Liberated Syndication Inc. (fka LSYN)

[Ponch73]

Outrage aside, it's important to first understand the mechanics of the increase in G&A expense.

$1.752 million of the $2.412 million of G&A expense in the quarter was due to a charge for stock-based compensation. Hopefully, this $1.752 million hit will be a one-time charge.

The nature of the stock-based compensation was explained in the
"Subsequent Events" section on page 27 of the 2016 10-K.

On January 18, 2017, the Board of Directors approved the issuance of stock awards of 1,500,000 common shares to the CEO, 1,250,000 shares to the CFO and 900,000 shares, 300,000 to each of the three independent board members. The awards were valued at $0.48 per share and vest in 25% tranches upon achieving the following milestones or the stock is forfeited: 1) Up-list to NASDAQ within 24 months; 2) Market cap of $25 Million for 5 consecutive days within 12 months; 3) Market cap of 50 Million for 5 consecutive days within 18 months: 4) Market cap of $75 Million for 5 consecutive days within 24 months.

If you multiply the total of 3.65 million shares x $0.48, you exactly get the $1.752 million that was included in G&A in the quarter.

It's important to note that this expense was a non-cash expense, and does not affect the company's operating and free cash flow. That's not to say that it doesn't have an economic impact, however. If all 3.6 million shares vest, it will dilute existing shareholders by 18%.

So, to circle back, you're getting outraged at something that has already been disclosed. It should not have come as a surprise to you.

Broader picture, however, it's very strange that the aforementioned options vest on the basis of market cap instead of price per share. I'd hate for the company to do something ill-advised, like an expensive acquisition or issuance of debt, that expands the market cap of the company without improving shareholder value on a per share basis.

It's also very clear that company management and directors are overpaid and self-serving (especially since they only "manage" LSYN on a part-time basis) . Given that they own such little stock outright, LSYN seems like a perfect play for an activist shareholder. Any volunteers out there?