Salem Media Group, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Recent Transactions

Recent Transactions

6 Months Ended

Jun. 30, 2023

Text Block [Abstract]

Recent Transactions

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.

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.