NEVADA
|
|
47-5224851
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification No.)
|
Large accelerated filer ☐
|
|
Accelerated filer ☐
|
|
Non-accelerated filer ☐
|
|
Smaller reporting company ☒
|
|
Emerging growth company ☒
|
|
|
|
3
|
||
Item 1A.
|
5
|
|
24
|
||
25
|
||
25
|
||
25
|
||
25
|
||
26
|
||
26
|
||
35
|
||
|
36
|
|
56
|
||
56
|
||
56
|
||
57
|
||
61
|
||
66
|
||
67
|
||
67
|
||
68
|
Plan
Category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted average
exercise price of outstanding options, warrants and
rights
|
Number of
securities remaining available for future issuance under equity
compensation plans excluded securities reflected in column
(a)
|
|
(a)
|
(b)
|
(c)
|
Equity compensation
plans approved by stockholders
|
-
|
$0.00
|
3,000,000
|
|
|
|
|
Equity compensation
plans not approved by stockholders
|
-
|
$0.00
|
-
|
|
|
|
|
Total
|
-
|
$0.00
|
3,000,000
|
Period
|
(a)Total number
of shares (or units) purchased
|
(b)Average price
paid per share (or unit)
|
(c)Total number
of shares (or units) purchased as part of publicly announced plans
or programs
|
(d)Maximum
number (or approximate dollar value) of shares (or units) that may
yet be purchased under the plans or programs
|
December
2018
|
55,000(1)
|
$1.50
|
-
|
-
|
Total
|
55,000
|
$1.50
|
-
|
-
|
|
Page
|
|
|
37
|
|
|
|
39
|
|
|
|
40
|
|
|
|
41
|
|
|
|
42
|
|
|
|
43
|
|
|
|
|
December
31,
2018
|
December
31,
2017
|
CURRENT
ASSETS:
|
|
|
Cash
|
$11,079,941
|
$5,211,845
|
Accounts
receivable, net
|
481,921[1]
|
660,139[1]
|
Prepaid
expenses
|
449,223
|
186,425
|
Total
current assets
|
12,011,085
|
6,058,409
|
|
|
|
Property
and equipment, net
|
2,229,294
|
3,007,025
|
Goodwill
|
16,388,171
|
16,352,069
|
Definite
life - intangible assets, net
|
7,786,686
|
9,644,000
|
Prepaid expense
|
191,609
|
7,076
|
Total
assets
|
$38,606,845
|
$35,068,579
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts
payable
|
$745,889
|
$440,565
|
Accrued
expenses
|
377,572
|
769,485
|
Deferred
revenue, net of current portion
|
2,276,079
|
1,247,686
|
Current
portion of capital lease obligation
|
72,986
|
69,243
|
Current portion of
loans payable, net of $28,068 and $33,366 discount,
respectively
|
2,638,599
|
1,566,634
|
Total
current liabilities
|
6,111,125
|
4,093,613
|
|
|
|
LONG TERM
LIABILITIES:
|
|
|
Loans payable, net
of $51,566 and $79,634 discount, less current portion
|
5,681,767
|
8,320,366
|
Capital lease
obligation, net of current portion
|
831
|
73,817
|
Deferred
revenue, net
|
371,938
|
133,617
|
Total
long-term liabilities
|
6,054,536
|
8,527,800
|
Total
liabilities
|
12,165,661
|
12,621,413
|
|
|
|
COMMITMENTS &
CONTINGENCIES
|
-
|
-
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
Common
stock
|
29,722
|
29,596
|
Additional
paid-in capital
|
35,010,552
|
34,804,457
|
Accumulated
deficit
|
(8,599,090)
|
(12,386,887)
|
Total
stockholders' equity
|
26,441,184
|
22,447,166
|
Total
liabilities and stockholders' equity
|
$38,606,845
|
$35,068,579
|
Liberated Syndication Inc. and Subsidiaries
Balance Sheet (Parenthetical)
|
|
|
Statement of
Financial Position
|
December
31,
2018
|
December
31,
2017
|
Allowance
for doubtful accounts
|
$14,000
|
$14,000
|
Common
stock authorized
|
200,000,000
|
200,000,000
|
Common
stock par value
|
$0.001
|
$0.001
|
Common
stock outstanding
|
29,721,974
|
29,595,473
|
|
Years
ended
|
|
|
December
31,
2018
|
December
31,
2017
|
|
|
|
|
|
|
Revenue
|
$22,010,132
|
$10,584,219
|
|
|
|
Costs and operating
expenses
|
|
|
|
|
|
Cost of revenue
(excluding depreciation and amortization)
|
3,331,876
|
2,379,151
|
General and
administrative
|
6,065,661
|
10,263,775
|
Technology
|
1,842,020
|
610,794
|
Selling
|
846,434
|
299,074
|
Customer
support
|
2,830,789
|
191,820
|
Depreciation and
amortization
|
3,013,732
|
22,033
|
Total costs and
operating expenses
|
17,930,512
|
13,766,647
|
Operating income
(loss)
|
4,079,620
|
(3,182,428)
|
|
|
|
|
|
|
Interest
expense
|
(387,064)
|
-
|
Interest
income
|
84,992
|
-
|
Other
income
|
10,249
|
33
|
Income (loss) from
operations before income taxes
|
3,787,797
|
(3,182,395)
|
|
|
|
Income tax expense
(benefit)
|
-
|
-
|
Net Income
(loss)
|
$3,787,797
|
$(3,182,395)
|
|
|
|
|
|
|
BASIC AND DILUTED
INCOME (LOSS) PER COMMON SHARE
|
$0.13
|
$(0.13)
|
BASIC AND DILUTED
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
|
29,740,207
|
24,390,595
|
|
|
|
Additional
|
|
|
Common
Stock
|
Paid
In
|
Accumulated
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
|
|
|
|
|
Balance at December
31, 2016
|
20,805,860
|
$20,806
|
$25,047,247
|
$(9,204,492)
|
|
|
|
|
|
Issuance of Common
Stock for services
|
7,250,000
|
7,250
|
7,266,750
|
-
|
|
|
|
|
|
Repurchase of
Common Stock
|
(40,000)
|
(40)
|
(7,960)
|
-
|
|
|
|
|
|
Issuance of Common
Stock to acquire Pair Networks Inc.
|
1,579,613
|
1,580
|
2,498,420
|
-
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
(3,182,395)
|
|
|
|
|
|
Balance at December
31, 2017
|
29,595,473
|
$29,596
|
$34,804,457
|
$(12,386,887)
|
|
|
|
|
|
Issuance of Common
Stock for services
|
200,000
|
200
|
317,800
|
-
|
|
|
|
|
|
Return of Common
Stock for final settlement of Pair Acquisition
|
(18,499)
|
(19)
|
(29,260)
|
-
|
|
|
|
|
|
Repurchase of
Common Stock
|
(55,000)
|
(55)
|
(82,445)
|
-
|
|
|
|
|
|
Net
Income
|
-
|
-
|
-
|
3,787,797
|
|
|
|
|
|
Balance at December
31, 2018
|
29,721,974
|
$29,722
|
$35,010,552
|
$(8,599,090)
|
|
December
31,
2018
|
December
31,
2017
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
Net
income (loss)
|
$3,787,797
|
$(3,182,395)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
Depreciation
and amortization
|
3,013,732
|
22,033
|
Issuance
of common stock for services
|
318,000
|
7,274,000
|
Amortization
of discount on loan fees
|
33,366
|
-
|
Change
in assets and liabilities:
|
|
|
Accounts
receivable
|
112,838
|
(184,874)
|
Prepaid
expenses
|
(447,332)
|
(70,289)
|
Accounts
payable
|
305,324
|
(319,483)
|
Accrued
expense
|
(391,913)
|
66,586
|
Deferred
revenue
|
1,266,714
|
(18,174)
|
Net
Cash Provided by Operating Activities
|
7,998,526
|
3,587,404
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
Purchase
of property & equipment
|
(378,687)
|
(69,064)
|
Acquisition
of Pair Networks Inc., net of cash acquired
|
-
|
(13,060,953)
|
Net
Cash Used in Investing Activities
|
(378,687)
|
(13,130,017)
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
Repurchase
of common stock
|
(82,500)
|
(8,000)
|
Proceeds
from loans
|
-
|
10,000,000
|
Payment
of debt issuance costs
|
-
|
(113,000)
|
Repayment
on term loan
|
(1,600,000)
|
-
|
Repayment
on capital lease
|
(69,243)
|
-
|
Net
Cash Provided by (Used in) Financing Activities
|
(1,751,743)
|
9,879,000
|
|
|
|
Net
Increase in Cash and Cash Equivalents
|
5,868,096
|
336,387
|
Cash
and Cash Equivalents at Beginning of Period
|
5,211,845
|
4,875,458
|
Cash
and Cash Equivalents at End of Period
|
$11,079,941
|
$5,211,845
|
|
|
|
Supplemental
Disclosures of Cash Flow Information
|
|
|
Cash
paid during the periods for:
|
|
|
Interest
|
350,761
|
-
|
Income
taxes
|
-
|
-
|
|
Life
|
December
31,
2018
|
December
31,
2017
|
|
|
|
|
Furniture,
fixtures, and equipment
|
3-10
yrs
|
$8,155,322
|
$8,032,178
|
Leasehold
improvements
|
3 - 5
yrs
|
2,646,400
|
2,646,400
|
Software
|
3 yrs
|
262,046
|
6,503
|
|
11,063,768
|
10,685,081
|
|
Less: Accumulated
depreciation
|
|
(8,834,474)
|
(7,678,056)
|
Property &
equipment, net
|
|
$2,229,294
|
$3,007,025
|
|
December
31,
|
December
31,
|
|
2018
|
2017
|
Pair
|
$4,903,920
|
$4,867,818
|
Libsyn
|
11,484,251
|
11,484,251
|
Total
Goodwill
|
$16,388,171
|
$16,352,069
|
|
December
31,
|
December
31,
|
|
2018
|
2017
|
|
|
|
Goodwill at
beginning of period
|
$16,352,069
|
$11,484,251
|
Acquisition of
Pair
|
36,102
|
4,867,818
|
Impairment
|
-
|
-
|
Goodwill at end of
period
|
$16,388,171
|
$16,352,069
|
|
Preliminary
Fair
Value
|
Weighted Average
Useful
Life
(in
Years)
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Customer
Relationships
|
$3,947,000
|
7
|
$563,857
|
$3,383,143
|
Intellectual
Property
|
3,709,000
|
7
|
529,857
|
3,179,143
|
Trade
name
|
576,000
|
10
|
57,600
|
518,400
|
Non-compete
|
1,412,000
|
2
|
706,000
|
706,000
|
Total
|
$9,644,000
|
|
$1,857,314
|
$7,786,686
|
For twelve months
ending December 31,
|
|
2019
|
$1,857,314
|
2020
|
1,151,315
|
2021
|
1,151,315
|
2022
|
1,151,314
|
2023
|
1,151,314
|
Thereafter
|
1,324,114
|
Total
|
$7,786,686
|
For the year ending
December 31,
|
|
2019
|
$2,666,667
|
2020
|
1,600,000
|
2021
|
1,600,000
|
2022
|
1,600,000
|
2023
|
933,333
|
Thereafter
|
-
|
Total
|
$8,400,000
|
|
Shares
|
Weighted Average Grant Date Fair Value
|
Average Remaining Life
|
Issued
and outstanding awards subject to forfeiture at beginning of
period
|
7,250,000
|
$1.00
|
1.68
|
Stock
Awards Issued
|
-
|
$-
|
-
|
Awards
no-longer subject to forfeiture
|
2,075,000
|
$0.61
|
N/A
|
Cancelled
/ Forfeited Awards
|
-
|
-
|
-
|
Issued
and outstanding awards subject to forfeture at end of
period
|
5,175,000
|
$1.16
|
1.45
|
|
December
31,
2018
|
December 31,
2017
|
Current:
|
|
|
Hosting
services
|
$1,601,335
|
$1,032,000
|
Domains
|
535,273
|
104,172
|
Media
subscription
|
139,471
|
111,514
|
|
$2,276,079
|
$1,247,686
|
Noncurrent:
|
|
|
Hosting
services
|
39,071
|
50,351
|
Domains
|
332,867
|
83,266
|
|
$2,648,017
|
$1,381,303
|
|
2019
|
2020
|
2021
|
2022
|
2023
|
Thereafter
|
Total
|
|
|
|
|
|
|
|
|
Domains
|
$535,273
|
$132,278
|
$87,726
|
$70,796
|
$36,957
|
$5,110
|
$868,140
|
Hosting
|
1,601,335
|
35,340
|
3,731
|
-
|
-
|
-
|
1,640,406
|
Media
Subscription
|
139,471
|
-
|
-
|
-
|
-
|
-
|
139,471
|
|
$2,276,079
|
$167,618
|
$91,457
|
$70,796
|
$36,957
|
$5,110
|
$2,648,017
|
|
Twelve months
ended December 31
|
|
|
2018
|
2017
|
Hosting
services
|
$8,896,966
|
$47,563
|
Podcast
hosting
|
10,915,771
|
8,504,883
|
Advertising
|
1,323,776
|
1,662,788
|
Domains
|
547,770
|
-
|
Other
|
325,849
|
368,985
|
|
$22,010,132
|
$10,584,219
|
|
For the Years
Ended
|
|
|
December
31,
|
|
Current tax
expense:
|
2018
|
2017
|
Federal
|
$-
|
$-
|
State
|
-
|
-
|
Current tax
expense
|
-
|
-
|
Deferred tax
expense (benefit):
|
|
|
Revaluation of
deferred tax asset change in Federal Tax Rate
|
-
|
1,400,760
|
Depreciation and
amortization
|
(668,673)
|
-
|
Goodwill
|
493,180
|
511,108
|
Non-cash
compensation
|
366,496
|
-
|
Return
to accrual
|
(188,106)
|
-
|
Valuation
Allowance
|
(909,738)
|
(110,866)
|
Net
operating loss carryforward
|
906,841
|
(1,801,002)
|
Subtotal deferred
tax expense/(benefit)
|
-
|
-
|
Income tax
expense/(benefit)
|
$-
|
$-
|
|
For the Years
Ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
Computed tax at the
expected statutory rate
|
$795,437
|
$(1,082,014)
|
State and local
income taxes, net of federal
|
299,885
|
173,117
|
Other
non-deductible expenses
|
2,522
|
1,632
|
Revaluation of
deferred tax assets for change in Federal Tax Rate
|
-
|
1,400,760
|
Other
items
|
(188,106)
|
(382,629)
|
Valuation
Allowance
|
(909,738)
|
(110,866)
|
Income tax
expense/(benefit)
|
$-
|
$-
|
|
December
31,
|
December
31,
|
|
2018
|
2017
|
Current deferred
tax assets (liabilities):
|
|
|
Allowance for
doubtful accounts
|
$-
|
$-
|
Vacation
accrual
|
-
|
-
|
Total current
deferred tax assets (liabilities)
|
-
|
-
|
|
|
|
Long-term deferred
tax assets (liabilities):
|
|
|
Goodwill -
impaired
|
2,066,632
|
2,066,632
|
Goodwill –
tax amortization
|
(4,408,529)
|
(3,915,349)
|
Depreciation and
amortization
|
347,471
|
-
|
Non-cash
compensation
|
1,735,115
|
-
|
Net operating loss
carryforward
|
2,808,240
|
5,307,384
|
Valuation
allowance
|
(2,548,929)
|
(3,458,667)
|
Total long-term
deferred tax assets (liabilities)
|
$-
|
$-
|
Net term deferred
tax assets (liabilities)
|
$-
|
$-
|
Year ending
December 31:
|
Lease
Payments
|
2019
|
544,284
|
2020
|
493,164
|
2021
|
365,562
|
2022
|
19,812
|
Thereafter
|
-
|
Total Minimum Lease
Payment
|
$1,422,822
|
Year ending December 31,
|
Lease
Payments
|
2019
|
75,132
|
2020
|
835
|
Total
minimum lease payments
|
75,967
|
Less
amount representing interest
|
(2,150)
|
Present
value of minimum lease payments
|
73,817
|
Less
Current Portion
|
(72,986)
|
|
$831
|
|
December
31,
2017
|
December
31,
2017
|
Income (loss) from
operations available to common stockholders
(numerator)$
|
$3,787,797
|
(3,182,395)
|
Income (loss)
available to common stockholders (numerator)
|
3,787,797
|
(3,182,395)
|
Weighted average
number of common shares outstanding during the period used in
earnings per share (denominator)
|
29,740,207
|
24,390,595
|
|
2018
|
2017
|
||||
(in
thousands)
|
Libsyn
|
Pair
|
Total
|
Libsyn
|
Pair
|
Total
|
|
|
|
|
|
|
|
Revenue
|
$12,630
|
$9,380
|
$22,010
|
$10,536
|
$48
|
$10,584
|
Cost of
revenue
|
2,516
|
816
|
3,332
|
2,379
|
-
|
2,379
|
|
|
|
|
|
|
|
Total
assets
|
$20,875
|
$17,732
|
$38,607
|
$16,965
|
$18,104
|
$35,069
|
Depreciation and
amortization
|
$46
|
$2,968
|
$3,014
|
$22
|
$-
|
$22
|
Name
|
|
Age
|
|
Position(s)
|
|
Served in
Position Since
|
Christopher
J. Spencer
|
|
50
|
|
Chief
Executive Officer and Chairman of the Board
|
|
2015
|
John
Busshaus
|
|
55
|
|
Chief
Financial Officer
|
|
2015
|
Denis
Yevstifeyev
|
|
38
|
|
Director
|
|
2015
|
Douglas
Polinsky
|
|
59
|
|
Director
|
|
2015
|
J.
Gregory Smith
|
|
49
|
|
Director
|
|
2015
|
|
|
|
|
|
|
|
Name and
principal position
|
Salary
($)
|
Bonus
($)
|
Stock awards
($)
|
Non-equity
incentive plan compensation ($)
|
All other
compensation ($)
|
Total
($)
|
Christopher Spencer
– Chief Executive Officer
|
|
|
|
|
|
|
2018
|
400,000
|
60,000
|
-
|
-
|
-
|
460,000
|
2017
|
400,000
|
-
|
2,392,000
|
-
|
-
|
2,792,000
|
2016
|
400,000
|
150,000
|
-
|
-
|
-
|
550,000
|
John Busshaus
– Chief Financial Officer
|
|
|
|
|
|
|
2018
|
350,000
|
45,000
|
-
|
-
|
-
|
395,000
|
2017
|
350,000
|
-
|
1,968,000
|
-
|
-
|
2,318,000
|
2016
|
350,000
|
125,000
|
-
|
-
|
-
|
475,000
|
|
Option
awards
|
Stock
awards
|
||||||
Name
|
Numberof securities
underlying unexercised options (#) exercisable
|
Number of
securities underlying unexercised options (#)
unexercisable
|
Equity incentive
plan awards: number of securities underlying unexercised unearned
options (#)
|
Option exercise
price ($)Optionexpiration date
|
Number
of shares or units of stock that have not vested
(#)
|
Market value
of shares or units of stock that have not vested
($)
|
Equity incentive
plan awards: number of unearned shares, units or other rights that
have not vested (#)
|
Equity incentive
plan awards: market or payout value of unearned shares, units or
other rights that have not vested ($)
|
Chris
Spencer
|
-
|
-
|
-
|
-
|
1,850,000
|
2,312,500
|
-
|
-
|
John L.
Busshaus
|
-
|
-
|
-
|
-
|
1,525,000
|
1,906,250
|
-
|
-
|
|
Option
awards
|
Stock
awards
|
||
Name
|
Number
of
shares
acquired
on exercise
(#)
|
Value
realized on
exercise
($)
|
Number
of shares
acquiredon vesting
(#)
|
Value
realized
on vesting
($)
|
Christopher
Spencer
|
-
|
-
|
-
|
-
|
John L.
Busshaus
|
-
|
-
|
-
|
-
|
Plan
Category
|
Maximum shares
to be issued upon exercise of options
|
Weighted-average
exercise price of outstanding options
|
Shares remaining
available for future issuance under existing equity
compensation plans (excluding shares reflected in
first column)
|
Plans approved by
stockholders
|
3,000,000
|
$-
|
3,000,000
|
Plans not approved
by stockholders
|
-
|
-
|
-
|
|
|
|
|
Total
|
3,000,000
|
$-
|
3,000,000
|
Name
|
Fees earned
or paid in cash ($)
|
Stock awards ($)
|
Option awards ($)
|
Non-equity
incentive plan compensation ($)
|
Nonqualified
deferred compensation earnings ($)
|
All other
compensation ($)
|
Total($)
|
Doug
Polinsky
|
66,000
|
-
|
-
|
-
|
-
|
-
|
66,000
|
J. Gregory
Smith
|
66,000
|
-
|
-
|
-
|
-
|
-
|
66.000
|
Denis
Yevstifeyev
|
66,000
|
-
|
-
|
-
|
-
|
-
|
66,000
|
Name of
Beneficial Owner (1)
|
Amount and Nature of
Beneficial Ownership
|
Owner
%
|
10%
Stockholders:
|
|
|
None
|
|
|
Directors:
|
|
|
Douglas
Polinsky
|
504,241
|
1.7%
|
J. Gregory
Smith
|
486,000
|
1.6%
|
Denis
Yevstifeyev
|
500,000
|
1.7%
|
Executive
Officers:
|
|
|
Christopher
Spencer, Chief Executive Officer
|
2,834,392
|
9.5%
|
John L.
Busshaus
|
2,207,524
|
7.4%
|
All directors and
executive officers as a group (5 persons)
|
6,532,157
|
22.0%
|
Fee
category
|
2018
|
2017
|
Audit Fees
(1)
|
$82,000
|
$70,000
|
Audit –
related fees
|
-
|
-
|
Tax
fees
|
-
|
-
|
All other
fees
|
-
|
-
|
Total
fees
|
$82,000
|
$70,000
|
(1)
|
Consists
of fees for audit of the Company's annual financial statements,
audit of the financial statements of acquired subsidiaries, the
review of interim financial statements included in the Company's
quarterly reports, and the review of other documents filed with the
Securities and Exchange Commission.
|
Exhibit
Number
|
|
Description
|
|
Articles of Incorporation (3)
|
|
|
Bylaws (3)
|
|
|
Tax Matters Agreement (3)
|
|
|
Stock Agreement of Christopher J. Spencer dated April 13,
2017(4)*
|
|
|
Stock Agreement of John Busshaus dated April 13,
2017(4)*
|
|
|
Stock Agreement of Douglas Polinsky dated April 13,
2017(4)*
|
|
|
Stock Agreement of Denis Yevstifeyev dated April 13,
2017(4)*
|
|
|
Stock Agreement of John G. Smith dated April 13,
2017(4)*
|
|
|
Stock Agreement of Christopher J. Spencer dated December 15,
2017(5)*
|
|
|
Stock Agreement of John Busshaus dated December 15,
2017(5)*
|
|
|
Stock Agreement of Douglas Polinsky dated December 15,
2017(5)*
|
|
|
Stock Agreement of Denis Yevstifeyev dated December 15,
2017(5)*
|
|
|
Stock Agreement of John G. Smith dated December 15,
2017(5)*
|
|
|
Loan Agreement among Liberated Syndication, Webmayhem, Inc., Pair
Networks, Inc. and First Commonwealth Bank dated December 27, 2017
(2)
|
|
10.13
|
|
2018 Omnibus Equity Incentive Plan
|
21
|
|
Subsidiaries of Registrant
|
|
302 Certification of Christopher J. Spencer
|
|
|
302 Certification of John Busshaus
|
|
|
906 Certification
|
Date:
|
3/14/19
|
|
By:
|
/s/ Christopher J. Spencer
|
|
|
|
|
Christopher J. Spencer
|
|
|
|
|
Chief Executive Officer and President
|
Date:
|
3/14/19
|
|
By:
|
/s/ Christopher J. Spencer
|
|
|
|
|
Christopher J. Spencer
|
|
|
|
|
Chief Executive Officer and President
|
Date:
|
3/14/19
|
|
|
/s/ John Busshaus
|
|
|
|
|
John Busshaus
|
|
|
|
|
Chief Financial Officer
|
Date:
|
3/14/19
|
|
By:
|
/s/ Christopher J. Spencer
|
|
|
|
|
Christopher J. Spencer
|
|
|
|
|
Chief Executive Officer and President
|
Date:
|
3/14/19
|
|
|
/s/ John Busshaus
|
|
|
|
|
John Busshaus
|
|
|
|
|
Chief Financial Officer
|
Date:
|
3/14/19
|
|
By:
|
/s/ Christopher J. Spencer
|
|
|
|
|
Christopher J. Spencer
|
|
|
|
|
Chief Executive Officer and President
|
Date:
|
3/14/19
|
|
|
/s/ John Busshaus
|
|
|
|
|
John Busshaus
|
|
|
|
|
Chief Financial Officer
|
IV2EIM\>F7>I?8F5N2&N%#P
M.&&U#YC#'R@MVGQ[^+?BKX3>)M-FTZ'0]6TN\M[R4Z9]FF_M&7[-93W#,DJN
M4P7CB0#RR Organization
– Liberated Syndication Inc., (“Company”, “parent”), a Nevada Corporation, was organized on
September 30, 2015. Webmayhem, Inc. (“Libsyn”), a Pennsylvania corporation, a wholly owned subsidiary of the Company,
was organized on January 1, 2001. Libsyn provides podcast hosting services for producers of content. Libsyn also offers ad insertion
on certain of the producers’ content. Libsyn offers hosting and distribution tools, including storage, bandwidth, syndication
creation, distribution, and statistics tracking. Libsyn offers an enterprise solution for professional media producers and corporate
customers and a premium subscription service that provides producers a custom App and a podcast Website where listeners can access
their show, login to purchase a subscription, and get access to premium content. On
December 27, 2017, the Company purchased all the issued and outstanding shares of Pair Networks Inc., (“Pair”), a
Pennsylvania corporation, and subsidiaries Ryousha Kokusai, LLC (Ryousha) and 660837NB, Inc. (NB), in a transaction accounted
for as a purchase. Pair
Networks Inc. provides web hosting services and domain name registrations. Services include shared web hosting, e-commerce, fully-managed
virtual private and dedicated servers, customer self-managed dedicated servers, domain-name registration, co-location and content-delivery
networks. Pair began operations in August 1995. It incorporated in the state of Pennsylvania in August 1998. Pair’s principal
operations are conducted on-site in Pittsburgh, PA. Pair also has an operating site in Denver, Colorado, and a remote site back-up
location in Pittsburgh, PA. Ryousha
Kokusai, LLC (dba Pair International), a wholly owned single-member limited liability company subsidiary of Pair, was formed on
January 1, 2015. The Value Added Tax(VAT) for sales to European Union countries subject to the VAT in Europe are paid through
Ryousha Kokusai LLC. There are no operating activities conducted by Ryousha. NB, a Canadian Company was organized on December
2, 2011. NB is used solely for holding the Canadian tradenames and domain names of Pair. There are no operating activities conducted
by NB. Principles
of Consolidation - Our financial statements have been prepared in accordance with generally accepted accounting principles
in the United States (GAAP) and include our accounts and the accounts of our subsidiaries. The financial statements presented
reflect the accounts of parent, Libsyn, Ryousha, NB and Pair. All material intercompany accounts and transactions have been eliminated. Accounting
Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Our
more significant estimates include: We
periodically evaluate these estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable;
however, actual results may differ from our estimates. Cash
and Cash Equivalents – The Company considers all highly liquid investments with an original maturity date of three months
or less when purchased to be cash equivalents. At December 31, 2018, the Company had $10,641,198 cash balances in excess of federally
insured limits. Concentration
of Credit Risk - Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily
of cash, cash equivalents and account receivable. Management’s assessment of the Company’s credit risk for cash and
cash equivalents is low as cash and cash equivalents are held in financial institutions believed to be credit worthy. No single
customer represented over 10% of our total revenue for any period presented. As of December 31, 2018, two customers individually
accounted for 18% and 12%, respectively, of our total accounts receivable. In 2017, the same two customers individually accounted
for 10% and 8%, respectively. Accounts
Receivable – Accounts receivable consist of trade receivables arising in the normal course of business. At December
31, 2018 and 2017, the Company has an allowance for doubtful accounts of $14,000 and $14,000, respectively, which reflects the
Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance
based on known troubled accounts, historical experience, and other currently available evidence. During the years ended December
31, 2018 and 2017, the Company adjusted the allowance for bad debt by $0. Registry
Deposits - Registry deposits represent amounts on deposit with, or receivable from, various domain name registries to be used
by us to make payments for future domain registrations or renewals. Prepaid
Domain Name Registry Fees - Prepaid domain name registry fees represent amounts charged by a registry at the time a domain
is registered or renewed. These amounts are amortized to cost of revenue over the same period revenue is recognized for the related
domain registration contracts. Property
and Equipment – Property and equipment
is stated at cost. Depreciation is recorded over the shorter of the estimated useful life or the lease term of the applicable
asset using the straight-line method beginning on the date an asset is placed in service. Maintenance and repairs are charged
to expense as incurred. Definite-Life
Intangible Assets – The Company evaluates its long-lived assets for impairment whenever events or change in circumstances
indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over
the fair value of the asset. Software
Development Costs - We account for software development costs, including costs to develop software products or the software
component of products to be marketed to external users, as well as software programs to be used solely to meet our internal needs
in accordance with ASC Topic 985 Software. Software development costs associated with software to be sold, leased, or for internal
use are expensed as incurred until technological feasibility, defined as a working model or prototype, has been established. At
that time, such costs are capitalized until the product is available for general release and amortized over its useful life. Debt
Issuance Costs - We defer and amortize issuance costs, underwriting fees and related expenses incurred in connection with
the issuance of debt instruments using the effective interest method over the terms of the respective instruments. Debt issuance
costs, other than those associated with our revolving credit loan, are reflected as a direct reduction (discount) of the carrying
amount of the related debt liability. Goodwill
– Goodwill is evaluated for impairment annually and whenever events or changes in circumstances indicate the carrying
value of goodwill may not be recoverable. The Company performed the annual impairment test of goodwill as of December 31, 2018.
Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand
or business climate that could affect the value of goodwill or a significant decrease in expected cash flows. The company recorded
no impairment charge for goodwill during the years ended December 31, 2018 and 2017. Advertising
Costs – Advertising costs are expensed as incurred and amounted to $122,424 and $34,623 for the periods ending December
31, 2018 and 2017, respectively. Fair
Value of Financial Instruments – The Company accounts for fair value measurements for financial assets and financial
liabilities in accordance with FASB ASC Topic 820. The authoritative guidance, which, among other things, defines fair value,
establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category
measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the
amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Unless
otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, prepaid
expenses, and accounts payable, deferred revenue and accrued expenses approximates their recorded values due to their short-term
maturities. Revenue
Recognition - On January 1, 2018, we adopted the Financial Accounting Standards Board's (FASB) new revenue recognition standard
using the modified retrospective method applied to those contracts not completed as of January 1, 2018. Results for reporting
periods beginning after January 1, 2018 are presented under the new standard. The
adoption of the new standard did not have a material impact to our financial statements. Revenue
is recognized when control of the promised services is transferred to our customers, in an amount reflecting the consideration
we expect to be entitled to in exchange for those services. Certain
products are generally sold with a right of return within our policy, which are accounted for as variable consideration when estimating
the amount of revenue to recognize. Refunds are estimated at contract inception using the expected value method based on historical
refund experience and updated each reporting period as additional information becomes available and only to the extent it is probable
a significant reversal of any incremental revenue will not occur. Refunds reduce deferred revenue at the time they are granted
and resulted in a reduced amount of revenue recognized over the contract term of the applicable service compared to the amount
originally expected. Our
revenue is categorized and disaggregated as follows: Domains
- Domains revenue primarily consists of domain registrations and renewals, domain privacy, domain application fees, domain
back-orders, aftermarket domain sales and fee surcharges paid to ICANN. Domain registrations provide a customer with the exclusive
use of a domain during the applicable contract term. After the contract term expires, unless renewed, the customer can no longer
access the domain. Consideration is recorded as deferred revenue when received, which is typically at the time of sale, and revenue,
other than for aftermarket domain sales, is recognized over the period in which the performance obligations are satisfied, which
is generally over the contract term. Aftermarket domain revenue is recognized when ownership of the domain is transferred to the
buyer. Hosting
Services - Hosting services revenue primarily consists of website hosting products, website building products and services,
website security products, an online shopping cart and online visibility products and email accounts. Consideration is recorded
as deferred revenue when received, which is typically at the time of sale, and revenue is recognized over the period in which
the performance obligations are satisfied, which is generally over the contract term. Podcast
Hosting - Podcast hosting publishing services are billed on a month to month basis, with first month’s bill prorated
to the end of the month so all performance obligations are satisfied at each month-end. Consideration is recorded as revenue as
the services, the underlying performance obligation, are provided and or satisfied and collection is probable which is generally
when received. Media
Subscription Services - The Company facilitates the sale of producers’ premium content through the sale of subscriptions.
The amount earned per transaction is fixed with the producers determine the price for the sale of each subscription, and the Company
earns a percentage of what the customer pays. The performance obligation is providing the subscription hosting medium and billing
services. Accordingly, the Company reports premium subscription revenue on a net basis over the subscription service period in
which the performance obligation is satisfied. Advertising
– The Company recognizes revenue from the insertion of advertisements in digital media. The performance obligation is
the download of the digital media with the advertisement inserted. The performance obligation to recognize advertising revenue
is satisfied upon delivery of the media download and collection is probable. Equity-Based
Compensation - Our equity-based awards are comprised of stock and are accounted for using the fair value method. Stock is
measured based on the fair market value of the underlying common stock on the date of grant. Awards vest and compensation is recognized
over the requisite service period. The measurement date for performance vesting awards is the date on which the applicable performance
criteria are approved by our board of directors. Leases
– The Company accounts for leases in accordance with Accounting Standards Codification (“ASC”) Topic 840.
Leases that meet one or more of the capital lease criteria of standard are recorded as a capital lease, all other leases are operating
leases. Other
Definite-life Intangible Assets - Other intangible assets consist of customer relationships, intellectual property, trade
name and non-compete agreement, which were generated through the acquisition of Pair. Management considers these intangible assets
to have finite-lives. These assets are being amortized on a straight-line basis over their estimated useful lives. Business
Combinations - We include the results of operations of acquired businesses in our consolidated financial statements as of
the respective dates of acquisition. Accounting for business combinations requires us to make significant estimates and assumptions,
especially at the acquisition date, with respect to tangible and intangible assets acquired and liabilities assumed and pre-acquisition
contingencies. The purchase price of acquisitions, including estimates of the fair value of contingent consideration when applicable,
is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values on
the respective acquisition dates, with the excess recorded as goodwill. We use our best estimates and assumptions to accurately
assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The estimates
are inherently uncertain and subject to refinement. We continue to collect information and reevaluate these estimates and assumptions
quarterly and record any adjustments to the preliminary estimates to goodwill provided we are within the measurement period. Contingent
consideration is adjusted to fair value in subsequent periods as an increase or decrease in general and administrative expenses.
Acquisition-related costs are expensed as incurred. See Note 3 to our consolidated financial statements for additional information
regarding business combinations. Income
Taxes - The Company accounts for income taxes using the liability method, which requires the determination of deferred tax
assets and liabilities based on the differences between the financial and tax basis of assets and liabilities, using enacted tax
rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by a valuation allowance,
if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will
not be realized. The Company anticipates earnings in the near future and the realization of the benefit of the deferred
tax assets. Earnings
(Loss) Per Share – The Company computes earnings per share in accordance with FASB ASC Topic 260 Earnings Per Share,
which requires the Company to present basic earnings per share and diluted earnings per share when the effect is dilutive (see
Note 9). Income
Taxes – The Company accounts for income taxes in accordance with FASB ASC Topic 740 Accounting for Income Taxes. This
topic requires an asset and liability approach for accounting for income taxes (see Note 7). Recently
Enacted Accounting Standards - In February 2016, the FASB issued changes to the accounting for leases that primarily affect
presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying
lease liability for operating leases with an initial life in excess of one year. This standard is effective for us beginning in
the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial statements. In
January 2017, the FASB issued ASU 2017-04, Intangibles, Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,
which simplifies the manner in which an entity should perform its annual, or interim, goodwill impairment test. Under
the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge
based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The
standard eliminates the previous requirement to calculate a goodwill impairment charge by comparing the implied fair value of
goodwill with its carrying amount. The
new standard becomes effective for us on January 1, 2020. We early adopted the proposed guidance under ASU 2017-04 for the year
end December 31, 2018 on a prospective basis. The implementation of ASU 2017-04 did not have a material impact on our consolidated
financial statements and related disclosures. Other
recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the
Company’s present or future financial statements. The
following is a summary of property and equipment at: Life December
31, 2018 December
31, 2017 Depreciation
expense for the periods ended December 31, 2018 and 2017 was $1,156,418 and $22,033, respectively. Goodwill
- Goodwill is tested for impairment annually, as well as when an event, or change in circumstances, indicates impairment
may have occurred. In accordance with ASC 350, Intangibles-Goodwill and Other, we first assess qualitative factors to determine
whether the existence of events or circumstances leads to a determination that it is more likely than not (a likelihood of more
than 50%) that the fair value of our reporting unit is less than its carrying amount. If after assessing the qualitative factors
we determine that it is not more likely than not that the fair value of the reporting unit is less than the carrying value, then
we conclude that we have no goodwill impairment and no further testing is performed; otherwise, we proceed to the two-step process.
The first step under the two-step process is to compare the fair value of the reporting unit to its carrying value. If the fair
value exceeds the carrying value, goodwill is not impaired, and no further testing is performed. The
Company followed the guidance in ASC 350-20-35-3 and performed the annual impairment test of goodwill. Using qualitative factors
to determine whether it is necessary to perform the two-step goodwill impairment test discussed in paragraphs ASC 350-20-35-4
through 35-19, management concluded that it is more likely than not that the fair value of the Webmayhem reporting unit is more
than its carrying amount. Therefore, no further testing is performed. Since
2018 was the first full reporting year for the Pair reporting unit, management decided it necessary to perform the quantitative
impairment test as described in ASC 350-30-35-19. Using the valuation technique based on multiples of earnings or revenue, it
was concluded that the goodwill of Pair had a fair market value which exceeded the carrying value of goodwill. Therefore, goodwill
of Pair is considered not to be impaired. Goodwill
consists of: The
following is a summary of goodwill for the Year Ended: As
of December 31, 2018, identifiable intangible assets consist of following: Preliminary Fair
Value Weighted Average Useful
Life (in
Years) Accumulated Amortization Net
Carrying Amount The
estimated future amortization expenses related to other intangible assets as of December 31, 2018 are as follows: On
December 27, 2017, the Company entered into a loan agreement (the “Loan Agreement”) among the Company, Libsyn, and
Pair, together, and First Commonwealth Bank, a Pennsylvania bank and trust company (the “Bank”). The
Loan Agreement provides for: (i) a revolving credit facility pursuant to which the Company may borrow an aggregate principal amount
not to exceed $2,000,000 (the “Revolving Credit Facility”); and (ii) a term loan in a principal amount equal to $8,000,000
(the “Term Loan” and, together with the Revolving Credit Facility, the “Facility”). A portion of the Revolving
Credit Facility, up to $500,000, may be used for standby letters of credit for the account of the Company. As of December 31,
2018, $2,000,000 was drawn down on the revolving line with $0 available. The
loan currently accrues interest at LIBOR plus 125 base points or prime plus 75 basis points at the election of the Company. As
of December 31, 2018, the Company has elected LIBOR plus 125 basis points or 3.756%. The Term Loan is repayable in quarterly installments of $400,000
commencing on March 31, 2018 and on the last day of each June, September, December and March thereafter, through and including
September 30, 2022. Accrued interest is payable in arrears not less frequently than quarterly. The remaining unpaid principal balance
of the Term Loan, together with accrued interest thereon, is due and payable in full on December 27, 2022. The Term Loan also calls
for additional payment equal to the following: 1)100% of the proceeds from the sale of any common shares 2) 100% of the proceeds
from the sale of assets not immediately replaced 3) excess liquidity in any given year up to $1,066,667 and no more than $3,200,000
over the life of the term loan. Excess liquidity is obtained when the audited financial statements reflect a cash balance greater
than $4,600,000. Based upon the 2018 financial statements, the company demonstrates excess liquidity per the Term Loan agreement.
As such, the company has included the expected $1,066,667 payment to the bank as a current liability. As of December 31, 2018,
the balance on the term loan was $6,400,000. The
Company, Libsyn and Pair have granted the bank a blanket security interest in their respective assets, and the Company has pledged
the stock of Webmayhem Inc. and Pair Networks Inc. to the bank, as security for all obligations under the Loan Agreement. Borrowings
under the Facility are at variable rates which are, at the Company’s option, tied to LIBOR (London Interbank Offered Rate)
plus an applicable rate or a prime rate. Interest rates are subject to change based on the Company’s combined cash balances.
The Facility contains covenants that may have the effect of limiting the ability of the Company to, among other things, merge
with or acquire other entities, enter into a transaction resulting in a change in control, create certain new liens, incur certain
additional indebtedness, engage in certain transactions with affiliates, engage in new lines of business or sell a substantial
part of its assets. The Facility also requires the Company to maintain certain consolidated fixed charge coverage ratios and minimum
liquidity balances. The
Facility also contains customary events of default, including (but not limited to) default in the payment of principal or, following
an applicable grace period, interest, breaches of the Company’s covenants or warranties under the Facility, payment default
or acceleration of certain indebtedness of the Company or any subsidiary, certain events of bankruptcy, insolvency or liquidation
involving the Company or its subsidiaries, certain judgments or uninsured losses, changes in control and certain liabilities related
to ERISA based plans. On
December 27, 2017, the Company drew $10,000,000 under the Facility to finance a portion of the cash consideration pursuant to
the Share Purchase Agreement. Debt issuance costs of $113,000 for the Facility were recorded as a discount and will be amortized
over the life of the Facility. As of December 31, 2018, the discount was $79,634. Future
Maturities of the loans at December 31, 2018 are as follows: Common
Stock - The Company has authorized 200,000,000 shares of common stock, $0.001 par value. As of December 31, 2018, 29,721,974
shares were issued and outstanding. During
the first quarter of 2018, the Company issued 200,000 shares of common stock valued at $318,000 to a consultant for services rendered. During
the first quarter of 2018, the seller of Pair Networks Inc., returned 18,499 shares valued at $29,279 to the company as per the
terms of the acquisition agreement dated December 27, 2017 in connection with the closing adjustment for the net-working capital
provision. During
the fourth quarter of 2018, the Company repurchased 55,000 shares of common stock for $82,500, and the stock was retired. During
January 2017, the Company issued 3,650,000 stock awards comprising of shares of common stock valued at $1,752,000 to officers
and directors and recorded non-compensation of $1,752,000. These shares are subject to forfeiture based on market conditions,
including the market cap of the Company and up-listing to NASDAQ. These market conditions expire through April 2019. The shares
are unable to be traded until these market conditions have been achieved. During
the second quarter of 2017, the Company repurchased 40,000 restricted stock awards comprising of shares of common stock for $8,000,
and the stock was retired. During
December 2017, the Company issued 3,600,000 stock awards comprising of shares of common stock valued at $5,522,000 to officers,
directors and employees, and recorded non-compensation of $5,522,000. These shares are subject to forfeiture based on market conditions,
including the market cap of the Company, the trading price of the common stock of the Company and up-listing to NASDAQ. These
market conditions expire through December 2020. The shares are unable to be traded until these market conditions have been achieved. On
December 27, 2017, the Company completed the acquisition of all the issued and outstanding shares of capital stock of Pair. As
part of the consideration, the Company issued 1,579,613 “unregistered” shares of the Company’s common stock
valued at $2,500,000. Information
regarding vested stock awards for the year ended December 31, 2018 is summarized in the table below: Deferred
revenue consists of the following: December
31, 2018 December 31, 2017 Deferred
revenue as of December 31, 2018 is expected to be recognized as revenue as follows: Disaggregated
revenue consists of following: The
Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes which requires the Company
to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences
between book and tax accounting and any available operating loss or tax credit carryforwards. At December 31, 2018 and 2017, the
total of all deferred tax assets was $2,548,929 and $3,458,667, respectively, and the total of the deferred tax assets related
to goodwill was $2,341,897 and $1,848,717, respectively. The amount of and ultimate realization of the benefits from the deferred
tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and
other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the
deferred tax assets the Company has established a valuation allowance of $2,548,929 and $3,458,667 for the years ended December
31, 2018 and 2017. The change in the valuation allowance for the years ended December 31, 2018 and 2017 was $909,738 and $110,866,
respectively. The
components of income tax expense (benefit) from continuing operations for the Years ended December 31, 2018 and 2017 consist of
the following: Deferred
income tax expense/(benefit) results primarily from the reversal of temporary timing differences between tax and financial statement
income. A
reconciliation of income tax expense at the federal statutory rate to income tax expense at the company’s effective rate
is as follows: The
temporary differences, tax credits and carryforwards gave rise to the following deferred tax asset at December 31, 2018 and 2017 At
December 31, 2018, the company has loss carryforwards of approximately $9.7 million that expire in various years through 2038. We
file U.S. federal, and U.S. states returns, and we are generally no longer subject to tax examinations for years prior to 2015
for U.S. federal and U.S. states tax returns. Operating
Leases - The Company leases office two spaces in Pittsburgh, Pennsylvania. The corporate headquarter lease is for $4,953 a
month through April 2022. The office space for Pair is $34,014 a month through September 2021. Pair leases a colocation data center
facility in Denver, Colorado for $6,390 through May 3, 2020. The
future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of December
31, 2018 are as follows: Lease
expense charged to operations was $611,538 and $167,945 for the periods ended December 31, 2018 and 2017, respectively. Capital
Leases – In connection with the acquisition of Pair, the Company acquired a lease of equipment on a
capital leases currently calling for monthly payments of approximately $6,261 through January of 2020. Included in property
and equipment, at December 31, 2018, the Company had recorded equipment on capital lease at $332,324, with related accumulated
depreciation of $116,313. During
the year ended December 31, 2018, depreciation expense for equipment on capital lease amounted to $33,232 and has been included
in depreciation expense. Future
minimum capital lease payments are as follows for the years ended December 31: Year
ending December 31, Lease Payments Basic
income (loss) per share is computed by dividing net income (loss) attributable to Liberated Syndication Inc. by the weighted-average
number of shares of common stock outstanding during the period. As of December 31, 2018, there were no common stock equivalents
outstanding. The
following data shows the amounts used in computing earnings per share and the weighted average number of shares of common stock
outstanding for the periods presented for the periods ended: December
31, 2017 December
31, 2017 Although
the Company does not expect to be liable for any obligations not expressly assumed by the Company from the Spin-Off, it is possible
that the Company could be required to assume responsibility for certain obligations retained by FAB should FAB fail to pay or
perform its retained obligations. FAB may have obligations that at the present time are unknown or unforeseen. As the nature of
such obligations are unknown, we are unable to provide an estimate of the potential obligation. However, should FAB incur such
obligations, the Company may be financially obligated to pay any losses incurred. The
Company has a 401 (k) plan and profit-sharing plan for the benefit of the employees of the Company. Employees are eligible to
participate in the plan the first of the month following their hire date and attaining the age of 21. Profit sharing contributions
are made at the discretion of the Board of Directors and vest 100% after the second year of service. The Company made a $100,000
profit sharing contribution to the plan in 2018. ASC
280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent
with the Company's internal organizational structure as well as information about geographical areas, business segments and major
customers in financial statements for details on the Company's business segments. The
Company is engaged in providing hosting services. The Company's chief operating decision maker (“CODM”) has been identified
as the CEO who reviews the financial information of separate operating segments when making decisions about allocating resources
and assessing performance of the group. Based on management's assessment, the Company has determined that it has two operating
segments as of December 31, 2018 which are podcast hosting services (Libsyn) and internet hosting services (Pair). The
following table presents summary information by segment for the twelve months ended December 31, 2018 and 2017, respectively: Management
has evaluated subsequent events through the date of the filing of this report. No events were identified that would require adjustment
to or disclosure in the financial statements. Liberated Syndication Inc., (“Company”, “parent”),
a Nevada Corporation, was organized on September 30, 2015. Webmayhem, Inc. (“Libsyn”), a Pennsylvania corporation,
a wholly owned subsidiary of the Company, was organized on January 1, 2001. Libsyn provides podcast hosting services for producers
of content. Libsyn also offers ad insertion on certain of the producers’ content. Libsyn offers hosting and distribution
tools, including storage, bandwidth, syndication creation, distribution, and statistics tracking. Libsyn offers an enterprise solution
for professional media producers and corporate customers and a premium subscription service that provides producers a custom App
and a podcast Website where listeners can access their show, login to purchase a subscription, and get access to premium content. On December 27, 2017, the Company purchased
all the issued and outstanding shares of Pair Networks Inc., (“Pair”), a Pennsylvania corporation, and subsidiaries
Ryousha Kokusai, LLC (Ryousha) and 660837NB, Inc. (NB), in a transaction accounted for as a purchase. Pair Networks Inc. provides web hosting services
and domain name registrations. Services include shared web hosting, e-commerce, fully-managed virtual private and dedicated servers,
customer self-managed dedicated servers, domain-name registration, co-location and content-delivery networks. Pair began operations
in August 1995. It incorporated in the state of Pennsylvania in August 1998. Pair’s principal operations are conducted on-site
in Pittsburgh, PA. Pair also has an operating site in Denver, Colorado, and a remote site back-up location in Pittsburgh, PA. Ryousha Kokusai, LLC (dba Pair International),
a wholly owned single-member limited liability company subsidiary of Pair, was formed on January 1, 2015. The Value Added Tax(VAT)
for sales to European Union countries subject to the VAT in Europe are paid through Ryousha Kokusai LLC. There are no operating
activities conducted by Ryousha. NB, a Canadian Company was organized on December 2, 2011. NB is used solely for holding the Canadian
tradenames and domain names of Pair. There are no operating activities conducted by NB. Our financial statements have been
prepared in accordance with generally accepted accounting principles in the United States (GAAP) and include our accounts and
the accounts of our subsidiaries. The financial statements presented reflect the accounts of parent, Libsyn, Ryousha, NB and Pair.
All material intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period. Our more significant estimates include: ·
the fair value of assets acquired, and liabilities assumed in business acquisitions; ·
the assessment of recoverability of long-lived assets, including property and equipment, goodwill
and intangible assets; ·
the estimated reserve for refunds; ·
the estimated useful lives of intangible and depreciable assets; ·
the grant date fair value of equity-based awards; ·
the recognition, measurement, and valuation of current and deferred income taxes; We periodically evaluate these estimates and adjust prospectively,
if necessary. We believe our estimates and assumptions are reasonable; however, actual results may differ from our estimates. The Company considers all highly liquid investments with an original
maturity date of three months or less when purchased to be cash equivalents. At December 31, 2018, the Company had $10,641,198
cash balances in excess of federally insured limits. Financial instruments that potentially subject the Company to a concentration
of credit risk consist primarily of cash, cash equivalents and account receivable. Management’s assessment of the Company’s
credit risk for cash and cash equivalents is low as cash and cash equivalents are held in financial institutions believed to be
credit worthy. No single customer represented over 10% of our total revenue for any period presented. As of December 31, 2018,
two customers individually accounted for 18% and 12%, respectively, of our total accounts receivable. In 2017, the same two customers
individually accounted for 10% and 8%, respectively. Accounts receivable consist of trade
receivables arising in the normal course of business. At December 31, 2018 and 2017, the Company has an allowance for doubtful
accounts of $14,000 and $14,000, respectively, which reflects the Company’s best estimate of probable losses inherent in
the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience,
and other currently available evidence. During the years ended December 31, 2018 and 2017, the Company adjusted the allowance
for bad debt by $0. Registry deposits represent amounts
on deposit with, or receivable from, various domain name registries to be used by us to make payments for future domain registrations
or renewals. Prepaid domain name registry fees
represent amounts charged by a registry at the time a domain is registered or renewed. These amounts are amortized to cost of
revenue over the same period revenue is recognized for the related domain registration contracts. Property and equipment is stated at cost. Depreciation is recorded over the shorter
of the estimated useful life or the lease term of the applicable asset using the straight-line method beginning on the date an
asset is placed in service. Maintenance and repairs are charged to expense as incurred. The Company evaluates its long-lived assets for impairment whenever
events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the
carrying amount over the fair value of the asset. We account for software development costs, including
costs to develop software products or the software component of products to be marketed to external users, as well as software
programs to be used solely to meet our internal needs in accordance with ASC Topic 985 Software. Software development costs associated
with software to be sold, leased, or for internal use are expensed as incurred until technological feasibility, defined as a working
model or prototype, has been established. At that time, such costs are capitalized until the product is available for general release
and amortized over its useful life. We defer and amortize issuance costs,
underwriting fees and related expenses incurred in connection with the issuance of debt instruments using the effective interest
method over the terms of the respective instruments. Debt issuance costs, other than those associated with our revolving credit
loan, are reflected as a direct reduction (discount) of the carrying amount of the related debt liability. Goodwill is evaluated for impairment annually and whenever events
or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The Company performed the annual impairment
test of goodwill as of December 31, 2018. Triggering events that may indicate impairment include, but are not limited to, a significant
adverse change in customer demand or business climate that could affect the value of goodwill or a significant decrease in expected
cash flows. The company recorded no impairment charge for goodwill during the years ended December 31, 2018 and 2017. Advertising costs are expensed as
incurred and amounted to $122,424 and $34,623 for the periods ending December 31, 2018 and 2017, respectively. The Company accounts for fair value measurements for financial assets
and financial liabilities in accordance with FASB ASC Topic 820. The authoritative guidance, which, among other things, defines
fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability
category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing
the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between
market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market
participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes
a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Unless otherwise disclosed, the fair value of the Company’s
financial instruments including cash, accounts receivable, prepaid expenses, and accounts payable, deferred revenue and accrued
expenses approximates their recorded values due to their short-term maturities. On January 1, 2018, we adopted the Financial Accounting Standards
Board's (FASB) new revenue recognition standard using the modified retrospective method applied to those contracts not completed
as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new standard. The adoption of the new standard did not have a material impact to
our financial statements. Revenue is recognized when control of the promised services is transferred
to our customers, in an amount reflecting the consideration we expect to be entitled to in exchange for those services. Certain products are generally sold with a right of return within
our policy, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Refunds are estimated
at contract inception using the expected value method based on historical refund experience and updated each reporting period as
additional information becomes available and only to the extent it is probable a significant reversal of any incremental revenue
will not occur. Refunds reduce deferred revenue at the time they are granted and resulted in a reduced amount of revenue recognized
over the contract term of the applicable service compared to the amount originally expected. Our revenue is categorized and disaggregated as follows: Domains - Domains revenue primarily consists
of domain registrations and renewals, domain privacy, domain application fees, domain back-orders, aftermarket domain sales and
fee surcharges paid to ICANN. Domain registrations provide a customer with the exclusive use of a domain during the applicable
contract term. After the contract term expires, unless renewed, the customer can no longer access the domain. Consideration is
recorded as deferred revenue when received, which is typically at the time of sale, and revenue, other than for aftermarket domain
sales, is recognized over the period in which the performance obligations are satisfied, which is generally over the contract term.
Aftermarket domain revenue is recognized when ownership of the domain is transferred to the buyer. Hosting Services - Hosting services revenue
primarily consists of website hosting products, website building products and services, website security products, an online shopping
cart and online visibility products and email accounts. Consideration is recorded as deferred revenue when received, which is typically
at the time of sale, and revenue is recognized over the period in which the performance obligations are satisfied, which is generally
over the contract term. Podcast Hosting - Podcast hosting publishing
services are billed on a month to month basis, with first month’s bill prorated to the end of the month so all performance
obligations are satisfied at each month-end. Consideration is recorded as revenue as the services, the underlying performance obligation,
are provided and or satisfied and collection is probable which is generally when received. Media Subscription Services - The Company
facilitates the sale of producers’ premium content through the sale of subscriptions. The amount earned per transaction is
fixed with the producers determine the price for the sale of each subscription, and the Company earns a percentage of what the
customer pays. The performance obligation is providing the subscription hosting medium and billing services. Accordingly, the Company
reports premium subscription revenue on a net basis over the subscription service period in which the performance obligation is
satisfied. Advertising – The Company recognizes
revenue from the insertion of advertisements in digital media. The performance obligation is the download of the digital media
with the advertisement inserted. The performance obligation to recognize advertising revenue is satisfied upon delivery of the
media download and collection is probable. Our equity-based awards are comprised
of stock and are accounted for using the fair value method. Stock is measured based on the fair market value of the underlying
common stock on the date of grant. Awards vest and compensation is recognized over the requisite service period. The measurement
date for performance vesting awards is the date on which the applicable performance criteria are approved by our board of directors. We include the results of operations of acquired businesses in our
consolidated financial statements as of the respective dates of acquisition. Accounting for business combinations requires us to
make significant estimates and assumptions, especially at the acquisition date, with respect to tangible and intangible assets
acquired and liabilities assumed and pre-acquisition contingencies. The purchase price of acquisitions, including estimates of
the fair value of contingent consideration when applicable, is allocated to the tangible and intangible assets acquired and the
liabilities assumed based on their estimated fair values on the respective acquisition dates, with the excess recorded as goodwill.
We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities
assumed at the acquisition date. The estimates are inherently uncertain and subject to refinement. We continue to collect information
and reevaluate these estimates and assumptions quarterly and record any adjustments to the preliminary estimates to goodwill provided
we are within the measurement period. Contingent consideration is adjusted to fair value in subsequent
periods as an increase or decrease in general and administrative expenses. Acquisition-related costs are expensed as incurred.
See Note 3 to our consolidated financial statements for additional information regarding business combinations. The Company accounts for leases
in accordance with Accounting Standards Codification (“ASC”) Topic 840. Leases that meet one or more of the capital
lease criteria of standard are recorded as a capital lease, all other leases are operating leases. Other intangible assets consist
of customer relationships, intellectual property, trade name and non-compete agreement, which were generated through the acquisition
of Pair. Management considers these intangible assets to have finite-lives. These assets are being amortized on a straight-line
basis over their estimated useful lives. We include the results of operations of acquired businesses in our
consolidated financial statements as of the respective dates of acquisition. Accounting for business combinations requires us to
make significant estimates and assumptions, especially at the acquisition date, with respect to tangible and intangible assets
acquired and liabilities assumed and pre-acquisition contingencies. The purchase price of acquisitions, including estimates of
the fair value of contingent consideration when applicable, is allocated to the tangible and intangible assets acquired and the
liabilities assumed based on their estimated fair values on the respective acquisition dates, with the excess recorded as goodwill.
We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities
assumed at the acquisition date. The estimates are inherently uncertain and subject to refinement. We continue to collect information
and reevaluate these estimates and assumptions quarterly and record any adjustments to the preliminary estimates to goodwill provided
we are within the measurement period. Contingent consideration is adjusted to fair value in subsequent
periods as an increase or decrease in general and administrative expenses. Acquisition-related costs are expensed as incurred.
See Note 3 to our consolidated financial statements for additional information regarding business combinations. The Company accounts for income taxes using the liability method,
which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax
basis of assets and liabilities, using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred
tax assets are adjusted by a valuation allowance, if based on the weight of available evidence it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The Company anticipates earnings in the near future
and the realization of the benefit of the deferred tax assets. The Company computes earnings per
share in accordance with FASB ASC Topic 260 Earnings Per Share, which requires the Company to present basic earnings per share
and diluted earnings per share when the effect is dilutive (see Note 9). In February 2016, the FASB issued changes to the accounting for leases
that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use
asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective
for us beginning in the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial
statements. In January 2017, the FASB issued ASU 2017-04, Intangibles, Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the manner in which an entity should
perform its annual, or interim, goodwill impairment test. Under the new guidance, if a reporting unit’s carrying amount
exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited
to the amount of goodwill allocated to that reporting unit. The standard eliminates the previous requirement to calculate a goodwill
impairment charge by comparing the implied fair value of goodwill with its carrying amount. The new standard becomes effective for us on January 1, 2020. We
early adopted the proposed guidance under ASU 2017-04 for the year end December 31, 2018 on a prospective basis. The implementation
of ASU 2017-04 did not have a material impact on our consolidated financial statements and related disclosures. Other recent accounting pronouncements issued by the FASB did not
or are not believed by management to have a material impact on the Company’s present or future financial statements. Life December
31, 2018 December
31, 2017 The
following is a summary of goodwill for the Year Ended: Preliminary Fair
Value Weighted Average Useful
Life (in
Years) Accumulated Amortization Net
Carrying Amount December
31, 2018 December 31, 2017 Year
ending December 31, Lease Payments December
31, 2017 December
31, 2017 EVN "ZD;RW1-#/J?>_BP? +WS?_-/",>M\C-##P
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M )F%;DXS&\6=X@$ &@$ 9 >&PO=V]R:W-H965TXTI[Y'9VEPY.%=C@;$$@PQ )R;;X&^
M.4\?S>,8]+\,Z?>3:T-0;0XM4E>V9FTZ:RFNO.\@8D=GA8J(\,L&2=[55\"_
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12 Months Ended
Document and Entity Information [Abstract]
Entity Registrant Name
Liberated Syndication Inc.
Entity Central Index Key
0001667489
Amendment Flag
false
Document Type
10-K
Document Period End Date
Dec. 31, 2018
Document Fiscal Year Focus
2018
Document Fiscal Period Focus
FY
Current Fiscal Year End Date
--12-31
Entity Filer Category
Non-accelerated Filer
Entity Emerging Growth Company
true
EntityExTransitionPeriod
true
Entity Small Business
true
Entity Shell Company
false
Entity Current Reporting Status
Yes
Entity Well-known Seasoned Issuer
No
Entity Voluntary Filers
No
Entity Common Stock, Shares Outstanding
29,721,974
Entity Public Float
$ 37,782,893
Statement of Financial Position [Abstract]
Allowance for doubtful accounts
$ 14,000
$ 14,000
Common stock authorized
200,000,000
200,000,000
Common stock par value
$ .001
$ 0.001
Common stock outstanding
29,721,974
29,595,473
12 Months Ended
Income Statement [Abstract]
Revenue
$ 22,010,132
$ 10,584,219
Costs and operating expenses
Cost of revenue (excluding depreciation and amortization)
3,331,876
2,379,151
General and administrative
6,065,661
10,263,775
Technology
1,842,020
610,794
Selling
846,434
299,074
Customer support
2,830,789
191,820
Depreciation and amortization
3,013,732
22,033
Total costs and operating expenses
17,930,512
13,766,647
Operating income (loss)
4,079,620
(3,182,428)
Interest expense
(387,064)
0
Interest income
84,992
0
Other income (expense)
10,249
33
Income (loss) from operations before income taxes
3,787,797
(3,182,395)
Income tax expense (benefit)
0
0
Net Income (loss)
$ 3,787,797
$ (3,182,395)
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
$ 0.13
$ (0.13)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
29,740,207
24,390,595
12 Months Ended
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
· the
fair value of assets acquired, and liabilities assumed in business acquisitions;
· the
assessment of recoverability of long-lived assets, including property and equipment,
goodwill and intangible assets;
· the
estimated reserve for refunds;
· the
estimated useful lives of intangible and depreciable assets;
· the
grant date fair value of equity-based awards;
· the
recognition, measurement, and valuation of current and deferred income taxes;
• Level
1. Observable inputs such as quoted prices in active markets for identical assets or
liabilities;
• Level
2. Inputs, other than the quoted prices in active markets, that are observable either
directly or indirectly; and
• Level
3. Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
12 Months Ended
Property, Plant and Equipment [Abstract]
PROPERTY AND EQUIPMENT
Furniture,
fixtures, and equipment
3-10
yrs
$
8,155,322
$
8,032,178
Leasehold
improvements
3
- 5 yrs
2,646,400
2,646,400
Software
3
yrs
262,046
6,503
11,063,768
10,685,081
Less:
Accumulated depreciation
(8,834,474
)
(7,678,056
)
Property
& equipment, net
$
2,229,294
$
3,007,025
12 Months Ended
Goodwill and Intangible Assets Disclosure [Abstract]
GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS
December
31,
December
31,
2018
2017
Pair
$
4,903,920
$
4,867,818
Libsyn
11,484,251
11,484,251
Total
Goodwill
$
16,388,171
$
16,352,069
December
31,
December
31,
2018
2017
Goodwill
at beginning of period
$
16,352,069
$
11,484,251
Acquisition
of Pair
36,102
4,867,818
Impairment
-
-
Goodwill
at end of period
$
16,388,171
$
16,352,069
Customer
Relationships
$
3,947,000
7
$
563,857
$
3,383,143
Intellectual
Property
3,709,000
7
529,857
3,179,143
Trade
name
576,000
10
57,600
518,400
Non-compete
1,412,000
2
706,000
706,000
Total
$
9,644,000
$
1,857,314
$
7,786,686
For
twelve months ending December 31,
2019
$
1,857,314
2020
1,151,315
2021
1,151,315
2022
1,151,314
2023
1,151,314
Thereafter
1,324,114
Total
$
7,786,686
12 Months Ended
Loans Payable [Abstract]
LOANS
For
the year ending December 31,
2019
$
2,666,667
2020
1,600,000
2021
1,600,000
2022
1,600,000
2023
933,333
Thereafter
-
Total
$
8,400,000
12 Months Ended
Stockholders' Equity Note [Abstract]
CAPITAL STOCK
Shares
Weighted
Average Grant Date Fair Value
Average
Remaining Life
Issued
and outstanding awards subject to forfeiture at beginning of period
7,250,000
$
1.00
1.68
Stock
Awards Issued
-
$
-
-
Awards
no-longer subject to forfeiture
2,075,000
$
0.61
N/A
Cancelled
/ Forfeited Awards
-
-
-
Issued
and outstanding awards subject to forfeture at end of period
5,175,000
$
1.16
1.45
12 Months Ended
Revenue Recognition and Deferred Revenue [Abstract]
DEFERRED REVENUE
Current:
Hosting
services
$
1,601,335
$
1,032,000
Domains
535,273
104,172
Media
subscription
139,471
111,514
$
2,276,079
$
1,247,686
Noncurrent:
Hosting
services
39,071
50,351
Domains
332,867
83,266
$
2,648,017
$
1,381,303
2019
2020
2021
2022
2023
Thereafter
Total
Domains
$
535,273
$
132,278
$
87,726
$
70,796
$
36,957
$
5,110
$
868,140
Hosting
1,601,335
35,340
3,731
-
-
-
1,640,406
Media
Subscription
139,471
-
-
-
-
-
139,471
$
2,276,079
$
167,618
$
91,457
$
70,796
$
36,957
$
5,110
$
2,648,017
Twelve
months ended December 31
2018
2017
Hosting
services
$
8,896,966
$
47,563
Podcast
hosting
10,915,771
8,504,883
Advertising
1,323,776
1,662,788
Domains
547,770
-
Other
325,849
368,985
$
22,010,132
$
10,584,219
12 Months Ended
Income Tax Disclosure [Abstract]
INCOME TAXES
For
the Years Ended
December
31,
Current
tax expense:
2018
2017
Federal
$
-
$
-
State
-
-
Current
tax expense
-
-
Deferred
tax expense (benefit):
Revaluation
of deferred tax asset change in Federal Tax Rate
-
1,400,760
Depreciation
and amortization
(668,673
)
-
Goodwill
493,180
511,108
Non-cash
compensation
366,496
-
Return
to accrual
(188,106
)
-
Valuation
Allowance
(909,738
)
(110,866
)
Net
operating loss carryforward
906,841
(1,801,002
)
Subtotal
deferred tax expense/(benefit)
-
-
Income
tax expense/(benefit)
$
-
$
-
For
the Years Ended
December
31,
2018
2017
Computed
tax at the expected statutory rate
$
795,437
$
(1,082,014
)
State
and local income taxes, net of federal
299,885
173,117
Other
non-deductible expenses
2,522
1,632
Revaluation
of deferred tax assets for change in Federal Tax Rate
-
1,400,760
Other
items
(188,106
)
(382,629
)
Valuation
Allowance
(909,738
)
(110,866
)
Income
tax expense/(benefit)
$
-
$
-
December
31,
December
31,
2018
2017
Current
deferred tax assets (liabilities):
Allowance
for doubtful accounts
$
-
$
-
Vacation
accrual
-
-
Total
current deferred tax assets (liabilities)
-
-
Long-term
deferred tax assets (liabilities):
Goodwill
- impaired
2,066,632
2,066,632
Goodwill
– tax amortization
(4,408,529
)
(3,915,349
)
Depreciation
and amortization
347,471
-
Non-cash
compensation
1,735,115
-
Net
operating loss carryforward
2,808,240
5,307,384
Valuation
allowance
(2,548,929
)
(3,458,667
)
Total
long-term deferred tax assets (liabilities)
$
-
$
-
Net
term deferred tax assets (liabilities)
$
-
$
-
12 Months Ended
Leases [Abstract]
LEASES
Year
ending December 31:
Lease
Payments
2019
544,284
2020
493,164
2021
365,562
2022
19,812
Thereafter
-
Total
Minimum Lease Payment
$
1,422,822
2019
75,132
2020
835
Total
minimum lease payments
75,967
Less
amount representing interest
(2,150
)
Present
value of minimum lease payments
73,817
Less
Current Portion
(72,986
)
$
831
12 Months Ended
Earnings Per Share [Abstract]
EARNINGS PER SHARE
Income
(loss) from operations available to common stockholders (numerator)$
$
3,787,797
(3,182,395
)
Income
(loss) available to common stockholders (numerator)
3,787,797
(3,182,395
)
Weighted
average number of common shares outstanding during the period used in earnings per share (denominator)
29,740,207
24,390,595
12 Months Ended
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES
12 Months Ended
Segment Reporting [Abstract]
SEGMENT REPORTING
2018
2017
(in
thousands)
Libsyn
Pair
Total
Libsyn
Pair
Total
Revenue
$
12,630
$
9,380
$
22,010
$
10,536
$
48
$
10,584
Cost
of revenue
2,516
816
3,332
2,379
-
2,379
Total
assets
$
20,875
$
17,732
$
38,607
$
16,965
$
18,104
$
35,069
Depreciation
and amortization
$
46
$
2,968
$
3,014
$
22
$
-
$
22
12 Months Ended
Subsequent Events [Abstract]
SUBSEQUENT EVENTS
12 Months Ended
Accounting Policies [Abstract]
Organization
Principles of consolidation
Accounting estimates
Cash and cash equivalents
Concentration of credit risk
Accounts receivable
Registry deposits
Prepaid domain name registry fees
Property and Equipment
Definite-Life Intangible Assets
Software development costs
Debt issuance costs
Goodwill
Advertising costs
Fair value of financial instruments
• Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
• Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly
or indirectly; and
• Level 3. Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.
Revenue recognition
Equity-based compensation
Business combinations
Leases
Other definite-life intangible assets
Business combination
Income taxes
Earnings (loss) per share
Recently enacted accounting standards
12 Months Ended
Property, Plant and Equipment [Abstract]
Schedule of property and equipment
Furniture,
fixtures, and equipment
3-10
yrs
$
8,155,322
$
8,032,178
Leasehold
improvements
3
- 5 yrs
2,646,400
2,646,400
Software
3
yrs
262,046
6,503
11,063,768
10,685,081
Less:
Accumulated depreciation
(8,834,474
)
(7,678,056
)
Property
& equipment, net
$
2,229,294
$
3,007,025
12 Months Ended
Goodwill and Intangible Assets Disclosure [Abstract]
Summary of goodwill
December
31,
December
31,
2018
2017
Pair
$
4,903,920
$
4,867,818
Libsyn
11,484,251
11,484,251
Total
Goodwill
$
16,388,171
$
16,352,069
December
31,
December
31,
2018
2017
Goodwill
at beginning of period
$
16,352,069
$
11,484,251
Acquisition
of Pair
36,102
4,867,818
Impairment
-
-
Goodwill
at end of period
$
16,388,171
$
16,352,069
Summary of other intangible assets
Customer
Relationships
$
3,947,000
7
$
563,857
$
3,383,143
Intellectual
Property
3,709,000
7
529,857
3,179,143
Trade
name
576,000
10
57,600
518,400
Non-compete
1,412,000
2
706,000
706,000
Total
$
9,644,000
$
1,857,314
$
7,786,686
Schedule of estimated future amortization expenses related to other intangible assets
For
twelve months ending December 31,
2019
$
1,857,314
2020
1,151,315
2021
1,151,315
2022
1,151,314
2023
1,151,314
Thereafter
1,324,114
Total
$
7,786,686
12 Months Ended
Loans
Future maturities of the loans
For
the year ending December 31,
2019
$
2,666,667
2020
1,600,000
2021
1,600,000
2022
1,600,000
2023
933,333
Thereafter
-
Total
$
8,400,000
12 Months Ended
Capital Stock
Vested stock awards
Shares
Weighted
Average Grant Date Fair Value
Average
Remaining Life
Issued
and outstanding awards subject to forfeiture at beginning of period
7,250,000
$
1.00
1.68
Stock
Awards Issued
-
$
-
-
Awards
no-longer subject to forfeiture
2,075,000
$
0.61
N/A
Cancelled
/ Forfeited Awards
-
-
-
Issued
and outstanding awards subject to forfeture at end of period
5,175,000
$
1.16
1.45
12 Months Ended
Revenue Recognition and Deferred Revenue [Abstract]
Summary of Deferred revenue
Current:
Hosting
services
$
1,601,335
$
1,032,000
Domains
535,273
104,172
Media
subscription
139,471
111,514
$
2,276,079
$
1,247,686
Noncurrent:
Hosting
services
39,071
50,351
Domains
332,867
83,266
$
2,648,017
$
1,381,303
Deferred revenue expected to be recognized as revenue
2019
2020
2021
2022
2023
Thereafter
Total
Domains
$
535,273
$
132,278
$
87,726
$
70,796
$
36,957
$
5,110
$
868,140
Hosting
1,601,335
35,340
3,731
-
-
-
1,640,406
Media
Subscription
139,471
-
-
-
-
-
139,471
$
2,276,079
$
167,618
$
91,457
$
70,796
$
36,957
$
5,110
$
2,648,017
Summary of Disaggregated revenue
Twelve
months ended December 31
2018
2017
Hosting
services
$
8,896,966
$
47,563
Podcast
hosting
10,915,771
8,504,883
Advertising
1,323,776
1,662,788
Domains
547,770
-
Other
325,849
368,985
$
22,010,132
$
10,584,219
12 Months Ended
Income Tax Disclosure [Abstract]
Schedule of income tax expense (benefit)
For
the Years Ended
December
31,
Current
tax expense:
2018
2017
Federal
$
-
$
-
State
-
-
Current
tax expense
-
-
Deferred
tax expense (benefit):
Revaluation
of deferred tax asset change in Federal Tax Rate
-
1,400,760
Depreciation
and amortization
(668,673
)
-
Goodwill
493,180
511,108
Non-cash
compensation
366,496
-
Return
to accrual
(188,106
)
-
Valuation
Allowance
(909,738
)
(110,866
)
Net
operating loss carryforward
906,841
(1,801,002
)
Subtotal
deferred tax expense/(benefit)
-
-
Income
tax expense/(benefit)
$
-
$
-
Schedule of effective income tax rate reconciliation
For
the Years Ended
December
31,
2018
2017
Computed
tax at the expected statutory rate
$
795,437
$
(1,082,014
)
State
and local income taxes, net of federal
299,885
173,117
Other
non-deductible expenses
2,522
1,632
Revaluation
of deferred tax assets for change in Federal Tax Rate
-
1,400,760
Other
items
(188,106
)
(382,629
)
Valuation
Allowance
(909,738
)
(110,866
)
Income
tax expense/(benefit)
$
-
$
-
Schedule of deferred tax assets and liabilities
December
31,
December
31,
2018
2017
Current
deferred tax assets (liabilities):
Allowance
for doubtful accounts
$
-
$
-
Vacation
accrual
-
-
Total
current deferred tax assets (liabilities)
-
-
Long-term
deferred tax assets (liabilities):
Goodwill
- impaired
2,066,632
2,066,632
Goodwill
– tax amortization
(4,408,529
)
(3,915,349
)
Depreciation
and amortization
347,471
-
Non-cash
compensation
1,735,115
-
Net
operating loss carryforward
2,808,240
5,307,384
Valuation
allowance
(2,548,929
)
(3,458,667
)
Total
long-term deferred tax assets (liabilities)
$
-
$
-
Net
term deferred tax assets (liabilities)
$
-
$
-
12 Months Ended
Leases [Abstract]
Schedule of future minimum lease payments
Year
ending December 31:
Lease
Payments
2019
544,284
2020
493,164
2021
365,562
2022
19,812
Thereafter
-
Total
Minimum Lease Payment
$
1,422,822
Schedule of future minimum capital lease payments
2019
75,132
2020
835
Total
minimum lease payments
75,967
Less
amount representing interest
(2,150
)
Present
value of minimum lease payments
73,817
Less
Current Portion
(72,986
)
$
831
12 Months Ended
Earnings Per Share [Abstract]
Schedule of earnings per share
Income
(loss) from operations available to common stockholders (numerator)$
$
3,787,797
(3,182,395
)
Income
(loss) available to common stockholders (numerator)
3,787,797
(3,182,395
)
Weighted
average number of common shares outstanding during the period used in earnings per share (denominator)
29,740,207
24,390,595
12 Months Ended
Segment Reporting [Abstract]
Summary of Segment Reporting
2018
2017
(in
thousands)
Libsyn
Pair
Total
Libsyn
Pair
Total
Revenue
$
12,630
$
9,380
$
22,010
$
10,536
$
48
$
10,584
Cost
of revenue
2,516
816
3,332
2,379
-
2,379
Total
assets
$
20,875
$
17,732
$
38,607
$
16,965
$
18,104
$
35,069
Depreciation
and amortization
$
46
$
2,968
$
3,014
$
22
$
-
$
22
12 Months Ended
Accounting Policies [Abstract]
Cash balances in excess of federally insured limits
$ 10,641,198
$ 4,597,648
Allowance for doubtful accounts
14,000
14,000
Adjustments to allowance for bad debt
0
0
Advertising costs
122,424
34,623
Research and development costs
$ 1,842,020
$ 610,794
12 Months Ended
Property and equipment
$ 11,063,768
$ 10,685,081
Less: Accumulated depreciation
(8,834,474)
(7,678,056)
Property and equipment, net
2,229,294
3,007,025
Furniture, fixtures and equipment [Member]
Property and equipment
$ 8,155,322
8,032,178
Furniture, fixtures and equipment [Member] | Minimum [Member]
Estimated useful life
3 years
Furniture, fixtures and equipment [Member] | Maximum [Member]
Estimated useful life
10 years
Leasehold improvements [Member]
Property and equipment
$ 2,646,400
2,646,400
Leasehold improvements [Member] | Minimum [Member]
Estimated useful life
3 years
Leasehold improvements [Member] | Maximum [Member]
Estimated useful life
5 years
Software [Member]
Estimated useful life
3 years
Property and equipment
$ 262,046
$ 6,503
12 Months Ended
Property, Plant and Equipment [Abstract]
Depreciation expense
$ 1,156,418
$ 22,033
Goodwill
$ 16,388,171
$ 16,352,069
$ 11,484,251
Pair
Goodwill
4,903,920
4,867,818
Libsyn
Goodwill
$ 11,484,251
$ 11,484,251
12 Months Ended
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill at beginning of period
$ 16,352,069
$ 11,484,251
Acquisition of pair
36,102
4,867,818
Impairment
0
0
Goodwill at end of period
$ 16,388,171
$ 16,352,069
12 Months Ended
Preliminary fair value
$ 9,644,000
Accumulated amortization
1,857,314
Net carrying amount
7,786,686
Customer relationships
Preliminary fair value
$ 3,947,000
Weighted average useful life
7 years
Accumulated amortization
$ 563,857
Net carrying amount
3,383,143
Intellectual property
Preliminary fair value
$ 3,709,000
Weighted average useful life
7 years
Accumulated amortization
$ 529,857
Net carrying amount
3,179,143
Trade name
Preliminary fair value
$ 576,000
Weighted average useful life
10 years
Accumulated amortization
$ 57,600
Net carrying amount
518,400
Non-compete
Preliminary fair value
$ 1,412,000
Weighted average useful life
2 years
Accumulated amortization
$ 706,000
Net carrying amount
$ 706,000
Goodwill and Intangible Assets Disclosure [Abstract]
2019
$ 1,857,314
2020
1,151,315
2021
1,151,315
2022
1,151,314
2023
1,151,314
Thereafter
1,324,114
Total
$ 7,786,686
Loans Details Abstract
2019
$ 2,666,667
2020
1,600,000
2021
1,600,000
2022
1,600,000
2023
933,333
Thereafter
0
Total
$ 8,400,000
12 Months Ended
Capital Stock Details Abstract
Stock awards outstanding, beginning | shares
7,250,000
Stock awards, issued | shares
0
Stock awards, no-longer subject to forfeiture | shares
2,075,000
Stock awards, cancelled/forfeited | shares
0
Stock awards outstanding, ending | shares
5,175,000
Weighted average grant date fair value outstanding, beginning | $ / shares
$ 1.00
Weighted average grant date fair value, issued | $ / shares
0.00
Weighted average grant date fair value, no-longer subject to forfeiture | $ / shares
0.61
Weighted average grant date fair value, cancelled/forfeited | $ / shares
0.00
Weighted average grant date fair value outstanding, ending | $ / shares
$ 1.16
Average remaining life, issued
1 year 8 months 5 days
Average remaining life outstanding, ending
1 year 5 months 12 days
Stockholders' Equity Note [Abstract]
Common stock authorized
200,000,000
200,000,000
Common stock par value
$ .001
$ 0.001
Common stock issued
29,721,974
Common stock outstanding
29,721,974
29,595,473
Current revenue
$ 2,276,079
$ 1,247,686
Noncurrent revenue
371,938
133,617
Deferred revenue
2,648,017
1,381,303
Hosting Services
Current revenue
1,601,335
1,032,000
Noncurrent revenue
39,071
50,351
Deferred revenue
1,640,406
Domains
Current revenue
535,273
104,172
Noncurrent revenue
332,867
83,266
Deferred revenue
868,140
Media Subscription
Current revenue
139,471
$ 111,514
Deferred revenue
$ 139,471
2019
$ 2,276,079
2020
167,618
2021
91,457
2022
70,796
2023
36,957
Thereafter
5,110
Total
2,648,017
$ 1,381,303
Domains
2019
535,273
2020
132,278
2021
87,726
2022
70,796
2023
36,957
Thereafter
5,110
Total
868,140
Hosting Services
2019
1,601,335
2020
35,340
2021
3,731
2022
0
2023
0
Thereafter
0
Total
1,640,406
Media Subscription
2019
139,471
2020
0
2021
0
2022
0
2023
0
Thereafter
0
Total
$ 139,471
12 Months Ended
Revenue
$ 22,010,132
$ 10,584,219
Hosting Services
Revenue
8,896,966
47,563
Podcast Hosting
Revenue
10,915,771
8,504,883
Advertising
Revenue
1,323,776
1,662,788
Domains
Revenue
547,770
0
Other
Revenue
$ 325,849
$ 368,985
12 Months Ended
Current tax expense:
Federal
$ 0
$ 0
State
0
0
Current tax expense
0
0
Deferred tax expense (benefit):
Revaluation of deferred tax asset change in Federal Tax Rate
0
1,400,760
Depreciation and amortization
(668,673)
0
Goodwill
493,180
511,108
Non-cash compensation
366,496
0
Return to accrual
(188,106)
0
Valuation Allowance
(909,738)
(110,866)
Net operating loss carryforward
906,841
(1,801,002)
Subtotal deferred tax expense/(benefit)
0
0
Income tax expense/(benefit)
$ 0
$ 0
12 Months Ended
Income Tax Disclosure [Abstract]
Computed tax at the expected statutory rate
$ 795,437
$ (1,082,014)
State and local income taxes, net of federal
299,885
173,117
Other non-deductible expenses
2,522
1,632
Revaluation of deferred tax assets for change in Federal Tax Rate
0
1,400,760
Other items
(188,106)
(382,629)
Valuation Allowance
(909,738)
(110,866)
Income tax expense/(benefit)
$ 0
$ 0
Current deferred tax assets (liabilities):
Allowance for doubtful accounts
$ 0
$ 0
Vacation accrual
0
0
Total current deferred tax assets (liabilities)
0
0
Long-term deferred tax assets (liabilities):
Goodwill - impaired
2,066,632
2,066,632
Goodwill - tax amortization
(4,408,529)
(3,915,349)
Depreciation and amortization
347,471
0
Non-cash compensation
1,735,115
0
Net operating loss carryforward
2,808,240
5,307,384
Valuation allowance
(2,548,929)
(3,458,667)
Total long-term deferred tax assets (liabilities)
0
0
Net term deferred tax assets (liabilities)
$ 0
$ 0
12 Months Ended
Income Tax Disclosure [Abstract]
Total deferred tax assets
$ 2,548,929
$ 3,458,667
Deferred tax assets attributable to goodwill
2,341,897
1,848,717
Valuation allowance
2,548,929
3,458,667
Change in the valuation allowance
909,738
$ 110,866
Loss carryforwards
$ 9,700,000
Leases [Abstract]
2019
$ 544,284
2020
493,164
2021
365,562
2022
19,812
Thereafter
0
Total Minimum Lease Payment
$ 1,422,822
Leases Details 1Abstract
2019
$ 75,132
2020
835
Total minimum lease payments
75,967
Less amount representing interest
(2,150)
Present value of minimum lease payments
73,817
Less Current Portion
(72,986)
Total
$ 831
12 Months Ended
Leases Details Narrative Abstract
Lease expense charged to operations
$ 611,538
$ 167,945
12 Months Ended
Earnings Per Share [Abstract]
Income (loss) from operations available to common stockholders (numerator)
$ 3,787,797
$ (3,182,395)
Income (loss) available to common stockholders (numerator)
$ 3,787,797
$ (3,182,395)
Weighted average number of common shares outstanding during the period used in earnings per share (denominator)
29,740,207
24,390,595
12 Months Ended
Commitments And Contingencies Details
Profit sharing contribution
$ 100,000
$ in Thousands12 Months Ended
Revenue
$ 22,010
$ 10,584
Cost of revenue
3,332
2,379
Total assets
38,607
35,069
Depreciation and amortization
3,014
22
Libsyn
Revenue
12,630
10,536
Cost of revenue
2,516
2,379
Total assets
20,875
16,965
Depreciation and amortization
46
22
Pair
Revenue
9,380
48
Cost of revenue
816
0
Total assets
17,732
18,104
Depreciation and amortization
$ 2,968
$ 0
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