Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 14, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Liberated Syndication Inc. | |
Entity Central Index Key | 0001667489 | |
Amendment Flag | true | |
Amendment Description | 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 May 20, 2019 (the “Original 10-Q”) to restate our unaudited consolidated financial statements for the quarterly period ended March 31, 2019 and to amend related disclosures. | |
Document Type | 10-Q/A | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entitiy Shell Company | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Small Business | true | |
Entity Current Reporting Status | Yes | |
Entity Common Stock, Shares Outstanding | 29,271,974 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | NV | |
Entity File Number | 000-55779 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
CURRENT ASSETS: | ||
Cash | $ 12,516,269 | $ 11,079,941 |
Accounts receivable, net | 398,766 | 481,921 |
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 | 7,322,357 | 7,786,686 |
Prepaid expense | 252,312 | 191,609 |
Operating lease right-of-use assets | 1,268,326 | 0 |
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 | 0 |
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 | 0 | 831 |
Deferred revenue, net | 450,452 | 371,938 |
Operating lease liabilities | 756,575 | 0 |
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 |
UNAUDITED CONDENSED CONSOLIDA_2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 14,000 | $ 14,000 |
Common stock authorized | 200,000,000 | 200,000,000 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock outstanding | 29,721,974 | 29,721,974 |
UNAUDITED CONDENSED CONSOLIDA_3
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
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 |
UNAUDITED CONDENSED CONSOLIDA_4
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance, amount at Dec. 31, 2017 | $ 29,596 | $ 34,804,457 | $ (12,386,887) | $ 22,447,166 |
Balance, shares at Dec. 31, 2017 | 29,595,473 | |||
Issuance of Common Stock for services, amount | $ 200 | 317,800 | 318,000 | |
Issuance of Common Stock for services, shares | 200,000 | |||
Return of Common Stock for final settlement of Pair Acquisition, amount | $ (19) | (29,260) | (29,279) | |
Return of Common Stock for final settlement of Pair Acquisition, shares | (18,499) | |||
Net income | 1,803,974 | 1,803,974 | ||
Balance, amount at Mar. 31, 2018 | $ 29,777 | 35,092,997 | (10,582,913) | 24,539,862 |
Balance, shares at Mar. 31, 2018 | 29,776,974 | |||
Balance, amount at Dec. 31, 2018 | $ 29,722 | 35,010,552 | (8,013,542) | 27,026,732 |
Balance, shares at Dec. 31, 2018 | 29,721,974 | |||
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, amount at Mar. 31, 2019 | $ 29,722 | $ 34,857,139 | $ (6,812,919) | $ 28,073,942 |
Balance, shares at Mar. 31, 2019 | 29,721,974 |
UNAUDITED CONDENSED CONSOLIDA_5
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash Flows from Operating Activities | ||
Net income | $ 1,200,623 | $ 1,803,974 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 742,097 | 766,900 |
Issuance of common stock | 0 | 318,000 |
Deferred taxes | (101,529) | (1,336,905) |
Non-cash compensation expense, net of recapture | (153,413) | 0 |
Amortization of right-of-use asset | 129,495 | 0 |
Discount on loan fees | 7,403 | 9,023 |
Change in assets and liabilities: | ||
Accounts receivable | 83,155 | (76,925) |
Prepaid expenses | (152,627) | (134,237) |
Accounts payable | (178,645) | 44,031 |
Income taxes payable | 428,539 | 65,846 |
Accrued expense | 258,581 | (456,472) |
Operating lease liabilities | (129,495) | 0 |
Deferred revenue | (136,664) | 789,635 |
Net Cash Provided by Operating Activities | 1,997,520 | 1,792,870 |
Cash Flows from Investing Activities: | ||
Purchase of property and equipment | (143,304) | 0 |
Net Cash Used in Investing Activities | (143,304) | 0 |
Cash Flows from Financing Activities: | ||
Repayment on term loan | (400,000) | (400,000) |
Repayment on capital lease | (17,888) | (16,970) |
Net Cash Used in Financing Activities | (417,888) | (416,970) |
Net Increase in Cash | 1,436,328 | 1,375,900 |
Cash at Beginning of Period | 11,079,941 | 5,211,845 |
Cash at End of Period | 12,516,269 | 6,587,745 |
Supplemental Non-Cash Investing and Financing Activities | ||
Cash paid during the periods for: Interest | 76,502 | 96,730 |
Cash paid during the periods for: Income taxes | 0 | 0 |
Right-of-use operating lease assets obtained in exchange for operating lease liabilities | 1,397,821 | 0 |
Returned Common Stock | $ 0 | $ 29,278 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
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) and 660837NB, Inc. (NB), in a transaction accounted for as a purchase. Pair Networks Inc. provides web hosting services and domain name registrations. Services include shared web hosting, e-commerce, fully managed virtual private and dedicated servers, customer self-managed dedicated servers, domain-name registration, co-location and content-delivery networks. Pair began operations in August 1995. It incorporated in the state of Pennsylvania in August 1998. Pair’s principal operations are conducted on-site in Pittsburgh, PA. Pair also has an operating site in Denver, Colorado, and a remote site back-up location in Pittsburgh, PA. Ryousha Kokusai, LLC (dba Pair International), a wholly owned single-member limited liability company subsidiary of Pair, was formed on January 1, 2015. The Value Added Tax(VAT) for sales to European Union countries subject to the VAT in Europe are paid through Ryousha Kokusai LLC. There are no operating activities conducted by Ryousha. NB, a Canadian Company was organized on December 2, 2011. NB is used solely for holding the Canadian tradenames and domain names of Pair. There are no operating activities conducted by NB. 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, 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, 2018 (the 2018 Form 10-K). Prior Period Reclassifications - 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 assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets; ● the estimated reserve for refunds; ● the estimated useful lives of intangible and depreciable assets; ● the grant date fair value of equity-based awards; ● the recognition, measurement, and valuation of current and deferred income taxes; We periodically evaluate these estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results may differ from our estimates. 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 March 31, 2019, the Company had $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. Accounts Receivable – Accounts receivable consist of trade receivables arising in the normal course of business. At March 31, 2019 and March 31, 2018, 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 three months ended March 31, 2019 and 2018, the Company adjusted the allowance for bad debt by $0. Definite-life intangible assets – The Company evaluates its long-lived assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the asset. Technology 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 three months ended March 31, 2019 and 2018. Technology costs totaled $454,638 and $373,326 for the three months ended March 31, 2019 and 2018, 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 March 31, 2019. Advertising Costs – Advertising costs are expensed as incurred and amounted to $21,443 and $40,434 for the three months ending March 31, 2019 and 2018, 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. 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 - The Company accounts for revenue in accordance with 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 determining the price for the sale of each subscription, and the Company earns a percentage of what the customer pays. The performance obligation is providing the subscription hosting medium and billing services. Accordingly, the Company reports premium subscription revenue on a net basis over the subscription service period in which the performance obligation is satisfied. Advertising - The Company recognizes revenue from the insertion of advertisements in digital media. The performance obligation is the download of the digital media with the advertisement inserted. The performance obligation to recognize advertising revenue is satisfied upon delivery of the media download and collection is probable. Equity-Based Compensation - Our equity-based awards are comprised of stock and are accounted for using the fair value method. Stock is measured based on the fair market value of the underlying common stock on the date of grant. Awards vest and compensation is recognized over the requisite service period. The measurement date for performance vesting awards is the date on which the applicable performance criteria are approved by our board of directors. Leases – On January 1, 2019, the Company adopted Accounting Standards Codification ASC 842, Leases. ASC 842 was issued to increase transparency and comparability among entities by recognizing right-of-use assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. We elected to transition to ASC 842 using the option to apply the standard on its effective date, January 1, 2019. The comparative periods presented reflect the former lease accounting guidance and the required comparative disclosures are included in Note 8 – Leases. 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 - 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. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | The following is a summary of property and equipment at: Life March 31, 2019 December 31, 2018 Furniture, fixtures, and equipment 3-10 yrs $ 8,181,313 $ 8,155,322 Leasehold improvements 3 - 5 yrs 2,646,400 2,646,400 Software 3 yrs 379,360 262,046 11,207,073 11,063,768 Less: Accumulated depreciation (9,112,243 ) (8,834,474 ) Property & equipment, net $ 2,094,830 $ 2,229,294 Depreciation expense for the three months ended March 31, 2019 and 2018 was $277,769 and $302,571, respectively. |
GOODWILL AND OTHER DEFINITE-LIF
GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS | Goodwill - The following is a summary of goodwill: 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 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. As of March 31, 2019, identifiable intangible assets consist of following: Preliminary Fair Value Weighted Average Useful Life (in Years) Accumulated Amortization Net Carrying Amount Customer Relationships $ 3,947,000 7 $ 704,821 $ 3,242,179 Intellectual Property 3,709,000 7 662,322 3,046,678 Trade name 576,000 10 72,000 504,000 Non-compete 1,412,000 2 882,500 529,500 Total $ 9,644,000 $ 2,321,643 $ 7,322,357 Amortization expense for the three months ended March 31, 2019 and 2018 was $464,329 and $464,329, respectively. The estimated future amortization expenses related to other intangible assets as of March 31, 2019 are as follows: For twelve months ending March 31, 2020 $ 1,680,814 2021 1,151,314 2022 1,151,314 2023 1,151,314 2024 1,151,314 Thereafter 1,036,287 Total $ 7,322,357 |
LOANS
LOANS | 3 Months Ended |
Mar. 31, 2019 | |
Loans | |
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 March 31, 2019, $2,000,000 was drawn down on the revolving line with $0 available. The loan currently accrues interest at LIBOR plus 125 base points or prime plus 75 basis points at the election of the Company. As of March 31, 2019, the Company has elected LIBOR plus 125 basis points or 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 March 31, 2019, the balance on the term loan was $6,000,000. The Company, Libsyn and Pair have granted the bank a blanket security interest in their respective assets, and the Company has pledged the stock of Webmayhem Inc. and Pair Networks Inc. to the bank, as security for all obligations under the Loan Agreement. Borrowings under the Facility are at variable rates which are, at the Company’s option, tied to LIBOR (London Interbank Offered Rate) plus an applicable rate or a prime rate. Interest rates are subject to change based on the Company’s combined cash balances. The Facility contains covenants that may have the effect of limiting the ability of the Company to, among other things, merge with or acquire other entities, enter into a transaction resulting in a change in control, create certain new liens, incur certain additional indebtedness, engage in certain transactions with affiliates, engage in new lines of business or sell a substantial part of its assets. The Facility also requires the Company to maintain certain consolidated fixed charge coverage ratios and minimum liquidity balances. The Facility also contains customary events of default, including (but not limited to) default in the payment of principal or, following an applicable grace period, interest, breaches of the Company’s covenants or warranties under the Facility, payment default or acceleration of certain indebtedness of the Company or any subsidiary, certain events of bankruptcy, insolvency or liquidation involving the Company or its subsidiaries, certain judgments or uninsured losses, changes in control and certain liabilities related to ERISA based plans. On December 27, 2017, the Company drew $10,000,000 under the Facility to finance a portion of the cash consideration 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 March 31, 2019, the discount was $72,231. Future maturities of the loans at March 31, 2019 are as follows: For the period ending March 31, 2020 $ 2,666,667 2021 1,600,000 2022 1,600,000 2023 1,200,000 2024 933,333 Thereafter - Total $ 8,000,000 |
CAPITAL STOCK
CAPITAL STOCK | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
CAPITAL STOCK | 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. During the first quarter of 2018, the Company issued 200,000 shares of common stock valued at $318,000 to a consultant for services rendered. During the first quarter of 2018, the seller of Pair Networks Inc., returned 18,499 shares valued at $29,278 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. |
DEFERRED REVENUE
DEFERRED REVENUE | 3 Months Ended |
Mar. 31, 2019 | |
Deferred Revenue [Abstract] | |
DEFERRED REVENUE | Deferred revenue consists of the following: March 31, 2019 December 31, 2018 Current: Hosting services $ 1,262,506 $ 1,601,335 Domains 601,744 535,273 Media subscription 196,651 139,471 $ 2,060,901 $ 2,276,079 Noncurrent: Hosting services 32,935 39,071 Domains 417,517 332,867 $ 2,511,353 $ 2,648,017 Deferred revenue as of March 31, 2019 is expected to be recognized as revenue as follows: Remainder of 2019 2020 2021 2022 2023 Thereafter Total Domains $ 515,868 $ 220,347 $ 118,951 $ 94,112 $ 57,785 $ 12,198 $ 1,019,261 Hosting 1,180,745 110,556 4,140 - - - 1,295,441 Media Subscription 196,651 - - - - - 196,651 $ 1,893,264 $ 330,903 $ 123,091 $ 94,112 $ 57,785 $ 12,198 $ 2,511,353 Disaggregated revenue consists of following: 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 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Our provision for income taxes for the three-month periods ended March 31, 2019 and 2018 was a tax expense of approximately $327,010 and a tax benefit of approximately $1,271,059, respectively, which resulted in an effective tax rate of 21.0% and (238.5)%, respectively. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
LEASES | We 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 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 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 purposes 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 similar economic environment, adjusted for impacts of collateral. The weighted 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 amounts in the measurement of lease liabilities was $139,298. Total operating lease costs during the same period were $139,712. Maturity of lease liabilities: Twelve months ending March 31, Operating Leases 2020 557,532 2021 495,011 2022 279,554 2023 10,680 2024 - Thereafter - Total lease payments 1,342,777 Less amount of lease payment representing interest (74,451 ) Total present value of lease payments 1,268,326 Twelve months ending December 31, Operating Leases 2020 557,190 2021 513,830 2022 381,239 2023 29,816 2024 - Thereafter - Total lease payments 1,482,075 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | Basic income (loss) per share is computed by dividing net income (loss) attributable to Liberated Syndication Inc. by the weighted-average number of shares of common stock outstanding during the period. As of March 31, 2019, there were no common stock equivalents outstanding. The following data shows the amounts used in computing earnings per share and the weighted average number of shares of common stock outstanding for the periods presented for the periods ended: For the Three Months Ended March 31, 2019 2018 Income from operations available to common stockholders (numerator)$ $ 1,200,623 $ 532,915 Income available to common stockholders (numerator) 1,200,623 532,915 Weighted average number of common shares outstanding during the period used in earnings per share (denominator) 29,721,974 29,644362 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Although the Company does not expect to be liable for any obligations not expressly assumed by the Company from the Spin-Off, it is possible that the Company could be required to assume responsibility for certain obligations retained by FAB 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) 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 $111,431 profit sharing contribution to the plan in 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. |
SEGMENT REPORTING
SEGMENT REPORTING | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
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). The following table presents summary information by segment for the three months ended March 31, 2019 and 2018, respectively: (in thousands) Libsyn Pair Total Libsyn Pair Total Revenue $ 3,335 $ 2,948 $ 6,283 $ 2,882 $ 2,177 $ 5,059 Cost of revenue 567 273 840 534 173 707 Total assets $ 23,555 $ 18,783 $ 42,338 $ 19,019 $ 18,177 $ 37,196 Depreciation and amortization $ 17 $ 725 $ 742 $ 8 $ 759 $ 767 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
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. |
RESTATEMENT OF PREVIOUSLY REPOR
RESTATEMENT OF PREVIOUSLY REPORTED UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
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 March 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 months ended March 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 three months ended Mach 31, 2019 also changed as a result of the deferred income taxes and income tax payable for 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. 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 was decreased by $327,010, or $0.01 per basic and diluted share for the three months ended March 31, 2019. Total assets increased by $1,555,606 at March 31, 2019. Current and total liabilities increased by $1,297,068 at March 31, 2019. Accumulated deficit decreased by $258,538 at 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 three months ended March 31, 2019, Unaudited Consolidated Balance Sheet at 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 March 31, 2019 As Reported Corrections March 31, 2019 As Restated Deferred Tax Assets - 1,555,606 1,555,606 Total Assets 40,782,178 1,555,606 42,337,784 Income Taxes Payable - 1,297,068 1,297,068 Total Current Liabilities 6,471,795 1,297,068 7,768,863 Total Liabilities 12,966,774 1,297,068 14,263,842 Accumulated Deficit (7,071,457 ) 258,538 (6,812,919 ) Stockholder’s Equity 27,815,404 258,538 28,073,942 Unaudited Consolidated Statement of Operations Three months ended March 31, 2019 As Reported Corrections Three months ended March 31, 2019 As Restated Income Tax Benefit (Expense) - (327,010 ) (327,010 ) Net Income 1,527,633 (327,010 ) 1,200,623 Basic and Diluted Income Per Common Share 0.05 (0.01 ) 0.04 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 ) |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Organization | 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) and 660837NB, Inc. (NB), in a transaction accounted for as a purchase. Pair Networks Inc. provides web hosting services and domain name registrations. Services include shared web hosting, e-commerce, fully managed virtual private and dedicated servers, customer self-managed dedicated servers, domain-name registration, co-location and content-delivery networks. Pair began operations in August 1995. It incorporated in the state of Pennsylvania in August 1998. Pair’s principal operations are conducted on-site in Pittsburgh, PA. Pair also has an operating site in Denver, Colorado, and a remote site back-up location in Pittsburgh, PA. Ryousha Kokusai, LLC (dba Pair International), a wholly owned single-member limited liability company subsidiary of Pair, was formed on January 1, 2015. The Value Added Tax(VAT) for sales to European Union countries subject to the VAT in Europe are paid through Ryousha Kokusai LLC. There are no operating activities conducted by Ryousha. NB, a Canadian Company was organized on December 2, 2011. NB is used solely for holding the Canadian tradenames and domain names of Pair. There are no operating activities conducted by NB. |
Basis of Presentation | 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, 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, 2018 (the 2018 Form 10-K). |
Prior Period Reclassifications | Reclassification of $318,000 common stock in prior periods was recorded as a Non-cash compensation item in the Statement of Operations. Per SAB 14, this has been reclassified and included in General and administrative line item. |
Accounting Estimates | 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 assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets; ● the estimated reserve for refunds; ● the estimated useful lives of intangible and depreciable assets; ● the grant date fair value of equity-based awards; ● the recognition, measurement, and valuation of current and deferred income taxes; We periodically evaluate these estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results may differ from our estimates. |
Cash and Cash Equivalents | 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 March 31, 2019, the Company had $12,245,103 cash balances in excess of federally insured limits. |
Depreciation | Depreciation – Depreciation of property and equipment is provided on the straight-line method over the estimated useful lives. |
Accounts Receivable | Accounts Receivable – Accounts receivable consist of trade receivables arising in the normal course of business. At March 31, 2019 and March 31, 2018, 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 three months ended March 31, 2019 and 2018, the Company adjusted the allowance for bad debt by $0. |
Long-lived intangible assets | Definite-life intangible assets – The Company evaluates its long-lived assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the asset. |
Technology Costs | Technology 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 three months ended March 31, 2019 and 2018. Technology costs totaled $454,638 and $373,326 for the three months ended March 31, 2019 and 2018, respectively. |
Goodwill | 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 March 31, 2019. |
Advertising Costs | Advertising Costs – Advertising costs are expensed as incurred and amounted to $21,443 and $40,434 for the three months ending March 31, 2019 and 2018, respectively. |
Fair Value of Financial Instruments | 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. 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 | Revenue Recognition - The Company accounts for revenue in accordance with 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 determining the price for the sale of each subscription, and the Company earns a percentage of what the customer pays. The performance obligation is providing the subscription hosting medium and billing services. Accordingly, the Company reports premium subscription revenue on a net basis over the subscription service period in which the performance obligation is satisfied. Advertising - The Company recognizes revenue from the insertion of advertisements in digital media. The performance obligation is the download of the digital media with the advertisement inserted. The performance obligation to recognize advertising revenue is satisfied upon delivery of the media download and collection is probable. |
Equity-Based Compensation | 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 | Leases – On January 1, 2019, the Company adopted Accounting Standards Codification ASC 842, Leases. ASC 842 was issued to increase transparency and comparability among entities by recognizing right-of-use assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. We elected to transition to ASC 842 using the option to apply the standard on its effective date, January 1, 2019. The comparative periods presented reflect the former lease accounting guidance and the required comparative disclosures are included in Note 8 – Leases. 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 | 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 | 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 | 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. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Life March 31, 2019 December 31, 2018 Furniture, fixtures, and equipment 3-10 yrs $ 8,181,313 $ 8,155,322 Leasehold improvements 3 - 5 yrs 2,646,400 2,646,400 Software 3 yrs 379,360 262,046 11,207,073 11,063,768 Less: Accumulated depreciation (9,112,243 ) (8,834,474 ) Property & equipment, net $ 2,094,830 $ 2,229,294 |
GOODWILL AND OTHER DEFINITE-L_2
GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of goodwill | 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 |
Summary of other intangible assets | Preliminary Fair Value Weighted Average Useful Life (in Years) Accumulated Amortization Net Carrying Amount Customer Relationships $ 3,947,000 7 $ 704,821 $ 3,242,179 Intellectual Property 3,709,000 7 662,322 3,046,678 Trade name 576,000 10 72,000 504,000 Non-compete 1,412,000 2 882,500 529,500 Total $ 9,644,000 $ 2,321,643 $ 7,322,357 |
Schedule of estimated future amortization expenses related to other intangible assets | For twelve months ending March 31, 2020 $ 1,680,814 2021 1,151,314 2022 1,151,314 2023 1,151,314 2024 1,151,314 Thereafter 1,036,287 Total $ 7,322,357 |
LOANS (Tables)
LOANS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Loans Tables Abstract | |
Future maturities of the loans | For the period ending March 31, 2020 $ 2,666,667 2021 1,600,000 2022 1,600,000 2023 1,200,000 2024 933,333 Thereafter - Total $ 8,000,000 |
DEFERRED REVENUE (Tables)
DEFERRED REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Deferred Revenue | |
Schedule of deferred revenue | March 31, 2019 December 31, 2018 Current: Hosting services $ 1,262,506 $ 1,601,335 Domains 601,744 535,273 Media subscription 196,651 139,471 $ 2,060,901 $ 2,276,079 Noncurrent: Hosting services 32,935 39,071 Domains 417,517 332,867 $ 2,511,353 $ 2,648,017 |
Deferred revenue expected to be recognized | Remainder of 2019 2020 2021 2022 2023 Thereafter Total Domains $ 515,868 $ 220,347 $ 118,951 $ 94,112 $ 57,785 $ 12,198 $ 1,019,261 Hosting 1,180,745 110,556 4,140 - - - 1,295,441 Media Subscription 196,651 - - - - - 196,651 $ 1,893,264 $ 330,903 $ 123,091 $ 94,112 $ 57,785 $ 12,198 $ 2,511,353 |
Disaggregated revenue | 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 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Schedule of Future Minimum Lease Payments | 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 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share | For the Three Months Ended March 31, 2019 2018 Income from operations available to common stockholders (numerator)$ $ 1,200,623 $ 532,915 Income available to common stockholders (numerator) 1,200,623 532,915 Weighted average number of common shares outstanding during the period used in earnings per share (denominator) 29,721,974 29,644362 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting | |
Segment Reporting | (in thousands) Libsyn Pair Total Libsyn Pair Total Revenue $ 3,335 $ 2,948 $ 6,283 $ 2,882 $ 2,177 $ 5,059 Cost of revenue 567 273 840 534 173 707 Total assets $ 23,555 $ 18,783 $ 42,338 $ 19,019 $ 18,177 $ 37,196 Depreciation and amortization $ 17 $ 725 $ 742 $ 8 $ 759 $ 767 |
RESTATEMENT OF PREVIOUSLY REP_2
RESTATEMENT OF PREVIOUSLY REPORTED UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Restatement of financial statements | Unaudited Consolidated Balance Sheet March 31, 2019 As Reported Corrections March 31, 2019 As Restated Deferred Tax Assets - 1,555,606 1,555,606 Total Assets 40,782,178 1,555,606 42,337,784 Income Taxes Payable - 1,297,068 1,297,068 Total Current Liabilities 6,471,795 1,297,068 7,768,863 Total Liabilities 12,966,774 1,297,068 14,263,842 Accumulated Deficit (7,071,457 ) 258,538 (6,812,919 ) Stockholder’s Equity 27,815,404 258,538 28,073,942 Unaudited Consolidated Statement of Operations Three months ended March 31, 2019 As Reported Corrections Three months ended March 31, 2019 As Restated Income Tax Benefit (Expense) - (327,010 ) (327,010 ) Net Income 1,527,633 (327,010 ) 1,200,623 Basic and Diluted Income Per Common Share 0.05 (0.01 ) 0.04 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 ) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||
Cash balances in excess of federally insured limits | $ 12,245,103 | ||
Allowance for doubtful accounts | 14,000 | $ 14,000 | |
Adjusted allowance for bad debt | 0 | $ 0 | |
Software development costs | 454,638 | 373,326 | |
Advertising costs | $ 21,443 | $ 40,434 |
PROPERY AND EQUIPMENT (Details)
PROPERY AND EQUIPMENT (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 11,207,073 | $ 11,063,768 |
Less: Accumulated depreciation | (9,112,243) | (8,834,474) |
Property & equipment, net | 2,094,830 | 2,229,294 |
Furniture, fixtures and equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 8,181,313 | 8,155,322 |
Furniture, fixtures and equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Life | 3 years | |
Furniture, fixtures and equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Life | 10 years | |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 2,646,400 | 2,646,400 |
Leasehold Improvements [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Life | 3 years | |
Leasehold Improvements [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Life | 5 years | |
Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 379,360 | $ 262,046 |
Life | 3 years |
PROPERY AND EQUIPMENT (Details
PROPERY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 277,769 | $ 302,571 |
GOODWILL AND OTHER DEFINITE-L_3
GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Goodwill | ||
Goodwill at beginning of period | $ 16,388,171 | $ 0 |
Acquisition of 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 |
GOODWILL AND OTHER DEFINITE-L_4
GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Preliminary fair value | $ 9,644,000 | |
Accumulated amortization | 2,321,643 | |
Net carrying amount | 7,322,357 | $ 7,786,686 |
Customer relationships | ||
Preliminary fair value | $ 3,947,000 | |
Weighted average useful life | 7 years | |
Accumulated amortization | $ 704,821 | |
Net carrying amount | 3,242,179 | |
Intellectual property | ||
Preliminary fair value | $ 3,709,000 | |
Weighted average useful life | 7 years | |
Accumulated amortization | $ 662,322 | |
Net carrying amount | 3,046,678 | |
Trade name | ||
Preliminary fair value | $ 576,000 | |
Weighted average useful life | 10 years | |
Accumulated amortization | $ 72,000 | |
Net carrying amount | 504,000 | |
Non-compete | ||
Preliminary fair value | $ 1,412,000 | |
Weighted average useful life | 2 years | |
Accumulated amortization | $ 882,500 | |
Net carrying amount | $ 529,500 |
GOODWILL AND OTHER DEFINITE-L_5
GOODWILL AND OTHER DEFINITE-LIFE INTANGIBLE ASSETS (Details 2) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2020 | $ 1,680,814 | |
2021 | 1,151,314 | |
2022 | 1,151,314 | |
2023 | 1,151,314 | |
2024 | 1,151,314 | |
Thereafter | 1,036,287 | |
Total | $ 7,322,357 | $ 7,786,686 |
LOANS (Details)
LOANS (Details) | Mar. 31, 2019USD ($) |
Loans Details Abstract | |
2020 | $ 2,666,667 |
2021 | 1,600,000 |
2022 | 1,600,000 |
2023 | 1,200,000 |
2024 | 933,333 |
Thereafter | 0 |
Total | $ 8,000,000 |
CAPITAL STOCK (Details Narrativ
CAPITAL STOCK (Details Narrative) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Stockholders' Equity Note [Abstract] | ||
Common stock authorized | 200,000,000 | 200,000,000 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock issued | 29,721,974 | 29,721,974 |
Common stock outstanding | 29,721,974 | 29,721,974 |
DEFERRED REVENUE (Details)
DEFERRED REVENUE (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current revenue | $ 2,060,901 | $ 2,276,079 |
Noncurrent revenue | 450,452 | 371,938 |
Deferred revenue | 2,511,353 | |
Hosting Services | ||
Current revenue | 1,262,506 | 1,601,335 |
Noncurrent revenue | 32,935 | 39,071 |
Deferred revenue | 1,295,441 | |
Domains | ||
Current revenue | 601,744 | 535,273 |
Noncurrent revenue | 417,517 | 332,867 |
Deferred revenue | 1,019,261 | |
Media Subscription | ||
Current revenue | 196,651 | $ 139,471 |
Deferred revenue | $ 196,651 |
DEFERRED REVENUE (Details 1)
DEFERRED REVENUE (Details 1) | Mar. 31, 2019USD ($) |
Remainder of 2019 | $ 1,893,264 |
2020 | 330,903 |
2021 | 123,091 |
2022 | 94,112 |
2023 | 57,785 |
Thereafter | 12,198 |
Total | 2,511,353 |
Domains | |
Remainder of 2019 | 515,868 |
2020 | 220,347 |
2021 | 118,951 |
2022 | 94,112 |
2023 | 57,785 |
Thereafter | 12,198 |
Total | 1,019,261 |
Hosting Services | |
Remainder of 2019 | 1,180,745 |
2020 | 110,556 |
2021 | 4,140 |
2022 | 0 |
2023 | 0 |
Thereafter | 0 |
Total | 1,295,441 |
Media Subscription | |
Remainder of 2019 | 196,651 |
2020 | 0 |
2021 | 0 |
2022 | 0 |
2023 | 0 |
Thereafter | 0 |
Total | $ 196,651 |
DEFERRED REVENUE (Details 2)
DEFERRED REVENUE (Details 2) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenue | $ 6,282,979 | $ 5,059,305 |
Hosting Services | ||
Revenue | 2,727,916 | 2,061,495 |
Podcast Hosting | ||
Revenue | 3,137,817 | 2,501,107 |
Advertising | ||
Revenue | 173,641 | 320,664 |
Domains | ||
Revenue | 241,531 | 71,796 |
Other | ||
Revenue | $ 2,074 | $ 90,028 |
LEASES (Details)
LEASES (Details) | Mar. 31, 2019USD ($) |
Leases [Abstract] | |
2020 | $ 557,532 |
2021 | 495,011 |
2022 | 279,554 |
2023 | 10,680 |
2024 | 0 |
Therafter | 0 |
Total payments | 1,342,777 |
Less: imputed interest | (74,451) |
Total operating lease liability | 1,268,326 |
Year ending December 31: | |
2020 | 557,190 |
2021 | 513,830 |
2022 | 381,239 |
2023 | 29,816 |
2024 | 0 |
Thereafter | 0 |
Total Minimum Lease Payment | $ 1,482,075 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Earnings Per Share [Abstract] | ||
Income from operations available to common stockholders (numerator)$ | $ 1,200,623 | $ 532,915 |
Income available to common stockholders (numerator) | $ 1,200,623 | $ 532,915 |
Restated Weighted average number of common shares outstanding during the period used in earnings per share (denominator) | 29,721,294 | 29,644,362 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenue | $ 6,283 | $ 5,059 |
Cost of revenue | 840 | 707 |
Total assets | 42,338 | 37,196 |
Depreciation and amortization | 742 | 767 |
Libsyn | ||
Revenue | 3,335 | 2,882 |
Cost of revenue | 567 | 534 |
Total assets | 23,555 | 19,019 |
Depreciation and amortization | 17 | 8 |
Pair | ||
Revenue | 2,948 | 2,177 |
Cost of revenue | 273 | 173 |
Total assets | 18,783 | 18,177 |
Depreciation and amortization | $ 725 | $ 759 |
RESTATEMENT OF PREVIOUSLY REP_3
RESTATEMENT OF PREVIOUSLY REPORTED UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets | $ 1,555,606 | $ 1,454,077 | ||
Total assets | 42,337,784 | 40,060,922 | ||
Income taxes payable | 1,297,068 | 868,529 | ||
Total current liabilities | 7,768,863 | 6,979,654 | ||
Total liabilities | 14,263,842 | 13,034,190 | ||
Accumulated deficit | (6,812,919) | (8,013,542) | ||
Total stockholders' equity | 28,073,942 | $ 27,026,732 | $ 24,539,862 | $ 22,447,166 |
As Reported | ||||
Deferred tax assets | 0 | |||
Total assets | 40,782,178 | |||
Income taxes payable | 0 | |||
Total current liabilities | 6,471,795 | |||
Total liabilities | 12,966,774 | |||
Accumulated deficit | (7,071,457) | |||
Total stockholders' equity | 27,815,404 | |||
Corrections | ||||
Deferred tax assets | 1,555,606 | |||
Total assets | 1,555,606 | |||
Income taxes payable | 1,297,068 | |||
Total current liabilities | 1,297,068 | |||
Total liabilities | 1,297,068 | |||
Accumulated deficit | 258,538 | |||
Total stockholders' equity | $ 258,538 |
RESTATEMENT OF PREVIOUSLY REP_4
RESTATEMENT OF PREVIOUSLY REPORTED UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income tax expense (benefit) | $ (327,010) | $ 1,271,059 |
Net Income (loss) | $ 1,200,623 | $ 1,803,974 |
Basic and Diluted Income per Common Share | $ 0.04 | $ 0.06 |
As Reported | ||
Income tax expense (benefit) | $ 0 | |
Net Income (loss) | $ 1,527,633 | |
Basic and Diluted Income per Common Share | $ 0.05 | |
Corrections | ||
Income tax expense (benefit) | $ (327,010) | |
Net Income (loss) | $ (327,010) | |
Basic and Diluted Income per Common Share | $ (0.01) |
RESTATEMENT OF PREVIOUSLY REP_5
RESTATEMENT OF PREVIOUSLY REPORTED UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS (Details 2) (USD $) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Net Income (loss) | $ 1,200,623 | $ 1,803,974 |
Accumulated deficit | (6,812,919) | |
As Reported | ||
Net Income (loss) | 1,527,633 | |
Accumulated deficit | (7,071,457) | |
Corrections | ||
Net Income (loss) | (327,010) | |
Accumulated deficit | $ 258,538 |