mdia-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


o			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 x No o

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 x No o

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	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

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. o

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

The number of shares outstanding of each of MediaCo Holding Inc.’s classes of common stock, as of May 4, 2023, was:


20,470,539						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

Table of Contents

INDEX


			Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			3
Condensed Consolidated Statements of Operations for the three-month periods ended March 3 1 , 202 3 and 202 2			3
Condensed Consolidated Balance Sheets as of March 3 1 , 202 3 and December 31, 202 2			4
Condensed Consolidated Statements of Changes in Equity (Deficit) for the three-month periods ended March 3 1 , 202 3 and 202 2			5
Condensed Consolidated Statements of Cash Flows for the three -month periods ended March 3 1 , 202 3 and 202 2			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures about Market Risk			20
Item 4. Controls and Procedures			20
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			21
Item 5. Other Information			21
Item 6. Exhibits			21
SIGNATURES			22

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
(in thousands, except per share amounts)		2023		2022
NET REVENUES		$	7,335	$	8,113
OPERATING EXPENSES:
Operating expenses excluding depreciation and amortization expense		7,237		6,623
Corporate expenses		1,884		2,487
Depreciation and amortization		159		115
Gain on disposal of assets		(39)		—
Total operating expenses		9,241		9,225
OPERATING LOSS		(1,906)		(1,112)
OTHER INCOME (EXPENSE):
Interest expense, net		(103)		(2,077)
Other income		129		—

Total other income (expense)		26		(2,077)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(1,880)		(3,189)
PROVISION FOR INCOME TAXES		75		73
NET LOSS FROM CONTINUING OPERATIONS		(1,955)		(3,262)
DISCONTINUED OPERATIONS:
Loss from discontinued operations before income taxes		(152)		(1,041)

Income tax benefit from discontinued operations		—		10
NET LOSS FROM DISCONTINUED OPERATIONS		(152)		(1,031)
CONSOLIDATED NET LOSS		(2,107)		(4,293)
PREFERRED STOCK DIVIDENDS		590		838
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	(2,697)	$	(5,131)

Net loss per share attributable to common shareholders - basic and diluted:
Continuing operations		$	(0.10)	$	(0.54)
Discontinued operations		$	(0.01)	$	(0.14)
Net loss per share attributable to common shareholders - basic and diluted:		$	(0.11)	$	(0.68)

Weighted average common shares outstanding:
Basic		24,718		7,558
Diluted		24,718		7,558

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

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MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2023		December 31, 2022
(in thousands, except share data)	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,605	$	10,925
Restricted cash	4,407		4,376
Accounts receivable, net of allowance for credit losses of $102 and $122, respectively	7,186		8,568
Prepaid expenses	1,378		979
Other current assets	375		341
Current assets of discontinued operations	199		1,066
Total current assets	24,150		26,255
PROPERTY AND EQUIPMENT, NET	727		581
INTANGIBLE ASSETS, NET	64,635		64,703
OTHER ASSETS:
Operating lease right of use assets	14,828		5,088
Deposits and other	145		78
Total other assets	14,973		5,166

Total assets	$	104,485	$	96,705
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	3,721	$	3,880

Accrued salaries and commissions	1,054		875
Deferred revenue	1,208		825
Operating lease liabilities	1,423		1,816
Income taxes payable	3,008		3,008
Other current liabilities	162		35
Current liabilities of discontinued operations	66		659
Total current liabilities	10,642		11,098
LONG TERM DEBT, NET OF CURRENT	5,950		5,950
OPERATING LEASE LIABILITIES, NET OF CURRENT	14,194		3,808

DEFERRED INCOME TAXES	2,558		2,483
OTHER NONCURRENT LIABILITIES	135		51

Total liabilities	33,479		23,390
COMMITMENTS AND CONTINGENCIES
SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $0.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED; 260,000 SHARES ISSUED AND OUTSTANDING	26,929		26,339
EQUITY:
Class A common stock, $0.01 par value; authorized 170,000,000 shares; issued and outstanding 20,611,873 shares and 20,443,138 shares at March 31, 2023, and December 31, 2022, respectively	207		207
Class B common stock, $0.01 par value; authorized 50,000,000 shares; issued and outstanding 5,413,197 shares at March 31, 2023, and December 31, 2022	54		54
Class C common stock, $0.01 par value; authorized 30,000,000 shares; none issued	—		—
Additional paid-in capital	59,615		59,817
Accumulated deficit	(15,799)		(13,102)
Total equity	44,077		46,976
Total liabilities and equity	$	104,485	$	96,705

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

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MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	Class A Common Stock			Class B Common Stock			APIC		Accumulated Deficit		Total
(in thousands, except share data)	Shares	Amount		Shares	Amount
BALANCE, DECEMBER 31, 2022	20,443,138	$	207	5,413,197	$	54	$	59,817	$	(13,102)	$	46,976
Net loss	—	—		—	—		—		(2,107)		(2,107)
Issuance of class A to employees, officers and directors	564,548	6		—	—		363		—		369
Repurchase of class A common shares	(395,813)	(6)		—	—		(565)		—		(571)
Preferred stock dividends	—	—		—	—		—		(590)		(590)
BALANCE, MARCH 31, 2023	20,611,873	$	207	5,413,197	$	54	$	59,615	$	(15,799)	$	44,077










BALANCE, DECEMBER 31, 2021	3,056,757	$	31	5,413,197	$	54	$	24,030	$	(40,686)	$	(16,571)
Net loss	—	—		—	—		—		(4,293)		(4,293)
Issuance of class A to employees, officers and directors	100,276	1		—	—		343		—		344
Preferred stock dividends	—	—		—	—		—		(838)		(838)
BALANCE, MARCH 31, 2022	3,157,033	$	32	5,413,197	$	54	$	24,373	$	(45,817)	$	(21,358)

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

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MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss	$	(2,107)	$	(4,293)
Less: Loss from discontinued operations, net of tax	152		1,031
Adjustments to reconcile net loss to net cash provided by operating activities -

Depreciation and amortization	159		115
Amortization of deferred financing costs, including original issue discount	—		161
Noncash interest expense	—		168
Noncash lease expense	651		527
Allowance for credit losses	(20)		59

Provision for deferred income taxes	75		73
Noncash compensation	634		1,447

Other noncash items	82		—
Changes in assets and liabilities
Accounts receivable	1,402		4,290
Prepaid expenses and other current assets	(432)		(85)

Accounts payable and accrued liabilities	104		351
Deferred revenue	383		308
Operating lease liabilities	(398)		(604)
Other liabilities	133		1,070
Net cash provided by continuing operating activities	818		4,618
Net cash provided by discontinued operating activities	160		43
Net cash provided by operating activities	978		4,661
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(237)		(3)
Purchases of internally-created software	(312)		(741)

Net cash used in continuing investing activities	(549)		(744)
Net cash used in discontinued investing activities	—		(72)
Net cash used in investing activities	(549)		(816)
CASH FLOWS FROM FINANCING ACTIVITIES:




Repurchases of class A common stock	(571)		—
Settlement of tax withholding obligations	(109)		(1,116)
Net cash used in continuing financing activities	(680)		(1,116)
Net cash used in discontinued financing activities	(38)		(93)
Net cash used in financing activities	(718)		(1,209)
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(289)		2,636
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period	15,301		6,121
End of period	15,012		8,757
Less: Cash, cash equivalents and restricted cash of discontinued operations	—		—
Cash, cash equivalents and restricted cash of continuing operations at end of period	$	15,012	$	8,757
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	—	$	1,674

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

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MEDIACO HOLDING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands Unless Indicated Otherwise)

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

MediaCo Holding Inc. (“MediaCo” or the “Company”) is an owned and operated multi-media company formed in Indiana in 2019, focused on radio and digital advertising, premium programming and events.

Our assets consist of two radio stations, WQHT(FM) and WBLS(FM) (the “Stations”), which serve the New York City demographic market area that primarily targets Black, Hispanic, and multi-cultural consumers. We derive our revenues primarily from radio and digital advertising sales, but we also generate revenues from events, including sponsorships and ticket sales, licensing, and syndication.

On December 9, 2022, Fairway Outdoor LLC, FMG Kentucky, LLC and FMG Valdosta, LLC (collectively, “Fairway”), all of which were wholly owned direct and indirect subsidiaries of MediaCo, entered into an Asset Purchase Agreement (the “Purchase Agreement”), with The Lamar Company, L.L.C., a Louisiana limited liability company (the “Purchaser”), pursuant to which we sold our Fairway outdoor advertising business to the Purchaser. The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement.

We have classified the related assets and liabilities associated with our Fairway business as discontinued operations in our condensed consolidated balance sheets and the results of our Fairway business have been presented as discontinued operations in our condensed consolidated statements of operations for all periods presented through December 9, 2022 as the sale represented a strategic shift in our business that had a major effect on our operations and financial results. Unless otherwise noted, discussion in the notes to condensed consolidated financial statements refers to the Company’s continuing operations. See Note 2 — Discontinued Operations for additional information.

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

Basis of Presentation and Consolidation

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

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. Restricted cash represents amounts held in escrow related to the disposition of the Fairway business and amounts held as collateral for a letter of credit entered into in connection with the lease in New York City for our radio operations and corporate offices.

Fair Value Measurements

Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. 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 including 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.

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Allowance for Credit Losses

An allowance for credit losses is recorded based on management’s judgment of the collectability of trade receivables. When assessing the collectability of receivables, management considers, among other things, customer type (agency versus non-agency), historical loss experience, existing and expected future economic conditions and aging category. Amounts are written off after all normal collection efforts have been exhausted. The activity in the allowance for credit losses for the three-month periods ended March 31, 2023 and 2022 was as follows:


	Balance at beginning of period		Provision		Write-offs		Balance at end of period
Three months ended March 31, 2022	$	186	$	59	$	(125)	$	120
Three months ended March 31, 2023	$	122	$	(20)	$	—	$	102

Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates.

Earnings Per Share

Our basic and diluted net loss per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Shares of Series A preferred stock include rights to participate in dividends and distributions to common stockholders on an if-converted basis, and accordingly are considered participating securities. During periods of undistributed losses, however, no effect is given to our participating securities since they are not contractually obligated to share in the losses. We have elected to determine the earnings allocation based on income (loss) from continuing operations. As there is a loss from continuing operations, all potentially dilutive items were anti-dilutive and thus basic and diluted weighted-average shares are the same. The following is a reconciliation of basic and diluted net loss per share attributable to Class A and Class B common shareholders:


	Three Months Ended March 31,
		2023		2022
Numerator:
Loss from continuing operations		$	(1,955)	$	(3,262)
Less: Preferred stock dividends		(590)		(838)

Loss from continuing operations available to common shareholders		(2,545)		(4,100)
Loss from discontinued operations, net of income taxes		(152)		(1,031)
Net loss attributable to common shareholders		$	(2,697)	$	(5,131)

Denominator:
Weighted-average shares of common stock outstanding — basic and diluted		24,718		7,558







Earnings per share of common stock attributable to common shareholders:
Net loss per share attributable to common shareholders - basic and diluted:
Continuing operations		$	(0.10)	$	(0.54)
Discontinued operations		(0.01)		(0.14)
Net loss per share attributable to common shareholders - basic and diluted:		$	(0.11)	$	(0.68)

On August 20, 2021, MediaCo Holding Inc. entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. (“B. Riley”), pursuant to which the Company may offer and sell, from time to time through or to B. Riley, as agent or principal, shares of the Company’s Class A Common Stock, having an aggregate offering price of up to $12.5 million. No shares were sold during the three-month periods ended March 31, 2023 or 2022.

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For the three month period ended March 31, 2023, we repurchased under a share repurchase plan 395,813 shares of Class A common stock for an aggregate of $0.6 million. Subsequent to March 31, 2023 through May 4, 2023 we repurchased an additional 13,209 shares of Class A common stock under the share repurchase plan for an aggregate of $16 thousand.

The following convertible equity shares and restricted stock awards were excluded from the calculation of diluted net (loss) income per share because their effect would have been anti-dilutive.


	Three Months Ended March 31,
(in thousands)		2023	2022
Convertible Emmis promissory note		4,742	1,349
Convertible Standard General promissory notes		—	5,158
Series A convertible preferred stock		20,926	5,849
Restricted stock awards		194	611
Total anti-dilutive shares		25,862	12,967

Recent Accounting Pronouncements Adopted

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. We adopted this standard on January 1, 2023. The adoption of the new standard did not have a significant impact on our condensed consolidated financial statements.

2. DISCONTINUED OPERATIONS

On December 9, 2022, Fairway entered into the Purchase Agreement with the Purchaser. The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement. The purchase price was $78.6 million, subject to certain customary adjustments, paid at closing in cash. The sale resulted in a pre-tax gain of $46.9 million in the fourth quarter of 2022.

In accordance with ASC 205-20-S99-3, Allocation of Interest to Discontinued Operations, the Company elected to allocate interest expense to discontinued operations where the debt is not directly attributed to the Fairway business. Interest expense was allocated based on a ratio of net assets discontinued to the sum of consolidated net assets plus consolidated debt.

In addition, upon closing we entered into a transition service agreement with the Purchaser to support the operations after the divestiture for immaterial fees. This agreement commenced with the close of the transaction and was terminated at the end of the initial term in February 2023.

The financial results of Fairway are presented as income from discontinued operations on our condensed consolidated statements of operations through December 9, 2022, when the sale was completed. The following table presents the financial results of Fairway:


	Three Months Ended March 31,
	2023		2022
Net revenues	$	—	$	3,422
OPERATING EXPENSES
Operating expenses excluding depreciation and amortization expense	152		2,709
Depreciation and amortization	—		815
Loss on disposal of assets	—		18
Total operating expenses	152		3,542
Loss from operations of discontinued operations	(152)		(120)
Interest and other, net	—		(921)


Loss from discontinued operations, before income taxes	(152)		(1,041)
Income tax benefit	—		10
Loss from discontinued operations, net of income taxes	$	(152)	$	(1,031)

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The following table presents the aggregate carrying amounts of assets and liabilities of discontinued operations for Fairway in the consolidated balance sheets:


	March 31, 2023	December 31, 2022
Assets:
Accounts receivable, net	163	1,026

Other	36	40
Total current assets of discontinued operations	199	1,066

SEC Form 10-Q filed by Mediaco Holding Inc.