Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 22, 2018 | Jun. 30, 2017 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Liberated Syndication Inc. | ||
Entity Central Index Key | 1,667,489 | ||
Amendment Flag | false | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Current Reporting Status | Yes | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Common Stock, Shares Outstanding | 29,595,473 | ||
Entity Public Float | $ 20,428,703 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Cash | $ 5,211,845 | $ 4,875,458 |
Accounts receivable, net | 660,139 | 385,335 |
Prepaid expenses | 186,425 | 44,583 |
Total current assets | 6,058,409 | 5,305,376 |
Property and equipment, net | 3,007,025 | 33,982 |
Goodwill | 16,352,069 | 11,484,251 |
Definite life - intangible | 9,644,000 | 0 |
Other | 7,076 | 0 |
Total assets | 35,068,579 | 16,823,609 |
CURRENT LIABILITIES: | ||
Accounts payable | 440,565 | 536,295 |
Accrued expenses | 769,485 | 313,586 |
Deferred revenue, net | 1,247,686 | 110,167 |
Current portion of capital lease obligation | 69,243 | 0 |
Current portion of loans payable, net of $33,366 discount | 1,566,634 | 0 |
Total current liabilities | 4,093,613 | 960,048 |
Loans payable, net of $79,634 discount, less current portion | 8,320,366 | 0 |
Capital lease obligation, net of current portion | 73,817 | 0 |
Deferred revenue, net | 133,617 | 0 |
Total long-term liabilities | 8,527,800 | 0 |
Total liabilities | 12,621,413 | 960,048 |
STOCKHOLDERS' EQUITY | ||
Common stock | 29,596 | 20,806 |
Additional paid-in capital | 34,804,457 | 25,047,247 |
Retained Earnings (accumulated deficit) | (12,386,887) | (9,204,492) |
Total stockholders' equity | 22,447,166 | 15,863,561 |
Total liabilities and stockholders' equity | $ 35,068,579 | $ 16,823,609 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 14,000 | $ 14,000 |
Common stock authorized | 200,000,000 | 200,000,000 |
Common stock par value | $ .001 | $ 0.001 |
Common stock outstanding | 29,595,473 | 20,805,860 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Revenue | $ 10,584,219 | $ 8,792,208 |
Costs and operating expenses | ||
Cost of revenue (excluding depreciation and amortization) | 2,379,151 | 2,268,046 |
General and administrative | 2,989,775 | 2,786,923 |
Non-cash compensation | 7,274,000 | 0 |
Technology | 610,794 | 515,756 |
Selling | 299,074 | 282,954 |
Customer support | 191,820 | 129,232 |
Depreciation and amortization | 22,033 | 24,679 |
Total costs and operating expenses | 13,766,647 | 6,007,590 |
Operating income (loss) | (3,182,428) | 2,784,618 |
Other income (expense) | 33 | 0 |
Income (loss) from operations | (3,182,395) | 2,784,618 |
Income tax expense (benefit) | 0 | 0 |
Net Income (loss) | $ (3,182,395) | $ 2,784,618 |
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE | $ (0.13) | $ 0.13 |
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 24,390,595 | 20,805,860 |
STATEMENT OF STOCKHOLDERS_ EQUI
STATEMENT OF STOCKHOLDERS’ EQUITY - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] |
Balance, amount at Dec. 31, 2015 | $ 20,806 | $ 25,694,513 | $ (11,989,110) |
Balance, shares at Dec. 31, 2015 | 20,805,860 | ||
Distribution to FAB Universal Corp | (647,266) | ||
Net income (loss) | 2,784,618 | ||
Balance, amount at Dec. 31, 2016 | $ 20,806 | 25,047,247 | (9,204,492) |
Balance, shares at Dec. 31, 2016 | 20,805,860 | ||
Issuance of Common Stock for services, amount | $ 7,250 | 7,266,750 | |
Issuance of Common Stock for services, shares | 7,250,000 | ||
Repurchase of Common Stock, amount | $ (40) | (7,960) | |
Repurchase of Common Stock, shares | (40,000) | ||
Issuance of Common Stock to acquire Pair Networks Inc., amount | $ 1,580 | 2,498,420 | |
Issuance of Common Stock to acquire Pair Networks Inc., shares | 1,579,613 | ||
Net income (loss) | (3,182,395) | ||
Balance, amount at Dec. 31, 2017 | $ 29,596 | $ 34,804,457 | $ (12,386,887) |
Balance, shares at Dec. 31, 2017 | 29,595,473 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows from Operating Activities | ||
Net income (loss) | $ (3,182,395) | $ 2,784,618 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 22,033 | 24,679 |
Issuance of common stock for services | 7,274,000 | 0 |
Change in assets and liabilities: | ||
Accounts receivable | (184,874) | (49,068) |
Prepaid expenses | (70,289) | (32,083) |
Accounts payable | (319,483) | 125,861 |
Accrued expense | 66,586 | 271,507 |
Deferred revenue | (18,174) | (36,693) |
Net Cash Provided by Operating Activities | 3,587,404 | 3,088,821 |
Cash Flows from Investing Activities: | ||
Purchase of property & equipment | (69,064) | (36,791) |
Acquisition of Pair Networks Inc., net of cash acquired | (13,060,953) | 0 |
Net Cash Used in Investing Activities | (13,130,017) | (36,791) |
Cash Flows from Financing Activities: | ||
Distribution to FAB Universal Corp | 0 | (647,266) |
Re-purchase of common stock | (8,000) | 0 |
Proceeds from loan | 10,000,000 | 0 |
Payment of debt issuance costs | (113,000) | 0 |
Net Cash Used in Financing Activities | 9,879,000 | (647,266) |
Net Increase in Cash and Cash Equivalents | 336,387 | 2,404,764 |
Cash and Cash Equivalents at Beginning of Period | 4,875,458 | 2,470,694 |
Cash and Cash Equivalents at End of Period | 5,211,845 | 4,875,458 |
Supplemental Disclosures of Cash Flow Information | ||
Cash paid during the periods for: Interest | 0 | 0 |
Cash paid during the periods for: Income taxes | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Organization 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. The accompanying consolidated financial statements include the financial statements of Pair Ryousha and NB from December 28, 2017 to December 31, 2017. 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. N.B LLC, a Canadian Company was organized on December 2, 2011. NB is used solely for holding the Canadian tradenames and domain names. There are no operating activities conducted by NB Consolidation Accounting Estimates 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; 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. Segment and Reporting Unit - Cash and Cash Equivalents Accounts Receivable Registry Deposits - Prepaid Domain Name Registry Fees - Depreciation Long-lived intangible assets Software Development Costs Debt Issuance Costs - Goodwill Advertising Costs Fair Value of Financial Instruments • Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; • Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and • Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. 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 consist of podcast hosting, media publishing /advertising, podcast subscription, app sales, web hosting services including shared web hosting, e-commerce, fully-managed virtual private and dedicated servers, customer self-managed dedicated servers, domain name registrations and co-location and content-delivery networks. These products are sold to customer throughout the world. The Company does not track the geographic location of its customers. Podcast Hosting. Podcast hosting publishing services are billed on a month to month basis. The Company recognizes revenue from providing digital media publishing services when the services are provided and when collection is probable. Podcast Subscription. The Company facilitates the sale of producers’ premium content through the sale of subscriptions. The amount earned per transaction is fixed and the producers determine the price for the sale of the subscription, and the Company earns a percentage of what the customer pays. Accordingly, the Company reports premium subscription revenue on a net basis over the subscription service period. Media Publishing /Advertising. The Company recognizes revenue from the insertion of advertisements in digital media, as the digital media with the advertisement is downloaded and collection is probable. Apps. The Company recognizes revenue from the sale of apps when sold and collection is probable. 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 at the time of sale, and revenue, other than for aftermarket domain sales, is recognized as the product or service is delivered to the customer. Aftermarket domain revenue is recognized when control of the domain is transferred to the buyer. WEB Hosting. Hosting revenue primarily consists of website hosting products, website building products and services, an online shopping cart, search engine optimization and SSL certificates for encrypting data between the online browser and the certificate owner's server. Consideration is recorded as deferred revenue at the time of sale, and revenue is recognized as the product or service is delivered to the customer. Revenue arrangements with multiple deliverables are divided into separate units of accounting if each deliverable has stand-alone value to the customer. The majority of our revenue arrangements consist of multiple-element arrangements, with revenue for each unit of accounting recognized as the product or service is delivered to the customer. Our multiple-element arrangements may include a combination of some or all of the following: domain registrations, website hosting products, website building products and services, Secure Sockets Layer (SSL) certificates and other cloud-based products. Each of these products has stand-alone value and are sold separately. Consideration is allocated to each deliverable at the inception of an arrangement based on relative selling prices. We determine the relative selling price for each deliverable based on our vendor-specific objective evidence of selling price (VSOE) or our best estimate of selling price (BESP), if VSOE is not available. We have determined third-party evidence of selling price (TPE) is not a practical alternative due primarily to the significant variability among available third-party pricing information for similar products and differences in the features of our product and service offerings compared to other parties. We establish VSOE for certain of our products when a consistent number of stand-alone sales of these products have been priced within a reasonably narrow range. We are unable to establish VSOE when we lack pricing consistency, primarily related to our marketing strategies and variability in pricing due to promotional activity. For products where VSOE is not available, we determine BESP by considering our overall pricing objectives and market conditions. Significant factors taken into consideration include historical and expected discounting practices, the size, volume and term length of transactions, customer demographics, the geographic areas in which our products and services are sold and our overall go-to-market strategy. We maintain a reserve to provide for refunds granted to customers. Our reserve is an estimate based on historical refund experience. Refunds reduce deferred revenue at the time they are granted and result in a reduced amount of revenue recognized over the contract term of the applicable product compared to the amount originally expected. Consideration provided to customers for sales incentives or service disruption credits is recorded as a reduction of revenue at the later of the time the related revenue is recognized or when such consideration is offered. Such incentives and credits were not material in any of the periods presented. Equity-Based Compensation - Expected term. Expected volatility. Expected dividend yield. Risk-free interest rate. Business Combinations - Leases Research and Development - Earnings (Loss) Per Share Income Taxes Recently Enacted Accounting Standards - Prior Period Reclassifications - We will adopt the new standard effective January 1, 2018 using the modified retrospective transition method. We finalized our assessment of the new standard and the adoption of this guidance will not have a material impact on our consolidated financial statements or our internal controls over financial reporting. In February 2016, the FASB issued changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for us beginning in the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial statements. In January 2017, the FASB issued new guidance clarifying the definition of a business for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered to be a business. Our early adoption of this guidance effective October 1, 2017 did not have a material impact. In January 2017, the FASB issued new guidance simplifying the goodwill impairment test, eliminating the requirement for an entity to determine the fair value of its assets and liabilities (including unrecognized assets and liabilities) at the impairment testing date following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, an entity will be required to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the timing of our adoption and the expected impact of this new guidance. In May 2017, the FASB issued new guidance to amend the scope of modification accounting for share-based payment arrangements. The amendment provides guidance on the types of changes to the terms or conditions of share-based payment awards which would require an entity to apply modification accounting. Our adoption of this guidance on January 1, 2018 is not expected to have a material impact. Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
PROPERTY & EQUIPMENT
PROPERTY & EQUIPMENT | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | The following is a summary of property and equipment at: Life December 31, December 31, Furniture, fixtures, and equipment 3-10 yrs $ 8,032,178 $ 145,553 Leasehold improvements 3 - 5 yrs 2,646,400 — Software 3 yrs 6,503 — 10,685,081 145,553 Less: Accumulated depreciation (7,678,056 ) (111,571 ) Property & equipment, net $ 3,007,025 $ 33,982 Depreciation expense for the periods ended December 31, 2017 and 2016 was $22,033 and $24,679, respectively. |
ACQUISITION
ACQUISITION | 12 Months Ended |
Dec. 31, 2017 | |
Business Combinations [Abstract] | |
ACQUISITION | On December 27, 2017, the Company acquired of all the issued and outstanding shares of common stock of Pair, in exchange for the issuance of a total of 1,579,613 shares of the Company’s common stock and $13,542,689 of cash. Any loss arising from a breach of the representations as described under Section 6.02(a) of the Share Purchase Agreement shall not exceed $1,000,000. The parties agreed to set aside 631,844 common shares of the Company in an escrow account to satisfy any recourse. The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations Business Combinations—Identifiable Assets and Liabilities, and Any Non-controlling Interest On December 27, 2017, the Company entered into a Loan Agreement between the Company, Libsyn, and Pair, and First Commonwealth Bank, a Pennsylvania bank and trust company. 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. On December 27, 2017, the Company drew $10,000,000 under the Facility to finance a portion of the cash consideration paid to the Seller pursuant to the Share Purchase Agreement. The following are the fair value of assets acquired and liabilities assumed as of the Closing Date of December 27, 2017: Cash and cash equivalents $ 481,736 Accounts receivable, net 89,929 Prepaid assets 78,629 Property and equipment, net 2,926,012 Accounts payable (223,753 ) Accrued liabilities (389,312 ) Deferred revenue, current (1,114,700 ) Capital lease (143,060 ) Deferred revenue, non-current (174,610 ) Net tangible assets acquired 1,530,871 Goodwill 4,867,818 Other intangible assets 9,644,000 Total Consideration $ 16,042,689 The fair value of the major components of the other intangible assets acquired and their estimated useful lives are as follows: Preliminary Fair Value Weighted Average Useful Life (in Years) Customer relationships 3,947,000 7 Intellectual Property 3,709,000 7 Trade name 576,000 10 Non-compete 1,412,000 2 Total $ 9,644,000 Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. Acquisition-related costs were $468,146 during 2017. As of December 31, 2017, revenues of $47,563 and net loss of $26,840 from December 28, 2017 to December 31, 2018 of the acquired subsidiaries have been included in the Consolidated Financial Statements. The following unaudited pro forma condensed financial information presents the combined results of operations of Libsyn and Pair as if the acquisition had occurred as of the beginning of each period presented. : For the year ended December 31, 2017 Historical Pro forma (in thousands except per share amounts) Libsyn Pair Adjustments Combined Net sales $ 10,537 $ 12,026 — $ 22,563 Net income (loss) (3,155 ) 1,038 (1,900 ) [a] (4,017 ) Net income (loss) per common share, basic and diluted $ (0.15 ) Shares outstanding, basic and diluted 25,995 For the year ended December 31, 2016 Historical Pro forma (in thousands except per share amounts) Libsyn Pair Adjustments Combined Net sales $ 8,792 12,233 — $ 21,025 Net income (loss) 2,785 1,316 (1,405 ) [a] 2,696 Net income per common share, basic and diluted $ 0.10 Shares outstanding, basic and diluted 25,995 [a] Pro forma adjustments represent the full year amortization of intangible assets acquired in the acquisition of Pair. These assets were amortized on a straight-line basis over their estimated useful lives. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | Goodwill consists of: December 31, December 31, 2017 2016 Pair $ 4,867,818 $ — Libsyn 11,484,251 11,484,251 Total Goodwill $ 16,352,069 $ 11,484,251 The following is a summary of goodwill for the Year Ended: December 31, December 31, 2017 2016 Goodwill at beginning of period $ 11,484,251 $ 11,484,251 Acquisition of Pair 4,867,818 — Impairment — — Goodwill at end of period $ 16,352,069 $ 11,484,251 Impairment - During 2017 and 2016, management performed its annual test of impairment of goodwill assessing the qualitative factors and determined it is more than likely than not that the fair value of the reporting unit is greater than or equal to the carrying value of the reporting unit. Thus, not requiring further testing. All of the Company’s goodwill is expected to be deductible for tax purposes. Other definite-life intangible assets As of December 31, 2017, 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 $ — $ 3,947,000 Intellectual Property 3,709,000 7 — 3,709,000 Trade name 576,000 10 — 576,000 Non-compete 1,412,000 2 — 1,412,000 Total $ 9,644,000 $ — $ 9,644,000 The estimated future amortization expenses related to other intangible assets as of December 31, 2017 are as follows: For twelve months ending December 31, 2018 $ 1,857,314 2019 1,857,314 2020 1,151,314 2021 1,151,314 2022 1,151,314 Thereafter 2,475,429 Total $ 9,644,000 |
LOANS
LOANS | 12 Months Ended |
Dec. 31, 2017 | |
Loans Payable [Abstract] | |
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 December 31, 2017, $2,000,000 was drawn down on the revolving line with $0 available. The loan accrues interest at libor plus 175 base points or prime plus 75 basis points at the election of the Company. As of December 31, 2017, the Company has elected libor plus 175 basis points or 3.44%. The Term Loan is repayable in quarterly installments of $400,000 commencing on March 31, 2018 and on the last day of each June, September, December and March thereafter, through and including September 30, 2022. Accrued interest is payable in arrears not less frequently than quarterly. The remaining unpaid principal balance of the Term Loan, together with accrued interest thereon, is due and payable in full on December 27, 2022. The Term Loan also call 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. The Company has 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 their 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. Future Maturities of the loans at December 31, 2017 are as follows: For the year ending December 31, 2018 $ 1,600,000 2019 1,600,000 2020 1,600,000 2021 1,600,000 2022 3,600,000 Thereafter — Total $ 10,000,000 |
CAPITAL STOCK
CAPITAL STOCK | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
CAPITAL STOCK | Common Stock During April 2017, the Company issued 3,650,000 stock awards comprising of shares of common stock valued at $1,752,000 to officers and directors and recorded non-compensation of $1,752,000. These shares are subject to forfeiture based on market conditions, including the market cap of the Company and up-listing to NASDAQ. These market conditions expire through April 2019. The shares are unable to be traded until these market conditions have been achieved. During the second quarter of 2017, the Company repurchased 40,000 restricted stock awards comprising of shares of common stock for $8,000, and the stock was retired. During December 2017, the Company issued 3,600,000 stock awards comprising of shares of common stock valued at $5,522,000 to officers, directors and employees, and recorded non-compensation of $5,522,000. These shares are subject to forfeiture based on market conditions, including the market cap of the Company, the trading price of the common stock of the Company and up-listing to NASDAQ. These market conditions expire through December 2020. The shares are unable to be traded until these market conditions have been achieved. On December 27, 2017, the Company completed the acquisition of all the issued and outstanding shares of capital stock of Pair. As part of the consideration, the Company issued 1,579,613 “unregistered” shares of the Company’s common stock valued at $2,500,000. Of the total shares issued, 631,844 shares valued at $1,000,000 are “unregistered” and “restricted” and held in escrow. Information regarding vested stock awards for the year ended December 31, 2017 is summarized in the table below: Shares Weighted Average Issued and outstanding awards subject to forfeiture at beginning of period — $ — — Stock Awards Issued 7,250,000 $ 1.00 2.06 Awards no-longer subject to forfeiture — $ — — Cancelled / Forfeited Awards — — — Issued and outstanding awards subject to forfeiture at end of period 7,250,000 $ 1.00 1.68 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
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 December 31, 2017 and 2016, the total of all deferred tax assets was $3,458,667 and $3,569,533, respectively, and the total of the deferred tax assets related to goodwill was $1,848,717 and $2,086,340, respectively. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the deferred tax assets the Company has established a valuation allowance of $3,458,667 and $3,569,533 for the years ended December 31, 2017 and 2016. The change in the valuation allowance for the year ended December 31, 2017 and 2016 was $110,866 and $1,131,217, respectively. The components of income tax expense (benefit) from continuing operations for the Years ended December 31, 2017 and 2016 consist of the following: For the Years Ended December 31, Current tax expense: 2017 2016 Federal $ — $ State — — Current tax expense — — Deferred tax expense (benefit): Revaluation of deferred tax asset change in Federal Tax Rate 1,400,760 — Goodwill 511,108 511,108 Valuation Allowance (110,866 ) (1,131,217 ) Net operating loss carryforward (1,801,002 ) 620,109 Subtotal deferred tax expense/(benefit) — — Income tax expense/(benefit) $ — $ — Deferred income tax expense/(benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income. A reconciliation of income tax expense at the federal statutory rate to income tax expense at the company’s effective rate is as follows: For the Years Ended December 31, 2017 2016 Computed tax at the expected statutory rate $ (1,082,014 ) $ 946,770 State and local income taxes, net of federal 173,117 183,738 Other non-deductible expenses 1,632 709 Revaluation of deferred tax assets for change in Federal Tax Rate 1,400,760 — Other items (382,629 ) — Valuation Allowance (110,866 ) (1,131,217 ) Income tax expense/(benefit) $ — $ — The temporary differences, tax credits and carryforwards gave rise to the following deferred tax asset December 31, 2017 and 2016: December 31, December 31, 2017 2016 Current deferred tax assets (liabilities): Allowance for doubtful accounts $ — $ — Vacation accrual — — Total current deferred tax assets (liabilities) — — Long-term deferred tax assets (liabilities): Goodwill - impaired 2,066,632 2,903,618 Goodwill – tax amortization (3,915,349 ) (4,989,958 ) Net operating loss carryforward 5,307,384 5,655,873 Valuation allowance (3,458,667 ) (3,569,533 ) Total long-term deferred tax assets (liabilities) $ — $ — Net term deferred tax assets (liabilities) $ — $ — At December 31, 2017, the company has loss carryforwards of approximately $18,369,671 that expire in various years through 2037. We file U.S. federal, and U.S. states returns, and we are generally no longer subject to tax examinations for years prior to 2014 for U.S. federal and U.S. states tax returns. |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2017 | |
Leases [Abstract] | |
LEASES | Operating Lease The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of December 31, 2017 are as follows: Year ending December 31: Lease Payments 2018 $ 466,260 2019 466,260 2020 466,260 2021 364,218 2022 19,364 Thereafter — Total Minimum Lease Payment $ 1,782,362 Lease expense charged to operations was $167,945 and $266,405 for the periods ended December 31, 2017 and 2016, respectively. Capital Leases – During the years ended December 31, 2017, depreciation expense for equipment on capital lease amounted to $39,623 and has been included in depreciation expense. Future minimum capital lease payments are as follows for the years ended December 31: Year ending December 31, Lease Payments 2018 $ 75,132 2019 75,132 2020 835 Total minimum lease payments 151,099 Less amount representing interest (8,039 ) Present value of minimum lease payments 143,060 Less Current Portion (69,243 ) $ 73,817 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2017 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | The following data shows the amounts used in computing earnings per share and the weighted average number of shares of common stock outstanding for the periods presented for the periods ended: December 31, 2017 December 31, 2016 Income(loss) from operations available to common stockholders (numerator) $ (3,182,395 ) $ 2,784,618 Income(loss) available to common stockholders (numerator) (3,182,395 ) 2,784,618 Weighted average number of common shares outstanding during the period used in earnings per share (denominator) 24,390,595 20,805,860 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
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 should FAB fail to pay or perform its retained obligations. After the Spin-Off, FAB may have obligations that at the present time are unknown or unforeseen. As the nature of such obligations are unknown, we are unable to provide an estimate of the potential obligation. However, should FAB incur such obligations, the Company may be financially obligated to pay any losses incurred. The Company has a 401 (k) plan and Profit sharing plan for the benefit of the employees of the Company. Employees are eligible to participate in the plan the first of the month following their hire date and attaining the age of 21. Profit sharing contributions are made at the discretion of the Board of Directors and vest 100% after the second year of service. The Company made a $100,000 profit sharing contribution to the plan in 2017. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Management has evaluated subsequent events through the date of the filing of this report. On March 9, 2018, the Company issued 200,000 shares of unregistered common stock valued at $318,000 to a consultant for services rendered. During the first quarter of 2018, 912,500 of 7,250,000 common shares issued to officers, directors and employees (See Note 6) are no-longer subject to forfeiture as the Company reached the market condition. |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Organization | Organization 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. The accompanying consolidated financial statements include the financial statements of Pair Ryousha and NB from December 28, 2017 to December 31, 2017. 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. N.B LLC, a Canadian Company was organized on December 2, 2011. NB is used solely for holding the Canadian tradenames and domain names. There are no operating activities conducted by NB |
Consolidation | Consolidation |
Accounting estimates | Accounting Estimates 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; 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. |
Segment and reporting unit | Segment and Reporting Unit - |
Cash and cash equivalents | Cash and Cash Equivalents |
Accounts receivable | Accounts Receivable |
Registry deposits | Registry Deposits - |
Prepaid domain name registry fees | Prepaid Domain Name Registry Fees - |
Depreciation | Depreciation |
Long-lived intangible assets | Long-lived intangible assets |
Software development costs | Software Development Costs |
Debt issuance costs | Debt Issuance Costs - |
Goodwill | Goodwill |
Advertising costs | Advertising Costs |
Fair value of financial instruments | Fair Value of Financial Instruments • Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; • Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and • Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. 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 Revenue consist of podcast hosting, media publishing /advertising, podcast subscription, app sales, web hosting services including shared web hosting, e-commerce, fully-managed virtual private and dedicated servers, customer self-managed dedicated servers, domain name registrations and co-location and content-delivery networks. These products are sold to customer throughout the world. The Company does not track the geographic location of its customers. Podcast Hosting. Podcast hosting publishing services are billed on a month to month basis. The Company recognizes revenue from providing digital media publishing services when the services are provided and when collection is probable. Podcast Subscription. The Company facilitates the sale of producers’ premium content through the sale of subscriptions. The amount earned per transaction is fixed and the producers determine the price for the sale of the subscription, and the Company earns a percentage of what the customer pays. Accordingly, the Company reports premium subscription revenue on a net basis over the subscription service period. Media Publishing /Advertising. The Company recognizes revenue from the insertion of advertisements in digital media, as the digital media with the advertisement is downloaded and collection is probable. Apps. The Company recognizes revenue from the sale of apps when sold and collection is probable. 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 at the time of sale, and revenue, other than for aftermarket domain sales, is recognized as the product or service is delivered to the customer. Aftermarket domain revenue is recognized when control of the domain is transferred to the buyer. WEB Hosting. Hosting revenue primarily consists of website hosting products, website building products and services, an online shopping cart, search engine optimization and SSL certificates for encrypting data between the online browser and the certificate owner's server. Consideration is recorded as deferred revenue at the time of sale, and revenue is recognized as the product or service is delivered to the customer. Revenue arrangements with multiple deliverables are divided into separate units of accounting if each deliverable has stand-alone value to the customer. The majority of our revenue arrangements consist of multiple-element arrangements, with revenue for each unit of accounting recognized as the product or service is delivered to the customer. Our multiple-element arrangements may include a combination of some or all of the following: domain registrations, website hosting products, website building products and services, Secure Sockets Layer (SSL) certificates and other cloud-based products. Each of these products has stand-alone value and are sold separately. Consideration is allocated to each deliverable at the inception of an arrangement based on relative selling prices. We determine the relative selling price for each deliverable based on our vendor-specific objective evidence of selling price (VSOE) or our best estimate of selling price (BESP), if VSOE is not available. We have determined third-party evidence of selling price (TPE) is not a practical alternative due primarily to the significant variability among available third-party pricing information for similar products and differences in the features of our product and service offerings compared to other parties. We establish VSOE for certain of our products when a consistent number of stand-alone sales of these products have been priced within a reasonably narrow range. We are unable to establish VSOE when we lack pricing consistency, primarily related to our marketing strategies and variability in pricing due to promotional activity. For products where VSOE is not available, we determine BESP by considering our overall pricing objectives and market conditions. Significant factors taken into consideration include historical and expected discounting practices, the size, volume and term length of transactions, customer demographics, the geographic areas in which our products and services are sold and our overall go-to-market strategy. We maintain a reserve to provide for refunds granted to customers. Our reserve is an estimate based on historical refund experience. Refunds reduce deferred revenue at the time they are granted and result in a reduced amount of revenue recognized over the contract term of the applicable product compared to the amount originally expected. Consideration provided to customers for sales incentives or service disruption credits is recorded as a reduction of revenue at the later of the time the related revenue is recognized or when such consideration is offered. Such incentives and credits were not material in any of the periods presented. |
Equity-based compensation | Equity-Based Compensation - Expected term. Expected volatility. Expected dividend yield. Risk-free interest rate. |
Business combinations | Business Combinations - |
Leases | Leases |
Research and development | Research and Development - |
Earnings (loss) per share | Earnings (Loss) Per Share |
Income taxes | Income Taxes |
Recently enacted accounting standards | Recently Enacted Accounting Standards - |
Prior period reclassificatons | Prior Period Reclassifications - We will adopt the new standard effective January 1, 2018 using the modified retrospective transition method. We finalized our assessment of the new standard and the adoption of this guidance will not have a material impact on our consolidated financial statements or our internal controls over financial reporting. In February 2016, the FASB issued changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for us beginning in the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial statements. In January 2017, the FASB issued new guidance clarifying the definition of a business for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered to be a business. Our early adoption of this guidance effective October 1, 2017 did not have a material impact. In January 2017, the FASB issued new guidance simplifying the goodwill impairment test, eliminating the requirement for an entity to determine the fair value of its assets and liabilities (including unrecognized assets and liabilities) at the impairment testing date following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, an entity will be required to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the timing of our adoption and the expected impact of this new guidance. In May 2017, the FASB issued new guidance to amend the scope of modification accounting for share-based payment arrangements. The amendment provides guidance on the types of changes to the terms or conditions of share-based payment awards which would require an entity to apply modification accounting. Our adoption of this guidance on January 1, 2018 is not expected to have a material impact. Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
PROPERTY & EQUIPMENT (Tables)
PROPERTY & EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Life December 31, December 31, Furniture, fixtures, and equipment 3-10 yrs $ 8,032,178 $ 145,553 Leasehold improvements 3 - 5 yrs 2,646,400 — Software 3 yrs 6,503 — 10,685,081 145,553 Less: Accumulated depreciation (7,678,056 ) (111,571 ) Property & equipment, net $ 3,007,025 $ 33,982 |
ACQUISITION (Tables)
ACQUISITION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Business Combinations [Abstract] | |
Schedule of assets acquired and liabilities assumed | Cash and cash equivalents $ 481,736 Accounts receivable, net 89,929 Prepaid assets 78,629 Property and equipment, net 2,926,012 Accounts payable (223,753 ) Accrued liabilities (389,312 ) Deferred revenue, current (1,114,700 ) Capital lease (143,060 ) Deferred revenue, non-current (174,610 ) Net tangible assets acquired 1,530,871 Goodwill 4,867,818 Other intangible assets 9,644,000 Total Consideration $ 16,042,689 |
Schedule of other intangible assets acquired | Preliminary Fair Value Weighted Average Useful Life (in Years) Customer relationships 3,947,000 7 Intellectual Property 3,709,000 7 Trade name 576,000 10 Non-compete 1,412,000 2 Total $ 9,644,000 |
Schedule of unaudited pro forma condensed financial information | For the year ended December 31, 2017 Historical Pro forma (in thousands except per share amounts) Libsyn Pair Adjustments Combined Net sales $ 10,537 $ 12,026 — $ 22,563 Net income (loss) (3,155 ) 1,038 (1,900 ) [a] (4,017 ) Net income (loss) per common share, basic and diluted $ (0.15 ) Shares outstanding, basic and diluted 25,995 For the year ended December 31, 2016 Historical Pro forma (in thousands except per share amounts) Libsyn Pair Adjustments Combined Net sales $ 8,792 12,233 — $ 21,025 Net income (loss) 2,785 1,316 (1,405 ) [a] 2,696 Net income per common share, basic and diluted $ 0.10 Shares outstanding, basic and diluted 25,995 [a] Pro forma adjustments represent the full year amortization of intangible assets acquired in the acquisition of Pair. These assets were amortized on a straight-line basis over their estimated useful lives. |
GOODWILL AND OTHER INTANGIBLE21
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of goodwill | December 31, December 31, 2017 2016 Pair $ 4,867,818 $ — Libsyn 11,484,251 11,484,251 Total Goodwill $ 16,352,069 $ 11,484,251 December 31, December 31, 2017 2016 Goodwill at beginning of period $ 11,484,251 $ 11,484,251 Acquisition of Pair 4,867,818 — Impairment — — Goodwill at end of period $ 16,352,069 $ 11,484,251 |
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 $ — $ 3,947,000 Intellectual Property 3,709,000 7 — 3,709,000 Trade name 576,000 10 — 576,000 Non-compete 1,412,000 2 — 1,412,000 Total $ 9,644,000 $ — $ 9,644,000 |
Schedule of estimated future amortization expenses related to other intangible assets | For twelve months ending December 31, 2018 $ 1,857,314 2019 1,857,314 2020 1,151,314 2021 1,151,314 2022 1,151,314 Thereafter 2,475,429 Total $ 9,644,000 |
LOANS (Tables)
LOANS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Loans Tables | |
Future maturities of the loans | For the year ending December 31, 2018 $ 1,600,000 2019 1,600,000 2020 1,600,000 2021 1,600,000 2022 3,600,000 Thereafter — Total $ 10,000,000 |
CAPITAL STOCK (Tables)
CAPITAL STOCK (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Capital Stock Tables | |
Vested stock awards | Shares Weighted Average Issued and outstanding awards subject to forfeiture at beginning of period — $ — — Stock Awards Issued 7,250,000 $ 1.00 2.06 Awards no-longer subject to forfeiture — $ — — Cancelled / Forfeited Awards — — — Issued and outstanding awards subject to forfeiture at end of period 7,250,000 $ 1.00 1.68 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense (benefit) | For the Years Ended December 31, Current tax expense: 2017 2016 Federal $ — $ State — — Current tax expense — — Deferred tax expense (benefit): Revaluation of deferred tax asset change in Federal Tax Rate 1,400,760 — Goodwill 511,108 511,108 Valuation Allowance (110,866 ) (1,131,217 ) Net operating loss carryforward (1,801,002 ) 620,109 Subtotal deferred tax expense/(benefit) — — Income tax expense/(benefit) $ — $ — |
Schedule of effective income tax rate reconciliation | For the Years Ended December 31, 2017 2016 Computed tax at the expected statutory rate $ (1,082,014 ) $ 946,770 State and local income taxes, net of federal 173,117 183,738 Other non-deductible expenses 1,632 709 Revaluation of deferred tax assets for change in Federal Tax Rate 1,400,760 — Other items (382,629 ) — Valuation Allowance (110,866 ) (1,131,217 ) Income tax expense/(benefit) $ — $ — |
Schedule of deferred tax assets and liabilities | December 31, December 31, 2017 2016 Current deferred tax assets (liabilities): Allowance for doubtful accounts $ — $ — Vacation accrual — — Total current deferred tax assets (liabilities) — — Long-term deferred tax assets (liabilities): Goodwill - impaired 2,066,632 2,903,618 Goodwill – tax amortization (3,915,349 ) (4,989,958 ) Net operating loss carryforward 5,307,384 5,655,873 Valuation allowance (3,458,667 ) (3,569,533 ) Total long-term deferred tax assets (liabilities) $ — $ — Net term deferred tax assets (liabilities) $ — $ — |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Leases [Abstract] | |
Schedule of future minimum lease payments | Year ending December 31: Lease Payments 2018 $ 466,260 2019 466,260 2020 466,260 2021 364,218 2022 19,364 Thereafter — Total Minimum Lease Payment $ 1,782,362 |
Schedule of future minimum capital lease payments | Year ending December 31, Lease Payments 2018 $ 75,132 2019 75,132 2020 835 Total minimum lease payments 151,099 Less amount representing interest (8,039 ) Present value of minimum lease payments 143,060 Less Current Portion (69,243 ) $ 73,817 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | December 31, 2017 December 31, 2016 Income(loss) from operations available to common stockholders (numerator) $ (3,182,395 ) $ 2,784,618 Income(loss) available to common stockholders (numerator) (3,182,395 ) 2,784,618 Weighted average number of common shares outstanding during the period used in earnings per share (denominator) 24,390,595 20,805,860 |
SUMMARY OF SIGNIFICANT ACCOUN27
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
Cash balances in excess of federally insured limits | $ 4,597,648 | |
Allowance for doubtful accounts | 14,000 | $ 14,000 |
Adjustments to allowance for bad debt | 0 | 0 |
Advertising costs | 34,623 | 29,397 |
Research and development costs | $ 610,794 | $ 515,756 |
PROPERY & EQUIPMENT (Details)
PROPERY & EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property and equipment | $ 10,685,081 | $ 145,553 |
Less: Accumulated depreciation | (7,678,056) | (111,571) |
Property and equipment, net | 3,007,025 | 33,982 |
Furniture, fixtures and equipment [Member] | ||
Property and equipment | $ 8,032,178 | 145,553 |
Furniture, fixtures and equipment [Member] | Minimum [Member] | ||
Estimated useful life | 3 years | |
Furniture, fixtures and equipment [Member] | Maximum [Member] | ||
Estimated useful life | 10 years | |
Leasehold improvements [Member] | ||
Property and equipment | $ 2,646,400 | 0 |
Leasehold improvements [Member] | Minimum [Member] | ||
Estimated useful life | 3 years | |
Leasehold improvements [Member] | Maximum [Member] | ||
Estimated useful life | 5 years | |
Software [Member] | ||
Estimated useful life | 3 years | |
Property and equipment | $ 6,503 | $ 0 |
PROPERY & EQUIPMENT (Details Na
PROPERY & EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 22,033 | $ 24,679 |
ACQUISITION (Details)
ACQUISITION (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill | $ 16,352,069 | $ 11,484,251 | $ 11,484,251 |
Pair | |||
Cash and cash equivalents | 481,736 | ||
Accounts receivable, net | 89,929 | ||
Prepaid assets | 78,629 | ||
Property and equipment, net | 2,926,012 | ||
Accounts payable | (223,753) | ||
Accrued liabilities | (389,312) | ||
Deferred revenue, current | (1,114,700) | ||
Capital lease | (143,060) | ||
Deferred revenue, non-current | (174,610) | ||
Net tangible assets acquired | 1,530,871 | ||
Goodwill | 4,867,818 | ||
Other intangible assets | 9,644,000 | ||
Total Consideration | $ 16,042,689 |
ACQUISITION (Details 1)
ACQUISITION (Details 1) - Pair | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Preliminary fair value of other intangible assets | $ 9,644,000 |
Customer relationships | |
Preliminary fair value of other intangible assets | $ 3,947,000 |
Weighted average useful life | 7 years |
Intellectual property | |
Preliminary fair value of other intangible assets | $ 3,709,000 |
Weighted average useful life | 7 years |
Trade name | |
Preliminary fair value of other intangible assets | $ 576,000 |
Weighted average useful life | 10 years |
Non-compete | |
Preliminary fair value of other intangible assets | $ 1,412,000 |
Weighted average useful life | 2 years |
ACQUISITION (Details 2)
ACQUISITION (Details 2) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | ||
Net sales | $ 22,563 | $ 21,025 | |
Net income (loss) | $ (4,017) | $ 2,696 | |
Net income per common share, basic and diluted | $ (0.15) | $ 0.1 | |
Shares outstanding, basic and diluted | 25,995 | 25,995 | |
Libsyn | |||
Net sales | $ 10,537 | $ 8,792 | |
Net income (loss) | (3,155) | 2,785 | |
Pair | |||
Net sales | 12,026 | 12,233 | |
Net income (loss) | 1,038 | 1,316 | |
Pro forma adjustment | |||
Net sales | 0 | 0 | |
Net income (loss) | [1] | $ (1,900) | $ (1,405) |
[1] | Pro forma adjustments represent the full year amortization of intangible assets acquired in the acquisition of Pair. These assets were amortized on a straight-line basis over their estimated useful lives. |
GOODWILL AND OTHER INTANGIBLE33
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Goodwill | $ 16,352,069 | $ 11,484,251 | $ 11,484,251 |
Pair | |||
Goodwill | 4,867,818 | 0 | |
Libsyn | |||
Goodwill | $ 11,484,251 | $ 11,484,251 |
GOODWILL AND OTHER INTANGIBLE34
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill at beginning of period | $ 11,484,251 | $ 11,484,251 |
Acquisition of pair | 4,867,818 | 0 |
Impairment | 0 | 0 |
Goodwill at end of period | $ 16,352,069 | $ 11,484,251 |
GOODWILL AND OTHER INTANGIBLE35
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 2) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Preliminary fair value | $ 9,644,000 |
Accumulated amortization | 0 |
Net carrying amount | 9,644,000 |
Customer relationships | |
Preliminary fair value | $ 3,947,000 |
Weighted average useful life | 7 years |
Accumulated amortization | $ 0 |
Net carrying amount | 3,947,000 |
Intellectual property | |
Preliminary fair value | $ 3,709,000 |
Weighted average useful life | 7 years |
Accumulated amortization | $ 0 |
Net carrying amount | 3,709,000 |
Trade name | |
Preliminary fair value | $ 576,000 |
Weighted average useful life | 10 years |
Accumulated amortization | $ 0 |
Net carrying amount | 576,000 |
Non-compete | |
Preliminary fair value | $ 1,412,000 |
Weighted average useful life | 2 years |
Accumulated amortization | $ 0 |
Net carrying amount | $ 1,412,000 |
GOODWILL AND OTHER INTANGIBLE36
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 3) | Dec. 31, 2017USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2,018 | $ 1,857,314 |
2,019 | 1,857,314 |
2,020 | 1,151,314 |
2,021 | 1,151,314 |
2,022 | 1,151,314 |
Thereafter | 2,475,429 |
Total | $ 9,644,000 |
LOANS (Details)
LOANS (Details) | Dec. 31, 2017USD ($) |
Loans Details | |
2,018 | $ 1,600,000 |
2,019 | 1,600,000 |
2,020 | 1,600,000 |
2,021 | 1,600,000 |
2,022 | 3,600,000 |
Thereafter | 0 |
Total | $ 10,000,000 |
CAPITAL STOCK (Details)
CAPITAL STOCK (Details) | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Capital Stock Details | |
Stock awards outstanding, beginning | shares | 0 |
Stock awards, issued | shares | 7,250,000 |
Stock awards, no-longer subject to forfeiture | shares | 0 |
Stock awards, cancelled/forfeited | shares | 0 |
Stock awards outstanding, ending | shares | 7,250,000 |
Weighted average grant date fair value outstanding, beginning | $ / shares | $ .00 |
Weighted average grant date fair value, issued | $ / shares | 1 |
Weighted average grant date fair value, no-longer subject to forfeiture | $ / shares | .00 |
Weighted average grant date fair value, cancelled/forfeited | $ / shares | .00 |
Weighted average grant date fair value outstanding, ending | $ / shares | $ 1 |
Average remaining life, issued | 2 years 22 days |
Average remaining life outstanding, ending | 1 year 8 months 5 days |
CAPITAL STOCK (Details Narrativ
CAPITAL STOCK (Details Narrative) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Stockholders' Equity Note [Abstract] | ||
Common stock authorized | 200,000,000 | 200,000,000 |
Common stock par value | $ .001 | $ 0.001 |
Common stock issued | 29,595,473 | |
Common stock outstanding | 29,595,473 | 20,805,860 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Current tax expense: | ||
Federal | $ 0 | $ 0 |
State | 0 | 0 |
Current tax expense | 0 | 0 |
Deferred tax expense (benefit): | ||
Revaluation of deferred tax asset change in Federal Tax Rate | 1,400,760 | 0 |
Goodwill | 511,108 | 511,108 |
Valuation Allowance | (110,866) | (1,131,217) |
Net operating loss carryforward | (1,801,002) | 620,109 |
Subtotal deferred tax expense/(benefit) | 0 | 0 |
Income tax expense/(benefit) | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Computed tax at the expected statutory rate | $ (1,082,014) | $ 946,770 |
State and local income taxes, net of federal | 173,117 | 183,738 |
Other non-deductible expenses | 1,632 | 709 |
Revaluation of deferred tax assets for change in Federal Tax Rate | 1,400,760 | 0 |
Other items | (382,629) | 0 |
Valuation Allowance | (110,866) | (1,131,217) |
Income tax expense/(benefit) | $ 0 | $ 0 |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current deferred tax assets (liabilities): | ||
Allowance for doubtful accounts | $ 0 | $ 0 |
Vacation accrual | 0 | 0 |
Total current deferred tax assets (liabilities) | 0 | 0 |
Long-term deferred tax assets (liabilities): | ||
Goodwill - impaired | 2,066,632 | 2,903,618 |
Goodwill - tax amortization | (3,915,349) | (4,989,958) |
Net operating loss carryforward | 5,307,384 | 5,655,873 |
Valuation allowance | (3,458,667) | (3,569,533) |
Total long-term deferred tax assets (liabilities) | 0 | 0 |
Net term deferred tax assets (liabilities) | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Total deferred tax assets | $ 3,458,667 | $ 3,569,533 |
Deferred tax assets attributable to goodwill | 1,848,717 | 2,086,340 |
Valuation allowance | 3,458,667 | 3,569,533 |
Change in the valuation allowance | 110,866 | $ 1,131,217 |
Loss carryforwards | $ 18,369,671 | |
Loss carryforwards, expiration date | Dec. 31, 2037 |
LEASES (Details)
LEASES (Details) | Dec. 31, 2017USD ($) |
Leases [Abstract] | |
2,018 | $ 466,260 |
2,019 | 466,260 |
2,020 | 466,260 |
2,021 | 364,218 |
2,022 | 19,364 |
Thereafter | 0 |
Total Minimum Lease Payment | $ 1,782,362 |
LEASES (Details 1)
LEASES (Details 1) | Dec. 31, 2017USD ($) |
Leases Details 1 | |
2,018 | $ 75,132 |
2,019 | 75,132 |
2,020 | 835 |
Total minimum lease payments | 151,099 |
Less amount representing interest | (8,039) |
Present value of minimum lease payments | 143,060 |
Less Current Portion | (69,243) |
Total | $ 73,817 |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Leases Details Narrative | ||
Lease expense charged to operations | $ 167,945 | $ 266,405 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings Per Share [Abstract] | ||
Income (loss) from operations available to common stockholders (numerator) | $ (3,182,395) | $ 2,784,618 |
Income (loss) available to common stockholders (numerator) | $ (3,182,395) | $ 2,784,618 |
Weighted average number of common shares outstanding during the period used in earnings per share (denominator) | 24,390,595 | 20,805,860 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Commitments And Contingencies Details | |
Profit sharing contribution | $ 100,000 |