What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-13 compared with 2021-05-24 · 177 added, 119 removed, 388 unchanged (43% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

OPERATING EXPENSES:

2 unchanged sentences

Depreciation and amortization

Gain on disposal of assets

Loss (gain) on disposal of assets

Total operating expenses

OPERATING INCOME (LOSS)

OPERATING (LOSS) INCOME

OTHER EXPENSE:

Interest expense

LOSS BEFORE INCOME TAXES

(BENEFIT) PROVISION FOR INCOME TAXES

CONSOLIDATED NET LOSS

Loss on debt extinguishment

(LOSS) INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

CONSOLIDATED NET (LOSS) INCOME

PREFERRED STOCK DIVIDENDS

Basic and diluted loss per share attributable to common shareholders

Basic and diluted weighted average number of common shares outstanding

NET (LOSS) INCOME

Basic net (loss) income per share attributable to common shareholders

Basic weighted average number of common shares outstanding

Diluted net (loss) income per share attributable to common shareholders

Diluted weighted average number of common shares outstanding

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

34 unchanged sentences

authorized 170,000,000 shares;

issued and outstanding 1,785,880 shares and 2,437,550 shares at December 31, 2020, and March 31, 2021, respectively

issued and outstanding 1,785,880 shares and 2,828,344 shares at December 31, 2020, and June 30, 2021, respectively

Class B common stock, $ 0.01 par value;

authorized 50,000,000 shares;

issued and outstanding 5,413,197 shares at December 31, 2020, and March 31, 2021

issued and outstanding 5,413,197 shares at December 31, 2020, and June 30, 2021

Class C common stock, $ 0.01 par value;

15 unchanged sentences

BALANCE, MARCH 31, 2020

Net distributions to Emmis Communications Corp.

BALANCE, JUNE 30, 2020

BALANCE, DECEMBER 31, 2020

2 unchanged sentences

BALANCE, MARCH 31, 2021

Issuance of class A to employees, officers and directors

Preferred stock dividends

BALANCE, JUNE 30, 2021

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

2 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities -

Adjustments to reconcile net loss to net cash (used in) provided by operating activities -

Loss on debt extinguishment

Depreciation and amortization

Amortization of debt discount

Noncash interest expense

Noncash lease expense

1 unchanged sentence

Accretion of asset retirement obligation

(Benefit) provision for deferred income taxes

Provision for deferred income taxes

Noncash compensation

6 unchanged sentences

Other liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

7 unchanged sentences

Settlement of tax withholding obligations

Net cash provided by (used in) financing activities

INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Net cash provided by financing activities

INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS:

Beginning of period

6 unchanged sentences

(IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)

March 31, 2021

June 30, 2021

Summary of Significant Accounting Policies

1 unchanged sentence

(“MediaCo” or the “Company”) is an Indiana corporation formed in 2019, focused on radio and outdoor advertising.

Our assets consist of two radio stations, WQHT-FM and WBLS-FM, which serve the New York City metropolitan area, as well as approximately 3,500 outdoor advertising displays in the Southeast (Valdosta) region and Mid-Atlantic (Kentucky) region of the United States.

Our assets consist of two radio stations, WQHT-FM and WBLS-FM, which serve the New York City metropolitan area, as well as approximately 3,600 outdoor advertising displays in the Southeast (Georgia, Alabama and Tennessee) region and Mid-Atlantic (Kentucky) region of the United States.

We derive our revenues primarily from radio and outdoor advertising sales, but we also generate revenues from events, including sponsorships and ticket sales.

23 unchanged sentences

Through the first few months of calendar 2020, the disease became widespread around the world, and on March 11, 2020, the World Health Organization declared a pandemic.

In an effort to mitigate the continued spread of COVID-19, many federal, state and local governments have mandated various restrictions, including travel restrictions, restrictions on non-essential businesses and services, restrictions on public gatherings and quarantining of people who may have been exposed to the virus.

In an effort to mitigate the continued spread of COVID-19, many federal, state and local governments mandated various restrictions, including travel restrictions, restrictions on non-essential businesses and services, restrictions on public gatherings and quarantining of people who may have been exposed to the virus.

These restrictions, in turn, caused the United States economy to decline and businesses to cancel or reduce amounts spent on advertising, negatively impacting our advertising-based businesses.

1 unchanged sentence

If the spread of COVID-19 continues, or is suppressed but later reemerges as a variant strain, and public and private entities continue to implement restrictive measures, we expect that our results of operations, financial condition and cash flows will continue to be negatively affected, the extent to which is difficult to estimate at this time.

The preparation of con densed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period.

of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period.

Due to the uncertain future impacts of the COVID-19 pandemic and the related economic disruptions, actual results could differ from those estimates particularly as it relates to estimates reliant on forecasts and other assumptions reasonably available to the Company .

3 unchanged sentences

The accounting matters assessed included, but were not limited to, allowance for doubtful accounts, our ability to realize our deferred tax assets, and the carrying value of goodwill, FCC licenses and other long-lived assets.

As discussed in Note 7, during the year ended December 31, 2020, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic, the Company determined that it was more likely than not that it would be unable to realize its deferred tax assets and recorded a $18.8 million valuation allowance against these assets through an increase to our provision for income taxes.

As discussed in Note 7, during the three-month period ended June 30, 2020, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic, the Company determined that it was more likely than not that it would be unable to realize its deferred tax assets and recorded a $ 15.6 million valuation allowance against these assets through an increase to our provision for income taxes.

The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material changes to the estimates and material impacts to the Company’s condensed consolidated financial statements in future reporting periods.

4 unchanged sentences

During periods of undistributed losses however, no effect is given to our participating securities since they are not contractually obligated to share in the losses.

We did not have any participating securities for the three-month period ended March 31, 2020, as the preferred stock only became convertible to common stock on May 25, 2020.

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

The following is a reconciliation of basic and diluted net loss per share attributable to common shareholders:

For the Three Months

Ended March 31,

Ended June 30,

Net Income Per Share

Basic net (loss) income per common share:

Net (loss) income

Preferred dividends

Undistributed earnings allocated to participating securities

Net (loss) income attributable to common shareholders

Impact of restricted stock awards

Diluted net (loss) income per common share:

Net (loss) income attributable to common shareholders

For the Six Months

Ended June 30,

Net Income Per Share

Basic and diluted net loss per common share:

Preferred dividends

Net loss attributable to common shareholders

Basic and diluted weighted average Class A shares outstanding

Net loss per share attributable to Class A shareholders

Basic and diluted weighted average Class B shares outstanding

Net loss per share attributable to Class B shareholders

Because we have incurred a net loss for all periods where the Company had potentially dilutive securities, diluted net loss per common share is the same as basic net loss per common share.

The following convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

There were no potentially dilutive shares for the three-month period ended March 31, 2020 as neither the convertible promissory notes issued to Emmis and SG Broadcasting described in Note 5, nor the Series A convertible preferred stock, were convertible until May 25, 2020.

The Company did not issue any restricted stock awards until the three months ended September 30, 2020.

For the Three Months

Ended March 31,

Ended June 30,

For the Six Months

Ended June 30,

(In thousands)

Convertible Emmis promissory note

11 unchanged sentences

Awards to officers are typically made pursuant to employment agreements.

Restricted stock awards are granted out of the Company’s 2020 Equity Compensation Plan.

The following table presents a summary of the Company’s restricted stock grants outstanding at March 31, 2021, and restricted stock activity during the three months ended March 31, 2021 (“Price” reflects the weighted average share price at the date of grant):

Restricted stock awards are granted out of the Company’s 2020 and 2021 Equity Compensation Plans.

The following table presents a summary of the Company’s restricted stock grants outstanding at June 30, 2021, and restricted stock activity during the six months ended June 30, 2021 (“Price” reflects the weighted average share price at the date of grant):

Grants outstanding, beginning of period

1 unchanged sentence

Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense recognized by the Company during the three months ended March 31, 2020 and 2021.

The following table summarizes stock-based compensation expense recognized by the Company during the three and six months ended June 30, 2020 and 2021.

The Company did not recognize any tax benefits related to stock-based compensation during the periods presented below.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Operating expenses, excluding depreciation and amortization

1 unchanged sentence

Share-based compensation expense

As of March 31, 2021, there was $2.2 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements.

As of June 30, 2021, there was $ 2.7 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements.

The cost is expected to be recognized over a weighted average period of approximately 1.2 years.

Intangible Assets

As of December 31, 2020 and March 31, 2021, intangible assets consisted of the following:

As of December 31, 2020 and June 30, 2021, intangible assets consisted of the following:

As of December 31, 2020

As of March 31, 2021

As of June 30, 2021

Indefinite-lived intangible assets

5 unchanged sentences

therefore, they are not subject to amortization, but are tested for impairment at least annually as discussed below.

The carrying amounts of the Company’s FCC licenses were $63.3 million as of December 31, 2020 and March 31, 2021.

The carrying amounts of the Company’s FCC licenses were $ 63.3 million as of December 31, 2020 and June 30, 2021.

Pursuant to our accounting policy, stations in a geographic market cluster are considered a single unit of accounting.

1 unchanged sentence

When indicators of impairment are present, we will perform an interim impairment test.

There have been no indicators of impairment since we performed our annual

impairment assessment as of October 1, 2020 and therefore there has been no need to perform an interim impairment asset.

There have been no indicators of impairment since we performed our annual impairment assessment as of October 1, 2020 and therefore there has been no need to perform an interim impairment assessment.

Future impairment tests may result in additional impairment charges in subsequent periods.

20 unchanged sentences

If the carrying value of a reporting unit’s goodwill exceeds its fair value, the Company recognizes an impairment charge equal to the difference in the statement of operations.

All goodwill on the condensed consolidated balance sheets as of December 31, 2020 and March 31, 2021 is assigned to our Outdoor Advertising segment.

While the COVID-19 pandemic has negatively affected our outdoor operations, as of March 31, 2021, we don’t believe the long-term value of the outdoor business, and thus the associated goodwill, has been impaired.

All goodwill on the condensed consolidated balance sheets as of December 31, 2020 and June 30, 2021 is assigned to our Outdoor Advertising segment.

While the COVID-19 pandemic has negatively affected our outdoor operations, as of June 30, 2021, we don’t believe the long-term value of the outdoor business, and thus the associated goodwill, has been impaired.

The Company conducts its impairment test as of October 1 of each year, unless indications of impairment exist during an interim period.

10 unchanged sentences

Definite-lived intangibles

The following table presents the weighted-average useful life at March 31, 2021, and the gross carrying amount and accumulated amortization for our definite-lived intangible assets at December 31, 2020, and March 31, 2021:

The following table presents the weighted-average useful life at June 30, 2021, and the gross carrying amount and accumulated amortization for our definite-lived intangible assets at December 31, 2020, and June 30, 2021:

As of December 31, 2020

As of March 31, 2021

As of June 30, 2021

(in 000's, except years)

3 unchanged sentences

Customer list

In accordance with Accounting Standards Codification paragraph 360-10, the Company performs an analysis to (i) determine if indicators of impairment of a long-lived asset are present, (ii) test the long-lived asset for recoverability by comparing undiscounted cash flows of the long-lived asset to its carrying value and (iii) measure any potential impairment by comparing the long-lived asset's fair value to its current carrying value.

Total amortization expense from definite-lived intangibles for the three-month periods ended March 31, 2020 and 2021 was $0.4 million and $0.3 million, respectively.

In accordance with ASC paragraph 360-10, the Company performs an analysis to (i) determine if indicators of impairment of a long-lived asset are present, (ii) test the long-lived asset for recoverability by comparing undiscounted cash flows of the long-lived asset to its carrying value and (iii) measure any potential impairment by comparing the long-lived asset's fair value to its current carrying value.

Total amortization expense from definite-lived intangibles for the three and six-month periods ended June 30, 2020 was $ 0.5 million and $ 0.9 million, respectively.

Total amortization expense from definite-lived intangible assets for the three and six-month periods ended June 30, 2021 was $ 0.3 million and $ 0.6 million, respectively.

The following table presents the Company's estimate of future amortization expense for definite-lived intangibles:

12 unchanged sentences

Revenues are reported at the amount the Company expects to be entitled to receive under the contract.

Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the condensed consolidated balance sheet.

Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the condensed consolidated balance sheets.

Substantially all deferred revenue is recognized within twelve months of the payment date.

20 unchanged sentences

This network revenue is recognized as we broadcast the advertisements.

In connection with certain outdoor advertising arrangements, the customer

may request that the Company produce the billboard wrap (common ly printed on a vinyl material) displaying the customer’s advertisement on our outdoor structure.

In connection with certain outdoor advertising arrangements, the customer may request that the Company produce the billboard wrap (commonly printed on a vinyl material) displaying the customer’s advertisement on our outdoor structure.

This production revenue is recognized as the deliverable is made available to the customer or attached to our outdoor structure.

2 unchanged sentences

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Revenue by Source:

5 unchanged sentences

Long Term Debt

Long-term debt was comprised of the following at December 31, 2020, and March 31, 2021:

Long-term debt was comprised of the following at December 31, 2020, and June 30, 2021:

Senior credit facility

6 unchanged sentences

The Company has a five-year senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC, (“GACP”) a Delaware limited liability company, as administrative agent and collateral agent.

The Senior Credit Facility bears interest at a rate equal to the London Interbank Offered Rate ("LIBOR"), plus 7.5%, with a 2.0% LIBOR floor.

Prior to subsequent amendments discussed below, and in Note 12, Subsequent Event, the Senior Credit Facility required interest payments on the first business day of each calendar month, and quarterly payments on the principal in an amount equal to one and one quarter percent of the initial aggregate principal amount were due on the last day of each calendar quarter.

The Senior Credit Facility bears interest at a rate equal to the London Interbank Offered Rate ("LIBOR"), plus 7.5 %, with a 2.0 % LIBOR floor and a 1 % incremental interest rate paid in kind under certain circumstances (as discussed below).

Prior to subsequent amendments discussed below, the Senior Credit Facility required interest payments on the first business day of each calendar month, and quarterly payments on the principal in an amount equal to one and one quarter percent of the initial aggregate principal amount were due on the last day of each calendar quarter.

At its inception, the Senior Credit Facility included covenants pertaining to, among other things, the ability to incur indebtedness, restrictions on the payment of dividends, minimum liquidity requirements, collateral maintenance, minimum Consolidated Fixed Charge Coverage Ratio of 1.10:1.00 , and other customary restrictions.

As of March 31, 2021, a number of amendments had been entered into by the Company and GACP to modify, among other things, certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility) such that no quarterly payments are required beginning with the fiscal quarter ending September 30, 2020 through and including the fiscal quarter ending June 30, 2021 and the testing of the Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) is suspended through and including June 30, 2021.

The Senior Credit Facility currently requires us to maintain Minimum Liquidity (as defined in the Senior Credit Facility) of $2.5 million until November 25, 2021, and $3.0 million for the period thereafter.

In addition, the Senior Credit Facility includes a loan to value calculation, whereby the amount of debt outstanding thereunder is limited to a formula based on 60% of the fair value of the Company’s FCC licenses plus a multiple of the Company’s Billboard Cash Flow (as defined in the Senior Credit Facility).

There is $71.0 million outstanding and the Senior Credit Facility is carried net of a total unamortized discount of $2.0 million at March 31, 2021.

See Note 12, Subsequent Event, for a discussion of Amendment No.

4 to the Senior Credit Facility, executed on May 19, 2021.

As of June 30, 2021, a number of amendments had been entered into by the Company and GACP to modify, among other things, certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility).

On May 19, 2021, the Company entered into Amendment No.

4 to its Senior Credit Facility.

Under the terms of Amendment No.

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

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

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

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

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

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

at any time the multiple applied to Billboard Cash Flow exceeds 3.5 or the advance rate applied to the radio stations’ FCC licenses exceeds 60 %, an incremental annual interest rate of 1 % applies and is paid in kind monthly;

certain specified events of default were waived;

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

As a result of the $ 3.0 million payment made under the amendment, the Company recorded a loss on debt extinguishment of $ 81 thousand during the three-month period ended June 30, 2021.

For the period May 19, 2021 through June 30, 2021, the multiple applied to billboard cash flow was in excess of 3.5 x and the advance rate applied to the Company's FCC Licenses exceeded 60 % in order for the Company to achieve minimal compliance with its loan to value covenant.

Therefore, the incremental annual interest rate of 1 % applied during this period and an additional interest payment of $ 24 thousand was paid in kind on June 1, 2021 and added to the principal balance outstanding.

$ 58 thousand of incremental interest was accrued for at June 30, 2021 and was paid in kind after June 30, 2021.

As of June 30, 2021, there is $ 68.0 million outstanding under the Senior Credit Facility, which is carried net of a total unamortized discount of $ 2.1 million.

Emmis Convertible Promissory Note

The Emmis Convertible Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, plus an additional 1.0% on any payment of interest in kind and, without regard to whether the Company pays such interest in kind, an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter.

The Emmis Convertible Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0 %, plus an additional 1.0 % on any payment of interest in kind and, without regard to whether the Company pays such interest in kind, an additional increase of 1.0 % following the second anniversary of the date of issuance and additional increases of 1.0 % following each successive anniversary thereafter.

Because the Senior Credit Facility prohibits the Company from paying interest in cash on the Emmis Convertible Promissory Note, the Company has been accruing interest since inception using the rate applicable if the interest will be paid in kind.

1 unchanged sentence

The Emmis Convertible Promissory Note matures on November 25, 2024 .

As of March 31, 2021, the principal balance outstanding under the Emmis Convertible Promissory Note is $5.5 million.

Second Amended and Restated SG Broadcasting Promissory Note and Additional SG Broadcasting Promissory Note

The Second Amended and Restated SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter.

As of June 30, 2021, the principal balance outstanding under the Emmis Convertible Promissory Note is $ 5.5 million.

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

The Second Amended and Restated SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0 %, and an additional increase of 1.0 % following the second anniversary of the date of issuance and additional increases of 1.0 % following each successive

anniversary thereafter.

The Second Amended and Restated SG Broadcasting Promissory Note matures on May 25, 2025 .

Additionally, interest under the Second Amended SG Broadcasting Promissory Note is payable in kind through maturity, and is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

The Additional SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter.

The Additional SG Broadcasting Promissory Note matures on March 30, 2025.

The Additional SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0 %, and an additional increase of 1.0 % following the second anniversary of the date of issuance and additional increases of 1.0 % following each successive anniversary thereafter.

The Additional SG Broadcasting Promissory Note matures on May 25, 2025 .

Additionally, interest under the Additional SG Broadcasting Promissory Note is payable in kind through maturity, and is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

As of March 31, 2021, there was a total of $21.4 million outstanding under the Second Amended and Restated SG Broadcasting Promissory Note and the Additional SG Broadcasting Promissory Note.

See Note 12, Subsequent Event, for discussion of an additional contribution from Standard General in the form of subordinated debt subsequent to March 31, 2021, on May 19, 2021.

Based on amounts outstanding at March 31, 2021, mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:

On May 19, 2021, the Company issued to SG Broadcasting a subordinated convertible promissory note (the “May 2021 SG Broadcasting Promissory Note”), in return for which SG Broadcasting contributed $ 3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No.

Up to $ 7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note.

The May 2021 SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0 %, and an additional increase of 1.0 % on November 25, 2021 and additional annual increases of 1.0 % following each successive anniversary thereafter.

The May 2021 SG Broadcasting Promissory Note matures on May 25, 2025 and interest is payable in kind through maturity.

Subject to prior shareholder approval of the issuance of the shares, the May 2021 SG Broadcasting Promissory Note is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

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

4 to the Senior Credit Facility.

As of June 30, 2021, there was a total of $ 25.4 million outstanding under the Second Amended and Restated SG Broadcasting Promissory Note, the Additional SG Broadcasting Promissory Note and the May 2021 SG Broadcasting Promissory Note.

Based on amounts outstanding at June 30, 2021, mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:

Year ended December 31,

6 unchanged sentences

In the opinion of management of the Company, however, there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.

The effective tax rate for the three months ended March 31, 2020 and 2021 was (29)%, and 3% respectively.

During the year ended December 31, 2020, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic, the Company determined that it was more likely than not that it would be unable to realize its deferred tax assets and recorded a $18.8 million valuation allowance against these assets through an increase to our provision for income taxes.

Our effective tax rate for the three months ended March 31, 2021 differs from the statutory tax rate due to the recognition of additional valuation allowance.

The effective tax rate for the six months ended June 30, 2020 and 2021 was 233 % and 8 %, respectively.

During the three-month period ended June 30, 2020, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic and the significant operating losses expected in 2020, the Company determined that it was more likely than not that it would be unable to realize its deferred tax assets and recorded a $ 15.6 million valuation allowance against these assets through an increase to our provision for income taxes.

Our effective tax rate for the six months ended June 30, 2021 differs from the statutory tax rate due to the recognition of additional valuation allowance.

On May 25, 2021, the Company purchased 24 outdoor advertising structures consisting of 41 faces from DS Outdoor LLC dba Hotspots Outdoor for $ 0.4 million.

The structures are located in Alabama.

On June 25, 2021 the Company purchased 8 outdoor advertising structures consisting of 26 faces from Carpenter Outdoor, LLC for $ 0.4 million.

The structures are located in Georgia.

Both acquisitions are accounted for as asset purchases and our accounting for these transactions was finalized during the three months ended June 30, 2021.

The assets associated with both acquisitions are assigned to our Outdoor Advertising segment.

In connection with the two asset acquisitions, the Company recorded $ 0.9 million of property, plant and equipment, $ 0.3 million of right-of-use assets and corresponding operating lease liabilities and $ 0.1 million of additional asset retirement obligations.

We determine if an arrangement is a lease at inception.

1 unchanged sentence

Some leases have options to extend and some have options to terminate.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our condensed consolidated balance sheet.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our condensed consolidated balance sheets.

Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

6 unchanged sentences

Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred.

Variable lease expense recognized in the three months ended March 31, 2021 was not material.

Variable lease expense recognized in the six months ended June 30, 2020 and 2021, was not material.

We elected not to apply the recognition requirements of Accounting Standards Codification 842, “ Leases” , to short-term leases, which are deemed to be leases with a lease term of twelve months or less.

1 unchanged sentence

We elected this policy for all classes of underlying assets.

Short-term lease expense recognized in the three months ended March 31, 2021, was not material.

Short-term lease expense recognized in the six months ended June 30, 2020 and 2021, was not material.

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

Three Months Ended

Six Months Ended

Operating lease cost

4 unchanged sentences

Weighted average discount rate - operating leases

As of March 31, 2021, the annual minimum lease payments of our operating lease liabilities were as follows:

As of June 30, 2021, the annual minimum lease payments of our operating lease liabilities were as follows:

Year ending December 31,

3 unchanged sentences

Total recorded lease liabilities

Our outdoor advertising business generates lessor revenue derived from operating leases accounted for under ASC 842, “Leases.” Minimum fixed lease consideration under non-cancelable operating leases for each of the next five years and thereafter, excluding variable lease consideration, as of March 31, 2021, is as follows:

Year ending December 31,

4 unchanged sentences

Balance at December 31, 2020

Additions to asset retirement obligations

Accretion expense

Balance at March 31, 2021

Liabilities settled

Balance at June 30, 2021

Segment Information

1 unchanged sentence

(i) Radio, and (ii) Outdoor advertising.

Radio includes the operations and results of WQHT-FM and WBLS-FM, and outdoor advertising includes the operations and results of the Fairway businesses acquired in December 2019.

Radio includes the operations and results of WQHT-FM and WBLS-FM, and outdoor advertising includes the operations and results of the Fairway businesses acquired in December 2019 and additional acquisitions thereafter.

The Company groups activities that are not considered operating segments in the “All Other” category.

3 unchanged sentences

The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2020, and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Outdoor Advertising

2 unchanged sentences

Depreciation and amortization

Gain on disposal of assets

Operating income (loss)

Three Months Ended June 30, 2020

Outdoor Advertising

Operating expenses excluding depreciation and amortization expense

Corporate expenses

Depreciation and amortization

Loss on disposal of assets

Operating loss

Six Months Ended June 30, 2021

Outdoor Advertising

Operating expenses excluding depreciation and amortization expense

Corporate expenses

Depreciation and amortization

Gain on disposal of assets

Operating income (loss)

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Outdoor Advertising

2 unchanged sentences

Depreciation and amortization

Loss on disposal of assets

Operating income (loss)

1 unchanged sentence

As of December 31, 2020

As of March 31, 2021

As of June 30, 2021

Employee Retention Credits

The Consolidated Appropriations Act, passed in December 2020, expanded the employee retention credit program and due to revenue declines we have experienced, we qualified for approximately $ 0.9 million of employee retention credits in the second quarter of 2021 and expect to qualify for a similar amount in the third quarter of 2021.

We recognized a receivable of $ 0.9 million as of June 30, 2021.

The credits cover 70 % of qualified wages, plus the cost to continue providing health benefits to our employees, subject to a $ 7 thousand cap per employee.

The Company expects to receive the first $ 0.9 million of retention credits from the IRS following the filing of its Form 941 Employer's Quarterly Federal Tax Return for the second quarter of 2021.

Related Party Transactions

2 unchanged sentences

The common stock of MediaCo acquired by Standard General is entitled to ten votes per share and the common stock acquired by Emmis and distributed to Emmis’ shareholders is entitled to one vote per share.

Emmis will continue to provide management services to the Stations under a Management Agreement, subject to the direction of the MediaCo board of directors which currently consists of four directors appointed by Standard General and three directors appointed by Emmis.

Emmis continues to provide management services to the Stations under a Management Agreement, subject to the direction of the MediaCo board of directors, which now consists of five directors appointed by Standard General and three directors appointed by Emmis.

MediaCo pays Emmis an annual management fee of $ 1.25 million, plus reimbursement of certain expenses directly related to the operation of MediaCo’s business.

The sale closed on November 25, 2019, at which time MediaCo and Emmis also entered into the management agreement (the “Management Agreement”), an employee leasing agreement (the “Employee Leasing Agreement”) and certain other ancillary agreements.

For the three months ended March 31, 2020 and 2021, MediaCo recorded $ 0.3 million of management fee expense, which is included in corporate expenses in the accompanying condensed consolidated statements of operations.

$0.1 million was unpaid as of March 31, 2021 and December 31, 2020 and is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

Emmis has informed us that it does not intend to extend the Management Agreement beyond the initial term which expires in November 2021, but has not yet given formal notice to that effect.

For the six months ended June 30, 2020 and 2021, MediaCo recorded $ 0.6 million of management fee expense, which is included in corporate expenses in the accompanying condensed consolidated statements of operations.

$ 0.1 million was unpaid as of June 30, 2021 and December 31, 2020, and is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

Emmis has given formal notice that it does not intend to extend the Management Agreement beyond the initial term which expires in November 2021 .

Under the Employee Leasing Agreement, the employees of the Stations remained employees of Emmis and we reimbursed Emmis for the cost of these employees, including health and benefit costs.

Expense related to the Employee Leasing Agreement, which is included in operating expenses, was $3.1 million for the three months ended March 31, 2020.

Expense related to the Employee Leasing Agreement, which is included in operating expenses, was $ 4.5 million for the six months ended June 30, 2020.

No amount of expense related to the Employee Leasing Agreement remained unpaid as of December 31, 2020.

10 unchanged sentences

On November 25, 2020, annual interest of $ 0.5 million and $ 1.1 million was paid in kind and added to the principal balances of the Emmis Convertible Promissory Note and the SG Broadcasting Promissory Note, respectively.

Consequently, the principal amount outstanding under the Emmis Convertible Promissory Note and the two SG Broadcasting Promissory Notes as of March 31, 2021 was $5.5 million and $21.4 million, respectively.

The Company recognized interest expense of $0.1 million related to the Emmis Convertible Promissory Note for the three months ended March 31, 2020 and March 31, 2021.

The Company recognized interest expense of $0.2 million and $0.5 million related to the SG Promissory Notes for the three months ended March 31, 2020 and March 31, 2021, respectively.

On May 19, 2021, the Company issued to SG Broadcasting the May 2021 SG Broadcasting Promissory Note, in return for which SG Broadcasting loaned $ 3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No.

Up to $ 7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note.

On June 1, 2021, SG Broadcasting loaned $ 1.0 million to the Company under the May 2021 SG Broadcasting Promissory Note as required by Amendment No.

4 to the Senior Credit Facility.

Consequently, the principal amount outstanding under the Emmis Convertible Promissory Note and the SG Broadcasting Promissory Notes as of June 30, 2021 was $ 5.5 million and $ 25.4 million, respectively.

The Company recognized interest expense of $ 0.3 million related to the Emmis Convertible Promissory Note for the six months ended June 30, 2020 and June 30, 2021.

The Company recognized interest expense of $ 0.4 million and $ 1.1 million related to the SG Promissory Notes for the six months ended June 30, 2020 and June 30, 2021, respectively.

The terms of these notes are described in Note 5.

See Note 12, Subsequent Event, for discussion of an additional contribution from Standard General in the form of subordinated debt subsequent to March 31, 2021, on May 19, 2021.

Convertible Preferred Stock

1 unchanged sentence

MediaCo Series A Preferred Shares rank senior in preference to the MediaCo Class A common stock, MediaCo Class B common stock, and the MediaCo Class C common stock.

Pursuant to the Articles of Amendment, the ability of the Company to make distributions with respect to, or make a liquidation payment on, any other class of capital stock in the Company designated to be junior to, or on parity with, the MediaCo Series A Preferred Shares, will be subject to certain restrictions, including that (i) the MediaCo Series A Preferred Shares shall be entitled to receive the amount of dividends per share that would be payable on the number of whole common shares of the Company into which each share of MediaCo Series A Preferred Share could be converted, and (ii) the MediaCo Series A Preferred Shares, upon any liquidation, dissolution or winding up of the Company, shall be entitled to a preference on the assets of the Company.

Issued and outstanding shares of MediaCo Series A Preferred Shares shall accrue cumulative dividends, payable in kind, at an annual rate equal to the interest rate on any senior debt of the Company (see Note 5), or if no senior debt is outstanding, 6%, plus additional increases of 1% on December 12, 2020 and each anniversary thereof.

The current rate in effect at March 31, 2021 is 10.5%.

Pursuant to the Articles of Amendment, the ability of the Company to make distributions with respect to, or make a liquidation payment on, any other class of capital stock in the Company designated to be junior to, or on parity with, the MediaCo Series A Preferred Shares, will be subject to certain restrictions, including that (i) the MediaCo Series A Preferred Shares shall be entitled to receive the amount of dividends per share that would be payable on the number of whole common shares of the Company into which each share of MediaCo Series A Preferred Shares could be converted, and (ii) the MediaCo Series A Preferred Shares, upon any liquidation, dissolution or winding up of the Company, shall be entitled to a preference on the assets of the Company.

Issued and outstanding shares of MediaCo Series A Preferred Shares shall accrue cumulative dividends, payable in kind, at an annual rate equal to the interest rate on any senior debt of the Company, including any applicable paid in kind rate (see Note 5), or if no senior debt is outstanding, 6 %, plus additional increases of 1 % on December 12, 2020 and each anniversary thereof.

The current rate in effect at June 30, 2021 is 11.5 %.

MediaCo Series A Preferred Shares are redeemable for cash at the option of SG Broadcasting at any time on or after June 12, 2025 , and so the shares are classified outside of permanent equity.

3 unchanged sentences

The payment in kind increased the accrued value of the preferred stock and no additional shares were issued as part of this payment.

Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $0.5 million and $0.6 million for the three months ended March 31, 2020 and 2021, respectively.

As of December 31, 2020, and March 31, 2021, unpaid cumulative dividends were $0.1 million and $0.8 million, and included in the balance of preferred stock in the accompanying condensed consolidated balance sheets.

Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $ 1.1 million and $ 1.3 million for the six months ended June 30, 2020 and 2021, respectively.

As of December 31, 2020, and June 30, 2021, unpaid cumulative dividends were $ 0.1 million and $ 1.4 million, respectively, and included in the balance of preferred stock in the accompanying condensed consolidated balance sheets.

Loan Proceeds Participation Agreement

1 unchanged sentence

Standard General L.P., on behalf of all of the funds for which it serves as an investment advisor, agreed to guaranty MediaCo’s obligations under the LPPA.

As of the date of these financial statements, Emmis believes that the loan will be forgiven as Emmis believes it has spent the proceeds on qualifying expenditures.

During the three months ended June 30, 2021, Emmis received notification that the full amount of the loan has been forgiven.

Management Agreement for Billboards LLC

2 unchanged sentences

The Billboard Agreement has an effective date of August 1, 2020, has a term of three years, and has customary provisions on limitation of liability and indemnification.

$25 thousand of income was recognized in the three months ended March 31, 2021 in relation to the Billboard Agreement, all of which was outstanding as of March 31, 2021.

Additionally, Fairway incurred $49 thousand of out-of-pocket expenses for the period, none of which has been reimbursed as of March 31, 2021.

Subsequent Event

On May 19, 2021, the Company entered into Amendment No.

4 to its Senior Credit Facility.

Under the terms of Amendment No.

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

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

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

at any time the multiple applied to Billboard Cash Flow exceeds 3.5 or the advance rate applied to the radio stations’ FCC licenses exceeds 60%, an incremental annual interest rate of 1% applies and is paid in kind monthly;

certain specified events of default were waived;

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

Also on May 19, 2021, the Company issued to SG Broadcasting a subordinated convertible promissory note (the “May 2021 SG Broadcasting Promissory Note”), in return for which SG Broadcasting contributed $3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No.

Up to $7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note.

The May 2021 SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% on November 25, 2021 and additional annual increases of 1.0% following each successive anniversary thereafter.

The May 2021 SG Broadcasting Promissory Note matures on May 25, 2025 and interest is payable in kind through maturity.

$ 50 thousand of income was recognized in the six months ended June 30, 2021 in relation to the Billboard Agreement, all of which was outstanding as of June 30, 2021.

Additionally, Fairway incurred $ 83 thousand of out-of-pocket expenses for the period, none of which has been reimbursed as of June 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements