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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 001-39029

 

MEDIACO HOLDING INC.

(Exact name of registrant as specified in its charter)

 

Indiana

(State of incorporation or organization)

84-2427771

(I.R.S. Employer Identification No.)

395 HUDSON STREET, FLOOR 7

New york, new york 10014

(Address of principal executive offices)

(212) 229-9797

(Registrant’s Telephone Number, Including Area Code)

NOT APPLICABLE

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Class A common stock, $0.01 par value

MDIA

Nasdaq Capital Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes       No  

The number of shares outstanding of each of MediaCo Holding Inc.’s classes of common stock, as of May 6, 2022, was:

 

 

 

3,147,171

 

Shares of Class A Common Stock, $.01 Par Value

5,413,197

 

Shares of Class B Common Stock, $.01 Par Value

 

Shares of Class C Common Stock, $.01 Par Value

 

 


 

INDEX

 

 

Page

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

3

Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2022 and 2021

3

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2020

4

Condensed Consolidated Statements of Changes in Retained Deficit for the three-month periods ended March 31, 2022 and 2021

5

Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2022 and 2021

6

Notes to Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3. Quantitative and Qualitative Disclosures about Market Risk

23

Item 4. Controls and Procedures

24

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

24

Item 6. Exhibits

25

SIGNATURES

26

 

 


 

PART I — FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

(in thousands, except per share amounts)

 

2022

 

 

2021

 

NET REVENUES

 

$

11,535

 

 

$

9,743

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Operating expenses excluding depreciation and amortization expense

 

 

9,332

 

 

 

7,761

 

Corporate expenses

 

 

2,487

 

 

 

1,641

 

Depreciation and amortization

 

 

930

 

 

 

981

 

Loss (gain) on disposal of assets

 

 

18

 

 

 

(6

)

Total operating expenses

 

 

12,767

 

 

 

10,377

 

OPERATING LOSS

 

 

(1,232

)

 

 

(634

)

OTHER EXPENSE:

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,998

)

 

 

(2,538

)

LOSS BEFORE INCOME TAXES

 

 

(4,230

)

 

 

(3,172

)

PROVISION FOR INCOME TAXES

 

 

63

 

 

 

81

 

CONSOLIDATED NET LOSS

 

 

(4,293

)

 

 

(3,253

)

PREFERRED STOCK DIVIDENDS

 

 

838

 

 

 

634

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(5,131

)

 

$

(3,887

)

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share attributable to common shareholders

 

$

(0.68

)

 

$

(0.55

)

Basic and diluted weighted average number of common shares outstanding

 

 

7,558

 

 

 

7,115

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

- 3 -


 

MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

March 31,

2022

 

 

December 31,

2021

 

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

$

8,757

 

 

$

6,121

 

Accounts receivable, net of allowance for doubtful accounts of $226 and $313, respectively

 

9,226

 

 

 

13,756

 

Prepaid expenses

 

1,763

 

 

 

1,238

 

Other current assets

 

295

 

 

 

526

 

Total current assets

 

20,041

 

 

 

21,641

 

PROPERTY AND EQUIPMENT, NET

 

26,519

 

 

 

26,533

 

INTANGIBLE ASSETS, NET

 

77,787

 

 

 

78,030

 

OTHER ASSETS:

 

 

 

 

 

 

 

Operating lease right of use assets

 

20,911

 

 

 

21,663

 

Deposits and other

 

344

 

 

 

343

 

Total other assets

 

21,255

 

 

 

22,006

 

Total assets

$

145,602

 

 

$

148,210

 

LIABILITIES AND DEFICIT

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

2,443

 

 

$

2,710

 

Current maturities of long-term debt

 

3,672

 

 

 

2,754

 

Accrued salaries and commissions

 

1,575

 

 

 

1,284

 

Deferred revenue

 

2,390

 

 

 

2,022

 

Operating lease liabilities

 

4,015

 

 

 

3,801

 

Other current liabilities

 

2,440

 

 

 

1,412

 

Total current liabilities

 

16,535

 

 

 

13,983

 

LONG TERM DEBT, NET OF CURRENT

 

96,938

 

 

 

97,527

 

OPERATING LEASE LIABILITIES, NET OF CURRENT

 

15,999

 

 

 

16,909

 

ASSET RETIREMENT OBLIGATIONS

 

7,498

 

 

 

7,267

 

DEFERRED INCOME TAXES

 

2,132

 

 

 

2,069

 

OTHER NONCURRENT LIABILITIES

 

10

 

 

 

16

 

Total liabilities

 

139,112

 

 

 

137,771

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $0.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED; 220,000 SHARES ISSUED AND OUTSTANDING

 

27,848

 

 

 

27,010

 

RETAINED DEFICIT:

 

 

 

 

 

 

 

Class A common stock, $0.01 par value; authorized 170,000,000 shares; issued and outstanding 3,157,033 shares and 3,056,757 shares at March 31, 2022, and December 31, 2021, respectively

 

32

 

 

 

31

 

Class B common stock, $0.01 par value; authorized 50,000,000 shares; issued and outstanding 5,413,197 shares at March 31, 2022, and December 31, 2021

 

54

 

 

 

54

 

Class C common stock, $0.01 par value; authorized 30,000,000 shares; none issued

 

 

 

 

 

Additional paid-in capital

 

24,373

 

 

 

24,030

 

Accumulated deficit

 

(45,817

)

 

 

(40,686

)

Total deficit

 

(21,358

)

 

 

(16,571

)

Total liabilities and deficit

$

145,602

 

 

$

148,210

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

- 4 -


MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED DEFICIT

(Unaudited)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

APIC

 

 

Accumulated Deficit

 

 

Total

 

BALANCE, DECEMBER 31, 2021

 

 

3,056,757

 

 

$

31

 

 

 

5,413,197

 

 

$

54

 

 

$

24,030

 

 

$

(40,686

)

 

$

(16,571

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,293

)

 

 

(4,293

)

Issuance of class A to employees, officers and directors

 

 

100,276

 

 

 

1

 

 

 

 

 

 

 

 

 

343

 

 

 

 

 

 

344

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(838

)

 

 

(838

)

BALANCE, MARCH 31, 2022

 

 

3,157,033

 

 

$

32

 

 

 

5,413,197

 

 

$

54

 

 

$

24,373

 

 

$

(45,817

)

 

$

(21,358

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, DECEMBER 31, 2020

 

 

1,785,880

 

 

$

18

 

 

 

5,413,197

 

 

$

54

 

 

$

20,772

 

 

$

(31,852

)

 

$

(11,008

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,253

)

 

 

(3,253

)

Issuance of class A to employees, officers and directors

 

 

651,670

 

 

 

6

 

 

 

 

 

 

 

 

 

464

 

 

 

 

 

 

470

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(634

)

 

 

(634

)

BALANCE, MARCH 31, 2021

 

 

2,437,550

 

 

$

24

 

 

 

5,413,197

 

 

$

54

 

 

$

21,236

 

 

$

(35,739

)

 

$

(14,425

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

- 5 -


MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(4,293

)

 

$

(3,253

)

Adjustments to reconcile net loss to net cash provided by operating activities -

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

930

 

 

 

981

 

Amortization of debt discount

 

 

161

 

 

 

146

 

Noncash interest expense

 

 

171

 

 

 

 

Noncash lease expense

 

 

806

 

 

 

775

 

Provision for bad debts

 

 

64

 

 

 

61

 

Accretion of asset retirement obligation

 

 

232

 

 

 

165

 

Provision for deferred income taxes

 

 

63

 

 

 

81

 

Noncash compensation

 

 

1,556

 

 

 

634

 

Loss (gain) on sale of property and equipment

 

 

18

 

 

 

(6

)

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

4,466

 

 

 

1,183

 

Prepaid expenses and other current assets

 

 

(202

)

 

 

(186

)

Other assets

 

 

(66

)

 

 

39

 

Accounts payable and accrued liabilities

 

 

67

 

 

 

(412

)

Deferred revenue

 

 

368

 

 

 

215

 

Operating lease liabilities

 

 

(696

)

 

 

(941

)

Other liabilities

 

 

1,016

 

 

 

1,096

 

Net cash provided by operating activities

 

 

4,661

 

 

 

578

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(816

)

 

 

(206

)

Proceeds from the sale of property and equipment

 

 

 

 

 

111

 

Net cash used in investing activities

 

 

(816

)

 

 

(95

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Settlement of tax withholding obligations

 

 

(1,209

)

 

 

(164

)

Net cash used in financing activities

 

 

(1,209

)

 

 

(164

)

INCREASE IN CASH AND CASH EQUIVALENTS

 

 

2,636

 

 

 

319

 

CASH AND CASH EQUIVALENTS:

 

 

 

 

 

 

 

 

Beginning of period

 

 

6,121

 

 

 

4,171

 

End of period

 

$

8,757

 

 

$

4,490

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,674

 

 

$

1,157

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

- 6 -


MEDIACO HOLDING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands Unless Indicated Otherwise)

March 31, 2022

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

MediaCo Holding Inc. (“MediaCo” or the “Company”) is an owned and operated multi-media company formed in Indiana in 2019, focused on radio, outdoor, and digital advertising.

Our assets consist of two radio stations, WQHT-FM and WBLS-FM (the “Stations”), which serve the New York City demographic market area that primarily targets Black, Hispanic, and multi-cultural consumers, as well as approximately 3,500 outdoor advertising displays in the Southeast (Georgia, Alabama, South Carolina and Florida) and the Mid-Atlantic (Kentucky, West Virginia and Ohio) regions of the United States. We derive our revenues primarily from radio, outdoor, and digital advertising sales, but we also generate revenues from events, including sponsorships and ticket sales, licensing, and syndication.

Unless the context otherwise requires, references to “we”, “us” and “our” refer to MediaCo and its subsidiaries.

Basis of Presentation and Consolidation

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring adjustments) have been included.

Cash and Cash Equivalents

We consider time deposits, money market fund shares and all highly liquid debt investment instruments with original maturities of three months or less to be cash equivalents. At times, such deposits may be in excess of FDIC insurance limits.

Fair Value Measurements

Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. We have no assets or liabilities for which fair value is measured on a recurring basis using Level 3 inputs.

The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 2, Intangible Assets and Goodwill, and are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 2 for more discussion).

The Company’s long-term debt is not actively traded and is considered a Level 3 measurement. The Company believes the current carrying value of its long-term debt approximates its fair value.

Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates.

Earnings Per Share

Our basic and diluted net loss per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Shares of Series A preferred stock include rights to participate in dividends and distributions to common stockholders on an if-converted basis, and accordingly are considered participating securities. During periods of undistributed losses however, no effect is given to our participating securities since they are not contractually obligated to share in

- 7 -


the losses. The following is a reconciliation of basic and diluted net loss per share attributable to Class A and Class B common shareholders:

 

For the Three Months

Ended March 31,

 

 

2022

 

 

2021

 

Net loss

$

(4,293

)

 

$

(3,253

)

Preferred dividends

 

838

 

 

 

634

 

Net loss attributable to common shareholders

$

(5,131

)

 

$

(3,887

)

Basic and diluted weighted average common shares outstanding

 

7,558

 

 

 

7,115

 

Net loss attributable to common shareholders

$

(0.68

)

 

$

(0.55

)

 

On August 20, 2021, MediaCo Holding Inc. entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. (B. Riley”), pursuant to which the Company may offer and sell, from time to time through or to B. Riley, as agent or principal, shares of the Company’s Class A Common Stock, $0.01 par value per share, having an aggregate offering price of up to $12.5 million. No shares were sold during the three-month period ended March 31, 2022.

Because we have incurred a net loss for the period where the Company had potentially dilutive securities, diluted net loss per common share is the same as basic net loss per common share. The following convertible equity shares and restricted stock awards were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

 

For the Three Months

Ended March 31,

 

(in thousands)

2022

 

 

2021

 

Convertible Emmis promissory note

 

1,349

 

 

 

2,126

 

Convertible Standard General promissory notes

 

5,158

 

 

 

8,219

 

Series A convertible preferred stock

 

5,849

 

 

 

9,560

 

Restricted stock awards

 

611

 

 

 

174

 

Total anti-dilutive shares

 

12,967

 

 

 

20,079

 

 

Recent Accounting Pronouncements Not Yet Implemented

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses, which introduces new guidance for an approach based on using expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities and net investments in leases as well as reinsurance and trade receivables. This standard will be effective for us as of January 1, 2023. We do not expect the adoption of the new standard to have a significant impact on our condensed consolidated financial statements.

2. INTANGIBLE ASSETS AND GOODWILL

As of March 31, 2022 and December 31, 2021, intangible assets consisted of the following:

 

 

March 31, 2022

 

 

December 31, 2021

 

Indefinite-lived intangible assets

 

 

 

 

 

 

 

 

   FCC licenses

 

$

63,266

 

 

$

63,266

 

   Trade name

 

 

733

 

 

 

733

 

   Goodwill

 

 

13,102

 

 

 

13,102

 

Definite-lived intangible assets

 

 

 

 

 

 

 

 

   Customer list

 

 

686

 

 

 

929

 

Total

 

$

77,787

 

 

$

78,030

 

 

Valuation of Indefinite-lived Broadcasting Licenses

In accordance with ASC Topic 350, Intangibles—Goodwill and Other, the Company’s FCC licenses are considered indefinite-lived intangibles; therefore, they are not subject to amortization, but are tested for impairment at least annually as discussed below.

The carrying amounts of the Company’s FCC licenses were $63.3 million as of March 31, 2022 and December 31, 2021. Pursuant to our accounting policy, stations in a geographic market cluster are considered a single unit of accounting. The stations perform an annual impairment test of indefinite-lived intangibles as of October 1 of each year. When indicators of impairment are present, we will perform an interim impairment test. There have been no indicators of impairment since we performed our annual impairment assessment as of October 1, 2021 and therefore there has been no need to perform an interim impairment assessment. Future impairment tests may result in additional impairment charges in subsequent periods.

- 8 -


Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company considers both income and market valuation methods when it performs its impairment tests. Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its market at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in its market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license.

Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. The projections incorporated into our license valuations take into consideration then current economic conditions. Under the market method, the Company uses recent sales of comparable radio stations for which the sales value appeared to be concentrated entirely in the value of the license, to arrive at an indication of fair value. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by ASC Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting.

Valuation of Goodwill

All goodwill on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 is part of the Outdoor Advertising segment. The Company tests goodwill for impairment at least annually. We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test. We perform this assessment annually as of October 1, unless indicators of impairment exist at an interim period.

When performing a quantitative assessment for impairment, the Company uses a market approach to determine the fair value of the reporting unit. Management determines the fair value for the reporting unit by multiplying the cash flows of the reporting unit by an estimated market multiple. Management believes this methodology for valuing outdoor advertising businesses is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons, analyst reports, and market transactions. To corroborate the fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit. If the carrying value of a reporting unit’s goodwill exceeds its fair value, the Company recognizes an impairment charge equal to the difference in the statement of operations.

- 9 -


Valuation of Trade Name

As a result of the purchase of our Outdoor Advertising segment, the Company acquired the trade name “Fairway”. The trade name is well known in the industry and is being retained for continued market use following the acquisition. This trade name favorably factors into customer purchasing decisions. For the purchase price allocation, the trade name was valued using the relief from royalty method. This method is based on what a company would be willing to pay for a royalty in order to exploit the related benefits of the trade name. The value of the trade name is determined by discounting the inherent after-tax royalty savings associated with ownership or possession of the trade name. The valuation assigned to the trade name as a result of the purchase price accounting was $0.7 million. We assess the trade name annually for impairment on October 1 of each year, unless indications of impairment exist during an interim period.

Definite-lived intangibles

The following table presents the weighted-average useful life at March 31, 2022, and the gross carrying amount and accumulated amortization at March 31, 2022, and December 31, 2021, for our definite-lived intangible asset:

 

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

Weighted Average Remaining Useful Life

(in years)

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Amount

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Amount

 

Customer list

 

0.7

 

 

$

2,906

 

 

$

2,220

 

 

$

686

 

 

$

2,906

 

 

$

1,977

 

 

$

929

 

The customer list was acquired as part of the purchase of our Outdoor Advertising segment and was valued as part of the purchase price allocation performed at closing. Customer relationships represent a source of repeat business. The information contained in such relationships usually includes the preferences of the customer, the buying patterns of the customer, and the history of purchases that have been made by the customer. In calculating the value of Fairway Outdoors’ customer relationships, we employed the multiperiod excess earnings method of the income approach, which estimates value based on the present value of future economic benefits. This methodology resulted in a valuation of $2.9 million. A useful life of three years was assigned to the customer list.

Total amortization expense from definite-lived intangible assets for the three-month periods ended March 31, 2022, and 2021 was $0.2 million and $0.3 million, respectively. The Company estimates amortization expense of $0.7 million for the remainder of the year ending December 31, 2022 and none thereafter.

3. REVENUE

The Company generates revenue from the sale of services including, but not limited to: (i) on-air commercial broadcast time, (ii) display advertising on outdoor structures, (iii) non-traditional revenues including event-related revenues and event sponsorship revenues, and (iv) digital advertising. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue. Substantially all deferred revenue is recognized within twelve months of the payment date. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Advertising revenues presented in the condensed consolidated financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues.

Radio Advertising

On-air broadcast revenue is recognized when or as performance obligations under the terms of a contract with a customer are satisfied. This typically occurs over the period of time that advertisements are provided, or as an event occurs. Revenues are reported at the amount the Company expects to be entitled to receive under the contract. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the condensed consolidated balance sheets. Substantially all deferred revenue is recognized within twelve months of the payment date.

Outdoor Advertising

Our outdoor advertising business has approximately 3,500 faces consisting of bulletins, posters, and digital billboards. Bulletins are generally large, illuminated advertising structures that are located on major highways and target vehicular traffic. Posters are generally smaller advertising structures that are located on major traffic arteries and city streets and target vehicular and pedestrian traffic. Digital billboards are computer controlled LED displays where six to eight advertisers rotate continuously, each one having seven to ten seconds to display a static image. Digital billboards are generally located on major traffic arteries and streets. A substantial portion of this revenue is lessor revenue derived from operating leases accounted for under ASC 842, “Leases.” Rental revenue is recognized on a straight-line basis over the term of the respective lease.

- 10 -


Nontraditional

Nontraditional revenues principally consist of ticket sales and sponsorship of events our stations conduct in their local market. These revenues are recognized when our performance obligations are fulfilled, which generally coincides with the occurrence of the related event.

Digital

Digital revenue relates to revenue generated from the sale of digital marketing services (including display advertisements and video pre-roll and sponsorships, but excluding digital billboard advertisements) to advertisers on Company-owned websites and applications from revenue generated from content distributed across other digital platforms. Digital revenues are generally recognized as the digital advertising is delivered.

Other

Other revenue includes barter revenue, network revenue, and production revenue. The Company provides advertising broadcast time in exchange for certain products and services, including on-air radio programming. These barter arrangements generally allow the Company to preempt such bartered broadcast time in favor of advertisers who purchase time for cash consideration. These barter arrangements are valued based upon the Company’s estimate of the fair value of the products and services received. Revenue is recognized on barter arrangements when we broadcast the advertisements. Advertisements delivered under barter arrangements are typically aired during the same period in which the products and services are consumed. The Company also sells certain remnant advertising inventory to third-parties for cash, and we refer to this as network revenue. The third-parties aggregate our remnant inventory with other broadcasters' remnant inventory for sale to third parties, generally to large national advertisers. This network revenue is recognized as we broadcast the advertisements. In connection with certain outdoor advertising arrangements, the customer may request that the Company produce the billboard wrap (commonly printed on a vinyl material) displaying the customer’s advertisement on our outdoor structure. This production revenue is recognized as the deliverable is made available to the customer or attached to our outdoor structure. Other revenue also includes the management fee received from Billboards LLC (see Note 10).

Disaggregation of revenue

The following table presents the Company's revenues disaggregated by revenue source:

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

% of Total

 

 

2021

 

% of Total

 

Revenue by Source:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Radio Advertising

 

$

6,177

 

 

53.6

%

 

$

4,955

 

 

50.9

%

Outdoor Advertising (1)

 

 

3,124

 

 

27.1

%

 

 

2,972

 

 

30.5

%

Nontraditional

 

 

168

 

 

1.5

%

 

 

137

 

 

1.4

%

Digital

 

 

730

 

 

6.3

%

 

 

485

 

 

5.0

%

Other

 

 

1,336

 

 

11.5

%

 

 

1,194

 

 

12.2

%

Total net revenues

 

$

11,535

 

 

 

 

 

$

9,743

 

 

 

 

(1) A substantial portion of this revenue is from lessor revenue derived from operating leases accounted for under ASC 842, “Leases.”

4. LONG-TERM DEBT

Long-term debt was comprised of the following at March 31, 2022, and December 31, 2021:

 

 

March 31, 2022

 

 

December 31, 2021

 

Senior credit facility

 

$

68,514

 

 

$

68,343

 

Notes payable to Emmis

 

 

6,154

 

 

 

6,154

 

Notes payable to SG Broadcasting

 

 

27,574

 

 

 

27,574

 

Less: Current maturities

 

 

(3,672

)

 

 

(2,754

)

Less: Unamortized original issue discount

 

 

(1,632

)

 

 

(1,790

)

Total long-term debt, net of current portion and debt discount

 

$

96,938

 

 

$

97,527

 

- 11 -


 

Senior secured term loan agreement

The Company has a five-year senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC, (“GACP”) a Delaware limited liability company, as administrative agent and collateral agent. The Senior Credit Facility bears interest at a rate equal to the London Interbank Offered Rate ("LIBOR"), plus 7.5%, with a 2.0% LIBOR floor and a 1.0% incremental interest rate paid in kind under certain circumstances (as discussed below). The Senior Credit Facility matures on November, 25, 2024. Prior to subsequent amendments discussed below, the Senior Credit Facility required interest payments on the first business day of each calendar month, and quarterly payments on the principal in an amount equal to one and one quarter percent of the initial aggregate principal amount were due on the last day of each calendar quarter. At its inception, the Senior Credit Facility included covenants pertaining to, among other things, the ability to incur indebtedness, restrictions on the payment of dividends, minimum liquidity requirements, collateral maintenance, minimum Consolidated Fixed Charge Coverage Ratio of 1.10:1.00, and other customary restrictions.

As of March 31, 2022, a number of amendments had been entered into by the Company and GACP to modify, among other things, certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility). On May 19, 2021, the Company entered into Amendment No. 4 to its Senior Credit Facility. Under the terms of Amendment No. 4:

 

SG Broadcasting agreed to contribute up to $7.0 million to the Company in the form of subordinated debt, with $3.0 million contributed at closing, $1.0 million contributed on June 1, 2021, and up to an additional $3.0 million to be contributed through June 30, 2022, if necessary, to satisfy certain conditions described in Amendment No. 4;

 

the Company made a principal payment of $3.0 million to reduce borrowings outstanding under the Senior Credit Facility;

 

no quarterly scheduled principal payments are required through and including the quarter ending March 31, 2022;

 

the Minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) was reduced to 1.00:1.00 from April 1, 2020 through and including December 31, 2022, with it increasing to 1.10:1.00 on and after January 1, 2023;

 

for purposes of calculating compliance with the Minimum Consolidated Fixed Charge Coverage Ratio, Consolidated EBITDA (as defined in the Senior Credit Facility) includes certain amounts contributed by SG Broadcasting in the form of subordinated debt or equity, including those described above;

 

for purposes of calculating the Company’s borrowing base under the Senior Credit Facility, the multiple applied to Billboard Cash Flow (as defined in the Senior Credit Facility) increased from 3.5 to 5.0 and the advance rate applied to the radio stations’ FCC licenses increased from 60% to 70%;

 

at any time the multiple applied to Billboard Cash Flow exceeds 3.5 or the advance rate applied to the radio stations’ FCC licenses exceeds 60%, an incremental annual interest rate of 1.0% applies and is paid in kind monthly;

 

certain specified events of default were waived; and

 

an amendment fee of $0.4 million was paid in cash.

For the period May 19, 2021 through March 31, 2022, the multiple applied to billboard cash flow was in excess of 3.5x and the advance rate applied to the Company's FCC licenses exceeded 60% in order for the Company to achieve minimal compliance with its loan to value covenant. Therefore, the incremental annual interest rate of 1.0% applied during this period and additional interest payments of $0.2 million were paid in kind during the three-month period ended March 31, 2022, all of which were added to the principal balance outstanding. Incremental interest of $0.1 million was accrued at March 31, 2022 and was paid in kind after April 1, 2022.

As of March 31, 2022, there was $68.5 million outstanding under the Senior Credit Facility, carried net of a total unamortized discount of $1.6 million.

Emmis Convertible Promissory Note

The Emmis Convertible Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0%, plus an additional 1.0% on any payment of interest in kind and, without regard to whether the Company pays such interest in kind, an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. Because the Senior Credit Facility prohibits the Company from paying interest in cash on the Emmis Convertible Promissory Note, the Company has been accruing interest since inception using the rate applicable if the interest will be paid in kind. The Emmis Convertible Promissory Note is convertible, in whole or in part, into MediaCo Class A common stock at the option of Emmis and at a strike price equal to the thirty-day volume weighted average price of the MediaCo Class A common stock on the date of conversion. The Emmis Convertible Promissory Note matures on November 25, 2024. As of March 31, 2022, the principal balance outstanding under the Emmis Convertible Promissory Note was $6.2 million.

- 12 -


Second Amended and Restated SG Broadcasting Promissory Note, Additional SG Broadcasting Promissory Note and May 2021 SG Broadcasting Promissory Note

The Second Amended and Restated SG Broadcasting Promissory Note and Additional SG Broadcasting Promissory Note (“the SG Broadcasting Promissory Notes”) carry interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. The SG Broadcasting Promissory Notes mature on May 25, 2025. Additionally, interest under the SG Broadcasting Promissory Notes is payable in kind through maturity, and is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

On May 19, 2021, the Company issued to SG Broadcasting a subordinated convertible promissory note (the “May 2021 SG Broadcasting Promissory Note”), in return for which SG Broadcasting contributed $3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No. 4. Up to $7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note. The May 2021 SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% on November 25, 2021 and additional annual increases of 1.0% following each successive anniversary thereafter. The May 2021 SG Broadcasting Promissory Note matures on May 25, 2025 and interest is payable in kind through maturity. Subject to prior shareholder approval of the issuance of the shares, the May 2021 SG Broadcasting Promissory Note is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

On June 1, 2021, SG Broadcasting contributed $1.0 million to the Company under the May 2021 SG Broadcasting Promissory Note as required by Amendment No. 4 to the Senior Credit Facility.

On March 18, 2022, the Company and SG Broadcasting agreed to amend the May 2021 SG Broadcasting Promissory Note to extend the Company’s ability to draw the remaining $3.0 million on the May 2021 SG Broadcasting Promissory Note from June 30, 2022 to June 30, 2023.

As of March 31, 2022, there was a total of $27.6 million outstanding under the SG Broadcasting Promissory Notes and the May 2021 SG Broadcasting Promissory Note.

Based on amounts outstanding at March 31, 2022, mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

Senior Credit Facility

 

 

Emmis Note

 

 

SG Broadcasting Notes

 

 

Total Payments

 

Remainder of 2022

 

$

2,754

 

 

$

 

 

$

 

 

$

2,754

 

2023

 

 

3,672

 

 

 

 

 

 

 

 

 

3,672

 

2024

 

 

62,088

 

 

 

6,154

 

 

 

 

 

 

68,242

 

2025

 

 

 

 

 

 

 

 

27,574

 

 

 

27,574

 

2026

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

68,514

 

 

$

6,154

 

 

$

27,574

 

 

$

102,242

 

 

5. REGULATORY, LEGAL AND OTHER MATTERS

From time to time, our stations are parties to various legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.

6. INCOME TAXES

The effective tax rate for the three months ended March 31, 2022, and 2021 was 1% and 3%, respectively. Our effective tax rate for the three months ended March 31, 2022 differs from the statutory tax rate primarily due to the recognition of additional valuation allowance.

7. LEASES

We determine if an arrangement is a lease at inception. We have operating leases for office space, sites upon which advertising structures are built, tower space, equipment and automobiles expiring at various dates through October 2049. Some leases have options to extend and some have options to terminate. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our condensed consolidated balance sheets.

- 13 -


Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. Our lease terms may include options to extend or terminate the lease, which we treat as exercised when it is reasonably certain and there is a significant economic incentive to exercise that option. Our Outdoor Advertising segment treats evergreen leases as though they will be automatically renewed at the end of each term.

Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. Variable lease expense for the three months ended March 31, 2022, and 2021 was $0.1 million.

We elected not to apply the recognition requirements of ASC 842, “Leases”, to short-term leases, which are deemed to be leases with a lease term of twelve months or less. Instead, we recognized lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. We elected this policy for all classes of underlying assets. Short-term lease expense recognized in the three months ended March 31, 2022, and 2021 was not material.

The impact of operating leases to our condensed consolidated financial statements was as follows:

 

 

Three Months Ended

March 31,

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Operating lease cost

 

$

1,297

 

 

$

1,247

 

Operating cash flows from operating leases

 

 

1,484

 

 

 

1,290

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

 

192

 

 

 

 

 

 

As of March 31,

 

 

As of December 31,

 

 

2022

 

 

2021

 

Weighted average remaining lease term - operating leases (in years)

 

8.4

 

 

 

8.5

 

Weighted average discount rate - operating leases

 

9.4

%

 

 

9.4

%

As of March 31, 2022, the annual minimum lease payments of our operating lease liabilities were as follows:

Year ending December 31,

 

 

 

 

Remainder of 2022

 

$

3,731

 

2023

 

 

4,400

 

2024

 

 

2,900

 

2025

 

 

2,883

 

2026

 

 

2,751

 

After 2026

 

 

12,802

 

Total lease payments

 

 

29,467

 

Less imputed interest

 

 

(9,453

)

Total recorded lease liabilities

 

$

20,014

 

Our outdoor advertising business generates lessor revenue derived from operating leases accounted for under ASC 842, “Leases.” Minimum fixed lease consideration under non-cancelable operating leases for each of the next five years and thereafter, excluding variable lease consideration, as of March 31, 2022, is as follows:

Year ending December 31,

 

 

 

Remainder of 2022

$

6,686

 

2023

 

1,298

 

2024

 

160

 

2025

 

34

 

2026

 

8

 

After 2026

 

 

 

- 14 -


 

8. ASSET RETIREMENT OBLIGATIONS

The Company’s asset retirement obligations include the costs associated with the removal of its structures, resurfacing of the land, and retirement cost, if applicable, related to the Company’s outdoor advertising portfolio. The following table reflects information related to our asset retirement obligations.

Balance at December 31, 2021

 

 

$

7,267

 

Additions to asset retirement obligations

 

 

 

36

 

Accretion expense

 

 

 

232

 

Liabilities settled

 

 

 

(37

)

Balance at March 31, 2022

 

 

$

7,498

 

 

9. SEGMENT INFORMATION

The Company’s operations are aligned into two business segments: Radio and Outdoor Advertising. Radio includes the operations and results of WQHT-FM and WBLS-FM, and Outdoor Advertising includes the operations and results of the Fairway businesses acquired in December 2019 and additional acquisitions thereafter. The Company groups activities that are not considered operating segments in the “All Other” category.

These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate expenses, including transaction costs, are not allocated to reportable segments. The Company’s segments operate exclusively in the United States.

The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2021, and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.

Three Months Ended March 31, 2022

 

Radio

 

 

Outdoor Advertising

 

 

All Other

 

 

Consolidated

 

Net revenues

 

$

8,113

 

 

$

3,422

 

 

$

 

 

$

11,535

 

Operating expenses excluding depreciation and amortization expense

 

 

6,623

 

 

 

2,709

 

 

 

 

 

 

9,332

 

Corporate expenses

 

 

 

 

 

 

 

 

2,487

 

 

 

2,487

 

Depreciation and amortization

 

 

101

 

 

 

829

 

 

 

 

 

 

930

 

Loss on disposal of assets

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Operating income (loss)

 

$

1,389

 

 

$

(134

)

 

$

(2,487

)

 

$

(1,232

)

 

Three Months Ended March 31, 2021

 

Radio

 

 

Outdoor Advertising

 

 

All Other

 

 

Consolidated

 

Net revenues

 

$

6,502

 

 

$

3,241

 

 

$

 

 

$

9,743

 

Operating expenses excluding depreciation and amortization expense

 

 

5,291

 

 

 

2,470

 

 

 

 

 

 

7,761

 

Corporate expenses

 

 

 

 

 

 

 

 

1,641

 

 

 

1,641

 

Depreciation and amortization

 

 

191

 

 

 

790

 

 

 

 

 

 

981

 

Gain on disposal of assets

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Operating income (loss)

 

$

1,020

 

 

$

(13

)

 

$

(1,641