Mediaco Holding Inc. 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide this information. 26 Table Of Contents ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of MediaCo Holding Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of MediaCo Holding Inc. 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. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. Indianapolis, IN March 24, 2022 27 Table Of Contents MEDIACO HOLDING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year ended December 31, (in thousands, except per share amounts) 2021 2020 NET REVENUES $ 55,493 $ 39,261 OPERATING EXPENSES: Operating expenses excluding depreciation and amortization expense 37,724 32,344 Corporate expenses 8,434 4,338 Depreciation and amortization 3,925 4,081 (Gain) loss on disposal of assets ( 47 ) 197 Total operating expenses 50,036 40,960 OPERATING INCOME (LOSS) 5,457 ( 1,699 ) OTHER EXPENSE: Interest expense ( 11,100 ) ( 9,493 ) Loss on debt extinguishment ( 81 ) — Total other expense ( 11,181 ) ( 9,493 ) LOSS BEFORE INCOME TAXES ( 5,724 ) ( 11,192 ) PROVISION FOR INCOME TAXES 358 15,561 CONSOLIDATED NET LOSS ( 6,082 ) ( 26,753 ) PREFERRED STOCK DIVIDENDS 2,752 2,148 NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ ( 8,834 ) $ ( 28,901 ) Basic and diluted net loss per share attributable to common shareholders: $ ( 1.22 ) $ ( 4.07 ) Basic and diluted weighted average common shares outstanding 7,217 7,094 The accompanying notes to consolidated financial statements are an integral part of these statements. 28 Table Of Contents MEDIACO HOLDING INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, DECEMBER 31, (in thousands, except share data) 2021 2020 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,121 $ 4,171 Accounts receivable, net of allowance for doubtful accounts of $ 313 and $ 503 , respectively 13,756 8,508 Prepaid expenses 1,238 1,247 Other 526 1,274 Total current assets 21,641 15,200 PROPERTY AND EQUIPMENT: Land and buildings 1,736 1,669 Leasehold improvements 8,479 8,479 Broadcasting equipment 5,989 5,927 Outdoor advertising structures 27,344 26,390 Office equipment, computer equipment, software and automobiles 2,566 2,210 Construction in progress 88 37 46,202 44,712 Less accumulated depreciation and amortization ( 19,669 ) ( 17,062 ) Total property and equipment, net 26,533 27,650 INTANGIBLE ASSETS: Indefinite lived intangibles 63,999 63,999 Goodwill 13,102 13,102 Other intangibles 5,060 5,060 82,161 82,161 Less accumulated amortization ( 4,131 ) ( 2,944 ) Total intangible assets, net 78,030 79,217 OTHER ASSETS: Operating lease right of use assets 21,663 23,953 Deposits and other 343 331 Total other assets 22,006 24,284 Total assets $ 148,210 $ 146,351 The accompanying notes to consolidated financial statements are an integral part of these statements. 29 Table Of Contents MEDIACO HOLDING INC . AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS – (CONTINUED) DECEMBER 31, DECEMBER 31, (in thousands, except share data) 2021 2020 LIABILITIES AND RETAINED DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 2,710 $ 2,557 Current maturities of long-term debt 2,754 1,836 Accrued salaries and commissions 1,284 709 Deferred revenue 2,022 1,535 Operating lease liabilities 3,801 3,573 Other 1,412 549 Total current liabilities 13,983 10,759 LONG-TERM DEBT, NET OF CURRENT PORTION 97,527 93,918 OPERATING LEASE LIABILITIES, NET OF CURRENT 16,909 20,176 ASSET RETIREMENT OBLIGATION 7,267 6,316 DEFERRED INCOME TAXES 2,069 1,711 OTHER NONCURRENT LIABILITIES 16 221 Total liabilities 137,771 133,101 COMMITMENTS AND CONTINGENCIES (NOTE 12) SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $ 0.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED; 220,000 SHARES ISSUED AND OUTSTANDING 27,010 24,258 RETAINED DEFICIT: Class A common stock, $ 0.01 par value; authorized 170,000,000 shares; issued and outstanding 3,056,757 shares and 1,785,880 shares at December 31, 2021 and 2020, respectively 31 18 Class B common stock, $ 0.01 par value; authorized 50,000,000 shares; issued and outstanding 5,413,197 shares at December 31, 2021 and 2020 54 54 Class C common stock, $ 0.01 par value; authorized 30,000,000 shares; none issued — — Additional paid-in capital 24,030 20,772 Accumulated deficit ( 40,686 ) ( 31,852 ) Total deficit ( 16,571 ) ( 11,008 ) Total liabilities and deficit $ 148,210 $ 146,351 The accompanying notes to consolidated financial statements are an integral part of these statements. 30 Table Of Contents MEDIACO HOLDING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2021, AND 2020 Class A Common Stock Class B Common Stock (in thousands, except share data) Shares Amount Shares Amount APIC Accumulated Deficit Total BALANCE, DECEMBER 31, 2019 1,666,667 $ 17 5,359,753 $ 54 $ 20,644 $ ( 2,951 ) $ 17,764 Net loss — — — — — ( 26,753 ) ( 26,753 ) Adjustments related to distribution of common shares 16,596 — 53,444 — — — — Issuance of class A to employees, officers and directors 102,617 1 — — 128 — 129 Preferred stock dividends — — — — — ( 2,148 ) ( 2,148 ) BALANCE, DECEMBER 31, 2020 1,785,880 $ 18 5,413,197 $ 54 $ 20,772 $ ( 31,852 ) $ ( 11,008 ) Net loss — — — — — ( 6,082 ) ( 6,082 ) Sale of class A common shares 34,609 1 — — 341 — 342 Issuance of class A to employees, officers and directors 1,236,268 12 — — 2,917 — 2,929 Preferred stock dividends — — — — — ( 2,752 ) ( 2,752 ) BALANCE, DECEMBER 31, 2021 3,056,757 $ 31 5,413,197 $ 54 $ 24,030 $ ( 40,686 ) $ ( 16,571 ) The accompanying notes to consolidated financial statements are an integral part of these statements. 31 Table Of Contents MEDIACO HOLDING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended December 31, (in thousands) 2021 2020 OPERATING ACTIVITIES: Consolidated net loss $ ( 6,082 ) $ ( 26,753 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Loss on debt extinguishment 81 — Depreciation and amortization 3,925 4,081 Amortization of deferred financing costs, including original issue discount 636 590 Noncash interest expense 3,575 1,684 Noncash lease expense 3,016 2,852 Provision for bad debts 71 543 Accretion of asset retirement obligations 848 726 Provision for deferred income taxes 358 15,561 Noncash compensation 3,650 129 (Gain) loss on sale of property and equipment ( 47 ) 197 Changes in assets and liabilities: Accounts receivable ( 5,319 ) 1,896 Prepaid expenses and other current assets 757 416 Other assets ( 784 ) ( 331 ) Accounts payable and accrued liabilities 640 ( 8,761 ) Deferred revenue 487 ( 146 ) Operating lease liabilities ( 3,039 ) ( 2,395 ) Other liabilities 167 68 Net cash provided by (used in) operating activities 2,940 ( 9,643 ) INVESTING ACTIVITIES: Purchases of property and equipment ( 1,403 ) ( 409 ) Other 146 — Net cash used in investing activities ( 1,257 ) ( 409 ) FINANCING ACTIVITIES: Payments on long-term debt ( 3,000 ) ( 1,836 ) Proceeds from long-term debt 4,000 14,000 Proceeds of stock issuances 342 — Payments for debt related costs ( 354 ) ( 24 ) Settlement of tax withholding obligations ( 721 ) — Net cash provided by financing activities 267 12,140 INCREASE IN CASH AND CASH EQUIVALENTS 1,950 2,088 CASH AND CASH EQUIVALENTS: Beginning of period 4,171 2,083 End of period $ 6,121 $ 4,171 SUPPLEMENTAL DISCLOSURES: Cash paid for: Interest $ 6,308 $ 7,067 Income taxes — — Noncash financing transactions: Noncash debt-related costs — 281 The accompanying notes to consolidated financial statements are an integral part of these statements. 32 Table Of Contents MEDIACO HOLDING INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Unless Indicated Otherwise) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization MediaCo Holding Inc. (“MediaCo” or the “Company”) is an owned and operated multi-media company formed in Indiana in 2019, focused on radio, outdoor and digital advertising. Our assets consist of two radio stations, WQHT-FM and WBLS-FM (the “Stations”), which serve the New York City demographic market area that primarily targets Black, Hispanic, and multi-cultural consumers, as well as approximately 3,500 outdoor advertising displays in the Southeast (Georgia, Alabama, South Carolina and Florida) and the Mid-Atlantic (Kentucky, West Virginia and Ohio) regions of the United States. We derive our revenues primarily from radio, outdoor, and digital advertising sales, but we also generate revenues from events, including sponsorships and ticket sales, licensing, and syndication. Unless the context otherwise requires, references to “we”, “us” and “our” refer to MediaCo and its subsidiaries. Basis of Presentation and Consolidation Our 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. Emerging Growth Company The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. 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. Revenue Recognition The Company generates revenue from the sale of services and products 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. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue. Substantially all deferred revenue is recognized within twelve months of the payment date. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Advertising revenues presented in the financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15 % of gross revenues. Allowance for Doubtful Accounts An allowance for doubtful accounts is recorded based on management’s judgment of the collectability of receivables. When assessing the collectability of receivables, management considers, among other things, historical loss experience and existing economic conditions. Amounts are written off after all normal collection efforts have been exhausted. 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 Provision Write-Offs Balance At End Of Period Year ended December 31, 2020 $ 157 543 ( 197 ) $ 503 Year ended December 31, 2021 $ 503 71 ( 261 ) $ 313 33 Table Of Contents Cash and Cash Equivalents MediaCo considers time deposits, money market fund shares and all highly liquid debt investment instruments with original maturities of three months or less to be cash equivalents. At times, such deposits may be in excess of FDIC insurance limits. Property and Equipment Property and equipment are recorded at cost. Depreciation is generally computed using the straight-line method over the estimated useful lives of the related assets, which are 30 to 39 years for buildings, the shorter of economic life or expected lease term for leasehold improvements, five to seven years for broadcasting equipment, five years for automobiles, office equipment and computer equipment, 15 years for advertising structures, and three to five years for software. Maintenance, repairs and minor renewals are expensed as incurred; improvements are capitalized. On a continuing basis, the Company reviews the carrying value of property and equipment for impairment. If events or changes in circumstances were to indicate that an asset carrying value may not be recoverable, a write-down of the asset would be recorded through a charge to operations. See below for more discussion of impairment policies related to our property and equipment. Depreciation expense for the years ended December 31, 2021, and 2020, was $ 2.7 million and $ 2.8 million, respectively. Intangible Assets and Goodwill Indefinite-lived Intangibles and Goodwill Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible net assets acquired. In accordance with ASC Topic 350, “ Intangibles—Goodwill and Other,” goodwill, radio broadcasting licenses, and tradenames are not amortized, but are tested at least annually for impairment at the reporting unit level and unit of accounting level, respectively. We test for impairment annually, on October 1 of each year, or more frequently when events or changes in circumstances or other conditions suggest impairment may have occurred. 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 years ended December 31, 2021, and 2020. Definite-lived Intangibles The Company’s definite-lived intangible assets consist of programming agreements related to our radio business and customer relationships relating to our outdoor advertising business. These are amortized over the period of time the intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows. Advertising Costs Advertising costs are expensed when incurred. Advertising expenses were $ 0.2 million and $ 0.4 million for the years ended December 31, 2021, and 2020, respectively. Asset Retirement Obligations We are required to estimate our obligations upon the termination or non-renewal of a lease to dismantle and remove its advertising structures from the leased land and to reclaim the site to its original condition. The Company records the present value of obligations associated with the retirement of its advertising structures in the period in which the obligation is incurred. When the liability is recorded the cost is capitalized as part of the related advertising structure’s carrying amount. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The significant assumptions used in estimating the asset retirement obligation include the third-party cost of removing the asset, the cost of remediating the leased property to its original condition where required and the timing and number of lease renewals, all of which are estimated based on historical experience. The interest rate used to calculate the present value of such costs over the estimated retirement period is based on an estimated risk adjusted credit rate for the same period. Deferred Revenue and Barter Transactions Deferred revenue includes deferred barter and other transactions in which payments are received prior to the performance of services (e.g., cash-in-advance advertising). Barter transactions are recorded at the estimated fair value of the product or service received. Revenue from barter transactions is recognized when commercials are broadcast. The appropriate expense or asset is recognized when merchandise or services are used or received. 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 Our basic and diluted net loss per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Shares of Series A preferred stock include rights to participate in dividends and distributions to common stockholders on an if-converted basis, and accordingly are considered participating securities. During periods of undistributed losses however, no effect is given to our participating securities since they are not contractually obligated to share in the losses. 34 Table Of Contents The following is a reconciliation of basic and diluted net loss per share attributable to Class A and Class B common shareholders: Year Ended December 31, 2021 2020 Net loss $ ( 6,082 ) $ ( 26,753 ) Preferred dividends 2,752 2,148 Net loss attributable to common shareholders $ ( 8,834 ) $ ( 28,901 ) Basic and diluted weighted average common shares outstanding 7,217 7,094 Net loss per share attributable to common shareholders $ ( 1.22 ) $ ( 4.07 ) 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 . Year Ended December 31, (in thousands) 2021 2020 Convertible Emmis promissory note 2,269 1,370 Convertible Standard General promissory notes 8,725 5,308 Series A convertible preferred stock 9,845 6,005 Restricted stock awards 515 39 Total 21,354 12,722 Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company’s financial statements or income tax returns. Income taxes are recognized during the year in which the underlying transactions are reflected in the consolidated statements of operations. Deferred taxes are provided for temporary differences between amounts of assets and liabilities as recorded for financial reporting purposes and amounts recorded for income tax purposes. After determining the total amount of deferred tax assets, the Company determines whether it is more likely than not that some portion of the deferred tax assets will not be realized. If the Company determines that a deferred tax asset is not likely to be realized, a valuation allowance will be established against that asset to record it at its expected realizable value. Long-Lived Tangible Assets The Company periodically considers whether indicators of impairment of long-lived tangible assets are present. If such indicators are present, the Company determines whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If less, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals and other methods. If the assets determined to be impaired are to be held and used, the Company recognizes an impairment charge to the extent the asset’s carrying value is greater than the fair value. The fair value of the asset then becomes the asset’s new carrying value, which, if applicable, the Company depreciates or amortizes over the remaining estimated useful life of the asset. Estimates The Company has been actively monitoring the COVID-19 situation and its impact globally, as well as domestically and in the markets we serve. Our priority has been the safety of our employees, as well as the informational needs of the communities that we serve. 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 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. 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. 35 Table Of Contents 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 . The extent to which the COVID-19 pandemic and related economic disruptions impact the Company’s business and financial results will depend on future developments including, but not limited to: ( i ) the continued spread, duration and severity of the COVID-19 pandemic, (ii) the occurrence, spread, duration and severity of any subsequent wave or waves of outbreaks after the initial outbreak has subsided, (iii) the actions taken by the U.S. and foreign governments to contain the COVID-19 pandemic, address its impact or respond to the reduction in global and local economic activity, (iv) the occurrence, duration and severity of a global, regional or national recession, depression or other sustained adverse market event, and (v) how quickly and to what extent normal economic and operating conditions can resume. The accounting matters assessed included, but were not limited to, allowance for doubtful accounts, our ability to realize our deferred tax assets, and the carrying value of goodwill, FCC licenses and other long-lived assets. As discussed in Note 13, during 2020, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic and the significant operating losses we incurred, we were unable to conclude that it was more likely than not that we would be able to realize our deferred tax assets; 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 consolidated financial statements in future reporting periods. Reclassifications Certain amounts have been reclassified to conform to the current year presentation. Recent Accounting Pronouncements Not Yet Implemented In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses , which introduces new guidance for an approach based on using expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities and net investments in leases as well as reinsurance and trade receivables. This standard will be effective for us as of January 1, 2023. We are currently evaluating the impact that the adoption of the new standard will have on our consolidated financial statements. 2. COMMON STOCK 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. 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. 3. CONVERTIBLE PREFERRED STOCK 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. This issuance was not a “public offering” because no more than 35 non-accredited investors received securities of the Company, the Company did not engage in general solicitation or advertising with regard to the issuance and sale of shares of MediaCo Series A Preferred Shares and the Company did not make a public offering in connection with the sale of shares of MediaCo Series A Preferred Shares. MediaCo Series A Preferred Shares rank senior in preference to the MediaCo Class A common stock, MediaCo Class B common stock, and the MediaCo Class C common stock. Pursuant to the Articles of Amendment, the ability of the Company to make distributions with respect to, or make a liquidation payment on, any other class of capital stock in the Company designated to be junior to, or on parity with, the MediaCo Series A Preferred Shares, will be subject to certain restrictions, including that (i) the MediaCo Series A Preferred Shares shall be entitled to receive the amount of dividends per share that would be payable on the number of whole common shares of the Company into which each share of MediaCo Series A Preferred Share could be converted, and (ii) the MediaCo Series A Preferred Shares, upon any liquidation, dissolution or winding up of the Company, shall be entitled to a preference on the assets of the Company. Issued and outstanding shares of MediaCo Series A Preferred Shares shall accrue cumulative dividends, payable in kind, at an annual rate equal to the interest rate on any senior debt of the Company (see Note 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, 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. 36 Table Of Contents MediaCo Series A Preferred Shares are redeemable for cash at the option of SG Broadcasting at any time on or after June 12, 2025 , and so the shares are classified outside of permanent equity. The Series A Preferred Shares are also convertible into shares of Class A common stock at the option of SG Broadcasting at any time after May 25, 2020 , with the number of shares of common stock determined by dividing the original contribution, plus accrued dividends, by the 30-day volume weighted average share price of Class A common shares. On and after May 25, 2020, when the conversion option became effective, the Series A Preferred Shares became participating securities and we began calculating earnings per share using the two-class method. 4. SHARE BASED PAYMENTS 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): Awards Price Grants outstanding, beginning of period 103 $ 5.41 Granted 1,366 3.67 Vested (restriction lapsed) ( 363 ) 3.75 Forfeited ( 22 ) 5.56 Grants outstanding, end of period 1,084 $ 3.77 Recognized Non-Cash Compensation Expense 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, 2021 2020 Operating expenses excluding depreciation and amortization $ 1,436 $ — Corporate expenses 2,214 129 Stock-based compensation expense $ 3,650 $ 129 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. 5. REVENUE The Company generates revenue from the sale of services including, but not limited to: (i) on-air commercial broadcast time, (ii) display advertising on outdoor structures, (iii) non-traditional revenues including event-related revenues and event sponsorship revenues, and (iv) digital advertising. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue. Substantially all deferred revenue is recognized within twelve months of the payment date. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Advertising revenues presented in the condensed consolidated financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15 % of gross revenues . Radio Advertising On-air broadcast revenue is recognized when or as performance obligations under the terms of a contract with a customer are satisfied. This typically occurs over the period of time that advertisements are provided, or as an event occurs. Revenues are reported at the amount the Company expects to be entitled to receive under the contract. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the consolidated balance sheets. Substantially all deferred revenue is recognized within twelve months of the payment date. Outdoor Advertising Our outdoor advertising business has approximately 3,500 faces consisting of bulletins, posters and digital billboards. Bulletins are generally large, illuminated advertising structures that are located on major highways and target vehicular traffic. Posters are generally smaller advertising structures that are located on major traffic arteries and city streets and target vehicular and pedestrian traffic. Digital billboards are computer-controlled LED displays where six to eight advertisers rotate continuously, each one having seven to ten seconds to display a static image. Digital billboards are generally located on major traffic arteries and streets. A substantial portion of this revenue is lessor revenue derived from operating leases accounted for under ASC 842, “Leases.” Rental revenue is recognized on a straight-line basis over the term of the respective lease. 37 Table Of Contents Nontraditional Nontraditional revenues principally consist of ticket sales and sponsorship of events our stations conduct in their local market. These revenues are recognized when our performance obligations are fulfilled, which generally coincides with the occurrence of the related event. Digital Digital revenue relates to revenue generated from the sale of digital marketing services (including display advertisements and video 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 Other revenue includes barter revenue, network revenue, and production revenue. The Company provides advertising broadcast time in exchange for certain products and services, including on-air radio programming. These barter arrangements generally allow the Company to preempt such bartered broadcast time in favor of advertisers who purchase time for cash consideration. These barter arrangements are valued based upon the Company’s estimate of the fair value of the products and services received. Revenue is recognized on barter arrangements when we broadcast the advertisements. Advertisements delivered under barter arrangements are typically aired during the same period in which the products and services are consumed. The Company also sells certain remnant advertising inventory to third-parties for cash, and we refer to this as network revenue. The third-parties aggregate our remnant inventory with other broadcasters' remnant inventory for sale to third parties, generally to large national advertisers. This network revenue is recognized as we broadcast the advertisements. In connection with certain outdoor advertising arrangements, the customer may request that the Company produce the billboard wrap (commonly printed on a vinyl material) displaying the customer’s advertisement on our outdoor structure. This production revenue is recognized as the deliverable is made available to the customer or attached to our outdoor structure. Other revenue also includes the management fee received from Billboards LLC (see Note 15.) Disaggregation of revenue The following table presents the Company's revenues disaggregated by revenue source: Year Ended December 31, 2021 2020 Net revenues: Radio Advertising $ 30,012 54.1 % $ 19,129 48.7 % Nontraditional 4,864 8.8 % 761 1.9 % Digital 2,864 5.2 % 2,256 5.7 % Outdoor Advertising (1) 12,725 22.9 % 12,459 31.7 % Other 5,028 9.0 % 4,656 12.0 % Total net revenues $ 55,493 $ 39,261 (1) A substantial portion of this revenue is from lessor revenue derived from operating leases accounted for under ASC 842, “ Leases .” 6. LONG-TERM DEBT Long-term debt was comprised of the following at December 31, 2021, and December 31, 2020: December 31, 2021 December 31, 2020 Senior credit facility $ 68,343 $ 70,972 Notes payable to Emmis 6,154 5,535 Notes payable to SG Broadcasting 27,574 21,400 Less: Current maturities ( 2,754 ) ( 1,836 ) Less: Unamortized original discount ( 1,790 ) ( 2,153 ) Total long-term debt, net of current portion and debt discount $ 97,527 $ 93,918 Senior secured term loan agreement The Company has a five-year senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC, (“GACP”) a Delaware limited liability company, as administrative agent and collateral agent. The Senior Credit Facility bears interest at a rate equal to the London Interbank Offered Rate ("LIBOR"), plus 7.5 %, with a 2.0 % LIBOR floor and a 1.0 % incremental interest rate paid in kind under certain circumstances (as discussed below). The Senior Credit Facility matures on November, 25, 2024 . Prior to subsequent amendments discussed below, the Senior Credit Facility required interest payments on the first business day of each calendar month, and quarterly payments on the principal in an amount equal to one and one quarter percent of the initial aggregate principal amount were due on the last day of each calendar quarter. At its inception, the Senior Credit Facility included covenants pertaining to, among other things, the ability to incur indebtedness, restrictions on the payment of dividends, minimum liquidity requirements, collateral maintenance, minimum Consolidated Fixed Charge Coverage Ratio of 1.10:1.00 , and other customary restrictions. 38 Table Of Contents 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. 4: • SG Broadcasting agreed to contribute up to $ 7.0 million to the Company in the form of subordinated debt, with $ 3.0 million contributed at closing, $ 1.0 million contributed on June 1, 2021, and up to an additional $ 3.0 million to be contributed through June 30, 2022, if necessary, to satisfy certain conditions described in Amendment No. 4; • the Company made a principal payment of $ 3.0 million to reduce borrowings outstanding under the Senior Credit Facility; • no quarterly scheduled principal payments are required through and including the quarter ending March 31, 2022 ; • the Minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) was reduced to 1.00:1.00 from April 1, 2020 through and including December 31, 2022, with it increasing to 1.10:1.00 on and after January 1, 2023; • for purposes of calculating compliance with the Minimum Consolidated Fixed Charge Coverage Ratio, Consolidated EBITDA (as defined in the Senior Credit Facility) includes certain amounts contributed by SG Broadcasting in the form of subordinated debt or equity, including those described above; • for purposes of calculating the Company’s borrowing base under the Senior Credit Facility, the multiple applied to Billboard Cash Flow (as defined in the Senior Credit Facility) increased from 3.5 to 5.0 and the advance rate applied to the radio stations’ FCC licenses increased from 60 % to 70 %; • at any time the multiple applied to Billboard Cash Flow exceeds 3.5 or the advance rate applied to the radio stations’ FCC licenses exceeds 60 %, an incremental annual interest rate of 1.0 % applies and is paid-in-kind monthly; • certain specified events of default were waived; and • an amendment fee of $ 0.4 million was paid in cash. 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 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 . 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. For the year ended December 31, 2021, annual interest of $ 2.2 million was paid-in-kind and added to the principal balance outstanding. 39 Table Of Contents On May 19, 2021, the Company issued to SG Broadcasting a subordinated convertible promissory note (the “May 2021 SG Broadcasting Promissory Note”), in return for which SG Broadcasting contributed $ 3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No. 4. Up to $ 7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note. The May 2021 SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid-in-kind rate, or if no senior credit facility is outstanding, of 6.0 %, and an additional increase of 1.0 % on November 25, 2021 and additional annual increases of 1.0 % following each successive anniversary thereafter. The May 2021 SG Broadcasting Promissory Note matures on May 25, 2025 and interest is payable in-kind through maturity. Subject to prior shareholder approval of the issuance of the shares, the May 2021 SG Broadcasting Promissory Note is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty-day volume weighted average price of the MediaCo Class A common stock on the date of conversion. On June 1, 2021, SG Broadcasting contributed $ 1.0 million to the Company under the May 2021 SG Broadcasting Promissory Note as required by Amendment No. 4 to the Senior Credit Facility. 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, Senior Credit Facility Emmis Notes SG Broadcasting Notes Total 2022 2,754 — — 2,754 2023 3,672 — — 3,672 2024 61,917 6,154 — 68,071 2025 — — 27,574 27,574 2026 — — — — Total $ 68,343 $ 6,154 $ 27,574 $ 102,071 7. FAIR VALUE MEASUREMENTS Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Recurring Fair Value Measurements The Company has no financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2021 or 2020. 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 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 Certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The estimated fair value of financial instruments is determined using the best available market information and appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition. The use of different market assumptions may have a material effect on the estimated fair value amounts. The following methods and assumptions were used to estimate the fair value of financial instruments: • Cash and cash equivalents : The carrying amount of these assets approximates fair value because of the short maturity of these instruments. • Senior Credit Facility : As of December 31, 2021, the fair value and carrying value, excluding original issue discount, of the Company’s Senior Credit Facility debt was $ 68.3 million. This debt is not actively traded and is considered a Level 3 instrument. The Company believes the current carrying value of this debt approximates its fair value. 40 Table Of Contents • Other long-term debt : 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. 8. ACQUISITION 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. 9. LEASES We determine if an arrangement is a lease at inception. We have operating leases for office space, sites upon which advertising structures are built, tower space, equipment and automobiles expiring at various dates through October 2049. Some leases have options to extend and some have options to terminate. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our 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. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. Our lease terms may include options to extend or terminate the lease, which we treat as exercised when it is reasonably certain and there is a significant economic incentive to exercise that option. Our outdoor advertising segment treats evergreen leases as though they will be automatically renewed at the end of each term. Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. Variable lease expense for the 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 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 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, 2021 2020 Lease Cost Operating lease cost $ 5,018 $ 4,986 Other Information Operating cash flows from operating leases 5,858 5,020 Right-of-use assets obtained in exchange for new operating lease liabilities 754 — Weighted average remaining lease term - operating leases (in years) 8.5 9.0 Weighted average discount rate - operating leases 9.4 % 9.1 % As of December 31, 2021, the annual minimum lease payments of our operating lease liabilities were as follows: Year ended December 31, 2022 $ 4,922 2023 4,390 2024 2,890 2025 2,873 2026 2,740 After 2026 12,785 Total lease payments 30,600 Less: imputed interest ( 9,890 ) Total recorded lease liabilities $ 20,710 41 Table Of Contents 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 ended December 31, 2022 $ 7,588 2023 597 2024 82 2025 4 2026 — After 2026 — 10. INTANGIBLE ASSETS AND GOODWILL As of December 31, 2021 and 2020, intangible assets consisted of the following: December 31, 2021 December 31, 2020 Indefinite-lived intangible assets: FCC Licenses $ 63,266 $ 63,266 Trade Name 733 733 Goodwill 13,102 13,102 Definite-lived intangible assets: Programming Contract — 220 Customer List 929 1,896 Total $ 78,030 $ 79,217 In accordance with ASC Topic 350, Intangibles—Goodwill and Other, the Company reviews goodwill and other intangibles at least annually for impairment. In connection with any such review, if the recorded value of goodwill and other intangibles is greater than its fair value, the intangibles are written down and charged to results of operations. FCC licenses are renewed every eight years at a nominal cost, and historically both of our FCC licenses have been renewed at the end of their respective eight-year periods. Since we expect that both of our FCC licenses will continue to be renewed in the future, we believe they have indefinite lives. Given that our radio stations operate in the same geographic market they are considered a single unit of accounting. The trade name is an indefinite-lived intangible asset based on our intention to renew it when legally required and to utilize it going forward. Impairment Testing The Company generally performs its annual impairment review of indefinite-lived intangibles as of October 1 each year. 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. When indicators of impairment are present, the Company will perform an interim impairment test. We will perform additional interim impairment assessments whenever triggering events suggest such testing for the recoverability of these assets is warranted. 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 considers both income and market valuation methods when it performs its impairment tests. Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its market at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in its market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license. Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. The projections incorporated into our license valuations take into consideration 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. 42 Table Of Contents Below are some of the key assumptions used in our income method annual impairment assessments. 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 12.1 % 12.4 % Long-term Revenue Growth Rate 1.3 % 1.0 % Mature Market Share 9.2 % 9.4 % Operating Profit Margin 24.2-29.0% 26.6-29.5% As of both December 31, 2021 and December 31 2020, the carrying amount of the Company’s FCC licenses was $ 63.3 million. Valuation of Trade Name As a result of the Fairway Acquisition, the Company acquired the trade name ‘Fairway’. The trade name is well known in the industry and is being retained for continued market use following the acquisition. This trade name favorably factors into customer purchasing decisions. For the purchase price allocation, the trade name was valued using the relief from royalty method. This method is based on what a company would be willing to pay for a royalty in order to exploit the related benefits of the trade name. The value of the trade name is determined by discounting the inherent after-tax royalty savings associated with ownership or possession of the trade name. The valuation assigned to the trade name as a result of the purchase price accounting was $ 0.7 million. We assess the trade name annually for impairment on October 1 of each year along with our other indefinite-lived intangibles. Valuation of Goodwill 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. 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. Management determines the fair value for the reporting unit by multiplying the cash flows of the reporting unit by an estimated market multiple. Management believes this methodology for valuing outdoor advertising businesses is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons, analyst reports, and market transactions. To corroborate the fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit. If the carrying value of a reporting unit’s goodwill exceeds its fair value, the Company recognizes an impairment charge equal to the difference in the statement of operations. Definite-lived Intangibles 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: December 31, 2021 December 31, 2020 Weighted Average Remaining Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Programming Contract — $ 2,154 $ 2,154 $ — $ 2,154 $ 1,934 $ 220 Customer List 1.0 2,906 1,977 929 2,906 1,010 1,896 Total $ 5,060 $ 4,131 $ 929 $ 5,060 $ 2,944 $ 2,116 The customer list was acquired as part of the Fairway Acquisition on December 13, 2019 and was valued as part of the purchase price allocation performed at closing. Customer relationships represent a source of repeat business. The information contained in such relationships usually includes the preferences of the customer, the buying patterns of the customer, and the history of purchases that have been made by the customer. In calculating the value of Fairway Outdoors’ customer relationships, we employed the multiperiod excess earnings method of the income approach, which estimates value based on the present value of future economic benefits. This methodology resulted in a valuation of $ 2.9 million. A useful life of three years was assigned to the customer list. Total amortization expense from definite-lived 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. 11. ASSET RETIREMENT OBLIGATIONS The Company’s asset retirement obligation includes the costs associated with the removal of its structures, resurfacing of the land and retirement cost, if applicable, related to the Company’s outdoor advertising portfolio. The following table reflects information related to our asset retirement obligations. 43 Table Of Contents Balance at December 31, 2019 $ 5,623 Purchase price allocation adjustment 29 Accretion expense 726 Liabilities settled ( 62 ) Balance at December 31, 2020 $ 6,316 Additions to asset retirement obligations 179 Accretion expense 848 Liabilities settled ( 76 ) Balance at December 31, 2021 $ 7,267 12. OTHER COMMITMENTS AND CONTINGENCIES Commitments 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 2022 $ 1,137 2023 249 2024 — 2025 — 2026 — Thereafter — Total $ 1,386 Litigation 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. 13. INCOME TAXES The provision for income taxes for the years ended December 31, 2021, and 2020, consisted of the following: Year Ended December 31, 2021 2020 Current: Federal $ — $ — State — — Total current — — Deferred: Federal 110 10,146 State 248 5,415 Total deferred 358 15,561 Provision for income taxes $ 358 $ 15,561 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, 2021 2020 Federal statutory income tax rate 21 % 21 % Computed income tax provision at federal statutory rate $ ( 1,203 ) $ ( 2,350 ) State income tax ( 473 ) ( 920 ) Equity based compensation ( 201 ) — Valuation allowance 2,205 18,795 Other 30 36 Provision for income taxes $ 358 $ 15,561 44 Table Of Contents The final determination of our income tax liability may be materially different from our income tax provision. Significant judgment is required in determining our provision for income taxes. Our calculation of the provision for income taxes is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service and other taxing authorities. 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, 2021, and 2020, were as follows: December 31, 2021 December 31, 2020 Deferred tax assets: Intangible assets $ 13,622 $ 14,427 Lease liability 6,230 7,125 Interest deduction carryforward 4,311 2,219 Stock compensation 726 39 Net operating losses 8,674 8,009 Other 412 285 Valuation allowance ( 21,000 ) ( 18,795 ) Total deferred tax assets 12,975 13,309 Deferred tax liabilities Indefinite-lived intangible assets ( 7,056 ) ( 5,939 ) Right of use asset ( 6,477 ) ( 7,186 ) Property and equipment ( 1,511 ) ( 1,895 ) Total deferred tax liabilities ( 15,044 ) ( 15,020 ) Net deferred tax liabilities $ ( 2,069 ) $ ( 1,711 ) A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset (“DTA”) will not be realized. The Company has considered future taxable income and ongoing prudent and feasible tax-planning strategies in assessing the need for the valuation allowance. 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, 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 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. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest benefit that is greater than 50 percent likely of being realized upon ultimate settlement. As of December 31, 2021, the Company has no uncertain tax positions. 14. SEGMENT INFORMATION The Company’s operations are aligned into two business segments: (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 and additional acquisitions thereafter. The Company groups activities that are not considered operating segments in the “All Other” category. These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate expenses, including transaction costs, are not allocated to reportable segments. The Company’s segments operate exclusively in the United States. 45 Table Of Contents 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 Radio Outdoor Advertising All Other Consolidated Net revenues $ 41,727 $ 13,766 $ — $ 55,493 Operating expenses excluding depreciation and amortization expense 28,667 9,057 — 37,724 Corporate expenses — — 8,434 8,434 Depreciation and amortization 667 3,258 — 3,925 Loss on disposal of assets — ( 47 ) — ( 47 ) Operating income (loss) $ 12,393 $ 1,498 $ ( 8,434 ) $ 5,457 Year Ended December 31, 2020 Radio Outdoor Advertising All Other Consolidated Net revenues $ 26,020 $ 13,241 $ — $ 39,261 Operating expenses excluding depreciation and amortization expense 22,827 9,517 — 32,344 Corporate expenses — — 4,338 4,338 Depreciation and amortization 893 3,188 — 4,081 Loss on disposal of assets — 197 — 197 Operating income (loss) $ 2,300 $ 339 $ ( 4,338 ) $ ( 1,699 ) Total Assets Radio Outdoor Advertising Consolidated December 31, 2021 $ 90,485 $ 57,725 $ 148,210 December 31, 2020 84,219 62,132 146,351 15. 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. 16. RELATED PARTY TRANSACTIONS Transaction Agreement with Emmis and SG Broadcasting On June 28, 2019 , MediaCo entered into a Contribution and Distribution Agreement with Emmis and SG Broadcasting, pursuant to which (i) Emmis contributed the assets of its radio stations WQHT-FM and WBLS-FM, in exchange for $ 91.5 million in cash, a $ 5.0 million note and 23.72 % of the common stock of MediaCo, (ii) Standard General purchased 76.28 % of the common stock of MediaCo, and (iii) the common stock of MediaCo received by Emmis was distributed pro rata in a taxable dividend to Emmis’ shareholders on January 17, 2020. The common stock of MediaCo acquired by Standard General is entitled to ten votes per share and the common stock acquired by Emmis and distributed to Emmis’ shareholders is entitled to one vote per share. 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 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. 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 Employee Leasing Agreement was terminated at the expiration of the initial term, so no early termination penalties were incurred. Expense related to the Employee Leasing Agreement was $ 9.6 million for the year ended December 31, 2020. 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. 46 Table Of Contents As part of the acquisition of SG Broadcasting’s controlling interest in the Company from Emmis on November 25, 2019 , MediaCo owed to Emmis the working capital of the stations, but the Company was permitted to collect and retain, for a period of nine months, the first $ 5.0 million of net working capital attributable to the stations as of the closing date. This right to $ 5.0 million of retained net working capital was satisfied in January 2020 and used in the operations of the business. This amount was paid to Emmis during the three months ended September 30, 2020. Convertible Promissory Notes As a result of the transaction described above, on November 25, 2019, we issued convertible promissory notes to both Emmis and SG Broadcasting in the amounts of $ 5.0 million and $ 6.3 million, respectively. 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 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, 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. On November 25, 2020, annual interest of $ 0.5 million and $ 1.1 million was paid in kind and added to the principal balances of the Emmis Convertible Promissory Note and the SG Broadcasting Promissory Note, respectively. Consequently, the principal amount outstanding under the Emmis Convertible Promissory Note and 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. 4. 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. The terms of these notes are described in Note 6. Convertible Preferred Stock 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 $ 2.8 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. Loan Proceeds Participation Agreement On April 22, 2020, MediaCo and Emmis entered into a certain Loan Proceeds Participation Agreement (the “LPPA”) pursuant to which (i) Emmis agreed to use certain of the proceeds of the loan Emmis received pursuant to the Paycheck Protection Program (“PPP”) under Division A, Title I of the CARES Act to pay certain wages of employees leased to MediaCo pursuant to the Employee Leasing Agreement, between Emmis and MediaCo (ii) Emmis agreed to waive up to $ 1.5 million in reimbursement obligations of MediaCo to Emmis under the Employee Leasing Agreement to the extent that the PPP Loan is forgiven, and (iii) MediaCo agreed to promptly pay Emmis an amount equal to 31.56 % of the amount of the PPP Loan, if any, that Emmis is required to repay, up to the amount of the reimbursement obligations forgiven under (ii) above. 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. During 2021, Emmis received notification that the full amount of the loan was forgiven. 47 Table Of Contents Management Agreement for Billboards LLC On August 11, 2020, the board of directors of the Company unanimously authorized the entry into a certain Management Agreement (the “Billboard Agreement”) between Fairway Outdoor LLC (a subsidiary of the Company, “Fairway”) and Billboards LLC (an affiliate of Standard General, “Billboards”). Under the Billboard Agreement, Fairway will manage the billboard business of Billboards in exchange for payments of $ 25,000 per quarter and reimbursement of all out-of-pocket expenses incurred by Fairway in the performance of its duties under the Billboard Agreement. 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. $ 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. 17. SUBSEQUENT EVENTS 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. 48 Table Of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.