What changed in this filing

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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-24 · 30 added, 61 removed, 187 unchanged (33% of the section changed)

7 unchanged sentences

Consequently, weakness in the United States economy generally has an adverse effect on our advertising revenue and, therefore, our results of operations.

For example, the economic tumult caused by the on-going coronavirus (“COVID-19”) pandemic has had a material adverse effect on our advertising revenues, particularly at our New York radio stations.

For example, the economic tumult caused by the COVID-19 pandemic has had a material adverse effect on our advertising revenues at our New York radio stations.

Even in the absence of a general recession or downturn in the economy, an individual business sector (such as the automotive industry) that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn.

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Radio revenues in the New York market in which we operate are highly correlated to the performance of the economy of United States.

New York market revenues, as measured by the accounting firm Miller Kaplan Arase LLP ("Miller Kaplan"), during the year ended December 31, 2021, and the year ended December 31, 2020, were up 41.2% and down 31.3%, respectively.

During these same periods, the U.S.

New York market revenues, as measured by the accounting firm Miller Kaplan Arase LLP (“Miller Kaplan”), during the year ended December 31, 2022, and the year ended December 31, 2021, w ere up 1.6% and up 41.2%, respectively.

During these s ame periods, the U.S.

Bureau of Economic Analysis reports that U.S.

real gross domestic product grew 5.7% and contracted 3.4%, respectively.

real gross domestic product grew 2.1% and 5.9% , respectively.

We may lose audience share and advertising revenue to competing radio stations or other types of media.

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We delayed Summer Jam in 2021 until late August due to slower than expected reopening of the New York/New Jersey market.

Summer Jam in 2021 was further impacted by the effects of hurricane Henri.

In 2022, Summer Jam was moved back to June, however the ticket sales and advertising were negatively impacted by a combination of the pandemic, weather forecast and the suppressed market conditions, resulting in a loss in revenue.

Our ability to successfully hold future Summer Jams is dependent on, among other things, state and local restrictions on crowd sizes and people’s willingness to attend large gatherings.

We cannot predict when, if ever, advertising levels will return to pre-pandemic levels.

In our outdoor advertising markets, we face competition from larger and more diversified outdoor advertisers and other forms of advertising.

While we enjoy a significant market share in our outdoor advertising markets, we face competition from other outdoor advertisers and other media in these markets.

Although we are one of the largest companies focusing exclusively on outdoor advertising in our outdoor advertising markets, we compete in these markets against larger companies with diversified operations, such as television, radio and other broadcast media.

These diversified competitors have the advantage of cross-selling complementary advertising products to advertisers.

We also compete against an increasing variety of out-of-home advertising media, such as advertising displays in shopping centers, malls, airports, stadiums, movie theaters and supermarkets, and on taxis, trains and buses.

To a lesser extent, we also face competition from other forms of media, including radio, newspapers, direct mail advertising, telephone directories and the Internet.

We may be unable to compete against these forms of advertising competition in the future, and the competitive pressures that we face could adversely affect our profitability or financial performance.

Outdoor advertising is subject to expansive federal, state and local regulation, which could negatively affect our operations and financial results.

Outdoor advertising is subject to governmental regulation at the federal, state and local levels.

Regulations generally restrict the size, spacing, lighting and other aspects of advertising structures and pose a significant barrier to entry and expansion in many markets.

Federal law, principally the Highway Beautification Act of 1965, or the HBA, regulates outdoor advertising on Federal-Aid Primary, Interstate and National Highway Systems roads.

The HBA requires states, through the adoption of individual Federal/State Agreements, to “effectively control” outdoor advertising along these roads and mandates a state compliance program and state standards regarding size, spacing and lighting.

These state standards, or their local and municipal equivalents, may be modified over time in response to legal challenges or otherwise, which may have an adverse effect on our business.

All states have passed billboard control statutes and regulations at least as restrictive as the federal requirements, including laws requiring the removal of illegal signs at the owner’s expense (and without compensation from the state).

Additionally, some existing regulations restrict or prohibit digital billboards and similar types of digital displays.

Digital billboards have been developed and introduced relatively recently into the market on a large scale;

however, existing regulations that currently do not apply to them by their terms could be revised or new regulations could be enacted to impose greater restrictions.

These regulations may impose greater restrictions on digital billboards due to alleged concerns over aesthetics or driver safety.

The introduction of new, or the expansion of existing, regulations by federal, state or local governments may impose undue restrictions or burdens on our outdoor advertising business and could materially harm our outdoor advertising operations and financial results.

Summer Jam is highly sensitive to public tastes and is dependent on our ability to secure popular artists, and our ticketing revenue can be impacted by changes in consumer preferences.

Our business is highly sensitive to rapidly changing public tastes and is dependent on the availability of popular artists and events.

Summer Jam depends in part on our ability to anticipate the tastes of consumers and to offer events that appeal to them.

Since we rely on unrelated parties to create and perform at live music events, any unwillingness or lack of availability of popular artists could limit our ability to generate revenue.

In particular, there are a limited number of artists that can headline or who can sell out larger venues, which we rent.

Accordingly, our ticket sales success depends, in part, upon the ability of these third parties to correctly anticipate public demand for particular events, as well as the availability of popular artists, entertainers and teams.

In addition, artists are booked four to eight months in advance of the beginning of the tour and we often agree to pay an artist a fixed guaranteed amount prior to our receiving any revenue.

Therefore, if the public is not receptive, or an artist cancels, we may incur a loss depending on the amount of the fixed guarantee or incurred costs relative to any revenue earned, as well as revenue we could have earned at booked venues.

Furthermore, consumer preferences change from time to time, and our failure to anticipate, identify or react to these changes could result in reduced demand for our services, which would adversely affect our business, financial condition and results of operations.

We are a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements.

Investors in our Class A common stock will not have the same protections afforded to shareholders of companies that are subject to such requirements.

As of December 31, 2021, SG Broadcasting controlled approximately 94.7% of the outstanding voting interests of MediaCo through its ownership of MediaCo Class B common stock.

As of December 31, 2022, SG Broadcasting controlled approximat ely 72.4% of the outstanding voting interests of MediaCo through its ownership of MediaCo Class B common stock.

Because of the voting power of SG Broadcasting, we are considered a “controlled company” for purposes of Nasdaq requirements.

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Under FCC rules, radio licenses are granted for a term of eight years.

We are currently in the renewal process for our licenses with the FCC.

While we are not aware of facts or circumstances that would prevent us from having our current licenses renewed, though third parties could challenge our renewal applications, and there can be no assurance that the licenses will be renewed or that renewals will not include conditions or qualifications that could adversely affect our business and operations.

Failure to obtain the renewal of a ny of our broadcast licenses would likely have a material adverse effect on our business and operations.

Our licenses were successfully renewed in 2022 through June 2030.

While we are not aware of facts or circumstances that would prevent us from having our current licenses renewed in the future, third parties could challenge our renewal applications and there can be no assurance that the licenses will be renewed or that renewals will not include conditions or qualifications that could adversely affect our business and operations.

Failure to obtain the renewal of any of our broadcast licenses would likely have a material adverse effect on our business and operations.

In addition, if we or any of our officers, directors or significant stockholders materially violates the FCC’s rules and regulations or the Communications Act, is convicted of a felony or is found to have engaged in unlawful anticompetitive conduct or fraud upon a government agency, the FCC may, in response to a petition from a third party or on its own initiative, commence a proceeding to impose sanctions upon us which could involve the imposition of monetary fines, the revocation of our broadcast licenses or other sanctions.

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If the alignment between our brands and our audience shifts, then we might experience a shift in advertising revenue and categories.

Changes in current Federal regulations could adversely affect or business operations

Congress and the FCC have under consideration, and may in the future consider and adopt, new laws, regulations and policies that could, directly or indirectly, affect the profitability of our broadcast stations.

Changes in current Federal regulations could adversely affect our business operations

In particular, Congress is considering a revocation of radio's exemption from paying royalties to performing artists for use of their recordings (radio already pays a royalty to songwriters).

1 unchanged sentence

Our business strategy and our ability to operate profitably depend on the continued services of our key employees, the loss of whom could have a material adverse effect on our business.

Our success depends in large part upon the leadership and performance our radio and outdoor management teams and other key personnel.

Our success depends in large part upon the leadership and performance of our radio management teams and other key personnel.

Operating as an independent public company demands a significant amount of time and effort from our management and other personnel and may give rise to increased turnover.

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If we cannot effectively hire and retain qualified employees, our business, prospects, financial condition and results of operations could suffer.

Impairment losses related to our intangib le assets could reduce our earnings in the future .

Impairment losses related to our intangible assets could reduce our earnings in the future.

As of December 31, 2022, our intangible assets comprised 67% of our total assets.

We did not record any impairment charges during the years ended December 31, 2021, and December 31, 2020.

We did not record any impairment charges during the years ended December 31, 2022, and 2021.

However, if events occur or circumstances change, the fair value of our intangible assets might fall below the amount reflected on our balance sheet, and we may be required to recognize impairment charges in our statement of operations, which may be material, in future periods.

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While we generally carry insurance covering such catastrophes, we cannot be sure that the proceeds from such insurance will be sufficient to offset the costs of rebuilding or repairing our property or the lost income.

Our business is dependent upon the proper functioning of our internal business processes and information systems and modification or interruption of such systems may disrupt our business, processes and internal controls.

Our business is dependent upon the proper functioning of our internal business processes and information systems.

The modification, change of, or interruption of such systems may disrupt our business, processes and internal controls.

The proper functioning of our internal business processes and information systems is critical to the efficient operation and management of our business.

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In addition, our financial condition and results of operations will be subject to the specific risks applicable to any company in which we invest.

Risks Related to our Indebtedness:

Our substantial indebtedness could adversely affect our financial health.

We have a significant amount of indebtedness.

As of December 31, 2021, our total indebtedness was $102.1 million, consisting of $68.3 million under our five-year senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC (“GACP”) as administrative agent and collateral agent, $6.2 million of notes payable (the “Emmis Promissory Note”) to Emmis Communications Corporation (“Emmis”), from which we were spun off in November 2019, and $27.6 million of notes payable to SG Broadcasting.

Our substantial indebtedness could have important consequences to investors.

For example, it could:

make it more difficult for us to satisfy our obligations with respect to our indebtedness;

increase our vulnerability to generally adverse economic and industry conditions;

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

result in higher interest expense in the event of increases in interest rates because our debt is at variable rates of interest;

limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;

place us at a competitive disadvantage compared to some of our competitors that have less debt;

limit, along with the financial and other restrictive covenants in our credit agreements, our ability to borrow additional funds or make acquisitions.

Noncompliance with the financial covenants in our debt instruments could result in the loss of our sources of liquidity and acceleration of our indebtedness and cause substantial doubt about our ability to continue as a going concern.

The Company has debt service obligations of approximately $10.1 million due under its Senior Credit Facility from March 24, 2022, on which we are filing this Annual Report on Form 10-K, through March 24, 2023.

In addition, our Senior Credit Facility, requires us to maintain Minimum Liquidity (as defined in the Senior Credit Facility) of $3.0 million monthly until maturity and Minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) of 1.00:1.00 through and including December 31, 2022, with it increasing to 1.10:1.00 on and after January 1, 2023.

The Company expects its revenues and profitability to continue to experience the impact of the lingering COVID-19 pandemic.

We remain uncertain of the duration and severity of the future COVID impact on the business and remains unknown as of the date of issuance of these financial statements.

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

Our Senior Credit Facility includes a loan to value calculation, whereby the amount of debt outstanding thereunder is limited to a formula based on low and high watermark trigger of 60% or 70% of the fair value of the Company’s FCC licenses plus corresponding low or highwater mark trigger based on a multiple of the Company’s Billboard Cash Flow (as defined in the Senior Credit Facility).

If the most recent appraisal of the fair value of our FCC licenses obtained in connection with our annual impairment testing as of October 1, 2021 is deemed to be an Acceptable Appraisal (as defined in the Senior Credit Facility) by our lender in its sole discretion, we believe will remain in compliance for this calculation.

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

We believe based on our projected financial performance, our ability to closely run and monitor our business and our ability to draw on capital, that we will remain in compliance with all covenants throughout the next twelve months.

Risks Related to Indebtedness:

The terms of any future indebtedness may restrict our current and future operations, particularly our ability to respond to changes in market conditions or to take some actions.

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Our ability to generate cash depends on many factors beyond our control.

Our current credit agreement requires, and any future long-term debt agreements will likely require, us to pay periodic interest and principal payments during the term of such indebtedness.

Our November 25, 2019 convertible promissory note payable to Emmis Communications Corporation (the “Emmis Convertible Promissory Note”) is paid in-kind (“PIK”), but any future long-term debt agreements will likely require us to pay periodic interest and principal payments during the term of such indebtedness.

Our ability to make payments on indebtedness and to fund capital expenditures will depend on our ability to generate cash in the future.

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Therefore, SG Broadcasting is in a position to exercise substantial influence over the outcome of most matters submitted to a vote of our shareholders, including the election of a majority of our directors, the determination to engage in a merger, acquisition or disposition of a material amount of assets, or otherwise.

Additionally, other than with respect to the Emmis Promissory Note, which is convertible into MediaCo Class A common stock, Emmis no longer holds any common stock of MediaCo, though its officers serve as the MediaCo Class A Directors.

Additionally, other than with respect to the Emmis Convertible Promissory Note, which is convertible into MediaCo Class A common stock, Emmis no longer holds any common stock of MediaCo, though its officers serve as the MediaCo Class A Directors.

These officers were initially shareholders of MediaCo, but no assurance can be given that they have or will retain their ownership of MediaCo shares.

Further, so long as amounts remain outstanding under Emmis’ Promissory Note, MediaCo's board of directors is obligated to nominate as MediaCo Class A Directors only persons specified by Emmis.

Further, so long as amounts remain outstanding under the Emmis Convertible Promissory Note, MediaCo's board of directors is obligated to nominate as MediaCo Class A Directors only persons specified by Emmis.

Under Indiana law, directors of MediaCo may, in considering the best interests of the Company, consider the effects of any action on shareholders, employees, suppliers, and customers of the Company, and communities in which offices or other facilities of the Company are located, and any other factors the directors consider pertinent.

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• any derivative action or proceeding brought on behalf of the Company,

any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of MediaCo to the Company or the holders of shares MediaCo,

• any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of MediaCo to the Company or the holders of shares of MediaCo,

• any action asserting a claim arising pursuant to any provision of the Indiana Business Corporation Law (the “IBCL”), the Articles of Incorporation or the By-laws, or

10 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors