Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended December 31, 2018 and 2017

Note 1 — Organization and Basis of Presentation

Organization

LiveXLive Media, Inc. (“LiveXLive”) together with its subsidiaries (“we,” “us,” “our” or the “Company”) is a Delaware corporation headquartered in West Hollywood, California. The Company is a global digital media company focused on live entertainment.

The Company was reincorporated in the State of Delaware on August 2, 2017, pursuant to a reincorporation merger of Loton, Corp (“Loton”) with and into LiveXLive, Loton’s wholly-owned subsidiary at the time. As a result of the reincorporation merger, Loton ceased to exist as a separate entity, with LiveXLive being the surviving entity. In addition, on December 29, 2017, LiveXLive acquired Slacker, Inc. (“Slacker”), an internet music and radio streaming service incorporated in the state of Delaware, which is now a wholly-owned subsidiary of the Company.

Basis of Presentation

The presented financial information for the three and nine months ended December 31, 2018 includes the financial information and activities of LiveXLive (92 and 275 days, respectively) and Slacker (92 and 275 days, respectively). The presented financial information for the three and nine months ended December 31, 2017 includes the financial information and activities of LiveXLive (92 and 275 days, respectively) and Slacker (3 and 3 days, respectively), with the financial results of LiveXLive Tickets, Inc., a Delaware wholly-owned subsidiary of the Company (“LXL Tickets”), reflected as discontinued operations during the three and nine months ended December 31, 2017. Unless otherwise indicated, the information in the notes to the Company’s consolidated financial statements refers only to the Company’s continuing operations and does not include discussion of balances or activities of LXL Tickets.

In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2018, and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s interim unaudited condensed consolidated financial statements for the three and nine months ended December 31, 2018. The results for the three and nine months ended December 31, 2018 are not necessarily indicative of the results expected for the full 2019 fiscal year ending March 31, 2019. The condensed consolidated balance sheet as of March 31, 2018 has been derived from the Company’s audited balance sheet included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 29, 2018 (the “2018 Form 10-K”).

Going Concern and Liquidity

The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The interim unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete audited financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the 2018 Form 10-K.

These financial statements have been prepared on the basis of the Company having sufficient liquidity to fund its operations for at least the next twelve months from the issuance of these condensed consolidated financial statements in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 205-40 (“ASC Topic 205-40”), Presentation of Financial Statements—Going Concern . The Company’s principal sources of liquidity have historically been its debt and equity issuances and its cash and cash equivalents (which cash and cash equivalents amounted to $14.3 million as of December 31, 2018, and $10.3 million as of March 31, 2018, respectively). The Company’s internal plans and forecasts indicate that it may not have sufficient liquidity to continue to fund its business and operations for at least the next twelve months in accordance with ASC Topic 205-40.

As reflected in its condensed consolidated financial statements included elsewhere herein, the Company has a history of losses, incurred a net loss of $27.7 million, and utilized cash of $3.8 million in operating activities for the nine months ended December 31, 2018, and had a working capital deficiency of $17.6 million as of December 31, 2018. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date that these financial statements are filed. The Company’s condensed 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 the Company be unable to continue as a going concern.

The Company’s long-term ability to continue as a going concern is dependent upon its ability to increase revenue, reduce costs, achieve a satisfactory level of profitable operations, and obtain additional sources of suitable and adequate financing. The Company’s ability to continue as a going concern is also dependent on its ability to further develop and execute on its business plan. The Company 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.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. Acquisitions are included in the Company’s condensed consolidated financial statements from the date of the acquisition. The Company uses purchase accounting for its acquisitions, which results in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. All intercompany balances and transactions have been eliminated in consolidation.

Investments that the Company has the ability to control, and where it is the primary beneficiary, are consolidated.

Earnings or losses attributable to any non-controlling interests in a Company subsidiary are included in net income (loss) in the Company’s condensed consolidated statements of operations. Any investments in the Company’s affiliates over which the Company has the ability to exert significant influence, but does not control and with respect to which it is not the primary beneficiary are accounted for using the equity method of accounting. The Company accounts for its investments in equity securities in accordance with ASC Topic No. 321, Investments - Equity Securities , which requires the accounting for equity investments (other than those accounted for using the equity method of accounting) generally be measured at fair value for equity securities with readily determinable fair values. For equity securities without a readily determinable fair value that are not accounted for by the equity method, the Company measures the equity security using cost, less impairment, if any, and plus or minus observable price changes arising from orderly transactions in the same or similar investment from the same issuer. Any unrealized gains or losses will be reported in current earnings.

Reclassifications

Certain amounts in the Company’s previously issued financial statements have been reclassified to conform to the presentation following the acquisition of Slacker and reflect the operating structure of the Company after the disposition of LXL Tickets and the acquisition of Slacker.

Note 2 — Summary of Significant Accounting Policies

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include revenue, allowance for doubtful accounts, the assigned value of acquired assets and assumed and contingent liabilities associated with business combinations and the related purchase price allocation, valuation of media content, useful lives and impairment of property and equipment, intangible assets, goodwill and other assets, the fair value of the Company’s equity-based compensation awards and convertible debt and debenture instruments, fair values of derivatives, and legal contingencies. Actual results could differ materially from those estimates. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

Revenue Recognition Policy

On April 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09” or “Topic 606”) and all related amendments and applied the concepts to all contracts using the full retrospective method. The Company had no cumulative impact of adopting Topic 606 to record through accumulated deficit. There was no impact to the Company upon adoption of Topic 606, nor was there any impact to comparable revenues for the three and nine months ended December 31, 2017, as a result of applying Topic 606. Additionally, there were no changes to any line items in the Company’s condensed consolidated financial statements.

The Company accounts 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 the Company satisfies 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. The Company uses the expected value method to estimate the value of variable consideration on advertising and with original equipment manufacturer 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 and subscription 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.

Practical Expedients

The Company elected the practical expedient and did not restate contracts that began and were completed within the same annual reporting period.

The Company elected the practical expedient and recognized the incremental costs of obtaining a contract, if any, as an expense when incurred if the amortization period of the asset that would have been recognized is one year or less.

Gross Versus Net Revenue Recognition

The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction. To the extent the Company acts as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service prior to transfer to the customer. Where applicable, the Company has determined that it acts as the principal in all of its revenue streams.

The Company’s revenue is principally derived from the following services:

Subscription Services

Subscription services revenue substantially consist of monthly to annual recurring subscription fees, which are primarily paid in advance by credit card or through direct billings arrangements. The Company defers the portions of monthly to annual recurring subscription fees collected in advance and recognizes them in the period earned. Subscription revenue is recognized in the period of services rendered. The Company’s subscription revenue consists of performance obligations that are satisfied over time. This has been determined based on the fact that the nature of services offered are subscription based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. As a result, the Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure. The Company recognizes subscription revenue straight-line through the subscription period.

Subscription Services consist of:

Direct subscriber, mobile service provider and mobile app services

The Company generates revenue for subscription services on both a direct basis and through subscriptions sold through certain third-party mobile service providers and mobile app services (collectively the “Mobile Providers”). For subscriptions sold through the Mobile Providers, the subscriber executes an on-line agreement with Slacker outlining the terms and conditions between Slacker and the subscriber upon purchase of the subscription. The Mobile Providers promote the Slacker app through their e-store, process payments for subscriptions, and retain a percentage of revenue as a fee. The Company reports this revenue gross of the fee retained by the Mobile Providers, as the subscriber is Slacker’s customer in the contract and Slacker controls the service prior to the transfer to the subscriber. Subscription revenues from monthly subscriptions sold directly through Mobile Providers are subject to such Mobile Providers’ refund or cancellation terms. Revenues from Mobile Providers are recognized net of any such adjustments for variable consideration, including refunds and other fees. The Company’s payment terms vary based on whether the subscription is sold on a direct basis or through Mobile Providers. Subscriptions sold on a direct basis require payment before the services are delivered to the customer. The payment terms for subscriptions sold through Mobile Providers vary, but are generally payable within 30 days.

Third-Party Original Equipment Manufacturers

The Company generates revenue for subscription services through subscriptions sold through a third-party Original Equipment Manufacturer (the “OEM”). For subscriptions sold through the OEM, the OEM executes an agreement with Slacker outlining the terms and conditions between Slacker and the OEM upon purchase of the subscription. The OEM installs the Slacker app in their equipment and provides the Slacker service to the OEM’s customers. The monthly fee charged to the OEM is based upon a fixed rate per vehicle, multiplied by the variable number of total vehicles which have the Slacker application installed. The number of customers, or the variable consideration, is reported by OEMs and resolved on a monthly basis. The Company’s payment terms with OEM are up to 30 days. The OEM does not charge the car owners a fee for the Slacker service.

Advertising Revenue

Advertising revenue primarily consist 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.

Licensing Revenue

Licensing revenue primarily consists of sales of licensing rights to digitally stream its live music services in certain geographies (e.g. China). Licensing revenue is recognized when the Company satisfies its performance 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, which is typically when the live event has aired. Any license fees collected in advance of an event are deferred until the event airs. The Company reports licensing revenue on a gross basis as the Company acts as the principal in the underlying transactions.

Cost of Sales

Cost of Sales principally consists of royalties paid for the right to stream video, music and non-music content to the Company’s customers and the cost of securing the rights and producing and streaming live events from venues and for promoters. Royalties are calculated using negotiated and regulatory rates documented in content license agreements and are based on usage measures or revenue earned. Music royalties to record labels, professional rights organizations and music publishers primarily relate to the consumption of music listened to on Slacker’s radio services.

Sales and Marketing

Sales and Marketing include the direct and indirect costs related to the Company’s product and event advertising and marketing costs.

Product Development

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

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 an accelerated basis. The Company accounts for awards with graded vesting as if each vesting tranche is valued as a separate award. The Company uses the Black-Scholes-Merton option pricing model to determine the grant date fair value of stock options. This model requires the Company 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. The Company uses a predicted volatility of its stock price during the expected life of the options that is based on the historical performance of the Company’s stock price as well as including an estimate using guideline companies. The expected term is computed using the simplified method as the Company’s best estimate given its lack of actual exercise history. The Company has 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, restricted stock units (“RSUs”) and warrant grants. Forfeitures are recognized as incurred.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Company’s Statements of Operations in the period that includes the enactment date.

Net Income (Loss) Per Share

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of stock options issued to employees, directors and consultants, restricted stock units, warrants issued to third parties and accounted for as equity instruments, convertible debentures and convertible notes have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.

At December 31, 2018 and 2017, the Company had 167,363 and 0 warrants outstanding, respectively, 5,111,668 and 1,833,334 options outstanding, respectively, 673,408 and 0 restricted stock units outstanding, respectively, and 2,662,267 and 2,669,682 shares of common stock issuable underlying the Company’s convertible notes and convertible debentures payable, respectively.

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the underlying net tangible and intangible assets acquired, based on their respective fair values. The excess of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interests requires management’s judgment and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of customer turnover rates and estimates of terminal values.

Discontinued Operations

In determining whether a group of assets that is disposed (or to be disposed) should be presented as a discontinued operation, the Company analyzes whether the group of assets being disposed represents a component of the Company; that is, whether it had historic operations and cash flows that were clearly distinguished, both operationally and for financial reporting purposes. In addition, the Company considers whether the disposal represents a strategic shift that has or will have a major effect on its operations and financial results. The results of discontinued operations, as well as any gain or loss on the disposal, if applicable, are aggregated and separately presented in the Company’s consolidated statements of operations, net of income taxes.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with original maturities, when purchased, of three months or less.

Restricted Cash and Cash Equivalents

The Company maintains certain letters of credit agreements with its banking provider, which are secured by the Company’s cash for periods of less than one year. As of December 31, 2018 and March 31, 2018, the Company had restricted cash of $0.2 million and $3.7 million, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

The Company evaluates the collectability of its accounts receivable based on a combination of factors. Generally, it records specific reserves to reduce the amounts recorded to what it believes will be collected when a customer’s account ages beyond typical collection patterns, or the Company becomes aware of a customer’s inability to meet its financial obligations. There were no impairment losses recorded on receivables for the three and nine months ended December 31, 2018 and 2017.

The Company believes that the credit risk with respect to trade receivables is limited due to the large and established nature of its largest customers and the nature of its subscription receivables. At December 31, 2018, the Company had three customers that made up 10%, 23%, and 41% of the total net accounts receivable balance. At March 31, 2018, the Company had three customers that made up 15%, 16% and 34% of the total net accounts receivable balance.

The Company’s accounts receivable at December 31, 2018 and March 31, 2018 is as follows (in thousands):

Property and Equipment

Property and equipment are recorded at cost. Costs of improvements that extend the economic life or improve service potential are also capitalized. Capitalized costs are depreciated over their estimated useful lives. Costs for normal repairs and maintenance are expensed as incurred.

Depreciation is recorded using the straight-line method over the assets’ estimated useful lives, which are generally as follows: buildings and improvements (5 years), furniture and equipment (3 to 5 years) and computer equipment and software (3 to 5 years). Leasehold improvements are depreciated over the shorter of the estimated useful life, based on the estimates above, or the lease term.

The Company evaluates the carrying value of its property and equipment if there are indicators of potential impairment. If there are indicators of potential impairment, the Company performs an analysis to determine the recoverability of the asset group carrying value by comparing the expected undiscounted future cash flows to the net book value of the asset group. If it is determined that the expected undiscounted future cash flows are less than the net book value of the asset group, the excess of the net book value over the estimated fair value is recorded in the Company’s consolidated statements of operations. Fair value is generally estimated using valuation techniques that consider the discounted cash flows of the asset group using discount and capitalization rates deemed reasonable for the type of assets, as well as prevailing market conditions, appraisals, recent similar transactions in the market and, if appropriate and available, current estimated net sales proceeds from pending offers.

Capitalized Internal-Use Software

The Company capitalizes certain costs incurred to develop software for internal use. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Costs related to minor enhancements, maintenance and training are expensed as incurred.

Capitalized internal-use software costs are amortized on a straight-line basis over their three- to five-year estimated useful lives. The Company evaluates the useful lives of these assets and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. During the nine months ended December 31, 2018 and 2017, the Company capitalized $2.1 million and $0 of internal use software, respectfully.

Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The Company evaluates goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. The Company conducts its annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of the Company’s operations and comparability of its market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is measured by the resulting amount. Because the Company has one reporting unit, the Company utilizes an entity-wide approach to assess goodwill for impairment.

Intangible Assets with Indefinite Useful Lives

The Company’s indefinite-lived intangible assets consist of trademarks and trade names. The Company evaluates indefinite-lived intangible assets for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. The Company conducts its annual impairment analysis in the fourth quarter of each fiscal year.

Intangible Assets with Finite Useful Lives

The Company has certain finite-lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consist of Trademarks/Trade Names, Intellectual Property, Customer Relationships, and Capitalized Software Development Costs resulting from business combinations. Intangible assets with finite useful lives are amortized using the straight-line method over their respective estimated useful lives, which are generally as follows: Intellectual Property (15 years), Customer Relationships (1.5-5 years), Domain Names (5 years), and Software (5 years).

The Company reviews all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations. No impairment losses have been recorded in the three or nine months ended December 31, 2018 or 2017.

Deferred Revenue and Costs

Deferred revenue consists substantially of amounts received from customers in advance of the Company’s performance service period. Deferred revenue is recognized as revenue on a systematic basis that is proportionate to the period that the underlying services are rendered, which in certain arrangements is straight line over the remaining contractual term or estimated customer life of an agreement.

In the event the Company receives cash in advance of providing its music services and music streaming services, the Company will defer an amount of such future royalty and costs to 3rd party music labels, publishers and other providers on its balance sheets. Deferred costs are amortized to expense concurrent with the recognition of the related revenue and the expense is included in cost of sales.

Fair Value Measurements - Valuation Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (i.e., an exit price). The Company uses the three-level valuation hierarchy for classification of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect the Company’s own assumptions about the data market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized below:

The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety. Proper classification of fair value measurements within the valuation hierarchy is considered each reporting period. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

Concentration of Credit Risk

The Company maintains cash balances at commercial banks. Cash balances commonly exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to any significant credit risk with respect to such cash and cash equivalents.

Adoption of New Accounting Pronouncements

On April 1, 2018, the Company adopted Topic 606 and all related amendments and applied the concepts to all contracts using the full retrospective method. The adoption of this standard did not have a material impact to the Company’s income from continuing operations, net income, retained earnings, or any other financial statement line items. See Note 3 – Revenue for further discussion and disclosures required under this guidance.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This ASU requires companies to report their deferred tax liabilities and deferred tax assets, together as a single noncurrent item on their classified balance sheets. The Company adopted the standard effective April 1, 2017. The adoption of this standard did not have, and is not expected to have, a material impact to the condensed consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). This ASU requires that a statement of cash flows explains the change during the period in cash, cash equivalents, and amounts generally described as restricted cash. Amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted the standard effective April 1, 2018 and as a result, the Company reclassified presentation of its statement of cash flows for the nine months ended December 31, 2018 to include $3.7 million of restricted cash in its beginning cash, cash equivalent and restricted cash balance.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This ASU simplifies the subsequent measurement of goodwill by removing Step 2 from the goodwill impairment test. The Company adopted this guidance effective April 1, 2018. The adoption of this standard did not have, and is not expected to have, a material impact to the condensed consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to nonemployee share-based payment accounting . This ASU simplifies the accounting and reporting for share-based payments issued to nonemployees by expanding the scope of ASC 718, Compensation – Stock Compensation , which currently only includes share-based compensation to employees, to also include share-based payments to nonemployees for goods and services. The standard is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than a company’s adoption date of ASC 606. The Company adopted this guidance effective April 1, 2018 upon the adoption of ASC 606. The adoption resulted in no material impact to the Company.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases . ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. Subsequent to ASU 2016-02, the FASB issued related ASUs, including ASU No. 2018-10, Codification Improvements to Topic 842, Leases , which affects narrow aspects of the guidance in ASU 2016-02, intended to clarify the application of certain aspects of the new leases guidance, and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements , which provides for another transition method in addition to the modified retrospective approach required by ASU 2016-02. This option allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 and its respective amendments are effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.

In August 2018, the FASB issued ASU No. 2018-15. Intangibles - Goodwill and Other – Internal-Use Software, related to accounting for implementation costs incurred in hosted cloud computing service arrangements. Under the new guidance, implementation costs incurred in a hosting arrangement that is a service contract should be expensed or capitalized based on the nature of the costs and the project stage during which such costs are incurred. If the implementation costs qualify for capitalization, they must be amortized over the term of the hosting arrangement and assessed for impairment. Companies must disclose the nature of any hosted cloud computing service arrangements. This ASU also provides guidance for balance sheet and income statement presentation of capitalized implementation costs and statement of cash flows presentation for the related payments. This ASU will be effective beginning in the first quarter of our fiscal year 2021. Early adoption is permitted, including in an interim period. This guidance may be adopted either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact this ASU will have on its financial statements and related disclosures, as well as the timing of adoption and the application method.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statement presentation or disclosures.

Note 3 — Revenue

In May 2014, the FASB issued a comprehensive new revenue recognition standard that superseded nearly all existing revenue recognition guidance under GAAP. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. The FASB also issued important guidance clarifying certain guidelines of the standard, including (1) reframing the indicators in the principal versus agent guidance to focus on evidence that a company is acting as a principal rather than an agent and (2) identifying performance obligations and licensing. The guidance should be applied retrospectively, either to each prior period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative-effect adjustment as of the date of adoption. The Company adopted this standard on April 1, 2018, applying it retrospectively to each prior period presented in the financial statements.

The following table represents a disaggregation of revenue from contracts with customers for the three and nine months ended December 31, 2018 and 2017 (in thousands):

For some contracts, the Company may invoice up front for services recognized over time or for contracts in which the Company has unsatisfied performance obligations. Payment terms and conditions vary by contract type, although terms generally cover monthly payments. In the circumstances where the timing of invoicing differs from the timing of revenue recognition, the Company has determined its contracts do not include a significant financing component. The Company has elected to apply the optional exemption under ASC 606-10-50-14 and not provide disclosure of the amount and timing of performance obligations as the performance obligations are part of a contract that has an original expected duration of one year or less.

The following table summarizes the significant changes in contract liabilities balances during the nine months ended December 31, 2018 (in thousands):

Note 4 — Business Combinations

Fiscal 2019 Transactions

None.

Fiscal 2018 Transactions

During the fiscal year ended March 31, 2018, the Company completed two acquisitions (asset purchase constituting the acquisition of a business from an accounting perspective and an acquisition of a company).

Wantickets

On May 5, 2017, LXL Tickets, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (“APA”) with Wantickets RDM, LLC (“Wantickets”) and certain other parties, whereby LXL Tickets purchased certain operating assets of Wantickets for total consideration of 666,667 shares of common stock of the Company valued at $3.3 million (or $5.01 per share). The asset purchase was intended to augment and diversify the Company’s music operating segment. The goodwill recorded for the Wantickets asset purchase was $1.3 million. Key factors that contributed to the recognition of Wantickets goodwill were the opportunity to consolidate and complement existing content operations, certain software and customer lists, and the opportunity to generate future synergies within the existing music business. As a result of the Wantickets asset purchase, the goodwill is deductible for tax purposes.

The Company accounted for the Wantickets asset purchase transaction, which constitutes the acquisition of a business from an accounting perspective, as a business combination in accordance with ASC 805 “Business Combinations.” Significant other assets assumed were approximately $0.1 million in property and equipment, $0.4 million of trademark and trade names, $1.0 million in software associated with proprietary ticketing technology, and $0.5 million in domain names and customer relationships. For each of the three and nine month periods ended December 31, 2017, the Company incurred less than $0.1 million in transaction costs associated with the Wantickets asset purchase. The Company did not incur any transaction costs during the three and nine months ended December 31, 2018.

The following table summarizes the fair value of the assets acquired from Wantickets (in thousands):

Since the asset purchase date, the amount of revenue for LXL Tickets included in the Company’s condensed consolidated statements of operations within discontinued operations for the three and nine months ended December 31, 2018 was $0 and $0, respectively, and for the three and nine months ended December 31, 2017 was $0.1 million and $0.6 million, respectively. The net loss included in the Company’s condensed consolidated statements of operations within discontinued operations for the three and nine months ended December 31, 2018 was $0 and $0, respectively, and for the three and nine months ended December 31, 2017 was $0.3 million and $1.1 million, respectively.

During the quarter ended December 31, 2017, management of the Company made the decision to shut down the operations of LXL Tickets effective December 31, 2017 (see Note 5 - Dispositions). Pro forma financial information for the Wantickets asset purchase transaction is not presented due to the disposition of LXL Tickets during the year ended March 31, 2018.

Slacker, Inc.

On December 29, 2017, the Company acquired Slacker, including its $50.1 million of gross assets, for net consideration of $28.6 million consisting of (i) 6,126,788 shares of the Company’s common stock, valued at $20.1 million, (ii) 1,675,893 shares of the Company’s common stock issued to payoff certain debt of Slacker as of the transaction date, valued at $5.5 million, (iii) net cash payment of $2.4 million and issuance of 175,000 shares of the Company’s common stock, valued at $0.6 million to Slacker and its designees, and (iv) the assumption of Slacker’s liabilities of approximately $21.5 million. The acquisition is intended to augment and diversify the Company’s music operating segment. The Company accounted for the acquisition as a business combination. The goodwill recorded for the Slacker acquisition was $9.7 million. Key factors that contributed to the recognition of the Slacker goodwill were the opportunity to consolidate and complement existing content operations, trained workforce, proprietary software and operating platform, and the opportunity to generate future synergies with the Company’s existing business. As a result of the acquisition of the stock of Slacker, the goodwill is not deductible for tax purposes.

The following table summarizes the fair value of consideration transferred in the Slacker acquisition (in thousands):

The following table summarizes the fair value of the assets acquired and liabilities assumed in the Slacker acquisition (in thousands):

The amount of revenues for Slacker included in the Company’s condensed consolidated statements of operations for the three and nine months ended December 31, 2018 was $8.8 million and $24.2 million, respectively, and for the three and nine months ended December 31, 2017 was $0 and $0, respectively. The net loss for Slacker included in the Company’s condensed consolidated statements of operations for the three and nine months ended December 31, 2018 was ($1.9) million and ($7.4) million, respectively, and for the three and nine months ended December 31, 2017 was $0 and $0, respectively. The Company incurred no transaction costs associated with the Slacker acquisition during the three and nine months ended December 31, 2018. Less than $0.1 million of transaction costs associated with the Slacker acquisition were incurred during each of the three and nine months ended December 31, 2017.

In the quarter ended December 31, 2018, the Company finalized its purchase price allocation for the acquisition of Slacker on December 29, 2017. As a result of obtaining the final valuation of the acquisition, the following changes have been recorded in the current period (in thousands):

(* The fair value of equity consideration was changed by $5.7 million to reflect the lack of marketability from an 18-month lockout period. Changes in values of Tradenames and Intellectual property due to finalization of royalty rates.)

The change to the provisional consideration and asset fair values resulted in a decrease in amortization expense of $2.5 million and a decrease in accumulated depreciation of $2.5 million for the three months ended December 31, 2018, of which $1.9 million relates to the previous quarters.

Supplemental Pro Forma Information (Unaudited)

The pro forma financial information as presented below is for informational purposes only and is not indicative of operations that would have been achieved from the acquisitions had they taken place at the beginning of the fiscal year ended March 31, 2017. Supplemental information on an unaudited pro forma basis, as if these acquisitions had been completed as of April 1, 2016, is as follows (in thousands, except per share data):

The following table presents the revenues and net loss of the combined company for the three and nine months ended December 31, 2017 as if the acquisition had been completed on April 1, 2016.

The Company’s unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflect amortization of intangible assets as a result of the acquisition. The pro forma results are not necessarily indicative of the results that would have been realized had the acquisitions been consummated as of the beginning of the periods presented. The pro forma amounts include the historical operating results of the Company, with adjustments directly attributable to the acquisitions.

Note 5 — Dispositions

Discontinued Operations of LXL Tickets, Inc.

During the quarter ended December 31, 2017, management of the Company made the decision to shut down the operations of LXL Tickets effective December 31, 2017. Management concluded that the operations of LXL Tickets were not going to improve due to decreased consumer demand for nightlife and concert events and since LXL Tickets was no longer providing ticketing services to four major venues in 2017 that had produced significant revenues in 2016, ongoing litigation between such customers and Wantickets and such customers refusing to continue to work with LXL Tickets as a result of Wantickets’ non-payment for prior services, and continuing significant losses incurred by LXL Tickets through December 31, 2017 that were supposed to be funded by sellers of Wantickets’ assets that were never funded as required under the Wantickets’ Asset Purchase Agreement. The Company also decided to make a strategic shift in the focus of its operations through the acquisition of Slacker that closed in December 2017 (see Note 4 – Business Combinations). Therefore, it began laying off LXL Tickets’ employees during the quarter ended December 31, 2017, such that there was one employee left as of December 31, 2017. Management considers abandonment to have occurred at December 31, 2017 since LXL Tickets stopped accepting orders and using the acquired assets as of that date. To accomplish this, the results of LXL Tickets’ operations are reported as discontinued operations in accordance with ASC 205, Presentation of Financial Statements . Management currently does not have any plans to sell LXL Tickets or its remaining assets.

For the three and nine months ended December 31, 2017, the Company has recognized a ($0.3) million and ($1.1) million loss, respectively, from the operations of LXL Tickets. Additionally, the Company has recognized a ($2.8) million loss from disposal of LXL Tickets for the three and nine months ended December 31, 2017. The Company is presenting the operating loss of LXL Tickets and the loss from disposal of LXL Tickets on its condensed consolidated statements of operations under the heading “Loss from operations of discontinued operations.” For the nine months ended December 31, 2017, the Company recognized total operating and investing cash flows from LXL Tickets of less than $0.1 million and $0, respectively.

Major line items constituting net loss of the discontinued operations of LXL Tickets are as follows for the three months ended December 31, 2017 and the period from May 5, 2017 through December 31, 2017 (in thousands):

Depreciation expense was $0.3 million and less than $0.1 million for the three months ended December 31, 2018 and 2017, respectively, and was $0.6 million and less than $0.1 million for the nine months ended December 31, 2018 and 2017, respectively.

(* Increase in goodwill due to the net change in fair value of equity consideration transferred and final fair value of assets acquired and liabilities assumed.)

(* Tradenames determined to be indefinite-lived intangible asset in final purchase accounting. Preliminarily booked as a definite lived intangible asset.)

The Company’s finite-lived intangible assets were as follows as of March 31, 2018 (in thousands):

The Company’s amortization expense on its finite-lived intangible assets was ($0.1) million and $0 for the three months ended December 31, 2018 and 2017, respectively, and was $4.7 million and $0 for the nine months ended December 31, 2018 and 2017, respectively. Amortization expense and Accumulated Amortization for the three months ended December 31, 2018 included an ($2.5) million adjustment for the finalization of the purchase price allocation fair values of the acquisition of Slacker (see Note 4).

The Company expects to record amortization of intangible assets for fiscal years ending March 31, 2019 and future fiscal years as follows (in thousands):

Note 9 — Note Payable

On December 31, 2014, the Company converted accounts payable into a Senior Promissory Note (the “Note”) in the aggregate principal amount of $0.2 million. The Note bears interest at 6% per annum and interest is payable on a quarterly basis commencing March 31, 2015 or the Company may elect that the amount of such interest be added to the principal sum outstanding under this Note. The payables arose in connection with professional services rendered by attorneys for the Company prior to and through December 31, 2014, and the Note had an original maturity date of December 31, 2015, which was extended to September 30, 2016 or such later date as the lender may agree to in writing. As of the date of this Quarterly Report on Form 10-Q (this “Quarterly Report”), the Note has not been extended and is currently past due. In February 2018, the Note holder filed a claim for collection of the Note. See Note 14 – Commitments and Contingencies. As of December 31, 2018 and March 31, 2018, the balance due under the Note was $0.3 million and $0.3 million, respectively, which includes $0.1 million and $0 of accrued interest, respectively, outstanding under the Note. 

Note 10 — Senior Secured Convertible Debentures

On June 29, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”), with JGB Partners, LP, JGB Capital, LP and JGB (Cayman) Finlaggan Ltd. (each, a “Purchaser” and collectively, the “Purchasers”) pursuant to which the Company sold, in a private placement transaction (the “Financing”), for an aggregate cash purchase price of $10.0 million, $10.64 million in aggregate principal amount, of its 12.75% Original Issue Discount Senior Secured Convertible Debentures due June 29, 2021 (the “June 2018 Debentures”). In conjunction with the Financing, the Company (i) recorded issuance costs of $1.1 million against the liability and (ii) used $3.5 million of the proceeds to pay off 100% of the Company’s revolving line of credit (see Note 11 – Bank Debt). Issuance costs are being amortized to interest expense over the term of the June 2018 Debentures. The outstanding principal balance of the June 2018 Debentures at December 31, 2018 was $10.6 million, which included $0 of accrued interest.

The June 2018 Debentures mature on June 29, 2021, accrue interest at 12.75% per year, and are convertible into shares of common stock of the Company at a conversion price of $10.00 per share at the holder’s option, subject to certain customary adjustments such as stock splits, stock dividends and stock combinations (the “Conversion Price”). Commencing with the calendar month of December 2018 (subject to the following sentence), the holders of the June 2018 Debentures will have the right, at their option, to require the Company to redeem an aggregate of up to $0.2 million of the outstanding principal amount of the Debentures per month. For the month of December 2018, the holders may not submit a redemption notice for such a redemption prior to December 28, 2018. The Company will be required to promptly, but in any event no more than two trading days after a holder delivers a redemption notice to the Company, pay the applicable redemption amount in cash or, at the Company’s election and subject to certain conditions, in shares of common stock. At the Company’s election and subject to certain limitations, the Company may also pay interest in shares of its common stock. If the Company elects to pay the redemption amount or interest in shares of its common stock, then, subject to the next sentence, the shares will be delivered based on a price (the “Stock Payment Price”) equal to the lesser of (a) a 10% discount to the average of the three lowest daily volume weighted average prices of the Company’s common stock over the prior 20 trading days, or (b) the Conversion Price, subject to a certain minimum price per share and if certain conditions are met. The Company will not have the right to, and will not, make any redemption or interest payment in shares of its common stock unless and until it has obtained the requisite consent of its stockholders under the rules of Nasdaq or if the issuance of shares as a result of such election would reduce the number of shares that the Company is permitted to issue under Nasdaq listing standards upon the conversion in full of the June 2018 Debentures. As of the date of this Quarterly Report, the June 2018 Debentures holders have sent redemption notices for December 2018, January 2019 and February 2019. The Company has repaid $0.3 million of principal in January 2019, and $0.2 million of principal in February 2019.

Subject to the satisfaction of certain conditions, at any time after June 28, 2019, the Company may elect to prepay all, but not less than all, of the June 2018 Debentures for a prepayment amount equal to the outstanding principal balance of the June 2018 Debentures plus all accrued and unpaid interest thereon, together with a Prepayment Premium equal to the amount as discussed further below.

The Company’s obligations under the June 2018 Debentures can be accelerated upon the occurrence of certain customary events of default. In the event of default and acceleration of the Company’s obligations, the Company would be required to pay the applicable prepayment amount described above.

The Company’s obligations under the June 2018 Debentures have been guaranteed under a Subsidiary Guarantee (the “Subsidiary Guarantee”) by its wholly-owned subsidiaries, Slacker, LiveXLive, Corp. and LXL Studios, Inc. (the “Guarantors”). The Company’s obligations under the June 2018 Debentures and the Guarantors’ obligations under the Subsidiary Guarantee are secured under a Security Agreement by a lien on all of the Company’s and the Guarantors’ assets, subject to certain exceptions.

The Company has evaluated the June 2018 Debentures agreements and has identified two derivative instruments which are bifurcated from the underlying June 2018 Debentures relating to provisions around an event of default and mandatory prepayments upon divestitures exceeding certain thresholds. The Company has performed a fair value analysis using a binomial lattice calculation on both of the derivative instruments using the following assumptions. Coupon Rate: 12.75%, Term: 3.0 years, Volatility: 18.3%, Market Rate: 13.0%, Probability of Divesture: 5.0% and Probability of Default: 7.74%. The Company determined that at issuance, the fair value of the instruments was $0.2 million. The Company has recorded the fair value of the derivatives and corresponding debt discount within June 2018 Debentures on the Company’s Condensed Consolidated Balance Sheet at June 29, 2018. At December 31, 2018, the Company performed a fair value analysis using a binomial lattice calculation on both of the derivative instruments using the following assumptions: Coupon Rate: 12.75%, Term: 2.5 years, Volatility: 16.7%, Market Rate: 17.0%, Probability of Divesture: 5.0% and Probability of Default: 7.74%. The Company determined that as of the assessment date, the fair value is $0.2 million. The change in fair value of less than $0.1 million is recorded in Other income (expense) on the Company’s Condensed Consolidated Statements of Operations at December 31, 2018.

The Debentures (as defined below) contain customary affirmative and restrictive covenants and representations and warranties, including limitations on indebtedness, liens, investments, dispositions of assets, organizational document amendments, issuance of disqualified stock, change of control transactions, stock repurchases, indebtedness repayments, dividends, the creation of subsidiaries, affiliate transactions, deposit accounts and certain other matters. The Company must also maintain a specified minimum cash balance, meet certain financial targets, and maintain minimum amounts of liquidity.  As of December 31, 2018, the Company was not in compliance with one of these financial covenants, however, on February 11, 2019, the Company amended the Debenture agreements which removed the previous breach (see Note 19).

Effective February 11, 2019, the Company amended the SPA with the Purchasers to obtain additional financing, increasing the cash purchase price of the Debentures by $3.0 million, $3.2 million in aggregate principal amount, of its 12.75% Original Issue Discount Senior Secured Convertible Debentures due June 29, 2021 (the “February 2019 Debentures” and together with the June 2018 Debentures, the “Debentures”). In conjunction with the additional financing, the Company (i) recorded issuance costs of $0.1 million against the liability, (ii) modified certain financial liquidity covenants in the Debentures, (iii) modified the definition of “Monthly Allowance” by increasing it from $170,000 to $221,000, and (iv) amended the definition of “Prepayment Amount” to mean, with respect to any payment of the Debentures prior to the maturity date, the entire outstanding principal balance (including any original issue discount) of the Debenture, all accrued and unpaid interest thereon, together with a prepayment premium (the “Prepayment Premium”) equal to the following: (a) if the Debentures are prepaid on or after the original issuance date, but on or prior to December 31, 2019, all remaining regularly scheduled interest to be paid on the Debentures from the date of such payment of the Debentures to, but excluding, December 31, 2019, plus 10% of the entire outstanding principal balance of the Debentures, (b) if the Debentures are prepaid after December 31, 2019, but on or prior to June 30, 2020, 10% of the entire outstanding principal balance of the Debentures; (c) if the Debentures are prepaid on or after June 30, 2020, but on or prior to December 31, 2020, 8% of the entire outstanding principal balance of the Debentures; and (d) if the Debentures are prepaid on or after December 31, 2020, but prior to the maturity date, 6% of the entire outstanding principal balance of the Debentures. The terms of the February 2019 Debentures were otherwise the same as the June 2019 Debentures.

Note 11 — Bank Debt

As part of the acquisition of Slacker, the Company assumed what was initially a $5.0 million revolving line of credit from a commercial bank that was collateralized by all of the assets of Slacker. The revolving line of credit was based on the amount of eligible accounts receivable. The loan was cash collateralized and there were no covenants. The revolving line of credit bore an annual interest rate equal to prime rate as published in the Wall Street Journal plus 0.75%, and equaled 5.50% at March 31, 2018. The line had an original maturity date of March 31, 2018. On March 29, 2018, the Company entered into the Ninth Amendment to Loan and Security Agreement with the bank, extending the maturity date to July 31, 2018 and removing the financial reporting requirements. In June 2018, in conjunction with the issuance of the June 2018 Debentures, the revolving line of credit was fully repaid and the $3.5 million of cash collateral was returned to the Company. Also, as part of the acquisition of Slacker, the Company assumed a term loan with the bank with a balance of $1.7 million, which was paid off at the closing of the Slacker acquisition.

Total principal maturities of the Company’s long-term borrowings, including June 2018 Debentures, unsecured convertible notes, bank debt, and note payable are $0.3 million for the year ending March 31, 2019, $4.7 million for the year ending March 31, 2020 and $10.6 million for the year ending March 31, 2022.

As of December 31, 2018 and March 31, 2018, the Company had outstanding 7.5% (effective as of April 1, 2018, previously 6%) unsecured convertible notes payable (the “Trinad Notes”) issued to Trinad Capital Master Fund (“Trinad Capital”), a fund controlled by Mr. Ellin, the Company’s Chief Executive Officer, Chairman, director and principal stockholder as follows: 

(A) The first Trinad Note was issued on February 21, 2017, to convert aggregate principal and interest of $3.6 million under the first senior promissory note and second senior promissory note with Trinad Capital previously issued on December 31, 2014 and April 8, 2015, respectively. The first Trinad Note was due on March 31, 2018 and was extended to May 31, 2019. At December 31, 2018, the balance due of $3.8 million included $0.2 million of accrued interest outstanding under the first Trinad Note.  At March 31, 2018, $3.6 million of principal, which included no accrued interest, was outstanding under the first Trinad Note.

(B) Between October 27, 2017 and December 18, 2017, the Company issued nine unsecured convertible notes payable to Trinad Capital for aggregate total principal amount of $0.9 million. The notes were due on various dates through December 31, 2018 and were extended to May 31, 2019. For the three and nine months ended December 31, 2018, the Company amortized $0.1 million and $0.3 million, respectively, of discount to interest expense, and the unamortized discount as of December 31, 2018 was $0.2 million. As of December 31, 2018, $0.3 million of accrued interest was added to the principal balance. 

On March 30, 2018, the Company entered into an Amendment of Notes Agreement (the “Amendment Agreement”) with Trinad Capital pursuant to which the maturity date of all of the Company’s 6% unsecured convertible notes was extended to May 31, 2019. In consideration of the maturity date extension, the interest rate payable under the notes was increased from 6.0% to 7.5% beginning on April 1, 2018, and the aggregate amount of accrued interest due under all of the notes issued to Trinad Capital as of March 31, 2018 of $0.3 million was paid.

The Company may not redeem the any of the notes issued to Trinad Capital prior to May 2019 without Trinad Capital’s consent.

(C) On September 14, 2016, the Company issued a 6% unsecured convertible note payable to a certain investor for total principal amount of $0.2 million. This note was due on September 13, 2018. In June, 2018, the entire $0.2 million of principal and interest was converted into shares of the Company’s common stock, and less than $0.1 million of debt discount was charged to APIC as a result of the conversion. During the three and nine months ended December 31, 2018, the Company amortized $0 and less than $0.1 million, respectively, of discount to interest expense, and during each of the three and nine months ended December 31, 2017, the Company amortized less than $0.1 million of discount to interest expense.

(D) Between November 22, 2016 and March 29, 2017, the Company issued seven 6% unsecured convertible notes payable to certain investors for aggregate total principal of $1.2 million. The notes were due on various dates through September 30, 2018. On March 12, 2018, $0.4 million of principal and interest of the notes were converted into shares of the Company’s common stock, and less than $0.1 million of debt discount was charged to APIC as a result of the conversion. In addition, the noteholders received 24,760 three-year warrants, with an exercise price of $4.00 per share, as an incentive to convert the notes prior to its maturity date. In June 2018, the entire remaining $1.0 million of principal and interest of the notes was converted into shares of the Company’s common stock, and less than $0.1 million of debt discount was charged to APIC as a result of the conversion. During the three and nine months ended December 31, 2018, the Company amortized $0 and less than $0.1 million, respectively, of discount to interest expense, and during the three and nine months ended December 31, 2017, the Company amortized $0.2 million, and $0.6 million, respectively, of discount to interest expense.

(E) Between April 5, 2017 and June 29, 2017, the Company issued ten 6% unsecured convertible notes payable to certain investors for aggregate total principal of $1.7 million. The notes are due on various dates through June 29, 2018. On March 12, 2018, $1.7 million of principal and interest were converted into shares of the Company’s common stock, and $0.2 million of debt discount was charged to APIC as a result of the conversion. In addition, the noteholders received 115,559 three-year warrants, with an exercise price of $4.00 per share, as an incentive to convert the notes prior to its maturity date. For the three and nine months ended December 31, 2018, the Company amortized $0 and $0, respectively, of such discount to interest expense, and the unamortized discount as of December 31, 2018 was $0. For the three and nine months ended December 31, 2017, the Company amortized $0.4 million and $1.1 million, respectively, of such discount to interest expense. In July 2018, the remaining $0.1 million of principal and interest of the notes was converted into shares of the Company’s common stock, and less than $0 of debt discount was charged to APIC as a result of the conversion.

Note 13 — Related Party Transactions

Management Services from Trinad Management LLC

Pursuant to the Management Agreement (the “Management Agreement”) with Trinad Capital Management LLC (“Trinad LLC”) entered into on September 23, 2011, Trinad LLC agreed to provide certain management services to the Company through September 22, 2014 and on a month-to-month basis thereafter, including, without limitation, the sourcing, structuring and negotiation of potential business acquisitions and customer contracts for the Company. Under the Management Agreement, the Company compensated Trinad LLC for its services by (i) paying a fee equal to $2.1 million, with $0.1 million payable in advance of each consecutive 3-month calendar period during the term of the Management Agreement and with $1.0 million due at the end of the 3-year term, and (ii) issuing a warrant to purchase 750,000 shares of the Company’s common stock at an exercise price of $0.225 per share (the “Warrant”). The Warrant was exercisable in whole or in part by Trinad LLC at any time for a period of 10 years. On August 25, 2016, the Warrant was fully exercised on a cashless basis at an exercise price of $0.225 per share, resulting in the issuance of 716,216 shares of the Company’s common stock. Pursuant to the terms of the Employment Agreement, dated as of September 7, 2017, Mr. Ellin, the Company’s Chief Executive Officer, Chairman, director and principal stockholder and the Managing Member of Trinad LLC, agreed that effective as of the date of the consummation of the Public Offering (December 27, 2017), Trinad LLC would no longer receive the monthly fee under the Management Agreement. For three and nine months ended December 31, 2018, the Company incurred $0 and $0 of such fees, respectively. For three and nine months ended December 31, 2017, the Company incurred $0.1 million and $0.3 million of such fees, respectively.

Rent

During the three and nine months ended December 31, 2017, the Company subleased office space from Trinad LLC for no cost to the Company as part of the Management Agreement. Management estimates such amounts to be immaterial.

Note 14 — Commitments and Contingencies

Promotional Rights

Certain of the Company’s content acquisition agreements contain minimum guarantees, and require that the Company makes upfront minimum guarantee payments. As of December 31, 2018, the Company has licenses, production and/or distribution agreements to make future minimum guarantee commitments of $7.1 million, of which $0.8 million will be paid in the fiscal year ending March 31, 2019 and the remainder will be paid thereafter. These agreements also provide for a revenue share that ranges between 35% and 50% of net revenues. In addition, there are other licenses, production and/or distribution agreements that provide for a revenue share of 50% of net revenues; however, without a requirement to make future minimum guarantee commitment payments irrespective to the execution and results of the planned events. As of December 31, 2018, the Company had prepaid minimum guarantees of $0.2 million in content acquisition costs related to minimum guarantees.

Contractual Obligations

As of December 31, 2018, the Company is obligated under agreements with Content Providers and other contractual obligations to make guaranteed payments as follows: $1.1 million for the fiscal year ending March 31, 2019 and $2.1 million thereafter.

On a quarterly basis, the Company records the greater of the cumulative actual content acquisition costs incurred or the cumulative minimum guarantee based on forecasted usage for the minimum guarantee period. The minimum guarantee period is the period of time that the minimum guarantee relates to, as specified in each agreement, which may be annual or a longer period. The cumulative minimum guarantee, based on forecasted usage, considers factors such as listening hours, revenue, subscribers and other terms of each agreement that impact the Company’s expected attainment or recoupment of the minimum guarantees based on the relative attribution method.

Several of the Company’s content acquisition agreements also include provisions related to the royalty payments and structures of those agreements relative to other content licensing arrangements, which, if triggered, could cause the Company’s payments under those agreements to escalate. In addition, record labels, publishers and performing rights organizations with whom the Company has entered into direct license agreements have the right to audit the Company’s content acquisition payments, and any such audit could result in disputes over whether the Company has paid the proper content acquisition costs. However, as of December 31, 2018, the Company does not believe it is probable that these provisions of its agreements discussed above will, individually or in the aggregate, have a material adverse effect on its business, financial position, results of operations or cash flows.

Legal Proceedings

On March 3, 2016, Blink TV Limited and Northstar Media, Inc. (collectively, the “Plaintiffs”) filed a claim in the Los Angeles County Superior Court of California against the Company and LiveXLive, alleging breaches of two different license agreements for the live-streaming rights to “Bestival,” an annual music festival which takes place on the Isle of Wight in England. We and LiveXLive demurred to the complaint on May 10, 2016, and, prior to the hearing on the demurrer, Plaintiffs amended their complaint. The amended complaint no longer states a claim against LiveXLive Media and only states a single cause of action against LiveXLive for the alleged breach of a single license agreement. Plaintiffs are seeking $0.3 million in damages. To date, LiveXLive has vigorously contested Plaintiffs’ claims. In doing so, on December 23, 2016, LiveXLive filed a cross-complaint against Plaintiffs for breach of contract and breach of the implied covenant of good faith and fair dealing. LXL was notified on September 27, 2017, that Blink TV Limited is in bankruptcy in England and now has liquidators in place who are assuming the litigation. The liquidators will need to move for permission to substitute in as the real parties in interest. Trial was set for October 1, 2018. In June 2018, LiveXLive settled the claim with the Plaintiffs for an amount not material to the Company. In July 2018, a final dismissal of this matter was entered in court.

On July 17, 2017, Exodus Festival, Inc. (“Exodus”) filed a demand for arbitration with the International Centre for Dispute Resolution (“ICDR”), a division of the American Arbitration Association (the “AAA”), against Wantickets and LXL Tickets, in connection with event proceeds of $0.2 million allegedly owed by Wantickets to Exodus pursuant to a certain Presale Agreement For On-line Ticket Sales Services, entered into by and between Wantickets and Exodus on or about October 20, 2015 (the “Exodus-Wantickets Agreement”). Exodus alleges that LXL Tickets assumed Wantickets’ obligations under the Exodus-Wantickets Agreement pursuant to the Asset Purchase Agreement, dated May 5, 2017, among Wantickets, LXL Tickets, the Company and certain other persons. On January 8, 2018, the arbitrator denied LXL Tickets’ preliminary motion requesting for the arbitration claim to be dismissed based on jurisdictional and other arbitrability arguments and ruled that LXL Tickets assumed the Exodus-Wantickets Agreement by performing under the contract and/or as a successor interest. In June 2018, the parties concluded a formal arbitration proceeding with the arbitrator to determine to what extent is LXL Tickets liable to Exodus for the event proceeds allegedly owed to Exodus by Wantickets.  In August 2018, the arbitrator issued a decision adverse to LXL Tickets whereby Exodus was awarded the sum of $0.2 million against LXL Tickets.

On November 29, 2017, CL, LLC (d/b/a Light Nightclub) and CDBC, LLC (d/b/a Daylight Beach Club) (collectively, “Light”) filed a claim in the District Court, Clark County, Nevada against Wantickets, the Company, LXL Tickets, Joseph Schnaier and Brian Landow, alleging total damages in excess of $0.3 million (plus attorneys’ fees) (the “Claim Amount”) and (i) as to Wantickets and Mr. Schnaier, breach of contract with respect to the Presale Agreement For On-line Ticket Sales Services, entered into by and between Wantickets and Light on or about September 30, 2016, and breach of implied covenant of good faith and fair dealing, (ii) as to Mr. Landow, tortious interference with contract, (iii) as to the Company and LXL Tickets, successor in interest liability, and (iv) as to all defendants (except for Mr. Landow), unjust enrichment. In connection with this action, on October 3, 2017, Light entered into a settlement agreement with Wantickets and Mr. Schnaier, pursuant to which, among other things, Mr. Schnaier agreed to pledge all of his shares in the Company to secure his stipulated confession of judgment given to Light if Wantickets and Mr. Schnaier do not pay the Claim Amount by November 20, 2017. Wantickets and Mr. Schnaier have failed to pay the Claim Amount to Light by such date. Accordingly, on December 19, 2017, the court entered such confession of judgment and judgment against Wantickets and Mr. Schnaier. On December 22, 2017, we filed an answer on behalf of LXL Tickets that generally denied all the claims in Light’s complaint. In June 2018, an affiliate of Mr. Schnaier transferred approximately 51,500 shares of the Company’s common stock to Light to allow Light to sell such shares to satisfy the Claim Amount. On November 8, 2018, the Company, LXL Tickets and Light entered into a Settlement Agreement, pursuant to which each party released the other from any and all claims and damages related to this dispute, and a Stipulation for Dismissal with Prejudice, pursuant to which Light dismissed this matter as to the Company and LXL Tickets with prejudice with each party to bear their own attorneys fees and costs of suit. The parties anticipate that the court will approve such Stipulation. No consideration was paid by either the Company or LXL Tickets to Light related to this settlement. In October 2018, pursuant to the terms of the APA (as defined below), we submitted a formal demand to Wantickets, Mr. Schnaier and Danco to indemnify us, among other things, for and our costs and expenses incurred in connection with this matter. As of December 31, 2018, the potential range of loss related to this matter was not material. 

On February 8, 2018, Wynn Las Vegas, LLC (“Wynn”) filed a claim in the District Court, Clark County, Nevada against LXL Tickets claiming total damages in excess of $0.6 million (the “Wynn Claim Amount”) as a result of alleged breach of contract, breach of covenant of good faith and fair dealing and unjust enrichment with respect to that certain Second Amendment and Extension of the Wantickets.com Presale Agreement entered into by and between Wantickets and Wynn on or about September 30, 2016 (the “Wantickets-Wynn Agreement”). In connection with this action, on June 21, 2017, Wynn filed suit in the Eighth Judicial District Court, Clark County, Nevada against RNG Tickets, LLC (d/b/a Wantickets) and Wantickets. That litigation is still pending and active. RNG Tickets has not filed a responsive pleading in the case and Wantickets RDM has defaulted. The Company believes that Wynn’s position is that LXL Tickets acquired Wantickets, including Wantickets’ obligations under the Wantickets-Wynn Agreement (and not just certain assets and liabilities of Wantickets), and as such LXL Tickets should be liable to Wynn for the Wynn Claim Amount pursuant to the Wantickets-Wynn Agreement. The Company further believes that this action against LXL Tickets is without merit and intends to vigorously defend itself against any obligations or liability to Wynn with respect to such claims. As of December 31, 2018, the potential range of loss related to this matter was not material.

In March 2018, Manatt Phelps & Phillips, LLP served us with a complaint filed on February 22, 2018 in the Supreme Court of the State of California County of Los Angeles against the Company. The complaint alleges, among other things, breach of contract and breach of promissory note. Plaintiff is seeking damages of $0.2 million, plus interest, attorneys’ fees and costs and other such relief as the court may award. On April 12, 2018, the Company filed an answer that generally denied all the claims in the complaint. The Company intends to continue to vigorously defend itself against any obligations or liability to the plaintiff with respect to such claims, including potentially filing a counterclaim against the plaintiff.

On April 10, 2018, Joseph Schnaier, Danco Enterprises, LLC (an entity solely owned by Mr. Schnaier, “Danco”), Wantmcs Holdings, LLC (Mr. Schnaier is the managing member) and Wantickets (Mr. Schnaier is the 90% beneficial owner) filed a complaint in the Supreme Court of the State of New York, County of New York against each of the Company, LXL Tickets, Robert S. Ellin, Alec Ellin, Blake Indursky and Computershare Trust Company, N.A. (“Computershare”). Plaintiffs subsequently voluntarily dismissed all claims against Alec Ellin and Blake Indursky. The complaint alleged multiple causes of action arising out of Schnaier’s investment (through Danco) of $1.25 million into the Company in 2016, the Company’s purchase of certain operating assets of Wantickets pursuant to the Asset Purchase Agreement, dated as of May 5, 2017, and Mr. Schnaier’s employment with LXL Tickets, including claims for fraudulent inducement, breach of contract, conversion, and defamation. Plaintiffs seek monetary damages and injunctive relief. Plaintiffs have also sued Computershare for negligence and for injunctive relief relating to the refusal to transfer certain restricted shares of the Company’s common stock owned by the plaintiffs. Plaintiffs are seeking injunctive relief, damages of approximately $26.7 million, plus interest, attorneys’ fees and costs and other such relief as the court may award. The Company has denied plaintiffs’ claims. The Company believes that the complaint is an intentional act by the plaintiffs to publicly tarnish the Company’s and its senior management’s reputations through the public domain in an effort to obtain by threat of litigation certain results for Mr. Schnaier’s self-serving and improper purposes. The Company is vigorously defending this lawsuit, and the Company believes that the allegations are without merit and that it has strong defenses. On June 26, 2018, the Company and LXL Tickets, filed counterclaims against the plaintiffs for breach of contract (including under the Asset Purchase Agreement), fraudulent inducement, and other causes of action, seeking injunctive relief, damages, attorneys’ fees and expenses and such other relief as the court may award. The parties are currently engaged in pre-trial proceedings, including discovery. In October 2018, pursuant to the terms of the APA, the Company submitted a formal demand to Wantickets, Mr. Schnaier and Danco to indemnify the Company, among other things, for its costs and expenses incurred in connection with this matter. The outcome of this lawsuit is inherently uncertain and could have a material adverse effect on the Company’s business, financial condition and results of operations. 

On October 11, 2018, Manatt, Phelps & Phillips, LLP filed a complaint in the Court of Chancery of the State of Delaware against the Company alleging that we have improperly refused to remove the restrictive legend from the shares of the Company’s common stock owned by the plaintiff. Plaintiff is seeking declaratory judgment that all of the statutory prerequisites for removal of the restrictive legend have been met and injunctive relief requiring us to remove such restrictive legend, plus damages and losses suffered by the plaintiff as a result of our alleged conduct, including interest, attorneys’ fees and costs and other such relief as the court may award. The Company intends to deny plaintiff’s claims and believe that the plaintiff has failed to satisfy applicable securities laws as part of its demand to the Company to remove the restrictive legend. The Company intends to vigorously defend itself against any liability to the plaintiff with respect to such claims. As of December 31, 2018, the Company believes the chance of an unfavorable judgment requiring us to pay material damages to the plaintiff is remote, however the potential range of loss related to this matter could be material.

During the three and nine months ended December 31, 2018, the Company recorded aggregate legal settlement expenses relating to potential claims arising in connection with litigation brought against the Company by a number of third-parties of $0 and less than $0.1 million, respectively. During the three and nine months ended December 31, 2017, the Company recorded $0 of legal settlement expenses relating to potential claims arising in connection with litigation brought against the Company. Each of the full amounts was expensed and included in general and administrative expenses during their respective three and nine months ended December 31, 2018 and 2017.

While the resolution of the above matters cannot be predicted with certainty, the Company does not believe, based on current knowledge, that except as set forth above, the outcome of the currently pending claims or legal proceedings in which the Company is currently involved will have a material adverse effect on the Company’s financial statements.

 From time to time, the Company is involved in legal proceedings and other matters arising in connection with the conduct of its business activities. Many of these proceedings may be at preliminary stages and/or seek an indeterminate amount of damages. The Company regularly evaluates the status of its commitments and contingencies in which it is 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. The Company records an expense accrual for any commitments and loss contingency when it determines that a loss is probable and the amount of the loss can be reasonably estimated. If an expense accrual is not appropriate, the Company further evaluates 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 the Company 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.

Leases

Beginning on August 1, 2017, the Company was given the right to occupy approximately 5,200 square feet of office space in West Hollywood, California. The space was provided to the Company by an unrelated third party and is fully furnished. The Company compensates the landlord in cash at the rate of approximately $38 thousand per month for months that the Company occupies the space. The Company or the third party can terminate the arrangement at any time without prior notice.

Slacker leases its San Diego premises under operating leases expiring on December 31, 2019. Rent expense for the operating lease totaled $0.1 million and $0.3 million for the three and nine months ended December 31, 2018, respectively.

Note 15 — Employee Benefit Plan

Slacker sponsors a 401(k) plan (the “Plan”) covering all Slacker employees. Employees are eligible to participate in the Plan the first day of the calendar month following their date of hire. Slacker may make discretionary matching contributions to the Plan on behalf of its employees up to a maximum of 100% of the participant’s elective deferral up to a maximum of 5% of the employees’ annual compensation. Slacker made less than $0.1 million and $0.1 million in matching contributions to the plan for the three and nine months ended December 31, 2018, respectively.

Note 16 — Stockholders’ Equity

Issuance of Common Stock for Services to Consultants

During the nine months ended December 31, 2018, the Company issued 159,243 shares of its common stock valued at $0.7 million to certain Company consultants. Additionally, the Company has $0.6 million in Accounts Payable and accrued liabilities for stock earned by consultants, but not yet issued. During the three and nine months ended December 31, 2018, the Company recorded $0.2 million and $1.4 million, respectively, of expense related to stock issuances to consultants. The remaining unrecognized compensation cost of approximately $0.8 million is expected to be recorded over the next year as the shares vest.

During the nine months ended December 31, 2017, the Company issued 383,335 shares of its common stock valued at $1.7 million to certain Company consultants. During the three and nine months ended December 31, 2017, the Company recorded $1.0 million and $1.7 million, respectively, of expenses related to the stock issuances.

Issuance of Common Stock for Services to Employees

During the three and nine months ended December 31, 2018, the Company recorded $0.1 million and $0.4 million, respectively, of expense related to prior stock issuances to employees. As of December 31, 2018, the remaining unrecognized compensation cost of $0.2 million is expected to be recorded over the next year as the shares vest.

During the nine months ended December 31, 2017, the Company issued 233,334 shares of its common stock valued at $1.2 million to certain employees. During the three and nine months ended December 31, 2017, the Company recorded $0.1 million and $0.4 million, respectively, of expense related to the stock issuances to employees.

Additional details of the Company’s issuances of its common stock to employees during nine months ended December 31, 2018 are as follows:

Issuance of Common Stock upon Conversion of Notes

During the nine months ended December 31, 2018, we issued 393,570 shares of our common stock in exchange for the conversion of $1.2 million of our 6% unsecured convertible notes and related accrued interest.

At December 31, 2018, the intrinsic value of warrants outstanding and exercisable was $0.2 million.

Note 17 — Business Segment and Geographic Reporting

Management has determined that the Company has one consolidated operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. 

Customers

The Company has one external customer that accounts for more than 10% of its revenue, which is an OEM. The OEM provides premium Slacker service in all of their new vehicles. In the three and nine months ended December 31, 2018, total revenue from the OEM was $4.0 million and $9.1 million, respectively.

Geographic Information

The Company operates as an internet live music streaming platform based in the United States. All material revenues of the Company are derived from the United States. All long-lived assets of the Company are located in the United States.

Note 18 — Fair Value Measurements

We did not elect the fair value measurement option for any of our financial assets or liabilities. The fair values of certain financial instruments measured at amortized cost and the hierarchy level we used to estimate the fair values are shown below (in thousands):

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of December 31, 2018 and March 31, 2018. Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

Cash equivalents and restricted cash equivalents primarily consisted of short-term interest-bearing money market funds with maturities of less than 90 days and time deposits. The estimated fair values were based on available market pricing information of similar financial instruments.

Due to their short maturity, the carrying amounts of the Company’s accounts receivable, accounts payable and accrued expenses approximated their fair values as of December 31, 2018 and March 31, 2018.

The Company’s outstanding debt is carried at cost, adjusted for discounts. The Company’s bank debt is not publicly traded and the carrying amounts typically approximate fair value for debt that accrues interest at a variable rate, which are considered to be Level 2 inputs. The Company’s June 2018 Debentures, embedded derivatives and unsecured convertible notes payable with fixed rates are not publicly traded and the Company has estimated fair values using binomial lattice calculations and market rate assumptions. The Company has recognized less than $0.1 million of expense it both the three and nine months ended December 31, 2018, related to the fair value of bifurcated derivatives through other income (expense). The Company’s note payable is not publicly traded and fair value is estimated to equal carrying value.