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Table of Contents
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, 2024
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.)
48 West 25th Street
,
Third Floor
New York
,
New York
10010
(Address of principal executive offices)
(
212
)
229-9797
(Registrant's Telephone Number, Including Area Code)
395 Hudson Street, Floor 7
New York, New York 10014
(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 ((s)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 8, 2024, was:
41,291,540 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 3
period
s
ended
March
3
1
, 202
4
and 202
3
Condensed Consolidated Balance Sheets as of 4
March
3
1
, 202
4
and December 31, 202
3
Condensed Consolidated Statements of Changes in Equity (Deficit) for the three-month 5
periods ended
March
3
1
, 202
4
and 202
3
Condensed Consolidated Statements of Cash Flows for the 6
three
-month periods ended
March
3
1
, 202
4
and 202
3
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 21
Item 4. Controls and Procedures 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities 21
Item 5. Other Information 22
Item 6. Exhibits 22
SIGNATURES 23
-------------------------------------------------------------------------------
Table of Contents
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) 2024 2023
NET REVENUES $ 6,706 $ 7,335
OPERATING EXPENSES:
Operating expenses excluding depreciation and amortization expense 6,650 7,237
Corporate expenses 3,390 1,884
Depreciation and amortization 133 159
Gain on disposal of assets - (
39
)
Total operating expenses 10,173 9,241
OPERATING LOSS ( (
3,467 1,906
) )
OTHER INCOME (EXPENSE):
Interest expense, net ( (
136 103
) )
Other (expense) income 10 129
Total other (expense) income ( 26
126
)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ( (
3,593 1,880
) )
PROVISION FOR INCOME TAXES 84 75
NET LOSS FROM CONTINUING OPERATIONS ( (
3,677 1,955
) )
DISCONTINUED OPERATIONS:
Loss from discontinued operations before income taxes - (
152
)
Income tax benefit from discontinued operations - -
NET LOSS FROM DISCONTINUED OPERATIONS - (
152
)
CONSOLIDATED NET LOSS ( (
3,677 2,107
) )
PREFERRED STOCK DIVIDENDS 723 590
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ ( $ (
4,400 2,697
) )
Net loss per share attributable to common shareholders - basic and diluted:
Continuing operations $ ( $ (
0.18 0.10
) )
Discontinued operations $ - $ (
0.01
)
Net loss per share attributable to common shareholders - basic and diluted: $ ( $ (
0.18 0.11
) )
Weighted average common shares outstanding:
Basic 25,080 24,718
Diluted 25,080 24,718
The accompanying notes are an integral part of these unaudited condensed
consolidated statements.
-3-
-------------------------------------------------------------------------------
Table of Contents
MEDIACO HOLDING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2024 2023
(in thousands, except share data) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,960 $ 3,817
Restricted cash 1,354 1,337
Accounts receivable, net of allowance for credit losses of $ 6,684 6,675
378
and $
353
, respectively
Prepaid expenses 2,240 891
Other current assets 874 1,188
Total current assets 15,112 13,908
PROPERTY AND EQUIPMENT, NET 1,473 1,380
INTANGIBLE ASSETS, NET 64,663 64,593
OTHER ASSETS:
Operating lease right of use assets 13,529 13,614
Deposits and other 2,177 1,996
Total other assets 15,706 15,610
Total assets $ 96,954 $ 95,491
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 6,662 $ 2,625
Current maturities of long-term debt 6,458 6,458
Accrued salaries and commissions 688 539
Deferred revenue 828 557
Operating lease liabilities 1,634 1,444
Income taxes payable - 65
Other current liabilities 225 29
Total current liabilities 16,495 11,717
LONG TERM DEBT, NET OF CURRENT - -
OPERATING LEASE LIABILITIES, NET OF CURRENT 14,329 14,333
DEFERRED INCOME TAXES 2,850 2,775
OTHER NONCURRENT LIABILITIES 513 502
Total liabilities 34,187 29,327
COMMITMENTS AND CONTINGENCIES
SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $ 29,477 28,754
0.01
PAR VALUE,
10,000,000
SHARES AUTHORIZED;
286,031
SHARES ISSUED AND OUTSTANDING
EQUITY:
Class A common stock, $ 206 210
0.01
par value; authorized
170,000,000
shares; issued and outstanding
20,578,568
shares and
20,741,865
shares at March 31, 2024, and December 31, 2023, respectively
Class B common stock, $ 54 54
0.01
par value; authorized
50,000,000
shares; issued and outstanding
5,413,197
shares at March 31, 2024, and December 31, 2023
Class C common stock, $ - -
0.01
par value; authorized
30,000,000
shares;
none
issued
Additional paid-in capital 60,578 60,294
Accumulated deficit ( (
27,548 23,148
) )
Total equity 33,290 37,410
Total liabilities and equity $ 96,954 $ 95,491
The accompanying notes are an integral part of these unaudited condensed
consolidated statements.
-4-
-------------------------------------------------------------------------------
Table of Contents
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, Shares Amount Shares Amount
except share data)
BALANCE, 20,741,865 $ 210 5,413,197 $ 54 $ 60,294 $ ( $ 37,410
DECEMBER 23,148
31, 2023 )
Net loss - - - - - ( (
3,677 3,677
) )
Issuance of class ( ( - - 291 - 287
A to employees, 151,993 4
officers and ) )
directors, net
Repurchase ( - - - ( - (
of class 11,304 7 7
A common shares ) ) )
Preferred stock - - - - - ( (
dividends 723 723
) )
BALANCE, 20,578,568 $ 206 5,413,197 $ 54 $ 60,578 $ ( $ 33,290
MARCH 27,548
31, 2024 )
BALANCE, 20,443,138 $ 207 5,413,197 $ 54 $ 59,817 $ ( $ 46,976
DECEMBER 13,102
31, 2022 )
Net loss - - - - - ( (
2,107 2,107
) )
Issuance of class 564,548 6 - - 363 - 369
A to employees,
officers and
directors, net
Repurchase ( ( - - ( - (
of class 395,813 6 565 571
A common shares ) ) ) )
Preferred stock - - - - - ( (
dividends 590 590
) )
BALANCE, 20,611,873 $ 207 5,413,197 $ 54 $ 59,615 $ ( $ 44,077
MARCH 15,799
31, 2023 )
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) 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss $ ( $ (
3,677 2,107
) )
Less: Loss from discontinued operations, net of tax - 152
Adjustments to reconcile net loss to net cash provided by operating activities -
Depreciation and amortization 133 159
Noncash lease expense 85 651
Allowance for credit losses 25 (
20
)
Provision for deferred income taxes 75 75
Noncash compensation 364 634
Other noncash items 2 82
Changes in assets and liabilities
Accounts receivable ( 1,402
34
)
Prepaid expenses and other current assets ( (
1,035 432
) )
Other assets ( -
331
)
Accounts payable and accrued liabilities 4,210 104
Deferred revenue 271 383
Operating lease liabilities 186 (
398
)
Income taxes ( -
29
)
Other liabilities 167 133
Net cash provided by continuing operating activities 412 818
Net cash provided by discontinued operating activities - 160
Net cash provided by operating activities 412 978
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ( (
26 237
) )
Purchases of internally-created software ( (
146 312
) )
Net cash used in continuing investing activities ( (
172 549
) )
Net cash used in discontinued investing activities - -
Net cash used in investing activities ( (
172 549
) )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of class A common stock ( (
7 571
) )
Settlement of tax withholding obligations ( (
73 109
) )
Net cash used in continuing financing activities ( (
80 680
) )
Net cash used in discontinued financing activities - (
38
)
Net cash used in financing activities ( (
80 718
) )
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 160 (
289
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period 7,071 15,301
End of period 7,231 15,012
Less: Cash, cash equivalents and restricted cash of discontinued operations - -
Cash, cash equivalents and restricted cash of continuing operations at end of period $ 7,231 $ 15,012
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, as well as certain assets that we acquired in April
2024. See Note 10 for additional information. 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.
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.
Going Concern
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
Pursuant to Accounting Standards Codification ("ASC") Topic 205-40,
Going Concern
, the Company is required to evaluate whether there is substantial doubt about
its ability to continue as a going concern within one year of the date of
issuance of these financial statements (May 15, 2024). Based on its current
projections of future cash flows, current financial condition, sources of
liquidity and debt service obligations due on or before May 15, 2025, the
Company believes it has the ability to meet its obligations for at least one
year from the date of issuance of these condensed consolidated financial
statements.
In the 2023 Form 10-K filed on April 1, 2024, the Company stated that it had
substantial doubt about its ability to continue as a going concern within one
year after the date the financial statements were issued. As a result of the
consummation of the transactions contemplated by the asset purchase agreement
and related debt and equity issuances discussed in Note 10, the conditions
described in the 2023 Form 10-K that raised substantial doubt about whether
the Company would continue as a going concern no longer exist.
Cash, Cash Equivalents and Restricted Cash
MediaCo considers 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 at March 31, 2024 and December 31, 2023
consisted of $
1.4
million and $
1.3
million, respectively, held in escrow related to the Company's disposition of
the Fairway business, classified in current assets, and $
1.9
million as of March 31, 2024 and December 31, 2023 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, which expires in October 2039,
and included in the line item Deposits and Other in the condensed consolidated
balance sheets.
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, 2024 and 2023 was as follows:
Three Months Ended
March 31,
2024 2023
Beginning Balance $ 353 $ 122
Change in Provision 25 (
20
)
Write Offs - -
Ending Balance $ 378 $ 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. 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. For periods with 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,
2024 2023
Numerator:
Loss from continuing operations $ ( $ (
3,677 1,955
) )
Less: Preferred stock dividends ( (
723 590
) )
Loss from continuing operations available to common shareholders ( (
4,400 2,545
) )
Loss from discontinued operations, net of income taxes - (
152
)
Net loss attributable to common shareholders $ ( $ (
4,400 2,697
) )
Denominator:
Weighted-average shares of common stock outstanding - basic and diluted 25,080 24,718
Earnings per share of common stock attributable to common shareholders:
Net loss per share attributable to common shareholders - basic and diluted:
Continuing operations $ ( $ (
0.18 0.10
) )
Discontinued operations - (
0.01
)
Net loss per share attributable to common shareholders - basic and diluted: $ ( $ (
0.18 0.11
) )
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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, 2024 or 2023.
For the three month period ended March 31, 2024, we repurchased under a share
repurchase plan
11,304
shares of Class A common stock for an immaterial amount.
The following convertible equity shares and restricted stock awards were
excluded from the calculation of diluted net loss per share because their
effect would have been anti-dilutive.
Three Months Ended
March 31,
(in thousands) 2024 2023
Convertible Emmis promissory note 9,423 4,742
Series A convertible preferred stock 41,546 20,926
Restricted stock awards 146 194
Total anti-dilutive shares 51,115 25,862
Recent Accounting Pronouncements Not Yet Implemented
In December 2023, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
, which is intended to enhance the transparency and decision usefulness of
income tax disclosures by enhancing information about how an entity's
operations and related tax risks and its tax planning and operation
opportunities affect its tax rate and prospects for future cash flows. This
guidance is effective for fiscal years beginning after December 31, 2024, with
early adoption permitted. Adoption allows for prospective application, with
retrospective application permitted. We are currently assessing the impact
this standard will have on our condensed consolidated financial statements,
including, but not limited to, our income taxes footnote disclosure.
In November 2023, the FASB issued ASU 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
to update reportable segment disclosure requirements, primarily through
enhanced disclosures about significant segment expenses and information used
to assess segment performance. This update is effective beginning with the
Company's 2024 fiscal year annual reporting period, with early adoption
permitted. We are currently assessing the impact this standard will have 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.
The following table presents the financial results of Fairway:
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Three Months Ended
March 31,
2024 2023
Net revenues $ - $ -
OPERATING EXPENSES
Operating expenses excluding depreciation and amortization expense - 152
Total operating expenses - 152
(Loss) income from operations of discontinued operations - (
152
)
Interest and other, net - -
Loss from discontinued operations, before income taxes - (
152
)
Income tax benefit (expense) - -
Loss from discontinued operations, net of income taxes $ - $ (
152
)
3. INTANGIBLE ASSETS
As of March 31, 2024 and December 31, 2023, intangible assets consisted of the
following:
March 31, 2024 December 31, 2023
Indefinite-lived intangible assets
FCC licenses $ 63,266 $ 63,266
Definite-lived intangible assets
Software 1,397 1,327
Total $ 64,663 $ 64,593
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 March 31, 2024 and December 31, 2023. 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-live
d 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, 2023 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.
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Definite-lived intangibles
The following table presents the weighted-average useful life at March 31,
2024, and the gross carrying amount and accumulated amortization at March 31,
2024 and December 31, 2023, for our definite-lived intangible assets:
March 31, 2024 December 31, 2023
Weighted Average Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying
Remaining Useful Life Amount Amortization Amount Amount Amortization Amount
(in years)
Software 4.1 $ 1,733 $ 336 $ 1,397 $ 1,583 $ 256 $ 1,327
The software was developed internally by our radio operations and represents
our updated website and mobile application, which offer increased
functionality and opportunities to grow and interact with our audience. They
cost $
1.7
million to develop and useful lives of
five years
and
seven years
were assigned to the application and website, respectively.
Total amortization expense from definite-lived intangible assets for each of
the three months ended March 31, 2024 and 2023 was $
0.1
million.
The Company estimates amortization expense each of the next five years as
follows:
Year ending December 31, Amortization Expense
2024 (from April 1) $ 260
2025 347
2026 347
2027 304
2028 133
After 2028 6
Total $ 1,397
4. REVENUE
The Company generates revenue from the sale of services including, but not
limited to: (i) on-air commercial broadcast time, (ii) non-traditional
revenues including event-related revenues and event sponsorship revenues, and
(iii) 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.
Spot 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.
Digital
Digital revenue relates to revenue generated from the sale of digital
marketing services (including display advertisements and video pre-roll and
sponsorships) to advertisers on Company-owned websites and from revenue
generated from content distributed across other digital platforms. Digital
revenues are generally recognized as the digital advertising is delivered.
Syndication
Syndication revenue relates to revenue generated from the sale of rights to
broadcast shows we produce as well as revenues from syndicated shows we
broadcast for a fee. Syndication revenues are generally recognized ratably
over the term of the contract.
Events and Sponsorships
Events and Sponsorships 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.
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Other
Other revenue includes
barter
revenue, network revenue, talent fee revenue and other 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. Talent fee revenue are fees earned for appearances by our
talent, which is recognized when our performance obligations are fulfilled,
which generally coincides with the occurrence of the related appearance. Other
revenue is comprised of brand integrations, custom on-air shows, or other
amounts earned that do not fit in any other category and are recognized when
our performance obligations are fulfilled.
Disaggregation of revenue
The following table presents the Company's revenues disaggregated by revenue
source:
Three Months Ended March 31,
2024 % of Total 2023 % of Total
Revenue by Source:
Spot Radio Advertising $ 4,348 64.8 % $ 4,769 65.0 %
Digital 862 12.9 % 974 13.3 %
Syndication 598 8.9 % 605 8.2 %
Events and Sponsorships 121 1.8 % 156 2.1 %
Other 777 11.6 % 831 11.4 %
Total net revenues $ 6,706 $ 7,335
5. LONG-TERM DEBT
Long-term debt was comprised of the note payable to Emmis of $
6.5
million at March 31, 2024 and December 31, 2023 and was classified as current
at March 31, 2024 and December 31, 2023 as the note matures within the next 12
months.
Emmis Convertible Promissory Note
The Emmis Convertible Promissory Note (as defined below) 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. The Company has been
accruing interest since inception using the rate applicable if the interest
will be paid in kind. The Emmis Convertible Promissory Note is convertible, in
whole or in part, into MediaCo Class A common stock at the option of Emmis and
at a strike price equal to the thirty-day volume weighted average price of the
MediaCo Class A common stock on the date of conversion. The Emmis Convertible
Promissory Note matures on November 25, 2024. As of March 31, 2024, the
principal balance outstanding under the Emmis Convertible Promissory Note was $
6.5
million.
Based on amounts outstanding at March 31, 2024, mandatory principal payments
of long-term debt are $
6.5
million in 2024.
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.
On September 15, 2023, the Company received a notification letter from the
Nasdaq Listing Qualifications Department (the "Staff") notifying the Company
that, because the closing bid price for the Company's Class A common stock was
below $1.00 for 30 consecutive business days, the Company no longer met the
minimum bid price requirement for continued listing on The Nasdaq Capital
Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price
of $1.00 per share (the "Minimum Bid Price Requirement").
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In accordance with Nasdaq Listing Rule 5810(c)(3)(A)(ii), the Company was
given 180 calendar days, or until March 13, 2024, to regain compliance with
the Minimum Bid Price Requirement. The Company did not achieve compliance
during that period. On March 14, 2024, the Company received a notification
letter from the Staff notifying the Company that that it had been granted an
additional 180 days, or until September 9, 2024, to regain compliance with the
Minimum Bid Price Requirement, based on meeting the continued listing
requirement for market value of publicly held shares and all other applicable
requirements for initial listing on The Nasdaq Capital Market with the
exception of the bid price requirement, and the Company's written notice of
its intention to cure the deficiency during the second compliance period.
On April 17, 2024, the Company received a notification letter from the Staff
indicating that the Company has regained compliance with Nasdaq's Minimum Bid
Price Requirement and the matter is closed.
7. INCOME TAXES
The effective tax rate for the three months ended March 31, 2024 and 2023 was
2
% and
4
%, respectively. Our effective tax rate for the three months ended March 31,
2024 differs from the statutory tax rate primarily due to the recognition of
additional valuation allowance.
ASC paragraph 740-10 clarified the accounting for uncertainty in income taxes
by prescribing a recognition threshold and measurement attribute of the
financial statement recognition and measurement of a tax position taken or
expected to be taken within a tax return. For those benefits to be recognized,
a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. The amount recognized is measured as the largest
benefit that reaches greater than 50% likelihood of being realized upon
ultimate settlement. In 2023, we recorded approximately $
390
thousand of gross tax liability for uncertain tax positions related to federal
and state income tax returns filed. Additionally, we recognize accrued
interest and penalties related to unrecognized tax benefits as components of
our income tax provision. As of March 31, 2024, the amount of interest accrued
was approximately $
34
thousand, which did not include the federal tax benefit of interest deductions.
8. LEASES
We determine if an arrangement is a lease at inception. We have operating
leases for office space and tower space expiring at various dates through
October 2039. 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 the 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.
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. None of our leases contain variable lease payments.
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 three months ended March
31, 2024 and 2023 was not material.
On November 18, 2022, the Company entered into a lease agreement in New York
City for our radio operations and corporate offices with a lease commencement
date of February 1, 2023 and a noncancellable lease term through October 2039.
This resulted in a right of use asset of $
10.4
million and an operating lease liability of $
10.4
million when recorded at lease commencement.
The impact of operating leases to our condensed consolidated financial
statements was as follows:
Three Months Ended
March 31,
2024 2023
Operating lease cost $ 634 $ 952
Operating cash flows from operating leases 280 750
Right-of-use assets obtained in exchange for new operating lease liabilities - 10,391
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March 31, 2024 December 31, 2023
Weighted average remaining lease term - operating leases (in years) 13.8 14.0
Weighted average discount rate - operating leases 11.5 % 11.4 %
As of March 31, 2024, the annual minimum lease payments of our operating lease
liabilities were as follows:
Year ending December 31,
2024 (from April 1) $ 1,382
2025 2,053
2026 2,453
2027 2,477
2028 2,500
After 2028 26,560
Total lease payments 37,425
Less imputed interest (
21,462
)
Total recorded lease liabilities $ 15,963
9. RELATED PARTY TRANSACTIONS
Transaction Agreement with Emmis and SG Broadcasting
On June 28, 2019, MediaCo entered into a Contribution and Distribution
Agreement with Emmis Communications Corporation ("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.
Convertible Promissory Notes
As a result of the transaction described above, on November 25, 2019, we
issued a convertible promissory notes to Emmis (such note, the "Emmis
Convertible Promissory Note") in the amount of $
5.0
million. Through December 31, 2022, there were annual interest amounts paid in
kind on the Emmis Convertible Promissory Note such that the principal balances
outstanding as of December 31, 2022 was $
6.0
million.
For the year ended December 31, 2023, interest of $
0.5
million was paid-in-kind and added to the principal balance outstanding.
Consequently, the principal amount outstanding as of December 31, 2023 and
March 31, 2024 under the Emmis Convertible Promissory Note was $
6.5
million.
The Company recognized interest expense of $
0.2
million and $
0.1
million related to the Emmis Convertible Promissory Note for the three months
ended March 31, 2024 and 2023, respectively.
The terms of these Emmis Convertible Promissory Note is described in Note 5.
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 Share could be converted, and
(ii) the MediaCo Series A Preferred Shares, upon any liquidation, dissolution
or winding up of the Company, shall be entitled to a preference on the assets
of the Company. Issued and outstanding shares of MediaCo Series A Preferred
Shares shall accrue cumulative dividends, payable in kind, at an annual rate
equal to the interest rate on any senior debt of the Company (see Note 5), or
if
no
senior debt is outstanding,
6
%, plus additional increases of
1
% on December 12, 2020 and each anniversary thereof. On December 13, 2022,
dividends of $
3.4
million were paid in kind. The payment in kind increased the accrued value of
the preferred stock and
80,000
additional shares were issued as part of this payment.
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MediaCo Series A Preferred Shares are redeemable for cash at the option of SG
Broadcasting at any time on or after June 12, 2025, and so the shares are
classified outside of permanent equity. The Series A Preferred Shares are also
convertible into shares of Class A common stock at the option of SG
Broadcasting, with the number of shares of common stock determined by dividing
the original contribution, plus accrued dividends, by the
30-day
volume weighted average share price of Class A common shares. The Series A
Preferred Shares are participating securities and we calculate earnings per
share using the two-class method.
Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $
0.7
million and $
0.6
million, respectively, for the three months ended March 31, 2024 and 2023. As
of March 31, 2024 and December 31, 2023, unpaid cumulative dividends were $
0.9
million and $
0.2
million, respectively, and included in the balance of preferred stock in the
accompanying condensed consolidated balance sheets.
On April 16, 2024, SG Broadcasting exercised its right to entirely convert $
29.6
million of the outstanding balance on the MediaCo Series A Preferred Shares for
20.7
million shares of the Company's Class A common stock.
Consulting Agreements & Other Activity
In October 2023, we entered into agreements with
five
consultants that are currently employed by affiliates of Standard General.
One
of the agreements had a term that expired on February 1, 2024 and was billed
at an hourly rate of $
125
per hour.
Three
of the agreements have a term that expires on May 31, 2024 and are billed at
rates of $
6,000
, $
8,400
, and $
12,000
per month.
One
agreement may be terminated at any time by either party and is billed at $
18,000
per month, plus expenses. For the three months ended March 31, 2024, $
0.2
million of fees were incurred related to these agreements.
In March 2024, we made payments of $
15,000
to the National Association of Investment Companies, of which a member of our
board of directors is the President & CEO.
10. SUBSEQUENT EVENTS
On April 17, 2024, MediaCo, and its wholly-owned subsidiary MediaCo Operations
LLC, a Delaware limited liability company ("Purchaser"), entered into an asset
purchase agreement (the "Asset Purchase Agreement") with Estrella
Broadcasting, Inc., a Delaware corporation ("Estrella"), and SLF LBI
Aggregator, LLC, a Delaware limited liability company ("Aggregator") and
affiliate of HPS Investment Partners, LLC ("HPS"), pursuant to which Purchaser
purchased substantially all of the assets of Estrella and its subsidiaries
(other than certain broadcast assets owned by Estrella and its subsidiaries
(the "Estrella Broadcast Assets")) (the "Purchased Assets"), and assumed
substantially all of the liabilities (the "Assumed Liabilities") of Estrella
and its subsidiaries. Estrella operates
seven
television stations located in California, Texas, New York, Colorado,
Illinois, and Florida as well as
12
radio stations in California and Texas.
MediaCo provided the following consideration for the Purchased Assets:
i.
A warrant (the "Warrant") to purchase up to
28,206,152
shares of MediaCo's Class A Common Stock, par value $
0.01
per share ("Class A Common Stock");
ii.
60,000
shares of a newly designated series of MediaCo's preferred stock designated as
"Series B Preferred Stock" (the "Series B Preferred Stock");
iii.
A term loan in the principal amount of $
30.0
million under the Second Lien Credit Agreement (as defined below) (the "Second
Lien Term Loan"); and
iv.
An aggregate cash payment in the amount of approximately $
30.0
million to be used, in part, for the repayment of certain indebtedness of
Estrella and payment of certain Estrella transaction expenses.
Other key terms and agreements related to this transaction are summarized below.
Option Agreement
On April 17, 2024, in connection with the Transactions contemplated by the
Asset Purchase Agreement (the "Transactions"), MediaCo and Purchaser entered
into an Option Agreement (the "Option Agreement") with Estrella and certain
subsidiaries of Estrella pursuant to which (i) Purchaser was granted the
option to purchase
100
% of the equity interests of certain subsidiaries of Estrella holding the
Estrella Broadcast Assets (the "Option Subsidiaries Equity") in exchange for
7,051,538
shares of Class A Common Stock, and (ii) Estrella was granted the right to put
the Option Subsidiaries
Equity to Purchaser for the same consideration beginning six months after the
date of the closing of the Transactions (the "Closing Date"). The Option
Agreement is subject to FCC approval.
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First Lien Term Loan
In order to finance the Transactions, MediaCo and its direct and indirect
subsidiaries entered into a maximum $
45.0
million first lien term loan credit facility, dated April 17, 2024 (the "First
Lien Credit Agreement"), with White Hawk Capital Partners, LP, as term agent
thereunder, and the lenders party thereto. Under the terms of the First Lien
Credit Agreement, MediaCo received an initial term loan of $
35.0
million on April 17, 2024 (the "Initial Loan") and was provided with a
subsequent delayed draw facility of up to $
10.0
million that may be provided for additional working capital purposes under
certain conditions (the "Delayed Draw" and the loans thereunder, the "Delayed
Draw Term Loans"). The Initial Loan and Delayed Draw Term Loans are
collectively referred to as the "First Lien Term Loans." The proceeds of the
Initial Loan were used to finance the Transactions, pay off certain existing
indebtedness in connection therewith and pay related fees and transaction
costs. The Initial Loan will mature on April 17, 2029, and each Delayed Draw
Term Loan will mature on the date that is two years after the drawing of such
Delayed Draw Term Loan. First Lien Term Loans will be subject to monthly
amortization payments equal to
0.8333
% of the initial principal amount of the First Lien Term Loans, and monthly
interest payments at a rate of SOFR +
6.00
%. The Delayed Draw Term Loans have an unused lien fee of
1
% and a delayed draw term loan upfront fee of
3
%. As of May 9, 2024, $
5
million remains to be drawn on the Delayed Draw Term Loans. The First Lien
Term Loans are subject to a borrowing base in accordance with the terms of the
First Lien Credit Agreement.
Second Lien Term Loan
In addition, MediaCo and its direct and indirect subsidiaries entered into a $
30.0
million second lien term loan credit facility, dated April 17, 2024 (the
"Second Lien Credit Agreement"), with HPS as term agent, and the lenders party
thereto. Under the terms of the Second Lien Credit Agreement, MediaCo was
deemed to receive the Second Lien Term Loan of $
30.0
million on April 17, 2024 in exchange for the Transactions. The Second Lien
Term Loan will mature on April 17, 2029 and will be subject to monthly
interest payments at a rate of SOFR +
6.00
%. The Second Lien Term Loans are subject to a borrowing base in accordance
with the terms of the Second Lien Credit Agreement. MediaCo is currently
paying the variable SOFR interest in cash while the fixed rate portion is paid
in-kind.
Network Affiliation and Supply Agreements
On April 17, 2024, in connection with the Transactions, Purchaser entered into
a Network Program Supply Agreement (the "Network Program Supply Agreement")
with certain subsidiaries of Estrella that operate radio broadcast stations
(the "Radio Stations"). Pursuant to the Network Program Supply Agreement,
Purchaser has agreed to license certain programs and other material to the
Radio Stations for distribution on the Radio Stations' broadcast channels.
On April 17, 2024, in connection with the Transactions, Purchaser entered into
a Network Affiliation Agreement (the "Network Affiliation Agreement") with
certain subsidiaries of Estrella that operate television broadcast stations
(the "TV Stations"). Pursuant to the Network Affiliation Agreement, Purchaser
has agreed to license certain programs and other material to the TV Stations
for distribution on the TV Stations' broadcast channels.
There were no other subsequent events other than the conversion of MediaCo
Series A Preferred Shares for shares of the Company's Class A common stock
discussed in Note 9.
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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
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:
.
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, live video streaming, YouTube, and other
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;
.
Pending U.S. regulatory requirements for paying royalties to performing artists;
.
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 acquisitions, including the
recent transactions with Estrella Broadcasting, Inc. and any future
acquisitions;
.
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, filed with the Securities
and Exchange Commission on April 1, 2024
.
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, as well as the
assets acquired in April 2024 in our transactions, with Estrella Broadcasting,
Inc. These assets include Estrella Media's network, content, digital, and
commercial operations. Among the Estrella Media brands joining MediaCo are the
EstrellaTV network and its influential linear and digital video content
business, and Estrella Media's expansive digital channels, including its four
FAST channels - EstrellaTV, Estrella News, Cine EstrellaTV, and Estrella Games
- and the EstrellaTV app. 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
stations' ability to attract audiences in demographic groups targeted by their
advertisers. The Nielsen Company generally measures station ratings weekly for
markets measured by the Portable People Meter". Because audience ratings in a
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, 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.
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The following table summarizes the sources of our revenues from continuing
operations for the three months ended March 31, 2024 and 2023. The category
"Other" includes, among other items, revenues related to network revenues and
barter.
(dollars in thousands) Three Months Ended March 31,
2024 % of Total 2023 % of Total
Net revenues:
Spot Radio Advertising $ 4,348 64.8 % $ 4,769 65.0 %
Digital 862 12.9 % 974 13.3 %
Syndication 598 8.9 % 605 8.2 %
Events and Sponsorships 121 1.8 % 156 2.1 %
Other 777 11.6 % 831 11.4 %
Total net revenues $ 6,706 $ 7,335
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, rents,
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: (i) 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 (ii) 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 the rest of the radio industry, our stations have deployed HD
Radio(R). 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 few years, particularly in new automobiles. It is unclear what impact
HD Radio will have on the markets 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 broadcast 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 4.5% for the three months
ended March 31, 2024, as compared to the same period of the prior year. Our
gross revenues reported to Miller Kaplan were down 6.6%, as compared to the
same period of the prior year. The decreases for our New York Cluster were
largely driven by lower spend in the media and financial sectors.
MediaCo relies on events to help bolster revenue and operating performance.
One of the key events is Summer Jam that occurs in June of each year. Summer
Jam is highly reliant on tickets sales and sponsorships to drive revenue.
Tickets sales are dependent on the performers and the venue chosen, which also
impacts sponsorship revenue. MediaCo is currently estimating risk around the
year's Summer Jam revenue with a potential revenue decline from 2023 in the
range of $3.0 million to $3.6 million. While this is offset by lower estimated
operating costs, we are currently estimating operating profit could decline
from 2023 in the range of $1.5 million to $2.1 million.
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. 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.
MediaCo has been impacted by the rising interest rate environment in the
financial markets. While no longer impacting our current borrowings, which are
fixed rate, the cost of any potential future borrowings has been increasing.
At this time, we do not anticipate interest rates to decline.
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CRITICAL ACCOUNTING ESTIMATES
We have considered information available to us as of the date of issuance of
these financial statements and are not aware of any specific events or
circumstances that would require an update to our estimates or judgments, or a
revision to the carrying value of our assets or liabilities. Our estimates may
change as new events occur and additional information becomes available. Our
actual results may differ materially from these estimates.
A complete description of our critical accounting estimates is contained in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2023,
filed with the Securities and Exchange Commission on April 1, 2024.
RESULTS OF OPERATIONS
Three-Month Periods Ended March 31, 2024 compared to March 31, 2023
The following discussion refers to the Company's continuing operations. See
Note 2 - Discontinued Operations in our condensed consolidated financial
statements included elsewhere in this report for additional information.
Net revenues:
Three Months Ended March 31, 2024
(dollars in thousands) 2024 2023 $ Change % Change
Net revenues $ 6,706 $ 7,335 $ (629) (8.6) %
Net revenues decreased for the three months ended March 31, 2024 as lower
spend in the media and financial sectors was offset by stronger telecommunicatio
ns and healthcare spend.
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 4.5% for the three-month period ended March 31, 2024, as
compared to the same period of the prior year. Our gross revenues reported to
Miller Kaplan were down 6.6% for the three-month period ended
March 31, 2024
, as compared to the same period of the prior year.
Operating expenses excluding depreciation and amortization expense:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Operating expenses excluding depreciation and amortization expense $ 6,650 $ 7,237 $ (587) (8.1) %
Operating expenses excluding depreciation and amortization expense decreased
for the three months ended March 31, 2024 compared to the same period in the
prior year due to lower salary costs, lease expense, music license fees, and
professional service fees.
Corporate expenses:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Corporate expenses $ 3,390 $ 1,884 $ 1,506 79.9 %
Corporate expenses increased for the three months ended March 31, 2024 due to
higher professional service fees driven by the Estrella transaction, partially
offset by lower salary and stock based compensation expenses.
Depreciation and amortization:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Depreciation and amortization $ 133 $ 159 $ (26) (16.4) %
Depreciation and amortization expense decreased for the three months ended
March 31, 2024 due to certain assets becoming fully depreciated in the prior
year.
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Gain on disposal of assets:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Gain on disposal of assets $ - $ (39) $ 39 - %
The gain on disposal of assets for the three months ended March 31, 2023
related to the sale of vehicles in the first quarter of 2023. There were no
such disposals in the current year.
Operating loss:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Operating loss $ (3,467) $ (1,906) $ (1,561) 81.9 %
See
"Net revenues," "Operating expenses excluding depreciation and amortization,"
"Depreciation and amortization," "Gain on disposal of assets,"
and
"Corporate expenses"
above.
Interest expense, net:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Interest expense, net $ (136) $ (103) $ (33) 32.0 %
Interest expense, net increased for the three months ended March 31, 2024 due
to accrued interest on the Emmis convertible promissory note being paid in
kind in the fourth quarter of 2023, which increased the principal balance
outstanding.
Provision for income taxes:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Provision for income taxes $ 84 $ 75 $ 9 12.0 %
Our provision for income taxes tax is primarily due to changes in deferred tax
liabilities.
Consolidated net loss:
(dollars in thousands) Three Months Ended March 31, 2024
2024 2023 $ Change % Change
Consolidated net loss $ (3,677) $ (2,107) $ (1,570) 74.5 %
See
"Net revenues," "Operating expenses excluding depreciation and amortization,"
"Depreciation and amortization," "Gain on disposal of assets,"
"Corporate expenses,"
and
"Interest expense"
above.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash provided by operations and our At
Market Issuance Sales Agreement. Our primary uses of capital have been, and
are expected to continue to be, capital expenditures, working capital and
acquisitions.
At
March 31, 2024
,
we had cash, cash equivalents and restricted ca
sh of $7.2 million
and negative working capital of
$(1.4) million
. At December 31, 2023, we had cash, cash equivalents and restricted cash of
$7.1 million and net
working capital of $2.2 million. The decrease in net working capital was
driven by accrued expenses related to the Estrella transaction.
At March 31, 2024, we had
$6.5 million
of promissory notes outstanding to Emmis under the Emmis Convertible
Promissory Note, all of which was classified as current and has debt service
requirements of $7.3 million over the next twelve months.
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.
Cash flows provided by continuing operating activities were
$0.4 million
compared to cash flows provided by $0.8 million for the three months ended
March 31, 2024 and 2023, respectivel
y. The decrease was mainly attributable to changes in working capital.
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Cash flows used in continuing investing activities were $0.2 million for the
three months ended March 31, 2024, attributable to capital expenditures
related to a new digital platform project and our build out of our new space
for radio operations and corporate offices. C
ash flows used in continuing investing activities were $0.5 million for the
three months ended March 31, 2023, attributable to purchases of internally-creat
ed software.
Cash flows used in continuing financing activities were
$0.1 million
for the three months ended March 31, 2024, attributable to repurchases of our
Class A common stock and settlement of tax withholding obligations. Cash flows
used in continuing financing activities were $0.7 million for the three months
ended March 31, 2023, attributable to repurchases of our Class A common stock
and settlement of tax withholding obligations.
In the 2023 Form 10-K filed on April 1, 2024, the Company stated that it had
substantial doubt about its ability to continue as a going concern within one
year after the date the financial statements were issued. As a result of the
consummation of the transactions contemplated by the asset purchase agreement
and related debt and equity issuances discussed in Note 10 to these condensed
consolidated financial statements, the conditions described in the 2023 Form
10-K that raised substantial doubt about whether the Company would continue as
a going concern no longer exist.
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 Interim Chief Executive Officer ("Interim CEO") and
Chief Financial Officer ("CFO").
Based upon the Controls Evaluation, our Interim CEO and CFO concluded that as
of March 31, 2024, 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 March 31,
2024 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
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 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER
PURCHASES OF EQUITY SECURITIES
The following table provides information relating to the shares we purchased
during the quarter ended
March 31, 2024:
Period Total Number of Weighted Average Total Number of Approximate Dollar
Shares Purchased Price Paid per Share Shares Purchased as Value of Shares that
Part of Publicly May Yet Be Purchased
Announced Program Under the Program
January 1, 2024 - 11,304 $ 0.60 11,304 $ 1,000,029
January 31, 2024
February 1, 2024 - - $ - - $ 1,000,029
February 29, 2024
March 1, 2024 - - $ - - $ 1,000,029
March 31, 2024
Total 11,304 $ 0.60 11,304
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Table of Contents
ITEM 5. OTHER INFORMATION
None of the Company's directors and officers
adopted
, modified or
terminated
a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement
during the Company's fiscal quarter ended
March 31, 2024
.
ITEM 6. EXHIBITS
(a)
Exhibits.
The following exhibits are filed or incorporated by reference as a part of
this report:
Exhibit Exhibit Description Filed Herewith Incorporated by Reference
Number
Form Period Ending Exhibit Filing Date
31.1 Certification of Principal Executive X
Officer of MediaCo Holding
Inc. pursuant to Rule 13a-14(a)
under the Exchange Act
31.2 Certification of Principal Financial X
Officer of MediaCo Holding
Inc. pursuant to Rule 13a-14(a)
under the Exchange Act
32.1 Certification of Principal Executive Officer X
of MediaCo Holding Inc. pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Principal Financial Officer X
of MediaCo Holding Inc. pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL X
Instance Document
101.SCH Inline XBRL X
Taxonomy
Extension
Schema Document
101.CAL Inline XBRL X
Taxonomy Extension
Calculation
Linkbase Document
101.LAB Inline XBRL X
Taxonomy Extension
Labels Linkbase
Document
101.PRE Inline XBRL X
Taxonomy Extension
Presentation
Linkbase Document
101.DEF Inline XBRL X
Taxonomy Extension
Definition
Linkbase Document
104 Cover Page Interactive X
Data File (embedded
within the Inline
XBRL document)
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Table of Contents
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: May 15, 2024 By: /s/ Ann C. Beemish
Ann C. Beemish
Executive Vice President, Chief Financial Officer and
Treasurer
-23-
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Jacqueline Hernandez 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: May 15, 2024
/s/ Jacqueline Hernandez
Jacqueline Hernandez
Interim Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Ann C. Beemish, 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: May 15, 2024
/s/ Ann C. Beemish
Ann C. Beemish
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 March
31, 2024, 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: May 15, 2024
/s/ Jacqueline Hernandez
Jacqueline Hernandez
Interim Chief Executive Officer
(Principal 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 March
31, 2024, 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: May 15, 2024
/s/ Ann C. Beemish
Ann C. Beemish
Executive Vice President, Chief Financial Officer and
Treasurer
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