BEASLEY BROADCAST GROUP INC

NOTES TO CONDENSED CONSOLI DATED FINANCIAL STATEMENTS (UNAUDITED)

(1)

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of Beasley Broadcast Group, Inc. and its subsidiaries (the “Company”) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments necessary for a fair statement of the financial position and results of operations for the interim periods presented, and all such adjustments are of a normal and recurring nature. The Company’s results are subject to seasonal fluctuations; therefore, the results shown on an interim basis are not necessarily indicative of results for the full year.

(2)

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued guidance which requires additional disclosures primarily related to the Company's income tax rate reconciliation and income taxes paid. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively. The Company is currently in the process of reviewing the new guidance.

In November 2023, the FASB issued guidance which requires additional disclosures for the Company's reportable segments, primarily related to significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently in the process of reviewing the new guidance.

(3)

Proceeds from BMI Sale

On March 8, 2024, the Company received $6.0 million related to the sale of an investment in Broadcast Music, Inc. ("BMI") and recorded a gain of $6.0 million. The gain on sale of investment is reported in the accompanying condensed consolidated statement of net loss for the nine months ended September 30, 2024. After the sale, the Company no longer holds an investment in BMI.

(4)

Disposition

On September 11, 2023, the Company completed the sale of substantially all of the assets used in the operations of WWWE-AM

in Atlanta, GA to a third party for $250,000 in cash.

(5)

FCC Licenses

Federal Communications Commission ("FCC") licenses are tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the FCC licenses might be impaired. The Company assesses qualitative factors to determine whether it is more likely than not that its FCC licenses are impaired. If the Company determines it is more likely than not that its FCC licenses are impaired, then the Company is required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of the FCC licenses with the carrying amounts of such licenses. If the carrying amounts of the FCC licenses exceed the fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing FCC licenses for impairment, the Company combines its licenses into reporting units based on its market clusters. The FCC license valuations are Level 3 non-recurring fair value measurements.

Due to an increase in interest rates in the U.S. economy and a decrease in projected revenues, the Company tested its FCC

licenses for impairment during the third quarter of 2023. As a result of the quantitative impairment tests performed as of September

30, 2023, the Company recorded impairment losses of $78.2 million related to the FCC licenses in each of its market clusters. The

impairment losses were primarily due to an increase in the discount rate due to certain risks associated with the U.S. economy and a

decrease in the projected revenues in each market cluster used in the discounted cash flow analyses to estimate the fair values of the

FCC licenses.

The fair values of the FCC licenses in each of the market clusters were estimated 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. The key assumptions used in the discounted cash flow analyses are as

follows:

During the second quarter of 2023, due to the potential sale of substantially all of the assets used in the operations of WJBR-FM

in Wilmington, DE, the Company recorded an impairment loss of $10.0 million related to the FCC license. The Company completed the sale of WJBR-FM on October 5, 2023.

(6)

Goodwill

Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the

Company’s goodwill might be impaired. The Company assesses qualitative factors to determine whether it is necessary to perform a

quantitative assessment for each reporting unit. If the quantitative assessment is necessary, the Company will determine the fair value

of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, the Company 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 goodwill for impairment, the Company

has identified its radio market clusters and esports as its reporting units. The goodwill valuation is a Level 3 non-recurring fair value

measurement.

Due to an increase in interest rates in the U.S. economy and a decrease in projected revenues, the Company tested its goodwill for

impairment during the third quarter of 2023. As a result of the quantitative impairment test performed as of September 30, 2023, the

Company recorded an impairment loss of $10.6 million related to the goodwill in its Philadelphia, PA market cluster. The impairment

loss was primarily due to an increase in the discount rate due to certain risks associated with the U.S. economy and a decrease in the

projected revenues used in the discounted cash flow analysis to estimate the fair value of the goodwill.

The fair value of the goodwill in the Philadelphia, PA market cluster was estimated using an income approach. The income

approach is based upon a discounted cash flow analysis 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. The key assumptions used in the discounted cash flow analysis are as

follows:

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Long-Term Debt

Long-term debt is comprised of the following:

On February 2, 2021, the Company issued $300.0 million aggregate principal amount of 8.625% senior secured notes due on February 1, 2026 (the “Existing Notes”) under an indenture dated February 2, 2021 (the “Existing Notes Indenture”). Interest on the Existing 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 Existing 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. Prior to February 1, 2025, the Company will be subject to certain premiums, as defined in the Existing Notes Indenture, for optional or mandatory (upon certain contingent events) redemption of some or all of the Existing Notes.

In the second quarter of 2023, the Company repurchased $3.0 million principal amount of the Existing Notes for a price equal to 66% of the principal amount and recorded a gain of $1.0 million as a result of the repurchase.

Subsequent to quarter end, on October 8, 2024, the Company completed certain refinancing transactions related to the Existing Notes. See Note 16 for additional information.

(8)

Stockholders’ Equity

The changes in stockholders’ equity are as follows:

(9)

Net Revenue

Net revenue is comprised of the following:

The Company recognizes revenue when it satisfies a performance obligation under a contract with an advertiser. The transaction price is allocated to performance obligations based on executed contracts, which represent relative standalone selling prices. Payment is generally due within 30 days, although certain advertisers are required to pay in advance. Revenues are reported at the amount the Company expects to be entitled to receive under the contract. The Company has elected to use the practical expedient to expense sales commissions as incurred. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the balance sheets. Substantially all deferred revenue is recognized within 12 months of the payment date.

Audio revenue includes revenue from the sale or trade of aired commercial spots to advertisers directly or through national, regional or local advertising agencies. Each commercial spot is considered a performance obligation. Revenue is recognized when the commercial spots have aired. Trade sales are recorded at the estimated fair value of the goods or services received. If commercial spots are aired before the goods or services are received, then a trade sales receivable is recorded. If goods or services are received before the commercial spots are aired, then a trade sales payable is recorded. Other revenue includes revenue from concerts, promotional events, talent fees and other miscellaneous items. Such revenue is generally recognized when the concert, promotional event, or talent services are completed.

Digital revenue includes revenue from the sale of streamed commercial spots, station-owned assets and third-party products. Each streamed commercial spot, station-owned asset and third-party product is considered a performance obligation. Revenue is recognized when the commercial spots have streamed. Station-owned assets are generally scheduled over a period of time and revenue is recognized over time as the digital items are used for advertising content, except for streamed commercial spots. Third-party products are generally scheduled over a period of time with an impression target each month. Revenue from the sale of third-party products is recognized over time as the digital items are used for advertising content and impression targets are met each month. The Company assesses each digital sales order to determine if the Company is operating as the principal or an agent. The Company currently operates as the principal for digital revenue.

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Stock-Based Compensation

As a result of the Reverse Stock Split effected on September 23, 2024, consistent with the terms of the 2007 Plan and outstanding awards granted under the 2007 Plan, the total number of shares of Class A Common Stock issuable upon exercise, vesting or settlement of such awards and the total number of shares of Class A Common Stock remaining available for future awards under the 2007 Plan, as well as any share-based limits in the 2007 Plan, were proportionately reduced, and any fractional shares resulting therefrom were rounded down to the nearest whole share. Furthermore, the exercise prices of any outstanding options under the 2007 Plan were proportionately increased based on the Reverse Stock Split ratio, and the resulting exercise prices were rounded up to the nearest whole cent. All share and share-related information presented in the condensed consolidated financial statements, for all periods presented, has been retroactively adjusted to reflect the Reverse Stock Split.

The 2007 Plan permits the Company to issue up to 375,000 shares of Class A Common Stock. The 2007 Plan allows for eligible employees, directors and certain consultants of the Company to receive restricted stock units, shares of restricted stock, stock options or other stock-based awards. The restricted stock units that have been granted under the 2007 Plan generally vest overone tofive years of service.

A summary of restricted stock unit activity is presented below:

As of September 30, 2024, there was $0.8 million of total unrecognized compensation cost for restricted stock units granted under the 2007 Plan. That cost is expected to be recognized over a weighted-average period of 2.1 years.

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Income Taxes

The Company’s effective tax rate was (26)% and (27)% for thethree months ended September 30, 2023 and 2024, respectively, and (24)% and (32)% for thenine months ended September 30, 2023 and 2024, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes.

(12)

Earnings Per Share

Earnings per share calculation information is as follows:

(1)

Weighted-average shares outstanding used in the computation of basic and diluted Net loss attributable to BBGI stockholders per Class A and Class B common share have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split that occurred on September 23, 2024. See Note 15 for additional information.

The Company excluded the effect of restrictive stock units and restricted stock under the treasury stock method when reporting a net loss as the addition of shares was anti-dilutive. As a result, the Company excluded 3,807 shares and 18,379 shares for thethree months ended September 30, 2023 and 2024, respectively, and 4,166 shares and 23,588 shares for thenine months ended September 30, 2023 and 2024, respectively.

(13)

Financial Instruments

The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximates fair value due to the short-term nature of these financial instruments.

The estimated fair value of the Existing Notes, based on available market information, was $173.2 million and $158.4 million as of December 31, 2023 and September 30, 2024, respectively. The Company used Level 2 measurements under the fair value measurement hierarchy to determine the estimated fair value of the Existing Notes.

(14)

Segment Information

The Company currently operates two operating and reportable segments (Audio and Digital). The Company also operated an

esports segment until December 13, 2023. The identification of segments is consistent with how the segments report to and are

managed by the Company’s Chief Executive Officer (the Company’s Chief Operating Decision Maker). The Audio segment generates

revenue primarily from the sale of commercial advertising to customers of the Company’s stations in the following markets: Augusta, GA, Boston, MA, Charlotte, NC, Detroit, MI, Fayetteville, NC, Fort Myers-Naples, FL, Las Vegas, NV, Middlesex, NJ,

Monmouth, NJ, Morristown, NJ, Philadelphia, PA, and Tampa-Saint Petersburg, FL. The Digital segment generates revenue primarily

from the sale of digital advertising to customers of the Company’s stations and other advertisers throughout the United States.

Corporate expenses includes general and administrative expenses and certain other income and expense items not allocated to the

operating segments. Non-operating corporate items, including interest expense and income taxes, are reported in the accompanying

condensed consolidated statements of net loss.

Reportable segment information for thethree months ended September 30, 2024 is as follows:

Reportable segment information for the three months ended September 30, 2023 is as follows:

Reportable segment information for the nine months ended September 30, 2024 is as follows:

Reportable segment information for the nine months ended September 30, 2023 is as follows:

Reportable segment information as of September 30, 2024 is as follows:

Reportable segment information as of December 31, 2023 is as follows:

(15)

Reverse Stock Split

On September 23, 2024, the Company effected the Reverse Stock Split. As a result of the Reverse Stock Split, every 20 shares of the Company’s Class A Common Stock issued and outstanding were automatically converted into one share of Class A Common Stock, and every 20 shares of the Company’s Class B Common Stock issued and outstanding were automatically converted into one share of Class B Common Stock. No fractional shares of Class A Common Stock or Class B Common Stock were issued in connection with the Reverse Stock Split. Holders of Class A Common Stock or Class B Common Stock received cash in lieu of fractional shares. The Reverse Stock Split had no effect on the par value of the Company’s Class A Common Stock or Class B Common Stock, which remained $0.001 per share, and had no effect on the number of authorized shares of the Company’s Class A Common Stock or Class B Common Stock. Following the Reverse Stock Split, the Class A Common Stock continued to be traded on the Nasdaq Capital Market under the symbol “BBGI” on a split-adjusted basis beginning on September 24, 2024.

In addition, consistent with the terms of the 2007 Plan and outstanding awards granted under the 2007 Plan, the total number of shares of Class A Common Stock issuable upon exercise, vesting or settlement of such awards and the total number of shares of Class A Common Stock remaining available for future awards under the 2007 Plan, as well as any share-based limits in the 2007 Plan, were proportionately reduced, and any fractional shares resulting therefrom were rounded down to the nearest whole share. Furthermore, the exercise prices of any outstanding options under the 2007 Plan were proportionately increased based on the Reverse Stock Split ratio, and the resulting exercise prices were rounded up to the nearest whole cent. All share and share-related information presented in the condensed consolidated financial statements, for all periods presented, has been retroactively adjusted to reflect the decreased number of shares resulting from the Reverse Stock Split.

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Subsequent Events

On October 8, 2024 (the “Settlement Date”), Beasley Mezzanine Holdings, LLC (the “Issuer”), a wholly owned subsidiary of the Company, and certain other of the Company’s subsidiaries, completed: (i) the exchange (the “Exchange Offer”) of $194.7 million aggregate principal amount of the Existing Notes (representing 72.9% of the aggregate principal amount outstanding of the Existing Notes) for (a) $184.9 million aggregate principal amount of the Issuer’s newly issued 9.200% Senior Secured Second Lien Notes due August 1, 2028 (the “Exchange Notes”) at an exchange ratio of 95.0% of the aggregate principal amount of the Existing Notes tendered for exchange, (b)179,384 shares of Class A Common Stock of the Company, based upon pro rata ownership of the Exchange Notes issued by the Issuer, and (c) certain cash payments aggregating approximately $1.0 million, (ii) the purchase of $68.0 million aggregate principal amount of the Existing Notes at a purchase price of 62.5% plus accrued and unpaid interest (such offer, the “Tender Offer”) and (iii) the issuance by the Issuer of $30.9 million aggregate principal amount of 11.000% Senior Secured First Lien notes due 2028 (the “New Notes,” and such offering, the “New Notes Offer”) to holders of Existing Notes or their designees who participated in the Exchange Offer, including to certain backstop commitment parties who committed to purchase the New Notes not otherwise subscribed for. The Company received requisite consents from holders of Existing Notes to (a) adopt certain amendments (the “Proposed Amendments”) to the Existing Notes Indenture and the related security documents and (b) execute a supplemental indenture (the “Supplemental Indenture”) to the Existing Notes Indenture and each relevant ancillary document effecting the Proposed Amendments. The Company used the proceeds from the New Notes Offer of $30.0 million to fund, in part, the purchase of Existing Notes tendered in the Tender Offer.

On the Settlement Date, the Issuer entered into (i) a new indenture (the “New Notes Indenture”) governing its New Notes, which are fully and unconditionally secured by substantially all of the assets, other than certain excluded property, of the Issuer and the guarantors (the “Collateral”) on a senior secured first-priority lien basis, subject to certain exceptions, limitations and permitted liens and (ii) a new indenture (the “Exchange Notes Indenture”) governing its Exchange Notes, which are fully and unconditionally secured by liens on the Collateral on a senior secured second-priority lien basis, subject to certain exceptions, limitations and permitted liens, in each case with the guarantors thereto and Wilmington Trust, National Association, as trustee and collateral agent, with respect to both the Exchange Notes Indenture and New Notes Indenture. The New Notes Indenture and the Exchange Notes Indenture contain 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 its assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of its subsidiaries.

On the Settlement Date, the Issuer also entered into the Supplemental Indenture with Wilmington Trust, National Association, as trustee and collateral agent, supplementing the Existing Notes Indenture. On the Settlement Date, the Company entered into a common stock purchase agreement for the issuance and sale of 56,864 shares of Class A Common Stock of the Company to Beasley Family Towers, LLC at an offering price of approximately $12.31 per share, for gross proceeds of $700,000. The Company used the net proceeds to fund a portion of the cash payment made to the exchanging holders in the Exchange Offer, and for other corporate purposes.

As of September 30, 2024, the Company has incurred approximately $3.5 million in debt restructuring costs which are currently recorded in other assets on the balance sheet. These costs primarily consist of legal fees, financial advisory services, and other professional expenses directly related to the debt restructuring. The Company is currently evaluating the appropriate accounting treatment for these costs and expects to complete its analysis during the fourth quarter of 2024. Based on the outcome of this evaluation, a portion of these costs may be reclassified from other assets to debt issuance costs, or expensed in the fourth quarter of 2024.