What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-03-24 compared with 2021-03-30 · 254 added, 423 removed, 504 unchanged (57% of the section changed)

7 unchanged sentences

We have audited the accompanying consolidated balance sheets of MediaCo Holding Inc.

and Subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated and combined statements of operations, changes in equity, and cash flows for the year ended December 31, 2020 and the ten-months ended December 31, 2019, and the related notes (collectively referred to as the “consolidated and combined financial statements”).

In our opinion, the consolidated and combined financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the year ended December 31, 2020 and the ten-months ended December 31, 2019 in conformity with U.S.

and Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in retained deficit, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

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We believe that our audits provide a reasonable basis for our opinion.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated and combined financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated and combined financial statements, the Company does not expect to meet its liquidity needs or maintain compliance with certain of its financial covenants, which could cause the acceleration of all or a portion of unpaid principal amounts under the Company’s Senior Credit Facility, and the Company's sources of liquidity would be insufficient to satisfy such accelerated obligations if they became due within one year after the date of issuance of its consolidated and combined financial statements.

As a result, the Company has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated and combined financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2019.

Indianapolis, Indiana

Indianapolis, IN

March 24, 2022

1 unchanged sentence

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

For the ten months December 31, 2019

For the year ended December 31, 2020

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended December 31,

(in thousands, except per share amounts)

OPERATING EXPENSES:

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Depreciation and amortization

Loss on disposal of assets

(Gain) loss on disposal of assets

Total operating expenses

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Interest expense

Loss on debt extinguishment

Total other expense

INCOME (LOSS) BEFORE INCOME TAXES

LOSS BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

CONSOLIDATED NET INCOME (LOSS)

CONSOLIDATED NET LOSS

PREFERRED STOCK DIVIDENDS

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

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

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic and diluted net loss per share attributable to common shareholders:

Basic and diluted weighted average common shares outstanding

The accompanying notes to consolidated and combined financial statements are an integral part of these statements.

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACO HOLDING INC.

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CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(in thousands, except share data)

CURRENT ASSETS:

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Total intangible assets, net

OPERATING LEASE RIGHT-OF-USE ASSETS

OTHER ASSETS:

Deferred tax assets

Operating lease right of use assets

Deposits and other

Total other assets

The accompanying notes to consolidated and combined financial statements are an integral part of these statements.

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACO HOLDING INC .

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CONSOLIDATED BALANCE SHEETS – (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

LIABILITIES AND EQUITY (DEFICIT)

(in thousands, except share data)

LIABILITIES AND RETAINED DEFICIT

CURRENT LIABILITIES:

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220,000 SHARES ISSUED AND OUTSTANDING

SHAREHOLDERS’ EQUITY (DEFICIT):

Net parent company investment

RETAINED DEFICIT:

Class A common stock, $ 0.01 par value;

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authorized 50,000,000 shares;

issued and outstanding 5,359,753 shares and 5,413,197 shares at December 31, 2019 and 2020, respectively

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

Class C common stock, $ 0.01 par value;

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Accumulated deficit

Total equity (deficit)

Total liabilities and equity (deficit)

The accompanying notes to consolidated and combined financial statements are an integral part of these statements.

Total deficit

Total liabilities and deficit

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACO HOLDING INC.

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN EQUITY

FOR THE TEN MONTHS ENDED DECEMBER 31, 2019 AND YEAR ENDED DECEMBER 31, 2020

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2021, AND 2020

Class A Common Stock

Class B Common Stock

Net Parent Investment

(in thousands, except share data)

Accumulated Deficit

BALANCE, FEBRUARY 28, 2019

Net income (loss)

Net distributions to Emmis Communications Corp.

Allocated charges funded by Emmis Communications Corp.

Transaction adjustments from transactions amongst shareholders (1)

BALANCE, DECEMBER 31, 2019

Adjustments related to distribution of common shares

Issuance of class A to employees, officers and directors

Preferred stock dividends

BALANCE, DECEMBER 31, 2020

Adjustments relating to distribution of common shares

Sale of class A common shares

Issuance of class A to employees, officers and directors

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BALANCE, DECEMBER 31, 2021

(1) See Note 1 for further discussion.

The accompanying notes to consolidated and combined financial statements are an integral part of these statements.

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACO HOLDING INC.

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

For the ten months December 31, 2019

For the year ended December 31, 2020

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,

(in thousands)

OPERATING ACTIVITIES:

Consolidated net income (loss)

Adjustments to reconcile net income to net cash provided by operating

Noncash accretion of asset retirement obligations

Noncash lease expense

Amortization of deferred financing costs, including original issue discount

Consolidated net loss

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

Loss on debt extinguishment

Depreciation and amortization

Interest paid-in-kind

Amortization of deferred financing costs, including original issue discount

Noncash interest expense

Noncash lease expense

Provision for bad debts

Change in deferred income taxes

Accretion of asset retirement obligations

Provision for deferred income taxes

Noncash compensation

Loss on sale of assets

(Gain) loss on sale of property and equipment

Changes in assets and liabilities:

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Deferred revenue

Operating lease liabilities

Other liabilities

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Purchases of property and equipment

Purchase of Fairway Outdoor

Net cash used in investing activities

FINANCING ACTIVITIES:

Net transactions with Emmis Communications Corp.

Payments on long-term debt

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Payments for debt related costs

Settlement of tax withholding obligations

Net cash provided by financing activities

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Noncash financing transactions:

Consideration received by Emmis Communications Corporation as a result of the Transaction described in Note 1 to the accompanying consolidated and combined financial statements

Value of stock issued to employees under stock compensation program

Noncash debt-related costs

The accompanying notes to consolidated and combined financial statements are an integral part of these statements.

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACO HOLDING INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands Unless Indicated Otherwise)

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MediaCo Holding Inc.

(“MediaCo” or the “Company”) is an Indiana corporation formed in 2019 by Emmis Communications Corporation (“Emmis”) to facilitate the sale of a controlling interest in Emmis’ radio stations WQHT-FM and WBLS-FM (the “Stations”) to SG Broadcasting LLC (“SG Broadcasting”), an affiliate of Standard General L.P.

(“Standard General”) pursuant to an agreement entered into on June 28, 2019.

The sale (the “Transaction”) closed on November 25, 2019 .

On November 26, 2019, the Company’s Form 10 was declared effective and the Company became subject to SEC periodic filing requirements.

As of December 31, 2019, all of the Company’s Class A common stock was held by Emmis and all the Company’s Class B common stock was held by SG Broadcasting.

On January 17, 2020, Emmis distributed the Class A common stock pro rata to Emmis’ shareholders, making MediaCo a publicly traded company listed on the Nasdaq Capital Market.

Unless the context otherwise requires, references to “we”, “us” and “our” refer to MediaCo after giving effect to the contribution of the Stations by Emmis, as well as to the Stations while they were wholly owned by Emmis.

Prior to November 25, 2019, MediaCo had not conducted any business as a separate company and had no assets or liabilities.

The operations of the Stations contributed to us by Emmis on November 25, 2019, are presented as if they were our operations for all historical periods described and at the carrying value of such assets and liabilities reflected in Emmis’ books and records.

On December 9, 2019, the Company’s Board approved the assumption from an affiliate of SG Broadcasting of an agreement to purchase FMG Valdosta, LLC and FMG Kentucky, LLC (“Fairway Outdoor”) from Fairway Outdoor Advertising Group, LLC (the “Fairway Acquisition”).

Closing of the transaction occurred on December 13, 2019.

FMG Valdosta, LLC and FMG Kentucky, LLC are outdoor advertising businesses that operate advertising displays principally across Kentucky, West Virginia, Florida and Georgia.

Our assets consist of two radio stations, WQHT-FM and WBLS-FM, which serve the New York City metropolitan area, as well as approximately 3,300 advertising structures in the Southeast (Valdosta) 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.

On October 25, 2019, in order to more closely align our operations and internal controls with standard market practice, our Board of Directors approved the change in our fiscal year end from the last day in February to December 31.

The result is that the comparative period of this report covers the ten-month period March 1, 2019 to December 31, 2019.

A comparative, unaudited income statement for the year ended December 31, 2019 is presented below.

For the Year Ended December 31, 2019

OPERATING EXPENSES:

Operating expenses excluding depreciation and amortization expense

Corporate expenses

Depreciation and amortization

Total operating expenses

OPERATING INCOME

OTHER EXPENSE:

Interest expense

Total other expense

INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

CONSOLIDATED NET INCOME

PREFERRED STOCK DIVIDENDS

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

NET INCOME PER SHARE- BASIC AND DILUTED

WEIGHTED AVERAGE SHARES OUTSTANDING- BASIC AND DILUTED

Basis of Presentation and Combination

Our Consolidated and Combined Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

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

Our assets consist of two radio stations, WQHT-FM and WBLS-FM (the “Stations”), which serve the New York City demographic market area that primarily targets Black, Hispanic, and multi-cultural consumers, as well as approximately 3,500 outdoor advertising displays in the Southeast (Georgia, Alabama, South Carolina and Florida) and the Mid-Atlantic (Kentucky, West Virginia and Ohio) regions of the United States.

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

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

Basis of Presentation and Consolidation

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

All significant intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments necessary for fair presentation (including normal recurring adjustments) have been included.

For the period from March 1, 2019 through November 25, 2019 of the ten months ended December 31, 2019, MediaCo was 100% owned by Emmis.

Our financial statements for these periods are derived from the books and records of Emmis and were carved-out from Emmis at a carrying value reflective of historical cost in Emmis’ records.

Our historical combined financial results include an allocation of expense related to certain Emmis corporate functions, including executive oversight, legal, finance, human resources, and information technology.

These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue, headcount and other measures.

We consider this expense allocation methodology and results thereof to be reasonable for all periods presented.

However, the allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for all periods presented.

It is impracticable to estimate what the standalone costs of MediaCo would have been in the historical periods.

The equity balance in the consolidated and combined financial statements prior to the Transaction represents the excess of total assets over total liabilities.

All transactions between the Stations and Emmis were considered to be effectively settled in the consolidated and combined financial statements at the time the intercompany transaction was recorded.

The total net effect of the settlement of these intercompany transactions is reflected in the consolidated and combined statements of cash flow as a financing activity and in the consolidated and combined statements of changes in equity as net parent company investment.

Upon consummation of the Transaction, the debt which the Company assumed in connection with transactions between shareholders was recorded to equity, and the total amount of net parent company investment was reclassified to additional paid in capital in the accompanying consolidated and combined financial statements.

In connection with the Transaction, the Company recorded deferred tax assets associated with the difference between the book basis and the tax basis of the Stations’ assets.

The Company also eliminated certain tax accounts of the Stations from historical periods prior to the Transaction.

These adjustments are included as transaction adjustments in the accompanying consolidated and combined statements of changes in equity and resulted in a net increase to equity of $8.4 million as of the Transaction date.

Going Concern

The accompanying consolidated and combined financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Pursuant to ASC Topic 205-40, “ Going Concern ,” the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern within one year of the date of the filing of these financial statements (March 30, 2021).

Management considered the Company’s ability to forecast future cash flows, current financial condition, sources of liquidity and debt service obligations due on or before March 30, 2022.

The Company has been negatively impacted by COVID-19, and expects COVID-19 to continue to negatively impact revenues and profitability for an undetermined period of time.

Management has considered these circumstances in assessing the Company’s liquidity over the next year.

Liquidity is a measure of an entity’s ability to meet potential cash requirements, maintain its assets, fund its operations, and meet the other general cash needs of its business.

The Company’s liquidity is impacted by general economic, financial, competitive, and other factors beyond its control.

The Company’s liquidity requirements consist primarily of funds necessary to pay its expenses, principally debt service and operational expenses, such as labor costs, and other related expenditures.

The Company generally satisfies its liquidity needs through cash provided by operations.

In addition, the Company has taken steps to enhance its ability to fund its operational expenses by reducing various costs and is prepared to take additional steps as necessary.

The Company has debt service obligations of approximately $8.6 million due under its Senior Credit Facility from March 30, 2021 (the date of issuance of these financial statements) through March 30, 2022.

In addition, our Senior Credit Facility 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.

During the year ended December 31, 2020, the Company obtained amendments to our Senior Credit Facility in order to, among other things, suspend the testing of the Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) until July 1, 2021, at which time the Company will once again be required to comply with a Fixed Charge Coverage Ratio of 1.10:1.00.

The Company expects its revenues and profitability will continue to be adversely impacted by the COVID-19 pandemic, and the duration and severity of the impact is unknown as of the date of issuance of these financial statements.

Management anticipates that the Company will be unable to meet its liquidity needs and comply with the covenants of our Senior Credit Facility for the next twelve months with cash and cash equivalents on hand, projected cash flows from operations, and/or additional borrowings.

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).

If the most recent appraisal of the fair value of our FCC licenses obtained in connection with our annual impairment testing as of October 1, 2020 is deemed to be an Acceptable Appraisal (as defined in the Senior Credit Facility) by our lender in its sole discretion, we will have a shortfall in this calculation, requiring a repayment of approximately $8.0 million of Senior Credit Facility debt.

Our lender is not required to accept this appraisal and has the right to obtain a different appraisal, which could result in a different repayment amount, if any.

As a result of the conditions identified above , management has concluded that there is substantial doubt about the Company’s ability to con tinue as a going concern within one year after the date that the financial statements are issued.

T he Company’s independent auditor has included an explanatory paragraph regarding the Company’s ability to continue as a going concern in its report on these consolidated and combined financial statements, which constitutes an event of default under the Senior Credit Facility.

Upon this event of default, under the Senior Credit Facility, the lender may, but is not required to, declare all or any portion of the unpaid principal amount of the Senior Credit Facility , including interest accrued and unpaid, to be immediately due and payable, and/or to increase the annual interest rate in effect by 3 % .

Consequently, amounts outstanding under the Senior Credit Facility as of December 31, 2020 have been classified as current liabilities in the consolidated and combined financial statements.

Furthermore, depending on the duration and severity of the impact the COVID-19 pandemic has on our businesses and any action our lender may take, we may record impairments of assets in the future.

Management intends to request a waiver or amendment to its Senior Credit Facility and seek additional borrowings from Standard General to cure the existing default and anticipated future covenant violations.

While the Company has been successful in obtaining waivers and amendments under its Senior Credit Facility and has also received additional liquidity from Standard General in the past, no assurances can be made that the Company will be successful or receive such liquidity in the future.

Emerging Growth Company

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This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Allocation Policies

The following allocation policies were established by management of Emmis.

Unless otherwise noted, these policies were consistently applied in the historical financial statements.

In the opinion of management, the methods for allocating these costs were reasonable.

It is not practicable to estimate the costs that would have been incurred by us if we had been operated on a stand‑alone basis.

(i) Specifically Identifiable Operating Expenses

Costs which related entirely to the operations of the Stations were attributed entirely to the Stations.

These expenses consisted of costs of personnel who are 100% dedicated to the operations of the Stations, all costs associated with locations that conducted only the business of the Stations and amounts paid to third parties for services rendered to the Stations.

In addition, any costs incurred by Emmis, which were specifically identifiable to the operations of the Stations, were attributed to the Stations.

(ii) Shared Operating Expenses

Emmis incurred the cost of certain corporate general and administrative services and shared services that benefited all of its entities, including the Stations.

These shared services included radio executive management, legal, accounting, information services, telecommunications, human resources, insurance, and intellectual property compliance and maintenance.

These costs were allocated to the Stations based on one of the following allocation methods:

(1) percentage of Company revenues, (2) percentage of Company’s radio revenues, (3) headcount, and (4) pro rata portion based on the number of stations owned by Emmis.

Management determined which allocation method was appropriate based on the nature of the shared service being provided.

The Stations' allocated share of the consolidated Emmis federal tax provision was determined using the separate return method.

Under the separate return method, tax expense or benefit was calculated as if the Stations were subject to their own tax returns.

State income taxes generally were allocated in a similar manner.

Deferred tax assets and liabilities were determined based on differences between the financial reporting and tax bases of assets and liabilities carried by the Stations, and were measured using the enacted tax rates that are expected to be in effect in the period in which these differences were expected to reverse.

The principal components of deferred taxes related to tax amortization of indefinite-lived intangibles, namely FCC licenses, which are not amortized (but subject to impairment testing) for financial reporting purposes.

(iv) Allocated Charges

Allocations of Emmis’ costs were included in the combined condensed statements of operations of the Stations as follows:

For the Ten Months Ended December 31, 2019

For the Year Ended December 31, 2020

Station operating expenses, excluding depreciation and amortization expense

Noncash compensation

Allocated charges from Emmis

Revenue Recognition

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Amounts are written off after all normal collection efforts have been exhausted.

The activity in the allowance for doubtful accounts for the ten months ended December 31, 2019 and the year ended December 31, 2020 was as follows:

Ten months ended December 31, 2019

The activity in the allowance for doubtful accounts for the years ended December 31, 2021, and 2020, was as follows:

Balance At Beginning Of Period

Balance At End Of Period

Year ended December 31, 2020

Year ended December 31, 2021

Cash and Cash Equivalents

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See below for more discussion of impairment policies related to our property and equipment.

Depreciation expense for the ten months ended December 31, 2019 and year ended December 31, 2020 was $0.8 million, and $2.8 million, respectively.

Depreciation expense for the years ended December 31, 2021, and 2020, was $ 2.7 million and $ 2.8 million, respectively.

Intangible Assets and Goodwill

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Impairment exists when the asset carrying values exceed their respective fair values, and the excess is then recorded to operations as an impairment charge.

See Note 10, Intangible Assets and Goodwill, for more discussion of our annual impairment tests performed during the ten-month period ended December 31, 2019 and year ended December 31, 2020.

See Note 10, Intangible Assets and Goodwill, for more discussion of our annual impairment tests performed during the years ended December 31, 2021, and 2020.

Definite-lived Intangibles

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Advertising costs are expensed when incurred.

Advertising expenses were $0.4 million for both the ten months ended December 31, 2019, and year ended December 31, 2020.

Advertising expenses were $ 0.2 million and $ 0.4 million for the years ended December 31, 2021, and 2020, respectively.

Asset Retirement Obligations

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The appropriate expense or asset is recognized when merchandise or services are used or received.

Barter revenues for the ten months ended December 31, 2019, and year ended December 31, 2020 were $0.8 million, and $0.9 million, respectively.

Barter expenses were $0.9 million for both periods.

Barter revenues were $ 1.0 million and $ 0.9 million for the years ended December 31, 2021, and 2020, respectively.

Barter expenses were $ 1.0 million and $ 0.9 million for the years ended December 31, 2021, and 2020, respectively.

Earnings Per Share

3 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 ten-month period ended December 31, 2019, as the preferred stock only became convertible to common stock on May 25, 2020.

For the ten-month period ended December 31, 2019, the Class A shares issued to Emmis at the close of the Transaction have been assumed to be outstanding for the whole ten-month period.

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

For the Ten Months Ended December 31,

For the Year Ended December 31,

Net income (loss)

Year Ended December 31,

Preferred dividends

Net income (loss) attributable to common shareholders

Basic and diluted weighted average Class A shares outstanding

Net income (loss) per share attributable to Class A shareholders

Basic and diluted weighted average Class B shares outstanding

Net income (loss) per share attributable to Class B shareholders

Net loss attributable to common shareholders

Basic and diluted weighted average common shares outstanding

Net loss per share attributable to common shareholders

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

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

There were no potentially dilutive shares for the ten-month period ended December 31, 2019 as neither the convertible promissory notes issued to Emmis and SG Broadcasting described in Note 6, nor the Series A convertible preferred stock, were convertible until May 25, 2020.

The Company did not issue any restricted stock awards until the year ended December 31, 2020.

For the Ten Months Ended December 31,

For the Year Ended

Year Ended December 31,

(in thousands)

Convertible Emmis promissory note

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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.

Furthermore, some of our advertisers have seen a material decline in their businesses and may not be able to pay amounts owed to us when they come due.

If the spread of COVID-19 continues, or is suppressed but later reemerges, 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 consolidated and combined 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.

While not a material amount, some of our advertisers experienced a material decline in their businesses and were not able to pay amounts owed to us when they came due.

Throughout 2021, with the increased availability of vaccines, the U.S.

experienced an easing of restrictions on travel as well as social gatherings and business activities.

However, the broad economic impact of the COVID-19 pandemic remains across multiple sectors, specifically disrupting logistics and global supply chains.

If the spread of COVID-19 reaccelerates, or if supply chain disruptions persist, causing certain advertising categories (e.g., automotive dealers) to advertise less, 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 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.

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 .

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accordingly, we recorded a $ 18.8 million valuation allowance against these assets.

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 and combined financial statements in future reporting periods.

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 consolidated financial statements in future reporting periods.

Reclassifications

Certain amounts for the ten-month period ended December 31, 2019 have been reclassified to conform to the current year presentation.

Recent Accounting Standards Updates

On March 1, 2019, the stations adopted Accounting Standard Update 2016-02, Leases, using the modified retrospective approach, applied at the beginning of the period of adoption, and we elected the package of transitional practical expedients.

The adoption of this standard resulted in recording operating lease liabilities of approximately $14.9 million as of March 1, 2019, along with a corresponding right-of-use asset.

The implementation of this standard did not have an impact on our consolidated and combined statements of operations.

See Note 9 for more discussion of the Company’s leases.

Certain amounts have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements Not Yet Implemented

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This standard will be effective for us as of January 1, 2023.

We are currently evaluating the impact that the adoption of the new standard will have on our consolidated and combined financial statements.

We are currently evaluating the impact that the adoption of the new standard will have on our consolidated financial statements.

MediaCo has authorized Class A common stock, Class B common stock, and Class C common stock.

The rights of these three classes are essentially identical except that each share of Class A common stock has one vote with respect to substantially all matters, each share of Class B common stock has 10 votes with respect to substantially all matters, and each share of Class C common stock has no voting rights with respect to substantially all matters.

At December 31, 2019 all Class A common stock outstanding was owned by Emmis.

Emmis distributed all of these shares of Class A common stock to its shareholders on January 17, 2020.

All Class B common stock outstanding is owned by SG Broadcasting.

At December 31, 2021 and December 31, 2020, no shares of Class C common stock were issued or outstanding.

On August 20, 2021, MediaCo Holding Inc.

entered into an At Market Issuance Sales Agreement with B.

Riley Securities, Inc.(“B.

Riley”), pursuant to which the Company may offer and sell, from time to time through or to B.

Riley, as agent or principal, shares of the Company’s Class A Common Stock, $ 0.01 par value per share, having an aggregate offering price of up to $ 12.5 million.

During the year ended December 31, 2021, Class A stock totaling $ 0.3 million was sold under the agreement.

CONVERTIBLE PREFERRED STOCK

In connection with the Fairway Acquisition, the Company issued to SG Broadcasting 220,000 shares of MediaCo Series A Convertible Preferred Stock, par value $0.01 (the “MediaCo Series A Preferred Shares”) in exchange for a cash contribution of $22.0 million (the “SG Broadcasting Contribution”).

The Company issued to SG Broadcasting 220,000 shares of MediaCo Series A Convertible Preferred Stock, par value $ 0.01 (the “MediaCo Series A Preferred Shares”) in exchange for a cash contribution of $ 22.0 million (the “SG Broadcasting Contribution”).

This issuance of shares was issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended.

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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 6), or if no senior debt is outstanding, 6 %, plus additional increases of 1 % on December 12, 2020 and each anniversary thereof.

On December 13, 2020, dividends of $2.1 million were paid in kind.

On December 13, 2021, and 2020, dividends of $ 2.7 million and $ 2.1 million, respectively, were paid in kind.

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

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SHARE BASED PAYMENTS

The amounts recorded as share based compensation expense consist of a restricted stock award issued to an officer that vests in three equal installments.

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 amounts recorded as share based compensation expense consist of restricted stock awards issued to officers and employees that have vesting periods up to three years.

Awards are typically made pursuant to employment agreements.

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

We determine the fair value of restricted stock and RSUs based on the closing price of our stock on the date of grant.

We generally recognize compensation expense related to restricted stock and RSUs on a straight-line basis over the period during which the restriction lapses.

Forfeitures are recognized in the period in which they occur.

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

Grants outstanding, beginning of period

Vested (restriction lapsed)

Grants outstanding, end of period

Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense recognized by the Company during the ten-month period and year ended December 31, 2019 and 2020.

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

For the Ten Months Ended December 31,

For the Year Ended December 31,

The following table summarizes stock-based compensation expense recognized by the Company for the years ended December 31, 2021, and 2020 .

The Company recognized tax benefits of $ 0.2 million related to stock-based compensation for the year ended December 31, 2021.

No tax benefits were recognized for the year ended December 31, 2020.

Year Ended December 31,

Operating expenses excluding depreciation and amortization

Corporate expenses

Share-based compensation expense

As of December 31, 2020, there was $0.4 million of unrecognized compensation cost related to nonvested share-based compensation arrangements.

Stock-based compensation expense

As of December 31, 2021, there was $ 1.7 million of unrecognized compensation cost related to nonvested stock-based compensation arrangements.

The cost is expected to be recognized over a weighted average period of approximately 1.7 years.

The Company generates revenue from the sale of services including, but not limited to:

(i) on-air commercial broadcast time, (ii) non-traditional revenues including event-related revenues and event sponsorship revenues, (iii) digital advertising and (iv) outdoor advertising.

(i) on-air commercial broadcast time, (ii) display advertising on outdoor structures, (iii) non-traditional revenues including event-related revenues and event sponsorship revenues, and (iv) digital advertising.

Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue.

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We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Advertising revenues presented in the consolidated and combined financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues.

Advertising revenues presented in the condensed consolidated financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15 % of gross revenues .

Radio Advertising

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

Nontraditional

Nontraditional revenues principally consist of ticket sales and sponsorship of events our stations conduct in their local market.

These revenues are recognized when our performance obligations are fulfilled, which generally coincides with the occurrence of the related event.

Digital revenue relates to revenue generated from the sale of digital marketing services (including display advertisements and video sponsorships) to advertisers.

Digital revenues are generally recognized as the digital advertising is delivered.

Outdoor Advertising

Our outdoor advertising business has a total of 3,532 faces consisting of bulletins, posters and digital billboards.

Our outdoor advertising business has approximately 3,500 faces consisting of bulletins, posters and digital billboards.

Bulletins are generally large, illuminated advertising structures that are located on major highways and target vehicular traffic.

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Digital billboards are generally located on major traffic arteries and streets.

A substantial portion of this revenue is lessor revenue derived from operating leases accounted for under ASC 842, “Leases.” Rental revenue is recognized on a straight-line basis over the term of the respective lease.

Other revenue includes barter revenue and network revenue.

Nontraditional

Nontraditional revenues principally consist of ticket sales and sponsorship of events our stations conduct in their local market.

These revenues are recognized when our performance obligations are fulfilled, which generally coincides with the occurrence of the related event.

Digital revenue relates to revenue generated from the sale of digital marketing services (including display advertisements and video sponsorships, but excluding digital billboard advertisements) to advertisers on Company-owned websites and from revenue generated from content distributed across other digital platforms.

Digital revenues are generally recognized as the digital advertising is delivered.

Other revenue includes barter revenue, network revenue, and production revenue.

The Company provides advertising broadcast time in exchange for certain products and services, including on-air radio programming.

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

For the Ten Months Ended December 31, 2019

For the Year Ended December 31, 2020

Year Ended December 31,

Net revenues:

Radio Advertising

Non Traditional

Nontraditional

Outdoor Advertising (1)

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

As of December 31, 2019

As of December 31, 2020

December 31, 2021

December 31, 2020

Senior credit facility

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Senior secured term loan agreement

On November 25, 2019, the Company entered into a $50.0 million, five-year senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC, a Delaware limited liability company, as administrative agent and collateral agent, which included one tranche of additional borrowings of $25.0 million.

The Senior Credit Facility provides for initial borrowings of up to $50.0 million, of which net proceeds of $48.3 million after debt discount of $1.7 million, were paid concurrently to Emmis in connection with SG Broadcasting’s acquisition of a controlling interest in the Company.

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.

The Senior Credit Facility requires 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 are due on the last day of each calendar quarter.

The Senior Credit Facility includes covenants pertaining to, among other things, the ability to incur indebtedness, restrictions on the payment of dividends, minimum Liquidity (as defined in the Senior Credit Facility) of $2.0

million for the period from the effective date until November 25, 2020, $ 2 .5 million for the period from November 26, 2020 until November 25, 2021, and $ 3 .0 million for the period thereafter, collateral maintenance, minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) of 1.10 :1.00, and other customary restrictions.

The Company borrowed $ 23.4 million of the remaining available borrowings to fund the Fairway Acquisition on December 13, 2019.

Proceeds received were $ 22.6 million, net of a debt discount of $ 0.8 million.

The effective interest rate for the year ending December 31, 2020 was 10.3 %.

The obligations under the Senior Credit Facility are secured by a perfected first priority security interest in substantially all of the assets of MediaCo Holding Inc.

and its consolidated subsidiaries.

Amendment No.1 to senior secured term loan agreement

On February 28, 2020, the Company entered into Amendment No.

1 to its Senior Credit Facility, in order to, among other things, increase the maximum aggregate principal amount issuable under the SG Broadcasting Promissory Note to $10.3 million.

Amendment No.2 to senior secured term loan agreement

On March 27, 2020, the Company entered into Amendment No.

2 (“Amendment No.

2”) to its Senior Credit Facility, in order to, among other things, (i) reduce the required Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) to 1.00x from June 30, 2020 to December 31, 2020, (ii) reduce the minimum Liquidity (as defined in the Senior Credit Facility) requirement to $1.0 million through September 30, 2020, (iii) permit equity contributions and loans during calendar year 2020 under the SG Broadcasting Promissory Note and any amendments thereto to count toward Consolidated EBITDA (as defined in the Senior Credit Facility) for purposes of the Consolidated Fixed Charge Coverage Ratio calculation, and (iv) increase the maximum aggregate principal amount issuable under the Second Amended and Restated SG Broadcasting Promissory Note (as defined below) from $10.3 million to $20.0 million.

In connection with Amendment No.

2, the Company incurred an amendment fee of approximately $0.2 million, which was added to the principal amount of the Senior Credit Facility then outstanding.

Amendment No.3 to senior secured term loan agreement

On August 28, 2020, the Company entered into Amendment No.

3 (“Amendment No.

3”) to its Senior Credit Facility, in order, among other things, (i) to modify certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility) such that no quarterly payments shall be required beginning with the fiscal quarter ending September 30, 2020 through and including the fiscal quarter ending June 30, 2021 and (ii) to suspend the testing of the Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) from July 1, 2020 through and including June 30, 2021.

In connection with Amendment No.

3, the Company incurred an amendment fee of approximately $0.1 million, which was added to the principal amount of the Senior Credit Facility then outstanding.

The Senior Credit Facility is carried net of a total unamortized discount of $2.2 million at December 31, 2020.

Going concern reclassification

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).

Our lender is not required to accept this appraisal and has the right to obtain a different appraisal, which could result in a different repayment amount, if any.

As a result of this and other conditions described in Note 1, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued.

The Company’s independent auditor has included an explanatory paragraph regarding the Company’s ability to continue as a going concern in its report on these consolidated and combined financial statements, which constitutes an event of default under the Senior Credit Facility.

Upon this event of default, under the Senior Credit Facility, the lender may, but is not required to, declare all or any portion of the unpaid principal amount of the Senior Credit Facility, including interest accrued and unpaid, to be immediately due and payable, and/or to increase the annual interest rate in effect by 3% .

Consequently, amounts outstanding under the Senior Credit Facility as of December 31, 2020 have been classified as current liabilities in the consolidated and combined financial statements.

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

The Senior Credit Facility bears interest at a rate equal to the London Interbank Offered Rate ("LIBOR"), plus 7.5 %, with a 2.0 % LIBOR floor and a 1.0 % incremental interest rate paid in kind under certain circumstances (as discussed below).

The Senior Credit Facility matures on November, 25, 2024 .

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

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

As of December 31, 2021, several 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 1.0 % 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 year ended December 31, 2021.

For the period May 19, 2021 through December 31, 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 1.0 % applied during this period and additional interest payments of $ 0.4 million were paid in kind during the year ended December 31, 2021, all of which was added to the principal balance outstanding.

$ 0.1 million of incremental interest was accrued at December 31, 2021 and was paid-in-kind after January 1, 2022.

As of December 31, 2021, there is $ 68.3 million outstanding under the Senior Credit Facility, which is carried net of a total unamortized discount of $ 1.8 million.

Emmis Convertible Promissory Note

On November 25, 2019, as part of the consideration owed to Emmis in connection with SG Broadcasting’s acquisition of a controlling interest in the Company , the Company issued to Emmis the Emmis Convertible Promissory Note in the amount of $5.0 million.

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.

Because the Senior Credit Facility prohibits the Company from paying interest in cash on the Emmis Convertible Promissory Note, the Company accrues interest using the rate applicable for interest paid in kind.

The Emmis Convertible Promissory Note is convertible, in whole or in part, into MediaCo Class A common stock at the option of Emmis beginning six months after issuance and at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

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

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

The Emmis Convertible Promissory Note is convertible, in whole or in part, into MediaCo Class A common stock at the option of Emmis and at a strike price equal to the thirty-day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

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

On November 25, 2020, annual interest of $0.5 million was paid in kind and added to the principal balance outstanding.

Consequently, the principal amount outstanding under the Emmis Convertible Promissory Note as of December 31, 2020 was $5.5 million.

SG Broadcasting Promissory Note and amendments thereto

On November 25, 2019, the Company issued the SG Broadcasting Promissory Note, a subordinated convertible promissory note payable by the Company to SG Broadcasting, in return for which SG Broadcasting contributed to MediaCo $6.25 million for working capital and general corporate purposes.

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

Additionally, interest under the 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 beginning six months after issuance and at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

On February 28, 2020, the Company and SG Broadcasting amended and restated the SG Broadcasting Promissory Note such that the maximum aggregate principal amount issuable under the note was increased from $6.3 million to $10.3 million.

Also on February 28, 2020, SG Broadcasting loaned an additional $2.0 million to the Company pursuant to the amended note for working capital purposes.

On March 27, 2020, the Company and SG Broadcasting further amended and restated the SG Broadcasting Promissory Note (the “Second Amended and Restated SG Promissory Note”) such that the maximum aggregate principal amount issuable under the note was increased from $10.3 million to $20.0 million.

On March 27, 2020, SG Broadcasting loaned an additional $3.0 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes.

On August 28, 2020, SG Broadcasting loaned an additional $8.7 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes.

On November 25, 2020, annual interest of $1.1 million was paid in kind and added to the principal balance outstanding.

Consequently, the principal amount outstanding under the Second Amended and Restated SG Broadcasting Promissory Note as of December 31, 2020 was $21.1 million.

On September 30, 2020, SG Broadcasting loaned an additional $0.3 million to the Company pursuant to an additional SG Broadcasting Promissory Note (the “Additional SG Broadcasting Promissory Note”) for working capital purposes.

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 of the Second Amended and Restated SG Promissory Note and additional increases of 1.0% following each successive anniversary of the Second Amended and Restated SG Promissory Note thereafter.

For the year ended December 31, 2021, interest of $ 0.6 million was paid-in-kind and added to the principal balance outstanding which was $ 6.2 million December 31, 2021.

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, 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.

However, the Additional SG Broadcasting Promissory Note contains a limitation on conversion of the outstanding principal and any accrued but unpaid interest thereunder into shares of the Class A Common Stock, par value $0.01 per share (the “Class A Stock”), of the Company, such that the maximum number of shares of Class A Stock to be issued in connection with the conversion of the Additional SG Broadcasting Promissory Note shall not, without the prior approval of the shareholders of the Company, (i) exceed a number of shares equal to 19.9% of the outstanding shares of common stock of the Company immediately prior to September 30, 2020, (ii) exceed a number of shares that would evidence voting power greater than 19.9% of the combined voting power of the outstanding voting securities of the Company immediately prior to September 30, 2020, or (iii) otherwise exceed such number of shares of capital stock of the Company that would violate applicable listing rules of the Nasdaq Stock Market (“Nasdaq”), in each of subsections (i) through (iii), only to the extent required by applicable Nasdaq rules and guidance (the “Share Cap”).

In the event the number of shares of Class A Stock to be issued upon conversion of the Additional SG Broadcasting Promissory Note exceeds the Share Cap, then the portions of the Additional SG Broadcasting Promissory Note that would result in the issuance of any excess shares shall cease being convertible, and the Company shall instead either (x) repay such portions of the Additional SG Broadcasting Promissory Note in cash or (y) obtain shareholder approval of the issuance of shares of Class A Stock in excess of the Share Cap prior to the issuance thereof.

Based on am ounts outstanding at December 31, 2020 , mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:

For the year ended December 31, 2021, annual interest of $ 2.2 million was paid-in-kind and added to the principal balance outstanding.

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 December 31, 2021, there was a total of $ 27.6 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.

In March 2022, the Company extended the ability to draw the remaining $ 3.0 million on the May 2021 SG Broadcasting Promissory Note to June 30, 2023 and intends to draw the amount necessary to remain in compliance with our debt covenants under the Senior Credit Facility throughout the term of the note.

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

Year ended December 31,

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FAIR VALUE MEASUREMENTS

As defined in ASC Topic 820, “ Fair Value Measurement ,” fair value is 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 (exit price).

The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable, market corroborated or generally unobservable.

Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

The Company uses market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

These inputs may be readily observable, corroborated by market data, or generally unobservable.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Recurring Fair Value Measurements

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Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 10, Intangible Assets and Goodwill, and are adjusted to fair value only when the carrying values are more than the fair values, and those described in Note 8, Acquisition, whereby assets and liabilities acquired as part of an acquisition are measured at fair value on the date of the acquisition.

The categorization of the framework used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 10 and Note 8 for more discussion).

The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 10, Intangible Assets and Goodwill, and are adjusted to fair value only when the carrying values are more than the fair values The categorization of the framework used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 10 for more discussion).

Fair Value of Other Financial Instruments

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Other long-term debt :

The Emmis Promissory Note and SG Broadcasting Note are not actively traded and are considered Level 3 instruments.

The Emmis Promissory Note and SG Broadcasting Note are not actively traded and are considered L evel 3 instruments .

The Company believes the current carrying value of this debt approximates its fair value.

On December 9, 2019, the Company’s Board approved the assumption from an affiliate of SG Broadcasting of an agreement to purchase FMG Valdosta, LLC and FMG Kentucky, LLC from Fairway Outdoor Advertising Group, LLC for a purchase price of $43.1 million, subject to customary working capital adjustments.

Closing of the transaction occurred on December 13, 2019.

FMG Valdosta, LLC and FMG Kentucky, LLC are outdoor advertising businesses that operate advertising displays principally across Kentucky, West Virginia, Florida and Georgia.

Fees and expenses associated with the transaction were $1.2 million, which are included in corporate expenses in the consolidated and combined statement of operations.

The acquisition was funded through $23.4 million of additional borrowings under the Senior Credit Facility as described in Note 6, which were net of a debt discount of $0.8 million, resulting in $22.6 million of proceeds.

The remainder was financed by SG Broadcasting through $22.0 million of newly-issued Series A Convertible Preferred Stock.

The Series A Convertible Preferred Stock

pays an in-kind dividend equal to the rate on the existing SG Broadcasting Pro missory Note described in Note 6 , is convertible into MediaCo Class A common stock on the same terms as the SG Broadcasting Promissory Note, and is redeemable at the option of the holder five years and six months after issuance.

The Company believes this is a highly-scalable business model with attractive operative leverage.

As of December 31, 2020, our fair value allocation of the assets acquired and liabilities assumed from Fairway is considered final.

A number of purchase price allocation adjustments were made in the year ended December 31, 2020, which resulted in an increase to goodwill of $1.7 million.

T he Company believes there are growth opportunities in the billboard business, including organic growth and potential acquisitions, that could rapidly scale the business.

The allocations presented in the table below are based upon management’s estimate of the fair value using valuation techniques including income, cost and market approaches.

The most significant asset acquired, property, plant and equipment, was valued using the cost approach.

The purchase price allocation was as follows:

Cash consideration

Due from Seller

Total Consideration

Accounts receivable

Other current assets

Property, plant and equipment

Operating lease, right-of-use assets

Intangibles (Note 10)

Deferred tax asset

Assets Acquired

Accounts payable and accrued expenses

Current portion of operating lease liabilities

Operating lease liabilities, less current portion

Asset retirement obligations (Note 11)

Deferred revenue

Other noncurrent liabilities

Liabilities Assumed

Net Assets Acquired

The Fairway Acquisition was accounted for under the acquisition method of accounting, and, accordingly, the accompanying consolidated and combined financial statements include the results of operations of each acquired entity from the date of acquisition.

The revenues and operating income contributed to MediaCo by the acquired businesses for the period December 13, 2019 to December 31, 2019 were $0.7 million and $0.2 million, respectively.

The operating income is exclusive of acquisition costs of $1.2 million that are included in “All Other” in Note 14.

The following unaudited pro forma financial information for the Company gives effect to the acquisitions as if they had occurred on March 1, 2019.

These pro forma results do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on such date or to project the Company’s results of operations for any future period.

Ten Months Ended December 31, 2019

Net income attributable to common shareholders

Goodwill of $13.1 million was recognized as a result of the purchase which represented the excess of the purchase price over the identifiable acquired assets, $10.8 million of which is deductible for tax purposes.

The goodwill acquired is assigned to the outdoor advertising segment.

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 in 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 operating lease 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.

We have operating leases for office space, tower space, the land on which some outdoor advertising structures are erected, equipment and automobiles expiring at various dates through October 2049.

We have operating leases for office space, sites upon which advertising structures are built, tower space, equipment and automobiles expiring at various dates through October 2049.

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

Beginning March 1, 2019, operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our consolidated balance sheets.

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

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Our lease terms may include options to extend or terminate the lease, which we treat as exercised when it is reasonably certain and there is a significant economic incentive to exercise that option.

Our outdoor advertising segment treats evergreen leases as though they will be automatically renewed at the end of each term.

Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term.

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

Variable lease expense recognized in the year ended December 31, 2020, was not material.

Variable lease expense for the years ended December 31, 2021, and 2020, was $ 0.2 million.

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

Instead, we recognized lease payments in the consolidated and combined statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred.

Instead, we recognized lease payments in the consolidated statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred.

We elected this policy for all classes of underlying assets.

Short-term lease expense recognized in the year ended December 31, 2020, was not material.

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

Short-term lease expense for the years ended December 31, 2021, and 2020, was not material.

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

Year Ended December 31,

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

Year ending December 31,

Year ended December 31,

Total lease payments

Less imputed interest

imputed interest

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 December 31, 2021, is as follows:

Year ending December 31,

Year ended December 31,

INTANGIBLE ASSETS AND GOODWILL

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The Company generally performs its annual impairment review of indefinite-lived intangibles as of October 1 each year.

In the ten months ended December 31, 2019, the Company performed the analysis of the FCC licenses as of November 25, the date of the transfer of the stations from Emmis to MediaCo.

At the time of each impairment review, if the fair value of the indefinite-lived intangible is less than its carrying value, a charge is recorded to results of operations.

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We will perform additional interim impairment assessments whenever triggering events suggest such testing for the recoverability of these assets is warranted.

During the ten-month period ended December 31, 2019 and the year ended December 31, 2020, the Company did not record any impairment losses.

During the years ended December 31, 2021, and 2020, the Company did not record any impairment losses.

Valuation of Indefinite-lived Broadcasting Licenses

Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To determine the fair value of our FCC licenses, the Company considered both income and market valuation methods when it performed its impairment tests.

Under the income method, the Company projects cash flows that would be generated by each of its units of accounting assuming the unit of accounting was commencing operations in its respective market at the beginning of the valuation period.

To determine the fair value of our FCC licenses, the Company considers both income and market valuation methods when it performs its impairment tests.

Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its market at the beginning of the valuation period.

This cash flow stream is discounted to arrive at a value for the FCC license.

The Company assumes the competitive situation that exists in each market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period.

The Company assumes the competitive situation that exists in its market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period.

In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license.

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Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control.

The projections incorporated into our license valuations take current economic conditions into consideration.

The projections incorporated into our license valuations take into consideration the current economic conditions.

Under the market method, the Company uses recent sales of comparable radio stations for which the sales value appeared to be concentrated entirely in the value of the license, to arrive at an indication of fair value.

When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by ASC Topic 350-30-35.

In our case, radio stations in a geographic market cluster are considered a single unit of accounting.

Below are some of the key assumptions used in our income method annual impairment assessments.

In recent years, we have reduced long-term growth rates in the New York market in which we operate based on recent industry trends and our expectations for the market going forward.

November 25, 2019

The long-term growth rates in the New York market in which we operate are based on recent industry trends and our expectations for the market going forward.

October 1, 2021

October 1, 2020

Discount Rate

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The value of the trade name is determined by discounting the inherent after-tax royalty savings associated with ownership or possession of the trade name.

The valuation assigned to the trade name as a result of the purchase price accounting is $0.7 million.

We assess the trade name annually for impairment on October 1 of each year.

We utilized the relief from royalty method to perform our annual impairment assessment.

There was no impairment recognized for the year ended December 31, 2020.

The valuation assigned to the trade name as a result of the purchase price accounting was $ 0.7 million.

We assess the trade name annually for impairment on October 1 of each year along with our other indefinite-lived intangibles.

Valuation of Goodwill

As a result of the Fairway Acquisition discussed in Note 8, the Company has recorded $13.1 million of goodwill.

This accounts for all goodwill on the consolidated balance sheet as of December 31, 2020.

The Fairway Acquisition closed on December 13, 2019 and all assets acquired and liabilities assumed were valued as of that date, resulting in a goodwill valuation of $13.1 million.

As a result of the Fairway Acquisition during 2019, the Company recorded $ 13.1 million of goodwill which accounts for all goodwill on the consolidated balance sheet as of December 31, 2021 and is part of the Outdoor Advertising segment.

ASC Topic 350-20-35 requires the Company to test goodwill for impairment at least annually.

Under ASC 350 we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test.

Given the macroeconomic environment as a result of the COVID-19 pandemic we have elected not to perform the qualitative assessment.

We perform this assessment annually as of October 1.

When performing a quantitative assessment for impairment, the Company uses a market approach to determine the fair value of the reporting unit.

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

As of December 31, 2019

As of December 31, 2020

December 31, 2021

December 31, 2020

Programming Contract

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This methodology resulted in a valuation of $ 2.9 million.

A useful life of three years has been assigned to the customer list.

Total amortization expense from definite-lived intangibles for the ten-month period ended December 31, 2019, and the year ended December 31, 2020, was $0.3 million and $1.3 million, respectively.

The following table presents the Company’s estimate of amortization expense for each of the five succeeding years for definite-lived intangibles:

Year ended December 31,

A useful life of three years was assigned to the customer list.

Total amortization expense from definite-lived intangibles for the years ended December 31, 2021, and 2020, was $ 1.2 million and $ 1.3 million, respectively.

The Company estimates amortization expense of $ 0.9 million for the year ended December 31, 2022 and none thereafter.

ASSET RETIREMENT OBLIGATIONS

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Balance at December 31, 2020

Additions to asset retirement obligations

Accretion expense

Liabilities settled

Balance at December 31, 2021

OTHER COMMITMENTS AND CONTINGENCIES

In addition to the lease payments described in Note 9, t he Company has various commitments under the following types of material contracts:

(i) Management Agreement with Emmis (Note 15) and (ii) other contracts with annual commitments (including payouts to former management of Fairway Outdoor) at December 31, 2020 as follows:

Year ending December 31,

Management Agreement

The initial term of the management agreement with Emmis runs until November 25, 2021, however, MediaCo can terminate the agreement, without penalty, with six months’ notice.

Notice had not been given as of December 31, 2020 and therefore the amount shown in the table above represents the fee that would be due for that six month period.

As of December 31, 2020, WQHT-FM and WBLS-FM leased their employees from Emmis’ wholly owned subsidiary, Emmis Operating Company under an employee leasing arrangement.

Effective January 1, 2021, the Employee Leasing Agreement was terminated, and the Company hired all of the leased employees and assumed the employment and collective bargaining agreements related to leased employees.

The Company has assumed employment contracts totaling $2.9 million over the next three calendar years.

In addition to the lease payments described in Note 9, t he Company has various commitments under contracts that include purchase obligations, employment agreements, and payouts to former management of Fairway Outdoor, with annual commitments at December 31, 2021 as follows:

Year ended December 31,

Total Payments

From time to time, our stations are parties to various legal proceedings arising in the ordinary course of business.

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

The provision for income taxes for the ten months ended December 31, 2019, and year ended December 31, 2020 consisted of the following:

For the ten months ended December 31, 2019

For the year ended December 31, 2020

The provision for income taxes for the years ended December 31, 2021, and 2020, consisted of the following:

Year Ended December 31,

Total current

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Provision for income taxes

The provision for income taxes for the ten-month period ended December 31, 2019, and the year ended December 31, 2020 and differs from that computed at the Federal statutory corporate tax rate as follows:

For the ten months ended December 31, 2019

For the year ended December 31, 2020

The provision for income taxes for the years ended December 31, 2021, and 2020, differs from that computed at the Federal statutory corporate tax rate as follows:

Year Ended December 31,

Federal statutory income tax rate

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State income tax

State tax rate change

Entertainment disallowance

Equity based compensation

Valuation allowance

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As of December 31, 2021, the Company had no open income tax examinations.

The components of deferred tax assets and deferred tax liabilities at December 31, 2019, and December 31, 2020, were as follows:

As of December 31, 2019

As of December 31, 2020

The components of deferred tax assets and deferred tax liabilities at December 31, 2021, and 2020, were as follows:

December 31, 2021

December 31, 2020

Deferred tax assets:

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The Company has considered future taxable income and ongoing prudent and feasible tax-planning strategies in assessing the need for the valuation allowance.

During 2020, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic, the Company concluded that it was more likely than not that it would be unable to realize its deferred tax assets and recorded an $18.8 million valuation allowance against these assets.

As of December 31, 2021, and 2020, the Company recorded a valuation allowance against its deferred tax assets, because the Company's management determined that it was more likely than not that certain assets would not be fully realized , as a result of a sharp deterioration of business activity related to the COVID-19 pandemic.

The Company records certain deferred tax liabilities (“DTLs”) related to indefinite lived intangibles that are not expected to reverse during the carry-forward period.

These DTLs can be considered a source of future taxable income to support realization of net operating losses (“NOLs”) that do not expire and D TAs that upon reversal would give rise to NOLs that do not expire.

With this consideration, the total valuation allowance recorded at December 31, 2020 was $18.8 million, resulting in a net $1.7 million DTL on the balance sheet.

With this consideration, the total valuation allowance recorded at December 31, 2021, and 2020, was $ 21.0 million and $ 18.8 million, respectively, resulting in a net $ 2.1 million and $ 1.7 million DTL, respectively.

The Company has federal net operating losses (“NOLs”) of $ 34.8 million and state NOLs of $ 22.1 million available to offset future taxable income.

The federal and certain state net operating loss carryforwards do not expire, and the remaining state net operating loss carryforwards begin expiring in the year ending December 2039.

The federal and certain state NOL carryforwards do not expire, and the remaining state NOL carryforwards begin expiring in the year ending December 2039.

Accounting Standards Codification paragraph 740-10 clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken within a tax return.

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(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.

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The Company’s segments operate exclusively in the United States.

The accounting policies as described in the summary of significant accounting policies included in Note 1 to these consolidated and combined financial statements, are applied consistently across segments.

The accounting policies as described in the summary of significant accounting policies included in Note 1 to these consolidated financial statements, are applied consistently across segments.

Year Ended December 31, 2021

Outdoor Advertising

Operating expenses excluding depreciation and amortization

Corporate expenses excluding depreciation and amortization expense

Operating expenses excluding depreciation and amortization expense

Corporate expenses

Depreciation and amortization

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Operating income (loss)

Ten Months Ended December 31, 2019

Year Ended December 31, 2020

Outdoor Advertising

Operating expenses excluding depreciation and amortization

Corporate expenses excluding depreciation and amortization expense

Operating expenses excluding depreciation and amortization expense

Corporate expenses

Depreciation and amortization

Loss on disposal of assets

Operating income (loss)

Outdoor Advertising

As of December 31, 2019

As of December 31, 2020

December 31, 2021

December 31, 2020

EMPLOYEE RETENTION CREDITS

The Consolidated Appropriations Act, passed in December 2020, expanded the employee retention credit program through December 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 per quarter.

Due to revenue declines we have experienced, we qualified for approximately $ 1.9 million of employee retention credits during the year ended December 31, 2021, of which $ 1.1 million was received in cash and $ 0.8 million of employment tax withholdings were retained.

$ 1.7 million was recorded in Operating expenses excluding depreciation and amortization expense and $ 0.2 million was recorded in Corporate expenses.

RELATED PARTY TRANSACTIONS

Corporate Overhead and Share-Based Compensation

Until November 25, 2019 of the ten-month period ended December 31, 2019, MediaCo was 100% owned by Emmis.

Our financial statements for these periods are derived from the books and records of Emmis and were carved-out from Emmis at a carrying value reflective of historical cost in Emmis’ records.

We consider this expense allocation methodology and results thereof to be reasonable for all periods presented.

Transaction Agreement with Emmis and SG Broadcasting

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

The Management Agreement with Emmis Operating Company is for an initial term of two years (cancellable by MediaCo after 18 months) under which Emmis provides various services to us, including accounting, human resources, information technology, legal, public reporting and tax.

We pay Emmis an annual fee of $1.3 million in equal monthly installments for these services, plus reimbursement of certain expenses directly related to our operations.

For the year ended December 31, 2020, MediaCo recorded $1.3 million of management fee expense which is included in corporate expenses in the accompanying consolidated and combined statements of operations.

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

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

The Management Agreement with Emmis Operating Company was for an initial term of two years (cancellable by MediaCo after 18 months) under which Emmis provided various services to us, including accounting, human resources, information technology, legal, public reporting and tax.

The Management Agreement was terminated in November 2021 at the expiration of the initial term.

We paid Emmis an annual fee of $ 1.3 million in equal monthly installments for these services, plus reimbursement of certain expenses directly related to our operations.

For the years ended December 31, 2021, and 2020, MediaCo recorded $ 1.1 million and $ 1.3 million, respectively, of management fee expense which is included in corporate expenses in the accompanying consolidated statements of operations, all of which was paid as of December 31, 2021.

The initial term of the Employee Leasing Agreement lasted through December 31, 2020.

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Expense related to the Employee Leasing Agreement was $ 9.6 million for the year ended December 31, 2020.

This expense is recognized in operating expenses excluding depreciation and amortization in the consolidated and combined statements of operations.

This expense was recognized in operating expenses excluding depreciation and amortization in the consolidated statements of operations.

No amount remains unpaid as of December 31, 2021.

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On March 27, 2020, SG Broadcasting loaned an additional $ 3.0 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes.

On August 28, 2020, SG Broadcasting loaned an additional $8.7 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes.

On August 28, 2020, SG Broadcasting loaned an additional $ 8.7 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes, bringing the total principal amount outstanding to $ 20.0 million.

On September 30, 2020, SG Broadcasting loaned an additional $ 0.3 million to the Company pursuant to the Additional SG Broadcasting Promissory Note for working capital purposes.

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Consequently, the principal amount outstanding under the Emmis Convertible Promissory Note and SG Broadcasting Promissory Note as of December 31, 2020 was $ 5.5 million and $ 21.2 million, 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.

On September 30, 2021, annual interest of $ 25 thousand on the Second Amended Promissory Note was paid in kind and added to the principal balance outstanding.

On November 25, 2021, annual interest of $ 0.6 million and $ 2.2 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 SG Broadcasting Promissory Notes as of December 31, 2021 was $ 6.2 million and $ 27.6 million, respectively.

The Company recognized interest expense of $ 0.6 million and $ 2.5 million related to the Emmis Convertible Promissory Note and the SG Broadcasting Promissory Notes, respectively.

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On December 13, 2019, in connection with the Fairway Acquisition, the Company issued to SG Broadcasting 220,000 shares of MediaCo Series A Convertible Preferred Stock.

Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $2.1 million for the year ended December 31, 2020.

On December 13, 2020 $2.1 million of dividends were paid in kind.

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

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

Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $ 2.8 million and $ 2.1 million for the years ended December 31, 2021, and 2020.

On December 13, 2021, and 2020, $ 2.7 million and $ 2.1 million, respectively, of dividends were paid in kind.

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

As of December 31, 2021, and 2020, unpaid cumulative dividends were $ 0.2 million and $ 0.1 million, respectively, and included in the balance of preferred stock in the accompanying consolidated balance sheets.

See Note 3 for a description of the Preferred Stock.

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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.

Accordingly, $1.5 million of leased employee expense was waived by Emmis during the year ended December 31, 2020.

During 2021, Emmis received notification that the full amount of the loan was forgiven.

Management Agreement for Billboards LLC

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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.

$42 thousand of income was recognized in the year ended December 31, 2020 in relation to the Billboard Agreement, all of which was outstanding as of December 31, 2020.

Additionally, Fairway incurred $0.2 million of out-of-pocket expenses for the period, none of which has been reimbursed as of December 31, 2020.

$ 0.1 million of income was recognized in the year ended December 31, 2021 in relation to the Billboard Agreement, none of which was outstanding as of December 31, 2021.

Additionally, Fairway incurred $ 0.2 million of out-of-pocket expenses for the period, $ 0.1 million of which has been reimbursed as of December 31, 2021.

SUBSEQUENT EVENTS

On November 25, 2019, MediaCo entered into an Employee Leasing Agreement by and between Emmis and the Company.

Pursuant to the Employee Leasing Agreement, the Company leased from EOC personnel at radio stations WBLS-FM and WQHT-FM to perform services for the Company consistent with each leased employees’ past practices at the Radio Stations.

EOC serves as the manager of the Radio Stations and of the Company’s financial reporting, SEC compliance and similar obligations as a public company pursuant to a certain Management Agreement between the Company and EOC dated as of November 25, 2019.

The Management Agreement remains in full force and effect.

The Employee Leasing Agreement was terminated at the expiration of the initial term, so no early termination penalties were incurred.

In March 2022, a bonus award of $ 1.3 million was approved and granted to certain employees based on their service and results in 2021.

These awards are to be paid partially in cash and partially in restricted stock awards, which vest immediately upon grant in March 2022.

For the year ended December 31, 2021, we recorded $ 0.5 million of expense related to the cash portion of the awards, of which $ 0.2 million and $ 0.3 million are included in Operating expenses excluding depreciation and amortization expense and Corporate expenses, respectively.

$ 0.8 million was recorded as stock-based compensation expense in 2022.

In March 2022, the Company extended the time we are able to make additional draws on the May 2021 SG Broadcasting Promissory Note.

See Note 6 for further discussion.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk