UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
 
FORM 10-Q/A
(Amendment No. 1)
 
(Mark One)
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2018March 31, 2019
 
 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                                      to
to             
 
Commission File No. 000-55779
 
LIBERATED SYNDICATION INC.
 (Exact name of registrant as specified in its charter)
 
NEVADA
47-5224851
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
5001 Baum Boulevard, Suite 770
Pittsburgh, Pennsylvania 15213
 (Address of Principal Executive Offices)
 
Registrant's Telephone Number: (412) 621-0902
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of ‘‘large accelerated filer”, “accelerated filer,’’ “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
:
 
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☒
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No☒
 
As of November 12, 2018,May 14, 2019, there were 29,776,97429,271,974 shares of common stock, par value $0.001, of the registrant issued and outstanding.
 

 
 
 
Explanatory Note
 
This Quarterly Report on Form 10-Q/A (Amendment No. 1) amends the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) by Liberated Syndication Corp. (the “Company”) on November 14, 2018May 20, 2019 (the “Original 10-Q”) to restate our unaudited consolidated financial statements for the quarterly period ended September 30, 2018March 31, 2019 and to amend related disclosures.
 
Background of the Restatement
 
On April 28, 2020, the Audit Committee of the Board of Directors of Liberated Syndication Inc, a Nevada corporation (the “Company”) determined that (a) the Consolidated Balance Sheet as of December 31, 2018, (b) the Consolidated Statement of Operations for the year ended December 31, 2018, (c) the Statement of Stockholders’ Equity for the year ended December 31, 2018, and (d) the Consolidated Statement of Cash Flows for the year December 31, 2018, all as presented in the Company’s Annual Report on Form 10-K for the Period Ended December 31, 2018, as previously filed with the U.S. Securities and Exchange Commission on March 14, 2019, should not be relied upon. Subsequent to such determination, the Company reviewed the related interim financial statements and interim financial statements for the first three quarters of 2019 and 2018, and as a result of such review, on May 20, 2020, the Audit Committee determined that such interim financial statement should likewise no longer be relied upon.
 
Specifically, the amounts reported in the Consolidated Balance Sheet as of September 30, 2018March 31, 2019 for total assets, current liabilities, and consequently total liabilities and total stockholders’ equity, were determined to be materially different. Additionally, the income tax (benefit) expense in the Consolidated Statement of Operations for the three and nine months ended September 30, 2018March 31, 2019 was changed. As a result, the net income and the basic and diluted income per common share were determined to be materially different. The Statement of Stockholders’ Equity for the period ended March 31, 2019 with its net income and accumulated deficit are consequently affected. The Consolidated Statement of Cash Flows for the ninethree months ended September 30, 2018Mach 31, 2019 also changed as a result of the deferred income taxes and income tax payable for 2018.2019.
 
During the 2019 audit process, it was discovered through an ongoing IRS examination that the Company owed Federal tax for 2018.
 
The IRS examination uncovered an error in calculating the Net Operating Loss Carryforward (NOL) resulting from the spin-off of Libsyn in 2016. At December 31, 2017, the Company had recorded an NOL of approximately $14 million. The NOL was part of deferred tax asset which was valued at $0 on the balance sheet, as it had a full valuation allowance. Consequently, the Company was not recognizing tax expenses or the associated tax payable during 2018. However, as the IRS examination continued, it has become clear that the $14 million NOL was overestimated by approximately $12.5 million, and by March 31, 2018, that the NOL has been completely utilized. The result is that the Company ought to have begun recording income tax (benefit) expense in 2018.
 
This Federal Tax Balance will be paid with an amended return in 2020.
 
The Company has temporary tax differences which result in a deferred tax asset (DTA). Under the provisions of ASC Topic 740, a DTA is to be recognized for the potential future tax benefit from a loss carryforward. Full realization of the benefit, however, depends on the Company having income in future years.
 
Because the NOL has been completely utilized and the Company is now consistently recording profits, a DTA with the associated payable should have been recorded in 2018. DTAs represent future income tax benefits. But the tax (benefits) will be realized only if there is sufficient taxable income from which the deductible amount can be deducted.
 
Impact of the Restatement
 
As a result of the restatement, reported net income from continuing operations was decreased by $270,527,$327,010, or $0.01 per basic and diluted share for the three months ended September 30, 2018.
As a result of the restatement, reported net income from continuing operations was increased by $827,323, or $0.03 per basic and diluted share for the nine months ended September 30, 2018.March 31, 2019. Total assets increased by $1,416,762$1,555,606 at September 30, 2018.March 31, 2019. Current and total liabilities increased by $589,438$1,297,068 at September 30, 2018.March 31, 2019. Accumulated deficit decreased by $827,323$258,538 at September 30, 2018.March 31, 2019.
 
Items Amended in this Filing
 
For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing, in its entirety, as amended to reflect the restatement. No attempt has been made in this Form 10-Q/A to update other disclosures presented in the Original Filing, except as required to reflect the effects of the restatement. The following items have been amended as a result of the restatement:
Item 1. Financial Statements
Item 2. Management Discussion & AnalysisAnalysis
 
 
 
 
PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
The Unaudited Condensed Consolidated Financial Statements of Liberated Syndication Inc., a Nevada corporation (the “Company,” “Libsyn,” “Pair”, “we,” “our,” “us” and words of similar import), required to be filed with this 10-Q Quarterly Report were prepared by management and commence on the following page, together with related notes. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements fairly present the financial condition of the Company.
 
 
 
 
 
 
2
 
 
LIBERATED SYNDICATION INC.
FINANCIAL STATEMENTS
CONTENTS
LIBERATED SYNDICATION INC.
FINANCIAL STATEMENTS
 
CONTENTS
  PAGE
Unaudited Condensed Consolidated Balance Sheets 45

Unaudited Condensed Consolidated Statements of Operations6
   
Unaudited Condensed Consolidated StatementsStatement of OperationsStockholders’ Equity 57
   
Unaudited Condensed Consolidated Statements of Cash Flows 68
   
Notes to Unaudited Condensed Consolidated Financial Statements 79
   
 
 

3
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
September 30,
2018
(Unaudited)
(As Restated)
 
 
December 31,
2017
 
   CURRENT ASSETS:
 
 
 
 
 
 
     Cash
 $9,364,218 
 $5,211,845 
     Accounts receivable, net
  515,852(1)
  660,139(1)
     Prepaid expenses
  243,534 
  186,425 
     Prepaid domains, net
  216,760 
  - 
   Total current assets
  10,340,364 
  6,058,409 
 
    
    
   Property and equipment, net
  2,381,456 
  3,007,025 
   Goodwill
  16,388,171 
  16,352,069 
   Definite life - intangible assets, net
  8,251,014 
  9,644,000 
   Prepaid domains, net of current portion
  149,257 
  - 
   Other
  3,582 
  7,076 
   Deferred tax assets
  1,416,762 
  - 
   Total assets
 $38,930,606 
 $35,068,579 
 
    
    
   CURRENT LIABILITIES:
    
    
     Accounts payable
 $452,418 
 $440,565 
     Income tax payable
  589,438 
  - 
     Accrued expenses
  307,332 
  769,485 
     Deferred revenue, net
  2,293,245 
  1,247,686 
     Current portion of capital lease obligation
  72,032 
  69,243 
     Current portion of loans payable, net of $29,371 and $33,366 discount, respectively
  2,637,296 
  1,566,634 
   Total current liabilities
  6,351,761 
  4,093,613 
 
    
    
LONG TERM LIABILITIES:
    
    
     Loans payable, net of $58,151 and $79,634 discount, respectively, less current portion
  6,075,182 
  8,320,366 
Capital lease obligation, net of current portion
  19,439 
  73,817 
     Deferred revenue, net
  280,774 
  133,617 
   Total long-term liabilities
  6,375,395 
  8,527,800 
   Total liabilities
  12,727,156 
  12,621,413 
 
    
    
COMMITMENTS & CONTINGENCIES
  - 
  - 
 
    
    
   STOCKHOLDERS' EQUITY
    
    
     Common stock
  29,778 
  29,596 
     Additional paid-in capital
  35,092,997 
  34,804,457 
     Accumulated deficit
  (8,919,325)
  (12,386,887)
   Total stockholders' equity
  26,203,450 
  22,447,166 
   Total liabilities and stockholders' equity
 $38,930,606 
 $35,068,579 
Liberated Syndication Inc. and Subsidiaries Balance Sheet (Parenthetical)
 
 
 
Statement of Financial Position
 
September 30,
2018
(As Restated)
 
 
December 31,
2017
 
   Allowance for doubtful accounts [1]
  14,000 
  14,000 
   Common stock authorized
  200,000,000 
  200,000,000 
   Common stock par value
  0.001 
  0.001 
   Common stock issued and outstanding
  29,776,974 
  29,595,473 
 
 
The accompanying notes are an integral part to the unaudited condensed consolidated financial statements.
 

4
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
BALANCE SHEETS
 
 
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2018
(As Restated)
 
 
2017
 
 
2018
(As Restated)
 
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 $5,726,425 
 $2,730,237 
 $16,091,492 
 $7,723,250 
 
    
    
    
    
Costs and operating expenses
    
    
    
    
 
    
    
    
    
Cost of revenue (excluding depreciation and amortization)
  962,817 
  636,090 
  2,374,702 
  1,833,868 
General and administrative
  1,348,731 
  642,262 
  4,252,630 
  1,916,787 
Non-cash compensation
  - 
  - 
  318,000 
  1,752,000 
Technology
  426,339 
  157,328 
  1,292,238 
  463,386 
Selling
  220,460 
  75,649 
  647,833 
  235,583 
Customer support
  680,094 
  53,099 
  2,055,389 
  138,721 
Depreciation and amortization
  736,818 
  4,329 
  2,273,083 
  12,648 
Total costs and operating expenses
  4,375,259 
  1,568,757 
  13,213,875 
  6,352,993 
Operating income
  1,351,166 
  1,161,480 
  2,877,617 
  1,370,257 
 
    
    
    
    
 
    
    
    
    
Interest expense
  (92,002)
  - 
  (291,205)
  - 
Interest income
  21,904 
  - 
  44,970 
  - 
Other income
  3,690 
  - 
  8,857 
  - 
Income from operations before income taxes
  1,284,758 
  1,161,480 
  2,640,239 
  1,370,257 
 
    
    
    
    
Income tax expense (benefit)
  270,527 
  - 
  (827,323)
  - 
Net Income
 $1,014,231 
 $1,161,480 
 $3,467,562 
 $1,370,257 
 
    
    
    
    
 
    
    
    
    
BASIC AND DILUTED INCOME PER COMMON SHARE
 $0.03 
 $0.05 
 $0.12 
 $0.06 
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
  29,776,974 
  24,415,860 
  29,733,256 
  24,195,567 
 
 
March 31,
2019
(UNAUDITED)
(As Restated)
 
 
December 31,
2018
 
CURRENT ASSETS:
 
 
 
 
 
 
Cash
 $12,516,269 
 $11,079,941 
Accounts receivable, net
  398,766[1]
  481,921[1]
Prepaid expenses
  541,147 
  449,223 
Total current assets
  13,456,182 
  12,011,085 
 
    
    
Property and equipment, net
  2,094,830 
  2,229,294 
Goodwill
  16,388,171 
  16,388,171 
Definite life - intangible assets, net
  7,322,357 
  7,786,686 
Prepaid expense
  252,312 
  191,609 
Operating lease right-of-use assets
  1,268,326 
  - 
Deferred tax assets
  1,555,606 
  1,454,077 
Total assets
 $42,337,784 
 $40,060,922 
 
    
    
CURRENT LIABILITIES:
    
    
Accounts payable
 $567,244 
 $745,889 
Accrued expenses
  636,153 
  377,572 
Income tax payable
  1,297,068 
  868,529 
Deferred revenue
  2,060,901 
  2,276,079 
Current portion of capital lease obligation
  55,929 
  72,986 
Current portion of loans payable, net
  2,639,817 
  2,638,599 
Current portion of operating lease liabilities
  511,751 
  - 
Total current liabilities
  7,768,863 
  6,979,654 
 
    
    
LONG TERM LIABILITIES:
    
    
Loans payable, net
  5,287,952 
  5,681,767 
Capital lease obligation, net of current portion
  - 
  831 
Deferred revenue, net of current portion
  450,452 
  371,938 
Operating lease liabilities
  756,575 
  - 
Total long-term liabilities
  6,494,979 
  6,054,536 
Total liabilities
  14,263,842 
  13,034,190 
 
    
    
COMMITMENTS & CONTINGENCIES
  - 
  - 
 
    
    
 STOCKHOLDERS' EQUITY
    
    
     Common stock
  29,722 
  29,722 
     Additional paid-in capital
  34,857,139 
  35,010,552 
     Accumulated deficit
  (6,812,919)
  (8,013,542)
 Total stockholders' equity
  28,073,942 
  27,026,732 
 Total liabilities and stockholders' equity
 $42,337,784 
 $40,060,922 
Liberated Syndication Inc. and Subsidiaries Balance Sheet (Parenthetical)
Statement of Financial Position
 
March 31,
2019
 
 
December 31,
2018
 
   Allowance for doubtful accounts [1]
  14,000 
  14,000 
   Common stock authorized
  200,000,000 
  200,000,000 
   Common stock par value
  0.001 
  0.001 
   Common stock issued and outstanding
  29,721,974 
  29,721,974 
 
The accompanying notes are an integral part to the unaudited condensed consolidated financial statements.
 
 

5
5
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
 
 
Three Months Ended March 31,     
 
 
 
2019
(As Restated)  
 
 
 2018  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 $6,282,979 
 $5,059,305 
 
    
    
Costs and operating expenses
    
    
 
    
    
Cost of revenue (excluding depreciation and amortization)
  839,640 
  707,370 
General and administrative
  1,828,539 
  1,705,312 
Technology
  454,638 
  373,326 
Selling
  194,794 
  217,002 
Customer support
  659,868 
  668,230 
Depreciation and amortization
  742,097 
  766,900 
Total costs and operating expenses
  4,719,576 
  4,438,140 
Operating income
  1,563,403 
  621,165 
 
    
    
 
    
    
Interest expense
  (86,842)
  (100,596)
Interest income
  51,951 
  9,665 
Other income (expense)
  (879)
  2,681 
Income from operations before income taxes
  1,527,633 
  532,915 
 
    
    
Income tax expense (benefit)
  327,010 
  (1,271,059)
Net Income
 $1,200,623 
 $1,803,974 
 
    
    
 
    
    
BASIC AND DILUTED INCOME PER COMMON SHARE
 $0.04 
 $0.06 
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
  29,721,294 
  29,644,362 
The accompanying notes are an integral part to the unaudited condensed consolidated financial statements.
6
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 
 
 
 
 
  
 
 
Additional  
 
 
  
 
 
 Total  
 
 
 
Common
 
 
Par  
 
 
 Paid-in
 
 
Accumulated  
 
 
 Stockholders’  
 
 
 
Shares
 
 
Value  
 
 
 Capital
 
 
Defecit  
 
 
 Equity  
 
Balance at January 1, 2019
  29,721,974 
 $29,722 
 $35,010,552 
 $(8,013,542)
 $27,026,732 
Recapture of prior period non-cash compensation charges in the current period
    
    
  (830,500)
    
  (830,500)
Non-cash Compensation awards
    
    
  677,087 
    
  677,087 
Net income
    
    
    
  1,200,623 
  1,200,623 
Balance at March 31, 2019 (As Restated)
  29,721,974 
 $29,722 
 $34,857,139 
 $(6,812,919)
 $28,073,942 
 
 
 
 
 
 
 
 
Additional  
 
 
 
 
 
 Total  
 
 
 
Common
 
 
Par  
 
 
 Paid-in
 
 
  Accumulated
 
 
 Stockholders’  
 
 
 
Shares
 
 
Value  
 
 
 Capital
 
 
  Defecit
 
 
 Equity  
 
Balance at January 1, 2018
  29,595,473 
 $29,596 
 $34,804,457 
 $(12,386,887)
 $22,447,166 
Net Income
    
    
    
  1,803,974 
  1,803,974 
Issuance of Common Stock for services
  200,000 
  200 
  317,800 
    
  318,000 
Return of Common Stock for final settlement of Pair Acquisition
  (18,499)
  (19)
  (29,260)
    
  (29,279)
Balance at March 31, 2018
  29,776,974 
 $29,777 
 $35,092,997 
 $(10,582,913)
 $24,539,862 
The accompanying notes are an integral part to the unaudited condensed consolidated financial statements.
7
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
 
 
Three Months Ended March 31,
 
 
September 30,
2018
(As Restated)
 
 
September 30,
2017
 
 
2019
(As Restated)
 
 
2018
 
 
 
 
 
 
 
Cash Flows from Operating Activities
 
 
 
 
 
 
Net income
 $3,467,562 
 $1,370,257 
 $1,200,623 
 $1,803,974 
Adjustments to reconcile net income to net cash provided by operating activities:
    
    
Depreciation and amortization expense
  2,273,083 
  14,098 
  742,097 
  766,900 
Issuance of common stock for services
  318,000 
  1,752,000 
Issuance of common stock
  - 
  318,000 
Deferred income taxes
  1,416,762 
  - 
  (101,529)
  (1,336,905)
Non-cash compensation expense, net of recapture
  (153,413)
  - 
Amortization of right-of-use asset
  129,495 
  - 
Discount on loan fees
  25,478 
  - 
  7,403 
  9,023 
Change in assets and liabilities:
    
    
Accounts receivable
  78,906 
  (206,236)
  83,155 
  (76,925)
Prepaid expenses
  (419,633)
  (3,599)
  (152,627)
  (134,237)
Accounts payable
  11,853 
  (106,918)
  (178,645)
  44,031 
Income taxes payable
  589,438 
  - 
  428,539 
  65,846 
Accrued expense
  (462,152)
  (239,285)
  258,581 
  (456,472)
Operating lease liabilities
  (129,495)
  - 
Deferred revenue
  1,192,715 
  (9,142)
  (136,664)
  789,635 
Net Cash Provided by Operating Activities
  5,658,489 
  2,571,175 
  1,997,520 
  1,792,870 
    
    
Cash Flows from Investing Activities:
    
    
    
    
Purchase of property and equipment
  (254,527)
  (69,064)
  (143,304)
  - 
Net Cash Used in Investing Activities
  (254,527)
  (69,064)
  (143,304)
  - 
    
    
    
    
Cash Flows from Financing Activities:
    
    
Repayment on term loan
  (1,200,000)
  - 
  (400,000)
Repayment on capital lease
  (51,589)
  - 
  (17,888)
  (16,970)
Re-purchase of common stock
  - 
  (8,000)
Net Cash Used in Financing Activities
  (1,251,589)
  (8,000)
  (417,888)
  (416,970)
    
    
Net Increase in Cash
  4,152,373 
  2,494,111 
  1,436,328 
  1,375,900 
Cash at Beginning of Period
  5,211,845 
  4,875,458 
  11,079,941 
  5,211,845 
Cash at End of Period
 $9,364,218 
 $7,369,569 
 $12,516,269 
 $6,587,745 
    
    
Supplemental Disclosures of Cash Flow Information
    
    
Cash paid during the periods for:
    
    
Interest
 $263,981 
 $- 
 $76,502 
 $96,730 
Income taxes
  - 
  - 
    
    
Supplemental Non-Cash Investing and Financing Activities
    
Supplemental Non-Cash Investing and Financing Activities
    
Right-of-use operating lease assets obtained in exchange for operating lease liabilities
 $1,397,821 
 $- 
Returned Common Stock
 $29,278 
 $- 
 $- 
 $29,278 
 
The accompanying notes are an integral part to the unaudited condensed consolidated financial statements
 

68
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Organization – Liberated Syndication Inc., (“Company”, “parent”), a Nevada Corporation, was organized on September 30, 2015. Webmayhem, Inc. (“Libsyn”), a Pennsylvania corporation, currently a wholly owned subsidiary of the Company, was originally 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”)(Ryousha) and 660837 N.B.,660837NB, Inc. (“NB”)(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.
 
Basis of Presentation – 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. All material intercompany accounts and transactions have been eliminated.
 
Our interim financial statements are unaudited, and in our opinion, include all adjustments of a normal recurring nature necessary for the fair presentation of the periods presented. The results for the interim periods are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2018.2019.
 
These financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 20172018 (the 20172018 Form 10-K).
 
Prior Period Reclassifications - ReclassificationsReclassification of certain immaterial$318,000 common stock in prior period amounts haveperiods was recorded as a Non-cash compensation item in the Statement of Operations. Per SAB 14, this has been made to conform to the current period presentation.reclassified and included in General and administrative line item.
 
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. Management made assumptions and estimates for determining reserve for accounts receivable, depreciation of fixed assets and in determining the impairment of definite life intangible assets and goodwill. Actual results could differ from those estimated by management.
 
Our more significant estimates include:
 
●
the determination of the best estimate of selling price of the deliverables included in multiple-deliverable revenue arrangements;
●
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;
 
9
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
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 September 30, 2018,March 31, 2019, the Company had $8,858,914$12,245,103 cash balances in excess of federally insured limits.
 
Depreciation – Depreciation of property and equipment is provided on the straight-line method over the estimated useful lives.
 

7
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
Accounts Receivable – Accounts receivable consist of trade receivables arising in the normal course of business. At September 30,March 31, 2019 and March 31, 2018, and December 31, 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 ninethree months ended September 30,March 31, 2019 and 2018, and 2017, the Company adjusted the allowance for bad debt by $0.
 
Long-livedDefinite-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 DevelopmentTechnology Costs - 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. To date, costs incurred between the completion of a working model and the point at which the product is ready for general release have been insignificant. Accordingly, the Company has expensed all such costs to technology during the ninethree months ended September 30, 2018March 31, 2019 and 2017.2018. Software developmentTechnology costs totaled $1,292,238$454,638 and $463,386$373,326 for the ninethree months ended September 30,March 31, 2019 and 2018, and 2017, respectively.
 
Goodwill – Goodwill is evaluated for impairment annually in the fourth quarter of the Company’s fiscal year, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. 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. Management noted no triggering events during the period ended September 30, 2018.March 31, 2019.
 
Advertising Costs – Advertising costs are expensed as incurred and amounted to $95,075$21,443 and $25,344$40,434 for the ninethree months ending September 30,March 31, 2019 and 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:
 
●
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.
 
10
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
The fair value of the Company’s equity-based awards recorded in the Company’s financial statements during the first quarter of 2019 was determined using a Monte Carlo simulation valuation methodology based upon a Geometric Brownian Motion stock path, a Level 3 measurement. Volatility was based on historical volatility of the Company’s common stock over commensurate periods. The expected life was based on the contractual term of the award, and the risk-free interest rate was based on the implied yield available on U.S. Treasury Securities with a maturity similar to the awards’ expected life.
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) newThe Company accounts for 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, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting.

8
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
The adoption of the new standard did not have a material impact to our financial statements.
ASC Topic 606. 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 determinedetermining 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.
11
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
 
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 – TheOn January 1, 2019, the Company accounts for leases in accordance withadopted Accounting Standards Codification (“ASC”) Topic 840. Leases that meet one or more ofASC 842, Leases. ASC 842 was issued to increase transparency and comparability among entities by recognizing right-of-use assets and lease liabilities on the capitalbalance sheet and disclosing key information about lease criteria of standard are recorded as a capital lease, all other leases are operating leases.arrangements.
 

9
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTEWe elected to transition to ASC 842 using the option to apply the standard on its effective date, January 1, - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES2019. The comparative periods presented reflect the former lease accounting guidance and the required comparative disclosures are included in Note 8 – continuedLeases. There was not a material cumulative-effect adjustment to our beginning retained earnings as a result of adopting ASC 842. We have recognized additional operating lease assets and obligations of $1.3 million as of March 31, 2019. For additional disclosure and detail, see Note 8 – Leases.
 
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.
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.
 
NOTE 2 - PROPERTY & EQUIPMENT
 
The following is a summary of property and equipment at:
 
 
Life
 
September 30,
2018
 
 
December 31,
2017
 
Life
 
March 31,
2019
 
 
December 31,
2018
 
 
 
 
 
 
 
 
 
Furniture, fixtures, and equipment3-10 yrs
 $8,103,172 
 $8,032,178 
3-10 yrs
 $8,181,313 
 $8,155,322 
Leasehold improvements3 - 5 yrs
  2,646,400 
3 - 5 yrs
  2,646,400 
Software3 yrs
  190,038 
  6,503 
3 yrs
  379,360 
  262,046 
  10,939,609 
  10,685,081 
  11,207,073 
  11,063,768 
Less: Accumulated depreciation 
  (8,558,154)
  (7,678,056)
 
  (9,112,243)
  (8,834,474)
Property & equipment, net 
 $2,381,456 
 $3,007,025 
 
 $2,094,830 
 $2,229,294 
 
Depreciation expense for the ninethree months ended September 30,March 31, 2019 and 2018 was $277,769 and 2017 was $880,097 and $14,098,$302,571, respectively.
 
NOTE 3 - GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS
 
Goodwill - The following is a summary of goodwill:
 
 
 
September 30,
 
 
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 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Pair
 $4,903,920 
 $4,903,920 
Libsyn
  11,484,251 
  11,484,251 
Goodwill at end of period
 $16,388,171 
 $16,388,171 
 
During the first quarter of 2018, the Company completed its net-working capital closing adjustment for the acquisition of Pair, resulting in an additional allocation of $36,102 of goodwill.
12
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS - Continued
 
Other definite-life intangible assets - Other intangible assets consist of customer relationships, intellectual property, trade name and non-compete, which were generated through the acquisition of Pair. Management considers these intangible assets to have finite-lives except trade name. These assets are being amortized on a straight-line basis over their estimated useful lives.
 

10
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS - Continued
As of September 30, 2018,March 31, 2019, identifiable intangible assets consist of following:
 
 
Preliminary
Fair Value
 
 
Weighted Average
Useful Life
(in Years)
 
 
 
Accumulated
Amortization
 
 
 
Net Carrying
Amount
 
 
Preliminary
Fair Value
 
 
Weighted Average
Useful Life
(in Years)
 
 
 
Accumulated
Amortization
 
 
 
Net Carrying
Amount
 
Customer Relationships
 $3,947,000 
  7 
 $422,893 
 $3,524,107 
 $3,947,000 
  7 
 $704,821 
 $3,242,179 
Intellectual Property
  3,709,000 
  7 
  397,393 
  3,311,607 
  3,709,000 
  7 
  662,322 
  3,046,678 
Trade name
  576,000 
  10 
  43,200 
  532,800 
  576,000 
  10 
  72,000 
  504,000 
Non-compete
  1,412,000 
  2 
  529,500 
  882,500 
  1,412,000 
  2 
  882,500 
  529,500 
Total
 $9,644,000 
    
 $1,392,986 
 $8,251,014 
 $9,644,000 
    
 $2,321,643 
 $7,322,357 
 
Amortization expense for the ninethree months ended September 30,March 31, 2019 and 2018 was $464,329 and 2017 was $1,392,986 and $0, respectively$464,329, respectively.
 
The estimated future amortization expenses related to other intangible assets as of September 30, 2018March 31, 2019 are as follows:
 
For twelve months ending September 30,
 
 
 
2019
 $1,857,314 
For twelve months ending March 31,
 
 
 
2020
  1,327,814 
 $1,680,814 
2021
  1,151,315 
  1,151,314 
2022
  1,151,314 
  1,151,314 
2023
  1,151,314 
  1,151,314 
2024
  1,151,314 
Thereafter
  1,611,943 
  1,036,287 
Total
 $8,251,014 
 $7,322,357 
 
NOTE 4 - LOANS
 
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 September 30, 2018,March 31, 2019, $2,000,000 was drawn down on the revolving line with $0 available.
 
The loan currently accrues interest at LIBOR plus 150125 base points or prime plus 75 basis points at the election of the Company. As of September 30, 2018,March 31, 2019, the Company has elected LIBOR plus 150125 basis points or 3.886%3.7455%.
 
 The Term Loan is repayable in quarterly installments of $400,000 commencing on March 30, 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 a year 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 September 30, 2018,March 31, 2019, the balance on the term loan was $6,800,000.$6,000,000.

13
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – LOANS – Continued
 
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.

11
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – LOANS - Continued
 
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 payable to the Seller 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 September 30, 2018,March 31, 2019, the discount was $87,522.$72,231.
 
Future maturities of the loans at September 30, 2018March 31, 2019 are as follows:
 
For the year ending September 30,
 
 
 
2019
 $2,666,667 
For the period ending March 31,
 
 
 
2020
  1,600,000 
 $2,666,667 
2021
  1,600,000 
  1,600,000 
2022
  1,600,000 
  1,600,000 
2023
  1,333,333 
  1,200,000 
2024
  933,333 
Thereafter
  - 
  - 
Total
 $8,800,000 
 $8,000,000 
 
NOTE 5 - CAPITAL STOCK
 
Common Stock - The Company has authorized 200,000,000 shares of common stock, $0.001 par value. As of September 30, 2018, 29,776,974March 31, 2019, 29,721,974 shares were issued and outstanding.
In prior periods, the Company issued stock-based awards to employees that contained a vesting performance condition related to the occurrence of an uplisting of the Company’s common stock to the NASDAQ stock exchange. Such awards were initially expensed in the period issued as the Company deemed it probable the performance condition would be met. During the first quarter of 2019, approximately $830,500 of previously recognized expense related to these awards was recaptured in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”) as a credit to general and administrative expense as it became less than probable that such performance conditions would occur within the time specified in the stock award agreements.
On March 15, 2019 (“Modification Date”), the Company modified certain stock awards previously issued which contained a market condition. The prior agreement required the Company’s adjusted market capitalization to exceed $75 million on five consecutive days by April 23, 2019, whereas the modified award increases the adjusted market capitalization threshold to $80 million on five consecutive days within 18 months of the Modification Date. In accordance with ASC 718, the Company recorded the incremental fair value of the newly modified award over the fair value of the original award, as compensation expense totaling approximately $677,087.
No additional stock was issued during the first quarter of 2019.
14
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - CAPITAL STOCK - Continued
 
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 $18,49918,499 shares valued at $29,278 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 first quarter of 2017, the Company issued 3,650,000 shares of common stock valued at $1,752,000 to officers and directors.
During the second quarter of 2017, the Company repurchased 40,000 shares of common stock for $8,000, and the stock was retired.

12
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – DEFERRED REVENUE
 
Deferred revenue consists of the following:
 
 
September 30,
2018
 
 
December 31,
2017
 
 
March 31,
2019  
 
 
December 31,
2018
 
Current:
 
 
 
 
 
 
Hosting services
 $1,698,164 
 $1,032,000 
 $1,262,506 
 $1,601,335 
Domains
  486,102 
  104,172 
  601,744 
  535,273 
Media subscription
  108,979 
  111,514 
  196,651 
  139,471 
 $2,293,245 
 $1,247,686 
 $2,060,901 
 $2,276,079 
Noncurrent:
    
    
Hosting services
  - 
  50,351 
  32,935 
  39,071 
Domains
  280,774 
  83,266 
  417,517 
  332,867 
 $2,574,019 
 $1,381,303 
 $2,511,353 
 $2,648,017 
 
Deferred revenue as of September 30, 2018March 31, 2019 is expected to be recognized as revenue as follows:
 
 
Remainder of
2018
 
 
2019
 
 
2020
 
 
2021
 
 
2022
 
 
Thereafter
 
 
Total
 
 
Remainder of 2019  
 
 
2020  
 
 
2021  
 
 
2022  
 
 
 2023  
 
 
 Thereafter  
 
 
  Total
 
 
 
 
 
 
 
Domains
 $169,901 
 $350,520 
 $99,312 
 $67,619 
 $54,236 
 $25,289 
 $766,877 
 $515,868 
 $220,347 
 $118,951 
 $94,112 
 $57,785 
 $12,198 
 $1,019,261 
Hosting
  821,308 
  791,839 
  85,016 
  - 
  1,698,163 
  1,180,745 
  110,556 
  4,140 
  - 
  1,295,441 
Media Subscription
  55,633 
  53,346 
  - 
  108,979 
  196,651 
  - 
  -  
  - 
  -  
  - 
  196,651 
 $1,046,842 
 $1,195,705 
 $184,328 
 $67,619 
 $54,236 
 $25,289 
 $2,574,019 
 $1,893,264 
 $330,903 
 $123,091 
 $94,112 
 $57,785 
 $12,198 
 $2,511,353 
 
Disaggregated revenue consists of following:
 
 
 
Three Months Ended September 30
 
 
Nine months ended September 30
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Hosting services
 $2,246,071 
 $- 
 $6,439,706 
 $- 
Podcast hosting
  2,794,994 
  2,191,311 
  7,945,625 
  6,159,613 
Advertising
  449,467 
  443,107 
  1,020,881 
  1,285,075 
Domains
  159,128 
  - 
  347,423 
  - 
Other
  76,765 
  95,819 
  337,857 
  278,562 
 
 $5,726,425 
 $2,730,237 
 $16,091,492 
 $7,723,250 
NOTE 7 - INCOME TAXES
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 September 30, 2018 and December 31, 2017, the total of all deferred tax assets was $1,416,762 and $3,458,667, respectively, and the total of the deferred tax assets related to goodwill was $0 and $1,848,717, respectively. The 2017 deferred tax asst was fully allowed for in the year. 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. Management has analyzed the health of the Company and it is now more likely than not that the company will likely have strong income from operations moving forward. Therefore, the valuation allowance has been relieved. The change in the valuation allowance for the nine months ended September 30, 2018 and 2017 was $1,416,762 and $557,580, respectively.
 
 
Three Months Ended
March 31,
 
 
 
2019
 
 
2018
 
Hosting services
 $2,727,916 
 $2,061,495 
Podcast hosting
  3,137,817 
  2,501,107 
Advertising
  173,641 
  320,664 
Domains
  241,531 
  71,796 
Other
  2,074 
  90,028 
 
 $6,282,979 
 $5,059,305 
 

1315
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 7 - INCOME TAXES – continued
 
The components ofOur provision for income taxes for the three-month periods ended March 31, 2019 and 2018 was a tax expense (benefit) from continuing operations for the nine months ended September 30, 2018of approximately $327,010 and 2017 consista tax benefit of the following:
 
 
For the Nine months ended
 
 
 
September 30,
 
 
 
2018
 
 
2017
 
Current tax expense:
 
 
 
 
 
 
Federal
 $589,438 
 $- 
State
  - 
  - 
Current tax expense
  589,438 
  - 
 
    
    
Deferred tax (benefit) expense:
    
    
    Deferred revenue
  (21,045)
  - 
    Depreciation and amortization
  (67,966)
  - 
Intangible Assets
  - 
  383,331 
Non-cash compensation
  (1,327,751)
    
    Valuation Allowance
  - 
  (557,580)
Net operating loss carryforward
    
  174,249 
Subtotal deferred tax (benefit) expense
  (1,416,762)
  - 
Income tax (benefit) expense
 $(827,327)
 $- 
A reconciliationapproximately $1,271,059, respectively, which resulted in an effective tax rate of income tax expense as the federal statutory rate to income tax expense at the Company’s effective rate is as follows:
 
 
For the Nine months ended September 30,
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Computed tax at the expected statutory rate
 $589,438 
 $465,893 
  State and local income taxes, net of federal
  - 
  90,565 
  Other non-deductible expenses
  - 
  1,122 
  Valuation Allowance
  (1,416,762)
  (557,580)
Income tax (benefit) expense
 $(827,327)
 $- 
The temporary differences, tax credits21.0% and carryforwards gave rise to the following deferred tax asset at September 30, 2018 and December 31, 2017:
 
 
September 30,
 
 
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):
    
    
 
    
    
Long-term deferred tax assets (liabilities):
    
    
 
    
    
    Depreciation and amortization
  67,966 
  - 
    Deferred revenue
  21,045 
  - 
    Non-cash compensation
  1,327,751 
  - 
Goodwill - impaired
  - 
  2,066,632 
Intangible assets – tax amortization
  - 
  (3,915,349)
Net operating loss carryforward
  - 
  5,307,384 
    Valuation allowance
  - 
  (3,458,667)
Net term deferred tax assets (liabilities)
 $1,416,762 
 $- 
At December 31, 2018, the company has loss carryforwards of $0.
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.(238.5)%, respectively.
 
NOTE 8 -– LEASES
 
Operating Lease - The Company leasesWe lease two office spaces, a Denver data center, and three Xerox machines. These leases are all classified as operating leases. There is one capital lease for Emerson batteries which is immaterial to our condensed consolidated financial statements. Operating lease assets and obligations are reflected within Operating lease right-of-use assets, Current portion of operating lease liabilities, and Operating lease liabilities, respectively, on the Condensed Consolidated Balance Sheet.
Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in Pittsburgh, Pennsylvania.the period those payments are incurred.
We have options to renew lease terms for the office spaces and other assets. We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The corporate headquarters’weighted average remaining lease term for our operating leases as of March 31, 2019 was 2.52 years.
The discount rate implicit within our leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate for $4,841purposes of classifying the lease and measuring the right-of-use asset and lease liability. The incremental borrowing rate for our leases is determined based on lease term in a month through April 2022.similar economic environment, adjusted for impacts of collateral. The office spaceweighted average discount rate used to measure our operating lease liabilities as of March 31, 2019 was 4.42%.
For the first three months ended, March 31, 2019, cash paid for Pair is $34,014 a month through September 2021.amounts in the measurement of lease liabilities was $139,298. Total operating lease costs during the same period were $139,712.
Maturity of lease liabilities:
Twelve months ending March 31,
 
Operating Leases
 
2020
  557,532 
2021
  495,011 
2022
  279,554 
2023
  10,680 
2024
  - 
Thereafter
  - 
Total lease payments
  1,342,777 
Less amount of lease payment representing interest
  (74,451)
Total present value of lease payments
  1,268,326 
Twelve months ending December 31,
 
Operating Leases
 
2020
  557,190 
2021
  513,830 
2022
  381,239 
2023
  29,816 
2024
  - 
Thereafter
  - 
Total lease payments
  1,482,075 
 
 
1416
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 8 – LEASES - Continued
The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of September 30, 2018 are as follows:
Year ending September 30:
 
Lease Payments
 
2019
  466,260 
2020
  466,260 
2021
  466,260 
2022
  33,887 
Total Minimum Lease Payment
 $1,432,667 
Lease expense charged to operations was $458,805 and $153,252 for the nine months ended September 30, 2018 and 2017, respectively.
NOTE 9 –EARNINGS PER SHARE
 
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 September 30, 2018,March 31, 2019, 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:
 
 
For the Three Months
 
 
For the Nine Months
 
 
 For the Three Months Ended
 
 
September 30
 
 
 March 31,
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
2019
 
 
2018
 
 
 
 
 
 
 
Income from operations available to common stockholders (numerator)$
 $1,014,231 
 $1,161,480 
 $3,467,562 
  1,370,257 
 $1,200,623 
  532,915 
Income available to common stockholders (numerator)
  1,014,231 
  1,161,480 
  3,467,562 
  1,370,257 
  1,200,623 
  532,915 
Restated Weighted average number of common shares outstanding during the period used in earnings per share (denominator)
  29,776,974 
  24,415,860 
  29,733,256 
  24,195,567 
Weighted average number of common shares outstanding during the period used in earnings per share (denominator)
  29,721,974 
  29,644,362 
 
NOTE 10 – COMMITMENTS AND CONTINGENCIES
 
AfterAlthough 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 Universal Corp. (“FAB”), the former parent company of the Company, 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)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$111,431 profit sharing contribution to the plan in 2018.the first quarter of 2019.
 
The Company entered into employment agreements with it executive officers and management that provide for bonus payments at the end of the agreement, and bonus upon termination without cause, or following a change of control by the Company or by the executive for good reason.
NOTE 11 - SEGMENT REPORTING
 
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 March 31, 2019 which are podcast hosting services (Libsyn) and internet hosting services (Pair).

1517
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 11 - SEGMENT REPORTING - Continued
 
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 September 30, 2018 which are podcast hosting services (Libsyn) and internet hosting services (Pair).
The following table presents summary information by segment for the nine months ended September 30, 2018 and 2017, respectively:
 
 
2018   
 
 
2017   
 
(in thousands)
 
Libsyn
 
 
Pair
 
 
Total
 
 
Libsyn
 
 
Pair
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 $9,260 
 $6,831 
 $16,091 
 $7,723 
 $- 
 $7,723 
Cost of revenue
  1,818 
  557 
  2,375 
  1,834 
  - 
  1,834 
 
    
    
    
    
    
    
Total assets
 $21,092 
 $17,839 
 $38,931 
 $19,583 
 $- 
 $19,583 
Depreciation and amortization
 $30 
 $2,243 
 $2,273 
 $14 
 $- 
 $14 

The following table presents summary information by segment for the three months ended September 30,March 31, 2019 and 2018, and 2017, respectively:
 
 
2018   
 
 
2017   
 
(in thousands)
 
Libsyn
 
 
Pair
 
 
Total
 
 
Libsyn
 
 
Pair
 
 
Total
 
 
Libsyn
 
 
Pair
 
 
Total
 
 
Libsyn
 
 
Pair
 
 
Total
 
 
 
 
 
 
 
Revenue
 $3,352 
 $2,374 
 $5,726 
 $2,730 
 $- 
 $2,730 
 $3,335 
 $2,948 
 $6,283 
 $2,882 
 $2,177 
 $5,059 
Cost of revenue
  745 
  218 
  963 
  636 
  - 
  636 
  567 
  273 
  840 
  534 
  173 
  707 
    
    
Total assets
 $23,555 
 $18,783 
 $42,338 
 $19,019 
 $18,177 
 $37,196 
Depreciation and amortization
 $12 
 $725 
 $737 
 $6 
 $- 
 $6 
 $17 
 $725 
 $742 
 $8 
 $759 
 $767 
 
NOTE 12 - SUBSEQUENT EVENTS
 
Management has evaluated subsequent events through the date of the filing of this report. No events have occurred that would require adjustments to or disclosure in the financial statements.
 
16
NOTE 13 – RESTATEMENT OF PREVIOUSLY REPORTED UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
 
Background of the Restatement
 
On April 28, 2020, the Audit Committee of the Board of Directors of Liberated Syndication Inc, a Nevada corporation (the “Company”) determined that (a) the Consolidated Balance Sheet as of December 31, 2018, (b) the Consolidated Statement of Operations for the year ended December 31, 2018, (c) the Statement of Stockholders’ Equity for the year ended December 31, 2018, and (d) the Consolidated Statement of Cash Flows for the year December 31, 2018, all as presented in the Company’s Annual Report on Form 10-K for the Period Ended December 31, 2018, as previously filed with the U.S. Securities and Exchange Commission on March 14, 2019, should not be relied upon. Subsequent to such determination, the Company reviewed the related interim financial statements and interim financial statements for the first three quarters of 2019 and 2018, and as a result of such review, on May 20, 2020, the Audit Committee determined that such interim financial statement should likewise no longer be relied upon.
 
Specifically, the amounts reported in the Consolidated Balance Sheet as of September 30, 2018March 31, 2019 for total assets, current liabilities, and consequently total liabilities and total stockholders’ equity, were determined to be materially different. Additionally, the income tax (benefit) expense in the Consolidated Statement of Operations for the three and nine months ended September 30, 2018March 31, 2019 was changed. As a result, the net income and the basic and diluted income per common share were determined to be materially different. The Statement of Stockholders’ Equity for the period ended March 31, 2019 with its net income and accumulated deficit are consequently affected. The Consolidated Statement of Cash Flows for the ninethree months ended September 30, 2018Mach 31, 2019 also changed as a result of the deferred income taxes and income tax payable for 2018.2019.
 
During the 2019 audit process, it was discovered through an ongoing IRS examination it was discovered that the Company owed Federal tax for 2018.
 
The IRS examination uncovered an error in calculating the Net Operating Loss Carryforward (NOL) resulting from the spin-off of Libsyn in 2016. At December 31, 2017, the Company had recorded an NOL of approximately $14 million. The NOL was part of deferred tax asset which was valued at $0 on the balance sheet, as it had a full valuation allowance. Consequently, the Company was not recognizing tax expenses or the associated tax payable during 2018. However, as the IRS examination continued, it has become clear that the $14 million NOL was overestimated by approximately $12.5 million, and by March 31, 2018, that the NOL has been completely utilized. The result is that the Company ought to have begun recording tax expenses in 2018.
 
This Federal Tax Balance will be paid with an amended return in 2020.
 
The Company has temporary tax differences which result in a deferred tax asset (DTA). Under the provisions of ASC Topic 740, a DTA is to be recognized for the potential future tax benefit from a loss carryforward. Full realization of the benefit, however, depends on the Company having income in future years.
 
18
LIBERATED SYNDICATION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Because the NOL has been completely utilized and the Company is now consistently recording profits, a DTA with the associated payable should have been recorded in 2018. DTAs represent future income tax benefits. But the tax benefits will be realized only if there is sufficient taxable income from which the deductible amount can be deducted.
 
Impact of the Restatement
 
As a result of the restatement, reported net income from continuing operations was decreased by $270,527,$327,010, or $0.01 per basic and diluted share for the three months ended September 30, 2018.
As a result of the restatement, reported net income from continuing operations was increased by $827,323, or $0.03 per basic and diluted share for the nine months ended September 30, 2018.March 31, 2019. Total assets increased by $1,416,762$1,555,606 at September 30, 2018.March 31, 2019. Current and total liabilities increased by $589,438$1,297,068 at September 30, 2018.March 31, 2019. Accumulated deficit decreased by $827,323$258,538 at September 30, 2018.March 31, 2019.
 
The financial statements included in this Form 10-Q/A have been restated to reflect the adjustments described. The table below summarizes the effects of the restatement on Libsyn’s Unaudited Consolidated Statements of Operation for the ninethree months ended September 30, 2018 and,March 31, 2019, Unaudited Consolidated Balance Sheet at September 30, 2018.
17
March 31, 2019, and Unaudited Statement of Stockholders’ Equity for the year ended March 31, 2019.
 
In addition to the restatement of the financial statements, certain information within Note 7 – Income Taxes to the financial statements has been restated to reflect the corrections of misstatements discussed above as well as to add disclosure language as appropriate.
Unaudited Consolidated Balance Sheet
Unaudited Consolidated Balance Sheet
Unaudited Consolidated Balance Sheet
 
September 30,
2018
As Reported
 
 
Corrections
 
 
September 30,
2018
As Restated
 
 
March 31, 2019
As Reported
 
 
Corrections
 
 
March 31, 2019
As Restated
 
Deferred Tax Assets
  - 
  1,416,762 
  - 
  1,555,606 
Total Assets
  37,513,844 
  1,416,762 
  38,930,606 
  40,782,178 
  1,555,606 
  42,337,784 
Income Taxes Payable
  - 
  589,438 
  - 
  1,297,068 
Total Current Liabilities
  5,762,323 
  589,438 
  6,351,761 
  6,471,795 
  1,297,068 
  7,768,863 
Total Liabilities
  12,137,718 
  589,438 
  12,727,156 
  12,966,774 
  1,297,068 
  14,263,842 
Accumulated Deficit
  (9,746,648)
  827,323 
  (8,919,325)
  (7,071,457)
  258,538 
  (6,812,919)
Stockholder’s Equity
  25,376,127 
  827,323 
  26,203,450 
  27,815,404 
  258,538 
  28,073,942 
 
Unaudited Consolidated Statement of Operations
Unaudited Consolidated Statement of Operations
Unaudited Consolidated Statement of Operations
 
Nine months ended
September 30,
2018
As Reported
 
 
Corrections
 
 
Nine months ended
September 30,
2018
As Restated
 
 
Three months ended
March 31, 2019
As Reported
 
 
Corrections
 
 
Three months ended
March 31, 2019
As Restated
 
Income Tax (Benefit) Expense
  - 
  (827,323) 
Income Tax Benefit (Expense)
  - 
  (327,010)
Net Income
  2,640,239 
  827,323 
  3,467,562 
  1,527,633 
  (327,010)
  1,200,623 
Basic and Diluted Income Per Common Share
  0.09 
  0.03 
  0.12 
  0.05 
  (0.01)
  0.04 
 
 
Unaudited Consolidated Statement of Operations
 
 
 
Three months ended
September 30,
2018
As Reported
 
 
Corrections
 
 
Three months ended
September 30,
2018
As Restated
 
Income Tax (Benefit) Expense
  - 
  270,527 
  270,527 
Net Income
  1,284,758 
  270,527 
  1,014,231 
Basic and Diluted Income Per Common Share
  0.04 
  (0.01)
  0.03 
 
Unaudited Statement of Stockholders’ Equity
 
 
 
March 31, 2019
As Reported
 
 
Corrections
 
 
March 31, 2019
As Restated
 
Net Income
  1,527,633 
  (327,010)
  1,200,623 
Accumulated Deficit
  (7,071,457)
  258,538 
  (6,812,919)
 

18
 

 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
Safe Harbor Statement.
 
Statements made in this Form 10-Q which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of the Company, including, without limitation, (i) our ability to gain a larger share of the home healthcare industry,web hosting and podcasting industries, our ability to continue to develop services acceptable to our industry,industries, our ability to retain our business relationships, and our ability to raise capital and the growth of the home healthcare industry,web and podcasting hosting and domain industries, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets", "tend" or similar expressions.
 
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond the Company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in the Company's reports on file with the Securities and Exchange Commission: general economic or industry conditions, nationally and/or in the communities in which the Company conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, changes in the home healthcare industry,web hosting and podcasting industries, the development of services that may be superior to the services offered by the Company, competition, changes in the quality or composition of the Company's services, our ability to develop new services, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting the Company’s operations, services and prices.
 
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
 
Company Overview
 
Founded in 2015, Liberated Syndication Inc (“the “Company,”, “parent”, “we,” or “us” and words of similar import), a Nevada corporation, provides podcast hosting services through its wholly-owned subsidiary Webmayhem Inc., a Pennsylvania corporation (“Libsyn”), and webhosting services through its wholly-owned subsidiary Pair Networks, Inc., a Pennsylvania corporation (“Pair” or “PNI”). The Company’s consolidated financial statements include the financial statements of Libsyn and Pair. Libsyn’s focus is on our podcasting business, while Pair’s focus is on webhosting and domains.
 
Podcast Hosting and DistributionOur corporate offices consist of approximately 3,100 square feet of office space located at 5001 Baum Blvd, Suite 770, Pittsburgh, PA 15213. Our telephone number is (412) 621-0902. We also maintain an office at 2403 Sidney St., Suite 210, Pittsburgh, PA consisting of approximately 34,700 square feet.
 
BUSINESS
Libsyn
Libsyn is a Podcast Service Provider offering hosting and distribution tools which include storage, bandwidth, RSS creation, destination distribution, and audience statistics and analytics. Podcast producers can choose from a variety of hosting plan levels based on the requirements for their podcast. Plans are designed to provide full-featured podcast tools with generous storage and bandwidth transfer.
tracking. Podcast producers can choose from a variety of hosting plan levels based on the requirements for their podcast. Podcast producers’ sign-up online at www.libsyn.com, using their credit card to subscribe to a monthly plan. Libsyn’s standard plans rangeLibsyn offers a basic, getting started plan for $5 per month and more advanced plans that include more storage, advanced statistics, and podcast apps. Plans are designed to $75 per month. LibsynProprovide full-featured podcast tools with generous storage and bandwidth transfer. LibsynPRO service is an enterprise solution for professional media producers and corporate customers that require media network features and dedicated support. LibsynPro revenue consists primarily

Libsyn supports both audio and video podcasts, allowing producers to upload podcast episodes through the Libsyn interface or via FTP to manage publishing to online directories, web portals, content aggregators, App marketplaces and social media platforms for both download and streaming.
Approximately 62% of monthly hosting feesthe downloads from shows that Libsyn distributes reach audiences using Apple's iOS, Apple Podcasts and bandwidth usage charges. Other professional level add-ons,Apple’s iTunes platform which includes iTunes on the computer, iPads, iPhones, Apple Watch, Apple TV, and Apple’s Podcasts App on iOS devices. Libsyn also enables distribution to destinations like Google Play Music and aggregators such as set-up feesSpotify, Pandora, and custom features, representiHeartRadio. The OnPublish feature enables podcast episodes to be posted to social media sites such as Facebook, Twitter, YouTube, Linked-In and blogging platforms like WordPress and Blogger. Libsyn also provides a small portion of LibsynPro revenue.podcast player that can be embedded on websites or shared via social media.
 
During the first nine monthsLibsyn’s podcast platform architecture allows for expansion of 2018, Libsyn generated 70% of its revenue from Podcast hosting fees paid by Libsyn4 Producers. LibsynPro revenue is 17% of overall revenues,distribution destinations and Advertising revenue makes up 10% revenues. App subscriptions make up 3% of total Libsyn revenues. During the first nine months of 2017, Libsyn generated 64% of its revenue from Podcast hosting fees paid by Libsyn4 Producers. LibsynPro revenue is 17% of overall revenues, and Advertising revenue makes up 16% of revenues. App subscriptions make up 3% of total Libsyn revenues.

19
Trends in the number of podcast shows onOnPublish capabilities. Using the Libsyn networkservice, podcast producers can more broadly distribute and podcast consumption affect our revenue and financial results as they are directly relatedpromote their shows to cash flow and cost of revenue. Management believes that over the next 3 months, growth in the podcasting industry and Libsyn’s market leadership will continue to fuel expansion of the Libsyn network and revenue. The Company expects to see year-over-year bandwidth usage continue to grow in 2018.attract larger audiences.
 
Pair Networks, Inc. (“Pair”)
 
Pair Networks, founded in 1996, is one of the oldest and most experienced Internet hosting company providing a full range of fast, powerful and reliable Web hosting services. Pair offers a suite of Internet services from shared hosting to virtual private servers to customized solutions with world-class 24x7 on-site customer support. Based in Pittsburgh, Pair servesbusinesses, bloggers, artists, musicians, educational institutions and non-profit organizations around the world.
Pair offers a variety of hosting plan levels,levels; value add Internet services and domain registration. Through the Pair Account Control Center (ACC), customers can manage their hosting accounts and domains from one place.
 
Customers can choose from a variety of web hosting plan levels based on their requirements and applications. Pair Hosting offers shared servers, virtual private servers, dedicated servers and Pair cloud technologyoptimized WordPress hosting as managed services. With over twenty years of experience in Internet hosting, Pair has the expertise to build and manage reliable and powerful hosting solutions. The managed service and 24x7 support allow customers to focus on their core business without having to worry about hardware, operating systems, network connectivity or uptime.
 
ShareShared web hosting is a great option for startup or smaller businesses as the website sits on the same server with other websites and shares resources such as memory and Central Processing Unit (CPU). Basic website applications such as email and file sharing are ideal for shared server offerings.
 
Virtual private servers
Virtual private servers (VPS) is a step up from a shared hosting solution in that specific server resources are allocated directly for your use, assuring performance levels. This is a more secure and reliable option that separates your site from others and is ideal for storage or database applications for businesses, developers, and fast-growing sites.
Dedicated servers
Dedicated servers provide yet another level of security and performance for those who need more processing power or storage. Servers are built to customer specifications and tuned for performance, reliability and efficiency to meet the demand of more robust applications. Through Pair QuickServe (QS), a powerful hosting solution with tremendous capacity and speed, servers are ready for your use in no time and fully managed to keep them up to date.
Pair hosting also offers self-managed service through server collocation, which delivers the advantages of the powerful infrastructure that was built behind the fully managed offerings. For those customers who want to purchase their own hardware, collocation service in Pair’s data center allows for unmanaged service with the security and reliability of the diverse network, physically secure facilities, backup power and redundant climate control.

Optimized WordPress
WordPress (WP) is one of the fastest growing Content Management Systems (CMS) powering web sites today. Pair offers a managed WP product line that is optimally configured for performance and security. This managed WP service will ensure fast performance, high availability and security by keeping sites up to date with the latest WP core updates and patches and ensuring hardware and network speed and uptime. The WP service offers a range of scalable solutions from several to unlimited WP sites, ideal for single sites through enterprise applications.
Pair Hosting customers sign-up online at www.pair.com, using their credit card to subscribe to a monthly or annual plan. Pair offers a basic, getting started plan with a custom domain for $5.95 per month with a basic drag and drop website builder and more advanced plans that include additional storage, processing power and add-ons like eCommerce and WordPress. Plans are designed to provide full-featured web hosting tools for all levels including backups, Account Control and security and operating system maintenance and upgrades.
Pair Domains offers custom domains for Top Level Domains (TLDs) including dot-com, dot-org, and dot-net that vary in price from $7.00 to $70 per year based on the TLD. Customers can search for available domains and sign-up online at www.pairdomains.com using their credit card for a one to ten-year domain name purchase or domain transfer. All domain names registered by Pair include enhanced services such as custom and dynamic Domain Name System (DNS) which controls your domain name’s website and email, WHOIS privacy, email forwarding, and a drag and drop website builder.
Results of Operations
 
Nine months ended September 30, 2018Three Months Ended March 31, 2019 and 2017.2018.
 
During the ninethree months ended September 30, 2018,March 31, 2019, the Company recorded revenues of $16,091,492,$6,282,979, a 108%24% increase over revenues of $7,723,250$5,059,305 for the same period in 2017. The2018. This increase for 2018 reflects an increase in Libsyn4 hosting revenue as well as LibsynPro, and Premium Subscription, offset by decreasesa decrease in Advertisingadvertising revenue. This also reflects an increase in Pair’s hosting and domain offerings. Libsyn contributed $3,334,635 of revenue while Pair contributed $6,830,964$2,948,344, an increase of revenue during16% and 35%, respectively, when compared to the first nine monthsquarter of 2018, and $0 during 2017 due to the acquisition in December 2017. 2018.
Libsyn4 hosting revenue increased 31% due to the 28% growth in the number of podcasts on the network when comparing the first nine monthsquarter of 20182019 versus 2017.2018. LibsynPro revenue increased as a result of additional LibsynPro networks using our platform in 2018the first quarter of 2019 with increased bandwidth usage fees for delivery of podcasts contributing to the majority of the revenue gain. Advertising revenue decreased 24% in$127,571 during the first nine monthsquarter of 20182019 versus 2017.the same period of 2018. The decrease resulted from decrease in the dollars being spent on ad campaigns during the first nine monthsquarter of 20182019 with existing advertisers. Premium subscription revenue increased $18,714.decreased $34,603.
 
The Company recorded total costs and operating expenses of $13,213,875$4,719,576 during the nine months ended September 30, 2018, an 108%first quarter of 2019, a 6% increase as compared to total costs and operating expenses of $6,352,993 in$4,438,140 during the same period of 2017. Pair2018. Libsyn contributed $7,954,209$2,066,782 to total costs and operating expenses during the first nine monthsquarter of 2018,2019, and $0$1,818,378 during 2017 duethe same period in 2018. Pair contributed $2,652,794 to total costs and operating expenses during the acquisitionfirst quarter of 2019 and $2,619,762 during the same period in December 2017.2018.
 
During the nine months ended September 30, 2018,first quarter of 2019, cost of revenue totaled $2,374,702,$839,640, a 29%19% increase as compared to $1,833,868$707,370 for the same period in 2017.2018. Libsyn contributed $567,040 while Pair contributed $556,560$272,600 to the cost of revenue during the first nine monthsquarter of 2018. There was also2019. Libsyn recorded an increase in bandwidth costs, credit card processing fees, and colocation fees, offset by a decrease in ad sharing that is being paid to producers induring the first quarter of 2019 versus 2018, versus 2017, driven by a decrease in ad revenue. Pair recorded an increase in domain name fees and internet fees, offset by a decrease in processing fees and colocation fees. Cost of revenue as a percentage of revenue for Libsyn decreased to 17% in the first quarter of 2019 from 19% during the same period in 2018. This is a reflection of the reduction in the bandwidth rate to deliver the podcasts, off-set by an increase in bandwidth usage during the first quarter of 2019 due to the growth in the number of podcasts and increased podcast consumption on the Libsyn Platform. Cost of revenue as a percentage of revenue for Pair increased to 9% in the first quarter of 2019 from 8% during the same period in 2018. This is due primarily to the increase in domain name purchase fees and internet connectivity fees.
 
The increase in general and administrative was primarily driven by the addition of the Pair business consisting primarily of wages, rent, utilities, and health insurance costs.
General and administrative expenses including non-cash compensation, totaled $4,570,630$1,828,539 in the first quarter of 2019 versus $1,705,312 during the same period in 2018, versus $3,668,787 in 2017, an increase of 25%,7%. The increase was driven primarily due to the accrual of bonuses, offset by a decrease in consulting and professional fees as well as a reduction of non-cash expense for Libsyn. The decrease was further driven by the decrease in employment benefits, legal work, and maintenance fees. General and administrative expense for Pair during the first quarter of 2019 was $686,643 and $725,522 for the same period in 2018. General and administrative for Libsyn for the same periods was $1,141,896 and $979,790, respectively.
Technology expenses represented $454,638 in the first quarter of 2019 versus $373,326 in 2018, driven by an increase in wages fromsince the additionfirst quarter of Pair during 2018. Technology expenses represented $1,292,238 in 2018 versus $463,386 in 2017, driven by an increase in wages from the addition of Pair during 2018. Selling expenses during the first quarter of 2019 were $194,794 versus $217,002 during the same period in 2018 were $647,833 versus $235,583 in 2017 with the additiondriven by a reduction of the selling teamadvertising for Pair. Customer support expenses in 2018the first quarter of 2019 were $2,055,389$659,868 versus $138,721$668,230 during the same period in 20172018 driven by the 24/7reduction of support staff wages provided by Pair.
Depreciation and amortization expenses consist of charges relating to the depreciation of the property and equipment used in our operations and the amortization of intangible assets. Depreciation and amortization expense for the first quarter of 2019 was $742,097 and $766,900 during the same period in 2018. During the first quarter of 2019, Libsyn contributed $17,304 and Pair contributed $724,793 to depreciation and amortization expense.
 
Interest expense for the first nine monthsquarter of 20182019 was $291,205,$86,842 compared to $100,596 in the first quarter of 2018, which represents interest on the loan facility obtained in connection with the acquisition of Pair.

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Interest expense for the first quarter of 2019 was offset with interest income of $51,951, resulting in net cash expenditure of $34,891 on the note.
 
Income tax benefitexpense for the ninethree months ended September 30, 2018March 31, 2019 was $827,323,$327,010, which represents the deferred tax asset from the 2018 tax provision and the expected federal balance due for 2018. The income tax payable will be payable with the amended return in 2020. Income tax (benefit) for the three months ended March 31, 2018 was ($1,271,059).
 
The Company’s net income was $3,467,562 for the nine months ended September 30, 2018. This represents a $2,097,305 increase from $1,370,257 for the nine months ended September 30, 2017.
Three Months Ended September 30, 2018 and 2017.
During the three months ended September 30, 2018, the Company recorded revenues of $5,726,425, a 110% increase over revenues of $2,730,237 for the same period in 2017. The increase for 2018 reflects an increase in Libsyn 4 hosting revenue as well as LibsynPro, Premium Subscription and advertising. Pair contributed $2,373,822 of revenue during the third quarter of 2018, and $0 during 2017 due to the acquisition in December 2017. Libsyn4 hosting revenue increased due to the growth in the number of podcasts on the network when comparing the third quarter of 2018 versus 2017. LibsynPro revenue increased as a result of additional LibsynPro networks using our platform in 2018 with increased bandwidth usage fees for delivery of podcasts contributing to the majority of the revenue gain. Advertising revenue increased due to an increase in spending on campaigns during the third quarter of 2018. Premium subscription revenue increased due an increase in the number producers offering subscription.
Libsyn recorded total costs and operating expenses of $4,375,259 during the three months ended September 30, 2018, a 179% increase as compared to operating expenses of $1,568,757 in the same period of 2017. Pair contributed $2,613,605 to total costs and operating expenses during the third quarter of 2018, and $0 during 2017 due to the acquisition in December 2017.
During the three months ended September 30, 2018, cost of revenue totaled $962,817, a 51% increase as compared to $636,090 for the same period in 2017. Pair contributed $218,285 to cost of revenue during the third quarter of 2018. There was also an increase in bandwidth costs, credit card processing fees, and colocation fees, offset by a decrease in ad sharing that is being paid to producers in 2018 versus 2017.
Income tax expense$1,200,623 for the three months ended September 30, 2018 was $270,527, whichMarch 31, 2019. This represents the deferred tax asseta $603,351 decrease from the 2018 tax provision and the expected federal balance due for 2018. The income tax payable will be payable with the amended return in 2020.
The Company’s net income was $1,014,231$1,803,974 for the three months ended September 30,March 31, 2018. This represents a $147,249 decrease from ourFor the first quarter of 2019, Pair generated $307,840 of the net income of $1,161,480while Libsyn generated $892,783. Earnings per share decreased to $0.04 per share for the three months ended September 30, 2017.first quarter of 2019 from $0.06 per share for the first quarter of 2018.
 
Liquidity and Capital Resources.
 
Cash on hand was $9,364,218$12,516,269 at September 30, 2018,March 31, 2019, an increase of $4,152,373$1,436,328 over the $5,211,845$11,079,941 on hand at December 31, 2017.2018. Cash provided by operations for the ninethree months ended September 30, 2018,March 31, 2019, was $5,658,489,$1,997,520, an increase of $3,087,314$204,650 over the $2,571,175$1,792,870 cash provided by operations for the ninethree months ended September 30, 2017.March 31, 2018. The contribution from PairLibsyn of this cash generation totaled $1,494,893,$1,423,975, and LibsynPair added $2,657,480.$573,545. This increase is driven from our operating results of both segments of our business.
 
Cash used in investing activities of $254,527$143,304 during the thirdfirst quarter of 20182019 was for the purchase of equipment and capitalization of software development costs. No cash was used in investing activities during the same period in 2018.
 
Cash used in financing activities was $1,251,589$417,888 for the ninethree months ended September 30, 2018March 31, 2019 and $8,000$416,970 in 2017.2018. During the first ninethree months of 2018,2019, we made our payments on the loan used to acquire Pair, a total of $1,200,000,$400,000, as well as $51,589$17,888 of payments on our capital lease.
 
The increase in cash of $4,152,373$1,436,328 during the first ninethree months of 20182019 is a reflection of the strength of the overall business through the first ninethree months of 2018.2019.
 

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Off-balance sheet arrangements
We have operating leases for certain facilities, but otherwise do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, or capital resources.
The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of September 30, 2018 are as follows:
Year ending September 30:
 
Lease Payments
 
2019
  466,260 
2020
  466,260 
2021
  466,260 
2022
  33,887 
Total Minimum Lease Payment
 $1,432,667 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
Not required for smaller reporting companies.
 
Item 4. Controls and Procedures.
 
(a) Evaluation of Disclosure Controls and Procedures
 
Our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), which we refer to as disclosure controls, are controls and procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any control system. A control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are met. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
 
As of September 30, 2018,March 31, 2019, an evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of such date, the design and operation of these disclosure controls were not effective to accomplish their objectives at the reasonable assurance level due to the identification of errors which led to certain of our financial statements being restated. On an on-going basis we will evaluate the adequacy of our controls and procedures.level.
 
(b) Changes in Internal Control over Financial Reporting
 
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), occurred during the fiscal quarter ended September 30, 2018March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 

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PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
Liberated Syndication Inc. is involved in routine legal and administrative proceedings and claims of various types. We have no material pending legal or administrative proceedings, other than ordinary routine litigation incidental to our business, to which we or any of our subsidiaries are a party or of which any property is the subject.
 
Item 1A. Risk Factors.
 
Not required for smaller reporting companies.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
     None; not applicable.
 
Item 3. Defaults Upon Senior Securities.
 
     None; not applicable.
 
Item 4. Mine Safety Disclosures.
 
     None; not applicable.
 
Item 5. Other Information.
 
None; not applicable.
 
(a)
During the quarterly period ended September 30, 2018,March 31, 2019, there were no changes to the procedures by which shareholders may recommend nominees to the Company’s board of directors.
 
Item 6. Exhibits.
 
(ii)
Exhibit No.                                
Exhibit No.Description
Description
31.1
302 Certification of Christopher J. Spencer
31.2
302 Certification of Gabriel J. Mosey
32
 906 Certification.
101.1
The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.
 
2331.1
302 Certification of Christopher J. Spencer
31.2
302 Certification of Gabriel J. Mosey
32
906 Certification.
101.1 
The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Date:7/10/2020 By:/s/ Christopher J. Spencer
    Christopher J. Spencer
    Chief Executive Officer and President
 
 
Date:7/10/2020  
/s/ Gabriel J. Mosey
    
Gabriel J. Mosey
    Interim Chief Financial Officer
 
 
 
 
 
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