UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
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.)
395 HUDSON STREET, FLOOR 7
New york, new york 10014
(Address of principal executive offices)
(212) 229-9797
(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 November 8, 2021, was:
|
|
|
|
|
3,085,909 |
|
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
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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
||||
|
NET REVENUES |
|
$ |
9,360 |
|
|
$ |
17,820 |
|
|
$ |
28,141 |
|
|
$ |
41,939 |
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses excluding depreciation and amortization expense |
|
|
7,752 |
|
|
|
12,540 |
|
|
|
23,615 |
|
|
|
28,119 |
|
|
Corporate expenses |
|
|
1,214 |
|
|
|
2,422 |
|
|
|
3,311 |
|
|
|
5,908 |
|
|
Depreciation and amortization |
|
|
896 |
|
|
|
1,068 |
|
|
|
3,086 |
|
|
|
3,027 |
|
|
Loss (gain) on disposal of assets |
|
|
103 |
|
|
|
— |
|
|
|
185 |
|
|
|
(78 |
) |
|
Total operating expenses |
|
|
9,965 |
|
|
|
16,030 |
|
|
|
30,197 |
|
|
|
36,976 |
|
|
OPERATING (LOSS) INCOME |
|
|
(605 |
) |
|
|
1,790 |
|
|
|
(2,056 |
) |
|
|
4,963 |
|
|
OTHER EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(2,411 |
) |
|
|
(2,895 |
) |
|
|
(6,928 |
) |
|
|
(8,134 |
) |
|
Loss on debt extinguishment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(81 |
) |
|
LOSS BEFORE INCOME TAXES |
|
|
(3,016 |
) |
|
|
(1,105 |
) |
|
|
(8,984 |
) |
|
|
(3,252 |
) |
|
(BENEFIT) PROVISION FOR INCOME TAXES |
|
|
(22 |
) |
|
|
83 |
|
|
|
13,854 |
|
|
|
246 |
|
|
CONSOLIDATED NET LOSS |
|
|
(2,994 |
) |
|
|
(1,188 |
) |
|
|
(22,838 |
) |
|
|
(3,498 |
) |
|
PREFERRED STOCK DIVIDENDS |
|
|
534 |
|
|
|
709 |
|
|
|
1,591 |
|
|
|
2,012 |
|
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |
|
$ |
(3,528 |
) |
|
$ |
(1,897 |
) |
|
$ |
(24,429 |
) |
|
$ |
(5,510 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share attributable to common shareholders |
|
$ |
(0.50 |
) |
|
$ |
(0.26 |
) |
|
$ |
(3.44 |
) |
|
$ |
(0.77 |
) |
|
Basic and diluted weighted average number of common shares outstanding |
|
|
7,096 |
|
|
|
7,201 |
|
|
|
7,110 |
|
|
|
7,168 |
|
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 |
|
|
September 30, 2021 |
|
||
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,171 |
|
|
$ |
7,395 |
|
|
Accounts receivable, net |
|
|
8,508 |
|
|
|
14,504 |
|
|
Prepaid expenses |
|
|
1,247 |
|
|
|
1,257 |
|
|
Other current assets |
|
|
1,274 |
|
|
|
686 |
|
|
Total current assets |
|
|
15,200 |
|
|
|
23,842 |
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
27,650 |
|
|
|
27,059 |
|
|
INTANGIBLE ASSETS, NET |
|
|
79,217 |
|
|
|
78,271 |
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
|
Operating lease right of use assets |
|
|
23,953 |
|
|
|
22,197 |
|
|
Deposits and other |
|
|
331 |
|
|
|
312 |
|
|
Total other assets |
|
|
24,284 |
|
|
|
22,509 |
|
|
Total assets |
|
$ |
146,351 |
|
|
$ |
151,681 |
|
|
LIABILITIES AND DEFICIT |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
2,557 |
|
|
$ |
5,629 |
|
|
Current maturities of long-term debt |
|
|
1,836 |
|
|
|
1,836 |
|
|
Accrued salaries and commissions |
|
|
709 |
|
|
|
761 |
|
|
Deferred revenue |
|
|
1,535 |
|
|
|
1,967 |
|
|
Operating lease liabilities |
|
|
3,573 |
|
|
|
4,220 |
|
|
Other current liabilities |
|
|
549 |
|
|
|
3,552 |
|
|
Total current liabilities |
|
|
10,759 |
|
|
|
17,965 |
|
|
LONG TERM DEBT, NET OF CURRENT |
|
|
93,918 |
|
|
|
95,339 |
|
|
OPERATING LEASE LIABILITIES, NET OF CURRENT |
|
|
20,176 |
|
|
|
17,593 |
|
|
ASSET RETIREMENT OBLIGATIONS |
|
|
6,316 |
|
|
|
6,924 |
|
|
DEFERRED INCOME TAXES |
|
|
1,711 |
|
|
|
1,957 |
|
|
OTHER NONCURRENT LIABILITIES |
|
|
221 |
|
|
|
108 |
|
|
Total liabilities |
|
|
133,101 |
|
|
|
139,886 |
|
|
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 |
|
|
|
26,270 |
|
|
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 |
|
|
18 |
|
|
|
31 |
|
|
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 |
|
|
54 |
|
|
|
54 |
|
|
Class C common stock, $0.01 par value; authorized 30,000,000 shares; none issued |
|
|
— |
|
|
|
— |
|
|
Additional paid-in capital |
|
|
20,772 |
|
|
|
22,802 |
|
|
Accumulated deficit |
|
|
(31,852 |
) |
|
|
(37,362 |
) |
|
Total deficit |
|
|
(11,008 |
) |
|
|
(14,475 |
) |
|
Total liabilities and deficit |
|
$ |
146,351 |
|
|
$ |
151,681 |
|
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 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(18,359 |
) |
|
|
(18,359 |
) |
|
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(528 |
) |
|
|
(528 |
) |
|
BALANCE, JUNE 30, 2020 |
|
|
1,683,263 |
|
|
$ |
17 |
|
|
|
5,413,197 |
|
|
$ |
54 |
|
|
$ |
20,644 |
|
|
$ |
(23,852 |
) |
|
$ |
(3,137 |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,994 |
) |
|
|
(2,994 |
) |
|
Issuance of class A to employees, officers and directors |
|
|
102,617 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
43 |
|
|
|
— |
|
|
|
44 |
|
|
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(534 |
) |
|
|
(534 |
) |
|
BALANCE, SEPTEMBER 30, 2020 |
|
|
1,785,880 |
|
|
$ |
18 |
|
|
|
5,413,197 |
|
|
$ |
54 |
|
|
$ |
20,687 |
|
|
$ |
(27,380 |
) |
|
$ |
(6,621 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
) |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
943 |
|
|
|
943 |
|
|
Issuance of class A to employees, officers and directors |
|
|
390,794 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
595 |
|
|
|
— |
|
|
|
599 |
|
|
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(669 |
) |
|
|
(669 |
) |
|
BALANCE, JUNE 30, 2021 |
|
|
2,828,344 |
|
|
$ |
28 |
|
|
|
5,413,197 |
|
|
$ |
54 |
|
|
$ |
21,831 |
|
|
$ |
(35,465 |
) |
|
$ |
(13,552 |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,188 |
) |
|
|
(1,188 |
) |
|
Sale of class A common shares |
|
|
19,701 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
180 |
|
|
|
— |
|
|
|
180 |
|
|
Issuance of class A to employees, officers and directors |
|
|
222,956 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
791 |
|
|
|
— |
|
|
|
794 |
|
|
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(709 |
) |
|
|
(709 |
) |
|
BALANCE, SEPTEMBER 30, 2021 |
|
|
3,071,001 |
|
|
$ |
31 |
|
|
|
5,413,197 |
|
|
$ |
54 |
|
|
$ |
22,802 |
|
|
$ |
(37,362 |
) |
|
$ |
(14,475 |
) |
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)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2020 |
|
|
2021 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(22,838 |
) |
|
$ |
(3,498 |
) |
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities - |
|
|
|
|
|
|
|
|
|
Loss on debt extinguishment |
|
|
— |
|
|
|
81 |
|
|
Depreciation and amortization |
|
|
3,086 |
|
|
|
3,027 |
|
|
Amortization of debt discount |
|
|
440 |
|
|
|
471 |
|
|
Noncash interest expense |
|
|
— |
|
|
|
280 |
|
|
Noncash lease expense |
|
|
1,969 |
|
|
|
2,173 |
|
|
Provision for bad debts |
|
|
538 |
|
|
|
40 |
|
|
Accretion of asset retirement obligation |
|
|
566 |
|
|
|
526 |
|
|
Provision for deferred income taxes |
|
|
13,856 |
|
|
|
246 |
|
|
Noncash compensation |
|
|
44 |
|
|
|
2,360 |
|
|
Loss (gain) on sale of property and equipment |
|
|
185 |
|
|
|
(78 |
) |
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
3,318 |
|
|
|
(6,036 |
) |
|
Prepaid expenses and other current assets |
|
|
1,005 |
|
|
|
578 |
|
|
Other assets |
|
|
138 |
|
|
|
(398 |
) |
|
Accounts payable and accrued liabilities |
|
|
(9,108 |
) |
|
|
3,124 |
|
|
Deferred revenue |
|
|
(138 |
) |
|
|
432 |
|
|
Other liabilities |
|
|
(266 |
) |
|
|
849 |
|
|
Net cash (used in) provided by operating activities |
|
|
(7,205 |
) |
|
|
4,177 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(339 |
) |
|
|
(1,428 |
) |
|
Proceeds from the sale of property and equipment |
|
|
— |
|
|
|
146 |
|
|
Net cash used in investing activities |
|
|
(339 |
) |
|
|
(1,282 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Payments of long-term debt |
|
|
(1,837 |
) |
|
|
(3,000 |
) |
|
Proceeds from long-term debt |
|
|
14,281 |
|
|
|
4,000 |
|
|
Payments for debt-related costs |
|
|
(281 |
) |
|
|
(354 |
) |
|
Proceeds from issuance of class A common stock |
|
|
— |
|
|
|
180 |
|
|
Settlement of tax withholding obligations |
|
|
— |
|
|
|
(497 |
) |
|
Net cash provided by financing activities |
|
|
12,163 |
|
|
|
329 |
|
|
INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
4,619 |
|
|
|
3,224 |
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
2,083 |
|
|
|
4,171 |
|
|
End of period |
|
$ |
6,702 |
|
|
$ |
7,395 |
|
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
4,732 |
|
|
$ |
4,626 |
|
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)
September 30, 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 3,600 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.
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 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.
- 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, 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
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. The following is a reconciliation of basic and diluted net loss per share attributable to common shareholders:
|
|
For the Three Months Ended September 30, |
|
|||||||||||||||||||||
|
|
2020 |
|
|
2021 |
|
||||||||||||||||||
|
|
Net Loss |
|
|
Shares |
|
|
Net Loss Per Share |
|
|
Net Loss |
|
|
Shares |
|
|
Net Loss Per Share |
|
||||||
|
Basic and diluted net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(2,994 |
) |
|
|
|
|
|
|
|
|
|
$ |
(1,188 |
) |
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends |
|
534 |
|
|
|
|
|
|
|
|
|
|
|
709 |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders |
$ |
(3,528 |
) |
|
|
7,096 |
|
|
$ |
(0.50 |
) |
|
$ |
(1,897 |
) |
|
|
7,201 |
|
|
$ |
(0.26 |
) |
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||||||||||
|
|
2020 |
|
|
2021 |
|
||||||||||||||||||
|
|
Net Loss |
|
|
Shares |
|
|
Net Loss Per Share |
|
|
Net Loss |
|
|
Shares |
|
|
Net Loss Per Share |
|
||||||
|
Basic and diluted net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(22,838 |
) |
|
|
|
|
|
|
|
|
|
$ |
(3,498 |
) |
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends |
|
1,591 |
|
|
|
|
|
|
|
|
|
|
|
2,012 |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders |
$ |
(24,429 |
) |
|
|
7,110 |
|
|
$ |
(3.44 |
) |
|
$ |
(5,510 |
) |
|
|
7,168 |
|
|
$ |
(0.77 |
) |
On August 20, 2021, MediaCo Holding Inc. 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, 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.
- 8 -
The following convertible equity shares 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, |
|
||||||||||
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
||||
|
|
(In thousands) |
|
|||||||||||||
|
Convertible Emmis promissory note |
|
977 |
|
|
|
1,614 |
|
|
|
1,238 |
|
|
|
2,237 |
|
|
Convertible Standard General promissory notes |
|
3,979 |
|
|
|
6,198 |
|
|
|
5,023 |
|
|
|
8,610 |
|
|
Series A convertible preferred stock |
|
4,525 |
|
|
|
7,002 |
|
|
|
5,734 |
|
|
|
9,703 |
|
|
Restricted stock awards |
|
20 |
|
|
|
915 |
|
|
|
8 |
|
|
|
861 |
|
|
Total anti-dilutive shares |
|
9,501 |
|
|
|
15,729 |
|
|
|
12,003 |
|
|
|
21,411 |
|
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 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):
|
|
|
Awards |
|
|
Price |
|
||
|
Grants outstanding, beginning of period |
|
|
102,617 |
|
|
$ |
5.41 |
|
|
Granted |
|
|
1,366,334 |
|
|
|
3.37 |
|
|
Vested |
|
|
221,490 |
|
|
|
3.65 |
|
|
Forfeited |
|
|
15,916 |
|
|
|
3.11 |
|
|
Grants outstanding, end of period |
|
|
1,231,545 |
|
|
|
3.49 |
|
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, |
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
||||
|
Operating expenses, excluding depreciation and amortization |
|
$ |
— |
|
|
$ |
338 |
|
|
$ |
— |
|
|
$ |
710 |
|
|
Corporate expenses |
|
|
44 |
|
|
|
789 |
|
|
|
44 |
|
|
|
1,650 |
|
|
Share-based compensation expense |
|
$ |
44 |
|
|
$ |
1,127 |
|
|
$ |
44 |
|
|
$ |
2,360 |
|
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.
- 9 -
Note 3. 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 |
|
||
|
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
FCC Licenses |
|
$ |
63,266 |
|
|
$ |
63,266 |
|
|
Trade Name |
|
|
733 |
|
|
|
733 |
|
|
Goodwill |
|
|
13,102 |
|
|
|
13,102 |
|
|
Definite-lived intangible assets |
|
|
|
|
|
|
|
|
|
Programming contract |
|
|
220 |
|
|
|
— |
|
|
Customer list |
|
|
1,896 |
|
|
|
1,170 |
|
|
Total |
|
$ |
79,217 |
|
|
$ |
78,271 |
|
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 September 30, 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 impairment assessment as of October 1, 2020 and therefore there has been no need to perform an interim impairment assessment. 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 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.
- 10 -
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 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) |
|||||||||||||||||||||||
|
|
|
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 |
|
|
$ |
2,154 |
|
|
$ |
— |
|
— |
|
Customer list |
|
|
2,906 |
|
|
|
1,010 |
|
|
|
1,896 |
|
|
|
2,906 |
|
|
|
1,736 |
|
|
|
1,170 |
|
1.2 |
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 |
|
$ |
243 |
|
|
2022 |
|
|
927 |
|
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 sheets. Substantially all deferred revenue is recognized within twelve months of the payment date.
- 11 -
Outdoor Advertising
Our outdoor advertising business has approximately 3,600 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 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 13).
Disaggregation of revenue
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, |
|
||||||||||||||||||||||
|
|
|
2020 |
|
% of Total |
|
|
2021 |
|
% of Total |
|
|
2020 |
|
% of Total |
|
|
2021 |
|
% of Total |
|
||||||||
|
Revenue by Source: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Advertising |
|
$ |
4,633 |
|
|
49.5 |
% |
|
$ |
8,073 |
|
|
45.3 |
% |
|
$ |
13,641 |
|
|
48.5 |
% |
|
$ |
21,941 |
|
|
52.3 |
% |
|
Outdoor Advertising (1) |
|
|
2,957 |
|
|
31.6 |
% |
|
|
3,197 |
|
|
17.9 |
% |
|
|
9,254 |
|
|
32.9 |
% |
|
|
9,407 |
|
|
22.4 |
% |
|
Nontraditional |
|
|
203 |
|
|
2.2 |
% |
|
|
4,206 |
|
|
23.6 |
% |
|
|
451 |
|
|
1.6 |
% |
|
|
4,635 |
|
|
11.1 |
% |
|
Digital |
|
|
476 |
|
|
5.1 |
% |
|
|
1,001 |
|
|
5.6 |
% |
|
|
1,490 |
|
|
5.3 |
% |
|
|
2,151 |
|
|
5.1 |
% |
|
Other |
|
|
1,091 |
|
|
11.6 |
% |
|
|
1,343 |
|
|
7.6 |
% |
|
|
3,305 |
|
|
11.7 |
% |
|
|
3,805 |
|
|
9.1 |
% |
|
Total net revenues |
|
$ |
9,360 |
|
|
|
|
|
$ |
17,820 |
|
|
|
|
|
$ |
28,141 |
|
|
|
|
|
$ |
41,939 |
|
|
|
|
(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 September 30, 2021:
|
|
|
December 31, 2020 |
|
|
September 30, 2021 |
|
||
|
Senior credit facility |
|
$ |
70,972 |
|
|
$ |
68,170 |
|
|
Notes payable to Emmis |
|
|
5,535 |
|
|
|
5,535 |
|
|
Notes payable to SG Broadcasting |
|
|
21,400 |
|
|
|
25,425 |
|
|
Less: Current maturities |
|
|
(1,836 |
) |
|
|
(1,836 |
) |
|
Less: Unamortized original issue discount |
|
|
(2,153 |
) |
|
|
(1,955 |
) |
|
Total long-term debt, net of current portion and debt discount |
|
$ |
93,918 |
|
|
$ |
95,339 |
|
- 12 -
Senior secured term loan agreement
The Company has a five-year senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC, (“GACP”) a Delaware limited liability company, as administrative agent and collateral agent. The Senior Credit Facility bears interest at a rate equal to the London Interbank Offered Rate ("LIBOR"), plus 7.5%, with a 2.0% LIBOR floor and a 1% incremental interest rate paid in kind under certain circumstances (as discussed below). 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). On May 19, 2021, the Company entered into Amendment No. 4 to its Senior Credit Facility. Under the terms of Amendment No. 4:
|
|
• |
SG Broadcasting agreed to contribute up to $7.0 million to the Company in the form of subordinated debt, with $3.0 million contributed at closing, $1.0 million contributed on June 1, 2021, and up to an additional $3.0 million to be contributed through June 30, 2022, if necessary, to satisfy certain conditions described in Amendment No. 4; |
|
|
• |
the Company made a principal payment of $3.0 million to reduce borrowings outstanding under the Senior Credit Facility; |
|
|
• |
no quarterly scheduled principal payments are required through and including the quarter ending March 31, 2022; |
|
|
• |
the Minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) was reduced to 1.00:1.00 from April 1, 2020 through and including December 31, 2022, with it increasing to 1.10:1.00 on and after January 1, 2023; |
|
|
• |
for purposes of calculating compliance with the Minimum Consolidated Fixed Charge Coverage Ratio, Consolidated EBITDA (as defined in the Senior Credit Facility) includes certain amounts contributed by SG Broadcasting in the form of subordinated debt or equity, including those described above; |
|
|
• |
for purposes of calculating the Company’s borrowing base under the Senior Credit Facility, the multiple applied to Billboard Cash Flow (as defined in the Senior Credit Facility) increased from 3.5 to 5.0 and the advance rate applied to the radio stations’ FCC licenses increased from 60% to 70%; |
|
|
• |
at any time the multiple applied to Billboard Cash Flow exceeds 3.5 or the advance rate applied to the radio stations’ FCC licenses exceeds 60%, an incremental annual interest rate of 1% applies and is paid in kind monthly; |
|
|
• |
certain specified events of default were waived; and |
|
|
• |
an amendment fee of $0.4 million was paid in cash. |
As a result of the $3.0 million payment made under the amendment, the Company recorded a loss on debt extinguishment of $81 thousand during the 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 3.5x 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.
Emmis Convertible Promissory Note
The Emmis Convertible Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0%, plus an additional 1.0% on any payment of interest in kind and, without regard to whether the Company pays such interest in kind, an additional increase of 1.0% following the second anniversary of the date of issuance and additional increases of 1.0% following each successive anniversary thereafter. Because the Senior Credit Facility prohibits the Company from paying interest in cash on the Emmis Convertible Promissory Note, the Company has been accruing interest since inception using the rate applicable if the interest will be paid in kind. The Emmis Convertible Promissory Note is convertible, in whole or in part, into MediaCo Class A common stock at the option of Emmis and at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion. The Emmis Convertible Promissory Note matures on November 25, 2024. As of September 30, 2021, the principal balance outstanding under the Emmis Convertible Promissory Note is $5.5 million.
- 13 -
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.
On May 19, 2021, the Company issued to SG Broadcasting a subordinated convertible promissory note (the “May 2021 SG Broadcasting Promissory Note”), in return for which SG Broadcasting contributed $3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No. 4. Up to $7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note. The May 2021 SG Broadcasting Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if no senior credit facility is outstanding, of 6.0%, and an additional increase of 1.0% on November 25, 2021 and additional annual increases of 1.0% following each successive anniversary thereafter. The May 2021 SG Broadcasting Promissory Note matures on May 25, 2025 and interest is payable in kind through maturity. Subject to prior shareholder approval of the issuance of the shares, the May 2021 SG Broadcasting Promissory Note is convertible into MediaCo Class A common stock at the option of SG Broadcasting at a strike price equal to the thirty day volume weighted average price of the MediaCo Class A common stock on the date of conversion.
On June 1, 2021, SG Broadcasting contributed $1.0 million to the Company under the May 2021 SG Broadcasting Promissory Note as required by Amendment No. 4 to the Senior Credit Facility.
As of 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Senior Credit Facility |
|
|
Emmis Note |
|
|
SG Broadcasting Notes |
|
|
Total Payments |
|
||||
|
Remainder of 2021 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
2022 |
|
|
2,754 |
|
|
|
— |
|
|
|
— |
|
|
|
2,754 |
|
|
2023 |
|
|
3,672 |
|
|
|
— |
|
|
|
— |
|
|
|
3,672 |
|
|
2024 |
|
|
61,744 |
|
|
|
5,535 |
|
|
|
— |
|
|
|
67,279 |
|
|
2025 |
|
|
— |
|
|
|
— |
|
|
|
25,425 |
|
|
|
25,425 |
|
|
Total |
|
$ |
68,170 |
|
|
$ |
5,535 |
|
|
$ |
25,425 |
|
|
$ |
99,130 |
|
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.
- 14 -
Note 7. Income Taxes
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.
Note 8. Acquisitions
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.
Note 9. Leases
We determine if an arrangement is a lease at inception. We have operating leases for office space, sites upon which advertising structures are built, tower space, equipment and automobiles expiring at various dates through October 2049. Some leases have options to extend and some have options to terminate. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our condensed consolidated balance sheets.
Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. Our lease terms may include options to extend or terminate the lease, which we treat as exercised when it is reasonably certain and there is a significant economic incentive to exercise that option. Our outdoor advertising segment treats evergreen leases as though they will be automatically renewed at the end of each term.
Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. Variable lease expense recognized in the nine months ended September 30, 2021, was not material.
We elected not to apply the recognition requirements of ASC 842, “Leases”, to short-term leases, which are deemed to be leases with a lease term of twelve months or less. Instead, we recognized lease payments in the 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 nine months ended September 30, 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, |
|
||||
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
||||
|
Operating lease cost |
$ |
1,247 |
|
|
$ |
1,265 |
|
|
$ |
3,740 |
|
|
$ |
3,769 |
|
|
|
Nine Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||
|
|
2020 |
|
|
2021 |
|
||
|
Operating cash flows from operating leases |
$ |
3,754 |
|
|
$ |
3,860 |
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
— |
|
|
|
314 |
|
- 15 -
|
|
As of December 31, |
|
|
As of September 30, |
|
||
|
|
2020 |
|
|
2021 |
|
||
|
Weighted average remaining lease term - operating leases (in years) |
|
9.0 |
|
|
|
9.5 |
|
|
Weighted average discount rate - operating leases |
|
9.1 |
% |
|
|
9.3 |
% |
As of September 30, 2021, the annual minimum lease payments of our operating lease liabilities were as follows:
|
Year ending December 31, |
|
|
|
|
|
Remainder of 2021 |
|
$ |
1,367 |
|
|
2022 |
|
|
5,368 |
|
|
2023 |
|
|
4,346 |
|
|
2024 |
|
|
2,845 |
|
|
2025 |
|
|
2,829 |
|
|
After 2025 |
|
|
15,358 |
|
|
Total lease payments |
|
|
32,113 |
|
|
Less imputed interest |
|
|
10,300 |
|
|
Total recorded lease liabilities |
|
$ |
21,813 |
|
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:
Note 10. 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 |
|
|
Additions to asset retirement obligations |
|
|
|
161 |
|
|
Accretion expense |
|
|
|
526 |
|
|
Liabilities settled |
|
|
|
(79 |
) |
|
Balance at September 30, 2021 |
|
|
$ |
6,924 |
|
Note 11. Segment Information
The Company’s operations are aligned into two business segments: (i) Radio, and (ii) Outdoor advertising. Radio includes the operations and results of WQHT-FM and WBLS-FM, and outdoor advertising includes the operations and results of the Fairway businesses acquired in December 2019 and additional acquisitions thereafter. The Company groups activities that are not considered operating segments in the “All Other” category.
These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate expenses, including transaction costs, are not allocated to reportable segments. The Company’s segments operate exclusively in the United States.
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.
- 16 -
|
Three Months Ended September 30, 2021 |
|
Radio |
|
|
Outdoor Advertising |
|
|
All Other |
|
|
Consolidated |
|
||||
|
Net revenues |
|
$ |
14,361 |
|
|
$ |
3,459 |
|
|
$ |
— |
|
|
$ |
17,820 |
|
|
Operating expenses excluding depreciation and amortization expense |
|
|
10,467 |
|
|
|
2,073 |
|
|
|
— |
|
|
|
12,540 |
|
|
Corporate expenses |
|
|
— |
|
|
|
— |
|
|
|
2,422 |
|
|
|
2,422 |
|
|
Depreciation and amortization |
|
|
179 |
|
|
|
889 |
|
|
|
— |
|
|
|
1,068 |
|
|
Operating income (loss) |
|
$ |
3,715 |
|
|
$ |
497 |
|
|
$ |
(2,422 |
) |
|
$ |
1,790 |
|
|
Three Months Ended September 30, 2020 |
|
Radio |
|
|
Outdoor Advertising |
|
|
All Other |
|
|
Consolidated |
|
||||
|
Net revenues |
|
$ |
6,200 |
|
|
$ |
3,160 |
|
|
$ |
— |
|
|
$ |
9,360 |
|
|
Operating expenses excluding depreciation and amortization expense |
|
|
5,573 |
|
|
|
2,179 |
|
|
|
— |
|
|
|
7,752 |
|
|
Corporate expenses |
|
|
— |
|
|
|
— |
|
|
|
1,214 |
|
|
|
1,214 |
|
|
Depreciation and amortization |
|
|
208 |
|
|
|
688 |
|
|
|
— |
|
|
|
896 |
|
|
Loss on disposal of assets |
|
|
— |
|
|
|
103 |
|
|
|
— |
|
|
|
103 |
|
|
Operating income (loss) |
|
$ |
419 |
|
|
$ |
190 |
|
|
$ |
(1,214 |
) |
|
$ |
(605 |
) |
|
Nine Months Ended September 30, 2021 |
|
Radio |
|
|
Outdoor Advertising |
|
|
All Other |
|
|
Consolidated |
|
||||
|
Net revenues |
|
$ |
31,714 |
|
|
$ |
10,225 |
|
|
$ |
— |
|
|
$ |
41,939 |
|
|
Operating expenses excluding depreciation and amortization expense |
|
|
21,497 |
|
|
|
6,622 |
|
|
|
— |
|
|
|
28,119 |
|
|
Corporate expenses |
|
|
— |
|
|
|
— |
|
|
|
5,908 |
|
|
|
5,908 |
|
|
Depreciation and amortization |
|
|
553 |
|
|
|
2,474 |
|
|
|
— |
|
|
|
3,027 |
|
|
Gain on disposal of assets |
|
|
— |
|
|
|
(78 |
) |
|
|
— |
|
|
|
(78 |
) |
|
Operating income (loss) |
|
$ |
9,664 |
|
|
$ |
1,207 |
|
|
$ |
(5,908 |
) |
|
$ |
4,963 |
|
|
Nine Months Ended September 30, 2020 |
|
Radio |
|
|
Outdoor Advertising |
|
|
All Other |
|
|
Consolidated |
|
||||
|
Net revenues |
|
$ |
18,368 |
|
|
$ |
9,773 |
|
|
$ |
— |
|
|
$ |
28,141 |
|
|
Operating expenses excluding depreciation and amortization expense |
|
|
16,509 |
|
|
|
7,106 |
|
|
|
— |
|
|
|
23,615 |
|
|
Corporate expenses |
|
|
— |
|
|
|
— |
|
|
|
3,311 |
|
|
|
3,311 |
|
|
Depreciation and amortization |
|
|
689 |
|
|
|
2,397 |
|
|
|
— |
|
|
|
3,086 |
|
|
Loss on disposal of assets |
|
|
— |
|
|
|
185 |
|
|
|
— |
|
|
|
185 |
|
|
Operating income (loss) |
|
$ |
1,170 |
|
|
$ |
85 |
|
|
$ |
(3,311 |
) |
|
$ |
(2,056 |
) |
|
Total Assets |
|
Radio |
|
|
Outdoor Advertising |
|
|
Consolidated |
|
|||
|
As of December 31, 2020 |
|
$ |
84,219 |
|
|
$ |
62,132 |
|
|
$ |
146,351 |
|
|
As of September 30, 2021 |
|
|
89,090 |
|
|
|
62,591 |
|
|
|
151,681 |
|
Note 12. 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.
- 17 -
Note 13. Related Party Transactions
Transaction Agreement with Emmis and SG Broadcasting
On June 28, 2019, MediaCo entered into a Contribution and Distribution Agreement with Emmis and SG Broadcasting, pursuant to which (i) Emmis contributed the assets of its radio stations WQHT-FM and WBLS-FM, in exchange for $91.5 million in cash, a $5.0 million note and 23.72% of the common stock of MediaCo, (ii) Standard General purchased 76.28% of the common stock of MediaCo, and (iii) the common stock of MediaCo received by Emmis was distributed pro rata in a taxable dividend to Emmis’ shareholders on January 17, 2020. The common stock of MediaCo acquired by Standard General is entitled to ten votes per share and the common stock acquired by Emmis and distributed to Emmis’ shareholders is entitled to one vote per share. 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.
Convertible Promissory Notes
As a result of the transaction described above, on November 25, 2019, we issued convertible promissory notes to both Emmis and SG Broadcasting in the amounts of $5.0 million and $6.3 million, respectively. On February 28, 2020, the Company and SG Broadcasting amended and restated the SG Broadcasting Promissory Note such that the maximum aggregate principal amount issuable under the note was increased from $6.3 million to $10.3 million. Also on February 28, 2020, SG Broadcasting loaned an additional $2.0 million to the Company pursuant to the amended note for working capital purposes.
On March 27, 2020, the Company and SG Broadcasting further amended and restated the SG Broadcasting Promissory Note such that the maximum aggregate principal amount issuable under the note was increased from $10.3 million to $20.0 million. On March 27, 2020, SG Broadcasting loaned an additional $3.0 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes.
On August 28, 2020, SG Broadcasting loaned an additional $8.7 million to the Company pursuant to the Second Amended and Restated SG Promissory Note for working capital purposes, bringing the total principal amount outstanding to $20.0 million.
On September 30, 2020, SG Broadcasting loaned an additional $0.3 million to the Company pursuant to the Additional SG Broadcasting Promissory Note for working capital purposes.
On November 25, 2020, annual interest of $0.5 million and $1.1 million was paid in kind and added to the principal balances of the Emmis Convertible Promissory Note and the SG Broadcasting Promissory Note, respectively.
On May 19, 2021, the Company issued to SG Broadcasting the May 2021 SG Broadcasting Promissory Note, in return for which SG Broadcasting loaned $3.0 million to the Company to make the prepayment of Senior Credit Facility debt required under Amendment No. 4. Up to $7.0 million may be borrowed pursuant to the May 2021 SG Broadcasting Promissory Note.
On June 1, 2021, SG Broadcasting loaned $1.0 million to the Company under the May 2021 SG Broadcasting Promissory Note as required by Amendment No. 4 to the Senior Credit Facility.
On September 30, 2021, annual interest of $25 thousand on the Second Amended Promissory Note was paid in kind and added to the principal balance outstanding. 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.
The terms of these notes are described in Note 5.
- 18 -
Convertible Preferred Stock
On December 13, 2019, in connection with the purchase of our outdoor advertising segment, the Company issued to SG Broadcasting 220,000 shares of MediaCo Series A Convertible Preferred Stock.
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. 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.
Loan Proceeds Participation Agreement
On April 22, 2020, MediaCo and Emmis entered into a certain Loan Proceeds Participation Agreement (the “LPPA”) pursuant to which (i) Emmis agreed to use certain of the proceeds of the loan Emmis received pursuant to the Paycheck Protection Program (“PPP”) under Division A, Title I of the CARES Act to pay certain wages of employees leased to MediaCo pursuant to the Employee Leasing Agreement, between Emmis and MediaCo, (ii) Emmis agreed to waive up to $1.5 million in reimbursement obligations of MediaCo to Emmis under the Employee Leasing Agreement to the extent that the PPP Loan is forgiven, and (iii) MediaCo agreed to promptly pay Emmis an amount equal to 31.56% of the amount of the PPP Loan, if any, that Emmis is required to repay, up to the amount of the reimbursement obligations forgiven under (ii) above. Standard General L.P., on behalf of all of the funds for which it serves as an investment advisor, agreed to guaranty MediaCo’s obligations under the LPPA. During the nine months ended September 30, 2021, Emmis received notification that the full amount of the loan has been forgiven.
Management Agreement for Billboards LLC
On August 11, 2020, the board of directors of the Company unanimously authorized the entry into a certain Management Agreement (the “Billboard Agreement”) between Fairway Outdoor LLC (a subsidiary of the Company, “Fairway”) and Billboards LLC (an affiliate of Standard General, “Billboards”). Under the Billboard Agreement, Fairway will manage the billboard business of Billboards in exchange for payments of $25 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.
- 19 -
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Note: Certain statements included in this report or in the financial statements contained herein which are not statements of historical fact, including but not limited to those identified with the words “expect,” “should,” “will” or “look” are intended to be, and are, by this Note, identified as “forward-looking statements,” as defined in the Securities and Exchange Act of 1934, as amended. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future result, performance or achievement expressed or implied by such forward-looking statement. Such factors include, among others:
|
|
• |
Our relationship with Emmis and Emmis Operating Company’s ability to effectively manage our operations; |
|
|
• |
Potential conflicts of interest with SG Broadcasting and our status as a “controlled company”; |
|
|
• |
Our ability to operate as a standalone public company and to execute on our business strategy; |
|
|
• |
Our ability to compete with, and integrate into our operations, new media channels, such as digital video, YouTube, and real-time media delivery; |
|
|
• |
Our ability to continue to exchange advertising time for goods or services; |
|
|
• |
Our ability to use market research, advertising and promotions to attract and retain audiences; |
|
|
• |
U.S. regulatory requirements for owning and operating media broadcasting channels and our ability to maintain regulatory licenses granted by the FCC; |
|
|
• |
Industry and economic trends within the U.S. radio industry, generally, and the New York City radio industry, in particular; |
|
|
• |
Our ability to finance our operations or to obtain financing on terms that are favorable to MediaCo; |
|
|
• |
Our ability to successfully complete and integrate any future acquisitions; |
|
|
• |
The impact of COVID-19 and other pandemics; |
|
|
• |
The accuracy of management’s estimates and assumptions on which the Company’s financial projections are based; and |
|
|
• |
Other factors mentioned in documents filed by the Company with the Securities and Exchange Commission. |
For a more detailed discussion of these and other risk factors, see the Risk Factors section of our Annual Report on Form 10-K and the Risk Factors included in Exhibit 99.1 on Form 8-K, filed with the Securities and Exchange Commission on March 30, 2021 and May 21, 2021, respectively. MediaCo does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.
GENERAL
We own and operate two radio stations located in New York City and outdoor advertising businesses geographically focused in the Southeast (Georgia, Alabama, South Carolina and Florida) and the Mid-Atlantic (Kentucky, West Virginia and Ohio) regions. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales are the primary component of our consolidated revenues. These rates are in large part based on our radio stations’ ability to attract audiences in demographic groups targeted by their advertisers and the number of persons exposed to our billboards. The Nielsen Company generally measures radio station ratings weekly for markets measured by the Portable People Meter™, which includes all of our radio stations, while Geopath Insight Suite is the annual audience location measurement used for our billboards. Because audience ratings in a radio station’s local market are critical to the station’s financial success, our strategy is to use market research, advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.
Our revenues vary throughout the year. Revenue and operating income are usually lowest in the first calendar quarter for both our radio and outdoor advertising segments, partly because retailers cut back their advertising spending immediately following the holiday shopping season.
In addition to the sale of advertising time for cash, stations typically exchange advertising time for goods or services, which can be used by the station in its business operations. These barter transactions are recorded at the estimated fair value of the product or service received. We generally confine the use of such trade transactions to promotional items or services for which we would otherwise have paid cash. In addition, it is our general policy not to preempt advertising spots paid for in cash with advertising spots paid for in trade.
- 20 -
The following table summarizes the sources of our revenues for the three and nine months ended September 30, 2020 and 2021. The category “Non Traditional” principally consists of ticket sales and sponsorships of events our stations conduct in their local market. The category “Other” includes, among other items, revenues related to network revenues, production of billboard advertisements and barter.
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||||||||||||||
|
|
|
2020 |
|
% of Total |
|
|
2021 |
|
% of Total |
|
|
2020 |
|
% of Total |
|
|
2021 |
|
% of Total |
|
||||||||
|
|
|
(Amounts in thousands) |
|
|||||||||||||||||||||||||
|
Revenue by Source: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Advertising |
|
$ |
4,633 |
|
|
49.5 |
% |
|
$ |
8,073 |
|
|
45.3 |
% |
|
$ |
13,641 |
|
|
48.5 |
% |
|
$ |
21,941 |
|
|
52.3 |
% |
|
Outdoor Advertising (1) |
|
|
2,957 |
|
|
31.6 |
% |
|
|
3,197 |
|
|
17.9 |
% |
|
|
9,254 |
|
|
32.9 |
% |
|
|
9,407 |
|
|
22.4 |
% |
|
Nontraditional |
|
|
203 |
|
|
2.2 |
% |
|
|
4,206 |
|
|
23.6 |
% |
|
|
451 |
|
|
1.6 |
% |
|
|
4,635 |
|
|
11.1 |
% |
|
Digital |
|
|
476 |
|
|
5.1 |
% |
|
|
1,001 |
|
|
5.6 |
% |
|
|
1,490 |
|
|
5.3 |
% |
|
|
2,151 |
|
|
5.1 |
% |
|
Other |
|
|
1,091 |
|
|
11.6 |
% |
|
|
1,343 |
|
|
7.6 |
% |
|
|
3,305 |
|
|
11.7 |
% |
|
|
3,805 |
|
|
9.1 |
% |
|
Total net revenues |
|
$ |
9,360 |
|
|
|
|
|
$ |
17,820 |
|
|
|
|
|
$ |
28,141 |
|
|
|
|
|
$ |
41,939 |
|
|
|
|
(1) A substantial portion of this revenue is from lessor revenue derived from operating leases accounted for under ASC 842, “Leases.”
Roughly 20% of our expenses varies in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions and bad debt. Our costs that do not vary as much in relation to revenue are mostly in our programming and general and administrative departments, such as talent costs, ratings fees, rent, utilities and salaries. Lastly, our costs that are highly discretionary are costs in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience and market share.
KNOWN TRENDS AND UNCERTAINTIES
The U.S. radio industry is a mature industry and its growth rate has stalled. Management believes this is principally the result of two factors: (1) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, have gained advertising share against radio and other traditional media and created a proliferation of advertising inventory and (2) the fragmentation of the radio audience and time spent listening caused by satellite radio, audio streaming services and podcasts has led some investors and advertisers to conclude that the effectiveness of radio advertising has diminished.
Along with a large portion of the radio industry, our stations have deployed HD Radio®. HD Radio offers listeners advantages over standard analog broadcasts, including improved sound quality and additional digital channels. In addition to offering secondary channels, the HD Radio spectrum allows broadcasters to transmit other forms of data. We are participating in a joint venture with other broadcasters to provide the bandwidth that a third party uses to transmit location-based data to hand-held and in-car navigation devices. The number of radio receivers incorporating HD Radio has increased in the past year, particularly in new automobiles. It is unclear what impact HD Radio will have on the market in which we operate.
Our stations have also aggressively worked to harness the power of broadband and mobile media distribution in the development of emerging business opportunities by developing highly interactive websites with content that engages our listeners, deploying mobile applications and streaming our content, and harnessing the power of digital video on our websites and YouTube channels.
The results of our radio operations are solely dependent on the results of our stations in the New York market. Some of our competitors that operate larger station clusters in the New York market are able to leverage their market share to extract a greater percentage of available advertising revenue through packaging a variety of advertising inventory at discounted unit rates. Market revenues in New York as measured by Miller Kaplan Arase LLP (“Miller Kaplan”), an independent public accounting firm used by the radio industry to compile revenue information, were up 44.1% for the nine months ended September 30, 2021, as compared to the same period of the prior year. During this period, as measured by Miller Kaplan, revenues for our stations were up 73.1%. Our outperformance was largely driven by our largest outdoor concert, Summer Jam, which was held in August 2021. Due to the pandemic, we cancelled the concert in 2020, so there are no comparative revenues in the prior year related to this event.
As part of our business strategy, we continually evaluate potential acquisitions of businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. However, MediaCo’s long-term debt agreements substantially limit our ability to make acquisitions. We also regularly review our portfolio of assets and may opportunistically dispose of or otherwise monetize assets when we believe it is appropriate to do so.
- 21 -
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.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially lead to materially different results under different assumptions and conditions. We believe that our critical accounting policies are those described below.
Revenue Recognition
Broadcasting revenue is recognized as advertisements are aired and outdoor revenue is recognized over the life of the applicable lease of each billboard. Both broadcasting revenue and outdoor advertising revenue recognition is subject to meeting certain conditions such as persuasive evidence that an arrangement exists and collection is reasonably assured. These criteria are generally met at the time the advertisement is aired for broadcasting revenue or displayed for outdoor advertising revenue. Broadcasting advertising revenues presented in the financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues.
FCC Licenses
As of December 31, 2020 and September 30, 2021, we have recorded approximately $63.3 million in FCC licenses, which represents approximately 43% and 42% of our total assets, respectively. We would not be able to operate our radio stations without the related FCC license for each property. FCC licenses are renewed every eight years; consequently, we continually monitor our stations’ compliance with the various regulatory requirements. Historically, each of our FCC licenses has been renewed at the end of its respective period, and we expect that each FCC license will continue to be renewed in the future. We consider our FCC licenses to be indefinite-lived intangibles.
We do not amortize indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by Accounting Standards Codification (“ASC”) Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under a Local Marketing Agreement by another broadcaster. Consequently, our two radio stations in New York are considered a single unit of accounting.
We perform the annual impairment test of our FCC Licenses as of October 1 of each year and perform additional interim impairment testing whenever triggering events suggest such testing is warranted.
Valuation of Indefinite-lived Broadcasting Licenses
Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company considers both income and market valuation methods when it performs its impairment tests. Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its respective 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 the unit of accounting’s market remains unchanged, with the exception that the 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 then current economic conditions into consideration. 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.
- 22 -
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 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 fiscal year, unless indications of impairment exist during an interim period.
Deferred Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company’s financial statements or income tax returns. Income taxes are recognized during the year in which the underlying transactions are reflected in the consolidated statements of operations. Deferred taxes are provided for temporary differences between amounts of assets and liabilities recorded for financial reporting purposes as compared to amounts recorded for income tax purposes. After determining the total amount of deferred tax assets, the Company determines whether it is more likely than not that some portion of the deferred tax assets will not be realized.
Results of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2021, Compared to September 30, 2020
Net revenues:
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||
|
Net revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
|
$ |
6,200 |
|
|
$ |
14,361 |
|
|
$ |
8,161 |
|
|
|
131.6 |
% |
|
$ |
18,368 |
|
|
$ |
31,714 |
|
|
$ |
13,346 |
|
|
|
72.7 |
% |
|
Outdoor Advertising |
|
|
3,160 |
|
|
|
3,459 |
|
|
|
299 |
|
|
|
9.5 |
% |
|
|
9,773 |
|
|
|
10,225 |
|
|
|
452 |
|
|
|
4.6 |
% |
|
Total net revenues |
|
$ |
9,360 |
|
|
$ |
17,820 |
|
|
$ |
8,460 |
|
|
|
90.4 |
% |
|
$ |
28,141 |
|
|
$ |
41,939 |
|
|
$ |
13,798 |
|
|
|
49.0 |
% |
Net radio revenues increased for both the three-month and nine-month periods ended September 30, 2021, as a result of overall advertising revenues rebounding from the COVID-19 pandemic. In addition, various state and local departments of health increased their advertising to drive education and awareness surrounding vaccination efforts. Our stations benefited more than stations serving the general population due to the targeted nature of the awareness campaigns. Also, during the third quarter of the current year, we held our annual outdoor concert, Summer Jam, which was cancelled in the second quarter of the prior year due to the COVID-19 pandemic.
We typically monitor the performance of our stations against the aggregate performance of the market in which we operate based on reports for the period prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter and syndication arrangements. Miller Kaplan reported gross revenues for the New York radio market increased 44.1% for the nine-month period ended September 30, 2021, as compared to the same period of the prior year. Our gross revenues reported to Miller Kaplan were up 73.1% for the nine-month period ended September 30, 2021, as compared to the same period of the prior year.
Outdoor advertising revenues increased for the three-month and nine-month periods ended September 30, 2021, attributable to overall advertising revenues rebounding from the COVID-19 pandemic, which didn’t meaningfully impact our performance until the second quarter of 2020. Revenues in our outdoor advertising business have been less volatile than our radio business due to greater geographic diversification and longer duration advertising contracts with customers.
- 23 -
Operating expenses excluding depreciation and amortization expense:
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||
|
Operating expenses excluding depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
|
$ |
5,573 |
|
|
$ |
10,467 |
|
|
$ |
4,894 |
|
|
|
87.8 |
% |
|
$ |
16,509 |
|
|
$ |
21,497 |
|
|
$ |
4,988 |
|
|
|
30.2 |
% |
|
Outdoor Advertising |
|
|
2,179 |
|
|
|
2,073 |
|
|
|
(106 |
) |
|
|
(4.9 |
)% |
|
|
7,106 |
|
|
|
6,622 |
|
|
|
(484 |
) |
|
|
(6.8 |
)% |
|
Total operating expenses excluding depreciation and amortization expense |
|
$ |
7,752 |
|
|
$ |
12,540 |
|
|
$ |
4,788 |
|
|
|
61.8 |
% |
|
$ |
23,615 |
|
|
$ |
28,119 |
|
|
$ |
4,504 |
|
|
|
19.1 |
% |
Radio operating expenses excluding depreciation and amortization expense increased during the three-month and nine-month periods ended September 30, 2021 due to expenses associated with Summer Jam, our largest outdoor concert held in August 2021, but cancelled in the second quarter of the prior year due to the COVID-19 pandemic.
Outdoor advertising operating expenses excluding depreciation and amortization are largely fixed in nature; however, we recorded approximately $0.3 million and $0.6 million of employee retention credits in the three and nine-month periods ended September 30, 2021, respectively, which reduced operating expenses when compared to the three and nine-month periods ended September 30, 2020.
Corporate expenses
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||||
|
Corporate expenses |
|
$ |
1,214 |
|
|
$ |
2,422 |
|
|
$ |
1,208 |
|
|
|
99.5 |
% |
|
$ |
3,311 |
|
|
$ |
5,908 |
|
|
$ |
2,597 |
|
|
|
78.4 |
% |
||
The increase in corporate expenses for both the three and nine-month periods ended September 30, 2021 relate to personnel hires in advance of the management agreement between the Company and Emmis ending in November 2021, as well as noncash compensation expense associated with restricted stock grants. These increases were partially offset by approximately $0.1 million and $0.2 million of employee retention credits recorded in the three and nine-month periods ended September 30, 2021, respectively.
Depreciation and amortization:
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
|
$ |
208 |
|
|
$ |
179 |
|
|
$ |
(29 |
) |
|
|
(13.9 |
)% |
|
$ |
689 |
|
|
$ |
553 |
|
|
$ |
(136 |
) |
|
|
(19.7 |
)% |
|
Outdoor Advertising |
|
|
688 |
|
|
|
889 |
|
|
$ |
201 |
|
|
|
29.2 |
% |
|
|
2,397 |
|
|
|
2,474 |
|
|
|
77 |
|
|
|
3.2 |
% |
|
Total depreciation and amortization |
|
$ |
896 |
|
|
$ |
1,068 |
|
|
$ |
172 |
|
|
|
19.2 |
% |
|
$ |
3,086 |
|
|
$ |
3,027 |
|
|
$ |
(59 |
) |
|
|
(1.9 |
)% |
Radio depreciation and amortization expense decreased due to certain assets becoming fully depreciated in the prior year. Outdoor advertising depreciation and amortization increased due to revisions to the preliminary purchase price allocation recorded during 2020 and associated adjustments to depreciation and amortization, coupled with depreciation expense associated with two small asset acquisitions that closed in the second quarter of the current year.
- 24 -
Loss (gain) on sale of assets:
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||
|
Loss (gain) on sale of assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outdoor Advertising |
|
$ |
103 |
|
|
$ |
— |
|
|
$ |
(103 |
) |
|
N/M |
|
$ |
185 |
|
|
$ |
(78 |
) |
|
$ |
263 |
|
|
|
142.2 |
% |
|
Total loss (gain) on sale of assets |
|
$ |
103 |
|
|
$ |
— |
|
|
$ |
(103 |
) |
|
N/M |
|
$ |
185 |
|
|
$ |
(78 |
) |
|
$ |
263 |
|
|
|
142.2 |
% |
The gain on sale of assets in the nine months ended September 30, 2021 principally relates to the disposal of certain outdoor advertising assets during the second quarter. The loss on disposal of assets in the three and nine-month periods ended September 30, 2020 also relates to the disposal of certain outdoor advertising structures in the normal course of business.
Operating (loss) income:
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||
|
Operating (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
|
$ |
419 |
|
|
$ |
3,715 |
|
|
$ |
3,296 |
|
|
|
786.6 |
% |
|
$ |
1,170 |
|
|
$ |
9,664 |
|
|
$ |
8,494 |
|
|
|
726.0 |
% |
|
Outdoor Advertising |
|
|
190 |
|
|
|
497 |
|
|
|
307 |
|
|
|
161.6 |
% |
|
|
85 |
|
|
|
1,207 |
|
|
|
1,122 |
|
|
|
1320.0 |
% |
|
All Other |
|
|
(1,214 |
) |
|
|
(2,422 |
) |
|
|
(1,208 |
) |
|
|
(99.5 |
)% |
|
|
(3,311 |
) |
|
|
(5,908 |
) |
|
|
(2,597 |
) |
|
|
(78.4 |
)% |
|
Total operating (loss) income |
|
$ |
(605 |
) |
|
$ |
1,790 |
|
|
$ |
2,395 |
|
|
|
395.9 |
% |
|
$ |
(2,056 |
) |
|
$ |
4,963 |
|
|
$ |
7,019 |
|
|
|
341.4 |
% |
Radio and outdoor advertising operating income increased in the three and nine-month periods ended September 30, 2021, due to advertising revenues rebounding from the impact of the pandemic in the prior year. In addition, for the three and nine-month periods ended September 30, 2021, the Company qualified for employee retention credits of $1.0 million and $1.9 million, respectively, and recorded the benefit as a reduction to operating expenses.
Interest expense
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||
|
Interest expense |
|
$ |
(2,411 |
) |
|
$ |
(2,895 |
) |
|
$ |
(484 |
) |
|
|
20.1 |
% |
|
$ |
(6,928 |
) |
|
$ |
(8,134 |
) |
|
$ |
(1,206 |
) |
|
|
17.4 |
% |
Interest expense increased due to (i) the additional funding from SG Broadcasting during 2021, which took the form of additional loans, (ii) accrued interest on the Emmis Promissory Note and SG Broadcasting Promissory Notes being paid in kind in the fourth quarter of 2020, and (iii) an additional 1% paid in kind interest rate applicable beginning May 19, 2021 as a result of Amendment No. 4 to the senior credit facility.
Loss on debt extinguishment
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
||||||
|
|
|
(As reported, amounts in thousands) |
||||||||||||||||||||||||||
|
Loss on debt extinguishment |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
N/A |
|
$ |
— |
|
|
$ |
(81 |
) |
|
$ |
(81 |
) |
|
N/M |
The loss on debt extinguishment recorded during the nine months ended September 30, 3021 relates to the unscheduled principal payment of $3 million required under Amendment No. 4 to the senior credit facility. In connection with this principal payment, we wrote-off a pro rata portion of the unamortized debt discount and recognized this as a loss on debt extinguishment.
- 25 -
(Benefit) provision for income taxes:
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||
|
(Benefit) provision for income taxes |
|
$ |
(22 |
) |
|
$ |
83 |
|
|
$ |
105 |
|
|
|
(477.3 |
)% |
|
$ |
13,854 |
|
|
$ |
246 |
|
|
$ |
(13,608 |
) |
|
|
(98.2 |
)% |
Given the uncertainty in the economy due to the ongoing COVID-19 pandemic, particularly in the New York market, the Company concluded it could not reasonably estimate pre-tax income for the year ended December 31, 2021, so the Company is calculating its provision for income taxes on a discrete basis until there is greater clarity. During the three months ended June 30, 2020, the Company concluded that it was more likely than not that it would be unable to realize its deferred tax assets and recorded a valuation allowance against these assets.
Consolidated net loss:
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|
2020 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
|
(As reported, amounts in thousands) |
|
|||||||||||||||||||||||||||||
|
Consolidated net loss |
|
$ |
(3,528 |
) |
|
$ |
(1,897 |
) |
|
$ |
1,631 |
|
|
|
(46.2 |
)% |
|
$ |
(24,429 |
) |
|
$ |
(5,510 |
) |
|
$ |
18,919 |
|
|
|
(77.4 |
)% |
Net loss decreased for the three and nine-month periods ended September 30, 2021, primarily due to an increase in operating income and, in the case of the nine-month period, a decrease in provision for income taxes, partially offset by an increase in interest expense.
Liquidity and Capital Resources
At September 30, 2021, we had cash and cash equivalents of $7.4 million and net working capital of $5.9 million. At December 31, 2020, we had cash and cash equivalents of $4.2 million and net working capital of $4.4 million. The increase in net working capital is mostly due to an increase in cash and accounts receivable resulting from improved business operations. The impact of this is partially offset by an increase in accrued interest due to the timing of annual interest paid in kind on the Emmis Convertible Promissory Note and the promissory notes due to SG Broadcasting.
Cash flows provided by operating activities were $4.2 million for the nine months ended September 30, 2021 versus cash flows used in operating activities of $7.2 million for the nine months ended September 30, 2020. The increase was mainly attributable to an increase in operating income as we recover from the COVID-19 pandemic.
Cash flows used in investing activities were $1.3 million for the nine months ended September 30, 2021, attributable to the acquisition of billboard structures and routine capital expenditures, partially offset by the proceeds from the sale of certain outdoor advertising assets. Cash flows used in investing activities were $0.3 million for the nine months ended September 30, 2020, attributable to capital expenditures.
Cash flows provided by financing activities were $0.3 million for the nine months ended September 30, 2021, due to debt proceeds of $4.0 million and proceeds from the issuance of Class A common stock of $0.2 million, net of debt payments and debt-related costs of $3.4 million and settlement of tax withholding obligations of $0.5 million. Cash flows provided by financing activities were $12.2 million for the nine months ended September 30, 2020, due to $14.3 million of debt proceeds, partially offset by debt payments and debt-related costs of $2.1 million.
Our primary sources of liquidity are cash provided by operations, cash available through borrowings from Standard General, and sales of Class A common stock. Our primary uses of capital have been, and are expected to continue to be, capital expenditures, working capital, debt service requirements and acquisitions.
The Company continually projects its anticipated cash needs, which include its operating needs, capital needs, and principal and interest payments on its indebtedness.
Intangibles
As of September 30, 2021, approximately 42% of our total assets consisted of FCC broadcast licenses, the values of which depend significantly upon various factors including, among other things, market revenues, market growth rates and the operational results of our businesses. We would not be able to operate the properties without the related FCC license for each property. FCC licenses are renewed every eight years; consequently, we continually monitor our stations’ compliance with the various regulatory requirements. Historically, substantially all FCC licenses have been renewed at or after the end of their respective periods, and we expect that our FCC licenses will be renewed in the future.
- 26 -
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As an emerging growth company, we are not required to provide this information.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company evaluated the effectiveness of the design and operation of its “disclosure controls and procedures” (“Disclosure Controls”). This evaluation (the “Controls Evaluation”) was performed under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).
Based upon the Controls Evaluation, our CEO and CFO concluded that as of September 30, 2021, our Disclosure Controls are effective to ensure that information relating to MediaCo Holding Inc. and Subsidiaries that is required to be disclosed by us in the reports that we file or submit is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. In the opinion of management of the Company there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.
Item 5. Other Information
On November 10, 2021, MediaCo entered into an employment agreement with Rahsan-Rahsan Lindsay, effective as of July 1, 2021, to serve as the Company’s Chief Executive Officer through June 30, 2023. Under the agreement, Mr. Lindsay’s annual base salary rate is $550,000. His annual incentive bonus target is 60% of his base salary. The annual incentive bonus will be paid, if at all, based upon achievement of certain performance goals to be determined by the Company. The Company retains the right to pay such annual incentive bonus in cash or shares of our Class A common stock. Mr. Lindsay also retains the right to participate in all of our employee benefit plans for which he is otherwise eligible. On July 1, 2021, Mr. Lindsay was granted 191,174 restricted shares of the Company’s Class A common stock, which are scheduled to vest in eight equal quarterly installments, with the first installment vesting on October 1, 2021. If the Agreement is terminated (i) by the Company during the term other than for “Cause” (as defined in the agreement) or other than upon Mr. Lindsay’s death or Disability (as defined in the Agreement), or (ii) by Mr. Lindsay for “Good Reason” (as defined in the agreement), Mr. Lindsay will be entitled to severance equal to six months’ base salary and the vesting of his equity grants will accelerate, provided in each case he signs a separation agreement and general release. The agreement also contains customary confidentiality, non-competition, non-solicitation and anti-raiding restrictions that apply to Mr. Lindsay during and after the term. This description of the employment agreement is qualified in its entirety by reference to the employment agreement, a copy of which is attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q, and is incorporated herein by reference.
- 27 -
Item 6. Exhibits
|
|
(a) |
Exhibits. |
The following exhibits are filed or incorporated by reference as a part of this report:
|
|
|
|
||||||||||||
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Exhibit |
|
|
|
|
|
Incorporated by Reference |
||||||||
|
Number |
|
Exhibit Description |
|
Filed Herewith |
|
Form |
|
Period Ending |
|
Exhibit |
|
Filing Date |
||
|
3.1 |
|
Amended and Restated Articles of Incorporation of MediaCo Holding Inc., as amended |
|
|
|
10-KT |
|
12/31/2019 |
|
3.1 |
|
3/27/2020 |
||
|
3.2 |
|
|
|
|
10-K |
|
12/31/2020 |
|
3.2 |
|
3/30/2021 |
|||
|
10.1 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
31.1 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
31.2 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
32.1 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
32.2 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
101.INS |
|
Inline XBRL Instance Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.LAB |
|
Inline XBRL Taxonomy Extension Labels Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
- 28 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
MEDIACO HOLDING INC. |
|
|
|
|
|
|
Date: November 12, 2021 |
By: |
/s/ RYAN A. HORNADAY |
|
|
|
Ryan A. Hornaday |
|
|
|
Executive Vice President, Chief Financial Officer and |
|
|
|
Treasurer |
- 29 -
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective July 1, 2021 (the “Effective Date”), by and between MEDIACO HOLDING INC., an Indiana corporation, (“Employer” or “MediaCo”), and RAHSAN-RAHSAN LINDSAY, a New York resident (“Executive”).
RECITALS
WHEREAS, Employer and its subsidiaries and affiliates are engaged in the ownership and operation of certain radio, outdoor billboard, and other businesses (together with Employer, and as such subsidiaries and affiliates may change from time to time during the Term, the “MediaCo Group”).
WHEREAS, Employer desires to employ Executive and Executive desires to be so employed.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:
1.Employment Status and Duties. Upon the terms and subject to the conditions set forth in this Agreement, Employer hereby employs Executive, and Executive hereby accepts exclusive employment with Employer. During the Term (as defined herein), Executive shall serve as Chief Executive Officer or such other positions as mutually agreed to by Executive and MediaCo. Executive shall have such duties, functions, authority and responsibilities as are commensurate with such positions. Executive shall report to the Board of Directors of MediaCo (“Board of Directors”). Executive’s services hereunder shall be performed on an exclusive, full-time basis in a professional, diligent and competent manner to the best of Executive’s abilities. Executive shall not undertake any outside employment or business activities without the prior written consent of Employer. It is understood and agreed that the location for the performance of Executive’s duties and services pursuant to this Agreement shall be the offices designated by Employer in the New York City Metropolitan Statistical Area as its principal executive offices. Executive shall be permitted to serve on the board of charitable or civic organizations so long as such services: (i) are approved in writing in advance by Employer; and (ii) do not interfere with Executive’s duties and obligations under this Agreement. Employer hereby approves Executive’s participation as a Board Member of the 501(c)(3) not for profit organization, The Brotherhood Sister Sol, subject to the restrictions set forth in the preceding sentence. During the Term, Executive shall serve as a member of the Board of Directors, subject to election by MediaCo’s shareholders and any required Board of Directors’ approvals. Such Board of Directors service shall be without additional remuneration (unless Employer elects to remunerate “inside directors”) but shall be entitled to the benefit of indemnification pursuant to the terms of Section 14.9. MediaCo
1
acknowledges Executive has been appointed as a member of the Board of Directors. Executive shall also serve without additional remuneration as a director and/or officer of one (1) or more of Employer’s subsidiaries or affiliates if appointed to such position(s) by Employer or another member of the MediaCo Group, and shall also be entitled to the benefit of indemnification for such position(s) pursuant to the terms of Section 14.9. Executive will be subject to all applicable employment and other policies of Employer, as outlined in Employer’s employee handbook and elsewhere.
2.Term. The term of this Agreement shall commence on the Effective Date and continue to and including June 30, 2023 (the “Term”). This Agreement shall expire at the end of the Term unless earlier terminated in accordance with the terms of this Agreement. For purposes of this Agreement, the term “Contract Year” shall be defined to mean the twelve (12) month period commencing on July 1 of each calendar year during the Term and concluding on the last day of June of the following calendar year.
3.Base Salary. Upon the terms and subject to the conditions set forth in this Agreement, during the Term, Employer shall pay or cause to be paid to Executive a base salary at an annualized rate (the “Base Salary”) of Five Hundred Fifty Thousand Dollars and No Cents ($550,000), in accordance with Employer’s customary payroll practices and procedures (less any withholding for applicable taxes and other charges required or permitted by law). Except as otherwise set forth herein, Employer shall have no obligation to pay Executive the Base Salary for any periods during which Executive fails or refuses to render services pursuant to this Agreement (except that Executive shall not be considered to have failed or refused to render services during any periods of Executive’s incapacity or absence from work due to sickness or other approved leave of absence in accordance with the Employer’s policies).
4.Incentive Compensation.
4.1Restricted Shares Grant. On the Effective Date, Employer shall grant to Executive 191,174 restricted shares (the “Restricted Shares”) of Class A Common Stock of MediaCo (“Common Stock”). The Restricted Shares shall vest during the Term on a quarterly basis in eight (8) equal installments with the first one-eighth (1/8) installment vesting on October 1, 2021, in each case subject to the terms of this Section 4. In the event that any dividends are paid on Restricted Shares during the vesting period for the Restricted Shares grant, Employer shall pay dividends with respect to Executive’s Restricted Shares that are scheduled to vest at the end of the Contract Year in which the dividend is paid, in the same form and at the same time as dividends are paid to other shareholders in respect of vested, unrestricted shares of Common Stock. The Restricted Shares granted pursuant to this Section 4.1 shall be granted according to the terms and subject to the conditions of Employer’s 2021 Equity Compensation Plan, or any subsequent equity compensation or similar plan adopted by Employer and generally used to make equity-based awards to executive-level employees of the MediaCo Group (the “Plan”) and the Restricted Stock Agreement, and shall include a restrictive legend as provided for by the Plan. Upon the vesting of any Restricted Shares, Employer shall withhold a sufficient number of shares of
2
Common Stock to satisfy all federal, state and local withholding requirements unless Executive has otherwise remitted funds sufficient to satisfy any such withholding requirements, and Executive shall be permitted to elect additional share withholding for taxes under Section 15(a)(ii) of the Plan.
4.2Annual Bonus Amounts. Upon the terms and subject to the conditions set forth in this Section 4, following the conclusion of each calendar year, Executive shall be eligible to receive one (1) performance bonus in an annualized target amount equivalent to Sixty Percent (60%) of Executive’s Base Salary for the Contract Year (each, an “Annual Bonus”), the exact amount of which, if any, shall be determined based upon attainment of certain performance, financial or other goals as determined each calendar year by the Compensation Committee of the Board of Directors (the “Compensation Committee”), in its sole and absolute discretion, and communicated to Executive within ten (10) days after a final determination by the Compensation Committee.
4.3Payment of Bonus Amounts. Employer shall pay or cause to be paid to Executive the bonus amounts, if earned according to the terms and conditions set forth or referenced in this Agreement; provided that (unless provided otherwise in this Agreement) on the final day of the applicable measuring period for such bonus: (i) this Agreement is in full force and effect and has not been terminated for any reason (other than due to a material breach of this Agreement by Employer); and (ii) Executive is fully performing all of Executive’s material duties and obligations pursuant to this Agreement and is not in breach of any of the material terms and conditions of this Agreement (provided that Executive’s failure or inability to perform his duties and obligations because of his death or incapacity, including during leaves of absence permitted by law or applicable policy of Employer, shall not be considered a breach of this Agreement or non-performance under this provision). In addition, it is understood and agreed that Employer may, at its sole election, pay any bonus amounts earned by Executive pursuant to this Section 4 in cash or Common Stock; provided that the Common Stock evidencing any portion thereof is subject to any restrictions on resale under Employer’s insider trading policy and applicable federal and state law. In the event that Employer elects pursuant to this Section 4.3 to pay any Annual Bonus amounts in Common Stock, the percentage of such bonus amounts payable in Common Stock shall be consistent with, and the exact number of shares of Common Stock to be awarded to Executive shall be determined in the same manner as, that utilized for other executive-level employees of Employer. Any Annual Bonus amounts earned by Executive pursuant to the terms and conditions of Section 4.2 shall be paid after the end of the calendar year for which the bonus is earned (but in no event later than one hundred and twenty (120) days after the end of such calendar year). Any and all bonus amounts payable by Employer to Executive pursuant to this Section 4 shall be subject to applicable taxes and withholdings as required by law. Notwithstanding any other provisions of this Agreement, any bonus pursuant to Section 4.2 shall be paid to Executive by the earlier of the date specified herein or the date that is no later than two-and-a-half months after the end of either Employer’s or Executive’s first taxable year (whichever period is longer) in
3
which any such bonus is no longer subject to a substantial risk of forfeiture for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
5.Expenses; Travel. Employer shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in connection with the performance of Executive’s services hereunder upon presentation of expense statements, vouchers or other supporting documentation as Employer may require of Executive; provided that, such expenses are otherwise in accordance with Employer’s policies. Executive shall undertake such travel as may be required in the performance of Executive’s duties pursuant to this Agreement.
6.Vacation and Other Benefits. During the Term, Executive shall be entitled to receive paid vacation in accordance with Employer’s applicable policies and procedures for executive-level employees. Executive shall also be eligible to participate in and receive the fringe benefits generally made available to other executive‑level employees of Employer in accordance with and to the extent that Executive is eligible under the general provisions of Employer’s fringe benefit plans or programs; provided, however, that Executive understands that these benefits may be increased, changed, eliminated or added from time to time during the Term as determined in Employer’s sole and absolute discretion.
7.Confidential Information.
7.1Non‑Disclosure. Executive acknowledges that certain information concerning the business of the MediaCo Group and its members (including but not limited to trade secrets and other proprietary information) is of a highly confidential nature, and that, as a result of Executive’s employment with Employer prior to and during the Term, Executive shall receive and develop proprietary and confidential information concerning the business of Employer and/or other members of the MediaCo Group which, if known to Employer’s competitors, would damage Employer, other members of the MediaCo Group and their respective businesses. Accordingly, Executive hereby agrees that during the Term and thereafter, Executive shall not divulge or appropriate for Executive’s own use, or for the use or benefit of any third party (other than Employer and its representatives, or as directed in writing by Employer), any information or knowledge concerning the business of Employer, or any other member of the MediaCo Group, which is not generally available to the public other than through the activities of Executive. Executive further agrees that, immediately upon termination of Executive’s employment for any reason, Executive shall promptly surrender to Employer all documents, brochures, plans, strategies, writings, illustrations, client lists, price lists, sales, financial or marketing plans, budgets and any and all other materials (regardless of form or character) which Executive received from or developed on behalf of Employer or any member of the MediaCo Group in connection with Executive’s employment prior to or during the Term. Executive acknowledges that all such materials shall remain at all times during the Term and thereafter the sole and exclusive property of Employer and that nothing in this Agreement shall be deemed to grant Executive any right, title or interest in such material.
4
Notwithstanding anything to the contrary contained herein, nothing in this Agreement restricts or prohibits Executive from: (i) discussing his terms and conditions of employment; (ii) disclosing this Agreement to Executive’s legal, financial and tax advisors, and family members so long as such advisors and family members agree to adhere to the same confidential provisions outlined herein; and (iii) initiating communications directly with, responding to any inquiries from, providing testimony before, providing Confidential Information to, reporting possible violations of law or regulation to, or from filing a claim or assisting with an investigation directly with, a self-regulatory authority or a government agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation. Moreover, Executive is hereby advised that federal law provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret under either of the following conditions: (i) where the disclosure is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) where the disclosure is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. See 18 U.S.C. §1833(b)(1). Federal law also provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (x) files any document containing the trade secret under seal; and (y) does not disclose the trade secret, except pursuant to court order. See 18 U.S.C. §1833(b)(2).
7.2Work Product. Executive acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by Executive individually or jointly with others during the Term by Employer and relating in any way to the business or contemplated business, research or development of the MediaCo Group (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of Employer. Executive acknowledges that, by reason of being employed by Employer at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and
5
such copyrights are therefore owned by Employer. To the extent that the foregoing does not apply, Executive by these presents does hereby irrevocably assign to Employer, for no additional consideration, Executive’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit Employer’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that Employer would have had in the absence of this Agreement. During and after his employment, Executive agrees to reasonably cooperate with Employer to (a) apply for, obtain, perfect and transfer to Employer the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to Employer any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by Employer. Executive hereby irrevocably grants Employer power of attorney to execute and deliver any such documents on Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to Employer and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Executive does not promptly cooperate with Employer’s request (without limiting the rights Employer shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by Executive’s subsequent incapacity. Executive understands that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any confidential information, materials, software or other tools made available to him by Employer or the MediaCo Group. Executive waives all moral rights that Executive may now have or hereafter have in the Work Product, including without limitation the rights of attribution and integrity under Section 106A of the United States Copyright Act, 17 U.S.C. § 101 et seq., as amended by the Visual Artists’ Rights Act of 1990.
7.3Injunctive Relief. Executive acknowledges that Executive’s breach of this Section 7 will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any such breach would be inadequate; and that the provisions of this Section 7 have been specifically negotiated and carefully written to prevent such irreparable harm and damage. Accordingly, if Executive breaches this Section 7, Employer shall be entitled to injunctive relief (including attorneys’ fees and costs) enforcing this Section 7 to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security.
8.Non‑Competition; Non-Solicitation; Anti-Raiding; Injunctive Relief.
8.1To the extent permitted by law, Executive (whether on Executive’s own behalf or on behalf of any other person or entity) shall not directly or indirectly:
6
(i)During the Term, and for a period of six (6) months (which shall be extended by the length of any period during which Executive is in violation of this Section 8.1(i)) immediately following the expiration or early termination of the Term for any reason, voluntary or involuntary (“Termination”), within the “Geographic Territory” (as defined below), own, manage, operate, or otherwise engage or participate in any business that competes directly or indirectly with the business of Employer or any member of the MediaCo Group (“Competitor”) if Executive performs any duties, responsibilities, or functions on behalf of the Competitor that (a) are the same as or similar to the duties, responsibilities, or functions Executive performed for Employer or a member of the MediaCo Group during any portion of the 12 (twelve) month period immediately preceding the Termination (“Pre-Termination Period”), (b) relate in any respect to any aspect of the business of a member of the MediaCo Group as to which, during any portion of the Pre-Termination Period, Executive performed any duties or services or received any confidential information, or (c) relate in any respect to, or would benefit from the use of, any confidential information Executive received during the Pre-Termination Period. For purposes of this Section 8.1(i), Geographic Territory shall mean (a) New York, (b) New Jersey, (c) Connecticut, (d) New York City, New York, and/or (e) any other state, city, market, country, or geographic territory in which Employer or a member of the MediaCo Group delivered, sold, or marketed its products or services or conducted business during the Pre-Termination Period. Further, for the purposes of this Section 8.1(i) only, the term “Competitor” shall be limited to any business that, directly or indirectly, is engaged in (a) radio broadcasting or related services, (b) billboard or outdoor marketing services, (c) the music industry, and/or (d) providing digital services in the areas of hip hop, R&B, music, or multicultural programming. At least five (5) business days prior to Executive’s commencement of any duties, responsibilities or functions for a Competitor, Executive and the Competitor shall provide Employer with a written notice that describes the duties, responsibilities and functions to be performed by Executive and certifies that such duties, responsibilities and functions will comply with the terms and conditions of this Agreement. The parties acknowledge and agree that Employer’s and the MediaCo Group’s business is generally located at least within the Geographic Territory, extends throughout the Geographic Territory and is not limited to any particular region of the Geographic Territory. As long as Executive does not engage in any activity prohibited by this Section 8.1(i), Executive’s ownership of less than five percent (5%) of the issued and outstanding stock of any corporation whose stock is traded on an established securities market shall not constitute competition with Employer or the MediaCo Group for the purpose of this Section 8.1. Notwithstanding the foregoing, (A) with Employer’s written consent, which shall not be unreasonably withheld, Executive may join a commercial enterprise with multiple divisions or business lines, even if a division or business line engages in a business competitive with Employer, if such competitive business represents an insignificant portion of the commercial enterprise’s operations and revenue and Executive's services are not primarily for the competitive divisions or business lines; provided however, that Executive shall continue to comply with Executive’s obligations under Section 7.
(ii)During the Term, and for a period of one (1) year (which shall be extended by the length of any period during which Executive is in violation of this Section 8.1(ii)) immediately following Termination, sell or otherwise provide or solicit the sale or provision of (or supervise such activities) any products or services that directly or indirectly compete with any products or services of Employer or any member of the MediaCo Group to any person or entity as to which, during any portion of the Pre-Termination Period, Executive sold or supervised the sale of products or services, or otherwise performed any duties or services on behalf of Employer or a member of the MediaCo Group, or received any confidential information.
(iii)During the Term, and for a period of one (1) year (which shall be extended by the length of any period during which Executive is in violation of this Section 8.1(iii)) immediately following Termination, hire or otherwise engage any employee of Employer or a member of the MediaCo Group, or any other person or entity who during any portion of the three (3) months immediately preceding Termination had an actual employment, consulting, or contractor relationship with Employer or a member of the MediaCo Group or solicit, induce, or influence any such employee or other person or entity to discontinue, reduce, reject, or otherwise change in any manner adverse to the interests of Employer or a member of the MediaCo Group the nature or extent of such relationship with Employer or a member of the MediaCo Group; provided, however, that this restriction shall extend to only those persons who have access to or possess any knowledge that would give a competitor an unfair advantage. Notwithstanding anything to the contrary contained herein, nothing herein shall restrict or prohibit the solicitation or employment of any person (x) resulting from generalized searches for employees through the use of bone fide public advertisements in the media or any recruitment efforts conducted by any recruitment agency, that are not targeted specifically at employees of Employer; or (y) following the cessation of such person’s employment with Employer without solicitation or encouragement by Executive or such of Executive’s affiliates, directly or indirectly, in relation to such cessation of employment.
8.2Injunctive Relief. Executive acknowledges the special and unique nature of Executive’s employment with Employer as an executive-level employee, and understands that, as a result of Executive’s employment with Employer prior to and during the Term, Executive has gained and will continue to gain knowledge of and have access to highly sensitive and valuable information regarding the operations of Employer and its subsidiaries and affiliated entities, including but not limited to the confidential information described more fully in Section 7.1. Accordingly, Executive acknowledges Employer’s
7
interest in preventing the disclosure of such information through the engagement of Executive’s services by any of Employer’s or the MediaCo Group’s competitors following the expiration or termination of the Term for any reason. Executive acknowledges and agrees that the provisions of this Section 8 have been specifically negotiated and carefully worded in recognition of the opportunities which will be afforded to Executive by Employer by virtue of Executive’s continued association with Employer during the Term, and the influence that Executive has and will continue to have over Employer’s and the MediaCo Group’s employees, customers and suppliers. Executive further acknowledges that Executive’s breach of Section 8.1 herein will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any such breach would be inadequate; and that the provisions of this Section 8 have been specifically negotiated and carefully written to prevent such irreparable harm and damage. Accordingly, if Executive breaches Section 8.1, Employer shall be entitled to injunctive relief (including attorneys’ fees and costs) enforcing Section 8.1, to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security. Notwithstanding anything to the contrary contained in this Agreement, if Executive violates Section 8.1, and Employer brings legal action for injunctive or other relief, Employer shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full restrictive covenant periods set forth therein. Accordingly, the obligations set forth in Section 8.1 shall have the duration set forth therein, computed from the date such relief is granted but reduced by the time expired between the date the restrictive period began to run and the date of the first violation of the obligation(s) by Executive.
8.3Construction. Despite the express agreement herein between the parties, in the event that any provisions set forth in this Section 8 shall be determined by any court or other tribunal of competent jurisdiction to be unenforceable for any reason whatsoever, the parties agree that this Section 8 shall be interpreted to extend only to the maximum extent as to which it may be enforceable, and that this Section 8 shall be severable into its component parts, all as determined by such court or tribunal.
9.Effect of Termination. In the event of any termination of this Agreement, Executive’s employment shall terminate, and Executive and Employer shall have the following obligations:
9.1Executive’s Obligations. Executive shall have no further obligations or liabilities hereunder except Executive’s obligations under Sections 7 and 8, and any obligations arising in connection with any conduct of Executive described in Section 10.4.
9.2Employer’s Obligations. Employer shall have no further obligations or liabilities hereunder, except that Employer shall:
8
(i)Not later than two (2) weeks after the termination date, pay to Executive, pursuant to Employer’s customary payroll processes, in a lump-sum cash payment, subject to any applicable tax withholding and deductions required by law:
(a)Any Base Salary earned on or prior to the termination date, but which remains unpaid as of the termination date;
(b)Any other of Executive’s then-vested sums and benefits in accordance with the terms of this Agreement and the applicable benefits program; including, if any, an Annual Bonus payment and equity pursuant to the terms and conditions of Section 4; and
(c) Any unreimbursed expenses, subject to the terms and conditions of Section 5, and
(ii)Comply with the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the provisions of any Employer benefit plans in which Executive or Executive’s eligible dependents or beneficiaries are participating at the time of termination; and
(iii)Perform Employer’s obligations, if any, under Section 10.
10.Severance.
10.1Conditions of Severance. If (a) Employer terminates this Agreement during the Term other than for Cause (as defined below) or other than upon Executive’s death or Disability (as defined below), or (b) Executive terminates this Agreement for Good Reason (as defined below), Employer shall provide a severance agreement and general release (in form reasonably acceptable to Employer) to Executive within two (2) weeks after the effective date of such termination of employment, and, if Executive signs such severance agreement and general release, then within two (2) weeks after the effective date of such severance agreement and general release:
(i)Employer shall pay to Executive, pursuant to Employer’s customary payroll processes, in a lump sum cash payment, an amount equal to six (6) months of Executive’s then-current Base Salary, subject to any applicable tax withholding and deductions as required by law;
(ii)Employer shall accelerate in full the vesting of any equity granted to Executive prior to the termination date, subject to any applicable tax withholding and deductions as required by law; and
9
(iii) Employer shall also pay to Executive any other of Executive’s then-vested sums and benefits in accordance with the terms of this Agreement and the applicable benefits program; including, if any, an Annual Bonus payment pursuant to the terms and conditions of Section 4, and any unreimbursed expenses, subject to the terms and conditions of Section 5.
10.2Severance Agreement and General Release. Executive acknowledges and agrees that his execution of the severance agreement and general release is an inducement to Employer’s agreement to make such payments and a material condition to Executive’s receipt of any payments or benefits outlined in this Section 10.
10.3Definition of Termination of Employment. For purposes of this Agreement, “terminates employment,” “termination of employment,” or any variation of that term means a separation from service within the meaning of Section 409A (defined below). If Executive’s employment terminates but does not qualify as a separation from service under Section 409A, then Executive shall become entitled to receive the severance pay and benefits set forth in this Agreement at such time as he incurs a separation from service.
10.4Definition of Cause. For purposes of this Agreement, “Cause” shall be defined to mean any of the following: (i) Executive’s failure, refusal or neglect to perform any of Executive’s material duties or obligations under this Agreement, or any material duties assigned to Executive consistent with the terms of this Agreement (Executive’s inability or failure to perform his obligations hereunder because of his death, Disability or incapacity, including during leaves of absence permitted by law or applicable policy of Employer, shall not be considered Cause for termination under this provision), or abide by any applicable policy of Employer, or Executive’s breach of any material term or condition of this Agreement, and continuation of such failure, refusal, neglect, or breach after written notice and the expiration of a ten (10) day cure period; provided, however, that it is not the parties’ intention that the Employer shall be required to provide successive such notices, and in the event Employer has provided Executive with a notice and opportunity to cure, Employer may terminate this Agreement for Cause for a subsequent breach similar or related to the breach for which notice was previously given or for a continuing series or pattern of breaches (whether similar or related) without providing any further notice or opportunity to cure; (ii) commission of any felony or any other crime involving an act of moral turpitude which is harmful to Employer’s business or reputation; (iii) Executive’s action or omission, or knowing allowance of actions or omissions, which are in violation of any law or any of the rules or regulations of the Federal Communications Commission, or which otherwise jeopardize any of the licenses granted to Employer or any member of the MediaCo Group in connection with the ownership or operation of any radio station; (iv) theft in any amount; (v) actual or threatened violence against any individual (in
10
connection with his employment hereunder) or another employee; (vi) sexual or other prohibited harassment of others that is actionable under applicable laws; (vii) unauthorized disclosure or use of trade secrets or proprietary or confidential information, as described more fully in Section 7; (viii) any action which brings Employer or any member of the MediaCo Group into public disrepute, contempt, scandal or ridicule, and which is harmful to Employer’s business or reputation; and (ix) any matter constituting cause or gross misconduct under applicable laws.
10.5Definition of Disability. Executive’s termination of employment shall be upon Executive’s “Disability” if Employer’s notice of termination is given after Executive qualifies for coverage under Employer’s then applicable long term disability insurance plan and such plan is not materially less favorable to Executive than the long term disability insurance plan in effect on the Effective Date.
10.6Definition of Good Reason. For purposes of this Agreement, the term “Good Reason” shall be defined to mean, without Executive’s written consent: (i) a reduction by Employer in Executive’s Base Salary or target Annual Bonus opportunity from the amounts set forth in this Agreement; (ii) Employer requiring Executive to work in an office that is more than thirty-five (35) miles from the location of Employer’s principal executive offices at the time of this Agreement, except for required travel on business of the Employer to the extent substantially consistent with Executive’s business travel obligations, or (iii) a material breach of the terms of this Agreement by Employer; provided that Executive has given Employer written notice of such breach within thirty (30) days of the initial occurrence of the event that is alleged to constitute Good Reason, such breach remains uncured in the thirty (30) day period after such notice, and Executive terminates his employment no later than ten (10) days after the cure period has expired. Employer shall not take any position that a termination of employment by Executive for Good Reason fails to constitute on involuntary separation from service for purposes of Section 409A.
10.7. If this Agreement expires at the end of the second Contract Year and is not renewed or extended by the parties, Executive shall have no further obligations or liabilities hereunder, except Executive’s obligations under Sections 7 and 8, which shall survive the expiration of this Agreement. Employer shall have no further obligations or liabilities hereunder or otherwise, except the liabilities and obligations set forth in Sections 9.2(i) and 9.2(ii) above.
11.Application of Internal Revenue Code Section 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from
11
service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless Employer reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A.
It is intended that each installment of the Severance Benefits payments provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if Employer (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and Executive is, on the termination of service, a “specified employee” of Employer or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the date that is six months and one day after Executive’s Separation From Service, or (ii) the date of Executive’s death (such applicable date, the “Specified Employee Initial Payment Date”), the Employer (or the successor entity thereto, as applicable) shall (A) pay to Executive a lump sum amount equal to the sum of the Severance Benefit payments that Executive would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of the Severance Benefits had not been so delayed pursuant to this Section and (B) commence paying the balance of the Severance Benefits in accordance with the applicable payment schedules set forth in this Agreement.
This Agreement is intended to comply with Section 409A, and it is intended that no amounts payable hereunder shall be subject to tax under Section 409A. Employer shall use commercially reasonable efforts to comply with Section 409A with respect to payments of benefits hereunder.
12.Adjustments for Changes in Capitalization of Employer. In the event of any change in Employer’s outstanding Common Stock during the Term by reason of any reorganization, recapitalization, reclassification, merger, stock split, reverse stock split, stock dividend, asset spin-off, share combination, consolidation or other event, the number and class of Common Stock awarded pursuant to Section 4 shall be adjusted by the Compensation Committee in its sole and absolute discretion and, if applicable, in accordance with the terms of the Plan, and the Restricted Stock Agreement. The determination of the Compensation Committee shall be conclusive and binding. All adjustments pursuant to this Section 12 shall be made in a manner that does not result in taxation to the Executive under Section 409A.
13.Notices. All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be made in writing and shall be deemed to have been made as of: (a) the date that is the next date upon which an overnight delivery service (Federal Express, UPS or equivalent only) will make such delivery, if sent via such overnight delivery service, postage prepaid, (b) the date such delivery is made, if delivered in person to the notice party
12
specified below, or (c) the date such delivery is made, if delivered via email. Such notice shall be delivered as follows (or to such other or additional address as either party shall designate by notice in writing to the other in accordance herewith):
(i)If to Employer:
MediaCo Holding Inc.
395 Hudson Street, 7th Floor
New York, New York 10014
Attn: General Counsel
Email: legal@mediacoholding.com
With a copy to:
Justin Chairman, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Email: justin.chairman@morganlewis.com
(ii)If to Executive, to Executive at Executive’s address in the personnel records of Employer.
14.Miscellaneous.
14.1Governing Law; Venue. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Indiana without regard to its conflict of law principles. Any action to enforce, challenge or construe the terms or making of this Agreement or to recover for its breach shall be litigated exclusively in the Commercial Court of the State of Indiana located in Marion County, so long as such court has subject-matter jurisdiction over such action, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Indiana; provided, however, that Employer may elect, at its sole and absolute discretion, to litigate the action in the county or state where any breach by Executive occurred or where Executive can be found. Executive acknowledges and agrees that this venue provision is an essential provision of this Agreement and Executive hereby waives any defense thereto, including but not limited to, lack of personal jurisdiction, improper or wrong venue, or inconvenience.
14.2Captions. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of any of the terms and conditions of this Agreement.
13
14.3Entire Agreement. This Agreement shall supersede and replace, in all respects, any and all prior employment agreements between Executive and any member of the MediaCo Group, and such agreements shall immediately terminate and be of no further force or effect. For purposes of the preceding sentence, any indemnification, intellectual property rights, restricted stock or option agreement, as well as any benefits-related agreement, shall not constitute a “prior employment agreement.”
14.4Assignment. This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive to any third party; provided, however, that Executive may designate pursuant to Section 14.6 one (1) or more beneficiaries to receive any amounts that would otherwise be payable hereunder to Executive’s estate. Employer may assign all or any portion of its rights and obligations hereunder to any other member of the MediaCo Group or to any successor or assignee of Employer pursuant to a reorganization, recapitalization, merger, consolidation, sale of substantially all of the assets or stock of Employer, or otherwise.
14.5Amendments; Waivers. Except as expressly provided in the following sentence, this Agreement cannot be changed, modified or amended, and no provision or requirement hereof may be waived, without the written consent of Executive and Employer. Employer may amend this Agreement to the extent that Employer reasonably determines that such change is necessary to comply with Section 409A and further guidance thereunder, provided that such change does not reduce the amounts payable to Executive hereunder. The failure of a party at any time to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce such provision. No waiver by a party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement.
14.6Beneficiaries. Whenever this Agreement provides for any payment to Executive’s estate, such payment may be made instead to such beneficiary as Executive may have designated in a writing filed with Employer. Executive shall have the right to revoke any such designation and to re‑designate a beneficiary by written notice to Employer (or to any applicable insurance company).
14.7Change in Fiscal Year. If, at any time during the Term, Employer changes its fiscal year, Employer shall make such adjustments to the various dates and target amounts included herein as are necessary or appropriate, provided that no such change shall affect the date on which any amount is payable hereunder.
14
14.8Executive’s Warranty and Indemnity. Executive hereby represents and warrants that Executive: (i) has the full and unqualified right to enter into and fully perform this Agreement according to each and every term and condition contained herein; (ii) has not made any agreement, contractual obligation or commitment in contravention of any of the terms and conditions of this Agreement or which would prevent Executive from performing according to any of the terms and conditions contained herein; and (iii) has not entered into any agreement with any prior employer or other person, corporation or entity which would in any way adversely affect Executive’s or Employer’s right to enter into this Agreement. Furthermore, Executive hereby agrees to fully indemnify and hold harmless Employer and each of its subsidiaries, affiliates and related entities, and each of their respective officers, directors, employees, agents, attorneys, shareholders, insurers and representatives from and against any and all losses, costs, damages, expenses (including attorneys’ fees and expenses), liabilities and claims, arising from, in connection with, or in any way related to, Executive’s breach of any of the representations or warranties contained in this Section 14.8.
14.9Indemnification. Executive shall be entitled to the benefit, to the fullest extent permitted by applicable law, of (i) the indemnification provisions set forth in Employer’s articles of incorporation and/or by‑laws, or any applicable corporate resolution, as the same may be amended from time to time during the Term (not including any limiting amendments or additions, but including any amendments or additions that add to or broaden the protection afforded to Executive at the time of execution of this Agreement) and (ii) Executive’s rights under that certain Director and Officer Indemnification Agreement executed by Executive and MediaCo dated as of July 1, 2021 (the “Indemnification Agreement”). Additionally, Employer shall cause Executive to be indemnified in accordance with Chapter 37 of the Indiana Business Corporation Law (the “IBCL”), as the same may be amended from time to time during the Term, to the fullest extent permitted by the IBCL as required to make Executive whole in connection with any indemnifiable loss, cost or expense incurred in Executive’s performance of Executive’s duties and obligations pursuant to this Agreement. It is understood that the foregoing indemnification obligations shall survive the expiration or termination of the Term.
14.10Survival. The provisions of this Agreement shall survive the termination or expiration of this Agreement to the extent necessary in order to effectuate the intent of the parties hereunder, including without limitation Sections 5, 7, 8, 9, 10, 11, 13, and 14.
15
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.
|
|
MEDIACO HOLDING INC. (“Employer”)
By: /s/ Bradford A. Tobin Name: Bradford A. Tobin Position: President and Chief Operating Officer
|
|
|
RAHSAN-RAHSAN LINDSAY (“Executive”)
/s/ Rahsan-Rahsan Lindsay Rahsan-Rahsan Lindsay
|
16
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Rahsan-Rahsan Lindsay, certify that:
|
|
1. |
I have reviewed this quarterly report on Form 10-Q of MediaCo Holding Inc.; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: November 12, 2021 |
|
|
|
/s/ RAHSAN-RAHSAN LINDSAY |
|
|
Rahsan-Rahsan Lindsay |
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Ryan A. Hornaday, certify that:
|
|
1. |
I have reviewed this quarterly report on Form 10-Q of MediaCo Holding Inc.; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: November 12, 2021 |
|
|
|
/s/ RYAN A. HORNADAY |
|
|
Ryan A. Hornaday |
|
|
Executive Vice President, Chief Financial Officer and |
|
|
Treasurer |
Exhibit 32.1
SECTION 1350 CERTIFICATION
The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of MediaCo Holding Inc. (the “Company”), that, to his knowledge:
|
|
(1) |
the Quarterly Report of the Company on Form 10-Q for the period ended September 30, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
Date: November 12, 2021 |
|
|
|
|
|
/s/ RAHSAN-RAHSAN LINDSAY |
|
|
|
Rahsan-Rahsan Lindsay |
|
|
|
Chief Executive Officer |
Exhibit 32.2
SECTION 1350 CERTIFICATION
The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of MediaCo Holding Inc. (the “Company”), that, to his knowledge:
|
|
(1) |
the Quarterly Report of the Company on Form 10-Q for the period ended September 30, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
Date: November 12, 2021 |
|
|
|
|
|
/s/ RYAN A. HORNADAY |
|
|
|
Ryan A. Hornaday |
|
|
|
Executive Vice President, Chief Financial Officer and |
|
|
|
Treasurer |