Salem Media Group, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Recent Transactions

Recent Transactions

12 Months Ended

Dec. 31, 2022

Text Block [Abstract]

Recent Transactions

NOTE 3. RECENT TRANSACTIONS

During the year ended December 31, 2022, we completed or entered into the following transactions:

In September 2022, we entered into a settlement agreement in connection with a lawsuit. While we denied the allegations made in the lawsuit, we believed that settling the matter was preferable to protracted and costly litigation. We previously estimated that we would resolve the matter for $0.5 million, and that amount was accrued at December 31, 2020. During mediation held in September 2022, the parties reached a settlement whereby we agreed to $5.3 million in exchange for a release by the

laintiff of all claims. The settlement

amount

was paid in December 2022.

We invested in OPA, an entity formed for the purpose of developing, producing, and distributing a documentary motion picture. The documentary motion picture,

2000 Mules

, was released in May 2022. We recorded $4.1 million of earnings from our equity investment in OPA during the year ended December 31, 2022. At December 31, 2022, $0.1 million is included in other receivables in our Consolidated Balance sheet representing our share of profit from the documentary motion picture due from OPA.

Debt Transactions

We completed repurchases of our 2024 Notes as follows:


Date	Principal Repurchased		Cash Paid		% of Face Value			Bond Issue Costs		Net Gain (Loss)
	(Dollars in thousands)
December 19, 2022	$	4,650	$	4,557		98.00	%	$	57	$	36
December 14, 2022		1,000		965		96.50	%		5		30
June 13, 2022		5,000		4,947		98.95	%		35		18
June 10, 2022		3,000		2,970		99.00	%		21		9
June 7, 2022		2,464		2,446		99.25	%		17		1
May 17, 2022		2,525		2,500		99.00	%		18		7
January 12, 2022		2,500		2,531		101.26	%		22		(53	)

Acquisitions

On December 30, 2022, we acquired the book inventory and publishing rights of ISI Publishing for $0.4 million of cash.

On December 2, 2022, we acquired radio station

KKOL-AM

in Seattle, Washington for $0.5 million in cash. We paid $0.4 million of cash at closing and $0.1 million paid from an escrow account. We have been operating the station under a Local Marketing Agreement (“LMA”) since June 7, 2021.

On October 1, 2022, we acquired websites and the related assets of DayTradeSPY, a financial publication, for

0.6

million in cash. As part of the purchase agreement, we may pay up to an additional $

1.0

million of cash in contingent

earn-out

consideration within

one year

of the closing date based on the achievement of certain revenue benchmarks.

On May 2, 2022, we acquired websites and the related assets of Retirement Media for $0.2 million in cash. We recorded goodwill of approximately $2,400 associated with the expected synergies to be realized upon combining the operations into our digital media platform within Eagle Financial Publications. The accompanying Consolidated Statement of Operations reflects the operating results of this entity as of the closing date within our digital media segment.

On May 1, 2022, we began operating radio station

WYDB-FM

in Dayton, Ohio under a TBA.

On February 15, 2022, we acquired radio station

WLCC-AM

and an FM translator in the Tampa, Florida market for $0.6 million of cash. The WLCC transmitter site will be used to diplex radio station

WTBN-AM

due to the sale of the

WTBN-AM

transmitter site.

A summary of our business acquisitions and asset purchased during the year ended December 31, 2022, none of which were individually or in the aggregate material to our consolidated financial position as of the respective date of acquisition is as

follows:


Acquisition Date	Description	Total Consideration
		(Dollars in thousands)
December 30, 2022	ISI Publishing (asset acquisition)		$425
December 2, 2022	KKOL-AM Seattle, WA (asset acquisition)		508
October 1, 2022	DayTradeSPY (business acquisition)		881
May 2, 2022	Retirement Media (business acquisition)		190
February 15, 2022	WLCC-AM and FM Translator, Tampa, FL (asset acquisition)		609

			$2,613

The total purchase price consideration for our business acquisitions and asset purchases during the year ending December 31, 2022, is as

follows:


Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	2,172
Escrow deposits paid in prior years		160
Fair value of contingent earn-out consideration		281

Total purchase price consideration	$	2,613

The allocations presented in the table below are based upon estimates of the fair values using valuation techniques including income, cost and market approaches. The following preliminary purchase price allocations are based upon the valuation of assets and these estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date

Differences between the preliminary and final valuation could be substantially different from the initial estimate.


	Net Broadcast Assets Acquired		Net Digital Media Assets Acquired		Net Publishing Assets Acquired		Total Net Assets Acquired
	(Dollars in thousands)
Assets
Inventory	$	—	$	—	$	126	$	126
Property and equipment		603		166		—		769
Broadcast licenses		514		—		—		514
Goodwill		—		226		—		226
Customer lists and contracts		—		565		—		565
Domain and brand names		—		103		—		103
Author relationships		—		—		299		299
Non-Compete agreement		—		11		—		11

	$	1,117	$	1,071	$	425	$	2,613

Divestitures

On June 27, 2022, we sold 9.3 acres of land in the

Denver, Colorado

area for $8.2 million in cash resulting in a

pre-tax

gain of $6.5 million. The land was being used as the transmitter site for radio stations

KRKS-AM

and

KBJD-AM

and was an integral part of our broadcast operations for these stations. We will continue broadcasting both

KRKS-AM

and

KBJD-AM

from this site via a perpetual agreement with the buyer.

On May 25, 2022, we sold radio stations

WFIA-AM,

WFIA-FM

and

WGTK-AM

in Louisville, Kentucky for $4.0 million with credits applied from amounts previously paid, including a portion of the monthly fees paid under a TBA. We recorded a

pre-tax

gain of $0.5 million.

On January 10, 2022, we closed on the sale of 4.5 acres of land in Phoenix, Arizona for $2.0 million in cash. The land was being used as the transmitter site for radio station

KXXT-AM

and was an integral part of our broadcast operations for that station. We recorded a

pre-tax

gain of $1.8 million on the sale and had access to the land for

days to relocate our transmitter equipment for

KXXT-AM.

We continue to operate radio station

KXXT-AM

with a similar broadcast signal.

Pending Transactions

On December 20, 2022, we entered an Asset Purchase Agreement (“APA”) to acquire the George Gilder Report and other digital newsletters and related website assets. We assumed the deferred subscription liabilities paying no cash at the time of closing on February 1, 2023. The purchase price is 25% of net revenue generated from sales of most Eagle Financial products during the next year to people who are on George Gilder subscriber lists that are not already on Eagle Financial lists.

On September 29, 2022, we entered into an APA to acquire radio station

WMYM-AM

and an FM translator in Miami, Florida for $5.0 million. We paid $0.3

million of cash into an escrow account and began operating the radio station under a TBA beginning on November 16, 2022. The APA was amended for Salem to acquire only the radio station and translator for $

3.2

million, a related party to acquire the land directly from the seller for $1.8 million, and Salem to have an option to purchase the land from the related party pursuant to an option to purchase real estate agreement. The acquisition closed on January 6, 2023. Salem’s executive officers, who have

no relationship with the related party, began negotiations for the related party lease agreements and option agreements, subject to final approval by Salem’s Audit Committee pursuant to its related party transaction policy. The option to purchase real estate agreement was approved by Salem’s Audit Committee on March 1, 2023.

On September 22, 2022, we entered into an APA to acquire radio stations

WWFE-AM,

WRHC-AM

and two FM translators in Miami, Florida for $

5.0

million. The APA was amended for Salem to acquire only the radio stations and translators for $

3.0

million, a related party to acquire the land directly from the seller for $

2.0

million, and Salem to have an option to purchase the land from the related party pursuant to an option to purchase real estate agreement. The acquisition closed on January 10, 2023. Salem’s executive officers, who have no relationship with the related party, began negotiations for the related party lease agreements and option agreements, subject to final approval by Salem’s Audit Committee pursuant to its related party transaction policy. The option to purchase real estate agreement was approved by Salem’s Audit Committee on March 1, 2023.

In June 2022 we entered into agreements to sell radio stations

KLFE-AM

and

KNTS-AM

in Seattle, Washington for

0.7

million subject to approval of the Federal Communications Commission (“FCC.”) Radio station

KLFE-AM

is being programmed under a

TBA as of August

1, 2022.