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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

Commission File No. 0-25969

Graphic

URBAN ONE, INC.

(Exact name of registrant as specified in its charter)

Delaware

52-1166660

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1010 Wayne Avenue,

14th Floor

Silver Spring, Maryland 20910

(Address of principal executive offices)

(301429-3200

Registrant’s telephone number, including area code

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

 

UONE

 

NASDAQ Stock Market

Class D Common Stock

 

UONEK

 

NASDAQ Stock Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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

Accelerated filer  

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

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

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes   No  

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

Class

    

Outstanding at July 30, 2021

 

Class A Common Stock, $.001 Par Value

 

8,221,026

 

Class B Common Stock, $.001 Par Value

 

2,861,843

 

Class C Common Stock, $.001 Par Value

 

2,928,906

 

Class D Common Stock, $.001 Par Value

 

37,301,482

 

Table of Contents

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)

5

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)

6

Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020

7

Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 (Unaudited)

8

Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 (Unaudited)

9

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (Unaudited)

10

Notes to Consolidated Financial Statements (Unaudited)

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

40

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

61

Item 4.

Controls and Procedures

62

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

63

Item 1A.

Risk Factors

63

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

Item 3.

Defaults Upon Senior Securities

64

Item 4.

Mine Safety Disclosures

64

Item 5.

Other Information

64

Item 6.

Exhibits

65

SIGNATURES

66

2

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CERTAIN DEFINITIONS

Unless otherwise noted, throughout this report, the terms “Urban One,” the “Company,” “we,” “our” and “us” refer to Urban One, Inc. together with its subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements do not relay historical facts, but rather reflect our current expectations concerning future operations, results and events. All statements other than statements of historical fact are “forward-looking statements” including any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. You can identify some of these forward-looking statements by our use of words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “likely,” “may,” “estimates” and similar expressions.  You can also identify a forward-looking statement in that such statements discuss matters in a way that anticipates operations, results or events that have not already occurred but rather will or may occur in future periods.  We cannot guarantee that we will achieve any forward-looking plans, intentions, results, operations or expectations.  Because these statements apply to future events, they are subject to risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially from those forecasted or anticipated in the forward-looking statements.  These risks, uncertainties and factors include (in no particular order), but are not limited to:

economic volatility, financial market unpredictability and fluctuations in the United States and other world economies that may affect our business and financial condition, and the business and financial conditions of our advertisers, including as a result of the ongoing COVID-19 pandemic;
our high degree of leverage, certain cash commitments related thereto and potential inability to finance strategic transactions given fluctuations in market conditions;
fluctuations in the local economies of the markets in which we operate (particularly our largest markets, Atlanta; Baltimore; Houston; and Washington, DC) could negatively impact our ability to meet our cash needs and our ability to maintain compliance with our debt covenants;
the extent of the impact of the COVID-19 pandemic (particularly in our largest markets, Atlanta; Baltimore; Houston; and Washington, DC), including the duration, spread of variants, severity, and any recurrence of the COVID-19 pandemic, the duration and scope of any renewed government orders and restrictions, the impact on our employees, and the extent of the impact of the COVID-19 pandemic on overall demand for advertising across our various media;
local, regional, national, and international economic conditions that have been impacted as a result of the COVID-19 pandemic, including the risks of a global recession or a recession in one or more of our key markets, the impact that these economic conditions may have on us and our customers, and our assessment of that impact;
risks associated with the implementation and execution of our business diversification strategy;
regulation by the Federal Communications Commission (“FCC”) relative to maintaining our broadcasting licenses, enacting media ownership rules and enforcing of indecency rules;
regulation by certain gaming commissions relative to maintaining our interests, or our creditors ability to foreclose on collateral that includes our interests in, in any gaming licenses, joint ventures or other gaming and casino investments;
risks associated with our investment in gaming businesses that are managed or operated by persons not affiliated with us and over which we have little or no control;

3

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changes in our key personnel and on-air talent;
increases in competition for and in the costs of our programming and content, including on-air talent and content production or acquisitions costs;
financial losses that may be incurred due to impairment charges against our broadcasting licenses, goodwill, and other intangible assets;
increased competition for advertising revenues with other radio stations, broadcast and cable television, newspapers and magazines, outdoor advertising, direct mail, internet radio, satellite radio, smart phones, tablets, and other wireless media, the internet, social media, and other forms of advertising;
the impact of our acquisitions, dispositions and similar transactions, as well as consolidation in industries in which we and our advertisers operate;
developments and/or changes in laws and regulations, such as the California Consumer Privacy Act or other similar federal or state regulation through legislative action and revised rules and standards;
disruptions to our technology network including computer systems and software, whether by man-made or other disruptions of our operating systems, structures or equipment as well as natural events such as pandemic, severe weather, fires, floods and earthquakes;
other factors mentioned in our filings with the Securities and Exchange Commission (“SEC”) including the factors discussed in detail in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended December 31, 2020.

You should not place undue reliance on these forward-looking statements, which reflect our views as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

4

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URBAN ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

(Unaudited)

(In thousands, except share data)

NET REVENUE

$

107,593

$

76,008

$

199,033

$

170,883

OPERATING EXPENSES:

 

 

 

 

Programming and technical including stock-based compensation of $4 and $4, and $10 and $12, respectively

 

26,517

 

23,624

 

51,613

 

51,494

Selling, general and administrative, including stock-based compensation of $0 and $78, and $31 and $164, respectively

 

31,510

 

22,294

 

61,497

 

51,757

Corporate selling, general and administrative, including stock-based compensation of $168 and $186, and $384 and $485, respectively

 

9,321

 

7,326

 

19,657

 

15,957

Depreciation and amortization

 

2,325

 

2,382

 

4,589

 

4,930

Impairment of long-lived assets

 

 

 

 

53,650

Total operating expenses

 

69,673

 

55,626

 

137,356

 

177,788

Operating income (loss)

 

37,920

 

20,382

 

61,677

 

(6,905)

INTEREST INCOME

 

168

 

26

 

172

 

34

INTEREST EXPENSE

 

15,853

 

18,395

 

33,898

 

37,533

LOSS ON RETIREMENT OF DEBT

6,949

OTHER INCOME, net

 

(2,362)

 

(94)

 

(4,046)

 

(1,598)

Income (loss) before provision for (benefit from) income taxes and noncontrolling interests in income of subsidiaries

 

24,597

 

2,107

 

25,048

 

(42,806)

PROVISION FOR (BENEFIT FROM) INCOME TAXES

 

6,119

 

465

 

6,109

 

(21,390)

CONSOLIDATED NET INCOME (LOSS)

 

18,478

 

1,642

 

18,939

 

(21,416)

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

612

 

222

 

1,066

 

351

CONSOLIDATED NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

17,866

$

1,420

$

17,873

$

(21,767)

BASIC NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

 

 

 

Net income (loss) attributable to common stockholders

$

0.36

$

0.03

$

0.36

$

(0.48)

DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

 

 

 

Net income (loss) attributable to common stockholders

$

0.33

$

0.03

$

0.34

$

(0.48)

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

49,789,892

44,806,219

49,124,056

45,025,471

Diluted

53,780,918

48,154,262

53,186,619

45,025,471

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

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URBAN ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

(Unaudited)

(In thousands)

COMPREHENSIVE INCOME (LOSS)

$

18,478

$

1,642

$

18,939

$

(21,416)

LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

612

 

222

 

1,066

 

351

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

17,866

$

1,420

$

17,873

$

(21,767)

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

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URBAN ONE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of

    

June 30, 2021

    

December 31, 2020

(Unaudited)

(In thousands, except share data)

ASSETS

 

  

 

  

CURRENT ASSETS:

 

  

 

  

Cash and cash equivalents

$

129,307

$

73,385

Restricted cash

 

473

 

473

Trade accounts receivable, net of allowance for doubtful accounts of $7,307 and $7,956, respectively

 

103,902

 

106,296

Prepaid expenses

 

10,613

 

10,154

Current portion of content assets

 

31,180

 

28,434

Other current assets

 

4,260

 

4,224

Total current assets

 

279,735

 

222,966

CONTENT ASSETS, net

 

63,594

 

63,175

PROPERTY AND EQUIPMENT, net

 

25,258

 

19,192

GOODWILL

 

223,402

 

223,402

RIGHT OF USE ASSETS

 

42,202

 

40,918

RADIO BROADCASTING LICENSES

 

505,148

 

484,066

OTHER INTANGIBLE ASSETS, net

 

53,059

 

56,053

DEFERRED TAX ASSETS, net

3,933

10,041

ASSETS HELD FOR SALE

32,661

OTHER ASSETS

 

43,211

 

43,013

Total assets

$

1,239,542

$

1,195,487

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

 

 

  

CURRENT LIABILITIES:

 

 

  

Accounts payable

$

12,523

$

11,135

Accrued interest

 

26,414

 

8,017

Accrued compensation and related benefits

 

6,705

 

12,302

Current portion of content payables

 

19,403

 

16,248

Current portion of lease liabilities

 

9,975

 

8,928

Other current liabilities

 

24,137

 

26,917

Current portion of long-term debt

 

 

23,362

Total current liabilities

 

99,157

 

106,909

LONG-TERM DEBT, net of current portion, original issue discount and issuance costs

 

817,774

 

818,924

CONTENT PAYABLES, net of current portion

 

7,000

 

9,479

LONG-TERM LEASE LIABILITIES

 

35,950

 

36,577

OTHER LONG-TERM LIABILITIES

 

28,006

 

23,999

Total liabilities

 

987,887

 

995,888

REDEEMABLE NONCONTROLLING INTERESTS

 

15,192

 

12,701

STOCKHOLDERS’ EQUITY:

 

 

Convertible preferred stock, $.001 par value, 1,000,000 shares authorized; no shares outstanding at June 30, 2021 and December 31, 2020

 

 

Common stock — Class A, $.001 par value, 30,000,000 shares authorized; 8,221,026 and 4,441,635 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

8

 

4

Common stock — Class B, $.001 par value, 150,000,000 shares authorized; 2,861,843 shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

3

 

3

Common stock — Class C, $.001 par value, 150,000,000 shares authorized; 2,928,906 shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

3

 

3

Common stock — Class D, $.001 par value, 150,000,000 shares authorized; 37,266,083 and 37,515,801 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

37

 

38

Additional paid-in capital

 

1,023,458

 

991,769

Accumulated deficit

 

(787,046)

 

(804,919)

Total stockholders’ equity

 

236,463

 

186,898

Total liabilities, redeemable noncontrolling interests and stockholders’ equity

$

1,239,542

$

1,195,487

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

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URBAN ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2021 (UNAUDITED)

Convertible

Common

Common

Common

Common

Additional

Total

Preferred

Stock

Stock

Stock

Stock

 Paid-In

Accumulated

Stockholders’

    

Stock

    

Class A

    

Class B

    

Class C

    

Class D

    

Capital

    

Deficit

    

Equity

(In thousands, except share data)

BALANCE, as of December 31, 2020

$

$

4

$

3

$

3

$

38

$

991,769

$

(804,919)

$

186,898

Consolidated net income

17,873

17,873

Repurchase of 509,347 shares of Class D common stock

(1)

(904)

(905)

Issuance of 3,779,391 shares of Class A common stock

4

33,278

33,282

Exercise of options for 197,256 shares of common stock

315

315

Adjustment of redeemable noncontrolling interests to estimated redemption value

 

 

 

 

 

 

(1,425)

 

 

(1,425)

Stock-based compensation expense

 

 

 

 

 

 

425

 

 

425

BALANCE, as of June 30, 2021

$

$

8

$

3

$

3

$

37

$

1,023,458

$

(787,046)

$

236,463

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

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URBAN ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2020 (UNAUDITED)

Convertible

Common

Common

Common

Common

Additional

Total

Preferred

Stock

Stock

Stock

Stock

Paid-In

Accumulated

Stockholders’

    

Stock

    

Class A

    

Class B

    

Class C

    

Class D

    

Capital

    

Deficit

    

Equity

(In thousands, except share data)

BALANCE, as of December 31, 2019

$

$

2

$

3

$

3

$

39

$

979,834

$

(796,806)

$

183,075

Consolidated net loss

 

 

 

 

 

 

 

(21,767)

 

(21,767)

Repurchase of 3,911,860 shares of Class D common stock

 

 

 

 

 

(3)

 

(3,598)

 

 

(3,601)

Exercise of options for 1,032,922 shares of common stock

2

1,974

1,976

Adjustment of redeemable noncontrolling interests to estimated redemption value

(884)

(884)

Stock-based compensation expense

 

 

 

 

 

 

661

 

 

661

BALANCE, as of June 30, 2020

$

$

2

$

3

$

3

$

38

$

977,987

$

(818,573)

$

159,460

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

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URBAN ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

June 30, 

    

2021

    

2020

(Unaudited)

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Consolidated net income (loss)

$

18,939

$

(21,416)

Adjustments to reconcile net income (loss) to net cash from operating activities:

 

 

Depreciation and amortization

 

4,589

 

4,930

Amortization of debt financing costs

 

1,296

 

2,128

Amortization of content assets

 

18,575

 

16,639

Amortization of launch assets

 

668

 

514

Bad debt expense

134

894

Deferred income taxes

 

6,108

 

(21,391)

Amortization of right of use assets

3,851

4,042

Non-cash lease liability expense

2,066

2,436

Non-cash interest expense

 

158

 

1,044

Impairment of long-lived assets

 

 

53,650

Stock-based compensation

 

425

 

661

Non-cash fair value adjustment of Employment Agreement Award

1,508

1,311

Loss on retirement of debt

6,949

Gain on asset exchange agreement

404

Effect of change in operating assets and liabilities, net of assets acquired:

 

 

Trade accounts receivable

 

2,260

 

18,124

Prepaid expenses and other current assets

 

(1,285)

 

(137)

Other assets

 

(8,512)

 

(8,160)

Accounts payable

 

1,388

 

(805)

Accrued interest

 

18,397

 

(1,930)

Accrued compensation and related benefits

 

(5,597)

 

(6,065)

Other liabilities

 

235

 

2,394

Payments for content assets

 

(21,064)

 

(15,592)

Net cash flows provided by operating activities

 

51,492

 

33,271

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Purchases of property and equipment

 

(2,454)

 

(2,650)

Proceeds from sale of broadcasting assets

8,000

Acquisition of broadcasting assets

(475)

Net cash flows provided by (used in) investing activities

 

5,546

 

(3,125)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Repayment of 2017 credit facility

 

(317,332)

 

(1,648)

Proceeds of asset-backed credit facility

 

 

27,500

Proceeds of MGM National Harbor Loan

 

 

3,600

Proceeds from 2028 Notes

 

825,000

 

Proceeds from PPP Loan

7,505

Debt refinancing costs

(11,157)

Repayment of MGM National Harbor Loan

 

(57,889)

 

Repayment of 7.375% Notes

(2,984)

Repayment of 8.75% Notes

 

(347,016)

 

Repayment of 2018 credit facility

 

(129,935)

 

(20,348)

Proceeds from exercise of stock options

315

1,976

Proceeds from issuance of Class A common stock, net of fees

 

33,282

 

Payment of dividends to noncontrolling interest members of Reach Media

(1,000)

Repurchase of common stock

 

(905)

 

(3,601)

Net cash flows (used in) provided by financing activities

 

(1,116)

 

6,479

INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

55,922

36,625

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

73,858

33,546

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

$

129,780

$

70,171

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for:

Interest

$

14,048

$

36,291

Income taxes, net of refunds

$

782

$

NON-CASH OPERATING, FINANCING AND INVESTING ACTIVITIES:

Assets acquired under Entercom asset exchange

$

28,193

$

Liabilities recognized under Entercom asset exchange

$

2,669

$

Right of use asset and lease liability additions

$

4,935

$

3,187

Adjustment of redeemable noncontrolling interests to estimated redemption value

$

1,425

$

884

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

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URBAN ONE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a)

Organization

Urban One, Inc. (a Delaware corporation referred to as “Urban One”) and its subsidiaries (collectively, the “Company”) is an urban-oriented, multi-media company that primarily targets African-American and urban consumers. Our core business is our radio broadcasting franchise which is the largest radio broadcasting operation that primarily targets African-American and urban listeners. As of June 30, 2021, we owned and/or operated 63 independently formatted, revenue producing broadcast stations (including 54 FM or AM stations, 7 HD stations, and the 2 low power television stations we operate) located in 13 of the most populous African-American markets in the United States. While a core source of our revenue has historically been and remains the sale of local and national advertising for broadcast on our radio stations, our strategy is to operate as the premier multi-media entertainment and information content provider targeting African-American and urban consumers. Thus, we have diversified our revenue streams by making acquisitions and investments in other complementary media properties. Our diverse media and entertainment interests include TV One, LLC (“TV One”), an African-American targeted cable television network; our 80.0% ownership interest in Reach Media, Inc. (“Reach Media”) which operates the Rickey Smiley Morning Show and our other syndicated programming assets, including the Get Up! Mornings with Erica Campbell Show, Russ Parr Morning Show and the DL Hughley Show; and Interactive One, LLC (“Interactive One”), our wholly owned digital platform serving the African-American community through social content, news, information, and entertainment websites, including its Cassius and Bossip, HipHopWired and MadameNoire digital platforms and brands. We also hold a minority ownership interest in MGM National Harbor, a gaming resort located in Prince George’s County, Maryland. Through our national multi-media operations, we provide advertisers with a unique and powerful delivery mechanism to the African-American and urban audiences.

On January 19, 2019, the Company launched CLEO TV, a lifestyle and entertainment network targeting Millennial and Gen X women of color. CLEO TV offers quality content that defies negative and cultural stereotypes of today’s modern women. The results of CLEO TV’s operations will be reflected in the Company’s cable television segment.

On May 20, 2021, the City of Richmond, Virginia (the “City”) announced that it has selected the Company’s wholly-owned unrestricted subsidiary RVA Entertainment Holdings, LLC (“RVAEH”), as the City’s preferred casino gaming operator to develop and operate a casino resort in Richmond.  Pursuant to the Virginia Casino Act, the City is one of five cities within the Commonwealth of Virginia eligible to host a casino gaming establishment, subject to the citizens of the City approving a referendum, which is anticipated to be held in November 2021. Prior to requesting a Virginia court to order the referendum, the City is required to (i) select the City’s preferred location for the Casino Resort, which must be listed on the referendum, (ii) select a preferred casino gaming operator to develop and operate the Casino Resort (the “Preferred Casino Operator”), and (iii) submit the Preferred Casino Operator to the Commonwealth for pre-certification. RVAEH was approved in the pre-certification process on July 20, 2021.

If the voters approve the referendum, then the Commonwealth may issue one license permitting operation of a casino in Richmond.  Upon passage and certification of the referendum, RVAEH, along with its management and development team, including Peninsula Pacific Entertainment would commence development and construction of the casino resort to be named ONE Casino + Resort.

Our core radio broadcasting franchise operates under the brand “Radio One.”  We also operate our other brands, such as TV One, CLEO TV, Reach Media and Interactive One, while developing additional branding reflective of our diverse media operations and targeting our African-American and urban audiences.

As part of our consolidated financial statements, consistent with our financial reporting structure and how the Company currently manages its businesses, we have provided selected financial information on the Company’s four reportable segments: (i) radio broadcasting; (ii) Reach Media; (iii) digital; and (iv) cable television. (See Note 7 – Segment Information.)

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(b)

Interim Financial Statements

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In management’s opinion, the interim financial data presented herein include all adjustments (which include only normal recurring adjustments) necessary for a fair presentation. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

Results for interim periods are not necessarily indicative of results to be expected for the full year. This Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

(c)

Financial Instruments

Financial instruments as of June 30, 2021 and December 31, 2020, consisted of cash and cash equivalents, restricted cash, trade accounts receivable, asset-backed credit facility, long-term debt and redeemable noncontrolling interests. The carrying amounts approximated fair value for each of these financial instruments as of June 30, 2021 and December 31, 2020, except for the Company’s long-term debt. On June 1, 2021, the Company borrowed approximately $7.5 million on a new PPP loan (as defined in Note 4 – Long-Term Debt). The PPP Loan had a carrying value of approximately $7.5 million and fair value of approximately $7.5 million as of June 30, 2021. The fair value of the PPP Loan, classified as a Level 3 instrument, was determined based on the fair value of a similar instrument as of the reporting date using updated interest rate information derived from changes in interest rates since inception to the reporting date. On January 24, 2021, the Company borrowed $825 million in aggregate principal amount of senior secured notes due February 2028 (the “2028 Notes”). The 7.375% 2028 Notes had a carrying value of approximately $825.0 million and fair value of approximately $888.9 million as of June 30, 2021. The fair values of the 2028 Notes, classified as Level 2 instruments, were determined based on the trading values of these instruments in an inactive market as of the reporting date. The Company used the net proceeds from the 2028 Notes, together with cash on hand, to repay or redeem (1) the 2017 Credit Facility, (2) the 2018 Credit Facility, (3) the MGM National Harbor Loan; (4) the remaining amounts of our 7.375% Notes, and (5) our 8.75% Notes that were issued in the November 2020 Exchange Offer (all as defined below). Upon settlement of the 2028 Notes Offering, the 2017 Credit Facility, the 2018 Credit Facility and the MGM National Harbor Loan were terminated and the indentures governing the 7.375% Notes and the 8.75% Notes were satisfied and discharged. The 7.375% Senior Secured Notes that were due in April 2022 (the “7.375% Notes”) had a carrying value of approximately $3.0 million and fair value of approximately $2.8 million as of December 31, 2020. The fair values of the 7.375% Notes, classified as Level 2 instruments, were determined based on the trading values of these instruments in an inactive market as of the reporting date. On April 18, 2017, the Company closed on a $350.0 million senior secured credit facility (the “2017 Credit Facility”) which had a carrying value of approximately $317.3 million and fair value of approximately $293.5 million as of December 31, 2020. The fair value of the 2017 Credit Facility, classified as a Level 2 instrument, was determined based on the trading values of this instrument in an inactive market as of the reporting date. On December 20, 2018, the Company closed on a $192.0 million unsecured credit facility (the “2018 Credit Facility”) which had a carrying value of approximately $129.9 million and fair value of approximately $132.5 million as of December 31, 2020. The fair value of the 2018 Credit Facility, classified as a Level 2 instrument, was determined based on the trading values of this instrument in an inactive market as of the reporting date. On December 20, 2018, the Company also closed on a $50.0 million secured credit loan (the “MGM National Harbor Loan”) which had a carrying value of approximately $57.9 million and fair value of approximately $64.8 million as of December 31, 2020. The fair value of the 2018 MGM National Harbor Loan, classified as a Level 2 instrument, was determined based on the trading values of this instrument in an inactive market as of the reporting date. On November 9, 2020, we completed an exchange of 99.15% of our outstanding 7.375% Notes for $347.0 million aggregate principal amount of newly issued 8.75% Senior Secured Notes due December 2022 (the “8.75% Notes”). As of December 31, 2020, the 8.75% Notes had a carrying value of approximately $347.0 million and fair value of approximately $338.0 million. There was no balance outstanding on the Company’s asset-backed credit facility as of June 30, 2021 and December 31, 2020.

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Table of Contents

(d)

Revenue Recognition

In accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The Company elected to use the modified retrospective method, but the adoption of the standard did not have a material impact to our financial statements. In general, our spot advertising (both radio and cable television) as well as our digital advertising continues to be recognized when aired and delivered. For our cable television affiliate revenue, the Company grants a license to the affiliate to access its television programming content through the license period, and the Company earns a usage based royalty when the usage occurs, consistent with our previous revenue recognition policy. Finally, for event advertising, the performance obligation is satisfied at a point in time when the activity associated with the event is completed.

Within our radio broadcasting and Reach Media segments, the Company recognizes revenue for broadcast advertising at a point in time when a commercial spot runs. The revenue is reported net of agency and outside sales representative commissions. Agency and outside sales representative commissions are calculated based on a stated percentage applied to gross billing. Generally, clients remit the gross billing amount to the agency or outside sales representative, and the agency or outside sales representative remits the gross billing, less their commission, to the Company. For our radio broadcasting and Reach Media segments, agency and outside sales representative commissions were approximately $4.1 million and $2.5 million for the three months ended June 30, 2021 and 2020, respectively. Agency and outside sales representative commissions were approximately $7.6 million and $7.2 million for the six months ended June 30, 2021 and 2020, respectively.

Within our digital segment, including Interactive One, which generates the majority of the Company’s digital revenue, revenue is principally derived from advertising services on non-radio station branded but Company-owned websites. Advertising services include the sale of banner and sponsorship advertisements. Advertising revenue is recognized at a point in time either as impressions (the number of times advertisements appear in viewed pages) are delivered, when “click through” purchases are made, or ratably over the contract period, where applicable. In addition, Interactive One derives revenue from its studio operations, in which it provides third-party clients with publishing services including digital platforms and related expertise. In the case of the studio operations, revenue is recognized primarily through fixed contractual monthly fees and/or as a share of the third party’s reported revenue.

Our cable television segment derives advertising revenue from the sale of television air time to advertisers and recognizes revenue when the advertisements are run. Advertising revenue is recognized at a point in time when the individual spots run. To the extent there is a shortfall in contracts where the ratings were guaranteed, a portion of the revenue is deferred until the shortfall is settled, typically by providing additional advertising units generally within one year of the original airing. Our cable television segment also derives revenue from affiliate fees under the terms of various multi-year affiliation agreements based on a per subscriber fee multiplied by the most recent subscriber counts reported by the applicable affiliate. The Company recognizes the affiliate fee revenue at a point in time as its performance obligation to provide the programming is met. The Company has a right of payment each month as the programming services and related obligations have been satisfied. For our cable television segment, agency and outside sales representative commissions were approximately $4.4 million and $3.2 million for the three months ended June 30, 2021 and 2020, respectively. Agency and outside sales representative commissions were approximately $8.2 million and $6.9 million for the six months ended June 30, 2021 and 2020, respectively.

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Revenue by Contract Type

The following chart shows our net revenue (and sources) for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

(In thousands, unaudited)

Net Revenue:

 

  

 

  

 

  

 

  

Radio Advertising

$

42,605

$

25,358

$

75,944

$

63,776

Political Advertising

 

500

 

361

 

1,280

 

2,764

Digital Advertising

 

15,016

 

6,104

 

25,369

 

12,393

Cable Television Advertising

 

22,968

 

18,941

 

43,670

 

39,973

Cable Television Affiliate Fees

 

25,396

 

24,619

 

50,883

 

50,826

Event Revenues & Other

 

1,108

 

625

 

1,887

 

1,151

Net Revenue (as reported)

$

107,593

$

76,008

$

199,033

$

170,883

Contract assets and liabilities

Contract assets (unbilled receivables) and contract liabilities (customer advances and unearned income and unearned event income) that are not separately stated in our consolidated balance sheets at June 30, 2021, December 31, 2020 and June 30, 2020 were as follows:

    

June 30, 2021

    

December 31, 2020

    

June 30, 2020

(Unaudited)

(Unaudited)

(In thousands)

Contract assets:

 

  

 

  

 

  

Unbilled receivables

$

8,540

$

5,798

$

3,892

Contract liabilities:

 

 

 

Customer advances and unearned income

$

5,252

$

4,955

$

2,918

Unearned event income

 

6,118

 

5,921

 

10,352

Unbilled receivables consists of earned revenue on behalf of customers that have not yet been billed. Customer advances and unearned income represents advance payments by customers for future services under contract that are generally incurred in the near term. Unearned event income represents payments by customers for upcoming events.

For customer advances and unearned income as of January 1, 2021, approximately $545,000 and approximately $2.6 million was recognized as revenue during the three and six months ended June 30, 2021. For unearned event income, no revenue was recognized during the three or six months ended June 30, 2021. For customer advances and unearned income as of January 1, 2020, approximately $448,000 and approximately $2.1 million was recognized as revenue during the three and six months ended June 30, 2020. For unearned event income, there was no revenue was recognized during the three months or six months ended June 30, 2020.

Practical expedients and exemptions

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses.

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

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(e)

Launch Support

The cable television segment has entered into certain affiliate agreements requiring various payments for launch support. Launch support assets are used to initiate carriage under affiliation agreements and are amortized over the term of the respective contracts. The Company did not pay any launch support for carriage initiation during the three and six months ended June 30, 2021 and 2020. The weighted-average amortization period for launch support is approximately 7.4 years as of June 30, 2021, and approximately 7.4 years as of December 31, 2020. The remaining weighted-average amortization period for launch support is 4.0 years and 4.5 years as of June 30, 2021 and December 31, 2020, respectively. Amortization is recorded as a reduction to revenue to the extent that revenue is recognized from the vendor, and any excess amortization is recorded as launch support amortization expense. For the three months ended June 30, 2021 and 2020, launch support asset amortization of $105,000 and $105,000, respectively, was recorded as a reduction of revenue, and $229,000 and $151,000, respectively, was recorded as an operating expense in selling, general and administrative expenses. For the six months ended June 30, 2021 and 2020, launch support asset amortization of $211,000 and $211,000, respectively, was recorded as a reduction of revenue, and $457,000 and $302,000, respectively, was recorded as an operating expense in selling, general and administrative expenses. Launch assets are included in other intangible assets on the consolidated balance sheets, except for the portion of the unamortized balance that is expected to be amortized within one year which is included in other current assets.

(f)

Barter Transactions

For barter transactions, the Company provides broadcast advertising time in exchange for programming content and certain services. The Company includes the value of such exchanges in both broadcasting net revenue and operating expenses. The valuation of barter time is based upon the fair value of the network advertising time provided for the programming content and services received. For the three months ended June 30, 2021 and 2020, barter transaction revenues were $440,000 and $527,000, respectively. Additionally, for the three months ended June 30, 2021 and 2020, barter transaction costs were reflected in programming and technical expenses of $302,000 and $384,000, respectively, and selling, general and administrative expenses of $138,000 and $143,000, respectively. For the six months ended June 30, 2021 and 2020, barter transaction revenues were $889,000 and approximately $1.0 million, respectively. Additionally, for the six months ended June 30, 2021 and 2020, barter transaction costs were reflected in programming and technical expenses of $614,000 and $755,000, respectively, and selling, general and administrative expenses of $275,000 and $286,000, respectively.

(g)

Earnings Per Share

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock (Classes A, B, C and D) outstanding during the period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. The Company’s potentially dilutive securities include stock options and unvested restricted stock. Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a net loss, as the inclusion of the potentially dilutive common shares would have an anti-dilutive effect.

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Table of Contents

The following table sets forth the calculation of basic and diluted earnings per share from continuing operations (in thousands, except share and per share data):

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

(Unaudited)

(In Thousands)

Numerator:

Net income (loss) attributable to common stockholders