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Item 1. Financial Statements

2022-05-12 compared with 2021-11-12 · 131 added, 234 removed, 356 unchanged (51% of the section changed)

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands, except per share amounts)

OPERATING EXPENSES:

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Total operating expenses

OPERATING (LOSS) INCOME

OPERATING LOSS

OTHER EXPENSE:

Interest expense

Loss on debt extinguishment

LOSS BEFORE INCOME TAXES

(BENEFIT) PROVISION FOR INCOME TAXES

PROVISION FOR INCOME TAXES

CONSOLIDATED NET LOSS

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(in thousands, except share data)

September 30,

CURRENT ASSETS:

Cash and cash equivalents

Accounts receivable, net

Accounts receivable, net of allowance for doubtful accounts of $ 226 and $ 313 , respectively

Prepaid expenses

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220,000 SHARES ISSUED AND OUTSTANDING

RETAINED DEFICIT:

Class A common stock, $ 0.01 par value;

authorized 170,000,000 shares;

issued and outstanding 1,785,880 shares and 3,071,001 shares at December 31, 2020, and September 30, 2021, respectively

issued and outstanding 3,157,033 shares and 3,056,757 shares at March 31, 2022, and December 31, 2021, respectively

Class B common stock, $ 0.01 par value;

authorized 50,000,000 shares;

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

issued and outstanding 5,413,197 shares at March 31, 2022, and December 31, 2021

Class C common stock, $ 0.01 par value;

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MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

(In thousands, except share data)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED DEFICIT

Class A Common Stock

Class B Common Stock

(in thousands, except share data)

Accumulated Deficit

BALANCE, DECEMBER 31, 2021

Adjustments related to distribution of common shares

Preferred stock dividends

BALANCE, MARCH 31, 2020

Preferred stock dividends

BALANCE, JUNE 30, 2020

Issuance of class A to employees, officers and directors

Preferred stock dividends

BALANCE, SEPTEMBER 30, 2020

BALANCE, MARCH 31, 2022

BALANCE, DECEMBER 31, 2020

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BALANCE, MARCH 31, 2021

Issuance of class A to employees, officers and directors

Preferred stock dividends

BALANCE, JUNE 30, 2021

Sale of class A common shares

Issuance of class A to employees, officers and directors

Preferred stock dividends

BALANCE, SEPTEMBER 30, 2021

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Loss on debt extinguishment

Adjustments to reconcile net loss to net cash provided by operating activities -

Depreciation and amortization

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Deferred revenue

Operating lease liabilities

Other liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

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CASH FLOWS FROM FINANCING ACTIVITIES:

Payments of long-term debt

Proceeds from long-term debt

Payments for debt-related costs

Proceeds from issuance of class A common stock

Settlement of tax withholding obligations

Net cash provided by financing activities

Net cash used in financing activities

INCREASE IN CASH AND CASH EQUIVALENTS

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)

September 30, 2021

(Dollars in Thousands Unless Indicated Otherwise)

March 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

MediaCo Holding Inc.

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

Our assets consist of two radio stations, WQHT-FM and WBLS-FM, which serve the New York City metropolitan area, as well as approximately 3,600 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 and outdoor advertising sales, but we also generate revenues from events, including sponsorships and ticket sales.

(“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

Basis of Presentation and Consolidation

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

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Fair Value Measurements

As defined in Accounting Standards Codification (“ASC”) Topic 820, 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).

We have no assets or liabilities for which fair value is measured on a recurring basis using Level 3 inputs.

The Company has certain assets that are measured at fair value on a non-recurring basis under circumstances and events that include those described in Note 3, Intangible Assets, and are adjusted to fair value only when the carrying values are more than the fair values.

The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 2, 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 2 for more discussion).

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The Company believes the current carrying value of its long-term debt approximates its fair value.

Use of 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.

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

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

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

Per Share Data

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes.

Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is uncertainty about the length and severity of the consequences caused by the pandemic.

The Company has considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities.

These estimates may change as new events occur and additional information becomes available.

Actual results could differ materially from these estimates.

Earnings Per Share

Our basic and diluted net loss per share is computed using the two-class method.

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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.

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

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

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

For the Three Months

Ended September 30,

Net Loss Per Share

Basic and diluted net loss per common share:

Ended March 31,

Preferred dividends

Net loss attributable to common shareholders

For the Nine Months

Ended September 30,

Net Loss Per Share

Basic and diluted net loss per common share:

Preferred dividends

Basic and diluted weighted average common shares outstanding

Net loss attributable to common shareholders

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entered into an At Market Issuance Sales Agreement with B.

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

Riley Securities, Inc.

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 three-month period ending September 30, 2021, Class A stock totaling $ 0.2 million was sold under the agreement.

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

No shares were sold during the three-month period ended March 31, 2022.

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.

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

Ended March 31,

(in thousands)

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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 condensed consolidated financial statements.

Share Based Payments

The amounts recorded as share based compensation expense consist of restricted stock awards issued to employees and directors.

Awards to officers are typically made pursuant to employment agreements.

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

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

Grants outstanding, beginning of period

Grants outstanding, end of period

Recognized Non-Cash Compensation Expense

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

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Operating expenses, excluding depreciation and amortization

Corporate expenses

Share-based compensation expense

As of September 30, 2021, there was $ 3.0 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements.

The cost is expected to be recognized over a weighted average period of approximately 1.1 years.

Intangible Assets

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

As of December 31, 2020

As of September 30, 2021

We do not expect the adoption of the new standard to have a significant impact on our condensed consolidated financial statements.

INTANGIBLE ASSETS AND GOODWILL

As of March 31, 2022 and December 31, 2021, intangible assets consisted of the following:

March 31, 2022

December 31, 2021

Indefinite-lived intangible assets

Definite-lived intangible assets

Programming contract

Customer list

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

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

The carrying amounts of the Company’s FCC licenses were $ 63.3 million as of March 31, 2022 and December 31, 2021.

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

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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.

To determine the fair value of our FCC licenses, the Company considers both income and market valuation method s 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.

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Valuation of Goodwill

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.

All goodwill on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 is part of the Outdoor Advertising segment.

The Company tests goodwill for impairment at least annually.

W e 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, unless indicators of impairment exist at an interim period.

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

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

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

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

Valuation of Trade Name

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

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.

We assess the trade name annually for impairment as of October 1 of each year, unless indications of impairment exist during an interim period.

We assess the trade name annually for impairment on October 1 of each year, unless indications of impairment exist during an interim period.

Definite-lived intangibles

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

As of December 31, 2020

As of September 30, 2021

(in 000's, except years)

The following table presents the weighted-average useful life at March 31, 2022, and the gross carrying amount and accumulated amortization at March 31, 2022, and December 31, 2021, for our definite-lived intangible asset:

March 31, 2022

December 31, 2021

Weighted Average Remaining Useful Life

Gross Carrying

Programming agreement

Customer list

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

Total amortization expense from definite-lived intangible assets for the three and nine-month periods ended September 30, 2020 was $ 0.5 million and $ 1.0 million, respectively.

Total amortization expense from definite-lived intangible assets for the three and nine-month periods ended September 30, 2021 was $ 0.3 million and $ 0.9 million, respectively.

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

Year ending December 31,

Expected Amortization Expense

Remainder of 2021

The customer list was acquired as part of the purchase of our Outdoor Advertising segment 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 intangible assets for the three-month periods ended March 31, 2022, and 2021 was $ 0.2 million and $ 0.3 million, respectively.

The Company estimates amortization expense of $ 0.7 million for the remainder of the year ending December 31, 2022 and none thereafter.

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

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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.

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

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

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Revenue by Source:

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LONG-TERM DEBT

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

September 30,

Long-term debt was comprised of the following at March 31, 2022, and December 31, 2021:

March 31, 2022

December 31, 2021

Senior credit facility

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

As of March 31, 2022, a number of amendments had been entered into by the Company and GACP to modify, among other things, certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility).

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

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

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

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

Therefore, the incremental annual interest rate of 1 % applied during this period and additional interest payments of $ 174 thousand and $ 199 thousand were paid in kind during the three and nine month periods ended September 30, 2021, respectively, all of which were added to the principal balance outstanding.

$ 57 thousand of incremental interest was accrued for at September 30, 2021 and was paid in kind after September 30, 2021.

As of September 30, 2021, there is $ 68.2 million outstanding under the Senior Credit Facility, which is carried net of a total unamortized discount of $ 2.0 million.

For the period May 19, 2021 through March 31, 2022, 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 $ 0.2 million were paid in kind during the three-month period ended March 31, 2022, all of which were added to the principal balance outstanding.

Incremental interest of $ 0.1 million was accrued at March 31, 2022 and was paid in kind after April 1, 2022.

As of March 31, 2022, there was $ 68.5 million outstanding under the Senior Credit Facility, carried net of a total unamortized discount of $ 1.6 million.

Emmis Convertible Promissory Note

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

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

As of March 31, 2022, the principal balance outstanding under the Emmis Convertible Promissory Note was $ 6.2 million.

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

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

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

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

The Additional SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, 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.

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

The Second Amended and Restated SG Broadcasting Promissory Note and Additional SG Broadcasting Promissory Note (“the SG Broadcasting Promissory Notes”) carry 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 SG Broadcasting Promissory Notes mature on May 25, 2025 .

Additionally, interest under the SG Broadcasting Promissory Notes 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.

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.

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4 to the Senior Credit Facility.

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

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

On March 18, 2022, the Company and SG Broadcasting agreed to amend the May 2021 SG Broadcasting Promissory Note to extend the Company’s ability to draw the remaining $ 3.0 million on the May 2021 SG Broadcasting Promissory Note from June 30, 2022 to June 30, 2023 .

As of March 31, 2022, there was a total of $ 27.6 million outstanding under the SG Broadcasting Promissory Notes and the May 2021 SG Broadcasting Promissory Note.

Based on amounts outstanding at March 31, 2022, 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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In the opinion of management of the Company, however, there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.

The effective tax rate for the nine months ended September 30, 2020 and 2021 was ( 154 )% and ( 8 )%, respectively.

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

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

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

The structures are located in Alabama.

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

The structures are located in Georgia.

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

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

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

The effective tax rate for the three months ended March 31, 2022, and 2021 was 1 % and 3 %, respectively.

Our effective tax rate for the three months ended March 31, 2022 differs from the statutory tax rate primarily due to the recognition of additional valuation allowance.

We determine if an arrangement is a lease at inception.

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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.

Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

As our leases do not provid e 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.

Our O utdoor A dvertising 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 nine months ended September 30, 2021, was not material.

Variable lease expense for the three months ended March 31, 2022, and 2021 was $ 0.1 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.

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We elected this policy for all classes of underlying assets.

Short-term lease expense recognized in the nine months ended September 30, 2021, was not material.

Short-term lease expense recognized in the three months ended March 31, 2022, and 2021 was not material.

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

Three Months Ended

September 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease cost

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for new operating lease liabilities

As of March 31,

As of December 31,

As of September 30,

Weighted average remaining lease term - operating leases (in years)

Weighted average discount rate - operating leases

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

As of March 31, 2022, the annual minimum lease payments of our operating lease liabilities were as follows:

Year ending December 31,

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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 September 30, 2021, is as follows:

Year ending December 31,

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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 Company’s asset retirement obligations include 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.

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Liabilities settled

Balance at September 30, 2021

Balance at March 31, 2022

SEGMENT INFORMATION

The Company’s operations are aligned into two business segments:

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

Radio and 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.

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The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2021, and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.

Three Months Ended September 30, 2021

Outdoor Advertising

Operating expenses excluding depreciation and amortization expense

Corporate expenses

Depreciation and amortization

Operating income (loss)

Three Months Ended September 30, 2020

Three Months Ended March 31, 2022

Outdoor Advertising

4 unchanged sentences

Operating income (loss)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

Outdoor Advertising

4 unchanged sentences

Operating income (loss)

Nine Months Ended September 30, 2020

Outdoor Advertising

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, 2020

As of September 30, 2021

Employee Retention Credits

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

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 $ 0.9 million and $ 1.0 million of employee retention credits during the second quarter and third quarter of 2021, respectively.

During the third quarter, the Company received a payment of $ 0.9 million related to the second quarter employee retention credits and retained $ 0.8 million of employment tax withholdings.

Approximately $ 0.2 million of employee retention credits are recorded in other current assets in the accompanying condensed consolidated balance sheets and are expected to be collected by the Company after filing its Form 941 Employer's Quarterly Federal Tax Return for the third quarter of 2021.

March 31, 2022

December 31, 2021

RELATED PARTY TRANSACTIONS

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

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

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

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

For the nine months ended September, 2020 and 2021, MediaCo recorded $ 0.9 million of management fee expense, which is included in corporate expenses in the accompanying condensed consolidated statements of operations.

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

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

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

Expense related to the Employee Leasing Agreement, which is included in operating expenses, was $ 7.0 million for the nine months ended September 30, 2020.

No amount of expense related to the Employee Leasing Agreement remained unpaid as of 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.

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.

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

The Employee Leasing Agreement was terminated in January 2021 at the expiration of the initial term.

Convertible Promissory Notes

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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.

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

The Company recognized interest expense of $ 0.4 million and $ 0.5 million related to the Emmis Convertible Promissory Note for the nine months ended September 30, 2020 and September 30, 2021, respectively.

The Company recognized interest expense of $ 0.8 million and $ 1.8 million related to the SG Promissory Notes for the nine months ended September 30, 2020 and September 30, 2021, respectively.

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 as of March 31, 2022 and December 31, 2021 under the Emmis Convertible Promissory Note and the SG Broadcasting Promissory Notes was $ 6.2 million and $ 27.6 million, respectively.

The Company recognized interest expense of $ 0.2 million and $ 0.1 million related to the Emmis Convertible Promissory Note for the three months ended March 31, 2022, and 2021, respectively.

The Company recognized interest expense of $ 0.8 million and $ 0.5 million related to the SG Promissory Notes for the three months ended March 31, 2022, and 2021, respectively.

The terms of these notes are described in Note 4.

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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 Shares could be converted, and (ii) the MediaCo Series A Preferred Shares, upon any liquidation, dissolution or winding up of the Company, shall be entitled to a preference on the assets of the Company.

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

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

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

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.

The Series A Preferred Shares are considered participating securities for the purposes of calculating earnings per share under the two-class method.

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

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 4), 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, dividends of $ 2.7 million 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.

Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $ 1.6 million and $ 2.0 million for the nine months ended September 30, 2020 and 2021, respectively.

As of December 31, 2020, and September 30, 2021, unpaid cumulative dividends were $ 0.1 million and $ 2.1 million, respectively, and included in the balance of preferred stock in the accompanying condensed consolidated balance sheets.

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, 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.

The Series A Preferred Shares are participating securities and we calculate earnings per share using the two-class method.

Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $ 0.8 million and $ 0.6 million, respectively, for the three months ended March 31, 2022, and 2021.

As of March 31, 2022, and December 31, 2021, unpaid cumulative dividends were $ 1.0 million and $ 0.2 million, respectively, and included in the balance of preferred stock in the accompanying condensed consolidated balance sheets.

Loan Proceeds Participation Agreement

1 unchanged sentence

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

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

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

Management Agreement for Billboards LLC

1 unchanged sentence

Under the Billboard Agreement, Fairway will manage the billboard business of Billboards in exchange for payments of $ 25 thousand 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.

Income recognized in relation to the Billboard Agreement for the nine-month periods ended September 30, 2020 and 2021 was $ 17 thousand and $ 0.1 million, respectively.

Additionally, Fairway incurred $ 0.1 million of out-of-pocket expenses for both of the nine-month periods ended September 30, 2020 and 2021.

As of both December 31, 2020 and September 30, 2021, there was $ 0.2 million due from Billboards in relation to the Billboard Agreement and recorded as a receivable in the accompanying condensed consolidated balance sheets, comprised of both the management fee and out of pocket expenses due to Fairway.

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

$ 25 thousand of income was recognized and $ 0.1 million of out-of-pocket expenses were incurred for the three months ended March 31, 2022 in relation to the Billboard Agreement, all of which was outstanding at March 31, 2022.

SUBSEQENT EVENTS

On April 1, 2022, MediaCo Holding Inc.

(the “Company”) received a deficiency letter (the “Nasdaq Letter”) from the Nasdaq Listing Qualifications Department, notifying the Company that the Company is not in compliance with Nasdaq Listing Rule 5550(b)(3), which requires the Company to maintain net income from continuing operations of $ 0.5 million from continuing operations in the most recently completed fiscal year, or in two of the three most recently completed fiscal years (the “Minimum Net Income Requirement”), nor is it in compliance with either of the alternative listing standards, market value of listed securities or stockholders’ equity.

The Company’s failure to comply with the Minimum Net Income Requirement was based on the Company’s filing of its Annual Report on Form 10-K for the year ended December 31, 2021, reporting net loss from continuing operations of $ 6.1 million.

Pursuant to the Nasdaq Letter, the Company has 45 calendar days from the date of the Nasdaq Letter to submit a plan to regain compliance, and intends to submit such a plan during this period.

If it accepts the plan, Nasdaq can grant an extension of up to 180 calendar days from the date of the Nasdaq Letter to evidence compliance.

In the event the plan is not accepted by the Nasdaq staff, or in the event the plan is granted but the Company fails to regain compliance within the plan period, the Company would have the right to a hearing before an independent panel.

The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing.

The Company intends to take all reasonable measures available to regain compliance under the Nasdaq Listing Rules and remain listed on Nasdaq.

Neither the Nasdaq Letter nor the Company’s noncompliance have an immediate effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “MDIA.”

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

What changed 10-Q

Item 1. Financial Statements