Mediaco Holding Inc. [MDIA] Filings

10-Q 1 mdia-20240930.htm 10-Q mdia-20240930

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 September 30, 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)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

______________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A common stock, $0.01 par value	MDIA	Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. o

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

The number of shares outstanding of each of MediaCo Holding Inc.’s classes of common stock, as of November 7, 2024, was:


41,255,484						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 and nine -month periods ended September 30, 2024 and 2023			3
Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023			4
Condensed Consolidated Statements of Changes in Equity (Deficit) for the three-month and nine -month periods ended September 30, 2024 and 2023			5
Condensed Consolidated Statements of Cash Flows for the nin e -month periods ended September 30, 2024 and 2023			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures about Market Risk			34
Item 4. Controls and Procedures			34
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			35
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities			35
Item 5. Other Information			35
Item 6. Exhibits			36
SIGNATURES			37

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2024		2023		2024		2023
NET REVENUES	$	29,859	$	6,447	$	62,767	$	25,862
OPERATING EXPENSES:
Operating expenses excluding depreciation and amortization expense	32,672		7,175		73,969		25,458
Corporate expenses	2,319		1,095		9,154		3,981
Depreciation and amortization	1,741		130		3,305		437
Loss (gain) on disposal of assets	—		11		5		(28)
Total operating expenses	36,732		8,411		86,433		29,848
OPERATING LOSS	(6,873)		(1,964)		(23,666)		(3,986)
OTHER INCOME (EXPENSE):
Interest expense, net	(3,274)		(87)		(7,192)		(306)
Change in fair value of warrant shares liability	65,439		—		34,412		—
Other expense	(24)		(18)		(4)		(12)

Total other income (expense)	62,141		(105)		27,216		(318)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	55,268		(2,069)		3,550		(4,304)
PROVISION FOR INCOME TAXES	342		84		608		234
NET INCOME (LOSS) FROM CONTINUING OPERATIONS	54,926		(2,153)		2,942		(4,538)




NET LOSS FROM DISCONTINUED OPERATIONS	—		(163)		—		(306)
CONSOLIDATED NET INCOME (LOSS)	54,926		(2,316)		2,942		(4,844)
Net income attributable to noncontrolling interest	639		—		1,467		—
PREFERRED STOCK DIVIDENDS	—		602		851		1,788
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	54,287	$	(2,918)	$	624	$	(6,632)

Net income (loss) per share attributable to common shareholders - basic:
Continuing operations	$	0.73	$	(0.11)	$	0.01	$	(0.25)
Discontinued operations	$	—	$	(0.01)	$	—	$	(0.01)
Net income (loss) per share attributable to common shareholders - basic:	$	0.73	$	(0.12)	$	0.01	$	(0.26)

Net income (loss) per share attributable to common shareholders - diluted:
Continuing operations	$	0.66	$	(0.11)	$	0.01	$	(0.25)
Discontinued operations	$	—	$	(0.01)	$	—	$	(0.01)
Net income (loss) per share attributable to common shareholders - diluted:	$	0.66	$	(0.12)	$	0.01	$	(0.26)

Weighted average common shares outstanding:
Basic	74,271		24,713		54,939		25,032
Diluted	84,177		24,713		55,546		25,032

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

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MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2024		December 31, 2023
(in thousands, except share data)	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7,673	$	3,817
Restricted cash	—		1,337
Accounts receivable, net of allowance for credit losses of $792 and $353, respectively	32,248		6,675
Prepaid expenses	1,941		891
Current programming rights	3,048		—
Other current assets	629		1,188

Total current assets	45,539		13,908
PROPERTY AND EQUIPMENT, NET	19,220		1,380
GOODWILL	14,965		—
OTHER INTANGIBLE ASSETS, NET	190,813		64,593
OTHER ASSETS:
Operating lease right of use assets	56,273		13,614

Finance lease right of use assets	2,777		—
Noncurrent programming rights	5,674		—
Deposits and other	3,096		1,996
Total other assets	67,820		15,610

Total assets	$	338,357	$	95,491
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	31,106	$	2,625
Current maturities of long-term debt	6,458		6,458
Accrued salaries and commissions	989		539
Deferred revenue	10,791		557
Operating lease liabilities	6,113		1,444
Finance lease liabilities	686		—
Income taxes payable	2,025		29
Other current liabilities	1,517		65

Total current liabilities	59,685		11,717
LONG TERM DEBT, NET OF CURRENT	69,434		—
WARRANT SHARES	36,104		—
SERIES B PREFERRED STOCK	34,242		—
OPERATING LEASE LIABILITIES, NET OF CURRENT	40,615		14,333
FINANCE LEASE LIABILITIES, NET OF CURRENT	2,183		—

DEFERRED INCOME TAXES	3,354		2,775
NONCURRENT PROGRAM RIGHTS PAYABLE	5,071		—
OTHER NONCURRENT LIABILITIES	662		502

Total liabilities	251,350		29,327
COMMITMENTS AND CONTINGENCIES
SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $0.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED; 0 AND 286,031 SHARES ISSUED AND OUTSTANDING AT SEPTEMBER 30, 2024 AND DECEMBER 31, 2023, RESPECTIVELY	—		28,754
EQUITY:
Class A common stock, $0.01 par value; authorized 170,000,000 shares; issued and outstanding 41,226,547 shares and 20,741,865 shares at September 30, 2024, and December 31, 2023, respectively	413		210
Class B common stock, $0.01 par value; authorized 50,000,000 shares; issued and outstanding 5,413,197 shares at September 30, 2024, and December 31, 2023	54		54
Class C common stock, $0.01 par value; authorized 30,000,000 shares; none issued	—		—
Additional paid-in capital	89,968		60,294
Accumulated deficit	(22,524)		(23,148)
Total equity	67,911		37,410
Noncontrolling interests	19,096		—
Total equity and noncontrolling interests	87,007		37,410
Total liabilities and equity and noncontrolling interests	$	338,357	$	95,491

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

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MEDIACO HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

(Unaudited)


	Class A common stock			Class B common stock			APIC		Accumulated Deficit		Noncontrolling Interests		Total
(in thousands, except share data)	Shares	Amount		Shares	Amount
BALANCE, DECEMBER 31, 2023	20,741,865	$	210	5,413,197	$	54	$	60,294	$	(23,148)	$	—	$	37,410
Net loss	—	—		—	—		—		(3,677)		—		(3,677)
Issuance of class A to employees, officers and directors, net	(151,993)	(4)		—	—		291		—		—		287
Repurchase of class A common shares	(11,304)	—		—	—		(7)		—		—		(7)
Preferred stock dividends	—	—		—	—		—		(723)		—		(723)
BALANCE, MARCH 31, 2024	20,578,568	$	206	5,413,197	$	54	$	60,578	$	(27,548)	$	—	$	33,290
Net (loss) income	—	—		—	—		—		(49,135)		828		(48,307)
Issuance of class A to employees, officers and directors, net	(34,403)	—		—	—		22		—		—		22
Conversion of preferred series A shares	20,733,869	207		—	—		29,397		—		—		29,604

Noncontrolling interest resulting from Estrella transaction	—	—		—	—		—		—		17,629		17,629

Preferred stock dividends	—	—		—	—		—		(128)		—		(128)
BALANCE, JUNE 30, 2024	41,278,034	$	413	5,413,197	$	54	$	89,997	$	(76,811)	$	18,457	$	32,110
Net income (loss)	—	—		—	—		—		54,287		639		54,926
Issuance of class A to employees, officers and directors, net	(51,487)	—		—	—		(29)		—				(29)


BALANCE, SEPTEMBER 30, 2024	41,226,547	$	413	5,413,197	$	54	$	89,968	$	(22,524)	$	19,096	$	87,007

BALANCE, DECEMBER 31, 2022	20,443,138	$	207	5,413,197	$	54	$	59,817	$	(13,102)	$	—	$	46,976
Net loss	—	—		—	—		—		(2,107)		—		(2,107)
Issuance of class A to employees, officers and directors, net	564,548	6		—	—		363		—		—		369
Repurchase of class A common shares	(395,813)	(6)		—	—		(565)		—		—		(571)
Preferred stock dividends	—	—		—	—		—		(590)		—		(590)
BALANCE, MARCH 31, 2023	20,611,873	$	207	5,413,197	$	54	$	59,615	$	(15,799)	$	—	$	44,077
Net loss	—	—		—	—		—		(421)		—		(421)
Issuance of class A to employees, officers and directors, net	(150,485)	(2)		—	—		266		—		—		264
Repurchase of class A common shares	(56,031)	(1)		—	—		(67)		—		—		(68)
Preferred stock dividends	—	—		—	—		—		(596)		—		(596)
BALANCE, JUNE 30, 2023	20,405,357	$	204	5,413,197	$	54	$	59,814	$	(16,816)	$	—	$	43,256
Net loss	—	—		—	—		—		(2,316)		—		(2,316)

Issuance of class A to employees, officers and directors, net	752,901	7		—	—		367		—		—		374
Conversion of convertible promissory notes	(132,760)	(1)		—	—		(104)		—		—		(105)
Preferred stock dividends	—	—		—	—		—		(602)		—		(602)
BALANCE, SEPTEMBER 30, 2023	21,025,498	$	210	5,413,197	$	54	$	60,077	$	(19,734)	$	—	$	40,607

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)


	Nine Months Ended September 30,
(in thousands)	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)	$	2,942	$	(4,844)
Less: Loss from discontinued operations, net of tax	—		306
Adjustments to reconcile net income (loss) to net cash used in operating activities -

Depreciation and amortization	3,305		437

Amortization of deferred financing costs, including original issue discount	166		—
Amortization of fair value adjustment of Preferred Series B Shares and 2nd Lien Term Loan	824		—
Noncash change in warrant shares	(34,412)		—
Noncash interest expense	2,342		—
Noncash lease expense	1,642		1,679
Allowance for credit losses	114		(23)

Provision for deferred income taxes	579		224
Noncash compensation	627		1,404

Other noncash items	1,743		510
Changes in assets and liabilities
Accounts receivable	(9,363)		1,550
Prepaid expenses and other current assets	2,189		(1,160)
Other assets	(927)		88
Accounts payable and accrued liabilities	(3,928)		(594)
Deferred revenue	1,025		(179)
Operating lease liabilities	(158)		(533)

Income taxes	(37)		(2,979)
Other liabilities	596		452
Net cash used in continuing operating activities	(30,731)		(3,662)
Net cash provided by discontinued operating activities	—		259
Net cash used in operating activities	(30,731)		(3,403)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(714)		(858)
Purchases of internally-created software	(146)		(223)
Cash paid in acquisitions, net of cash acquired	(6,847)		—
Other investing	100		—

Net cash used in continuing investing activities	(7,607)		(1,081)
Net cash used in discontinued investing activities	—		—
Net cash used in investing activities	(7,607)		(1,081)
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term debt	43,800		—
Payments for debt-related costs	(1,868)		—

Repurchases of class A common stock	(7)		(737)
Finance lease principal payments	(159)		—
Settlement of tax withholding obligations	(345)		(402)
Net cash provided by (used in) continuing financing activities	41,421		(1,139)
Net cash used in discontinued financing activities	—		(38)
Net cash provided by (used in) financing activities	41,421		(1,177)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	3,083		(5,661)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period	7,071		15,301
End of period	10,154		9,640
Less: Cash, cash equivalents and restricted cash of discontinued operations	—		—
Cash, cash equivalents and restricted cash of continuing operations at end of period	$	10,154	$	9,640
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	2,391	$	—
Cash paid for income taxes	$	—	$	3,021

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., its subsidiaries, and a variable interest entity (“VIE”) (collectively, “MediaCo” or the “Company”) is an owned and operated multi-media company formed in Indiana in 2019, focused on television, radio and digital advertising, premium programming and events.

On April 17, 2024, MediaCo Holding Inc. 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 (such transactions, collectively, the “Estrella Acquisition”). MediaCo Operations LLC operates the Purchased Assets under the trade name Estrella MediaCo.

Our assets consist of two radio stations located in New York City, WQHT(FM) and WBLS(FM) (the “Stations”), which serve the New York City demographic market area and primarily target Black, Hispanic, and multi-cultural consumers, and as a result of the Estrella Acquisition, Estrella’s network, content, digital, and commercial operations, including network affiliation and program supply agreements with Estrella for its 11 radio stations serving Los Angeles, CA, Houston, TX, and Dallas, TX and nine television stations serving Los Angeles, CA, Houston, TX, Denver, CO, and Miami, FL. Among the Estrella brands that joined MediaCo are the EstrellaTV network, its influential linear and digital video content business, Estrella’s expansive digital channels, including its four FAST channels - EstrellaTV, Estrella News, Cine EstrellaTV - and Estrella Games, and the EstrellaTV app. See Note 3 for additional information. We derive our revenues primarily from radio, television 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, its subsidiaries and the Estrella VIE (as defined below), collectively.

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.

The Company determined that the Estrella entities holding the Estrella Broadcast Assets (the “Estrella VIE”) are a VIE in which the Company holds a controlling financial interest. Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) paragraph 810-10-25-38A and paragraph 810-10-25-38B, a reporting entity (in this case, the Company) is deemed to have a controlling financial interest in a VIE if it has both of the following characteristics:

a.The power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and

b.The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company determined that since the major factors in the economic performance of the Estrella VIE are the popularity of the programming provided by the Company to the Estrella VIE and the Company’s sale of advertising in that programming, the Company is the primary beneficiary of the VIE, and the remaining assets and liabilities of the Estrella VIE should be consolidated in the Company’s consolidated financial statements as of April 17, 2024.

The Company accounts for noncontrolling interest in accordance with ASC 810, which requires companies with noncontrolling interests to disclose such interests as a portion of equity but separate from the Parent’s equity. The noncontrolling interests’ portion of net income (loss) is presented on the condensed consolidated statement of operations.

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 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 (November 14, 2024). In conducting this analysis, management considered the Company’s current projections of future cash flows, current financial condition, sources of liquidity and debt service obligations due on or before November 14, 2025.

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The Company has experienced diminished revenues and profitability, driven in part by weaker sales for our annual Summer Jam concert, and expects these conditions to continue for an undetermined period of time. Management has considered these circumstances in assessing the Company’s liquidity over the next year. Liquidity is a measure of an entity’s ability to meet potential cash requirements, maintain its assets, fund its operations, and meet the other general cash needs of its business. The Company’s liquidity is impacted by general economic, financial, competitive, and other factors beyond its control. The Company’s liquidity requirements consist primarily of funds necessary to pay its expenses, principally debt service and operational expenses, such as labor costs, and other related expenditures. The Company generally satisfies its liquidity needs through cash provided by operations. In addition, the Company has taken steps to enhance its ability to fund its operational expenses by reducing various costs and is prepared to take additional steps as necessary.

At September 30, 2024, we had $6.5 million outstanding to Emmis under the Emmis Convertible Promissory Note (as defined in Note 10), all of which is classified as current, and debt service obligations of approximately $7.3 million due under the Emmis Convertible Promissory Note from November 14, 2024 (the date of issuance of these financial statements) through November 14, 2025. In September 2024, the Company entered into the First Amendment of the First Lien Credit Agreement with White Hawk Capital Partners, LP, which provides for $7.5 million of additional Delayed Draw Term Loan Commitments in addition to an aggregate $10.0 million in existing Delayed Draw Term Loans, and waives the requirement for mandatory prepayment of any net proceeds received as a result of any equity issuances, up to $7.3 million. Each Delayed Draw Term Loan will mature on the date that is two years after the drawing of such Delayed Draw Term Loan. See Note 3 for additional information.

As a result of this amendment, management anticipates the Company will be able to meet its liquidity needs for the next 12 months with cash and cash equivalents on hand, additional draws on its First Lien Term Loan, and projected cash flows from operations. Therefore, substantial doubt has been alleviated about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“fiscal year 2023”). As a result of the Estrella Acquisition, certain policies have been added or adjusted to reflect our combined business.

Programming Rights

MediaCo has elected to record programming right assets and liabilities acquired from third parties at the gross amount at inception. These programming rights are amortized, on a straight-line basis, over the license term, beginning in the period in which the license period begins and program becomes available for broadcast in accordance with ASC Topic 920, Entertainment - Broadcasters. Program rights expected to be amortized to expense in the following 12-month period are classified as current assets and program rights payable within the following 12-month period are classified as current liabilities. All program rights payable are included in accounts payable and accrued expenses except for $5.1 million which is included in noncurrent program rights payable. Amortization expense for the three and nine months ended September 30, 2024 was $0.9 million and $1.7 million, respectively, which is included in operating expenses excluding depreciation and amortization. These programming rights are primarily related to one agreement which ends in February 2028.

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 December 31, 2023 consisted of $1.3 million held in escrow related to the Company's disposition of the Fairway business, classified in current assets, as to which the restrictions were released in June 2024. Additionally, restricted cash of $1.9 million as of September 30, 2024 and December 31, 2023 was 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 restricted cash of $0.5 million as of September 30, 2024 was held for a collateral account related to merchant banking for the Company’s purchase card program and for an office lease security deposit, all 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 that 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. (see Note 4 for additional information). The Company’s Warrant Shares (as defined in Note 3) are classified as a liability for which the fair value is measured on a recurring basis using Level 2 inputs (see Note 6 for additional information). We have no assets or liabilities for which fair value is measured on a recurring basis using Level 3 inputs.

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The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 4, 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 4 for additional information).

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 as it is variable rate debt.

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 and nine months ended September 30, 2024 and 2023 was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Beginning Balance	$	679	$	102	$	353	$	122
Additions Related to Estrella Acquisition	87		—		583		—
Change in Provision	35		(3)		114		(23)
Write Offs	(9)		—		(258)		—
Ending Balance	$	792	$	99	$	792	$	99

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 our Series A Convertible Preferred Stock, $0.01 par value (the “Series A preferred stock” or the “Series A preferred shares”) included rights to participate in dividends and distributions to common shareholders on an if-converted basis, and accordingly were considered participating securities until April 2024, when all outstanding shares of Series A preferred stock were converted in accordance with their terms into 20.7 million shares of MediaCo’s Class A common stock, par value $0.01 per share (the “Class A common stock”). Warrant Shares (as defined in Note 3) have the right to participate in distributions on Class A common stock on an as-exercised basis, and accordingly are considered participating securities. During periods of undistributed losses, however, no effect was 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:

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator:
Income (loss) from continuing operations	$	54,926	$	(2,153)	$	2,942	$	(4,538)
Less: Net loss (income) attributable to noncontrolling interests	(639)		—		(1,467)		—
Less: Preferred stock dividends	—		(602)		(851)		(1,788)

Income (loss) from continuing operations available to common shareholders	54,287		(2,755)		624		(6,326)
Loss from discontinued operations, net of income taxes	—		(163)		—		(306)
Net income (loss) attributable to common shareholders for basic earnings per share	54,287		(2,918)		624		(6,632)
Add: Interest expense related to convertible Emmis promissory note (1)	252		—		—		—
Add: Net (loss) income attributable to noncontrolling interests	$	639	$	—	$	—	$	—
Net income (loss) attributable to common shareholders for diluted earnings per share	$	55,178	$	(2,918)	$	624	$	(6,632)

Denominator:
Weighted-average shares of common stock outstanding — basic	74,271		24,713		54,939		25,032
Dilutive items:
Convertible Emmis promissory note	2,305		—		—		—

Option agreement shares	7,052		—		—		—

Restricted stock awards	549		—		607		—
Weighted-average shares of common stock outstanding — diluted	84,177		24,713		55,546		25,032

Earnings per share of common stock attributable to common shareholders:
Net income (loss) per share attributable to common shareholders - basic:
Continuing operations	$	0.73	$	(0.11)	$	0.01	$	(0.25)
Discontinued operations	—		(0.01)		—		(0.01)
Net income (loss) per share attributable to common shareholders - basic:	$	0.73	$	(0.12)	$	0.01	$	(0.26)

Net income (loss) per share attributable to common shareholders - diluted:
Continuing operations	$	0.66	$	(0.11)	$	0.01	$	(0.25)
Discontinued operations	—		(0.01)		—		(0.01)
Net income (loss) per share attributable to common shareholders - diluted:	$	0.66	$	(0.12)	$	0.01	$	(0.26)

(1) The dilutive effect of the convertible Emmis promissory note was determined using the if-converted method, in accordance with which the note is assumed to be converted into common stock at the beginning of the reporting period. Interest expense, net of any income tax effects, is added back to the numerator of the calculation.

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 nine-month periods ended September 30, 2024 or 2023.

For the nine-month period ended September 30, 2024, we repurchased under a share repurchase plan 11,304 shares of Class A common stock for an immaterial amount.

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The following convertible equity shares, convertible promissory note shares, option agreement 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 September 30,		Nine Months Ended September 30,
(in thousands)	2024	2023	2024	2023
Convertible Emmis promissory note	—	5,432	9,727	4,844

Option agreement shares	—	—	4,272	—
Series A convertible preferred stock	—	24,040	16,350	21,396
Restricted stock awards	—	251	—	336
Total anti-dilutive shares	—	29,723	30,349	26,576

Recent Accounting Pronouncements Not Yet Implemented

In November 2024, the FASB issued ASU 2024-03, Accounting Standards Update (“ASU”) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The amendments in this ASU do not change or remove current expense disclosure requirements; however, the amendments affect where such information appears in the notes to financial statements because entities are required to include certain current disclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently assessing the impact this standard will have on our condensed consolidated financial statements.

In December 2023, the FASB issued 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 our 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 Outdoor LLC, FMG Kentucky, LLC and FMG Valdosta, LLC (collectively, “Fairway”), all of which were wholly owned direct and indirect subsidiaries of MediaCo, entered into an Asset Purchase Agreement (the “Purchase Agreement”), with The Lamar Company, L.L.C., a Louisiana limited liability company (the “Purchaser”), pursuant to which we sold our Fairway outdoor advertising business to the Purchaser. The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement. 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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net revenues	$	—	$	—	$	—	$	—
OPERATING EXPENSES
Operating expenses excluding depreciation and amortization expense	—		267		—		410


Total operating expenses	—		267		—		410
Income (loss) from operations of discontinued operations	—		(267)		—		(410)
Interest and other, net	—		—		—		—


Income (loss) from discontinued operations, before income taxes	—		(267)		—		(410)
Income tax benefit (expense)	—		104		—		104
Income (loss) from discontinued operations, net of income taxes	$	—	$	(163)	$	—	$	(306)

3. BUSINESS COMBINATIONS

The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, and liabilities assumed to be valued at their fair values at the acquisition date. The guidance further provides that: (1) acquisition costs will generally be expensed as incurred, (2) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (3) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. ASC 805 requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill.

Estrella Acquisition

On April 17, 2024, MediaCo consummated the Estrella Acquisition, pursuant to which it purchased substantially all of the assets of Estrella, other than the Estrella Broadcast Assets, and assumed substantially all of the liabilities of Estrella and its subsidiaries. MediaCo provided the following consideration for the Estrella Acquisition (the “Transaction Consideration”):

aA warrant (the “Warrant”) to purchase up to 28,206,152 shares of MediaCo’s Class A common stock;

b60,000 shares of a newly designated series of MediaCo’s preferred stock designated as “Series B Preferred Stock” (the “Series B Preferred Stock”),

cA 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

dAn aggregate cash payment in the amount of approximately $25.5 million to be used, in part, for the repayment of certain indebtedness of Estrella and payment of certain Estrella transaction expenses, financed through the First Lien Credit Agreement (as defined below).

Option Agreement

On April 17, 2024, in connection with the Estrella Acquisition, MediaCo and Estrella entered into an Option Agreement (the “Option Agreement” and, collectively with the Estrella Acquisition and the transactions contemplated by the Network Affiliation Agreement and the Network Program Supply Agreement described below, the “Estrella Transactions”) with Estrella and certain subsidiaries of Estrella pursuant to which (i) MediaCo 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 MediaCo for the same consideration during a period beginning six months after the date of the closing of the Estrella Transactions (the “Closing Date”) and ending after seven years, which will automatically extend for a renewal term of seven years unless both parties mutually agree otherwise.

Voting and Support Agreement

The Asset Purchase Agreement provides that MediaCo will prepare and file with the Securities and Exchange Commission (the “SEC”) a proxy statement to be sent to MediaCo stockholders relating to a special meeting of MediaCo stockholders (the “Stockholders Meeting”) to be held to consider approval of the issuance of shares of Class A Common Stock upon exercise of the Warrant and the issuance of shares of Class A Common Stock pursuant to the Option Agreement (the “Proposal”).

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On April 17, 2024, in connection with the Estrella Acquisition, SG Broadcasting LLC (“SG Broadcasting”), the holder of shares of Class A common stock and Class B common stock, par value $0.01 per share (“Class B common stock”) representing a majority of the voting power of the shares of MediaCo, entered into a Voting and Support Agreement with MediaCo and Estrella (the “Voting and Support Agreement”), pursuant to which SG Broadcasting agreed to, among other things, and subject to the terms and conditions set forth therein, at any meeting of MediaCo stockholders (including the Stockholders Meeting), or at any adjournment or postponement thereof, vote in favor of the Proposal and against any action or proposal that would reasonably be expected to prevent or materially delay consummation of the Proposal. The Voting Agreement also includes certain customary restrictions on SG Broadcasting’s ability to transfer its shares of MediaCo stock. The Voting Agreement will automatically terminate upon the date on which the Proposal is approved.

Warrant

On April 17, 2024, in connection with the Estrella Acquisition, MediaCo issued the Warrant, which provides for the purchase of up to 28,206,152 shares of Class A common stock (the “Warrant Shares”), subject to customary adjustments as set forth in the Warrant, at an exercise price per share of $0.00001. Subject to certain limitations, the Warrant also provides that the Warrant holder has the right to participate in distributions on Class A common stock on an as-exercised basis. The Warrant further provides that in no event shall the aggregate number of Warrant Shares issuable to the Warrant holder upon exercise of the Warrant exceed 19.9% of the aggregate number of shares of common stock of MediaCo outstanding, or the voting power of such outstanding shares of common stock, on the business day immediately preceding the issue date for such Warrant Shares, calculated in accordance with the applicable rules of the Nasdaq Capital Market (“Nasdaq”), unless and until the Proposal has been approved.

The shares of Class A common stock issuable upon the exercise of the Warrant and the shares of Class A common stock issuable upon the exercise of the Option Agreement represent approximately 43% of the outstanding shares of Class A common stock on a fully diluted basis (assuming the full exercise of the Warrant and the Option Agreement).

First Lien Term Loan

In order to finance the Estrella Acquisition, MediaCo 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 financing contemplated by the First Lien Term Loan, collectively with the Estrella Transaction and the payment of the Transaction Consideration, the “Transactions”). 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 Estrella Acquisition, pay off certain existing Estrella 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. The first of such Delayed Draw Term Loan of $5.0 million was made on May 2, 2024 and the second of such Delayed Draw Term Loans of $5.0 million was made on July 17, 2024. First Lien Term Loans will be subject to monthly interest payments at a rate of SOFR + 6.00%. Beginning May 2027, monthly amortization payments are required equal to 0.8333% of the initial principal amount of the First Lien Term Loans. The First Lien Term Loans are subject to a borrowing base in accordance with the terms of the First Lien Credit Agreement.

In September 2024, the Company entered into the First Amendment of the First Lien Credit Agreement with White Hawk Capital Partners, LP, which provides for $7.5 million of additional Delayed Draw Term Loan Commitments for Delayed Draw Term Loans, and waives the requirement for mandatory prepayment of any net proceeds received as a result of any equity issuances, up to $7.3 million. A fee of $0.3 million was paid in conjunction with entering into this amendment. No amounts have been drawn as of September 30, 2024.

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 connection with the consummation of the Estrella Acquisition. 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 Loan is subject to a borrowing base in accordance with the terms of the Second Lien Credit Agreement.

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Series B Preferred Stock

In addition, MediaCo issued 60,000 shares of Series B Preferred Stock with an aggregate initial liquidation value of $60.0 million, which Series B Preferred Stock rank senior and in priority of payment to all other equity securities of MediaCo, including with respect to any repayment, redemption, distributions, bankruptcy, insolvency, liquidation, dissolution or winding-up. Pursuant to the Series B Articles of Amendment, the ability of MediaCo 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 Series B Preferred Stock, will be subject to certain restrictions. Issued and outstanding shares of Series B Preferred Stock will accrue dividends, payable in kind, at an annual rate equal to 6.00% of the liquidation value thereof, subject to increase upon the occurrence of certain trigger events set forth in the Series B Articles of Amendment. The Series B Preferred Stock is mandatorily redeemable after seven years, at the Company’s option, change of control, liquidation event, or upon the occurrence of certain trigger events set forth in the Series B Articles of Amendment, and is not convertible into any other equity securities of the Company. As such, it is classified as a long term liability on the condensed consolidated balance sheet and accrued dividends are classified in Interest expense, net on the condensed consolidated statements of operations.

Network Affiliation and Supply Agreements

On April 17, 2024, in connection with the Estrella Acquisition, MediaCo 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, MediaCo 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 Estrella Acquisition, MediaCo 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, MediaCo has agreed to license certain programs and other material to the TV Stations for distribution on the TV Stations’ broadcast channels.

Preliminary Purchase Price Allocation

The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2024. The purchase price allocation is preliminary and subject to change, including purchase price consideration, property and equipment, intangible assets, income taxes, and goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. The preliminary allocation presented below is based upon management’s estimate of the fair values using valuation techniques including income, cost, and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and estimated discount rates.

The Estrella Acquisition comprises the new Estrella MediaCo Video & Digital and Estrella MediaCo Audio, Digital & Events segments. The following tables summarize the preliminary fair value of cash and noncash consideration transferred, assets acquired, and liabilities assumed as of the acquisition date:


						Preliminary Valuation as of April 17, 2024
Cash Consideration						25,499
Noncash Consideration:
Warrants(1)						70,515
Series B Preferred Stock(2)						31,975
Second Lien Term Loan(2)						26,534
Total Noncash Consideration						129,024
Total Consideration						154,523

(1) Represents the fair value of warrants to purchase 28,206,152 shares of Class A common stock issued in the Estrella Transactions valued at the closing price on the day prior to close of $2.50.

(2) Represents the fair value of the Series B Preferred Stock and Second Lien Term Loan using a required yield of 15.23% and 14.14%, respectively.

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						Preliminary Valuation and Allocation as of April 17, 2024
Cash and cash equivalents						18,124
Accounts receivable, net of allowance for doubtful accounts of $583						16,324
Prepaid expenses						1,838
Current programming rights						3,635
Other current assets						555
Property and equipment, net						17,897
Intangible assets, net						127,838
Right of use assets						47,361
Goodwill						14,965
Noncurrent programming rights						6,607
Deposits and other						689
Assets acquired						255,833

Accounts payable and accrued expenses						32,033

Deferred revenue						9,209
Operating lease liabilities						31,109
Finance lease liabilities						3,029




Other Liabilities						8,301

Liabilities assumed						83,681
Fair value of noncontrolling interests (1)						17,629

Net assets acquired						154,523

(1) Fair value of noncontrolling interests based on 7,051,538 warrants issued in Option Agreement valued at the closing price on the day prior to close of $2.50.

Property and equipment is primarily composed of broadcasting equipment and leasehold improvements. The fair value of property and equipment is based on preliminary assumptions that are subject to change as we complete our valuation procedures. Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives.

The amount allocated to definite-lived intangible assets represents the estimated fair values of customer relationships of $15.6 million and programming rights of $10.2 million and will be amortized over the estimated remaining useful lives of 15 years and four years, respectively.

The amount allocated to indefinite-lived intangible assets represents the estimated fair values of the FCC licenses of $112.2 million and goodwill of $15.0 million. Goodwill, which is derived from the expanded client base and our ability to provide broader advertising solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and we expect it will be deductible for tax purposes. Goodwill of $4.5 million and $10.5 million from this transaction is allocated to our Estrella MediaCo Video & Digital and Estrella MediaCo Audio, Digital & Events segments, respectively.

As part of the acquisition, we incurred costs of $9.0 million for the nine months ended September 30, 2024, primarily related to transaction bonuses and professional services, which are included in the operating expenses excluding depreciation and amortization and corporate expense line items in the condensed consolidated statement of operations. Additionally, there were $1.8 million of deferred financing costs and $1.1 million of original issue discount related to the issuance of the First Lien Credit Agreement included in the line item long term debt, net of current.

Variable Interest Entity

As discussed in Note 1, the Company determined that the Estrella entities holding the Estrella Broadcast Assets represented a VIE in which the Company holds a controlling financial interest, as MediaCo is the primary beneficiary of the VIE. Estrella VIE’s assets can be used only to settle obligations of the Estrella VIE. The carrying amounts of the VIE’s consolidated assets and liabilities included in the condensed consolidated balance sheet are as follows:

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	September 30, 2024
Cash and cash equivalents	$	4,519

Accounts receivable, net of allowance for doubtful accounts of $396	10,308
Prepaid expenses	504
Current programming rights	13
Other current assets	28

Total current assets	15,372
PROPERTY AND EQUIPMENT, NET	8,505
OTHER INTANGIBLE ASSETS, NET	112,210
OTHER ASSETS:
Operating lease right of use assets	2,789

Deposits and other	578
Total other assets	3,367

Total assets	$	139,454
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	4,547


Deferred revenue	858
Operating lease liabilities	353

Income taxes payable	2,027


Total current liabilities	7,785

OPERATING LEASE LIABILITIES, NET OF CURRENT	2,460




OTHER NONCURRENT LIABILITIES	3,870

Total liabilities	14,115
Net assets	125,339

The summarized operating results of the VIE are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net revenues	$	3,447	$	—	$	6,621	$	—
Operating income	637		—		1,464		—
Net income	639		—		1,467		—

Pro Forma Financial Information

The following table presents the estimated unaudited pro forma combined results of MediaCo and Estrella for the three and nine months ended September 30, 2024 and 2023 as if the acquisition had occurred on January 1, 2023:


	Three Months Ended September 30, (unaudited)				Nine Months Ended September 30, (unaudited)
	2024		2023		2024		2023
Net revenues	$	29,859	$	29,886	$	84,508	$	91,978
Income (loss) from continuing operations before income taxes	59,858		(4,438)		(10,132)		(37,090)

The supplemental pro forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of MediaCo and Estrella. The supplemental pro forma financial information does not necessarily represent what the combined companies’ revenue or results of operations would have been had the Estrella Acquisition been completed on January 1, 2023, nor is it intended to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining MediaCo and Estrella.

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The unaudited supplemental pro forma financial information reflects primarily pro forma adjustments related to fair value estimates for intangibles, property and equipment, debt, preferred stock, interest expense and amortization of deferred financing costs for the debt and preferred stock issuances to finance the Estrella Acquisition. The unaudited supplemental pro forma financial information includes transaction charges associated with the Estrella Acquisition. There are no material, nonrecurring pro forma adjustments directly attributable to the Estrella Acquisition included in the reported pro forma revenue and loss from continuing operations before income taxes.

4. INTANGIBLE ASSETS

As of September 30, 2024 and December 31, 2023, intangible assets consisted of the following:


	September 30, 2024		December 31, 2023
Indefinite-lived intangible assets
FCC licenses	$	175,476	$	63,266
Goodwill	14,965		—
Definite-lived intangible assets
Customer relationships	14,082		—


Software	1,224		1,327
Other	31		—
Total definite-lived intangible assets, net	$	15,337	$	1,327

Total noncurrent other intangible assets, net and goodwill	$	205,778	$	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 $175.5 million and $63.3 million as of September 30, 2024 and December 31, 2023, respectively. Pursuant to our accounting policy and the provisions of ASC350-30, which states that separately recorded indefinite-lived intangible assets should be combined into a single unit of accounting for purposes of testing for impairment if they are operated as a single asset, we aggregate FCC licenses for impairment testing if their signals are simulcast and are operating as one revenue producing asset.

The stations perform an annual impairment test of indefinite-lived 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. The FCC licenses consolidated with the Estrella VIE were recorded at fair value as part of the Estrella Acquisition. 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 licenses. 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 licenses.

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 or television 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 and television 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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Valuation of Goodwill

As a result of the Estrella Acquisition, the Company recorded $15.0 million of goodwill, which accounts for all goodwill on the condensed consolidated balance sheet as of September 30, 2024, and of which $4.5 million is allocated to our Estrella MediaCo Video & Digital segment and $10.5 million is allocated to our Estrella MediaCo Audio, Digital & Events segment. ASC Topic 350-20-35 requires the Company to test goodwill for impairment at least annually. Under ASC 350 we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test. We will perform this assessment annually as of October 1, unless indicators of impairment exist at an interim period. There were no indicators of impairment for the current period.

When performing a quantitative assessment for impairment, the Company intends to use a market approach to determine the fair value of each reporting unit by multiplying the cash flows of the reporting unit by an estimated market multiple. We believe this methodology for valuing our reporting units is a common approach and the multiples we intend to use will be based on our peer comparisons, analyst reports, and market transactions. To corroborate the fair values determined using the market approach, we intend to also use an income approach, which is a discounted cash flow method to determine the fair value of each reporting unit. If the carrying value of a reporting unit’s goodwill exceeds its fair value, the Company will recognize an impairment charge equal to the difference in the statement of operations.

Definite-lived intangibles

The following table presents the weighted-average useful life at September 30, 2024, and the gross carrying amount and accumulated amortization at September 30, 2024 and December 31, 2023, for our definite-lived intangible assets:


		September 30, 2024						December 31, 2023
	Weighted Average Remaining Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	3.7	$	15,572	$	1,490	$	14,082	$	—	$	—	$	—


Software	3.6	1,733		509		1,224		1,583		256		1,327
Other	0.5	56		25		31		—		—		—
Total		$	17,361	$	2,024	$	15,337	$	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. This software cost $1.7 million to develop and useful lives of five years and seven years were assigned to the application and website, respectively. The customer relationships, favorable leasehold interests, and a time brokerage agreement were acquired as part of the Estrella Acquisition.

Total amortization expense from definite-lived intangible assets for each of the three and nine months ended September 30, 2024 and 2023 and included in the depreciation and amortization line item in the condensed consolidated statements of operations was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization expense	$	836	$	58	$	1,768	$	193

The Company estimates amortization expense each of the next five years as follows:


Year ending December 31,	Amortization Expense
2024 (from October 1)	$	913
2025	3,306
2026	2,721
2027	2,152
2028	1,571
After 2028	4,674
Total	$	15,337

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5. 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. Certain network sales contracts include a guaranteed rating. If the guarantee is not met the Company is obligated to provide additional spots at no charge until the guaranteed rating is met, referred to as a makegood liability. The liability for each contract is calculated by determining the cost per guarantee per the original contract, multiplied by the number of deficiency units. As of September 30, 2024, the makegood liability assumed in the Estrella Acquisition was $9.0 million and is presented in Deferred revenue on the condensed consolidated balance sheets as is expected to be recognized over four years. 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 Advertising

On-air spot 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. On-air spot broadcast advertising rates are fixed based on each medium’s ability to attract audiences in demographic groups targeted by advertisers and rates can vary based on the time of day and ratings of the programming airing in that day part. 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.

Digital

Digital revenue relates to revenue generated from the sale of digital marketing services (including video, audio and display advertisements and sponsorships) to advertisers on Company-owned websites and applications as well as through third party publishers or OEM partners either through direct distribution relationships with the partner or through digital advertising exchanges. 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 revenue principally consists 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.

Other

Other revenue includes trade 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 and television programming. These trade arrangements generally allow the Company to preempt such bartered broadcast time in favor of advertisers who purchase time for cash consideration. These trade arrangements are valued based upon the Company’s estimate of the fair value of the products and services received. Revenue is recognized on trade arrangements when we broadcast the advertisements. Advertisements delivered under trade 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 on-air 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.

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Disaggregation of revenue

Due to the Estrella Acquisition, the Company now reports its results in three reportable segments: Estrella MediaCo Video & Digital (“EM-VD”), Estrella MediaCo Audio, Digital & Events (“EM-ADE”), and NY Audio, Digital & Events (“NY-ADE”). The following table presents the Company’s revenues disaggregated by revenue source and segment.