The following discussion is about MediaCo Holding Inc. and its affiliates (collectively, “MediaCo” or the “Company”).

We own and operate two radio stations located in New York City and outdoor
advertising businesses geographically focused in the Southeast (Georgia,
Alabama, South Carolina and Florida) and the Mid-Atlantic (Kentucky, West
Virginia and Ohio) regions. Our revenues are mostly affected by the advertising
rates our entities charge, as advertising sales are the primary component of our
consolidated revenues. These rates are in large part based on our radio
stations' ability to attract audiences in demographic groups targeted by their
advertisers and the number of persons exposed to our billboards. The Nielsen
Company generally measures radio station ratings weekly for markets measured by
the Portable People Meter™, which includes both of our radio stations, while
Geopath Insight Suite is the annual audience location measurement used for our
billboards. Because audience ratings in a radio station's local market are
critical to the station's financial success, our strategy is to use market
research, advertising and promotion to attract and retain audiences in each
station's chosen demographic target group

Our revenues vary throughout the year. Revenue and operating income are usually
lowest in the first calendar quarter for both our radio and outdoor advertising
segments, partly because retailers cut back their advertising spending
immediately following the holiday shopping season.

In addition to the sale of advertising time for cash, stations typically
exchange advertising time for goods or services, which can be used by the
station in its business operations. These barter transactions are recorded at
the estimated fair value of the product or service received. We generally
confine the use of such trade transactions to promotional items or services for
which we would otherwise have paid cash. In addition, it is our general policy
not to preempt advertising spots paid for in cash with advertising spots paid
for in trade.

The following table summarizes the sources of our revenues for the years ended
December 31, 2021, and 2020. The category "Nontraditional" principally consists
of ticket sales and sponsorships of events our stations conduct in their local
markets. The category "Other" includes, among other items, revenues related to
network revenues, production of billboard advertisements and barter.

                             Year Ended                 Year Ended
(Dollars in thousands)   December 31, 2021          December 31, 2020
Net revenues:
Radio Advertising      $    30,012       54.1 %   $    19,129       48.8 %
Outdoor Advertising         12,725       22.9 %        12,459       31.7 %
Nontraditional               4,864        8.8 %           761        1.9 %
Digital                      2,864        5.2 %         2,256        5.7 %
Other                        5,028        9.0 %         4,656       11.9 %
Total net revenues     $    55,493                $    39,261

Roughly 20% of our expenses varies in connection with changes in revenue. These
variable expenses primarily relate to costs in our sales department, such as
salaries, commissions and bad debt. Our costs that do not vary as much in
relation to revenue are mostly in our programming and general and administrative
departments, such as talent costs, rating fees, rents, utilities and salaries.
Lastly, our costs that are highly discretionary are costs in our marketing and
promotions department, which we primarily incur to maintain and/or increase our
audience and market share.


The U.S. radio industry is a mature industry and its growth rate has stalled.
Management believes this is principally the result of two factors: (1) new
media, such as various media distributed via the Internet, telecommunication
companies and cable interconnects, as well as social networks, have gained
advertising share against radio and other traditional media and created a
proliferation of advertising inventory and (2) the fragmentation of the radio
audience and time spent listening caused by satellite radio, audio streaming
services and podcasts has led some investors and advertisers to conclude that
the effectiveness of radio advertising has diminished.

Along with the rest of the radio industry, our stations have deployed HD Radio®.
HD Radio offers listeners advantages over standard analog broadcasts, including
improved sound quality and additional digital channels. In addition to offering
secondary channels, the HD Radio spectrum allows broadcasters to transmit other
forms of data. We are participating in a joint venture with other broadcasters
to provide the bandwidth that a third party uses to transmit location-based data
to hand-held and in-car navigation devices. The number of radio receivers
incorporating HD Radio has increased in the past year, particularly in new
automobiles. It is unclear what impact HD Radio will have on the markets in
which we operate.

Our stations have also aggressively worked to harness the power of broadband and
mobile media distribution in the development of emerging business opportunities
by developing highly interactive websites with content that engages our
listeners, deploying mobile applications and streaming our content, and
harnessing the power of digital video on our websites and YouTube channels.


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The results of our broadcast radio operations are solely dependent on the
results of our stations in the New York market. Some of our competitors that
operate larger station clusters in the New York market are able to leverage
their market share to extract a greater percentage of available advertising
revenue through packaging a variety of advertising inventory at discounted unit
rates. Market revenues in New York as measured by Miller Kaplan Arase LLP
("Miller Kaplan"), an independent public accounting firm used by the radio
industry to compile revenue information, were up 41.2% for the year ended
December 31, 2021, but down 31.3% for the year ended December 31, 2020, as
compared to the same periods of the prior year. During these periods, revenues
for our New York cluster were up 62.2% and down 42.1%, respectively. The
increases in the year ended December 31, 2021, as compared to the prior year
were largely driven by revenues generated by our largest outdoor concert, Summer
Jam, which was held in August 2021, but was cancelled in 2020 due to the
pandemic, which led to reduced revenues in the year ended December 31, 2020.

As part of our business strategy, we continually evaluate potential acquisitions
of businesses that we believe hold promise for long-term appreciation in value
and leverage our strengths. However, MediaCo's long-term debt agreements
substantially limit our ability to make acquisitions. We also regularly review
our portfolio of assets and may opportunistically dispose of or otherwise
monetize assets when we believe it is appropriate to do so.

The Company has been actively monitoring the COVID-19 situation and its impact
globally, as well as domestically and in the markets we serve. Our priority has
been the safety of our employees, as well as the informational needs of the
communities that we serve. Through the first few months of calendar 2020, the
disease became widespread around the world, and on March 11, 2020, the World
Health Organization declared a pandemic. In an effort to mitigate the continued
spread of COVID-19, many federal, state and local governments mandated various
restrictions, including travel restrictions, restrictions on non-essential
businesses and services, restrictions on public gatherings and quarantining of
people who may have been exposed to the virus. These restrictions, in turn,
caused the United States economy to decline and businesses to cancel or reduce
amounts spent on advertising, negatively impacting our advertising-based
businesses. While not a material amount, some of our advertisers experienced a
material decline in their businesses and were not able to pay amounts owed to us
when they came due. Throughout 2021, with the increased availability of
vaccines, the U.S. experienced an easing of restrictions on travel as well as
social gatherings and business activities. However, the broad economic impact of
the COVID-19 pandemic remains across multiple sectors, specifically disrupting
logistics and global supply chains. If the spread of COVID-19 reaccelerates, or
if supply chain disruptions persist, causing certain advertising categories
(e.g., automotive dealers) to advertise less, we expect that our results of
operations, financial condition and cash flows will continue to be negatively
affected, the extent to which is difficult to estimate at this time.


Critical accounting policies are defined as those that encompass significant
judgments and uncertainties, and potentially derive materially different results
under different assumptions and conditions. We believe that our critical
accounting policies are those described below.

FCC Licenses

As of December 31, 2021, we have recorded approximately $63.3 million for FCC
licenses, which represents approximately 43% of our total assets. We would not
be able to operate our radio stations without the related FCC license for each
property. FCC licenses are renewed every eight years; consequently, we
continually monitor our stations' compliance with the various regulatory
requirements. Historically, each of our FCC licenses has been renewed at the end
of its respective period, and we expect that each FCC license will continue to
be renewed in the future. We consider our FCC licenses to be indefinite-lived

We do not amortize indefinite-lived intangible assets, but rather test for
impairment at least annually or more frequently if events or circumstances
indicate that an asset may be impaired. When evaluating our radio broadcasting
licenses for impairment, the testing is performed at the unit of accounting
level as determined by Accounting Standards Codification ("ASC") Topic
350-30-35. In our case, radio stations in a geographic market cluster are
considered a single unit of accounting if they are not being operated under a
Local Marketing Agreement by another broadcaster. Consequently, our two radio
stations in New York are considered a single unit of accounting.

For the years ended December 31, 2021and 2020, we performed our annual impairment tests on October 1st of each year and we will continue to make our assessments on this date in future years.

Evaluation of indefinite broadcasting licenses

Fair value of our FCC licenses is estimated to be the stick value 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
respective market at the beginning of the valuation period. This cash flow
stream is discounted to arrive at a value for the FCC license. The Company
assumes the competitive situation that exists in the unit of accounting's market
remains unchanged, with the exception that the unit of accounting commenced
operations at the beginning of the valuation period. In doing so, the Company
extracts the value of going concern and any other assets acquired, and strictly
values the FCC license. Major assumptions involved in this analysis include
market revenue, market revenue growth rates, unit of accounting audience share,
unit of accounting revenue share and discount rate. Each of these assumptions
may change in the future based upon changes in general economic conditions,
audience behavior, consummated transactions, and numerous other variables that
may be beyond our control. The projections incorporated into our license
valuations take then current economic conditions into consideration. Under the
market method, the Company uses recent sales of comparable radio stations for
which the sales value appeared to be concentrated entirely in the value of the
license, to arrive at an indication of fair value


————————————————– ——————————


Below are some of the key assumptions used in our annual income-based impairment assessments. The long-term growth rates of new York market in which we operate are based on recent industry trends and our expectations for the market in the future.

                                October 1, 2021     October 1, 2020
Discount Rate                        12.1%               12.4%
Long-term Revenue Growth Rate        1.3%                1.0%
Mature Market Share                  9.2%                9.4%
Operating Profit Margin           24.2-29.0%          26.6-29.5%

Valuation of Goodwill

The Company has recorded $13.1 million of goodwill on the consolidated balance
sheet as of December 31, 2021, of which all is part of the Outdoor Advertising
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 perform this assessment annually as of October 1.

When performing a quantitative assessment for impairment, the Company uses a
market approach to determine the fair value of the reporting unit. Management
determines the fair value for the reporting unit by multiplying the cash flows
of the reporting unit by an estimated market multiple. Management believes this
methodology for valuing outdoor advertising businesses is a common approach and
believes that the multiples used in the valuation are reasonable given our peer
comparisons, analyst reports, and market transactions. To corroborate the fair
values determined using the market approach described above, management also
uses an income approach, which is a discounted cash flow method to determine the
fair value of the reporting unit. If the carrying value of a reporting unit's
goodwill exceeds its fair value, the Company recognizes an impairment charge
equal to the difference in the statement of operations.

Deferred taxes

The Company accounts for income taxes under the asset and liability method,
which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequence of events that have been recognized in the
Company's financial statements or income tax returns. Income taxes are
recognized during the year in which the underlying transactions are reflected in
the consolidated statements of operations. Deferred taxes are provided for
temporary differences between amounts of assets and liabilities recorded for
financial reporting purposes as compared to amounts recorded for income tax
purposes. After determining the total amount of deferred tax assets, the Company
determines whether it is more likely than not that some portion of the deferred
tax assets will not be realized.


Year ended December 31, 2021 compared to the year ended December 31, 2020

Net income:

                           Year ended December 31,              Change
(Dollars in thousands)       2021             2020           $           %
Net revenues:
Radio                    $     41,727        $ 26,020     $ 15,707       60.4 %
Outdoor Advertising            13,766          13,241          525        4.0 %
Total net revenues       $     55,493        $ 39,261     $ 16,232       41.3 %

Net radio revenues increased due to overall advertising revenues rebounding from
the COVID-19 pandemic. In addition, various state and local departments of
health increased their advertising to drive education and awareness surrounding
vaccination efforts. Our stations benefited more than stations serving the
general population due to the targeted nature of the awareness campaigns. Also,
during the current year, we held our annual outdoor concert, Summer Jam, which
was cancelled in the prior year due to the COVID-19 pandemic.

We typically monitor the performance of our stations against the aggregate
performance of the market in which we operate based on reports for the period
prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a
gross revenues basis and exclude revenues from barter and syndication
arrangements. Miller Kaplan reported gross revenues for the New York radio
market increased 41.2% for the year ended December 31, 2021, as compared to the
prior year. Our gross revenues reported to Miller Kaplan were up 62.2% for the
year ended December 31, 2021, as compared to the prior year.

Outdoor advertising revenue increased due to the rebound in overall advertising revenue following the COVID-19 pandemic. Revenues from our outdoor advertising businesses have been less volatile than those from our radio businesses due to greater geographic diversification and longer advertising contracts with clients.


————————————————– ——————————


Operating expenses excluding depreciation and amortization:

                                                  Year ended December 31,              Change
(Dollars in thousands)                             2021              2020           $          %
Operating expenses excluding depreciation
and amortization expense:
Radio                                          $     28,667        $  22,827     $ 5,840       25.6 %
Outdoor Advertising                                   9,057            9,517        (460 )     (4.8 )%
Total operating expenses excluding
depreciation and amortization expense          $     37,724        $  32,344     $ 5,380       16.6 %

Radio operating expenses excluding depreciation and amortization expense
increased during the year ended December 31, 2021 due to expenses associated
with holding Summer Jam, partially offset by $1.1 million of employee retention
credits for the year ended December 31, 2021.

Outdoor advertising operating expenses excluding depreciation and amortization
are largely fixed in nature; however, we recorded approximately $0.6 million of
employee retention credits in the year ended December 31, 2021, which reduced
operating expenses when compared to the prior year.

Corporate expenses:
                             Year ended December 31,               Change
(Dollars in thousands)       2021               2020            $          %
Corporate expenses       $      8,434        $     4,338     $ 4,096       94.4 %

The increase in head office expenses is linked to the recruitment of staff, the management contract with Emmis having ended in November 2021, as well as non-cash compensation expense associated with restricted stock awards. These increases were partly offset by $0.2 million employee retention credits in the current year.

Depreciation and amortization:

                                          Year ended December 31,           


(Dollars in thousands)                    2021               2020           $           %
Depreciation and amortization:
Radio                                 $        667        $       893     $ (226 )     (25.3 )%
Outdoor Advertising                          3,258              3,188       

70 2.2% Total amortization and depreciation $3,925 $4,081 $ (156 ) (3.8)%

Radio amortization expense decreased due to certain assets being fully depreciated in the prior year.

Outdoor advertising depreciation and amortization increased due to revisions to
the preliminary purchase price allocation recorded during 2020 and associated
adjustments to depreciation and amortization, coupled with depreciation expense
associated with two small asset acquisitions that closed in the second quarter
of the current year.

(Gain) loss on disposal of assets:

                                         Year ended December 31,            


(Dollars in thousands)                  2021                2020           $           %
(Gain) loss on disposal of assets:
Radio                                $         -           $       -     $    -          N/A
Outdoor Advertising                          (47   )             197       

(244) (123.9)% (Gain) loss on disposal of assets $ (47 ) $197 $ (244 ) (123.9)%

Gain on sale of assets for the year ended December 31, 2021 mainly concerns the sale of certain outdoor advertising assets. Loss on disposal of assets for the year ended December 31, 2020relates to the disposal of various display structures in the ordinary course of business.

Operating income (loss):
                                  Year ended December 31,               Change
(Dollars in thousands)              2021             2020           $            %
Operating income (loss):
Radio                           $     12,393        $  2,300     $ 10,093        438.8 %
Outdoor Advertising                    1,498             339        1,159        341.9 %
All Other                             (8,434 )        (4,338 )     (4,096 )       94.4 %
Total operating income (loss)   $      5,457        $ (1,699 )   $  7,156   


See “Net Income”, “Operating Expenses Excluding Depreciation” and “Head Office Expenses” above.


————————————————– ——————————

  Table Of Contents

Interest expense:
                           Year ended December 31,              Change
(Dollars in thousands)       2021              2020          $           %
Interest expense         $     (11,100 )     $ (9,493 )   $ (1,607 )     16.9 %

Interest expense increased due to (i) the additional funding from SG
Broadcasting during 2021, which took the form of additional loans, (ii) accrued
interest on the Emmis Promissory Note and SG Broadcasting Promissory Notes being
paid in kind in the fourth quarter of 2020, and (iii) an additional 1% paid in
kind interest rate applicable beginning May 19, 2021 as a result of Amendment
No. 4 to the senior credit facility.

Provision for income taxes:
                                Year ended December 31,                Change
(Dollars in thousands)         2021               2020              $            %
Provision for income taxes   $     358        $      15,561     $ (15,203 )     (97.7 )%

As a result of a sharp deterioration of business activity related to the
COVID-19 pandemic during 2020, the Company concluded that it was more likely
than not that it would be unable to realize its deferred tax assets and recorded
a valuation allowance against these assets.

Consolidated net loss:
                           Year ended December 31,               Change
(Dollars in thousands)       2021             2020           $            %
Consolidated net loss    $     (6,082 )     $ (26,753 )   $ 20,671       (77.3 )%

See “Net Income”, “Operating Expenses Excluding Depreciation”, “Head Office Expenses”, “Interest Expenses” and “Provision for Income Taxes” above.


Our primary sources of liquidity are cash provided by operations, cash available
through borrowings under the SG Broadcasting Promissory Note, and our At Market
Issuance Sales Agreement, under which we had $12.2 million of availability as of
March 16, 2022. Our primary uses of capital have been, and are expected to
continue to be, capital expenditures, working capital, debt service requirements
and acquisitions.

At December 31, 2021 we had cash and cash equivalents of $6.1 million and net
working capital of $7.7 million. At December 31, 2020, we had cash and cash
equivalents of $4.2 million and net working capital of $4.4 million. The
increase in net working capital is due to an increase in cash and accounts
receivable resulting from improved business operations, partially offset by an
increase in accrued interest due to the timing of payments.

During 2021, MediaCo benefitted from The Consolidated Appropriations Act, passed
in December 2020, which expanded the employee retention credit program. The
credits cover 70% of qualified wages, plus the cost to continue providing health
benefits to our employees, subject to a $7 thousand cap per employee per
quarter. Due to revenue declines, we qualified for approximately $1.9 million of
employee retention credits during 2021, of which $1.1 million was received in
cash and $0.8 million of employment tax withholdings were retained.

At December 31, 2021, we had $68.3 million of borrowings outstanding under the
Senior Credit Facility, of which $2.8 million is current. The borrowing rate
under our Senior Credit Facility was 9.5% at December 31, 2021. Additionally, at
December 31, 2021, we had $6.2 million and $27.6 million of promissory notes
outstanding to Emmis and SG Broadcasting, respectively, all of which is
classified as long-term.

The debt service requirements of MediaCo over the next twelve-month period are
expected to be $9.3 million related to our Senior Credit Facility ($2.8 million
of principal repayments and $6.5 million of interest payments). These
anticipated payments assume our lender does not accelerate the debt as a result
of non-compliance with any debt covenant described above. The Senior Credit
Facility bears interest at a variable rate. The Company estimates interest
payments by using the amounts outstanding as of December 31, 2021 and
then-current interest rates. There are no debt service requirements over the
next twelve months for either the Emmis Convertible Promissory Note or the SG
Broadcasting Promissory Note.

As part of our business strategy, we continually evaluate potential acquisitions
of businesses that we believe hold promise for long-term appreciation in value
and leverage our strengths. However, our Senior Credit Facility substantially
limits our ability to make acquisitions.

Operational activities

Cash provided by operating activities was $2.9 million for the year ended
December 31, 2021 compared to cash used in operating activities of $9.6 million
for the year ended December 31, 2020. The increase was mainly attributable to an
increase in operating income as we recover from the COVID-19 pandemic.

Investing activities

Cash used in investing activities of $1.3 million and $0.4 million for the years
ended December 31, 2021, and 2020, respectively, was attributable to capital


————————————————– ——————————

  Table Of Contents

Financing Activities

Cash provided by financing activities of $0.3 million for the year ended
December 31, 2021, was due to debt proceeds of $4.0 million and proceeds from
the issuance of Class A common stock of $0.3 million, partially offset by debt
payments and debt related costs of $3.4 million and settlement of tax
withholding obligations of $0.7 million.

Cash provided by financing activities of $12.1 million for the year ended
December 31, 2020consisted primarily of debt proceeds from $12.2 millionnet of debt repayments.


Our results of operations are usually subject to seasonal fluctuations, which
result in higher second quarter revenues and operating income. For our radio
operations, this seasonality is largely due to the timing of our largest concert
in June of each year. Results are typically lowest in the first calendar


The impact of inflation on operations has not been significant to date. However,
there can be no assurance that a high rate of inflation in the future would not
have an adverse effect on operating results, particularly since our Senior
Credit Facility is comprised entirely of variable-rate debt.


Other than legal contingencies incurred in the normal course of business, and
contractual commitments to purchase goods and services, all of which are
discussed in Note 12 to the consolidated financial statements, which is
incorporated by reference herein, the Company does not have any material
off-balance sheet financings or liabilities. The Company does not have any
majority-owned and controlled subsidiaries that are not included in the
consolidated financial statements, nor does the Company have any interests in or
relationships with any "special-purpose entities" that are not reflected in the
consolidated financial statements or disclosed in the Notes to consolidated
financial statements.

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