UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

Commission File Number 001-39029

 

MEDIACO HOLDING INC.

(Exact name of registrant as specified in its charter)

 

INDIANA

(State of incorporation or organization)

84-2427771

(I.R.S. Employer Identification No.)

ONE EMMIS PLAZA

40 MONUMENT CIRCLE, SUITE 700

INDIANAPOLIS, INDIANA 46204

(Address of principal executive offices)

(317) 266-0100

(Registrant’s Telephone Number, Including Area Code)

NOT APPLICABLE

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Class A common stock, $0.01 par value

MDIA

Nasdaq Capital Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes       No  

The number of shares outstanding of each of MediaCo Holding Inc.’s classes of common stock, as of May 18, 2021, was:

 

 

 

2,437,550

 

Shares of Class A Common Stock, $.01 Par Value

5,413,197

 

Shares of Class B Common Stock, $.01 Par Value

 

Shares of Class C Common Stock, $.01 Par Value

 

 


 

INDEX

 

 

Page

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

3

Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2020 and 2021

3

Condensed Consolidated Balance Sheets as of December 31, 2020 and March 31, 2021

4

Condensed Consolidated Statement of Changes in Equity (Deficit) for the three-month periods ended March 31, 2020 and 2021

5

Condensed Consolidated Statements of Cash Flows for the three-months periods ended March 31, 2020 and 2021

6

Notes to Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3. Quantitative and Qualitative Disclosures about Market Risk

25

Item 4. Controls and Procedures

25

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

25

Item 6. Exhibits

26

Signatures

27

 

 


 

PART I — FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2021

 

NET REVENUES

 

$

11,785

 

 

$

9,743

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Operating expenses excluding depreciation and amortization expense

 

 

9,457

 

 

 

7,761

 

Corporate expenses

 

 

1,165

 

 

 

1,641

 

Depreciation and amortization

 

 

1,027

 

 

 

981

 

Gain on disposal of assets

 

 

 

 

 

(6

)

Total operating expenses

 

 

11,649

 

 

 

10,377

 

OPERATING INCOME (LOSS)

 

 

136

 

 

 

(634

)

OTHER EXPENSE:

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,238

)

 

 

(2,538

)

LOSS BEFORE INCOME TAXES

 

 

(2,102

)

 

 

(3,172

)

(BENEFIT) PROVISION FOR INCOME TAXES

 

 

(617

)

 

 

81

 

CONSOLIDATED NET LOSS

 

 

(1,485

)

 

 

(3,253

)

PREFERRED STOCK DIVIDENDS

 

 

529

 

 

 

634

 

NET LOSS

 

$

(2,014

)

 

$

(3,887

)

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share attributable to common shareholders

 

$

(0.28

)

 

$

(0.55

)

Basic and diluted weighted average number of common shares outstanding

 

 

7,084

 

 

 

7,115

 

 

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

- 3 -


 

MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

December 31,

2020

 

 

March 31,

2021

 

 

 

 

 

 

 

(Unaudited)

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,171

 

 

$

4,490

 

Accounts receivable, net

 

 

8,508

 

 

 

7,264

 

Prepaid expenses

 

 

1,247

 

 

 

1,648

 

Other current assets

 

 

1,274

 

 

 

1,059

 

Total current assets

 

 

15,200

 

 

 

14,461

 

PROPERTY AND EQUIPMENT, NET

 

 

27,650

 

 

 

27,086

 

INTANGIBLE ASSETS, NET

 

 

79,217

 

 

 

78,903

 

OTHER ASSETS:

 

 

 

 

 

 

 

 

Operating lease right of use assets

 

 

23,953

 

 

 

23,178

 

Deposits and other

 

 

331

 

 

 

290

 

Total other assets

 

 

24,284

 

 

 

23,468

 

Total assets

 

$

146,351

 

 

$

143,918

 

LIABILITIES AND DEFICIT

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

2,557

 

 

$

2,207

 

Current maturities of long-term debt

 

 

1,836

 

 

 

2,754

 

Accrued salaries and commissions

 

 

709

 

 

 

647

 

Deferred revenue

 

 

1,535

 

 

 

1,750

 

Operating lease liabilities

 

 

3,573

 

 

 

3,503

 

Other current liabilities

 

 

549

 

 

 

1,740

 

Total current liabilities

 

 

10,759

 

 

 

12,601

 

LONG TERM DEBT, NET OF CURRENT

 

 

93,918

 

 

 

93,147

 

OPERATING LEASE LIABILITIES, NET OF CURRENT

 

 

20,176

 

 

 

19,305

 

ASSET RETIREMENT OBLIGATIONS

 

 

6,316

 

 

 

6,481

 

DEFERRED INCOME TAXES

 

 

1,711

 

 

 

1,792

 

OTHER NONCURRENT LIABILITIES

 

 

221

 

 

 

125

 

Total liabilities

 

 

133,101

 

 

 

133,451

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $0.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED; 220,000 SHARES ISSUED AND OUTSTANDING

 

 

24,258

 

 

 

24,892

 

DEFICIT:

 

 

 

 

 

 

 

 

Class A common stock, $0.01 par value; authorized 170,000,000 shares; issued and outstanding 1,785,880 shares and 2,437,550 shares at December 31, 2020, and March 31, 2021, respectively

 

 

18

 

 

 

24

 

Class B common stock, $0.01 par value; authorized 50,000,000 shares; issued and outstanding 5,413,197 shares at December 31, 2020, and March 31, 2021

 

 

54

 

 

 

54

 

Class C common stock, $0.01 par value; authorized 30,000,000 shares; none issued

 

 

 

 

 

 

Additional paid-in capital

 

 

20,772

 

 

 

21,236

 

Accumulated deficit

 

 

(31,852

)

 

 

(35,739

)

Total deficit

 

 

(11,008

)

 

 

(14,425

)

Total liabilities and deficit

 

$

146,351

 

 

$

143,918

 

 

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

- 4 -


MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share data)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,485

)

 

 

(1,485

)

Adjustments related to distribution of common shares

 

 

16,596

 

 

 

 

 

 

53,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(529

)

 

 

(529

)

BALANCE, MARCH 31, 2020

 

 

1,683,263

 

 

$

17

 

 

 

5,413,197

 

 

$

54

 

 

$

20,644

 

 

$

(4,965

)

 

$

15,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, DECEMBER 31, 2020

 

 

1,785,880

 

 

$

18

 

 

 

5,413,197

 

 

$

54

 

 

$

20,772

 

 

$

(31,852

)

 

$

(11,008

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,253

)

 

 

(3,253

)

Issuance of class A to employees, officers and directors

 

 

651,670

 

 

 

6

 

 

 

 

 

 

 

 

 

464

 

 

 

 

 

 

470

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(634

)

 

 

(634

)

BALANCE, MARCH 31, 2021

 

 

2,437,550

 

 

$

24

 

 

 

5,413,197

 

 

$

54

 

 

$

21,236

 

 

$

(35,739

)

 

$

(14,425

)

 

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

- 5 -


MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,485

)

 

$

(3,253

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,027

 

 

 

981

 

Amortization of debt discount

 

 

140

 

 

 

146

 

Noncash lease expense

 

 

631

 

 

 

775

 

Provision for bad debts

 

 

373

 

 

 

61

 

Accretion of asset retirement obligation

 

 

182

 

 

 

165

 

(Benefit) provision for deferred income taxes

 

 

(617

)

 

 

81

 

Noncash compensation

 

 

 

 

 

634

 

Loss (gain) on sale of property and equipment

 

 

78

 

 

 

(6

)

Changes in assets and liabilities -

 

 

 

 

 

 

 

 

Accounts receivable

 

 

335

 

 

 

1,183

 

Prepaid expenses and other current assets

 

 

909

 

 

 

(186

)

Other assets

 

 

(44

)

 

 

39

 

Accounts payable and accrued liabilities

 

 

(2,783

)

 

 

(412

)

Deferred revenue

 

 

(182

)

 

 

215

 

Other liabilities

 

 

(127

)

 

 

155

 

Net cash provided by (used in) operating activities

 

 

(1,563

)

 

 

578

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(197

)

 

 

(206

)

Proceeds from the sale of property and equipment

 

 

 

 

 

111

 

Net cash used in investing activities

 

 

(197

)

 

 

(95

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments of long-term debt

 

 

(918

)

 

 

 

Proceeds from long-term debt

 

 

5,181

 

 

 

 

Payments for debt-related costs

 

 

(181

)

 

 

 

Settlement of tax withholding obligations

 

 

 

 

 

(164

)

Net cash provided by (used in) financing activities

 

 

4,082

 

 

 

(164

)

INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

2,322

 

 

 

319

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

 

 

 

 

 

 

 

 

Beginning of period

 

 

2,083

 

 

 

4,171

 

End of period

 

$

4,405

 

 

$

4,490

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,148

 

 

$

1,157

 

 

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

- 6 -


MEDIACO HOLDING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)

March 31, 2021

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Organization

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 3,500 outdoor advertising displays in the Southeast (Valdosta) region and Mid-Atlantic (Kentucky) region of the United States. We derive our revenues primarily from radio and outdoor advertising sales, but we also generate revenues from events, including sponsorships and ticket sales.

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

Basis of presentation

Our condensed 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.

Cash and Cash Equivalents

We consider 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.

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. 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 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 3 for more discussion).

The Company’s long-term debt is not actively traded and is considered a Level 3 measurement. 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 have mandated various restrictions, including travel restrictions, restrictions on non-essential businesses and services, restrictions on public gatherings and quarantining of people who may have been exposed to the virus. These restrictions, in turn, caused the United States economy to decline and businesses to cancel or reduce amounts spent on advertising, negatively impacting our advertising-based businesses. Furthermore, some of our advertisers have seen a material decline in their businesses and may not be able to pay amounts owed to us when they come due. If the spread of COVID-19 continues, or is suppressed but later reemerges as a variant strain, and public and private entities continue to implement restrictive measures, we expect that our results of operations, financial condition and cash flows will continue to be negatively affected, the extent to which is difficult to estimate at this time.

- 7 -


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

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. We did not have any participating securities for the three-month period ended March 31, 2020, as the preferred stock only became convertible to common stock on May 25, 2020. The following is a reconciliation of basic and diluted net loss per share attributable to Class A and Class B common shareholders:

 

 

For the Three Months

Ended March 31,

 

 

2020

 

 

2021

 

Net loss

$

(1,485

)

 

$

(3,253

)

Preferred dividends

 

529

 

 

 

634

 

Net loss attributable to common shareholders

$

(2,014

)

 

$

(3,887

)

Basic and diluted weighted average Class A shares outstanding

 

1,680

 

 

 

1,702

 

Net loss per share attributable to Class A shareholders

$

(0.28

)

 

$

(0.55

)

Basic and diluted weighted average Class B shares outstanding

 

5,404

 

 

 

5,413

 

Net loss per share attributable to Class B shareholders

$

(0.28

)

 

$

(0.55

)

Because we have incurred a net loss for all periods where the Company had potentially dilutive securities, diluted net loss per common share is the same as basic net loss per common share. The following convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive. There were no potentially dilutive shares for the three-month period ended March 31, 2020 as neither the convertible promissory notes issued to Emmis and SG Broadcasting described in Note 5, nor the Series A convertible preferred stock, were convertible until May 25, 2020. The Company did not issue any restricted stock awards until the three months ended September 30, 2020.

 

 

For the Three Months

Ended March 31,

 

 

2020

 

 

2021

 

Convertible Emmis promissory note

$

 

 

$

2,126

 

Convertible Standard General promissory notes

 

 

 

 

8,219

 

Series A convertible preferred stock

 

 

 

 

9,560

 

Restricted stock awards

 

 

 

 

174

 

Total

$

 

 

$

20,079

 

 

- 8 -


 

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 condensed consolidated financial statements.

Note 2. 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 Equity Compensation Plan.

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

 

 

Awards

 

 

Price

 

Grants outstanding, beginning of period

 

 

102,617

 

 

$

5.41

 

Granted

 

 

718,816

 

 

 

3.34

 

Vested

 

 

141,412

 

 

 

3.17

 

Grants outstanding, end of period

 

 

680,021

 

 

 

3.69

 

Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense recognized by the Company during the three months ended March 31, 2020 and 2021. The Company did not recognize any tax benefits related to stock-based compensation during the periods presented below.

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2021

 

Operating expenses, excluding depreciation and amortization

 

$

 

 

$

259

 

Corporate expenses

 

 

 

 

 

375

 

Share-based compensation expense

 

$

 

 

$

634

 

As of March 31, 2021, there was $2.2 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 1.4 years.

Note 3. Intangible Assets

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

 

 

 

As of December 31, 2020

 

 

As of March 31, 2021

 

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

 

 

 

147

 

   Customer list

 

 

1,896

 

 

 

1,655

 

Total

 

$

79,217

 

 

$

78,903

 

 

Valuation of Indefinite-lived Broadcasting Licenses

In accordance with ASC Topic 350, “Intangibles—Goodwill and Other,” the Company’s FCC licenses are considered indefinite-lived intangibles; therefore, they are not subject to amortization, but are tested for impairment at least annually as discussed below.

The carrying amounts of the Company’s FCC licenses were $63.3 million as of December 31, 2020 and March 31, 2021. Pursuant to our accounting policy, stations in a geographic market cluster are considered a single unit of accounting. The stations perform an annual impairment test of indefinite-lived intangibles as of October 1 of each year. When indicators of impairment are present, we will perform an interim impairment test. There have been no indicators of impairment since we performed our annual

- 9 -


impairment assessment as of October 1, 2020 and therefore there has been no need to perform an interim impairment asset. Future impairment tests may result in additional impairment charges in subsequent periods.

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 then 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.

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. 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. All goodwill on the condensed consolidated balance sheets as of December 31, 2020 and March 31, 2021 is assigned to our Outdoor Advertising segment. While the COVID-19 pandemic has negatively affected our outdoor operations, as of March 31, 2021, we don’t believe the long-term value of the outdoor business, and thus the associated goodwill, has been impaired. 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

As a result of the purchase of our outdoor advertising segment, 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. 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.

Definite-lived intangibles

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

 

 

 

As of December 31, 2020

 

 

As of March 31, 2021

 

 

(in 000's, except years)

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Amount

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Amount

 

Weighted

Average

Remaining

Useful Life

(in years)

Programming agreement

 

$

2,154

 

 

$

1,934

 

 

$

220

 

 

$

2,154

 

 

$

2,007

 

 

$

147

 

0.5

Customer list

 

 

2,906

 

 

 

1,010

 

 

 

1,896

 

 

 

2,906

 

 

 

1,251

 

 

 

1,655

 

1.7

 

- 10 -


 

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

Total amortization expense from definite-lived intangibles for the three-month periods ended March 31, 2020 and 2021 was $0.4 million and $0.3 million, respectively. The following table presents the Company's estimate of future amortization expense for definite-lived intangibles:

 

Year ending December 31,

 

Expected Amortization Expense

 

Remainder of 2021

 

$

874

 

2022

 

 

928

 

 

Note 4. 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 condensed consolidated balance sheet. 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.

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. 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

- 11 -


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 11.)

Disaggregation of revenue

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

% of Total

 

 

2021

 

% of Total

 

Revenue by Source:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Radio Advertising

 

$

6,380

 

 

54.1

%

 

$

4,955

 

 

50.9

%

Outdoor Advertising (1)

 

 

3,267

 

 

27.7

%

 

 

2,972

 

 

30.5

%

Nontraditional

 

 

168

 

 

1.4

%

 

 

137

 

 

1.4

%

Digital

 

 

674

 

 

5.7

%

 

 

485

 

 

5.0

%

Other

 

 

1,296

 

 

11.1

%

 

 

1,194

 

 

12.2

%

Total net revenues

 

$

11,785

 

 

 

 

 

$

9,743

 

 

 

 

(1) A substantial portion of this revenue is from lessor revenue derived from operating leases accounted for under ASC 842, “Leases.”

Note 5. Long Term Debt

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

 

 

December 31,

2020

 

 

March 31,

2021

 

Senior credit facility

 

$

70,972

 

 

$

70,972

 

Notes payable to Emmis

 

 

5,535

 

 

 

5,535

 

Notes payable to SG Broadcasting

 

 

21,400

 

 

 

21,400

 

Less: Current maturities

 

 

(1,836

)

 

 

(2,754

)

Less: Unamortized original issue discount

 

 

(2,153

)

 

 

(2,006

)

Total long-term debt, net of current portion and debt discount

 

$

93,918

 

 

$

93,147

 

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. Prior to subsequent amendments discussed below, and in Note 12, Subsequent Event, the Senior Credit Facility required interest payments on the first business day of each calendar month, and quarterly payments on the principal in an amount equal to one and one quarter percent of the initial aggregate principal amount were due on the last day of each calendar quarter. At its inception, the Senior Credit Facility included covenants pertaining to, among other things, the ability to incur indebtedness, restrictions on the payment of dividends, minimum liquidity requirements, collateral maintenance, minimum Consolidated Fixed Charge Coverage Ratio of 1.10:1.00, and other customary restrictions.

As of March 31, 2021, a number of amendments had been entered into by the Company and GACP to modify, among other things, certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility) such that no quarterly payments are required beginning with the fiscal quarter ending September 30, 2020 through and including the fiscal quarter ending June 30, 2021 and the testing of the Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) is suspended through and including June 30, 2021. The Senior Credit Facility currently requires us to maintain Minimum Liquidity (as defined in the Senior Credit Facility) of $2.5 million until November 25, 2021, and $3.0 million for the period thereafter. In addition, the Senior Credit Facility includes a loan to value calculation, whereby the amount of debt outstanding thereunder is limited to a formula based on 60% of the fair value of the Company’s FCC licenses plus a multiple of the Company’s Billboard Cash Flow (as defined in the Senior Credit Facility). 

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

See Note 12, Subsequent Event, for a discussion of Amendment No. 4 to the Senior Credit Facility, executed on May 19, 2021.

- 12 -


Emmis Convertible Promissory Note

The Emmis Convertible Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, plus an additional 1.0% on any payment of interest in kind and, without regard to whether the Company pays such interest in kind, an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. 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. As of March 31, 2021, the principal balance outstanding under the Emmis Convertible Promissory Note is $5.5 million.

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

The Second Amended and Restated SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. The Second Amended and Restated SG Broadcasting Promissory Note matures on May 25, 2025. Additionally, interest under the Second Amended SG Broadcasting Promissory Note is payable in kind through maturity, and is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

The Additional SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. The Additional SG Broadcasting Promissory Note matures on March 30, 2025. Additionally, interest under the Additional SG Broadcasting Promissory Note is payable in kind through maturity, and is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.

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

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

Senior Credit Facility

 

 

Emmis Note

 

 

SG Broadcasting Notes

 

 

Total Payments

 

Remainder of 2021

 

$

2,754

 

 

$

 

 

$

 

 

$

2,754

 

2022

 

 

3,672

 

 

 

 

 

 

 

 

 

3,672

 

2023

 

 

3,672

 

 

 

 

 

 

 

 

 

3,672

 

2024

 

 

60,874

 

 

 

5,535

 

 

 

 

 

 

66,409

 

2025

 

 

 

 

 

 

 

 

21,400

 

 

 

21,400

 

Total

 

$

70,972

 

 

$

5,535

 

 

$

21,400

 

 

$

97,907

 

 

Note 6. Regulatory, Legal and Other Matters

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 -


Note 7. Income Taxes

The effective tax rate for the three months ended March 31, 2020 and 2021 was (29)%, and 3% respectively. During the year ended December 31, 2020, as a result of a sharp deterioration of business activity related to the COVID-19 pandemic, the Company determined that it was more likely than not that it would be unable to realize its deferred tax assets and recorded a $18.8 million valuation allowance against these assets through an increase to our provision for income taxes. Our effective tax rate for the three months ended March 31, 2021 differs from the statutory tax rate due to the recognition of additional valuation allowance.

Note 8. 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 condensed consolidated balance sheet.

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

We elected not to apply the recognition requirements of Accounting Standards Codification 842, “Leases”, to short-term leases, which are deemed to be leases with a lease term of twelve months or less. Instead, we recognized lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. We elected this policy for all classes of underlying assets. Short-term lease expense recognized in the three months ended March 31, 2021, was not material.

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

 

 

Three Months Ended

March 31,

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2021

 

Lease Cost

 

 

 

 

 

 

 

 

Operating lease cost

 

$

1,248

 

 

$

1,247

 

Other Information

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

 

1,490

 

 

 

1,290

 

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

 

 

 

 

 

 

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

 

 

9.1

 

 

 

8.6

 

Weighted average discount rate - operating leases

 

 

10.5

%

 

 

9.1

%

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

Year ending December 31,

 

 

 

 

Remainder of 2021

 

$

4,019

 

2022

 

 

5,254

 

2023

 

 

4,270

 

2024

 

 

2,855

 

2025

 

 

2,847

 

After 2025

 

 

15,915

 

Total lease payments

 

 

35,160

 

Less imputed interest

 

 

12,352

 

Total recorded lease liabilities

 

$

22,808

 

- 14 -


 

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

Year ending December 31,

 

 

 

Remainder of 2021

$

6,097

 

2022

 

1,231

 

2023

 

 

2024

 

 

2025

 

 

After 2025

 

 

 

Note 9. 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.

Balance at December 31, 2020

 

 

$

6,316

 

Accretion expense

 

 

 

165

 

Balance at March 31, 2021

 

 

$

6,481

 

 

Note 10. 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. 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.

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

Three Months Ended March 31, 2021

 

Radio

 

 

Outdoor Advertising

 

 

All Other

 

 

Consolidated

 

Net revenues

 

$

6,502

 

 

$

3,241

 

 

$

 

 

$

9,743

 

Operating expenses excluding depreciation and amortization expense

 

 

5,291

 

 

 

2,470

 

 

 

 

 

 

7,761

 

Corporate expenses

 

 

 

 

 

 

 

 

1,641

 

 

 

1,641

 

Depreciation and amortization

 

 

191

 

 

 

790

 

 

 

 

 

 

981

 

Loss on disposal of assets

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Operating income (loss)

 

$

1,020

 

 

$

(13

)

 

$

(1,641

)

 

$

(634

)

 

Three Months Ended March 31, 2020

 

Radio

 

 

Outdoor Advertising

 

 

All Other

 

 

Consolidated

 

Net revenues

 

$

8,339

 

 

$

3,446

 

 

$

 

 

$

11,785

 

Operating expenses excluding depreciation and amortization expense

 

 

6,931

 

 

 

2,526

 

 

 

 

 

 

9,457

 

Corporate expenses

 

 

 

 

 

 

 

 

1,165

 

 

 

1,165

 

Depreciation and amortization