SCHEDULE: LiveOne Boosts PodcastOne Stake to 71.8%

LiveOne, Inc. has increased its beneficial ownership in PodcastOne, Inc. to 71.8% through recent share acquisitions and debt conversions, reinforcing its strategic investment.

Summary

• LiveOne, Inc. (Reporting Person) beneficially owns 19,761,050 shares of PodcastOne, Inc. common stock, representing approximately 71.8% of the outstanding shares.
• This ownership includes 18,661,050 common shares (67.8%) and 1,100,000 Bridge Warrants (4.0%) convertible into common stock.
• PodcastOne was acquired by LiveOne on July 1, 2020, becoming a wholly-owned subsidiary, and later spun out as a majority-owned subsidiary on September 8, 2023, via a direct listing.
• LiveOne acquired 237,113 shares of PodcastOne on June 11, 2025, by settling intercompany balances for services rendered.
• Since March 15, 2024, LiveOne has acquired a total of 1,712,326 shares of PodcastOne through intercompany balance settlements.
• LiveOne recently completed a private placement of $16.75 million in Original Issue Discount Senior Secured Convertible Debentures for a cash purchase price of $15.25 million, with an option for an additional $11 million under certain conditions. These debentures are convertible into LiveOne common stock at $2.10 per share and accrue interest at 11.75% per year.

Sentiment

Score: 6

Explanation: The filing indicates LiveOne's continued strong control over PodcastOne and successful capital raising through debentures. However, the high interest rate and secured nature of the debt, along with potential future dilution from conversion, introduce financial risks. The overall sentiment is neutral to slightly positive due to the strategic consolidation and capital infusion, balanced by the cost and structure of the debt.

Positives

• LiveOne, Inc. maintains a significant majority ownership stake of 71.8% in PodcastOne, Inc., indicating strong control and strategic alignment.
• The acquisition of additional shares through intercompany balance settlements (237,113 shares on June 11, 2025, and 1,712,326 shares since March 15, 2024) demonstrates LiveOne's continued investment and confidence in PodcastOne.
• The recent private placement of $16.75 million in debentures provides LiveOne with capital, with an option for an additional $11 million, which could support future growth initiatives.

Negatives

• The debentures issued by LiveOne carry a high interest rate of 11.75% per year, indicating a potentially high cost of capital.
• The debentures are secured by a lien on all of LiveOne's and its guarantors' assets, including PodcastOne's assets, which increases financial risk for the company and its subsidiaries.
• Holders of the debentures have monthly redemption rights, which could create ongoing liquidity demands on LiveOne.
• The debentures include prepayment premiums and acceleration clauses upon certain events like Change of Control or default, potentially leading to significant unexpected payouts.

Risks

• Debt Obligations: LiveOne's obligations under the $16.75 million (and potentially additional $11 million) senior secured convertible debentures, which accrue interest at 11.75% per year, pose a significant financial burden.
• Asset Lien: The debentures are secured by a lien on all of LiveOne's and its guarantors' assets, including PodcastOne's assets, meaning these assets could be seized in case of default.
• Liquidity Risk from Redemptions: Holders of the debentures have the right to require monthly redemptions of principal, starting at $100,000 per month and increasing over time, which could strain LiveOne's cash flow.
• Prepayment Premiums: Early prepayment of the debentures, whether optional or mandatory (e.g., upon a Change of Control), incurs significant premiums (e.g., 5% or 4% of principal, or 10% for Change of Control before May 19, 2026), increasing the cost of debt.
• Acceleration of Debt: Customary events of default could lead to the acceleration of LiveOne's obligations under the debentures, requiring immediate payment of the full outstanding principal plus premiums.
• Conversion Dilution: The debentures are convertible into LiveOne's common stock at $2.10 per share, which could lead to dilution for existing LiveOne shareholders if converted.
• Intercompany Balance Risk: While shares were acquired through settlement of intercompany balances, this indicates ongoing financial transactions between LiveOne and PodcastOne, which could carry inherent risks related to intercompany accounting and financial health.

Future Outlook

LiveOne, Inc. intends to continually evaluate its investment in PodcastOne, Inc. and reserves the right to engage in discussions regarding PodcastOne's operations, strategic direction, and potential transactions including debt or equity capital raising, acquisitions, mergers, combinations, and other strategic transactions. LiveOne may also cause or introduce strategic or corporate transactions involving PodcastOne or its subsidiaries, or dispose of all or a portion of its shares. The ability to sell additional debentures is contingent on LiveOne's stock price reaching $4.20 for 30 consecutive trading days or achieving $3 million in free cash flow for three consecutive increasing quarters.

Industry Context

This filing highlights the ongoing consolidation and strategic maneuvering within the digital audio and entertainment industry, specifically in podcasting. LiveOne, a broader music and entertainment platform, is solidifying its control over PodcastOne, a key asset in its portfolio. The use of convertible debt financing by LiveOne suggests a strategy to raise capital for its operations, potentially to fund growth or manage existing liabilities, which is a common practice in the dynamic and capital-intensive media technology sector. The direct listing of PodcastOne and subsequent majority ownership by LiveOne reflects a trend of larger media companies spinning out or partially divesting digital assets while maintaining significant influence.

Comparison to Industry Standards

• LiveOne's 71.8% ownership of PodcastOne is a substantial majority stake, providing strong control, which is common for strategic investors or parent companies maintaining influence over spun-out entities. For example, similar to how IAC maintains significant stakes in companies like Angi or Dotdash Meredith after spin-offs.
• The 11.75% interest rate on LiveOne's senior secured convertible debentures is relatively high, especially for a secured debt instrument, suggesting either a higher perceived risk by investors or a reflection of current market conditions for growth-oriented media companies. This rate is higher than typical corporate bond yields for investment-grade companies but might be comparable to rates seen in venture debt or high-yield bonds for smaller, growth-stage companies in the media tech space.
• The structure of the debentures, including original issue discount, conversion features, and redemption rights, is typical for private placements to institutional investors seeking higher returns and equity upside in growth companies.
• The conditions for selling additional debentures (VWAP target of $4.20 or $3 million Free Cash Flow for three increasing quarters) are performance-based triggers, common in growth financing to align investor interests with company performance.

Related Party Transactions

• LiveOne, Inc. acquired 1,712,326 shares of PodcastOne, Inc. common stock since March 15, 2024, as a result of the settlement of PodcastOne's intercompany balances owed to LiveOne for services previously rendered.
• LiveOne, Inc. was a participant in PodcastOne's private placement of Bridge Notes in July 2022.
• PodcastOne, Inc. (the Issuer) is a wholly-owned subsidiary of LiveOne, Inc. (the Reporting Person) as of July 1, 2020, and became a majority-owned subsidiary after the Direct Listing on September 8, 2023.
• PodcastOne, Inc. is a guarantor of LiveOne, Inc.'s obligations under the May 2025 Senior Secured Convertible Debentures, and its assets are part of the collateral.

Stakeholder Impact

• Shareholders (PodcastOne): LiveOne's majority ownership (71.8%) means LiveOne has significant control over strategic decisions, potentially limiting the influence of minority shareholders. The acquisition of shares via intercompany balance settlement could be seen as a non-dilutive way for LiveOne to increase its stake.
• Shareholders (LiveOne): The issuance of senior secured convertible debentures could lead to dilution if converted into LiveOne common stock at $2.10 per share. The high interest rate on the debentures (11.75%) represents a significant cost of capital that could impact LiveOne's profitability. The securing of the debentures with LiveOne's and its subsidiaries' assets increases risk.
• Creditors (LiveOne): The new debenture holders are secured creditors with a lien on assets, providing them with a strong position. Other unsecured creditors might face increased risk due to the senior secured nature of this new debt.
• Employees (PodcastOne & LiveOne): The strategic consolidation and financing activities could imply stability or potential for growth, but also potential for restructuring or changes in operational focus depending on LiveOne's future strategic evaluations.

Next Steps

• LiveOne, Inc. intends to continually evaluate its investment in PodcastOne, Inc.
• LiveOne, Inc. may engage in communications with PodcastOne's stockholders, officers, or directors regarding operations and strategic direction.
• LiveOne, Inc. reserves the right to cause or introduce strategic or corporate transactions involving PodcastOne or its subsidiaries.
• LiveOne, Inc. may sell an additional $11 million in debentures if specific performance conditions (VWAP or Free Cash Flow targets) are met within 15 months of May 19, 2025.
• Holders of the Initial Debentures have monthly redemption rights starting August 2025.
• LiveOne, Inc. has an option to prepay the Initial Debentures after May 19, 2026, subject to certain conditions and premiums.

Key Dates

Recommendation

LiveOne's increased stake in PodcastOne solidifies its control over a key asset in the growing podcasting sector, which is a positive for strategic alignment. The recent capital raise provides LiveOne with funds, but the high interest rate (11.75%) and the secured nature of the debentures, along with potential future dilution from conversion, introduce significant financial risks. The company's ability to sell additional debentures is tied to performance metrics, indicating a focus on growth, but the overall financial structure suggests a cautious approach is warranted. Given the mixed signals of strategic consolidation and high-cost debt, a "hold" recommendation is appropriate for a seasoned investor to observe how LiveOne manages its debt obligations and leverages its control over PodcastOne for future growth.

Keywords

PodcastOne, LiveOne, SEC Filing, Schedule 13D, Beneficial Ownership, Majority Stake, Convertible Debentures, Private Placement, Debt Financing, Corporate Governance, Media, Entertainment, Podcasting, NASDAQ