following table provides the stock-based compensation expense included in the above line items (in thousands):

		Year Ended
		March 31,
		2026				2025				% Change
Stock-based compensation expense
Cost of sales		$	4,722			$	93				4977	%
Sales and marketing			253				31				716	%
General and administrative			3,236				4,091				(21	)%
Total stock-based compensation expense		$	8,211			$	4,215				95	%

The following table provides our results of operations, as a percentage of revenue, for the periods presented:

		Year Ended
		March 31,
		2026				2025
Revenue			100	%			100	%
Operating expenses
Cost of sales			88	%			91	%
Sales and marketing			5	%			7	%
Product development			0	%			0	%
General and administrative			10	%			12	%
Impairment of intangible assets			0	%			1	%
Amortization of intangible assets			1	%			2	%
Total operating expenses			104	%			112	%
Income (loss) from operations			(4	)%			(12	)%
Other income (expense), net			(0	)%			0	%
Loss before income taxes			(4	)%			(12	)%
Income tax provision			0	%			0	%
Net loss			(4	)%			(12	)%

Revenue

Revenue increased $9.6 million, or 18%, for our fiscal year ended March 31, 2026 ("fiscal 2026") compared to our year ended March 31, 2025 ("fiscal 2025"). The increase in revenue was primarily due to growth in direct ad revenue of $6.3 million and an increase in barter revenue of $3.0 million due to an increase in advertising demand as a result of our increased partnerships and podcasts delivered.

Cost of sales

Cost of sales increased $6.7 million, or 14%, for fiscal 2026 compared to fiscal 2025. The increase was in line with our revenue growth as revenue share splits with our content creators remained consistent.

Operating Expenses

		Year Ended
		March 31,
		2026				2025				% Change
Sales and marketing expenses		$	3,239			$	3,479				(7	)%
Product development			46				52				(12	)%
General and administrative			6,354				6,205				2	%
Impairment of intangible assets			-				334				100	%
Amortization of intangible assets			573				1,089				(47	)%
Total Other Operating Expenses		$	10,212			$	11,159				(8	)%

Sales and Marketing

Sales and marketing expenses decreased $0.2 million, or 7%, for fiscal 2026 compared to fiscal 2025. The decrease was primarily due to less advertising spending as it pertained to marketing our podcast shows.

Product Development

Product development decreased $6,000, or 12%, for fiscal 2026 compared to fiscal 2025. The decrease was primarily due to a decrease in project activity.

General and Administrative

General and administrative expenses increased $0.1 million, or 2%, for fiscal 2026 compared to fiscal 2025. The increase was primarily due to an increase in stock-based compensation and our legal and accounting fees.

Impairment of Intangible and Fixed Assets

Impairment of intangible assets decreased by $0.3 million, or 100%, for fiscal 2026 compared to fiscal 2025. The decrease is attributed to the cancellation of a show previously acquired (see Note 4 - Goodwill and Intangible Assets) in the amount of $.02 million and the remining due to ceasing to use some of the company's internally developed software.

Amortization of Intangible Assets

Amortization of intangible assets decreased by $0.5 million, or 47%, for fiscal 2026 compared to fiscal 2025. The decrease can be attributed to the decrease in content related intangibles associated with the write-off of certain podcasts.

Other Income (Expense), net

		Year Ended
		March 31,
		2026				2025				% Change
Total other income (expense), net		$	(2	)		$	-				100	%

Other income (expense), net decreased $2,000, or 100%, for fiscal 2026 compared to fiscal 2025. The change was not deemed significant.

Non-GAAP Financial Measures

The following table presents certain non-GAAP financial measures, along with the most directly comparable U.S. GAAP measure, for each period presented below. In addition to our results determined in accordance with U.S. GAAP, we believe these non-GAAP financial measures are useful in evaluating our operating performance. See below for a description of the non-GAAP financial measures and their limitations as an analytical tool. A reconciliation is also provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP.

Contribution Margin

Contribution Margin is a non-GAAP financial measure defined as Revenue less Cost of Sales.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) before (a) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity, (c) employee severance payments and third party professional fees directly attributable to acquisition or corporate realignment activities, (d) certain non-recurring expenses associated with legal settlements or reserves for legal settlements in the period that pertain to historical matters that existed at acquired companies prior to their purchase date, (e) interest and other collateral/loan-related fees, (f) depreciation and amortization (including goodwill and intangible asset impairment, if any), and (g) certain stock-based compensation expense. We use Adjusted EBITDA to evaluate our performance. We believe that information about Adjusted EBITDA assists investors by allowing them to evaluate changes in the operating results of our business separate from non-operational factors that affect net income (loss), thus providing insights into both operations and the other factors that affect reported results. Adjusted EBITDA is not calculated or presented in accordance with GAAP. A limitation of the use of Adjusted EBITDA as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, Adjusted EBITDA should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, Adjusted EBITDA as presented herein may not be comparable to similarly titled measures of other companies.

Adjusted EBITDA Margin

Adjusted EBITDA Margin is a non-GAAP financial measure that we define as the ratio of Adjusted EBITDA to Revenue.

The following table sets forth the reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure for the year ended March 31, 2026 and 2025 (in thousands):

																		Non-
																		Recurring
						Depreciation				Stock-Based				Stock-Based				Acquisition and				Other				(Benefit)
		Net Income				and				Compensation				Compensation				Realignment				(Income)				Provision				Adjusted
		(Loss)				Amortization				Employees & Directors				Third Party Service				Costs				Expense				for Taxes				EBITDA
Year Ended March 31, 2026
Total		$	(2,644	)		$	616			$	1,654			$	6,557			$	120			$	2			$	-			$	6,305
Year Ended March 31, 2025
Total		$	(6,458	)		$	1,671			$	2,671			$	1,544			$	47			$	-			$	24			$	(501	)

The following table sets forth the reconciliation of Contribution Margin to Revenue, the most comparable GAAP financial measure (in thousands):

		Year Ended
		March 31,
		2026				2025
Revenue:		$	61,671			$	52,119
Less:
Cost of sales			(54,101	)			(47,394	)
Amortization of developed technology			(31	)			(227	)
Gross Profit			7,539				4,498
Share-based compensation			4,722				93
Depreciation			32				145
Developed technology			31				227
Contribution Margin		$	12,324			$	4,963

Limitations and Reconciliations of Non-GAAP Financial Measures

Non-GAAP financial measures are presented for supplemental informational purposes only. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under U.S. GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under U.S. GAAP. For example, other companies in our industry may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance. In addition, free cash flow does not reflect our future contractual commitments and the total increase or decrease of our cash balance for a given period. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures and to not rely on any single financial measure to evaluate our business.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe that the assumptions and estimates associated with our revenue recognition, allowance for doubtful accounts, the assigned value of acquired tangible and intangible assets and assumed and contingent liabilities associated with business combinations, provision for legal settlements, useful lives and impairment of property and equipment, intangible assets, goodwill and other assets, the fair value of our equity-based compensation awards and convertible debt instruments, and valuation of deferred income tax assets and liabilities, have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Revenue Recognition

We account 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 we satisfy 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. We use the expected value method to estimate the value of variable consideration on advertising 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 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.

We report revenue on a gross or net basis based on management's assessment of whether we act as a principal or agent in the transaction. To the extent we act as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable. The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer. Where applicable, we have determined that we act as the principal in all of its membership service streams and may act as principal or agent for our advertising and licensing revenue streams.

Advertising Revenue

Advertising revenue primarily consists 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. The Company 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 we enter into barter transactions involving advertising provided in exchange for goods and services. Revenue from barter transactions is recognized ratably over time based on the terms of the contract as delivery of impressions is performed on a consistent basis. The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the advertising spots promised or delivered to the customer. Services received are charged to expense in the same manner.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period, on a straight-line basis. We use the Black-Scholes-Merton option pricing model to determine the grant date fair value of stock options. This model requires us to estimate the expected volatility and the expected term of the stock options which are highly complex and subjective variables. The variables take into consideration, among other things, actual and projected employee stock option exercise behavior. We use a predicted volatility of its stock price during the expected life of the options that is based on the historical performance of our stock price as well as including an estimate using guideline companies. Expected term is computed using the simplified method as the Company's best estimate given its lack of actual exercise history. We have selected a risk-free rate based on the implied yield available on U.S. Treasury securities with a maturity equivalent to the expected term of the stock. Stock-based awards are comprised principally of stock options, restricted stock and restricted stock units ("RSUs"). Forfeitures are recognized as incurred.

Stock option awards issued to non-employees are accounted for at the grant date fair value determined using the Black-Scholes-Merton option pricing model. Management believes that the fair value of the stock options is more reliably measured than the fair value of the services received. We record the fair value of these equity-based awards and expense at their cost ratably over related vesting periods.

Commitments and Contingencies

From time to time, we are involved in legal proceedings and other matters arising in connection with the conduct of our business activities. Many of these proceedings may be at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of our commitments and contingencies in which we are involved to (i) assess whether a material loss is probable or there is at least a reasonable possibility that a material loss or an additional material loss in excess of a recorded accrual may have been incurred and (ii) determine if financial accruals are required when appropriate. We record an expense accrual for any commitments and loss contingency when we determine that a loss is probable and the amount of the loss can be reasonably estimated. If an expense accrual is not appropriate, we further evaluate each matter to assess whether an estimate of possible loss or range of loss can be made and whether or not any such matter requires additional disclosure. There can be no assurance that any proceeding against us will be resolved in amounts that will not differ from the amounts of estimated exposures. Legal fees and other costs of defending litigation are expensed as incurred.

Non-Income Tax Contingencies

We do not collect and remit sales and use or similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable or legally required.

The June 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc., No. 17-494, along with the application of existing, new or future rulings and laws, could have adverse effects on our business, prospects and operating results.

Long-lived Assets, Goodwill and Intangible Assets with Finite Lives

We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination, and allocate the purchase price of each acquired business to its respective net tangible and intangible assets. Acquired intangible assets principally comprise of customer relationships and technology. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits is expected to be consumed.

Goodwill represents the excess of the purchase consideration of an acquired entity over the fair value of the acquired net assets. Goodwill is tested for impairment annually or when events or circumstances change that would indicate that goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends or significant under-performance relative to expected historical or projected future results of operations.

We evaluate the recoverability of our intangible assets, and other long-lived assets with finite useful lives for impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. These trigger events or changes in circumstances include, but are not limited to a significant decrease in the market price of a long-lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being used, significant adverse changes in legal factors, including changes that could result from our inability to renew or replace material agreements with certain of our partners such as Tesla Motors on favorable terms, significant adverse changes in the business climate including changes which may result from adverse shifts in technology in our industry and the impact of competition, a significant adverse deterioration in the amount of revenue or cash flows we expect to generate from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of our long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. We perform impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In making this determination, we consider the specific operating characteristics of the relevant long-lived assets, including (i) the nature of the direct and any indirect revenues generated by the assets; (ii) the interdependency of the revenues generated by the assets; and (iii) the nature and extent of any shared costs necessary to operate the assets in their intended use. An impairment test would be performed when the estimated undiscounted future cash flows expected to result from the use of the asset group is less than its carrying amount. Impairment is measured by assessing the usefulness of an asset by comparing its carrying value to its fair value. If an asset is considered impaired, the impairment loss is measured as the amount by which the carrying value of the asset group exceeds its estimated fair value. Fair value is determined based upon estimated discounted future cash flows. The key estimates applied when preparing cash flow projections relate to revenue, operating margins, economic lives of assets, overheads, taxation and discount rates. To date, we have not recognized any such impairment loss associated with our long-lived assets.

Goodwill is tested for impairment at the reporting unit level, which is the same or one level below an operating segment. In any year we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or we decide to bypass the qualitative assessment, we perform a quantitative analysis. The quantitative analysis is used to identify both the existence of impairment and the amount of the impairment loss by comparing the estimated fair value of a reporting unit with its carrying value, including goodwill. The estimated fair value is based on internal projections of expected future cash flows and operating plans, as well as market conditions relative to the operations of our reporting units. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired; otherwise, an impairment loss is recognized within our consolidated statements of operations in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Liquidity and Capital Resources

Current Financial Condition

As of March 31, 2026, our principal sources of liquidity were our cash and cash equivalents in the amount of $3.5 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. All of such Bridge Notes were converted into shares of our common stock in connection with the completion of our Direct Listing. As of March 31, 2026, we had a net related party receivable balance of $0.3 million. Our parent is required to maintain a minimum cash balance as a result of debt covenants on its debt.

Our long-term ability to continue as a going concern is dependent upon our ability to increase revenue, reduce costs, achieve a satisfactory level of profitable operations, and obtain additional sources of suitable and adequate financing. Our ability to continue as a going concern is also dependent its ability to further develop and execute on our business plan. We may also have to reduce certain overhead costs through the reduction of salaries and other means and settle liabilities through negotiation. There can be no assurance that management's attempts at any or all of these endeavors will be successful.

Sources of Liquidity

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 warrants to purchase shares of our common stock (the "Bridge Warrants"), and we also issued warrants to purchase shares of our common stock to the placement agent in the offering (the "Placement Agent Warrants"). 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. On September 8, 2023, we completed a Qualified Event (as defined in the Bridge Notes) as a result of our direct listing on The NASDAQ Capital Market on such date. In connection with such completed Qualified Event, 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 at the conversion price of $3.00 per share, and the exercise price of the Bridge Warrants and the Placement Agent Warrants was fixed at $3.00 per share. All of the 3,114,000 Bridge Warrants and the Placement Agent Warrants were issued and outstanding as of March 31, 2026.

In August 2023, LiveOne entered into a $1.7 million secured loan with Capchase which accrues interest at 8% and matures 30 months form issuance (the "Capchase Loan"). On January 28, 2025, LiveOne entered into a new Business Loan Agreement (the "2025 Business Loan Agreement") with its then senior lender to update certain terms of its former credit facility (the "ABL Credit Facility"), including to reduce the principal amount outstanding under the promissory note underlying the facility (the "Promissory Note") to $3,750,000, reflecting LiveOne's repayment of the ABL Credit Facility as of such date, and to extend the maturity date of the Promissory Note to November 20, 2025. The Capchase Loan was repaid in full in February 2026.

On May 19, 2025, we and LiveOne entered into a Securities Purchase Agreement (the "SPA") with certain institutional investors (each, a "Purchaser" and collectively, the "Purchasers"), pursuant to which (i) LiveOne sold to the Purchasers our Original Issue Discount Senior Secured Convertible Debentures (the "Initial Debentures") in an aggregate principal amount of $16,775,000 for an aggregate cash purchase price of $15,250,000, and (ii) if certain conditions are satisfied as set forth in the SPA, including at least one of the Conditions (as defined below), LiveOne may sell at its option to the Purchasers its additional Original Issue Discount Senior Secured Convertible Debentures in an aggregate principal amount of $11,000,000 on substantially the same terms as the Initial Debentures (the "Additional Debentures" and collectively with the Initial Debentures, the "Debentures"). The Debentures are convertible into shares of LiveOne's common stock at the holder's option at a conversion price of $2.10 per share, subject to certain customary adjustments such as stock splits, stock dividends and stock combinations. LiveOne may sell to the Purchasers the Additional Debentures if within 15 months of the Closing Date either of the following conditions have been satisfied during such 15-month period (the "Conditions"): (x) the VWAP (as defined in the SPA) of LiveOne's common stock has been equal to or greater than $4.20 per share (subject to certain customary adjustments such as stock splits, stock dividends and stock combinations) for 30 consecutive trading days, or (y) Free Cash Flow (as defined in the SPA) has been equal to or greater to $3,000,000 for three consecutive fiscal quarters, and has increased in each of the foregoing quarters from the immediately preceding fiscal quarter. The Initial Debentures mature on May 19, 2028 and accrue interest at 11.75% per year. Commencing with the calendar month of August 2025 (subject to the following sentence), the holders of the Initial Debentures will have the right, at their option, to require LiveOne to redeem an aggregate of up to $100,000 of the outstanding principal amount of the Debentures per month. Commencing from November 18, 2025, May 18, 2026 and May 18, 2027, the holders of the Initial Debentures will have the right, at their option, to require LiveOne to redeem an aggregate of up to $150,000, $250,000 and $300,000, respectively, of the outstanding principal amount of the Initial Debentures per month. In connection with the sale of the Debentures, LiveOne paid off all obligations owing under, and terminated, the 2025 Business Loan Agreement, and all related loan agreements.

As of May 31, 2025, LiveOne's total outstanding consolidated indebtedness was $14.7 million, net of fees and discounts, which consisted of the Debentures and a SBA loan.

On October 1, 2024, LiveOne announced an amended relationship with our largest OEM customer. The OEM customer no longer subsidize LiveOne's services to some of its customers, however, LiveOne continues to offer all OEM customer vehicles in North America the opportunity to convert to become direct subscribers of LiveOne's LiveOne music app. The direct subscription to the LiveOne app allows such users for the first time to access their LiveOne music and LiveOne's other service offerings directly across all of their devices. LiveOne's music streaming button/icon, which allows users to directly connect their subscription to LiveOne, is expected to remain in the OEM customer's music streaming services dashboard in perpetuity. The OEM customer will continue to pay LiveOne monthly for grandfathered vehicles for the term of the OEM license agreement. Accordingly, the change in LiveOne's relationship with the OEM customer in October 2024 is likely to cause its liquidity and cash flows to fluctuate significantly beyond March 31, 2025, which may then have an impact on our liquidity and potentially cause our liquidity to fluctuate significantly beyond March 31, 2025. LiveOne's liquidity will depend upon its ability to convert as many of the OEM drivers as possible to become direct subscribers of its LiveOne app and the OEM customer continuing to pay for any grandfather users, as well as LiveOne's ability to enter into new B2B agreements to provide its services that could materially contribute to our liquidity and cash flows, which may then have an impact on our liquidity and potentially cause our liquidity to fluctuate significantly. In addition, LiveOne's liquidity will depend on its ability to negotiate with its music labels, publishers and other partners to achieve flexibility in the terms of its license agreements to match their OEM driver conversions, which may then have an impact on our liquidity and potentially cause our liquidity to fluctuate significantly. Furthermore, LiveOne's liquidity will be dependent on its ability to repay the Debentures when due and/or pay any amounts that LiveOne has agreed to pay under the SX Settlement Agreement, which may then have an impact on our liquidity and potentially cause our liquidity to fluctuate significantly.

As of the date of this Annual Report, holders of 1,243,998 Bridge Warrants (other than LiveOne) exercised their warrants for cash at an exercise price of $3.00 per share resulting in proceeds to us of approximately $3.73 million. LiveOne also exercised all of its 1.1 million Bridge Warrants.

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 June 2026. 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.

Subject to applicable limitations in the instruments governing our outstanding indebtedness, if any, we may also use our current cash and cash equivalents to repurchase shares of our common stock, and pay down our debt, if any, and/or LiveOne's debt, in part or in full. We may do so in the open market, through tender offers, through exchanges for debt or equity securities, in privately negotiated transactions or otherwise.

In the future, we may utilize additional commercial financings, bonds, notes, debentures, lines of credit and term loans with a syndicate of commercial banks or other bank syndicates and/or issue equity securities (publicly or privately) for general corporate purposes, including acquisitions and investing in our intangible assets, content, platform and technologies.

As reflected in our consolidated financial statements included elsewhere in this Annual Report, we have a history of losses which was $2.6 million for the year ended March 31, 2026. 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, 2026 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.

Our long-term ability to continue as a going concern is dependent upon our ability to increase revenue, reduce costs, achieve a satisfactory level of profitable operations, and/or obtain additional sources of suitable and adequate financing. Our ability to continue as a going concern is also dependent its ability to further develop and execute on our business plan. We may also have to reduce certain overhead costs through the reduction of salaries and other means and settle liabilities through negotiation. There can be no assurance that management's attempts at any or all of these endeavors will be successful.

Credit Agreement and Other Debt

For additional information regarding our credit agreement and other debt, see "Contractual Obligations" in this Item 7 below and in the footnotes to the Consolidated Financial Statements (Notes 6, 7, and 8 to our financial statements included elsewhere in this Annual Report).

Sources and Uses of Cash

Cash Flows

The following table provides information regarding our cash flows for the fiscal years ended March 31, 2026 and 2025 (in thousands):

		Year Ended
		March 31,
		2026				2025
Net cash provided by (used in) operating activities		$	2,452			$	(212	)
Net cash used in investing activities			(22	)			(154	)
Net cash used in financing activities			-				-
Net change in cash, cash equivalents and restricted cash		$	2,430			$	(366	)

Cash Provided By (Used In) Operating Activities

Net cash provided by operating activities for the year ended March 31, 2026 of $2.5 million primarily resulted from our net loss during the period of $2.6 million, which included non-cash charges of $3.7 million largely comprised of depreciation and amortization, stock-based compensation and provision for credit losses. The remainder of our sources of cash used in operating activities of $1.4 million for this period was from changes in our working capital.

Net cash provided by our operating activities for the year ended March 31, 2025 of $0.2 million primarily resulted from our net loss during the period of $6.5 million, which included non-cash charges of $4.4 million largely comprised of depreciation and amortization, stock-based compensation, provision for credit losses and impairment of intangibles. The remainder of our sources of cash used in operating activities of $1.8 million for this period was from changes in our working capital, including $2.4 million from timing of intercompany payables/receivables.

Cash Flows Used In Investing Activities

Net cash used in investing activities for the year ended March 31, 2026 of $22,000 was principally due to the $22,000 of cash used for the purchase of property and equipment during such period.

Net cash used in investing activities for the year ended March 31, 2025 of $0.2 million was principally due to the $0.2 million of cash used for the purchase of property and equipment during such period.

Cash Flows Used In Financing Activities

Net cash used in financing activities for the year ended March 31, 2026 was none.

Net cash used in financing activities for the year ended March 31, 2025 was none.

Debt Covenants

As of March 31, 2026, LiveOne was in compliance with all of its Debenture debt covenants.

Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report for a discussion of new accounting pronouncements.