BEASLEY BROADCAST GROUP INC 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a multi-platform media company whose primary business is operating radio stations throughout the United States. We offer local and national advertisers integrated marketing solutions across audio, digital and event platforms. We own and operate stations in the following markets: Atlanta, GA, Augusta, GA, Boston, MA, Charlotte, NC, Detroit, MI, Fayetteville, NC, Fort Myers-Naples, FL, Las Vegas, NV, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Philadelphia, PA, Tampa-Saint Petersburg, FL, and Wilmington, DE. We refer to each group of stations in each market as a market cluster. Unless the context otherwise requires, all references in this report to the “Company,” “we,” “us” or “our” are to Beasley Broadcast Group, Inc. and its subsidiaries. COVID-19 Pandemic Beginning in early 2020, we were impacted by deteriorating general economic conditions resulting from the COVID-19 pandemic that caused a downturn in the advertising industry. The decreased demand for advertising materially negatively impacted our results of operations, liquidity and financial condition in 2020, and to a lesser extent, in 2021 and 2022. In response to the COVID-19 pandemic, beginning in March 2020, we implemented certain expense control initiatives, such as reductions in compensation for management and other employees, reductions in planned capital expenditures, negotiated vendor pricing reductions, furloughs and headcount reductions for certain employees and suspensions of new employee hiring and travel and entertainment expenses. These initiatives reduced our expenses throughout the remainder of 2020, and certain of these expense reductions continued during 2021 and 2022. Our board of directors also suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of our stockholders. The extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments, which are uncertain and unpredictable. Accordingly, it is reasonably possible that these uncertainties could materially impact the Company’s significant accounting estimates related to, but not limited to, allowance for doubtful accounts, impairment of Federal Communications Commission (“FCC”) licenses and goodwill, and determination of right-of-use assets. Cautionary Note Regarding Forward-Looking Statements This report contains “forward-looking statements” about the Company within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future, not past, events. All statements other than statements of historical fact included in this document are forward-looking statements. These forward-looking statements are based on the current beliefs and expectations of the Company’s management and are subject to known and unknown risks and uncertainties. Forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, contain words such as: “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “may,” “will,” “plans,” “projects,” “could,” “should,” “would,” “seek,” “forecast,” or other similar expressions. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements. 25 Table of Contents Index to Financial Statements Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those projected or implied in those statements. Factors that could cause actual results or events to differ materially from these forward-looking statements include, but are not limited to: • the effects of the COVID-19 pandemic, including its potential effects on the economic environment and the Company’s results of operations, liquidity and financial condition, and the increased risk of impairments of the Company’s FCC licenses and/or goodwill; • external economic forces that could have a material adverse impact on the Company’s advertising revenues and results of operations; • the ability of the Company’s stations to compete effectively in their respective markets for advertising revenues; • the ability of the Company to develop compelling and differentiated digital content, products and services; • audience acceptance of the Company’s content, particularly its audio programs; • the ability of the Company to respond to changes in technology, standards and services that affect the audio industry; • the Company’s dependence on federally issued licenses subject to extensive federal regulation; • actions by the FCC or new legislation affecting the audio industry; • increases to royalties the Company pays to copyright owners or the adoption of legislation requiring royalties to be paid to record labels and recording artists; • the Company’s dependence on selected market clusters of stations for a material portion of its net revenue; • credit risk on the Company’s accounts receivable; • the risk that the Company’s FCC licenses and/or goodwill could become impaired; • the Company’s substantial debt levels and the potential effect of restrictive debt covenants on the Company’s operational flexibility and ability to pay dividends; • the potential effects of hurricanes on the Company’s corporate offices and stations; • the failure or destruction of the internet, satellite systems and transmitter facilities that the Company depends upon to distribute its programming; • disruptions or security breaches of the Company’s information technology infrastructure and information systems; • the loss of key personnel; • the Company’s ability to integrate acquired businesses and achieve fully the strategic and financial objectives related thereto and their impact on the Company’s financial condition and results of operations; • the fact that the Company is controlled by the Beasley family, which creates difficulties for any attempt to gain control of the Company; and • other economic, business, competitive, and regulatory factors affecting the businesses of the Company, including those set forth in the Company’s filings with the SEC. Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. We do not intend, and undertake no obligation, to update any forward-looking statement. 26 Table of Contents Index to Financial Statements Financial Statement Presentation The following discussion provides a brief description of certain key items that appear in our financial statements and general factors that impact these items. Net Revenue. Our net revenue is primarily derived from the sale of commercial spots to advertisers directly or through national, regional or local advertising agencies. Revenues are reported at the amount we expect to be entitled to receive under the contract. Local revenue generally consists of commercial advertising sales, digital advertising sales and other sales to advertisers in a station’s local market, either directly to the advertiser or through the advertiser’s agency. National revenue generally consists of commercial advertising sales through advertiser agencies. National advertiser agencies generally purchase advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions. Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listener levels. Advertising rates are primarily based on the following factors: • a station’s audience share in the demographic groups targeted by advertisers as measured principally by periodic reports issued by Nielsen Audio; • the number of stations, as well as other forms of media, in the market competing for the attention of the same demographic groups; • the supply of, and demand for, radio advertising time; and • the size of the market. Our net revenue is affected by general economic conditions, competition and our ability to improve operations at our radio market clusters. Seasonal revenue fluctuations are also common in the radio broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Our revenues typically are lowest in the first calendar quarter of the year. In addition, our revenues tend to fluctuate between years, consistent with, among other things, increased advertising expenditures in even-numbered years by political candidates, political parties and special interest groups. This political spending typically is heaviest during the fourth quarter of such years. We use trade sales agreements to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services; however, we endeavor to minimize trade revenue in order to maximize cash revenue from our available airtime. We also continue to invest in digital support services to develop and promote our station websites, applications, and other distribution platforms. We derive revenue from our websites through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our stations over the internet. We also generate revenue from selling third-party digital products and services. Operating Expenses. Our operating expenses consist primarily of programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our stations. We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our market clusters. Critical Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if: • it involves a significant level of estimation uncertainty; and 27 Table of Contents Index to Financial Statements • changes in the estimate or different estimates that could have been selected have had or are reasonably likely to have a material impact on our results of operations or financial condition. Accounts Receivable. We continually evaluate our ability to collect our accounts receivable. Our ongoing evaluation includes review of specific accounts at our stations, the current financial condition of our customers and our historical write-off experience. This ongoing evaluation requires management judgment, and if we had made different assumptions about these factors, the allowance for doubtful accounts could have been materially different. Property and Equipment. We are required to assess the recoverability of our property and equipment whenever an event has occurred that may result in an impairment loss. If such an event occurs, we will compare estimates of related future undiscounted cash flows to the carrying amount of the asset. If the future undiscounted cash flow estimates are less than the carrying amount of the asset, we will reduce the carrying amount to the estimated fair value. The determination of when an event has occurred and estimates of future cash flows and fair value all require management judgment. The use of different assumptions or estimates may result in alternative assessments that could be materially different. We did not identify any triggering events that may have resulted in an impairment loss on our property and equipment in 2022. However, there can be no assurance that impairments of our property and equipment will not occur in future periods. FCC Licenses. As of December 31, 2022, FCC licenses with an aggregate carrying amount of $487.2 million represented 68% of our total assets. We are required to test our FCC licenses for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our FCC licenses might be impaired. We assess qualitative factors to determine whether it is more likely than not that our FCC licenses might be impaired. If we determine it is more likely than not that our FCC licenses are impaired, then we are required to perform a quantitative impairment test. In 2022, we elected to perform the quantitative impairment test for our FCC licenses in all markets. The quantitative impairment test compares the fair value of our FCC licenses with their carrying amounts. If the carrying amounts of the FCC licenses exceed their fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing our FCC licenses for impairment, we combine our FCC licenses into reporting units based on our market clusters. Due to an increase in interest rates in the U.S. economy, we tested our FCC licenses for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, we recorded impairment losses of $2.8 million related to the FCC licenses in our Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters. The impairment losses were due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks associated with the U.S. economy. The fair values of our FCC licenses were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected audio market revenues, projected growth rate for audio market revenues, projected audio market revenue shares, projected audio operating income margins, and a discount rate appropriate for the audio industry. The key assumptions used in the discounted cash flow analyses are as follows: Revenue growth rates (1.9)% - 15.9% Market revenue shares at maturity 0.6% - 44.0% Operating income margins at maturity 19.2% - 32.6% Discount rate 9.5% Interest rates in the U.S. economy continued to increase during the third quarter of 2022; however, there were no changes to the discount rate or any other items used in the discounted cash flow analyses to estimate the fair value of the FCC licenses. Therefore, we did not record any impairment losses related to FCC licenses during the third quarter of 2022. We performed the annual quantitative impairment test for our FCC licenses in all markets during the fourth quarter of 2022. As a result of the quantitative impairment test performed as of November 30, 2022, we recorded 28 Table of Contents Index to Financial Statements impairment losses of $19.2 million related to the FCC licenses in our Boston, MA, Charlotte, NC, Fort Myers-Naples, FL, Middlesex-Monmouth-Morristown, NJ, and Wilmington, DE market clusters. The impairment losses were primarily due to a decrease in projected revenue in these markets. The fair values of our FCC licenses were estimated using an income approach. The key assumptions used in the discounted cash flow analyses are as follows: Revenue growth rates 0.3% - 2.7% Market revenue shares at maturity 0.7% - 44.7% Operating income margins at maturity 19.7% - 30.4% Discount rate 9.5% The carrying amount of our FCC licenses for each reporting unit and the percentage by which fair value exceeded the carrying amount are as follows: Market cluster FCC licenses Excess Atlanta, GA $ 832,300 54.5 % Augusta, GA 6,113,075 5.5 Boston, MA 125,394,900 — Charlotte, NC 53,726,600 — Detroit, MI 29,978,201 6.9 Fayetteville, NC 8,974,679 0.4 Fort Myers-Naples, FL 7,160,900 — Las Vegas, NV 37,080,600 0.8 Middlesex, Monmouth, Morristown, NJ 21,735,200 — Philadelphia, PA 119,674,192 6.6 Tampa-Saint Petersburg, FL 61,787,351 4.8 Wilmington, DE 14,791,800 — Goodwill. As of December 31, 2022, goodwill with an aggregate carrying amount of $13.3 million represented 2% of our total assets. We are required to test our goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our goodwill might be impaired. We assess qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is necessary, we will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, we will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized will not exceed the total amount of goodwill allocated to the reporting unit. For the purpose of testing our goodwill for impairment, we have identified our market clusters and esports segment as our reporting units. Due to an increase in interest rates in the U.S. economy, we tested our goodwill for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, we recorded impairment losses of $5.9 million related to the goodwill in our Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL, and Tampa-Saint Petersburg, FL market clusters. The impairment losses were due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our goodwill due to certain risks associated with the U.S. economy. The fair values of our goodwill were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected audio market revenues, projected growth rate for audio market revenues, projected audio market revenue shares, projected audio operating income margins, and a discount rate appropriate for the audio industry. The key assumptions used in the discounted cash flow analyses are as follows: Revenue growth rates (1.9)% - 11.1% Operating income margins 5.4% - 29.8% Discount rate 9.5% 29 Table of Contents Index to Financial Statements Interest rates in the U.S. economy continued to increase during the third quarter of 2022, however, there were no changes to the discount rate or any other items used in the discounted cash flow analyses to estimate the fair value of goodwill. Therefore, we did not record any impairment losses related to goodwill during the third quarter of 2022. We performed the annual quantitative impairment test for our goodwill in all markets during the fourth quarter of 2022. As a result of the quantitative impairment test, we recorded an impairment loss of $8.9 million related to the goodwill in our Boston, MA market cluster. The impairment loss was primarily due to a decrease in projected revenue in Boston. The fair value of our goodwill was estimated using an income approach. The key assumptions used in the discounted cash flow analysis are as follows: Revenue growth rates 0.5% - 11.4% Operating income margin 13.1% Discount rate 9.5% In addition, as a result of a quantitative impairment test in the esports segment, we recorded an impairment loss of $1.5 million related to the goodwill in the esports segment. The impairment loss was primarily due to a decrease in projected revenue in the esports segment. We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of our FCC licenses and goodwill, however, these estimates and assumptions are highly judgmental in nature. Actual results can be materially different from estimates and assumptions. If actual market conditions are less favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of our indefinite-lived intangible assets below the amounts reflected on our balance sheets, we may recognize future impairment charges, the amount of which may be material. For example, if the discount rate used in our discounted cash flow analyses was increased to 10.0% without any additional changes to the other assumptions used in the discounted cash flow analyses, we would have recorded additional impairment losses of $20.5 million related to the FCC licenses in each of our market clusters except Atlanta, GA. Other Intangibles. As of December 31, 2022, other intangibles with an aggregate carrying amount of $8.2 million represented 1% of our total assets. Other intangibles include advertiser relationships, franchise rights, trade names, and brands. For the purpose of testing other intangibles for impairment, we have identified our market clusters, and digital and esports segments as our reporting units. We performed a quantitative impairment test for our franchise rights in the esports segment as of December 31, 2022. As a result of the test, we recorded an impairment loss of $12.8 million. The impairment loss was primarily due to a decrease in projected revenue in the esports segment. The fair values of the franchise rights were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected revenue, projected growth rate for revenue, projected operating income margins, and a discount rate appropriate for the esports industry. The key assumptions used in the discounted cash flow analyses are as follows: Revenue growth rate(s) 3.0% - 25.0% Operating income margin(s) (22.3)% - 43.5% Discount rate 20.0% Leases. We are required to determine whether a contract is or contains a lease at inception. Our analysis includes whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This consideration involves judgment with respect to whether we have the right to obtain substantially all of the economic benefits from the use of the identified asset and whether we have the right to direct the use of the identified asset. We calculate the term for each lease agreement to include the noncancellable period specified in the agreement together with: (1) the periods covered by options to extend the lease if we are reasonably certain to exercise that option, (2) the periods covered by an option to terminate if we 30 Table of Contents Index to Financial Statements are reasonably certain not to exercise that option and (3) the period covered by an option to extend (or not terminate) if controlled by the lessor. The assessment of whether we are reasonably certain to exercise an option to extend a lease requires significant judgement surrounding contract-based factors, asset-based factors, entity-based factors and market-based factors. These factors are evaluated based on the facts and circumstances at the time we enter a lease agreement. The lease liabilities and the related right-of-use assets are calculated based on the present value of the lease payments using (1) the rate implicit in the lease or (2) the lessee’s incremental borrowing rate (“IBR”). IBR is defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. See Note 11 to the accompanying financial statements. Supplemental Employee Retirement Plan. The costs and liabilities of the Supplemental Employee Retirement Plan (“SERP”) are determined using actuarial valuations. An actuarial valuation involves making various assumptions that include the discount rate and mortality rates. The discount rate is based on matching the cash flows of the SERP to the FTSE Pension Discount Curve. The mortality assumptions are based on the mortality tables and mortality improvement scales which are selected based on the most recent study of the Society of Actuaries. The SERP is frozen so future employment does not change the benefit amounts. Actual results will differ from results which are estimated based on assumptions. See Note 12 to the accompanying financial statements. Recent Accounting Pronouncements Recent accounting pronouncements are described in Note 2 to the accompanying financial statements. Results of Operations Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 The following summary table presents a comparison of our results of operations for the years ended December 31, 2021 and 2022, with respect to certain of our key financial measures. The changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 8 of this report. Results of Operations — Consolidated Year Ended December 31, Change 2021 2022 $ % Net revenue $ 241,426,308 $ 256,381,018 $ 14,954,710 6.2 % Operating expenses 199,470,185 213,236,063 13,765,878 6.9 Corporate expenses 16,578,046 18,001,359 1,423,313 8.6 Impairment losses — 52,874,470 52,874,470 — Gain on exchange — 3,350,539 3,350,539 — Other operating income, net 400,000 — (400,000 ) (100.0 ) Loss on extinguishment of long-term debt 4,996,731 — (4,996,731 ) (100.0 ) Gain on forgiveness of long-term debt 10,000,000 — (10,000,000 ) (100.0 ) Other income, net 68,437 1,382,322 1,313,885 1919.8 Income tax benefit 5,321,630 17,787,434 12,465,804 234.2 Net loss 1,535,094 42,057,430 40,522,336 2639.7 31 Table of Contents Index to Financial Statements Results of Operations — Segments Year Ended December 31, Change 2021 2022 $ % Net revenue Audio $ 206,460,883 $ 213,036,307 $ 6,575,424 3.2 % Digital 32,743,850 40,755,164 8,011,314 24.5 Other 2,221,575 2,589,547 367,972 16.6 $ 241,426,308 $ 256,381,018 $ 14,954,710 6.2 Operating expenses Audio $ 163,639,369 $ 173,011,492 $ 9,372,123 5.7 % Digital 32,355,572 36,398,687 4,043,115 12.5 Other 3,475,244 3,825,884 350,640 10.1 $ 199,470,185 $ 213,236,063 $ 13,765,878 6.9 Net Revenue. Net revenue increased $15.0 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021. Audio revenue increased $6.6 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to recovery from the COVID-19 pandemic and political advertising for the 2022 elections. Digital revenue increased $8.0 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to continued growth in the digital segment and the acquisition of Guarantee Digital, LLC (“Guarantee”). Operating Expenses. Operating expenses increased $13.8 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021. Audio operating expenses increased $9.4 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to recovery from the COVID-19 pandemic. Digital operating expenses increased $4.0 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to continued investment in the digital segment and the acquisition of Guarantee. Corporate Expenses. Corporate expenses increased $1.4 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to a decreased allocation of digital expenses to operating expenses. Impairment Losses. As a result of our annual quantitative impairment tests performed during the fourth quarter of 2022, we recorded impairment losses of $19.2 million related to the FCC licenses in our Boston, MA, Charlotte, NC, Fort Myers-Naples, FL, Middlesex-Monmouth-Morristown, NJ, and Wilmington, DE market clusters, an impairment loss of $8.9 million related to the goodwill in our Boston, MA market cluster and an impairment loss of $1.5 million related to goodwill in the esports segment. The impairment losses were primarily due to a decrease in projected revenue in these markets and the esports segment. We also performed a quantitative impairment test for our franchise rights in the esports segment during the fourth quarter of 2022. As a result of the test, we recorded an impairment loss of $12.8 million primarily due to a decrease in projected revenue in the esports segment. Due to an increase in interest rates in the U.S. economy, we tested our FCC licenses and goodwill for impairment during the second quarter of 2022. As a result of the quantitative impairment tests, we recorded impairment losses of $2.8 million related to the FCC licenses in our Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters and impairment losses of $5.9 million related to the goodwill in our Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL, and Tampa-Saint Petersburg, FL market clusters. The impairment losses were primarily due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of FCC licenses and goodwill due to certain risks associated with the U.S. economy. On April 1, 2022, we completed the sale of substantially all of the assets used in the operations of WWNN-AM in West Palm Beach-Boca Raton, FL to a third party for $1.25 million in cash. As a result of the sale, we recorded an impairment loss of $1.9 million related to the FCC license during the first quarter of 2022. 32 Table of Contents Index to Financial Statements Gain on Exchange. On December 22, 2022, we completed an asset exchange with Audacy Nevada, LLC, pursuant to which we agreed to exchange all of the assets used or useful in the operations of KDWN-AM in Las Vegas, NV for all of the assets used or useful in the operations of KXTE-FM in Las Vegas, NV. As a result of the exchange, we recorded a gain on exchange of $3.4 million in 2022. Other Operating Income, Net. Other operating income, net for the year ended December 31, 2021 includes life insurance proceeds of $3.0 million related to the death of Mr. George Beasley, the Company’s former Chairman, in June 2021, partially offset by certain payments totaling $1.5 million that were accrued in accordance with Mr. Beasley’s employment contract, payments of $0.6 million for consulting services related to the COVID-19 pandemic and expenses of $0.5 million related to the early termination of a programming contract. Loss on Extinguishment of Long-Term Debt. We recorded a loss on extinguishment of long-term debt of $5.0 million during the year ended December 31, 2021, resulting from the issuance of the secured notes on February 2, 2021 and the use of proceeds to refinance in full our previously oustanding credit facility. Gain on Forgiveness of Long-Term Debt. We recorded a gain on forgiveness of long-term debt of $10.0 million during the year ended December 31, 2021, resulting from forgiveness of the PPP loan in November 2021, as described in “Liquidity and Capital Resources — PPP Loan” below. Other Income, Net. In the third quarter of 2022, we repurchased $5.0 million aggregate principal amount of the Notes for an aggregate price equal to 77% of the principal amount and recorded an aggregate gain of $1.0 million as a result of the repurchases. In the second quarter of 2022, we repurchased $5.0 million aggregate principal amount of the Notes for an aggregate price equal to 96% of the principal amount and recorded an aggregate gain of $0.1 million as a result of the repurchases. Income Tax Benefit. Our effective tax rate was approximately (79)% and (30)% for the year ended December 31, 2021 and 2022, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes, certain non-taxable income, and certain expenses that are not deductible for tax purposes. Net Loss. Net loss for the year ended December 31, 2022 was $42.1 million compared to a net loss of $1.5 million for the year ended December 31, 2021, as a result of the factors described above. Liquidity and Capital Resources Overview. Our primary sources of liquidity is internally generated cash flow and cash on hand. Our primary liquidity needs have been, and for the next twelve months and thereafter are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and station acquisitions. Historically, our capital expenditures have not been significant. In addition to property and equipment associated with station acquisitions, our capital expenditures have generally been, and are expected to continue to be, related to the maintenance of our office and studio space, the maintenance of our towers and equipment, and digital products and information technology. We have also purchased or constructed office and studio space in some of our markets to facilitate the consolidation of our operations. In response to the COVID-19 pandemic, our board of directors has suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Company’s stockholders. In addition, as discussed in “Secured Notes” below, the Indenture governing our Notes limits our ability to pay dividends. Secured Notes. On February 2, 2021, we issued $300.0 million aggregate principal amount of 8.625% senior secured notes due on February 1, 2026 (the “Notes”) under an indenture dated February 2, 2021 (the “Indenture”). 33 Table of Contents Index to Financial Statements Interest on the Notes accrues at the rate of 8.625% per annum and is payable semiannually in arrears on February 1 and August 1 of each year. The Notes are secured on a first-lien priority basis by substantially all assets of the Company and its majority owned subsidiaries and are guaranteed jointly and severally by the Company and its majority owned subsidiaries. We used the net proceeds from the Notes, to refinance in full our previously outstanding credit facility, to repay a previously outstanding promissory note and loan from George Beasley (see Note 10 to the accompanying financial statements) and to pay related accrued interest, fees and expenses. The Indenture contains restrictive covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, guarantee indebtedness or issue disqualified stock or, in the case of such subsidiaries, preferred stock; pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments; make certain investments or acquisitions; sell, transfer or otherwise convey certain assets; create liens; enter into agreements restricting certain subsidiaries’ ability to pay dividends or make other intercompany transfers; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of our subsidiaries. In the third quarter of 2022, we repurchased $5.0 million aggregate principal amount of the Notes for an aggregate price equal to 77% of the principal amount and recorded an aggregate gain of $1.0 million as a result of the repurchases. In the second quarter of 2022, we repurchased $5.0 million aggregate principal amount of the Notes for an aggregate price equal to 96% of the principal amount and recorded an aggregate gain of $0.1 million as a result of the repurchases. From time to time, we repurchase sufficient shares of our common stock to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock. We paid $0.1 million to repurchase 97,113 shares during the year ended December 31, 2022. From time to time, we may seek to repurchase, redeem or otherwise retire our Notes through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases, redemptions or other transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity: • internally generated cash flow; • additional borrowings or notes offerings, to the extent permitted under the Indenture governing our Notes; and • additional equity offerings. We believe we will have sufficient liquidity and capital resources to permit us to provide for our liquidity requirements and meet our financial obligations for the next twelve months and thereafter. However, poor financial results or unanticipated expenses could give rise to default under the Notes, additional debt servicing requirements or other additional financing or liquidity requirements sooner than we expect, and we may not secure financing when needed or on acceptable terms. Off-Balance Sheet Arrangements. We did not have any off-balance sheet arrangements as of December 31, 2022. 34 Table of Contents Index to Financial Statements Cash Flows . The following summary table presents a comparison of our cash flows for the years ended December 31, 2021 and 2022 with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 8 of this report. Year ended December 31, 2021 2022 Net cash provided by (used in) operating activities $ (1,907,227 ) $ 11,147,084 Net cash used in investing activities (1,136,268 ) (14,177,688 ) Net cash provided by (used in) financing activities 33,662,705 (8,813,385 ) Net increase (decrease) in cash and cash equivalents $ 30,619,210 $ (11,843,989 ) Net Cash Provided By (Used In) Operating Activities. Net cash provided by operating activities was $11.1 million during the year ended December 31, 2022, as compared to net cash used in operating activities of $1.9 million during the year ended December 31, 2021. Significant factors affecting the $13.1 million increase in net cash provided by operating activities included a $15.5 million increase in cash receipts from revenue and a $10.5 million decrease in cash paid for operating expenses, partially offset by an $11.1 million increase in interest payments and a $1.6 million increase in cash paid for corporate expenses. Net Cash Used In Investing Activities. Net cash used in investing activities during the year ended December 31, 2022 included payments of $13.4 million for capital expenditures and a payment of $2.0 million for the acquisition of Guarantee, partially offset by proceeds of $1.2 million from a station disposition. Net cash used in investing activities for the same period in 2021 included payments of $4.5 million for capital expenditures, partially offset by proceeds of $3.0 million from life insurance. Net Cash Provided By (Used In) Financing Activities. Net cash used in financing activities during the year ended December 31, 2022 included Notes repurchases of $8.7 million. Net cash provided by financing activities for the same period in 2021 included proceeds of $300.0 million from the issuance of the Notes and proceeds from the $10.0 million PPP loan, partially offset by credit facility and promissory note repayments of $263.5 million, repayment of the $5.0 million loan provided by George Beasley, and payments of $7.6 million for debt issuance costs related to the Notes. Related Party Transactions Beasley Broadcasting Management, LLC We lease our principal executive offices in Naples, FL from Beasley Broadcasting Management, LLC, which is held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley, and other members of the Beasley family. The lease agreement expires on May 31, 2023. Rental expense was $0.3 million for the year ended December 31, 2022. Beasley Family Properties, LLC On September 30, 2021, the office space leased from GGB Estero, LLC for our stations in Fort Myers, FL was transferred to Beasley Family Properties, LLC, which is held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley, and other members of the Beasley family. The lease agreement expires on August 31, 2024. Rental expense was $0.2 million for the year ended December 31, 2022. Beasley Family Towers, LLC We lease towers for 16 stations in various markets from Beasley Family Towers, LLC (“BFT”), which is partially held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other 35 Table of Contents Index to Financial Statements members of the Beasley family and partially owned directly by Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family. The lease agreements expire on various dates through December 31, 2038. Rental expense was $0.8 million for the year ended December 31, 2022. We lease office space for our stations in Fayetteville, NC from BFT. The lease agreement expires on August 31, 2030. Rental expense was $0.1 million for the year ended December 31, 2022. GGB Augusta, LLC We lease land for our stations in Augusta, GA from GGB Augusta, LLC, which is held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley, and other members of the Beasley family. The lease agreement expires on November 1, 2023. Rental expense was approximately $48,000 for the year ended December 31, 2022. GGB Las Vegas, LLC We lease office space for our stations in Las Vegas, NV from GGB Las Vegas, LLC, which is controlled by members of the Beasley family. The lease agreement expires on December 31, 2023. Rental expense was $0.2 million for the year ended December 31, 2022. Wintersrun Communications, LLC We sold a tower for one station in Charlotte, NC to Wintersrun Communications, LLC, which is partially held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family and partially owned directly by Bruce G. Beasley and Brian E. Beasley, for $0.4 million then leased back the tower under an agreement which expires on December 31, 2045. The lease met the criteria to be recorded as a finance lease, however based on the terms of the lease agreement the $0.3 million gain on sale was deferred and will be recognized as the finance lease right-of-use asset is depreciated. Rental expense was $0.1 million for the year ended December 31, 2022. We lease a tower for one station in Augusta, GA from Wintersrun. The lease agreement expires on October 15, 2025. Rental expense was approximately $31,000 for the year ended December 31, 2022. Loan to Interactive Life, Inc. In May 2022, we provided a $250,000 loan to Interactive Life, Inc. that accrues interest at 8.625% per annum with no cash payments due until the loan’s maturity in May 2024. Interactive Life, Inc. is controlled by Mr. Joseph Harb. We currently hold an investment in Quu, Inc., a company that is controlled by Mr. Harb. Repayment of the loan to Interactive Life, Inc. is guaranteed by Mr. Harb with 3,333,334 shares of Class A common stock of Quu, Inc. Inflation For the years ended December 31, 2021 and 2022, inflation has affected our performance in terms of higher costs for operating expenses, however, the exact impact cannot be reasonably determined. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Not required for smaller reporting companies. 36 Table of Contents Index to Financial Statements