BEASLEY BROADCAST GROUP INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA BEASLEY BROADCAST GROUP, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 173 ) 38 Consolidated Balance Sheets as of December 31, 2021 and 2022 41 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021 and 2022 42 Consolidated Statements of Equity for the Years Ended December 31, 2021 and 2022 43 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2022 44 Notes to Consolidated Financial Statements 45 Consolidated Financial Statement Schedule — Valuation and Qualifying Accounts 67 37 Table of Contents Crowe LLP Independent Member Crowe Global Report of Independent Registered Public Accounting Firm Shareholders and the Board of Directors of Beasley Broadcast Group, Inc. Naples, Florida Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Beasley Broadcast Group, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes and consolidated financial statement schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 38 Table of Contents FCC Licenses Impairment Assessment — Radio Reporting Units As disclosed in Note 5 to the consolidated financial statements, the Company’s consolidated FCC licenses balance was $487.2 million as of December 31, 2022. During the year ended December 31, 2022, the Company recorded impairment on FCC licenses of $23.8 million. Management performs an annual impairment test during the fourth quarter of each year which includes a qualitative assessment as to whether it is more likely than not that an FCC license is impaired. During 2022, management elected to bypass the qualitative assessment and perform a quantitative assessment for all radio reporting units. FCC licenses are assessed for recoverability at the market cluster level. Potential impairment is identified by comparing the fair value of a market’s FCC licenses to its carrying value. Fair value is estimated by management using an income approach. Management’s cash flow projections for its FCC licenses included significant judgments and assumptions relating to revenue growth rates, the market share at maturity and operating income margins at maturity of an average station within a market based upon market size and station type and the discount rate. We considered auditing the impairment of FCC licenses to be a critical audit matter because it involved a high degree of subjectivity in evaluating management’s estimates, judgments, and assumptions, as well as significant audit effort due to complexity in the aggregation and evaluation of significant amounts of data and the use of valuation specialists. Our audit procedures related to impairment of FCC licenses included the following: a. Evaluated management’s judgments in their assessment of changes in market conditions or events, or other changes in circumstances that indicate an impairment of FCC licenses may be present. b. Tested the reliability, appropriateness of aggregation, and relevance of underlying data used in the valuation model. c. Evaluated the appropriateness of valuation model used and the application of certain assumptions in the valuation model, and recalculated the discounted cash flow schedules. d. Evaluated the significant assumptions used by management, including revenue growth rates, the market share at maturity and operating income margins at maturity of an average station within a market based upon market size and station type and the discount rate.. This involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance in the market being evaluated, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. e. Utilized valuation specialists to assist in evaluating certain assumptions applied in the valuation model. Other Intangibles Impairment Assessment — Franchise Rights As disclosed in Note 7 to the consolidated financial statements, the Company’s franchise rights balance was $4.7 million as of December 31, 2022. During the year ended December 31, 2022, the Company recorded impairment on franchise rights of $12.8 million. The impairment evaluation of long-lived assets is an assessment that begins with the Company’s monitoring of indicators of impairment of the asset group which the Company believes is the lowest applicable level for which there are identifiable cash flows. The Company reviews franchise rights for impairment indicators whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. During 2022, management performed a qualitative assessment and identified a triggering event that indicated franchise rights may be impaired; therefore, management performed a quantitative assessment. When performing a quantitative impairment assessment, the Company estimates undiscounted cash flows at the asset group level over the remaining useful life of the franchise rights, being the primary asset within the asset group. If the estimated undiscounted cash flows are not sufficient to recover the carrying value of the asset group, the Company then compares the carrying value of the asset group with its estimated fair value. The Company applies 39 Table of Contents significant judgment in estimating the fair value of the asset group, based on historical and projected operating performance and industry information currently available. When the estimated fair value is determined to be lower than the carrying value of the asset group, the asset group is written down to its estimated fair value. Fair value of the franchise rights is estimated by management using an income approach. Management’s cash flow projections included significant judgments and assumptions relating to revenue and operating expenses over the projection period and to the discount rate. We considered auditing the impairment of franchise rights to be a critical audit matter because of the significant judgment required by management to determine estimated cash flows and the discount rate (including the company-specific risk premium component). This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s cash flow analysis. Our audit procedures related to impairment of franchise rights included the following: a. Evaluated management’s judgments in their assessment of ichanges in market conditions or events, or other changes in circumstances that indicate an impairment of franchise rights may be present. b. Tested the completeness, accuracy, appropriateness of aggregation, and the relevance and reliability of underlying data used in the valuation model based on the income approach. c. Evaluated the appropriateness of valuation model used and the application of certain assumptions in the valuation model, and recalculated the discounted cash flow schedules. d. Evaluated the significant assumptions used by management, including revenue and operating expense projections and the discount rate. This involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the asset group evaluated, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Additionally, we performed sensitivity testing on these assumptions e. Utilized valuation specialists to assist in evaluating the methodology used and certain assumptions applied in the valuation model. /s/ Crowe LLP We have served as the Company’s auditor since 2006. Fort Lauderdale, Florida March 27, 2023 40 Table of Contents BEASLEY BROADCAST GROUP, INC. CONSOLIDATED BALANCE SHEETS December 31, December 31, 2021 2022 ASSETS Current assets: Cash and cash equivalents $ 51,378,642 $ 39,534,653 Accounts receivable, less allowance for doubtful accounts of $ 1,720,477 in 2021 and $ 1,876,751 in 2022 53,378,437 56,683,526 Prepaid expenses 4,044,056 5,078,231 Other current assets 3,397,418 4,364,120 Total current assets 112,198,553 105,660,530 Property and equipment, net 49,843,166 55,807,047 Operating lease right-of-use assets 34,155,175 38,478,756 Finance lease right-of-use assets 320,000 306,667 FCC licenses 508,413,913 487,249,798 Goodwill 28,596,547 13,265,460 Other intangibles, net 22,697,207 8,219,939 Other assets 5,863,501 5,955,158 Total assets $ 762,088,062 $ 714,943,355 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 6,995,081 $ 19,344,621 Operating lease liabilities 7,693,831 8,166,394 Finance lease liabilities 1,945 — Other current liabilities 29,811,226 29,183,630 Total current liabilities 44,502,083 56,694,645 Due to related parties 372,193 85,731 Long-term debt, net of current installments and unamortized debt issuance costs 293,789,892 285,472,107 Operating lease liabilities 28,747,450 37,485,602 Deferred tax liabilities 115,689,317 98,068,981 Other long-term liabilities 15,904,829 13,647,481 Total liabilities 499,005,764 491,454,547 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; no ne issued — — Class A common stock, $ 0.001 par value; 150,000,000 shares authorized; 16,249,312 issued and 12,696,857 outstanding in 2021; 16,763,227 issued and 13,113,659 outstanding in 2022 16,248 16,761 Class B common stock, $ 0.001 par value; 75,000,000 shares authorized; 16,662,743 issued and outstanding in 2021 and 2022 16,662 16,662 Additional paid-in capital 150,896,611 151,948,310 Treasury stock, Class A common stock; 3,552,455 shares in 2021; 3,649,568 shares in 2022 ( 29,021,360 ) ( 29,155,300 ) Retained earnings 142,220,494 100,163,064 Accumulated other comprehensive (loss) income ( 1,046,357 ) 499,311 Total stockholders’ equity 263,082,298 223,488,808 Total liabilities and stockholders’ equity $ 762,088,062 $ 714,943,355 See accompanying notes to consolidated financial statements 41 Table of Contents BEASLEY BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Year Ended Year Ended December 31, December 31, 2021 2022 Net revenue $ 241,426,308 $ 256,381,018 Operating expenses: Operating expenses (including stock-based compensation of $ 317,938 in 2021 and $ 193,738 in 2022 and excluding depreciation and amortization shown separately below) 199,470,185 213,236,063 Corporate expenses (including stock-based compensation of $ 1,065,518 in 2021 and $ 865,165 in 2022) 16,578,046 18,001,359 Depreciation and amortization 11,309,995 9,920,546 FCC licenses impairment losses — 23,799,383 Goodwill impairment losses — 16,253,087 Other impairment losses — 12,822,000 Gain on exchange — ( 3,350,539 ) Gain on disposition ( 191,988 ) — Other operating income, net ( 400,000 ) — Total operating expenses 226,766,238 290,681,899 Operating income (loss) 14,660,070 ( 34,300,881 ) Non-operating income (expense): Interest expense ( 26,456,236 ) ( 26,914,045 ) Loss on extinguishment of long-term debt ( 4,996,731 ) — Gain on forgiveness of long-term debt 10,000,000 — Other income, net 68,437 1,382,322 Loss before income taxes ( 6,724,460 ) ( 59,832,604 ) Income tax benefit ( 5,321,630 ) ( 17,787,434 ) Loss before equity in earnings of unconsolidated affiliates ( 1,402,830 ) ( 42,045,170 ) Equity in earnings of unconsolidated affiliates, net of tax ( 132,264 ) ( 12,260 ) Net loss ( 1,535,094 ) ( 42,057,430 ) Earnings attributable to noncontrolling interest 129,249 — Net loss attributable to BBGI stockholders ( 1,405,845 ) ( 42,057,430 ) Other comprehensive loss: Unrecognized actuarial gain on postretirement plan (net of income tax expense of $ 140,151 in 2021 and $ 542,438 in 2022) 380,262 1,545,668 Comprehensive loss $ ( 1,025,583 ) $ ( 40,511,762 ) Net loss attributable to BBGI stockholders per Class A and B common share: Basic and diluted $ ( 0.05 ) $ ( 1.43 ) Weighted average shares outstanding: Basic and diluted 29,263,987 29,473,989 See accompanying notes to consolidated financial statements 42 Table of Contents BEASLEY BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Accumulated Other Comprehensive (Loss) Income Additional Paid-In Capital Class A Class B Treasury Stock Retained Noncontrolling Total Shares Amount Shares Amount Shares Amount Earnings Interest Equity Balances as of January 1, 2021 15,930,765 $ 15,930 16,662,743 $ 16,662 $ 154,004,965 ( 3,253,691 ) $ ( 28,187,857 ) $ 143,304,213 $ ( 1,426,619 ) $ ( 625,474 ) $ 267,101,820 Stock-based compensation 318,547 318 — — 1,383,138 — — — — — 1,383,456 Acquisition of noncontrolling interest — — — — ( 4,490,130 ) — — — — — ( 4,490,130 ) Adjustment from related party acquisition — — — — ( 1,362 ) — — — — — ( 1,362 ) Purchase of treasury stock — — — — — ( 298,764 ) ( 833,503 ) — — — ( 833,503 ) Net loss — — — — — — — ( 1,405,845 ) — ( 129,249 ) ( 1,535,094 ) Other comprehensive gain — — — — — — — — 380,262 — 380,262 Elimination of noncontrolling interest — — — — — — — 322,126 — 754,723 1,076,849 Balances as of December 31, 2021 16,249,312 16,248 16,662,743 16,662 150,896,611 ( 3,552,455 ) ( 29,021,360 ) 142,220,494 ( 1,046,357 ) — 263,082,298 Stock-based compensation 513,915 513 — — 1,058,390 — — — — — 1,058,903 Adjustment from related party acquisition — — — — ( 6,691 ) — — — — — ( 6,691 ) Purchase of treasury stock — — — — — ( 97,113 ) ( 133,940 ) — — — ( 133,940 ) Net loss — — — — — — — ( 42,057,430 ) — — ( 42,057,430 ) Other comprehensive gain — — — — — — — — 1,545,668 — 1,545,668 Balances as of December 31, 2022 16,763,227 $ 16,761 16,662,743 $ 16,662 $ 151,948,310 ( 3,649,568 ) $ ( 29,155,300 ) $ 100,163,064 $ 499,311 $ — $ 223,488,808 See accompanying notes to consolidated financial statements 4 3 Table of Contents BEASLEY BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended Year Ended December 31, December 31, 2021 2022 Cash flows from operating activities: Net loss $ ( 1,535,094 ) $ ( 42,057,430 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock-based compensation 1,383,456 1,058,903 Provision for bad debts ( 1,248,394 ) 1,108,840 Depreciation and amortization 11,309,995 9,920,546 FCC licenses impairment losses — 23,799,383 Goodwill impairment losses 16,253,087 Other impairment losses 12,822,000 Gain on exchange — ( 3,350,539 ) Gain on disposition ( 191,988 ) — Amortization of loan fees 1,551,996 1,491,061 Loss on extinguishment of long-term debt 4,996,731 — Gain on forgiveness of long-term debt ( 10,000,000 ) — Deferred income taxes ( 5,321,630 ) ( 18,157,845 ) Equity in earnings of unconsolidated affiliates 132,264 12,260 Change in operating assets and liabilities: Accounts receivable ( 4,734,620 ) ( 4,413,929 ) Prepaid expenses ( 1,557,196 ) ( 1,034,175 ) Other assets ( 143,084 ) ( 639,724 ) Accounts payable ( 5,400,326 ) 12,349,540 Other liabilities 8,758,921 3,212,130 Other operating activities 91,742 ( 1,227,024 ) Net cash provided by (used in) operating activities ( 1,907,227 ) 11,147,084 Cash flows from investing activities: Payment for acquisition — ( 2,000,000 ) Capital expenditures ( 4,498,768 ) ( 13,363,000 ) Proceeds from dispositions 362,500 1,185,312 Proceeds from life insurance 3,000,000 — Net cash used in investing activities ( 1,136,268 ) ( 14,177,688 ) Cash flows from financing activities: Issuance of debt 310,000,000 — Payments on debt ( 268,500,000 ) ( 8,677,500 ) Payment of debt issuance costs ( 7,604,215 ) — Reduction of finance lease liabilities ( 70,171 ) ( 1,945 ) Purchase of treasury stock ( 162,909 ) ( 133,940 ) 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 ) Cash and cash equivalents at beginning of period 20,759,432 51,378,642 Cash and cash equivalents at end of period $ 51,378,642 $ 39,534,653 Cash paid for interest $ 14,704,713 $ 25,564,611 Cash paid for income taxes $ 1,526,303 $ 1,550,250 Supplemental disclosure of non-cash investing and financing activities: Acquisition of noncontrolling interest $ 4,490,130 $ — Extinguishment of trade sales payable $ 934,500 $ — Class A common stock returned to treasury stock $ 670,594 $ — See accompanying notes to consolidated financial statements 44 Table of Contents BEASLEY BROADCAST GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Nature of Business Beasley Broadcast Group, Inc. (the “Company” or “BBGI”) is a multi-platform media company , operating two reportable business segments, whose primary business is operating radio stations throughout the United States. The Company offers local and national advertisers integrated marketing solutions across audio, digital and event platforms. The Company owns and operates 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. The Company also operates an esports segment, however, it does not exceed the thresholds for separate disclosure. COVID-19 Beginning in early 2020, the Company was 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 the Company’s 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, the Company 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 the Company’s expenses throughout the remainder of 2020, and certain of these expense reductions continued during 2021 and 2022. The Company’s board of directors also suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Company’s stockholders. The extent to which the COVID-19 pandemic will continue to impact the Company’s 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. As a result, many of the Company’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. The Company’s estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements. (2) Summary of Significant Accounting Policies Principles of Consolidation The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiaries, including OutlawsXP, Inc. (“Outlaws”). As of January 1, 2021, the Company held an approximately 90 % economic interest in Outlaws and an approximately 51 % economic interest in Renegades Holdings, Inc. (“Renegades”). On March 12, 2021, the Company entered into an agreement to exchange its ownership interest in Renegades for the interest held by Renegades in Outlaws. As a result of the exchange, Outlaws became a wholly owned subsidiary of the Company, and the Company no longer holds an economic interest in Renegades. Renegades was included in the financial statements of the Company up to the date of the exchange transaction. Net assets and results of operations for Outlaws and Renegades as of and for the years ended December 31, 2021 and 2022 were not significant. All significant inter-company transactions and balances have been eliminated. 4 5 Table of Contents Use of Estimates Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Such estimates include: (i) the amount of allowance for doubtful accounts; (ii) future cash flows used for testing recoverability of property and equipment; (iii) fair values used for testing FCC licenses, goodwill and other intangibles for impairment; (iv) estimates used to determine the incremental borrowing rate to record lease liabilities and related right-of-use assets (v) the realization of deferred tax assets; and (vi) actuarial assumptions related to the SERP. Actual results and outcomes may differ from management’s estimates and assumptions. Cash and Cash Equivalents All short-term investments with an original maturity of three months or less are considered to be cash equivalents. Accounts Receivable Accounts receivable consist primarily of uncollected amounts due from advertisers for the sale of advertising airtime. The amounts are net of advertising agency commissions and an allowance for doubtful accounts. The allowance for doubtful accounts reflects management’s estimate of probable losses in accounts receivable. Management determines the allowance based on historical information, relative improvements or deteriorations in the age of the accounts receivable and changes in current economic conditions. Interest is not accrued on accounts receivable. Property and Equipment Property and equipment is recorded at fair value in a business combination or otherwise at cost and depreciated using the straight-line method over the estimated useful life of the asset. If an event or change in circumstances were to indicate that the carrying amount of property and equipment is not recoverable, the carrying amount will be reduced to the estimated fair value. Repairs and maintenance are charged to expense as incurred. FCC Licenses FCC licenses, including translator licenses, are generally granted for renewable terms of eight years . Renewal costs are generally minor and expensed as incurred. Licenses are tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company’s licenses might be impaired. The Company assesses qualitative factors to determine whether it is more likely than not that its licenses are impaired. If the Company determines it is more likely than not that its licenses are impaired, then the Company is required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of the Company’s licenses with their carrying amounts. If the carrying amounts of the licenses exceed their fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing its licenses for impairment, the Company combines its licenses into reporting units based on its market clusters. See Note 5 for changes in the carrying amount of FCC licenses for the years ended December 31, 2021 and 2022. The weighted-average period before the next renewal of the Company’s FCC licenses is 6.0 years. Goodwill Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company’s goodwill might be impaired. The Company assesses qualitative 4 6 Table of Contents factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is necessary, the Company will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, the Company 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 its goodwill for impairment, the Company has identified its market clusters and esports as its reporting units. See Note 6 for changes in the carrying amount of goodwill for the year ended December 31, 2022. There were no changes in the carrying of goodwill for the year ended December 31, 2021. Other Intangibles Other intangibles include advertiser relationships, franchise rights and a trade name, which are amortized over their respective estimated useful lives and brands and other intangibles with indefinite lives which are not amortized. If an event or change in circumstances were to indicate that the carrying amount of any other intangibles is not recoverable, the carrying amount will be reduced to the estimated fair value. For the purpose of testing its other intangibles for impairment, the Company has identified its market clusters, digital, and esports as its reporting units. See Note 7 for changes in the carrying amount of other intangibles for the years ended December 31, 2021 and 2022. Investments Other assets include an investment in Quu, Inc. (“Quu”). The Company is considered to have the ability to exercise significant influence over the operating and financial policies of Quu. Therefore, the investment in Quu is accounted for using the equity method. The Company will recognize its share of the earnings of Quu in the periods for which it is reported. Any loss in value of the investment that is other than a temporary decline will be recognized. Other assets also include a noncontrolling interest in AUDIOis, which does not have a readily determinable fair value, and therefore, is recorded at cost less impairment. The Company evaluates the investments on a quarterly basis to identify impairment. When the evaluation indicates that an impairment exists, the Company will estimate the fair value of the investment and recognize an impairment loss equal to the difference between the fair value and the carrying amount of the investment. The carrying amount of the investment in QUU was $ 2.0 million as of December 31, 2021 and 2022. Debt Issuance Costs Debt issuance costs are capitalized and amortized over the life of the related debt as interest expense on a straight-line basis which approximates the effective interest method. Unamortized debt issuance costs are reported as a direct deduction from the carrying amount of the related debt. Leases The Company determines whether a contract is or contains a lease at inception. The term for each lease agreement begins on the commencement date and includes the noncancelable period specified in the agreement together with: (1) the periods covered by options to extend the lease if the Company is reasonably certain to exercise that option, (2) the periods covered by an option to terminate if the Company is 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 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. 4 7 Table of Contents 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 that 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. Treasury Stock Treasury stock is accounted for using the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Stock-Based Compensation The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized in earnings over the period during which an employee is required to provide service. No compensation cost is recognized for equity instruments for which employees do not render the requisite services. Income Taxes The Company recorded income taxes under the liability method. Deferred tax assets and liabilities are recognized for all temporary differences between tax and financial reporting bases of the Company’s assets and liabilities using enacted tax rates applicable to the periods in which the differences are expected to affect taxable income. Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. Comprehensive Loss Comprehensive loss consists of net loss and other gains and losses affecting equity that, under accounting principles generally accepted in the United States of America, are excluded from net loss, including unrecognized net actuarial gains and losses related to the SERP. Loss per Share Basic net loss per share is computed by dividing net loss attributable to common stockholders of the Company by the weighted average number of common shares outstanding for the period. Common shares outstanding include shares of both Class A and Class B common stock, which have equal rights and privileges except with respect to voting. Diluted net loss per share reflects the potential dilution that could occur if stock options, restricted stock or other contracts to issue common stock were exercised or converted into common stock and were not anti-dilutive. When reporting a net loss, the effect of restrictive stock units and restricted stock is excluded under the treasury stock method as the addition of shares would be anti-dilutive. Concentrations of Risk Certain cash deposits with financial institutions may, at times, exceed FDIC insurance limits. The stations located in Boston, MA, Detroit, MI, and Philadelphia, PA collectively contributed 58 % of the Company’s net revenue in 2022. The stations located in Boston, MA, Detroit, MI, and Philadelphia, PA collectively contributed 59 % of the Company’s net revenue in 2021. 4 8 Table of Contents Fair Value Measurements Fair value is defined as 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. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels. The three levels of the fair value hierarchy are defined as follows: Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date. Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, as of the reporting date. Level 3 — Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting date. Sports Programming Costs Sports programming rights for a specified season are amortized on a straight-line basis over the season. Other payments are expensed when the additional contract elements, such as post-season games, are broadcast. Segments The Company currently operates three operating segments (Audio, Digital, esports) and two reportable segments (Audio, Digital). The identification of segments is consistent with how the segments report to and are managed by the Company’s Chief Executive Officer (the Company’s Chief Operating Decision Maker). Operating results are reported to the Chief Operating Decision Maker on a statement of operations, which includes net revenue, operating expenses, impairment losses, gains and losses on dispositions and depreciation and amortization. Corporate expenses include general and administrative expenses and certain other income and expense items not allocated to the operating segments. Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance that will require the measurement of all expected credit losses for financial assets, including accounts receivable, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance was initially effective for the Company for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. In November 2019, the FASB issued additional guidance that included a deferral of the effective date for smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, and interim periods within those years. The Company adopted the guidance on January 1, 2023 however it does not expect the new guidance to have a material impact on the Company’s consolidated financial statements. (3) Acquisitions and Dispositions On December 22, 2022, the Company completed an asset exchange with Audacy Nevada, LLC and Beasley Media Group, LLC under which the Company 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. On September 29, 2022, the Company also entered into a local marketing agreement (“LMA”) with Audacy Nevada, LLC and began operating KXTE-FM on November 14, 2022. The LMA ended on December 22, 2022. The assets received from the exchange did not meet the definition of a business under ASC 805. The exchange was accounted for in accordance with ASC 610-20 which resulted in the Company recognizing a gain for the difference between the fair value of the assets received and the carrying amount of the assets given. 4 9 Table of Contents The fair value of the assets received in the asset exchange was $ 5.8 million. The Company recorded a gain on exchange of $ 3.4 million. The asset allocation is summarized as follows: Property and equipment $ 302,336 FCC license 5,451,000 Fair value of assets received 5,753,336 Carrying amount of assets of exchanged station ( 2,402,797 ) Gain on exchange $ 3,350,539 The fair value of the property and equipment was estimated using cost and market approaches. Property and equipment for which there are comparable current replacements available were valued on the basis of a cost approach. The cost approach allowed for factors such as physical depreciation as well as functional and economic obsolescence. Property and equipment for which an active used market exists, including property for which there is no longer comparable current replacements available but for which there remains an active used market, were valued using a market approach. The market approach is based on the selling prices of similar assets on the used market. As few sales reflect identical assets, the selling prices of similar assets was utilized with adjustments made for any differences such as age, condition, and options. If different assumptions or estimates had been used in the cost and market approaches, the fair value of the property and equipment could have been materially different. The fair value of the FCC license was estimated using an income approach. The income approach measures the expected economic benefits the licenses provide and discounts these future benefits using discounted cash flow analyses. The discounted cash flow analyses assume that each license is held by a hypothetical start-up station and the value yielded by the discounted cash flow analyses represents the portion of the station’s value attributable solely to its license. The discounted cash flow model incorporates variables such as market revenues; the projected growth rate for market revenues; projected market revenue share; projected station operating income margins; and a discount rate appropriate for the radio broadcasting industry. The variables used in the analyses reflect historical station and market growth trends, as well as anticipated station performance, industry standards, and market conditions. The discounted cash flow projection period of ten years was determined to be an appropriate time horizon for the analyses. Stable market revenue share and operating margins are expected at the end of year three (maturity). If different assumptions or estimates had been used in the income approach, the fair value of the FCC licenses could have been materially different. If actual results are different from assumptions or estimates used in the discounted cash flow analyses, the Company may incur impairment losses in the future and they may be material. The key assumptions used in the valuation of the FCC license are as follows: Revenue growth rates 0.3 % - 1.5 % Market revenue shares at maturity 5.2 % Operating income margins at maturity 23.3 % Discount rate 9.5 % On June 22, 2022, the Company completed the acquisition of Guarantee Digital, LLC (“Guarantee”), a digital marketing agency, for $ 2.0 million in cash. The acquisition broadened the Company’s digital revenue base across the U.S. The acquisition was accounted for as a business combination. The final purchase price allocation was completed during the third quarter of 2022. The final purchase price allocation is summarized as follows: Property and equipment $ 3,000 Goodwill 922,000 Other intangibles 1,075,000 $ 2,000,000 50 Table of Contents Goodwill was equal to the amount the purchase price exceeded the values allocated to the tangible and identifiable intangible assets and includes the value of the assembled workforce. The goodwill was allocated to the Digital segment. The $ 0.9 million allocated to goodwill is deductible for tax purposes. Revenue and earnings for Guarantee are not material for all reporting periods presented in the accompanying financial statements. On April 1, 2022, the Company 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, the Company recorded an impairment loss of $ 1.9 million related to the FCC license during the first quarter of 2022. (4) Property and Equipment Property and equipment is comprised of the following: December 31, Estimated useful lives (years) 2021 2022 Land $ 13,342,547 $ 13,342,547 — Buildings and improvements 31,716,052 39,350,594 15 - 30 Broadcast equipment 33,053,234 32,663,190 5 - 15 Transportation equipment 2,294,487 2,304,018 5 Office equipment 7,735,270 9,871,341 5 - 10 Construction in progress 2,878,319 649,321 — 91,019,909 98,181,011 Less accumulated depreciation and amortization ( 41,176,743 ) ( 42,373,964 ) $ 49,843,166 $ 55,807,047 The Company recorded depreciation expense of $ 8.0 million and $ 6.9 million for the years ended December 31, 2021 and 2022, respectively. (5) FCC Licenses Changes in the carrying amount of FCC licenses for the years ended December 31, 2021 and 2022 are as follows: Balance as of January 1, 2021 $ 508,558,355 Disposition ( 144,442 ) Balance as of December 31, 2021 508,413,913 Asset exchange acquisition (see Note 3) 5,451,000 Asset exchange disposition (see Note 3) ( 2,025,500 ) Disposition (see Note 3) ( 790,232 ) Impairment losses (see below and also Note 3) ( 23,799,383 ) Balance as of December 31, 2022 $ 487,249,798 FCC licenses are tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the FCC licenses might be impaired. The Company assesses qualitative factors to determine whether it is more likely than not that its FCC licenses are impaired. If the Company determines it is more likely than not that its FCC licenses are impaired, then the Company is required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of the FCC licenses with the carrying 51 Table of Contents amounts of such licenses. If the carrying amounts of the FCC licenses exceed the fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing FCC licenses for impairment, the Company combines its licenses into reporting units based on its market clusters. Due to an increase in interest rates in the U.S. economy, the Company tested its FCC licenses for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, the Company recorded impairment losses of $ 2.8 million related to the FCC licenses in its Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE 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 the FCC licenses due to certain risks associated with the U.S. economy. The fair values of the 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 broadcasting 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, the Company did not record any impairment losses related to FCC licenses during the third quarter of 2022. The Company performed the annual quantitative impairment test for its 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, the Company recorded impairment losses of $ 19.2 million related to the FCC licenses in its 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 the 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 % On February 3, 2021, the Company completed the sale of WHSR-AM in West Palm Beach-Boca Raton, FL to a third party for $ 0.4 million. The sale included an FCC translator license with a carrying amount of $ 0.1 million. (6) Goodwill Changes in the carrying amount of goodwill for the year ended December 31, 2022 are as follows: Balance as of January 1, 2022 $ 28,596,547 Acquisition (see Note 3) 922,000 Impairment losses ( 16,253,087 ) Balance as of December 31, 2022 $ 13,265,460 52 Table of Contents Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company’s goodwill might be impaired. The Company assesses qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is necessary, the Company will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, the Company 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 goodwill for impairment, the Company has identified its audio market clusters and esports as its reporting units. Due to an increase in interest rates in the U.S. economy, the Company tested its goodwill for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, the Company recorded impairment losses of $ 5.9 million related to the goodwill in its 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 goodwill due to certain risks associated with the U.S. economy. The fair values of the goodwill was 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 broadcasting 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 % 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, the Company did not record any impairment losses related to goodwill during the third quarter of 2022. The Company performed the annual quantitative impairment test for its goodwill in all markets during the fourth quarter of 2022. As a result of the quantitative impairment test , the Company recorded an impairment loss of $ 8.9 million related to the goodwill in its Boston, MA market cluster. The impairment loss was primarily due to a decrease in projected revenue in Boston. The fair value of its 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, the Company 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. 5 3 Table of Contents (7) Other Intangibles Other intangibles as of December 31, 2022 are comprised of the following: Asset Accumulated amortization Net asset Amortization period (years) Advertiser relationships $ 2,029,000 $ ( 636,869 ) $ 1,392,131 6 - 11 Franchise rights 4,739,523 — 4,739,523 10 Trade name 510,000 ( 33,202 ) 476,798 8 7,278,523 ( 670,071 ) 6,608,452 Brands 1,582,663 — 1,582,663 Other intangibles with indefinite lives 28,824 — 28,824 $ 8,890,010 $ ( 670,071 ) $ 8,219,939 Other intangibles as of December 31, 2021 are comprised of the following: Asset Accumulated amortization Net asset Amortization period (years) Advertiser relationships $ 1,464,000 $ ( 454,731 ) $ 1,009,269 11 Franchise rights 25,149,300 ( 5,072,849 ) 20,076,451 10 26,613,300 ( 5,527,580 ) 21,085,720 Brands 1,582,663 — 1,582,663 Other intangibles with indefinite lives 28,824 — 28,824 $ 28,224,787 $ ( 5,527,580 ) $ 22,697,207 If an event or change in circumstances were to indicate that the carrying amount of any other intangibles is not recoverable, the carrying amount will be reduced to the estimated fair value. For the purpose of testing its other intangibles for impairment, the Company has identified its market clusters, digital, and esports as its reporting units. During the fourth quarter of 2022, the Company received information related to the franchise rights in the esports segment, and based on that information the Company concluded that the carrying amount of the franchise rights was not fully recoverable. Therefore, the Company performed a quantitative impairment test for its franchise rights as of December 31, 2022. As a result of the test, the Company recorded an impairment loss of $ 12.8 million. 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 % 5 4 Table of Contents The Company recorded amortization expense of $ 3.2 million and $ 2.7 million for the years ended December 31, 2021 and 2022, respectively. Estimated future amortization expense related to intangible assets subject to amortization for the next five years and thereafter is as follows: 2023 $ 968,083 2024 968,083 2025 968,083 2026 968,083 2027 968,083 Thereafter 1,768,037 Total $ 6,608,452 (8) Other Assets On March 1, 2019, the Company (i) issued 235,296 shares of Class A common stock with a fair value of $ 1.0 million, (ii) agreed to provide $ 1.0 million of media advertising over a three year period, and (iii) contributed $ 2.5 million in cash for an aggregate investment of $ 4.5 million in Renegades, an esports organization, in exchange for 3,750,000 shares. The Company acquired an additional 416,666 shares in the third quarter of 2019 for $ 0.5 million in cash. In January 2020, the Company acquired an additional 833,334 shares for an aggregate of $ 1.0 million in cash. As a result of the additional investment in January 2020, the Company obtained control of Renegades and consolidated the accounts of Renegades in the accompanying financial statements as of and for the year ended December 31, 2020. On March 12, 2021, the Company entered into an agreement to exchange its ownership interest in Renegades for the interest held by Renegades in Outlaws. As a result of the exchange, Outlaws is now a wholly owned subsidiary of the Company, and the Company no longer holds an economic interest in Renegades. Therefore, the accounts of Renegades are no longer consolidated in the Company’s financial statements subsequent to the date of the exchange. Also, as a result of the exchange, the Company recorded a loss of approximately $ 3,000 attributable to the difference between the estimated fair value of the economic interest held by Renegades in Outlaws and the carrying amount of the Company’s ownership interest in Renegades in the first quarter of 2021. The Company used a discounted cash flow model with annual revenue growth rates ranging from 5 % to 57 %, operating margins ranging from ( 27 )% to 67 %, and a discount rate of 13.5 % to determine the loss. (9) Other Current Liabilities Other current liabilities are comprised of the following: December 31, 2021 2022 Accrued interest $ 10,781,250 $ 10,448,469 Accrued payroll expenses 7,066,169 5,121,950 Deferred revenue 3,085,370 4,696,989 Accrued digital expenses 3,946,288 3,028,440 Other accrued expenses 4,932,149 5,887,782 $ 29,811,226 $ 29,183,630 5 5 Table of Contents (10) Long-Term Debt Long-term debt is comprised of the following: December 31, December 31, 2021 2022 Secured notes $ 300,000,000 $ 290,000,000 Less unamortized debt issuance costs ( 6,210,108 ) ( 4,527,893 ) $ 293,789,892 $ 285,472,107 On February 2, 2021, the Company 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”). 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. The Company 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 18) 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 its assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of its subsidiaries. Prior to February 1, 2025, the Company will be subject to certain premiums, as defined in the Indenture, for optional or mandatory (upon certain contingent events) redemption of some or all of the Notes. In connection with the issuance of the Notes and the repayment of the previously outstanding credit facility, the Company recorded a loss on extinguishment of long-term debt of $ 5.0 million during the first quarter of 2021. In the third quarter of 2022, the Company 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, the Company 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. On March 1, 2021, the Company entered into a loan with Synovus Bank for $ 10.0 million pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The loan bore interest at a rate of 1.0 % per annum and was scheduled to mature on March 1, 2026. Principal and interest payments were deferred, with interest accruing, until after the period in which the Company was allowed to apply for loan forgiveness pursuant to the PPP. In September 2021, the Company submitted an application for forgiveness, and, in November 2021, the loan was forgiven in full. As of December 31, 2020, the previously outstanding credit facility consisted of a term loan facility with a remaining balance of $ 238.0 million and a revolving credit facility with an outstanding balance of $ 20.0 million and a maximum commitment of $ 20.0 million. The revolving credit facility carried interest, based on LIBOR, at 4.4 % as of December 31, 2020. The term loan carried interest, based on LIBOR, at 5.25 % as of December 31, 2020. As noted above, the credit facility was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering. On November 14, 2019, the Company acquired a majority interest in an esports team and issued a promissory note for $ 16.5 million to the seller. On June 30, 2020, the Company entered into an amendment to the 5 6 Table of Contents promissory note applicable to the remaining balance. As amended, the promissory note bore cash-pay interest at 5 % per annum payable quarterly in arrears and additional payment-in-kind interest at 10 % per annum. The promissory note had a remaining balance of $ 5.5 million as of December 31, 2020. As noted above, the amended promissory note was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering. (11) Leases The Company leases office space, towers and office equipment. Discount rates are based on the Company’s incremental borrowing rate due to the rate implicit in the leases being not readily determinable. The Company used the current borrowing rate on its credit facility, adjusted for the effects of collateralization, to determine the various rates it would pay to finance similar transactions over similar time periods. The following table summarizes lease information: Year ended December 31, 2021 2022 Lease cost Operating lease cost $ 11,104,313 $ 11,974,079 Finance lease cost: Amortization of right-of-use asset 13,334 — Interest on lease liability 2,829 — Short-term lease cost 29,100 29,880 Total lease cost $ 11,149,576 $ 12,003,959 Other information Operating cash flows from operating leases $ 11,272,752 $ 11,665,909 Operating cash flows from finance lease 2,829 — Financing cash flows from finance lease 70,171 — Right-of-use assets obtained in exchange for new operating lease liabilities 8,220,577 13,383,043 Right-of-use assets obtained in exchange for new finance lease liabilities — — December 31, 2022 Weighted-average remaining lease term — operating leases 7.0 years Weighted-average remaining lease term — finance lease 23.0 years Weighted-average discount rate — operating leases 8.9 % Weighted-average discount rate — finance lease 3.9 % As of December 31, 2022, future minimum payments for operating and finance leases for the next five years and thereafter are summarized as follows: 2023 $ 11,764,630 2024 10,513,493 2025 9,705,251 2026 7,246,886 2027 5,715,981 Thereafter 20,780,380 Total lease payments 65,726,621 Less imputed interest ( 20,074,625 ) Present value of lease liabilities $ 45,651,996 5 7 Table of Contents (12) Employee Benefit Plans Defined Contribution Plan The Company has a defined contribution plan that conforms to Section 401(k) of the Internal Revenue Code. Under this plan, employees may contribute a minimum of 1 % of their compensation (no maximum) to the Plan. However, the Internal Revenue Code limited contributions to $ 19,500 and $ 20,500 (or $ 26,000 and $ 27,000 if aged 50 years or older) in 2021 and 2022, respectively. No employer matching contributions were made to the defined contribution plan in 2021 and 2022. Supplemental Employee Retirement Plan The benefit obligations related to the frozen SERP of $ 10.2 million and $ 8.0 million are reported in other long-term liabilities in the consolidated balance sheets as of December 31, 2021 and 2022, respectively. The Company contributed $ 0.5 million to the SERP in both 2021 and 2022. The SERP is summarized as follows: Year ended December 31, 2021 2022 Change in Projected Benefit Obligation Benefit obligation at beginning of year $ 10,805,326 $ 10,187,817 Interest cost 222,849 250,240 Actuarial (gain) loss ( 348,736 ) ( 1,990,024 ) Benefits paid ( 491,622 ) ( 489,961 ) Benefit obligation at end of year $ 10,187,817 $ 7,958,072 Change in Plan Assets Fair value of plan assets at beginning of year $ — $ — Employer contribution 491,622 489,961 Benefits paid ( 491,622 ) ( 489,961 ) Fair value of plan assets at end of year $ — $ — Funded status $ ( 10,187,817 ) $ ( 7,958,072 ) Unrecognized net actuarial loss 1,418,856 ( 669,250 ) Cumulative employer contributions in excess of the net periodic pension cost $ ( 8,768,961 ) $ ( 8,627,322 ) Amounts Recognized in the Statement of Financial Position Current liabilities $ ( 545,575 ) $ ( 562,238 ) Noncurrent liabilities ( 9,642,242 ) ( 7,395,834 ) Net amount recognized $ ( 10,187,817 ) $ ( 7,958,072 ) Amounts Recognized in Accumulated Other Comprehensive Income Net actuarial (gain) loss $ 1,418,856 $ ( 669,250 ) Total (before tax effects) $ 1,418,856 $ ( 669,250 ) Information for Pension Plans about Benefit Obligation and Plan Assets Projected benefit obligation $ 10,187,817 $ 7,958,072 Accumulated benefit obligation $ 10,187,817 $ 7,958,072 5 8 Table of Contents Year ended December 31, 2021 2022 Weighted-average assumptions for Disclosure Discount rate 2.50 % 4.90 % Mortality table Pri-2012 WC Pri-2012 WC Mortality improvement scale MP-2021 MP-2021 Net periodic benefit cost Interest cost $ 222,849 $ 250,240 Recognized net actuarial (gain) loss 171,677 98,082 Net periodic benefit cost $ 394,526 $ 348,322 Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income Net actuarial (gain) loss $ ( 348,736 ) $ ( 1,990,024 ) Recognized net actuarial (gain) loss ( 171,677 ) ( 98,082 ) Total recognized in other comprehensive income (before tax effects) $ ( 520,413 ) $ ( 2,088,106 ) Total recognized in net cost and other comprehensive income (before tax effects) $ ( 125,887 ) $ ( 1,739,784 ) Amounts Expected to be Recognized in Net Periodic Cost in the Coming Year (Gain) loss recognition $ 81,151 $ — Prior service cost recognition $ — $ — Net initial obligation (asset) recognition $ — $ — Weighted-average assumptions used to determine Net Periodic Benefit Cost Discount rate 2.10 % 2.50 % Corridor 10.00 % 10.00 % Average future working lifetime 5.43 4.99 Mortality table Pri-2012 WC Pri-2012 WC Mortality improvement scale MP-2020 MP-2021 Estimated Future Benefit Payments 2023 $ 562,238 2024 $ 595,397 2025 $ 618,116 2026 $ 618,092 2027 $ 610,066 2028-2032 $ 2,976,034 Contributions Estimated contributions for 2023 $ 562,238 (13) Stockholders’ Equity The Company has two classes of common stock: Class A common stock and Class B common stock. In the election of directors, the holders of Class A common stock are entitled by class vote, exclusive of other stockholders, to elect two of the Company’s directors, with each Class A share being entitled to one vote. In the election of the other six directors and all other matters submitted to the stockholders for a vote, the holders of Class A shares and Class B shares shall vote as a single class, with each Class A share being entitled to one vote and each Class B share entitled to ten votes. 5 9 Table of Contents From time to time, the Company repurchases sufficient shares of its common stock to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock. The Company paid $ 0.1 million to repurchase 97,113 shares in 2022. In response to the COVID-19 pandemic, the board of directors 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, the Indenture governing the Notes limits the ability of the Company to pay dividends. (14) Revenue Revenue is comprised of the following: Year ended December 31, 2021 2022 Audio $ 206,460,883 $ 213,036,307 Digital 32,743,850 40,755,164 Other 2,221,575 2,589,547 $ 241,426,308 $ 256,381,018 The Company recognizes revenue when it satisfies a performance obligation under a contract with an advertiser. The transaction price is allocated to performance obligations based on executed contracts which represent relative standalone selling prices. Payment is generally due within 30 days, although certain advertisers are required to pay in advance. Revenues are reported at the amount the Company expects to be entitled to receive under the contract. The Company has elected to use the practical expedient to expense sales commissions as incurred. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the balance sheet. Substantially all deferred revenue is recognized within twelve months of the payment date. December 31, December 31, 2021 2022 Deferred revenue $ 3,085,370 $ 4,696,989 Year ended December 31, 2021 2022 Losses on receivables $ 2,064,164 $ 952,566 Audio revenue includes revenue from the sale or trade of aired commercial spots to advertisers directly or through national, regional or local advertising agencies. Each commercial spot is considered a performance obligation. Revenue is recognized when the commercial spots have aired. Trade sales are recorded at the estimated fair value of the goods or services received. If commercial spots are aired before the goods or services are received, then a trade sales receivable is recorded. If goods or services are received before the commercial spots are aired, then a trade sales payable is recorded. Other revenue includes revenue from concerts, promotional events, talent fees and other miscellaneous items. Such revenue is generally recognized when the concert, promotional event, or talent services are completed. December 31, December 31, 2021 2022 Trade sales receivable $ 881,885 $ 1,564,054 Trade sales payable 614,467 806,162 Year ended December 31, 2021 2022 Trade sales revenue $ 6,089,517 $ 5,862,351 60 Table of Contents Digital revenue includes revenue from the sale of streamed commercial spots, station-owned assets and third-party products. Each streamed commercial spot, station-owned asset and third-party product is considered a performance obligation. Revenue is recognized when the commercial spots have streamed. Station-owned assets are generally scheduled over a period of time and revenue is recognized over time as the digital items are used for advertising content, except for streamed commercial spots. Third-party products are generally scheduled over a period of time with an impression target each month. Revenue from the sale of third-party products is recognized over time as the digital items are used for advertising content and impression targets are met each month. The Company assesses each digital order to determine if the Company is operating as the principal or an agent. In general, the Company operates as the principal, however, after the acquisition of Guarantee, the Company determined that it is operating as an agent for one advertiser. (15) Stock-Based Compensation The Beasley Broadcast Group, Inc. 2007 Equity Incentive Award Plan (the “2007 Plan”) permits the Company to issue up to 7.5 million shares of Class A common stock. The 2007 Plan allows for eligible employees, directors and certain consultants of the Company to receive restricted stock units, shares of restricted stock, stock options or other stock-based awards. The restricted stock units that have been granted under the 2007 Plan generally vest over one to five years of service. A summary of restricted stock unit activity is presented below: Units Weighted - Average Grant-Date Fair Value Unvested as of January 1, 2021 453,501 $ 4.11 Granted 925,271 2.34 Vested ( 318,547 ) 3.12 Forfeited ( 119,391 ) 2.16 Unvested as of December 31, 2021 940,834 2.77 Granted 778,857 1.35 Vested ( 513,915 ) 2.51 Forfeited ( 120,958 ) 2.32 Unvested as of December 31, 2022 1,084,818 $ 1.87 A summary of restricted stock activity is presented below: Shares Weighted- Average Grant-Date Fair Value Unvested as of January 1, 2021 12,500 $ 4.84 Vested ( 12,500 ) 4.84 Unvested as of December 31, 2021 — $ — As of December 31, 2022, there was $ 1.4 million of total unrecognized compensation cost for restricted stock units granted under the 2007 Plan. That cost is expected to be recognized over a weighted-average period of 2.5 years. 61 Table of Contents (16) Income Taxes Income tax benefit is as follows: Year ended December 31, 2021 2022 Current: Federal $ — $ 265,813 State — 104,598 — 370,411 Deferred: Federal ( 3,040,141 ) ( 10,074,570 ) State ( 2,281,489 ) ( 8,083,275 ) ( 5,321,630 ) ( 18,157,845 ) $ ( 5,321,630 ) $ ( 17,787,434 ) Income tax benefit differs from the amounts that would result from applying the federal statutory rate of 21 % to the Company’s loss before taxes as follows: Year ended December 31, 2021 2022 Expected tax benefit $ ( 1,412,137 ) $ ( 12,564,847 ) State income taxes, net of federal benefit ( 353,270 ) ( 2,618,634 ) Tax rate adjustments ( 822,982 ) ( 3,687,539 ) Change in valuation allowance ( 3,097 ) ( 5,121 ) Non-deductible items 837,045 884,241 Non-taxable items ( 3,412,500 ) — Other ( 154,689 ) 204,466 $ ( 5,321,630 ) $ ( 17,787,434 ) Temporary differences that give rise to the components of deferred tax assets and liabilities are as follows: December 31, 2021 2022 Deferred tax assets: Allowance for doubtful accounts $ 451,685 $ 476,552 Other assets 274,357 327,689 Operating lease liabilities 759,130 919,745 Other long-term liabilities 2,743,597 2,084,645 Stock-based compensation 223,960 156,677 Interest expense limitation 5,097,723 10,006,855 Net operating losses 3,221,884 2,215,118 Subtotal 12,772,336 16,187,281 Valuation allowance ( 305,043 ) ( 299,922 ) Total 12,467,293 15,887,359 Deferred tax liabilities: Prepaid expenses ( 465,976 ) ( 143,287 ) Property and equipment ( 3,308,562 ) ( 5,834,727 ) Intangibles ( 124,382,072 ) ( 107,978,326 ) Total ( 128,156,610 ) ( 113,956,340 ) Net deferred tax liabilities $ ( 115,689,317 ) $ ( 98,068,981 ) 62 Table of Contents As of December 31, 2022, the Company has federal net operating losses of $ 3.4 million and state net operating losses of $ 26.8 million. The valuation allowance relates to net operating losses and unrealized losses on investments which management has determined, more likely than not, that such losses will not be utilized. As of December 31, 2021 and 2022, the Company does not have any material unrecognized tax benefits and accordingly, has not recorded any interest or penalties related to unrecognized tax benefits. The Company and its subsidiaries file a consolidated federal income tax return and various state returns. These returns remain subject to examination by taxing authorities for all years after 2018. (17) Loss Per Share Net loss per share calculation information is as follows: Year ended December 31, 2021 2022 Net loss attributable to BBGI stockholders $ ( 1,405,845 ) $ ( 42,057,430 ) Weighted-average shares outstanding: Basic 29,263,987 29,473,989 Effect of dilutive restricted stock units and restricted stock — — Diluted 29,263,987 29,473,989 Net loss attributable to BBGI stockholders per Class A and Class B common share — basic and diluted $ ( 0.05 ) $ ( 1.43 ) The Company excluded the effect of restrictive stock units and restricted stock under the treasury stock method when reporting a net loss as the addition of shares was anti-dilutive. The number of shares excluded was 229,777 and 140,170 for the years ended December 31, 2021 and 2022, respectively. (18) Related Party Transactions Beasley Broadcasting Management, LLC The Company leases its 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 $ 0.2 million and $ 0.3 million for the years ended December 31, 2021 and 2022, respectively. Beasley Family Properties, LLC On September 30, 2021, the office space leased by the Company from GGB Estero, LLC for its 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 $ 0.1 million and $ 0.2 million for the years ended December 31, 2021 and 2022, respectively. Beasley Family Towers, LLC The Company leases 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 members of the Beasley family and partially owned directly by Caroline Beasley, Bruce G. Beasley, 6 3 Table of Contents 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 each of the years ended December 31, 2021 and 2022. The Company leases office space for its stations in Fayetteville, NC from BFT. The lease agreement expires on August 31, 2030 . Rental expense was $ 0.1 million for each of the years ended December 31, 2021 and 2022. GGB Augusta, LLC The Company leases land for its 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 $ 45,000 and $ 48,000 for the years ended December 31, 2021 and 2022, respectively. GGB Estero, LLC The Company leases office space for its stations in Fort Myers, FL from GGB Estero, 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 office space was transferred to Beasley Family Properties, LLC on September 30, 2021. Rental expense was $ 0.2 million for the year ended December 31, 2021. GGB Las Vegas, LLC The Company leases office space for its 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 each of the years ended December 31, 2021 and 2022. Wintersrun Communications, LLC The Company sold the 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 each of the years ended December 31, 2021 and 2022. The Company leases 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 each of the years ended December 31, 2021 and 2022. Loan from George Beasley In June 2020, George Beasley, the Company’s former Chairman, provided a $ 5.0 million loan to the Company that accrued payment-in-kind interest at 6 % per annum with no cash payments due until the loan’s maturity in December 2023 . Mr. Beasley and GGB Family Limited Partnership also each entered into standby letters of credit in combined aggregate face amount of $ 5.0 million in favor of U.S. Bank, National Association for the benefit of the Company as a source of backup liquidity that could have been drawn by U.S. Bank, National Association in the event that the Company failed to maintain a minimum liquidity amount under the then-existing credit facility. The loan was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering (see Note 10). 6 4 Table of Contents Loan to Interactive Life, Inc. In May 2022, the Company 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. The Company currently holds 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. (19) Commitments and Contingencies The Company has various commitments for rating services and on-air programming including sports broadcast rights for the Boston Bruins, Boston Celtics, and New England Patriots. As of December 31, 2022, future minimum payments for the next five years and thereafter are summarized as follows: 2023 $ 24,673,403 2024 24,484,535 2025 24,830,681 2026 7,918,073 2027 6,750,000 Thereafter 21,275,000 Total $ 109,931,692 In the normal course of business, the Company is party to various legal matters. The ultimate disposition of these matters will not, in management’s judgment, have a material adverse effect on the Company’s financial position. (20) Financial Instruments The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximates fair value due to the short-term nature of these financial instruments. The estimated fair value of the Company’s Notes, based on available market information, was $ 295.9 million and $ 174.0 million as of December 31, 2021 and 2022, respectively. The Company used Level 2 measurements under the fair value measurement hierarchy to determine the estimated fair value of the Notes. (21) Segment Information The Company currently operates three operating segments (Audio, Digital, esports) and two reportable segments (Audio, Digital). The identification of segments is consistent with how the segments report to and are managed by the Company’s Chief Executive Officer (the Company’s Chief Operating Decision Maker). The Audio segment generates revenue primarily from the sale of commercial advertising to customers of the Company’s 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. The Digital segment generates revenue primarily from the sale of digital advertising to customers of the Company’s stations and other advertisers throughout the United States. Corporate includes general and administrative expenses and certain other income and expense items not allocated to the operating segments. Non-operating corporate items, including interest expense and income taxes, are reported in the accompanying consolidated statements of comprehensive loss. 6 5 Table of Contents Reportable segment information for the year ended December 31, 2022 is as follows: Audio Digital Other Corporate Total Net revenue $ 213,036,307 $ 40,755,164 $ 2,589,547 $ — $ 256,381,018 Operating expenses 173,011,492 36,398,687 3,825,884 — 213,236,063 Corporate expenses — — — 18,001,359 18,001,359 Depreciation and amortization 6,277,953 102,402 2,772,489 767,702 9,920,546 Impairment losses 38,594,470 — 14,280,000 — 52,874,470 Gain on exchange ( 3,350,539 ) — — — ( 3,350,539 ) Operating income (loss) $ ( 1,497,069 ) $ 4,254,075 $ ( 18,288,826 ) $ ( 18,769,061 ) $ ( 34,300,881 ) Audio Digital Other Corporate Total Capital expenditures $ 13,160,276 $ 58,300 $ 59,084 $ 401,651 $ 13,679,311 Reportable segment information for the year ended December 31, 2021 is as follows: Audio Digital Other Corporate Total Net revenue $ 206,460,883 $ 32,743,850 $ 2,221,575 $ — $ 241,426,308 Operating expenses 163,639,369 32,355,572 3,475,244 — 199,470,185 Corporate expenses — — — 16,578,046 16,578,046 Depreciation and amortization 7,514,406 12,885 3,148,595 634,109 11,309,995 Gain on disposition ( 191,988 ) — — — ( 191,988 ) Other operating (income) expense, net 500,000 — — ( 900,000 ) ( 400,000 ) Operating income (loss) $ 34,999,096 $ 375,393 $ ( 4,402,264 ) $ ( 16,312,155 ) $ 14,660,070 Audio Digital Other Corporate Total Capital expenditures $ 4,409,592 $ 87,432 $ 2,852 $ ( 1,108 ) $ 4,498,768 Reportable segment information as of December 31, 2022 is as follows: Audio Digital Other Corporate Total Property and equipment, net $ 51,941,687 $ 112,693 $ 67,751 $ 3,684,916 $ 55,807,047 FCC licenses 487,249,798 — — — 487,249,798 Goodwill 10,582,360 922,000 1,761,100 — 13,265,460 Other intangibles, net 1,841,001 992,752 5,206,523 179,663 8,219,939 Reportable segment information as of December 31, 2021 is as follows: Audio Digital Other Corporate Total Property and equipment, net $ 45,696,008 $ 74,547 $ 21,644 $ 4,050,967 $ 49,843,166 FCC licenses 508,413,913 — — — 508,413,913 Goodwill 25,377,447 — 3,219,100 — 28,596,547 Other intangibles, net 1,974,093 — 20,543,451 179,663 22,697,207 6 6 Table of Contents BEASLEY BROADCAST GROUP, INC. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2021 and 2022 Description Balance at Beginning of Period Charged to Costs and Expenses Deductions Balance at End of Period Year ended December 31, 2021: Allowance for doubtful accounts (deducted from accounts receivable) 5,033,035 ( 1,248,394 ) 2,064,164 1,720,477 Valuation allowance for deferred tax assets 308,140 — 3,097 305,043 Year ended December 31, 2022: Allowance for doubtful accounts (deducted from accounts receivable) 1,720,477 1,108,840 952,566 1,876,751 Valuation allowance for deferred tax assets 305,043 — 5,121 299,922 6 7 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.