Attached files
Exhibit
99.2
Liberated
Syndication Inc. and Subsidiaries
and
pair Networks Inc. and Subsidiaries
Unaudited pro forma combined consolidated financial
information
The
following unaudited pro forma combined consolidated balance sheet
reflects the estimated adjustments to Libsyn’s historical
consolidated balance sheet as of September 30, 2017. Also, the
unaudited pro forma combined consolidated statement of income
reflects the estimated adjustments to Libsyn’s historical
consolidated statement of operations for the year ended December
31, 2016, and for the nine months ended September 30, 2017, to give
effect to:
●
The acquisition of
pair Networks, Inc. (“PNI”), per the terms of the Share
Exchange Agreement signed on December 27, 2017, and related debt
funding, along with payment of cash consideration and issuance of
1,579,613 shares of
common Stock of Libsyn, as if both had occurred on January
1, 2016.
The
acquisition is treated as a purchase transaction. The initial
accounting for the business combination is not complete as of the
filing of these proforma condensed combined financial statements.
We are reporting in these pro forma condensed combined financial
statements provisional estimated amounts of the fair market value
of the assets acquired. The determination of the PNI purchase price
and allocation of the purchase price to the underlying tangible and
intangible assets in the pro forma condensed combined financial
statements are subject to change as additional information becomes
available. The unaudited pro forma combined consolidated statements
of operations are not necessarily indicative of Libsyn’s
actual results of operations assuming the transaction were
completed on January 1, 2016, nor do they purport to represent
Libsyn’s results of operations for the future
periods.
The
unaudited pro forma combined consolidated financial statements
should be read in conjunction with the historical financial
statements and related notes of Libsyn appearing in the Annual
Report.
1
Liberated
Syndication Inc. and Subsidiaries
and
pair Networks Inc. and Subsidiaries
Unaudited pro forma combined consolidated balance
sheet
As of
September 30, 2017
|
Historical
|
|
|
|
|
|
Liberated
Syndication Inc.
|
pair
Networks, Inc.
|
|
Proforma
Increase
(Decrease)
|
Proforma
Combined
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
|
$7,369,569
|
$470,366
|
[A]
|
$(270,366)
|
|
|
|
|
[B]
|
(13,563,778)
|
|
|
|
|
[C]
|
10,000,000
|
$4,005,791
|
Accounts
receivable, net
|
591,572
|
93,387
|
|
-
|
684,959
|
Prepaid domain name
registry fees
|
-
|
570,850
|
|
-
|
570,850
|
Prepaid
expense
|
44,600
|
154,205
|
|
-
|
198,805
|
|
|
|
|
|
|
Total Current
Assets
|
8,005,741
|
1,288,808
|
|
(3,834,144)
|
5,460,405
|
|
|
|
|
|
|
Property and
equipment, net
|
88,948
|
2,996,500
|
|
-
|
3,085,448
|
Goodwill
|
11,484,251
|
-
|
[A]
|
470,366
|
|
|
|
|
[B]
|
15,912,357
|
27,396,608
|
Note receivable
– stockholder
|
-
|
16,446,101
|
[A]
|
(16,446,101)
|
-
|
Prepaid domain name
registry fees, net
|
-
|
680,992
|
|
-
|
680,992
|
Other
assets
|
3,582
|
34,896
|
|
-
|
38,478
|
Total
assets
|
$19,582,522
|
$21,447,297
|
|
$(4,367,888)
|
$36,661,931
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
$429,377
|
$158,003
|
|
$-
|
$587,380
|
Current portion of
deferred revenue
|
101,025
|
2,803,606
|
|
-
|
2,904,631
|
Accrued
payroll
|
-
|
241,161
|
|
-
|
241,161
|
Current portion of
notes payable
|
-
|
240,000
|
[A]
|
(240,000)
|
|
|
|
|
[C]
|
1,600,000
|
1,600,000
|
Other current
liabilities
|
74,302
|
32,800
|
|
-
|
107,102
|
|
|
|
|
|
|
Total Current
Assets
|
604,704
|
3,475,570
|
|
1,360,000
|
5,440,274
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue,
net of current
|
-
|
1,184,031
|
|
-
|
1,184,031
|
Notes payable, net
of current
|
-
|
3,544,454
|
[A]
|
(3,544,454)
|
|
|
|
|
[C]
|
8,400,000
|
8,400,000
|
Capital
lease
|
-
|
159,808
|
|
-
|
159,808
|
Total
liabilities
|
604,704
|
8,363,863
|
|
6,215,546
|
15,184,113
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY:
|
|
|
|
|
|
Common
stock
|
24,416
|
25,100
|
[A]
|
(25,100)
|
|
|
|
|
[B]
|
1,580
|
25,996
|
Additional paid-in
capital
|
26,787,637
|
-
|
[B]
|
2,498,420
|
29,286,057
|
Retained earnings
(accumulated deficit)
|
(7,834,235)
|
13,058,334
|
[B]
|
(13,058,333)
|
5,224,099
|
Total
stockholders’ equity
|
18,977,818
|
13,083,434
|
|
(10,583,434)
|
21,477,818
|
Total liabilities
and stockholders’ equity
|
$19,582,522
|
$21,447,297
|
|
$(4,367,888)
|
$36,661,931
|
|
|
|
|
|
|
2
Liberated
Syndication Inc. and Subsidiaries
and
pair Networks Inc. and Subsidiaries
Unaudited pro forma condensed combined consolidated statement of
operations
For the
nine months ended September 30, 2017
|
Historical
|
|
|
|
|
|
Liberated
Syndication Inc
|
pair Networks,
Inc
|
|
Pro forma
adjustments
|
Pro forma
Combined
|
NET
SALES
|
$7,723,250
|
$8,880,048
|
|
$-
|
$16,603,298
|
|
|
|
|
|
|
COST
OF REVENUE
|
2,309,902
|
906,651
|
|
-
|
3,216,533
|
|
|
|
|
|
|
GROSS
PROFIT
|
5,413,348
|
7,973,397
|
|
-
|
13,386,745
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
Selling
expense
|
235,583
|
293,293
|
|
-
|
528,876
|
General and
administrative expenses
|
3,735,052
|
6,336,162
|
D
|
(209,189)
|
9,862,025
|
Consulting
|
72,456
|
-
|
|
-
|
72,456
|
Total Operating
Expense
|
4,043,091
|
6,629,455
|
|
(209,189)
|
10,463,357
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
1,370,257
|
1,343,942
|
|
209,189
|
2,923,388
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
Interest
(expense)
|
-
|
(100,774)
|
G
|
(139,226)
|
(240,000)
|
Interest
income
|
-
|
87,364
|
E
|
(87,364)
|
-
|
Other
income
|
-
|
(14,270)
|
|
-
|
(14,270)
|
Total Other Income
(Expense)
|
-
|
(27,680)
|
|
(226,590)
|
(254,270)
|
|
|
|
|
|
|
INCOME
BEFORE INCOME TAXES
|
1,370,257
|
1,316,262
|
|
(17,401)
|
2,669,118
|
|
|
|
|
|
|
INCOME
TAX EXPENSE
|
-
|
-
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
$1,370,257
|
$1,316,262
|
|
$(17,401)
|
$2,669,118
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING
|
24,415,860
|
|
B
|
1,579,613
|
25,995,473
|
|
|
|
|
|
|
BASIC
EARNINGS PER SHARE
|
$0.06
|
|
|
|
$0.10
|
3
Liberated
Syndication Inc. and Subsidiaries
and
pair Networks Inc. and Subsidiaries
Unaudited pro forma condensed combined consolidated statement of
operations
For the
year ended December 31, 2016
|
Historical
|
|
|
|
|
|
Liberated
Syndication Inc
|
pair Networks,
Inc
|
|
Pro forma
adjustments
|
Pro forma
Combined
|
NET
SALES
|
$8,792,208
|
$12,233,107
|
|
$-
|
$21,025,315
|
|
|
|
|
|
|
COST
OF REVENUE
|
2,808,482
|
1,124,961
|
|
-
|
3,933,443
|
|
|
|
|
|
|
GROSS
PROFIT
|
5,983,727
|
11,108,146
|
|
-
|
17,091,873
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
Selling
expense
|
282,954
|
260,777
|
|
-
|
543,731
|
General and
administrative expenses
|
2,830,719
|
9,413,644
|
D
|
(648,495)
|
11,595,868
|
Consulting
|
85,435
|
-
|
|
-
|
85,435
|
Total Operating
Expense
|
3,199,109
|
9,674,421
|
|
(648,495)
|
12,225,035
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
2,784,618
|
1,433,725
|
|
648,495
|
4,866,838
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
Interest
(expense)
|
-
|
(42,990)
|
G
|
(286,024)
|
(329,014)
|
Interest
income
|
-
|
103,062
|
E
|
(100,652)
|
2,410
|
Other
income
|
-
|
(177,532)
|
F
|
190,000
|
12,468
|
Total Other Income
(Expense)
|
-
|
(117,460)
|
|
(196,676)
|
(314,136)
|
|
|
|
|
|
|
INCOME
BEFORE INCOME TAXES
|
2,784,618
|
1,316,265
|
|
451,819
|
4,552,702
|
|
|
|
|
|
|
INCOME
TAX EXPENSE
|
-
|
-
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
$2,784,618
|
$1,316,265
|
|
$451,819
|
$4,552,702
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING
|
24,415,860
|
|
B
|
1,579,613
|
25,995,473
|
|
|
|
|
|
|
BASIC
EARNINGS PER SHARE
|
$0.11
|
|
|
|
$0.18
|
4
Liberated
Syndication Inc. and Subsidiaries
and
pair Networks Inc. and Subsidiaries
Notes to the Unaudited pro forma combined consolidated statement of
operations
NOTE 1 – Liberated Syndication Inc. and
Subsidiaries.
Liberated Syndciation Inc. ("Libsyn"), a Nevada corporation, was
organized on September 25, 2016. The Company operates podcast
hosting service, through its wholly owned subsidiary, Webmayhem
Inc., a Pennsylvania corporation.
NOTE 2 – pair Networks Inc. and Subsidiaries
pair
Networks, Inc. and subsidiary (PNI) provide 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. PNI began operations in
August 1995. It incorporated in the state of Pennsylvania in August
1998. PNI’s principal operations are conducted on-site in
Pittsburgh, PA. PNI 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 PNI, was formed on January
1, 2015. The sales to European Union countries subject to the Value
Added Tax (VAT) in Europe are recorded and handled through this
LLC.
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 fair value of the consideration paid,
fair value of the underlying assets acquire and resulting goodwill
and amortization of intangible assets. Actual results could
differ from those estimated by management.
The initial accounting for the business combination is not complete
as of the filing of these proforma condensed combined financial
statements. We are reporting in these proforma condensed
combined financial statements provisional estimated amounts of the
fair market values of the assets acquired, and are subject to
change as additional information, including the final determination
of the PNI purchase price and allocation of the purchase price to
the underlying tangible and intangible assets becomes
available.
We shall retrospectively adjust the provisional amounts recognized
at the acquisition date to reflect new information obtained about
facts and circumstances that existed as of the acquisition date
that, if known, would have affected the measurement of the amounts
recognized as of that date.
NOTE 3 - ACQUISITION AND PROFORMA ADJUSTMENTS
On December 27, 2017, pursuant to a Share Purchase Agreement, by
and among, Liberated Syndication, Inc. and pair Networks, Inc., a
Pennsylvania company (“PNI”), Libsyn acquired 100% of
the outstanding common Stock of PNI.
Under the terms of the Agreement, the parties agreed that Libsyn
shall acquire from PNI all of the issued and outstanding shares of
PNI’s capital stock in exchange for the sum of
1.
Two
Million Five Hundred Thousand Dollars ($2,500,000) or 1,579,613
“unregistered” and “restricted” shares of
Libsyn’s common stock.
2.
Plus,
Thirteen million Five Hundred Thousand Dollars ($13,500,000) in
cash.
3.
Plus,
the total amount of cash determined as of immediately prior to
closing ($470,366).
4.
Minus,
Two Hundred Thousand Dollars ($200,000).
5.
Minus,
the outstanding amount of indebtedness determined as of immediately
prior to the Closing.
6.
Plus
or minus the amount by which the Net Working Capital determined as
of immediately prior to the Closing exceeds or is less than, as
applicable, the Net Working Capital Target. (Plus
$63,778)
5
Liberated
Syndication Inc. and Subsidiaries
and
pair Networks Inc. and Subsidiaries
Notes to the Unaudited pro forma combined consolidated statement of
operations
To
obtain financing for a portion of the cash consideration, Libsyn
secured the following loans totaling $10,000,000. (1) an $8,000,000
Term Loan Note bearing interest at LIBOR plus 175 basis point with
principal and interest payments to be made quarterly, maturing on
December 27, 2022. (2) a $2,000,000 Revolving Credit Note bearing
interest at LIBOR plus 175 basis points with interest payments to
be made quarterly, maturing on December 27, 2022.
The pro
forma balance sheet assumes the PNI acquisition occurred on
September 30, 2017.
[A] To
record for the structure of the deal being a no debt no cash
acquisition except for $200,000 of cash and the forgiveness of the
note with the shareholder of PNI. The short-term line of credit was
$240,000; the Note payable was $3,544,454 and the note receivable
to the shareholder of PNI was $16,446,101.
[B] To record the acquisition of a 100% of PNI’s Common Stock
for the sum of the following: (1) $13,563,778 in cash, plus, (2)
the issuance of 1,579,613 shares of Common Stock of Libsyn. The
acquisition will be recorded using the purchase accounting
method.
[C] To
record the money borrowed to fund the purchase of PNI. The Company
secured a $2,000,000 revolver bearing interest at LIBOR plus 175
basis points, and an $8,000,000 5-year term loan bearing interest
at LIBOR plus 175 basis points.
The pro
forma statement of operations assumes the PNI acquisition occurred
on January 1, 2016. For purposes of the pro forma statement of
operations for the year ended December 31, 2016, PNI’s
historical statements of operations were combined with
Libsyn’s historical statement of operations for the year
ended December 31, 2016. For the purposes of the pro forma
statement of operations for the nine months ended September 30,
2017 PNI’s historical statement of operations for the nine
months ended September 30, 2017 were combined with Libsyn’s
historical statement of operations for the nine months ended
September 30, 2017.
[D] The
following table provides a list of changes in general and
administrative expenses for the period presented:
|
Year
Ended
December
31
2016
|
Nine Months
ended
September
30,
2017
|
Incremental audit
fees
|
$45,000
|
$45,000
|
Accounting fee
savings
|
(34,950)
|
(70,000)
|
Owners compensation
savings
|
(530,770)
|
(113,077)
|
Legal fee
savings
|
(127,775)
|
(71,112)
|
Total
|
$(648,495)
|
$(209,189)
|
|
|
|
The
following table provide a list of the changes in other income and
expense associate with the change in ownership as well as the
effects of securing loans for purchase of PNI
|
Year
Ended
December
31,
2016
|
Nine Months
ended
September
30,
2017
|
[E] Interest on
shareholder note receivable
|
$(100,652)
|
$(87,364)
|
[F] Consulting
fee
|
190,000
|
-
|
|
|
|
Interest on
$10,000,000 financing
|
$(320,000)
|
$(240,000)
|
Interest on PNI
loans
|
33,976
|
100,774
|
[G] Total
Interest
|
$(286,024)
|
$(139,226)
|
6