BEASLEY BROADCAST GROUP INC - Annual Report: 2021 (Form 10-K)

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As of June 30, 2021, the aggregate market value of the Class A Common Stock held by of the registrant was $27,017,644 based on the number of shares outstanding as of such date and the closing price of $2.89 on NASDAQ’s National Market System on such date, the last business day of our most recently completed second fiscal quarter.

The FCC has the power to impose penalties for violations of its rules that are implemented pursuant to the Communications Act of 1934, as amended (the “Communications Act”), including the imposition of monetary forfeitures, the issuance of short-term licenses, the imposition of conditions on the renewal of a license, and, in egregious cases, of licenses and the revocation of licenses.

 Radio stations operate pursuant to licenses that are ordinarily granted by the FCC for renewable terms of eight years. A radio station may continue to operate beyond the expiration date of its license if a timely filed license renewal application is pending. During the period following the filing of renewal applications, petitions to deny license renewals can be filed by interested parties, including members of the public. Generally, the FCC renews a broadcast license upon a finding that (i) the broadcast station has served the public interest, convenience and necessity; (ii) there have been no serious violations by the licensee of the Communications Act or the FCC’s rules; and (iii) there have been no other violations by the licensee of the Communications Act or other FCC rules that, when taken together, indicate a pattern of abuse. Historically, FCC licenses have generally been renewed. The most recent renewal cycle started in June 2019 and will conclude in April 2022. The of one or more of our licenses could have a material adverse effect on our business.

Rules to allow AM stations to voluntarily convert to operations became effective in 2021.

The FCC’s rules prohibit the broadcast of obscene material at any time and indecent material between the hours of 6 am and 10 pm. Broadcasters’ risk of violating the prohibition on the broadcast of indecent material is increased by the vagueness of the FCC’s definition of indecent material, coupled with the spontaneity of live programming. The FCC has expanded the breadth of indecency regulation to include material that could be considered “blasphemy,” “personally reviling epithets,” “profanity” and vulgar or coarse words, amounting to a nuisance. The maximum permitted fine for an indecency violation is $445,445 per incident and $4,111,796 for any continuing violation arising from a single act or failure to act. Because the FCC may investigate indecency complaints prior to notifying a licensee of the existence of a

FCC regulations require a radio station to include an announcement that identifies the sponsor of all advertisements and other content broadcast by any radio station for which any money, service or other valuable consideration is received. Fines for such violations can be substantial as they are dependent on the number of times a particular advertisement is broadcast. In April 2021 the FCC adopted rules that would require radio stations to disclose when foreign governmental entities have paid a station, directly or indirectly, to broadcast programming under a lease time agreement. Radio stations will be required to take certain actions to determine if an entity leasing airtime from it is covered by the new rules. The National Association of Broadcasters has filed an appeal of the new rules and a request that they be stayed pending appeal. Unless the effectiveness of the new rules is stayed by the court considering the appeal, they will become effective upon approval by the Office of Management and Budget.

 The Communications Act prohibits the assignment of broadcast licenses or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers, among other things:

 The Communications Act and FCC rules impose specific limits on the number of commercial radio stations an entity can own, directly or by attribution, in a single market, and the combination of radio stations, television stations and newspapers that any entity can own, directly or by attribution, in a single market. Digital radio channels authorized for AM and FM stations do not count as separate “stations” for purposes of the ownership limits. The radio multiple-ownership rules may preclude us from acquiring certain radio stations we might otherwise seek to acquire. The ownership rules also effectively prevent us from selling radio stations in a market to a buyer that has reached its ownership limit in the market unless that buyer divests other radio stations. The FCC’s ownership rules that are currently in effect and apply to our broadcast holdings are briefly summarized below.

The local radio ownership rule establishes the following limits:

The FCC generally applies its ownership limits to attributable interests held by an individual, corporation, partnership or other entity. An “attributable” interest for purposes of the FCC’s broadcast ownership rules generally

    The Communications Act prohibits the issuance or holding of broadcast licenses by persons who are not U.S. citizens, whom the FCC rules refer to as “aliens,” including any corporation organized under the laws of a foreign country or of which more than 20% of its capital stock is owned or voted by aliens. In addition, the FCC may prohibit any corporation from holding a broadcast license if the corporation is controlled by any other corporation of which more than 25% of the capital stock is owned of record or voted by aliens. The FCC has interpreted this provision of the Communications Act to require an affirmative public interest finding before a broadcast licensee may be granted or held by such an entity. In November 2013, the FCC confirmed that it would review situations in which foreigners own more than 25% of a holding company of an entity that holds a broadcast license on a case by case basis. In 2016, the FCC adopted streamlined rules and procedures for the filing and review of requests to permit foreigners to own more than 25% of a holding company’s equity. In acting upon a request for declaratory ruling, the FCC will coordinate with Executive Branch agencies on national security, law enforcement, foreign policy and other policy issues. The rules also specify how public companies should monitor foreign ownership compliance and provide for remedial provisions in the event a public company determines that it has exceeded its foreign ownership limits. The streamlined rules permit a broadcast licensee to file a petition with the FCC seeking approval for a proposed foreign investor to own up to 100% of the controlling parent entity and for a foreign investor identified in the petition to increase its equity and/or voting interest in a parent entity at a future time up to 49.9 percent. In October 2020, the FCC adopted rules to streamline the timeline for the required review of these requests by Executive Branch agencies and to require licensees to respond to a standardized set of national security and law enforcement questions. Our certificate of incorporation prohibits the ownership, voting and transfer of our capital stock in violation of the FCC restrictions, and prohibits the issuance of capital stock or the voting rights such capital stock represents to or for the account of aliens or corporations otherwise subject to domination or control by aliens in excess of the FCC limits. The certificate of incorporation authorizes our board of directors to enforce these prohibitions.

 It is not uncommon for radio stations to enter into agreements under which separately owned and licensed radio stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with FCC’s rules and policies. Under these arrangements, separately owned radio stations could agree to function cooperatively in programming, advertising sales and similar matters, subject to the requirement that the licensee of each radio station maintain independent control over the programming and operations of its own radio station.

FCC rules that had also prohibited a broadcast station from duplicating more than 25% of its programming on another radio station serving substantially the same area in the same broadcast service, that is or either through common ownership of the two radio stations or through a time brokerage agreement, were eliminated in October 2020. A Petition asking the FCC to reconsider the elimination of the rule for simulcasts of two commonly owned or operated FM stations serving substantially the same area is pending.

. The FCC is required to review quadrennially the media ownership rules to modify, repeal, or retain any rules as it determines to be in the public interest. In August 2016, the FCC released an Order in a proceeding that combined the 2010 and 2014 quadrennial reviews which retained most of the existing multiple ownership rules. The FCC adopted one change that applies to radio stations in “embedded” markets – smaller markets within the boundaries of larger markets. Previously, such stations had to comply with the local radio multiple ownership rules in both the smaller and larger markets. Under the revised rules, such stations could request that application of the rules to the larger market be waived if the larger market does not accurately reflect the competition faced by stations in the embedded market. Several parties filed petitions requesting the FCC to reconsider its August 2016 Order. In November 2017, the FCC released an Order on Reconsideration that eliminated the newspaper-broadcast and television-radio cross ownership rules, relaxed the local television ownership rule and eliminated the attribution of JSAs between television stations. The rule changes went into effect on February 7, 2018. However, several public interest organizations filed petitions for review with the Court of Appeals for the Third Circuit, the same court that has considered challenges to prior ownership orders issued by the FCC. In an Order adopted in September 2019, the Third Circuit vacated the FCC’s November 2017 Reconsideration Order. The FCC and the intervenors petitioned the Third Circuit for en banc review in November 2019, which the Third Circuit denied. Following the denial, in November 2019, a mandate reinstating the newspaper-broadcast and radio-television cross-ownership rules was issued. In April 2021, the Supreme Court in a unanimous decision reinstated the FCC’s 2017 Reconsideration Order which resulted in the elimination of the newspaper-broadcast and radio television cross-ownership rules and

 The Communications Act requires broadcasters to serve the public interest. The FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a radio station’s community of license. Under the currently effective rules, a licensee is required to present programming that is responsive to issues of the radio station’s community of license and to maintain records demonstrating this responsiveness. Under changes to the FCC rules implemented in 2017 and 2018, all of our radio stations are required to maintain their public inspection files online on an FCC maintained website rather than in their physical studios. This means that the materials in these stations’ public files are more widely accessible. Radio stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act. Those rules regulate, among other things, political advertising, sponsorship identifications, the advertisement of contests and lotteries, employment practices, broadcast of obscene and indecent content, and technical operations, including limits on human exposure to radio frequency radiation.

We must pay royalties to copyright owners of musical compositions (typically, songwriters and publishers) whenever we broadcast or stream musical compositions. Copyright owners of musical compositions most often rely on intermediaries known as performing rights organizations (“PROs”) to negotiate licenses with copyright users for the public performance of their compositions, collect royalties under such licenses and distribute them to copyright owners. We have obtained public performance licenses from, and pay license fees to, the four major PROs in the U.S., which are the American Society of Composers, Authors and Publishers (“ASCAP”), Broadcast Music, Inc. (“BMI”), SESAC LLC (“SESAC”) and Global Music Rights LLC (“GMR”). There is no guarantee that additional PROs will not emerge, which could impact, and in some circumstances increase, our royalty rates and negotiation costs.

 Congress and the FCC are considering, or may in the future consider and adopt new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation, ownership and profitability of our radio stations, including the loss of audience share and advertising revenues for our radio stations, and an inability to acquire additional radio stations or to finance those acquisitions. Such matters may include:

 The agencies responsible for enforcing the federal antitrust laws, the Federal Trade Commission (“FTC”) or the Department of Justice, may investigate certain acquisitions. In January 2022, they jointly announced an initiative to review and revise federal merger guidelines. The Department of Justice and the FTC have reviewed numerous potential radio acquisitions where an operator proposed to acquire an additional station in its existing markets or multiple stations in new markets, and has challenged a number of such transactions. Some of these challenges have resulted in consent decrees requiring the sale of certain stations. We cannot predict the outcome of any specific FTC or Department of Justice investigation or how any revisions to the merger guidelines will impact radio industry mergers and acquisitions. Any decision by the FTC or the Department of Justice to challenge a proposed acquisition could affect our ability to consummate the acquisition or to consummate it on the proposed terms.

damages framework for (i) violations of the CCPA and (ii) businesses that fail to implement reasonable security procedures and practices to prevent data breaches. Our websites are also subject to regulation relating to acquisition of personal information from children under the age of 13, including the federal Child Online Privacy Protection Act (“COPPA”) and the federal Controlling the Assault of Pornography and Marketing Act federal, state and, territorial laws and regulations may be adopted with respect to the Internet or other online services, covering such issues as user privacy, child safety, data security, advertising, pricing, content, copyrights and trademarks, access by persons with disabilities, distribution, taxation and characteristics and quality of products and services.

The FCC selected technology as the exclusive technology for the introduction of terrestrial digital operations by AM and FM radio stations. The technology is also known as “HD Radio.” The advantages of digital audio broadcasting over traditional analog broadcasting technology include improved sound quality, the ability to broadcast additional channels, and the ability to offer a greater variety of auxiliary services. We currently utilize HD Radio digital technology on most of our stations.

Our internet address is www.bbgi.com. You may obtain through our website, free of charge, copies of our annual reports on Form quarterly reports on Form current reports on Form and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These reports will be available as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (the “SEC”).

The pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. In 2020, we were impacted by deteriorating general economic conditions resulting from the pandemic that caused a downturn in the advertising industry. The decreased demand for advertising materially negatively impacted our results of operations, liquidity and financial condition. The extent to which the pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as: the length and severity of the pandemic; any potential resurgence of the pandemic, including from the more transmissible variant strains and the emergence of any new variants of concern; future government regulations and actions in response to the pandemic; the timing, availability, effectiveness and adoption rates of vaccines and treatments; and the overall impact of the pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

We operate in a highly competitive business. A decline in our audience share or advertising rates in a particular market may cause a decline in the revenue and cash flows of our stations located in that market. Our radio stations compete for audiences and advertising revenues within their respective markets directly with other radio stations, as well as with other media platforms and companies selling digital advertising. These other media platforms include broadcast and cable television, streaming services, newspapers and magazines, outdoor advertising, direct mail, internet radio, satellite radio, smart phones, tablets, and other wireless media, the internet, social media, smart speakers, podcasts and other forms of advertising. Our radio stations also compete for audiences and advertising revenues within their respective markets directly with Amazon, Apple, Facebook and Google.

Further, advertising revenue may vary from even- to years based on the volatility and unpredictability of political advertising revenue. Political advertising revenue from elections, which is generally greater in even-numbered years when deferral elections occur, has the potential to create fluctuations in our operating results on a basis. In addition, political advertising revenue is dependent on the level of political advertising expenditures and competitiveness of particular races within each local market.

In order to attract consumers and generate increased activity on our digital properties, we believe that we must offer compelling and differentiated content, products and services. However, acquiring, developing, and offering such content, products and services may require significant costs and time to develop, while consumer tastes may be difficult to predict and are subject to rapid change. If we are unable to provide content, products and services that are sufficiently attractive to our digital users, we may not be able to generate the increases in activity necessary to generate increased advertising revenues. In addition, although we have access to certain content provided by our other businesses, we may be required to make substantial payments to license such content. Many of our content arrangements with third parties are so competitors may be able to offer similar or identical content. If we are not able to acquire or develop compelling content and do so at reasonable prices, or if other companies offer content that is similar to that provided by our digital department, we may not be able to attract and increase the engagement of digital consumers on our digital properties.

The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act. We are required to obtain licenses from the FCC to operate our radio stations. Our business depends upon maintaining our broadcast licenses, which are issued by the FCC for a term of eight years and are renewable. Although the vast majority of FCC radio station licenses are routinely renewed, we cannot assure you that the FCC will approve our future renewal applications or that the renewals will be for full eight-year terms or will not include conditions or qualifications that could adversely affect our operations. The or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on us. A renewal cycle for radio station licenses began in June 2019 and will conclude in April 2022.

We must comply with extensive FCC regulations and policies regarding the ownership and operation of our radio stations. FCC regulations limit the number of radio stations that a licensee can own in a market, which could restrict our ability to consummate any future transactions, and in certain circumstances, could require us to divest one or more radio stations. Online music services such as Amazon Music Unlimited, Apple Music, Pandora and Spotify are not regulated by the FCC; therefore, they are not subject to any ownership restrictions or FCC regulations governing their operations. Our ability to compete with online music services may be impeded because of the extensive FCC regulations to which we are subject. The FCC also requires radio stations to comply with certain technical requirements to limit interference between two or more radio stations. Possible changes in interference protections, creation of additional classes of FM stations, spectrum allocations and other technical rules may negatively affect the operation of our stations. If the FCC relaxes certain technical requirements, it could impair the signals transmitted by our radio stations and could have a material adverse effect on us. In addition, the FCC has recently increased its enforcement of certain regulations, including regulations requiring a radio station to include an announcement which identifies the sponsor of all advertisements and other content broadcast by any radio station for which any money, service or other valuable consideration is received, requiring all radio stations to maintain online public inspection files hosted on an FCC database that is easily accessible by members of the public and the FCC, and prohibiting the transmission of EAS codes or simulations thereof in the absence of an actual emergency or authorized test. Moreover, these FCC regulations and others may change over time, and we cannot assure you that those changes would not have a material adverse effect on us.

Due to the impact of the pandemic, our board of directors has suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Company’s stockholders. While we intend to pay a regular quarterly cash dividend, future payments, if any, will be at the discretion of our Board of Directors. Future quarterly dividend payments can also be changed or discontinued at any time and will be subject to limitations under the terms of the Indenture governing our Notes, as well as any future agreements. The payment and timing of any future quarterly dividends will also depend upon, among other things, our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors deemed relevant by our Board of Directors.

In addition, we compete for creative and performing talent with other radio stations and radio station groups, radio networks, and other providers of syndicated content and other media such as broadcast television, cable television, satellite television, the internet, podcast producers and satellite radio. Our ability to attract and retain key personnel is an important aspect of our competitiveness. Our employees and other talent are subject to change and may be lost to competitors or for other reasons. Any adverse changes in particular programs, formats or talent could have a material adverse effect on our ratings and our ability to attract advertisers, which would negatively impact our business, financial condition or results of operations.

Members of the Beasley family beneficially own the majority of all outstanding shares of Class B common stock, which is convertible to Class A common stock on a basis. The market for our Class A common stock could change substantially if members of the Beasley family convert their shares of Class B common stock to shares of Class A common stock and then sell large amounts of shares of Class A common stock in the public market.

We have two authorized and outstanding classes of equity securities: Class A common stock, $.001 par value, and Class B common stock, $.001 par value. The only difference between the Class A and Class B common stock is that Class A is entitled to one vote per share and Class B is entitled to ten votes per share. Class B is convertible into Class A shares on a share basis under certain circumstances. Our Class A common stock trades on the NASDAQ Global Market under the symbol “BBGI.” There is no established public trading market for our Class B common stock.

In response to the pandemic, our board of directors has suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Company’s stockholders. In addition, the Indenture governing our Notes limits our ability to pay dividends.

On March 27, 2007, our board of directors approved the Beasley Broadcast Group, Inc. 2007 Equity Incentive Award Plan (the “2007 Plan”). The original term of the 2007 Plan ended on March 27, 2017. Our stockholders approved an amendment to the 2007 Plan at the Annual Meeting of Stockholders on June 8, 2017 to, among other things, extend the term of the 2007 Plan until March 27, 2027. The 2007 Plan permits us to purchase sufficient shares to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock. All shares purchased during the three months ended December 31, 2021 were purchased to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock.

The pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. In 2020, we were impacted by deteriorating general economic conditions resulting from the pandemic that caused a downturn in the advertising industry. The decreased demand for advertising materially negatively impacted our results of operations, liquidity and financial condition. In 2021, we benefited from a general economic recovery from the pandemic however the continuing impact of subsequent variants may result in general economic conditions deteriorating again in the future.

The extent to which the pandemic will continue to impact our business and financial results going forward will be dependent on future developments which are uncertain and unpredictable. Accordingly, it is reasonably possible that these uncertainties could materially impact the Company’s significant accounting estimates related to, but not limited to, allowance for doubtful accounts and impairment of Federal Communications Commission (“FCC”) licenses and goodwill. As a result, many of the Company’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. The Company’s estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.

Our net revenue is primarily derived from the sale of commercial spots to advertisers directly or through national, regional or local advertising agencies. Revenues are reported at the amount we expect to be entitled to receive under the contract. Local revenue generally consists of commercial advertising sales, digital advertising sales and other sales to advertisers in a radio station’s local market, either directly to the advertiser or through the advertiser’s agency. National revenue generally consists of commercial advertising sales through advertiser agencies. National advertiser agencies generally purchase advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions.

Our operating expenses consist primarily of programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our radio stations. We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our radio market clusters.

We continually evaluate our ability to collect our accounts receivable. Our ongoing evaluation includes review of specific accounts at our radio stations, the current financial condition of our customers and our historical experience. This ongoing evaluation requires management judgment, and if we had made different assumptions about these factors, the allowance for doubtful accounts could have been materially different.

We are required to assess the recoverability of our property and equipment whenever an event has occurred that may result in an impairment loss. If such an event occurs, we will compare estimates of related future undiscounted cash flows to the carrying amount of the asset. If the future undiscounted cash flow estimates are less than the carrying amount of the asset, we will reduce the carrying amount to the estimated fair value. The determination of when an event has occurred and estimates of future cash flows and fair value all require management judgment. The use of different assumptions or estimates may result in alternative assessments that could be materially different. We did not identify any triggering events that may have resulted in an impairment loss on our property and equipment in 2021. However, there can be no assurance that impairments of our property and equipment will not occur in future periods.

As of December 31, 2021, FCC licenses with an aggregate carrying amount of $508.4 million represented 67% of our total assets. We are required to test our FCC licenses for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our FCC licenses might be impaired. We assess qualitative factors to determine whether it is more likely than not that our FCC licenses might be impaired. If we determine it is more likely than not that our FCC licenses are impaired, then we are required to perform a quantitative impairment test. In 2021, we elected to perform the quantitative impairment test for our FCC licenses in all markets. The quantitative impairment test, performed as of November 30, 2021, compares the fair value of our FCC licenses with their carrying amounts. If the carrying amounts of the FCC licenses exceed their fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing our FCC licenses for impairment, we combine our FCC licenses into reporting units based on our market clusters. We estimate the fair value of our FCC licenses using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables, such as projected radio market revenues, projected growth rate for radio market revenues, projected radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry.

As of December 31, 2021, goodwill with an aggregate carrying amount of $28.6 million represented 4% of our total assets. We are required to test our goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our goodwill might be impaired. We assess qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is necessary, we will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, we will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized will not exceed the total amount of goodwill allocated to the reporting unit. For the purpose of testing our goodwill for impairment, we have identified our radio market clusters and esports as our reporting units. We did not identify any triggering events for impairment in 2021.

We are required to determine whether a contract is or contains a lease at inception. Our analysis includes whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This consideration involves judgment with respect to whether we have the right to obtain substantially all of the economic benefits from the use of the identified asset and whether we have the right to direct the use of the identified asset. We calculate the term for each lease agreement to include the noncancellable period specified in the agreement together with: (1) the periods covered by options to extend the lease if we are reasonably certain to exercise that option, (2) the periods covered by an option to terminate if we are reasonably certain not to exercise that option and (3) the period covered by an option to extend (or not terminate) if controlled by the lessor. The assessment of whether we are reasonably certain to exercise an option to extend a lease requires significant judgement surrounding contract-based factors, asset-based factors, entity-based factors and market-based factors. These factors are evaluated based on the facts and circumstances at the time we enter a lease agreement. The lease liabilities and the related assets are calculated based on the present value of the lease payments using (1) the rate implicit in the lease or (2) the lessee’s incremental borrowing rate (“IBR”). IBR is defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. See Note 10 to the accompanying financial statements.

The costs and liabilities of the Supplemental Employee Retirement Plan (“SERP”) are determined using actuarial valuations. An actuarial valuation involves making various assumptions that include the discount rate and mortality rates. The discount rate is based on matching the cash flows of the SERP to the FTSE Pension Discount Curve. The mortality assumptions are based on the mortality tables and mortality improvement scales which are selected based on the most recent study of the Society of Actuaries. The SERP is frozen so future employment does not change the benefit amounts. Actual results will differ from results which are estimated based on assumptions. See Note 11 to the accompanying financial statements.

Net revenue increased $35.3 million during the year ended December 31, 2021 as compared to the year ended December 31, 2020. Significant factors affecting net revenue included an increase in audio revenue and digital revenue primarily due to recovery from the pandemic, partially offset by a decrease in political advertising and other revenue.

Operating expenses increased $17.3 million during the year ended December 31, 2021 as compared to the year ended December 31, 2020. Significant factors affecting operating expenses included an increase in audio operating expenses and digital operating expenses primarily due to recovery from the pandemic.

Corporate expenses increased $0.9 million during the year ended December 31, 2021 as compared to the year ended December 31, 2020. The primary factors affecting corporate expenses were an increase in cash and stock-based compensation and contract services.

Due to the impact of the pandemic on the U.S. economy, we tested our FCC licenses for impairment during the first quarter of 2020. As a result of the quantitative impairment test, we recorded impairment losses of $6.8 million related to the FCC licenses in our Atlanta, GA, Las Vegas, NV, Middlesex-Monmouth-Morristown, NJ, West Palm Beach-Boca Raton, FL, and Wilmington, DE radio market clusters. The impairment losses were primarily due to a decrease in projected revenue in these markets due to the impact of the pandemic and an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry. On December 31, 2020, we completed the sale of certain land in our Charlotte, NC market cluster to a third party. As a result of the sale, we no longer utilize one FCC license in that market. Therefore, the carrying amount of $2.2 million was recorded in impairment losses during the fourth quarter of 2020.

On December 31, 2020, we completed the sale of certain land in our Charlotte, NC market cluster for $4.65 million. As a result of the sale, we recorded a gain of $4.4 million in the year ended December 31, 2020.

Other operating income, net for the year ended December 31, 2021 includes life insurance proceeds of $3.0 million related to the death of George Beasley, the Company’s former Chairman, in June 2021, partially offset by certain payments totaling $1.5 million that were paid in accordance with Mr. Beasley’s employment contract, payments of $0.6 million for consulting services related to the pandemic and expenses of $0.5 million related to the early termination of a programming

contract. Other operating income, net for the year ended December 31, 2020 includes a legal reduction of $4.0 million in the franchise fee payable to the esports league, partially offset by payments of $1.0 million for consulting services related to the pandemic.

Interest expense increased $9.6 million during the year ended December 31, 2021, as compared to the year ended December 31, 2020. The primary factors affecting interest expense were an increase in long-term debt outstanding and the applicable interest rate.

We recorded a loss on extinguishment of long-term debt of $5.0 million during the year ended December 31, 2021, resulting from the issuance of secured notes on February 2, 2021 and the use of proceeds to repay the credit facility. We recorded a loss on modification of long-term debt of $2.8 million during the year ended December 31, 2020, resulting from an amendment to our credit agreement.

We recorded a gain on forgiveness of long-term debt of $10.0 million during the year ended December 31, 2021, resulting from forgiveness of the PPP loan in November 2021, as described in “Liquidity and Capital Resources – PPP Loan” below.

Our effective tax rate was approximately (22)% and (79)% for the years ended December 31, 2020 and 2021, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes, certain income, and certain expenses that are not deductible for tax purposes.

Net loss for the year ended December 31, 2021 was $1.5 million compared to net loss of $18.9 million for the year ended December 31, 2020 as a result of the factors described above.

 Our primary sources of liquidity is internally generated cash flow and cash on hand. Our primary liquidity needs have been, and for the next twelve months and thereafter are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and radio station acquisitions. Historically, our capital expenditures have not been significant. In addition to property and equipment associated with radio station acquisitions, our capital expenditures have generally been, and are expected to continue to be, related to the maintenance of our office and studio space, the maintenance of our radio towers and equipment, and digital products and information technology. We have also purchased or constructed office and studio space in some of our markets to facilitate the consolidation of our operations.

In response to the pandemic, our board of directors has suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Company’s stockholders. In addition, as discussed in “Secured Notes” below, the Indenture governing our Notes limits our ability to pay dividends.

On February 2, 2021, we issued $300.0 million aggregate principal amount of 8.625% senior secured notes due on February 1, 2026 (the “Notes”) under an indenture dated February 2, 2021 (the “Indenture”). Interest on the Notes accrues at the rate of 8.625% per annum and is payable semiannually in arrears on February 1 and August 1 of each year. The Notes are secured on a first-lien priority basis by substantially all assets of the Company and its majority owned subsidiaries and are guaranteed jointly and severally by the Company and its majority owned subsidiaries. We used the net proceeds from the Notes, to repay the credit facility, the promissory note, and a loan from George Beasley (see Note 9 to the accompanying financial statements) and to pay related accrued interest, fees and expenses. The Indenture contains restrictive covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, guarantee indebtedness or issue disqualified stock or, in the case of such subsidiaries, preferred stock; pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments; make certain investments or acquisitions; sell, transfer or otherwise convey certain assets; create liens; enter into agreements restricting certain subsidiaries’ ability to pay dividends or make other intercompany transfers; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of our subsidiaries.

. On March 1, 2021, we entered into a loan with Synovus Bank for $10.0 million pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The loan bore interest at a rate of 1.0% per annum and was scheduled to mature on March 1, 2026. Principal and interest payments were deferred, with interest accruing, until after the period in which we were allowed to apply for loan forgiveness pursuant to the PPP. In September 2021, we submitted an application for forgiveness, and, in November 2021, the loan was forgiven in full.

 As of December 31, 2020, the credit facility consisted of a term loan facility with a remaining balance of $238.0 million and a revolving credit facility with an outstanding balance of $20.0 million and a maximum commitment of $20.0 million. The revolving credit facility carried interest, based on LIBOR, at 4.4% as of December 31, 2020. The term loan carried interest, based on LIBOR, at 5.25% as of December 31, 2020. As noted above, the credit facility was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.

On November 14, 2019, we acquired a majority interest in an esports team and issued a promissory note for $16.5 million to the seller. On June 30, 2020, we entered into an amendment to the promissory note applicable to the remaining balance. As amended, the promissory note bore interest at 5% per annum payable quarterly in arrears and additional interest at 10% per annum. The promissory note had a remaining balance of $5.5 million as of December 31, 2020. As noted above, the promissory note was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.

In June 2020, George Beasley, our former Chairman, provided a $5.0 million loan to the Company that accrued interest at 6% per annum with no cash payments due until the loan’s maturity in December 2023. Mr. Beasley and GGB Family Limited Partnership also each entered into standby letters of credit in combined aggregate face amount of $5.0 million in favor of U.S. Bank, National Association for the benefit of the Company as a source of backup liquidity in the event we failed to maintain a minimum liquidity amount under the then-existing credit facility. As noted above, the loan from Mr. Beasley was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.

We did not have any sheet arrangements as of December 31, 2021.

. The following summary table presents a comparison of our cash flows for the years ended December 31, 2020 and 2021 with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 8 of this report.

 Net cash used in operating activities was $1.9 million during the year ended December 31, 2021, as compared to net cash provided by operating activities of $4.2 million during the year ended December 31, 2020. Significant factors affecting the $6.1 million increase in net cash used in operating activities included a $33.8 million increase in cash paid for operating expenses, partially offset by a $27.5 million increase in cash receipts from revenue.

 Net cash used in investing activities during the year ended December 31, 2021 included payments of $4.5 million for capital expenditures, partially offset by proceeds of $3.0 million from life insurance. Net cash used in investing activities for the same period in 2020 included payments of $7.5 million for capital expenditures and payments of $1.0 million for investments, partially offset by proceeds of $4.6 million from dispositions.

 Net cash provided by financing activities during the year ended December 31, 2021 included proceeds of $300.0 million from the issuance of the Notes and proceeds from the $10.0 million PPP loan, partially offset by credit facility and promissory note repayments of $263.5 million, repayment of the $5.0 million loan provided by George Beasley, and payments of $7.6 million for debt issuance costs related to the Notes. Net cash provided by financing activities for the same period in

We sold a tower for one radio station in Charlotte, NC to Wintersrun Communications, LLC, which is partially held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family and partially owned directly by Bruce G. Beasley and Brian E. Beasley, for $0.4 million then leased back the tower under an agreement which expires on December 31, 2045. The lease met the criteria to be recorded as a finance lease, however based on the terms of the lease agreement the $0.3 million gain on sale was deferred and will be recognized as the finance lease asset is depreciated. Rental expense was $0.1 million for the year ended December 31, 2021.

In June 2020, George Beasley, our former Chairman, provided a $5.0 million loan to the Company that accrued interest at 6% per annum with no cash payments due until the loan’s maturity in December 2023. Mr. Beasley and GGB Family

As disclosed in Note 5 to the consolidated financial statements, the Company’s consolidated FCC licenses balance was $508.4 million as of December 31, 2021. Management performs an annual impairment test during the fourth quarter of each year which includes a qualitative assessment as to whether it is more likely than not that an FCC license is impaired. In addition, management prepares a qualitative assessment at each quarter end throughout the year. This qualitative assessment requires significant judgment when considering the events and circumstances that may affect the estimated fair value of the FCC licenses. During the fourth quarter of 2021, management elected to bypass the qualitative assessment and perform a quantitative assessment for all reporting units. If there are changes in market conditions, events, or other circumstances that occur during the interim periods that indicate the carrying value of its FCC licenses may be impaired, management determines whether an interim test is necessary. FCC licenses are assessed for recoverability at the market cluster level. Potential impairment is identified by comparing the fair value of a market’s FCC licenses to its carrying value. Fair value is estimated by management using the Greenfield method, which is a form of the income approach, assuming a scenario in which the only assets held by an investor are FCC licenses. Management’s cash flow projections for its FCC licenses included significant judgments and assumptions relating to the market share and profit margin of an average station within a market based upon market size and station type, the forecasted growth rate of each radio market (including long-term growth rate), and the discount rate.

The pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. In 2020, the Company was impacted by deteriorating general economic conditions resulting from the pandemic that caused a downturn in the advertising industry. The decreased demand for advertising materially negatively impacted the Company results of operations, liquidity and financial condition. In 2021, the Company benefited from a general economic recovery from the pandemic however the continuing impact of subsequent variants may result in general economic conditions deteriorating again in the future.

The extent to which the pandemic will continue to impact the Company’s business and financial results going forward will be dependent on future developments which are uncertain and unpredictable. Accordingly, it is reasonably possible that these uncertainties could materially impact the Company’s significant accounting estimates related to, but not limited to, allowance for doubtful accounts, impairment of Federal Communications Commission (“FCC”) licenses and goodwill, and determination of assets. As a result, many of the Company’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. The Company’s estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.

Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Such estimates include (i) the amount of allowance for doubtful accounts; (ii) future cash flows used for testing recoverability of property and equipment; (iii) fair values used for testing FCC licenses and goodwill for impairment; (iv) estimates used to determine the incremental borrowing rate to record lease liabilities and related assets (v) the realization of deferred tax assets; and (vi) actuarial assumptions related to the SERP. Actual results and outcomes may differ from management’s estimates and assumptions.

The Company determines whether a contract is or contains a lease at inception. The term for each lease agreement begins on the commencement date and includes the noncancelable period specified in the agreement together with: (1) the periods covered by options to extend the lease if the Company is reasonably certain to exercise that option, (2) the periods covered by an option to terminate if the Company is reasonably certain not to exercise that option and (3) the period covered by an option to extend (or not terminate) if controlled by the lessor. The lease liabilities and the related use assets are calculated based on the present value of the lease payments using (1) the rate implicit in the lease or (2) the lessee’s incremental borrowing rate (“IBR”). IBR is defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

(3)	Acquisitions and Dispositions