Safe Harbor Statement.

Statements made in this Form 10-Q which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of the Company, including, without limitation, (i) our ability to gain a larger share of the web hosting and podcasting industries, our ability to continue to develop services acceptable to our industries, our ability to retain our business relationships, and our ability to raise capital and the growth of the web and podcasting hosting and domain industries, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets", "tend" or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond the Company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in the Company's reports on file with the Securities and Exchange Commission: the outbreak of the coronavirus ("COVID-19") and the global spread of the COVID-19 pandemic during 2020, general economic or industry conditions, nationally and/or in the communities in which the Company conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, changes in the web hosting and podcasting industries, the development of services that may be superior to the services offered by the Company, competition, changes in the quality or composition of the Company's services, our ability to develop new services, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting the Company's operations, services and prices.

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Company Overview

Founded in 2015, Liberated Syndication Inc ("the "Company,", "parent", "we," or "us" and words of similar import), a Nevada corporation, provides podcast hosting services through its wholly-owned subsidiary Webmayhem Inc., a Pennsylvania corporation ("Libsyn"), and web hosting services through its wholly-owned subsidiary Pair Networks, Inc., a Pennsylvania corporation ("Pair" or "PNI"). The Company's consolidated financial statements include the financial statements of Libsyn and Pair. Libsyn's focus is on our podcasting business, while Pair's focus is on web hosting and domains.

Our corporate offices consist of approximately 3,100 square feet of office space located at 5001 Baum Blvd, Suite 770, Pittsburgh, PA 15213. Our telephone number is (412) 621-0902. We also maintain an office at 2403 Sidney St., Suite 210, Pittsburgh, PA consisting of approximately 34,700 square feet.

BUSINESS

Libsyn

Libsyn is a podcast service provider offering hosting and distribution tools which include storage, bandwidth, RSS creation, distribution, and statistics tracking. Podcast producers can choose from a variety of hosting plan levels based on the requirements for their podcast. Podcast producers' sign-up online at www.libsyn.com, using their credit card to subscribe to a monthly plan. Libsyn offers a basic, getting started plan for $5 per month and more advanced plans that include more storage, advanced statistics, and podcast apps. Plans are designed to provide full-featured podcast tools with generous storage and bandwidth transfer. LibsynPro service is an enterprise solution for professional media producers and corporate customers that require media network features and dedicated support.




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Libsyn supports both audio and video podcasts, allowing producers to upload podcast episodes through the Libsyn interface or via FTP to manage publishing to online directories, web portals, content aggregators, App marketplaces and social media platforms for both download and streaming.

Approximately 62% of the downloads from shows that Libsyn distributes reach audiences using Apple's iOS, Apple Podcasts and Apple's iTunes platform which includes iTunes on the computer, iPads, iPhones, Apple Watch, Apple TV, and Apple's Podcasts App on iOS devices. Libsyn also enables distribution to destinations like Google Play Music and aggregators such as Spotify, Pandora, and iHeartRadio. The OnPublish feature enables podcast episodes to be posted to social media sites such as Facebook, Twitter, YouTube, Linked-In and blogging platforms like WordPress and Blogger. Libsyn also provides a podcast player that can be embedded on websites or shared via social media.

Libsyn's podcast platform architecture allows for expansion of distribution destinations and OnPublish capabilities. Using the Libsyn service, podcast producers can more broadly distribute and promote their shows to attract larger audiences.

Pair Networks, Inc. ("Pair")

Pair, founded in 1996, is one of the oldest and most experienced Internet hosting companies providing a full range of fast, powerful and reliable web hosting services. Pair offers a suite of Internet services from shared hosting to virtual private servers to customized solutions with world-class 24x7 on-site customer support. Based in Pittsburgh, Pair serves businesses, bloggers, artists, musicians, educational institutions and non-profit organizations around the world.

Pair offers a variety of hosting plan levels; value add Internet services and domain registration. Through the Pair Account Control Center (ACC), customers can manage their hosting accounts and domains from one place.

Customers can choose from a variety of web hosting plan levels based on their requirements and applications. Pair Hosting offers shared servers, virtual private servers, dedicated servers and optimized WordPress hosting as managed services. With over twenty years of experience in Internet hosting, Pair has the expertise to build and manage reliable and powerful hosting solutions. The managed service and 24x7 support allow customers to focus on their core business without having to worry about hardware, operating systems, network connectivity or uptime.

Shared web hosting is a great option for startup or smaller businesses as the website sits on the same server with other websites and shares resources such as memory and Central Processing Unit (CPU). Basic website applications such as email and file sharing are ideal for shared server offerings.

Virtual private servers

Virtual private servers (VPS) is a step up from a shared hosting solution in that specific server resources are allocated directly for a customer's use, assuring performance levels. This is a more secure and reliable option that separates a customer's site from others and is ideal for storage or database applications for businesses, developers, and fast-growing sites.

Dedicated servers

Dedicated servers provide yet another level of security and performance for those who need more processing power or storage. Servers are built to customer specifications and tuned for performance, reliability and efficiency to meet the demand of more robust applications. Through Pair QuickServe (QS), a powerful hosting solution with tremendous capacity and speed, servers are ready for a customer's use quickly and fully managed to keep them up to date.

Pair hosting also offers self-managed service through server collocation, which delivers the advantages of the powerful infrastructure that was built behind the fully managed offerings. For those customers who want to purchase their own hardware, collocation service in Pair's data center allows for unmanaged service with the security and reliability of the diverse network, physically secure facilities, backup power and redundant climate control.




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Optimized WordPress

WordPress (WP) is one of the fastest growing Content Management Systems (CMS) powering web sites today. Pair offers a managed WP product line that is optimally configured for performance and security. This managed WP service provides fast performance, high availability and security by keeping sites up to date with the latest WP core updates and patches and ensuring hardware and network speed and uptime. The WP service offers a range of scalable solutions from several to unlimited WP sites, ideal for single sites through enterprise applications.

Pair Hosting customers sign-up online at www.pair.com, using their credit card to subscribe to a monthly or annual plan. Pair offers a basic, getting started plan with a custom domain for $5.95 per month with a basic drag and drop website builder and more advanced plans that include additional storage, processing power and add-ons like eCommerce and WordPress. Plans are designed to provide full-featured web hosting tools for all levels including backups, account control and security and operating system maintenance and upgrades.

Pair Domains offers custom domains for Top Level Domains (TLDs) including dot-com, dot-org, and dot-net that vary in price from $7.00 to $70 per year based on the TLD. Customers can search for available domains and sign-up online at www.pairdomains.com using their credit card for a one to ten-year domain name purchase or domain transfer. All domain names registered by Pair include enhanced services such as custom and dynamic Domain Name System (DNS) which controls your domain name's website and email, WHOIS privacy, email forwarding, and a drag and drop website builder.

Results of Operations

Three months Ended March 31, 2020 and 2019.

During the three months ended March 31, 2020, the Company recorded revenues of $6,252,751, a 0.5% decrease from revenues of $6,282,979 for the same period in 2019. The decrease for 2020 reflects a decrease due to Pair's hosting and domain offerings and a slight decrease to LibsynPro revenue, offset by an increase in Libsyn4 hosting revenue. Libsyn contributed $3,779,264 and $3,334,635 of revenue during the first three months of 2020 and 2019, respectively. Pair contributed $ 2,473,487 and $2,948,344 of revenue during the first three months of 2020 and 2019, respectively.

Libsyn4 hosting revenue increased $450,552, or 17% during the first three months ended March 31, 2020 when compared to the same period in 2019 due to the growth in the number of podcasts on the network. LibsynPro revenue decreased slightly by 4% as a result of relatively flat revenue from producers using the LibsynPro networks and using our platform. Advertising revenue decreased $48,891 during the first three months of 2020 versus the same period of 2018. The decrease resulted from decrease in the dollars being spent on ad campaigns during the first three months of 2020 with existing advertisers. Premium subscription revenue increased $66,228.

The Company recorded total costs and operating expenses of $4,834,330 during the first three months of 2020, a 2% increase as compared to total costs and operating expenses of $4,719,576 during the same period of 2019. Libsyn contributed $2,165,048 to total costs and operating expenses during the first three months of 2020, and $2,066,782 during the same period in 2019. Pair contributed $2,669,282 to total costs and operating expenses during the first three months of 2019 and $2,652,794 during the same period in 2018.

During the first three months of 2020, cost of revenue totaled $807,236, a 3.9% increase as compared to $839,640 for the same period in 2019. Libsyn contributed $503,482 while Pair contributed $303,754 to the cost of revenue during the first three months of 2020. Libsyn recorded a decrease in bandwidth costs and ad sharing paid to producers offset by an increase in credit card processing fees, and colocation fees during the first three months of 2020 versus 2019. Pair recorded a decrease in domain name fees and internet fees. Cost of revenue as a percentage of revenue for Libsyn decreased to 13% during the first three months of 2020 from 21% during the same period in 2019. This is a reflection of the reduction in the bandwidth rate to deliver the podcasts, off-set by an increase in bandwidth usage during the first three months of 2020 due to the growth in the number of podcasts and increased podcast consumption on the Libsyn Platform. Cost of revenue as a percentage of revenue for Pair increased to 12% during the first three months of 2020 from 9% during the same period in 2019. This is due primarily to the increase in domain name purchase fees and internet connectivity fees.




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General and administrative expenses totaled $1,950,041 during the first three months of 2020 versus $1,828,539 during the same period in 2019, an increase of 7%. The increase was driven primarily due to an increase in legal and advisory fees, wage expense, and insurance costs, offset by a decrease in professional fees as well as a reduction of non-cash expense for Libsyn. General and administrative expense for Pair during the first three months of 2020 was $842,422 and $686,643 for the same period in 2019. General and administrative for Libsyn for the same periods was $1,141,896 and $781,888, respectively.

Technology expenses represented $581,070 during the first three months of 2020 versus $454,638 in 2019, driven by an increase in wage expense during the first three months of 2020. Selling expenses during the first three months of 2020 were $230,812 versus $194,794 during the same period in 2019 driven by an increase in advertising expense. Customer support expenses in the first three months of 2020 were $751,167 versus $659,868 during the same period in 2019 driven by the increase in support staff costs.

Depreciation and amortization expenses consist of charges relating to the depreciation of the property and equipment used in our operations and the amortization of intangible assets. Depreciation and amortization expense for the first three months of 2020 was $514,004 and $742,097 during the same period in 2019. During the first three months of 2020, Libsyn contributed $20,040 and Pair contributed $492,964 to depreciation and amortization expense.

Interest expense for the first three months of 2020 was $62,342 compared to $86,842 in the three months of 2019, which represents interest on the loan facility obtained in connection with the acquisition of Pair. Interest expense for the three months of 2020 was offset with interest income of $58,434, resulting in net cash expenditure of $3,908.

Income tax expense for the three months ended March 31, 2020 was $304,536, which represents a change in the deferred tax assets and the expected federal balance due for the three month period ended March 31, 2020. Income tax expense for the three months ended March 31, 2019 was $327,010.

The Company's net income was $1,120,111 for the three months ended March 31, 2020. This represents a $80,512 decrease from $1,200,623 for the three months ended March 31, 2019. Earnings per share remained the same at $0.04 per share for the first three months of 2020 when compared to the first three months of 2019.


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