10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller Reporting Company

Emerging Growth Company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

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

FOR THE TRANSITION PERIOD FROM

COMMISSION FILE NUMBER

000-26497

SALEM MEDIA GROUP, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


DELAWARE		77-0121400
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NUMBER)

6400 NORTH BELT LINE ROAD IRVING, TEXAS		75063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (469)

586-0080


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	SALM	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

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 provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class A		Outstanding at August 1, 2023
Common Stock, $0.01 par value per share		21,663,091 shares

Class B		Outstanding at August 1, 2023
Common Stock, $0.01 par value per share		5,553,696 shares

PART I – FINANCIAL INFORMATION

SALEM MEDIA GROUP, INC.

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)


	December 31, 2022 (Note 1)			June 30, 2023 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	2
Accounts receivable (net of allowances of $7,939 in 2022 and $8,438 in 2023)		30,756			29,526
Unbilled revenue		2,890			2,403
Income tax receivable		195			349
Other receivables (net of allowances of $586 in 2022 and $640 in 2023)		1,817			1,878
Inventories		1,513			1,308
Prepaid expenses		7,619			9,328
Assets held for sale		267			1,267

Total current assets		45,057			46,061

Notes receivable (net of allowance of $571 in 2022 and $473 in 2023)		922			941
Property and equipment (net of accumulated depreciation of $191,638 in 2022 and $196,340 in 2023)		81,296			83,467
Operating lease right-of-use assets		43,671			44,547
Financing lease right-of-use assets		63			81
Broadcast licenses		303,774			299,724
Goodwill		24,085			23,499
Amortizable intangible assets (net of accumulated amortization of $59,383 in 2022 and $60,075 in 2023)		2,149			4,836
Deferred financing costs		681			56
Other assets		3,424			4,035

Total assets	$	505,122		$	507,247

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,539		$	4,096
Accrued expenses		17,495			16,321
Accrued compensation and related expenses		10,298			10,366
Accrued interest		949			1,027
Contract liabilities		11,901			13,283
Deferred rent income		122			118
Current portion of operating lease liabilities		8,305			9,920
Current portion of financing lease liabilities		43			50
Current portion of long-term debt		8,958			22,615

Total current liabilities		64,610			77,796

Long-term debt, less current portion		150,367			152,297
Operating lease liabilities, less current portion		42,406			42,380
Financing (capital) lease liabilities, less current portion		39			43
Deferred income taxes		66,732			63,901
Contract liabilities, long-term		1,886			3,836
Deferred rent income, less current portion		3,659			3,613
Other long-term liabilities		66			61

Total liabilities		329,765			343,927

Commitments and contingencies (Note 13)
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 23,980,741 issued and 21,663,091 outstanding at December 31, 2022 and June 30, 2023		232			232
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2022 and June 30, 2023, respectively		56			56
Additional paid-in capital		248,820			249,031
Accumulated deficit		(39,745	)		(51,993	)
Treasury stock, at cost (2,317,650 shares at December 31, 2022 and June 30, 2023)		(34,006	)		(34,006	)

Total stockholders’ equity		175,357			163,320

Total liabilities and stockholders’ equity	$	505,122		$	507,247

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2023			2022			2023
Net broadcast revenue	$	52,452		$	49,680		$	100,884		$	98,020
Net digital media revenue		10,804			10,860			21,104			21,370
Net publishing revenue		5,426			5,234			9,303			9,873

Total net revenue		68,682			65,774			131,291			129,263

Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $453 and $586 for the three months ended June 30, 2022 and 2023, respectively, and $901 and $1,068 for the six months ended June 30, 2022 and 2023, respectively, paid to related parties)		41,538			43,518			79,659			86,327
Legal settlement		951			—			951			—
Digital media operating expenses, exclusive of depreciation and amortization shown below		8,273			9,026			16,746			18,020
Publishing operating expenses, exclusive of depreciation and amortization shown below		5,432			6,026			9,899			11,402
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $159 and $8 for the three months ended June 30, 2022 and 2023, respectively, and $168 and $17 for the six months ended June 30, 2022 and 2023, respectively, paid to related parties)		4,781			4,655			9,591			9,651
Debt modification costs		20			—			248			—
Depreciation		2,858			2,874			5,800			5,724
Amortization		332			647			666			1,190
Change in the estimated fair value of contingent earn-out consideration		—			—			(5	)		(2	)
Impairment of indefinite-lived long-term assets other than goodwill		3,935			1,139			3,935			3,263
Impairment of goodwill		127			1,847			127			1,847
Net (gain) loss on the disposition of assets		(6,893	)		143			(8,628	)		122

Total operating expenses		61,354			69,875			118,989			137,544

Operating income (loss)		7,328			(4,101	)		12,302			(8,281	)
Other income (expense):
Interest income		149			13			149			26
Interest expense		(3,389	)		(3,539	)		(6,783	)		(6,970	)
Gain (loss) on early retirement of long-term debt		35			—			(18	)		(60	)
Earnings (loss) from equity method investment		3,913			(19	)		3,913			(11	)
Net miscellaneous income and (expenses)		(1	)		(9	)		—			211

Net income (loss) before income taxes		8,035			(7,655	)		9,563			(15,085	)
Benefit from income taxes		(1,082	)		(561	)		(1,293	)		(2,837	)

Net income (loss)	$	9,117		$	(7,094	)	$	10,856		$	(12,248	)

Basic income (loss) per share data:
Basic income per share	$	0.33		$	(0.26	)	$	0.39		$	(0.45	)
Diluted income (loss) per share data:
Diluted income per share	$	0.33		$	(0.26	)	$	0.39		$	(0.45	)
Basic weighted average shares outstanding		27,214,787			27,216,787			27,196,081			27,216,787

Diluted weighted average shares outstanding		27,570,881			27,216,787			27,590,644			27,216,787

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share and per share data)


	Class A Common Stock				Class B Common Stock				Additional Paid-In		Accumulated			Treasury
	Shares		Amount		Shares		Amount		Capital		Deficit			Stock			Total
Stockholders’ equity, December 31, 2021		23,922,974	$	232		5,553,696	$	56	$	248,438	$	(36,509	)	$	(34,006	)	$	178,211
Stock-based compensation		—		—		—		—		106		—			—			106
Options exercised		40,913		—		—		—		94		—			—			94
Lapse of restricted shares		14,854		—		—		—		—		—			—			—
Net income		—		—		—		—		—		1,739			—			1,739

Stockholders’ equity, March 31, 2022		23,978,741	$	232		5,553,696	$	56	$	248,638	$	(34,770	)	$	(34,006	)	$	180,150

Stock-based compensation		—		—		—		—		68		—			—			68
Net income		—		—		—		—		—		9,117			—			9,117

Stockholders’ equity, June 30, 2022		23,978,741	$	232		5,553,696	$	56	$	248,706	$	(25,653	)	$	(34,006	)	$	189,335


	Class A Common Stock				Class B Common Stock				Additional Paid-In		Accumulated			Treasury
	Shares		Amount		Shares		Amount		Capital		Deficit			Stock			Total
Stockholders’ equity, December 31, 2022		23,980,741	$	232		5,553,696	$	56	$	248,820	$	(39,745	)	$	(34,006	)	$	175,357
Stock-based compensation		—		—		—		—		75		—			—			75
Net loss		—		—		—		—		—		(5,154	)		—			(5,154	)

Stockholders’ equity, March 31, 2023		23,980,741	$	232		5,553,696	$	56	$	248,895	$	(44,899	)	$	(34,006	)	$	170,278

Stock-based compensation		—		—		—		—		136		—			—			136
Net loss		—		—		—		—		—		(7,094	)		—			(7,094	)

Stockholders’ equity, June 30, 2023		23,980,741	$	232		5,553,696	$	56	$	249,031	$	(51,993	)	$	(34,006	)	$	163,320

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2022			2023
OPERATING ACTIVITIES
Net income (loss)	$	10,856		$	(12,248	)
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash stock-based compensation		174			211
Depreciation and amortization		6,466			6,914
Amortization of deferred financing costs		496			835
Non-cash lease expense		4,414			4,600
Accretion of acquisition-related deferred payments and contingent earn-out consideration		—			9
Provision for bad debts		(102	)		(1,060	)
Deferred income taxes		(1,204	)		(2,831	)
Change in the estimated fair value of contingent earn-out consideration		(5	)		(2	)
Impairment of indefinite-lived long-term assets other than goodwill		3,935			3,263
Impairment of goodwill		127			1,847
(Gain) loss on early retirement of long-term debt		18			60
Net (gain) loss on the disposition of assets		(8,628	)		122
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue		(5,314	)		2,649
Income tax receivable		—			(154	)
Inventories		(568	)		205
Prepaid expenses and other current assets		(1,608	)		(1,709	)
Accounts payable and accrued expenses		5,162			(585	)
Operating lease liabilities		(4,324	)		(3,861	)
Contract liabilities		(167	)		(1,688	)
Deferred rent income		(88	)		(27	)
Other liabilities		(518	)		(4	)
Income taxes payable		(1,322	)		—

Net cash provided by (used in) operating activities		7,800			(3,454	)

INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances		(6,153	)		(5,279	)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements		(52	)		(62	)
Purchases of broadcast assets and radio stations		(548	)		(5,535	)
Purchases of digital media businesses and assets		(190	)		(25	)
Return of equity investment in limited liability corporations		4,500			—
Equity investment in limited liability corporations		(3,500	)		(1,500	)
Proceeds from sale of assets		14,150			3,500
Other		106			221

Net cash provided by (used in) investing activities		8,313			(8,680	)

FINANCING ACTIVITIES
Proceeds from the issuance of 2028 Notes		—			44,685
Payments to repurchase 2024 Notes		(15,394	)		(38,966	)
Proceeds from borrowings under ABL Facility		26,229			115,348
Payments on ABL Facility		(26,219	)		(101,691	)
Payments of debt issuance costs		(37	)		(4,056	)
Payments of acquisition-related contingent earn-out consideration		—			(30	)
Proceeds from the exercise of stock options		94			—
Payments on financing lease liabilities		(31	)		(30	)
Book overdraft		—			(3,124	)

Net cash provided by (used in) financing activities		(15,358	)		12,136

Net increase in cash and cash equivalents		755			2
Cash and cash equivalents at beginning of year		1,785			—

Cash and cash equivalents at end of period	$	2,540		$	2

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BUSINESS AND BASIS OF PRESENTATION

Business

Salem Media Group, Inc. (“Salem,” “we,” “us,” “our” or the “company”) is a domestic multimedia company specializing in Christian and conservative content. Our media properties include radio broadcasting, digital media, and publishing entities. We have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 15 – Segment Data.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of Salem include the company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Information with respect to the three and six months ended June 30, 2023 and 2022 is unaudited. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form

10-Q

and Article 10 of Regulation

S-X.

Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the company. The unaudited interim financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Salem filed on Form

10-K

for the year ended December 31, 2022. Our results are subject to seasonal fluctuations and therefore, the results of operations for the interim periods presented are not necessarily indicative of the results of operations for a full year.

The balance sheet at December 31, 2022 included in this report has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP. Certain reclassifications have been made to the prior year financial statements to conform to the presentation in the current year, which had no impact on the previously reported financial statements.

Equity Method Investment

We invested in OneParty America LLC (“OPA”), an entity formed for the purpose of developing, producing, and distributing a documentary motion picture. We analyzed our investment to determine the degree to which we influenced OPA. The determination of the degree to which we can influence an investee requires extensive analysis depending on the terms and nature of each investment.

We reviewed OPA in accordance with the guidance within Accounting Standards Codification (“ASC”) 810

, Consolidation

. Based on our analysis using the variable interest model, we determined that OPA was a Variable Interest Entity (“VIE”), but because we did not have a controlling financial interest, we were not the primary beneficiary of OPA. Accordingly, we accounted for our investment in OPA in accordance with ASC

323-30

, Investments – Equity Method and Joint Ventures

We recorded our equity method investment at cost with subsequent adjustments to the carrying value for our share of the earnings or losses of OPA. Distributions received from the equity method investment were recorded as reductions in the carrying value of such investment and are classified on the unaudited condensed consolidated interim statements of cash flows pursuant to the cumulative earnings approach. Under the cumulative earnings approach, distributions received are accounted for as a return on investment in cash inflows from operating activities unless the cumulative distributions received exceed the cumulative equity in earnings recognized from the investment. When such an excess occurs, the current period distributions up to this excess are considered returns of investment and are classified as cash inflows from investing activities.

The documentary motion picture,

2000 Mules

, was released in May 2022. We recorded $3.9 million of earnings from our equity investment in OPA. At June 30, 2022, we recorded a net receivable of $1.3 million from OPA that is included in other receivables in our Condensed Consolidated Balance sheet representing our share of profit from the documentary motion picture.

As of June 30, 2023, the balance of that receivable was $43,000.

We monitor equity method investments for impairment and records a reduction in the carrying value if the carrying exceeds the estimated fair value. An impairment charge is recorded when such impairment is deemed to be other than temporary. To determine whether an impairment is other than temporary, we consider our ability and intent to hold the investment until the carrying amount is fully recovered. Circumstances that indicate an impairment may have occurred include factors such as decreases in quoted market prices or declines in the operations of the investee. The evaluation of the investment for potential impairment requires us to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. There were no indications of impairment at June 30, 202

Table of Contents

Use of Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates require the use of judgment as future events, and the effect of these events cannot be predicted with certainty.

Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.

Significant areas for which management uses estimates include:

•

revenue recognition;

•

asset impairments, including broadcasting licenses and goodwill;

•

contingency reserves;

•

allowance for doubtful accounts;

•

barter transactions;

•

assessment of contract-based factors, asset-based factors, entity-based factors and market-based factors to determine the lease term impacting

Right-Of-Use

(“ROU”) assets and lease liabilities; and

•

determining the Incremental Borrowing Rate (“IBR”) for calculating ROU assets and lease liabilities

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no changes to our significant accounting policies described in Note 2 to our Annual Report on Form

10-K

for the year ended December 31, 2022 filed with the SEC on March 10, 2023, that have had a material impact on our Condensed Consolidated Financial Statements and related notes.

We may make strategic investments in entities that share similar interests in Christian and conservative content. The accounting for these investments depends on the degree to which we influence the investee. The determination of the degree to which we can influence the investee requires extensive analysis depending on the terms and nature of each investment. For material investments that we directly or indirectly hold a controlling financial interest, we apply the guidance within ASC 810,

Consolidation

. For material investments that we do not hold a controlling interest, but for which we have significant influence, we apply the equity method of accounting under ASC

323-30,

Investments – Equity Method and Joint Ventures

. For investments in which we do not have significant influence, we apply the accounting guidance in ASC 321 – Investments Equity Securities.

We monitor equity method investments for impairment and record a reduction in the carrying value if the carrying value exceeds the estimated fair value. An impairment charge is recorded when such impairment is deemed to be other than temporary. To determine whether an impairment is other than temporary, we consider our ability and intent to hold the investment until the carrying amount is fully recovered. Circumstances that indicate an impairment may have occurred include factors such as decreases in quoted market prices or declines in the operations of the investee. The evaluation of the investment for potential impairment requires us to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. There were no indications of impairment at June 30, 2023.

Recent Accounting Pronouncements

Changes to accounting principles are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Update (“ASUs”) to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to not be applicable to our financial position, results of operations, cash flows, or presentation thereof.

Accounting Standards Adopted in 2023

In September 2022, the FASB issued ASU

2022-04

, Liabilities – Supplier Finance Programs (Subtopic

405-50):

Disclosure of Supplier Finance Program Obligations

, to enhance the transparency about the use of supplier finance programs. The ASU was effective January 1, 2023, and is to be applied retrospectively with early adoption permitted. We do not currently utilize Supplier Finance programs, therefore, the adoption of ASU

No. 2022-04

did not have a material impact on our condensed consolidated financial position, results of operations, cash flows, or presentation thereof.

In March 2022, the FASB issued ASU

2022-02,

Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures

(Topic 326):

Financial Instruments – Credit Losses

. This amended guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year of origination for financing receivables, such as loans and interest receivable. The ASU was effective January 1, 2023, and is required to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis. The adoption of ASU

No. 2022-02

did not have a material impact on our condensed consolidated financial position, results of operations, cash flows, or presentation thereof.

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In October 2021

the FASB issued ASU 2021

Business Combinations (Topic

805

): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

, which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic

606

) rather than adjust them to fair value at the acquisition date. The ASU was effective January 1, 2023, with early adoption permitted. The adoption of ASU

No. 2021-08

did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

Recent Accounting Standards or Updates

Not

Yet Effective

In March 2023, the FASB issued ASU

2023-01,

Leases (Topic 842) – Common Control Arrangements

. The ASU amends the accounting for leasehold improvements in common control arrangements by requiring a lessee in a common control lease arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to the common control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. Further, a lessee that no longer controls the use of the underlying asset will derecognize the remaining carrying amount of the improvements through an adjustment to equity, reflecting the transfer of the asset to the lessor under common control. This ASU is effective for fiscal years beginning after December 15, 2023 (fiscal 2025), including interim periods within those fiscal years. Early adoption is permitted in any annual or interim period as of the beginning of the related fiscal year. We are evaluating the effect of adopting this new accounting guidance.

In June 2022, the FASB issued ASU

2022-03,

Fair Value Measurement (Topic 820) Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions

. This amended guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU is effective January 1, 2024, and is to be applied prospectively with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

NOTE 3. RECENT TRANSACTIONS

During the

six-month

period ended June 30, 2023, we completed or entered into the following transactions:

Related Party Transaction

On May 25, 2023, we closed on the sale to a related party the economic interests in the leases at our Greenville, South Carolina radio transmitter site for $

3.5

million resulting in a pre-tax gain of $

3.3 million.

Debt Transactions

Because the availability of our ABL Facility was less than $4.5 million during the quarter, we were required to test against the fixed charge coverage ratio covenant. The fixed charge coverage ratio was below the required 1.0 to 1.0 level during the quarter and therefore, we were not in compliance with that covenant. On August 7, 2023 we signed a forbearance whereby the bank agreed not to exercise remedies on the default during the month of August. Additionally, the notional amount of the revolver was reduced from $30.0 million to $25.0 million with a minimum availability of $1.0 million. Finally, the interest rate on the ABL Facility was increased by two

percentage points effective July 1, 2023 through the date of the forbearance amendment.

On March 20, 2023, we issued $

44.7

million in new

7.125

% Senior Secured Notes due 2028 (“2028 Notes”) at a discount of $

41.9

million resulting in an effective yield of

8.625

%. We used a portion of the proceeds of this borrowing to redeem the remaining $

36.5

million of

6.75

% Senior Secured Notes due 2024 (“2024 Notes”). The redemption of the 2024 Notes closed on March 27, 2023.

On January 19, 2023, we repurchased $2.5 million of the 2024 Notes at 97.25% of face value recognizing a gain of $39,000 after adjusting for debt issue costs.

Acquisitions

We invested in a limited liability company that will own, distribute, and market a motion picture. The investment of $1.5

million at June 30, 2023 is reflected at cost in other assets.

On March 24, 2023, we closed on the acquisition of Digital Felt Productions and the digital content library through its www.digitalfelt.com domain and website for $25,000 in cash.

Table of Contents

On February 1, 2023, we closed on the acquisition of 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. We will pay the seller

25% of net revenue generated from sales of most Eagle Financial products during the next year to subscribers who are on George Gilder subscriber lists that are not already on Eagle Financial lists. We recorded goodwill of approximately $1.2 million associated with the expected synergies to be realized upon combining the operations into our digital media platform within Eagle Financial Publications. The accompanying Condensed Consolidated Statement of Operations reflects the operating results of this entity as of the closing date within our digital media segment.

On January 10, 2023, we closed

the acquisition of radio stations

WWFE-AM,

WRHC-AM,

two FM translators and six office condominiums in Miami, Florida for $3.0 million in cash.

On January 6, 2023, we closed on the acquisition of radio station

WMYM-AM

and an FM translator in Miami, Florida for $3.2 million in cash.

The total purchase price consideration for our business acquisitions and asset purchases during the

six-month

period ending June 30, 2023, is as follows:


Description	Total Consideration
Description	(Dollars in thousands)
Cash payments made upon closing	$	5,568
Escrow deposits paid in prior years		750
Fair value of contingent earn-out consideration		263

Total purchase price consideration	$	6,581

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		Net Digital Media			Total
	Assets Acquired		Assets Acquired			Net Assets
Assets
Property and equipment	$	2,671	$	39		$	2,710
Broadcast licenses		3,542		—			3,542
Goodwill		80		1,181			1,261
Domain and brand names		—		718			718
Subscriber base and lists		—		1,769			1,769
Non-Compete agreement		—		1,601			1,601

Liabilities
Contract liabilities		—		(5,020	)		(5,020	)

	$	6,293	$	288		$	6,581

Pending Transactions

On June 29, 2023 we entered into an agreement to sell radio station KSAC-FM in Sacramento, California for $

1.0 million subject to approval of the Federal Communications Commission (“FCC”)

Radio station

KSAC-FM

will begin being programmed under a Time Brokerage Agreement (“TBA”) on August 1, 2023. Based on our plan to sell the station, we recorded an estimated

pre-tax

loss on the sale of assets of $3.3

million at June 30, 2023, reflecting the sales price as compared to the carrying value of the assets. The $1.0 million carrying value of the assets were reclassed as held for sale as of June 30, 2023. We expect to close the sale in the fourth quarter of this year.

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 FCC. The $0.3 million carrying value of the assets are included as held for sale as of June 30, 2023. Radio station KLFE-AM has been programmed under a TBA since August 1, 2022. The station sales closed in July 2023.

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	PAGE NO.
COVER PAGE
INDEX
FORWARD LOOKING STATEMENTS		2
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		30
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		56
Item 4. Controls and Procedures.		56
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.		57
Item 1A. Risk Factors.		57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		57
Item 3. Defaults Upon Senior Securities.		57
Item 4. Mine Safety Disclosures.		57
Item 5. Other Information.		57
Item 6. Exhibits.		57
EXHIBIT INDEX		58
SIGNATURES		59


	Six Months Ended June 30,
	2022		2023
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Cash paid for interest, net of capitalized interest	$	6,156	$	5,965
Cash paid for interest on finance lease liabilities	$	4	$	2
Net cash paid for (received from) income taxes	$	1,233	$	148
Other supplemental disclosures of cash flow information:
Barter revenue	$	1,525	$	1,552
Barter expense	$	1,632	$	1,580
Non-cash investing and financing activities:
Capital expenditures reimbursable under tenant improvement allowances	$	52	$	62
Right-of-use assets acquired through operating leases	$	5,569	$	5,747
Right-of-use assets acquired through financing leases	$	17	$	39
Net assets and liabilities assumed in a non-cash acquisition	$	—	$	5,020
Estimated present value of contingent-earn out consideration	$	6	$	529


	Six Months Ended June 30, 2023
	Broadcast		Digital Media		Publishing			Consolidated

	(Dollars in thousands)
By Source of Revenue:
Block Programming – National	$	26,979	$	—	$	—		$	26,979
Block Programming – Local		11,917		—		—			11,917

Broadcast Programming Revenue		38,896		—		—			38,896

Spot Advertising – National		5,750		—		—			5,750
Spot Advertising – Local		19,554		—		—			19,554
Network Advertising		10,208		—		—			10,208

Broadcast Advertising Revenue		35,512		—		—			35,512

Infomercials		337		—		—			337
Other Revenue		4,149		—		—			4,149

Other Broadcast Revenue		4,486		—		—			4,486

Digital Advertising		15,244		7,967		—			23,211
Digital Streaming		3,112		1,693		—			4,805
Digital Downloads		89		3,757		—			3,846
Digital Subscriptions		418		7,873		—			8,291
Other Digital Revenue		263		80		—			343

Digital Revenue		19,126		21,370		—			40,496

Book Sales		—		—		5,541			5,541
Estimated Sales Returns & Allowances		—		—		(10	)		(10	)

Net Book Sales