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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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

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 a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August 7, 2017, 4,166,991~~June 20, 2018, 4,216,991 shares of Class A common stock, par value $0.0001 per share, 2,340,353 shares of Class B common stock, par value $0.0001 per share and 380,000 shares of Series C convertible preferred stock, $0.01 par value per share, which are convertible into 760,000 shares of Class A common stock, were outstanding.

This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Spanish Broadcasting System, Inc. intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and includes this statement for purposes of such safe harbor provisions.

“Forward-looking” statements, as such term is defined by the Securities Exchange Commission (the “SEC”) in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, our recapitalization ~~plan,~~and restructuring efforts, growth and acquisition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,” “seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, those identified in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017 as filed with the SEC on May 23, 2018 (the “Annual Report”), and those described from time to time in our future reports filed with the SEC. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. These risks and uncertainties include the following factors:

3Our ability to retain key employees, on-air talent and program hosts;

•

~~Our ability to retain key employees, on-air talent and program hosts;~~

Impairment of our goodwill and other intangible assets deemed to have indefinite useful lives can cause our net income or net loss to fluctuate significantly;

Piracy of our programming and other content, including digital and internet piracy, may decrease revenue received from the exploitation of our programming and other content and adversely affect our business and profitability;

The material weakness in our internal control over financial reporting, which could adversely affect our business, reputation and results of operations;

Damage to our brands or reputation;

Our business may be adversely affected by legal or governmental proceedings brought by or on behalf of our employees;

Raúl Alarcón, the Chairman of our Board of Directors, Chief Executive Officer and President, has majority voting control of our common stock and 100% voting control of our Series C preferred stock and this control may discourage or influence certain types of transactions or strategic initiatives; ~~and~~

Changes in government ~~regulation.~~regulations, and

Other risk factors discussed in our Annual Report.

We do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements—Unaudited

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share data)

	June 30,			December 31,			March 31,			December 31,
Assets	2017			2016			2018			2017
Current assets:
Cash and cash equivalents	$	16,234		$	23,835		$	20,082		$	16,141
Receivables:
Trade		28,034			32,952			27,415			32,046
Barter		162			270			200			288
		28,196			33,222			27,615			32,334
Less allowance for doubtful accounts		1,064			745			1,437			1,529
Net receivables		27,132			32,477			26,178			30,805
Prepaid expenses and other current assets		8,754			6,597			9,255			8,055
Total current assets		52,120			62,909			55,515			55,001
Property and equipment, net of accumulated depreciation of $63,654 in 2017 and $61,735 in 2016		24,621			26,406
Property and equipment, net of accumulated depreciation of $62,362 in 2018 and $61,502 in 2017								22,675			23,464
FCC broadcasting licenses		322,197			323,961			322,197			322,197
Goodwill		32,806			32,806			32,806			32,806
Other intangible assets, net of accumulated amortization of $1,164 in 2017 and $1,116 in 2016		1,384			1,432
Other intangible assets, net of accumulated amortization of $1,236 in 2018 and $1,212 in 2017								1,312			1,336
Assets held for sale		2,173			1,377			409			409
Deferred tax assets		1,789			1,615
Other assets		442			384			678			691
Total assets	$	437,532		$	450,890		$	435,592		$	435,904
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued expenses	$	17,013		$	12,733		$	19,504		$	18,763
Accrued interest		1,872			7,290			1,797			1,797
Unearned revenue		975			1,325			710			715
Other liabilities		—			4			11			11
12.5% senior secured notes, net of unamortized discount of $0 in 2017 and $629 in 2016 and net of deferred financing costs of $0 in 2017 and $1,138 in 2016 (note 8).		264,664			273,233
Current portion of other long-term debt		11			4,616
10 3/4% Series B cumulative exchangeable redeemable preferred stock outstanding and dividends outstanding, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares: 90,549 shares issued and outstanding at June 30, 2017 and December 31, 2016 and $70,165 and $65,299 of dividends payable as of June 30, 2017 and December 31, 2016, respectively.		160,714			155,848
12.5% senior secured notes (note 8)								260,274			260,274
10 3/4% Series B cumulative exchangeable redeemable preferred stock outstanding and dividends outstanding, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares: 90,549 shares issued and outstanding at March 31, 2018 and December 31, 2017 and $77,465 and $75,032 of dividends payable as of March 31, 2018 and December 31, 2017, respectively.								168,014			165,581
Total current liabilities		445,249			455,049			450,310			447,141
Other liabilities, less current portion		3,143			2,955			3,447			3,406
Derivative instruments		—			17
Deferred income taxes		111,301			106,986
Deferred tax liabilities								81,096			81,271
Total liabilities		559,693			565,007			534,853			531,818
Commitments and contingencies (note 6)
Stockholders’ deficit:
Series C convertible preferred stock, $0.01 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively		4			4
Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 4,166,991 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively		—			—
Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 2,340,353 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively		—			—
Series C convertible preferred stock, $0.01 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively								4			4
Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 4,216,991 and 4,166,991 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively								—			—
Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 2,340,353 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively								—			—
Additional paid-in capital		526,124			525,999			526,169			526,147
Accumulated other comprehensive loss, net		—			(102	)
Accumulated deficit		(648,289	)		(640,018	)		(625,434	)		(622,065	)
Total stockholders’ deficit		(122,161	)		(114,117	)		(99,261	)		(95,914	)
Total liabilities and stockholders’ deficit	$	437,532		$	450,890		$	435,592		$	435,904

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three-Months Ended						Six-Months Ended						Three-Months Ended
	June 30,						June 30,						March 31,
	2017			2016			2017			2016			2018			2017
Net revenue	$	34,181		$	35,260		$	65,531		$	66,873		$	33,906		$	31,350
Operating expenses:
Engineering and programming		6,818			7,586			15,435			15,748			6,731			8,617
Selling, general and administrative		16,563			12,978			31,050			28,433			14,888			14,487
Corporate expenses		2,793			2,549			5,237			5,542			2,963			2,444
Depreciation and amortization		1,111			1,165			2,243			2,415			1,025			1,132
Total operating expenses		27,285			24,278			53,965			52,138			25,607			26,680
Gain on the disposal of assets, net of disposal costs		(12,826	)		—			(12,827	)		(3	)		—			(1	)
Recapitalization costs		3,263			—			4,089			—			711			826
Other operating gains		—			(26	)		—			(26	)
Other operating income														(1	)		—
Operating income		16,459			11,008			20,304			14,764			7,589			3,845
Other (expense) income:
Other expense:
Interest expense, net		(9,328	)		(10,053	)		(19,315	)		(20,089	)		(8,138	)		(9,987	)
Dividends on Series B preferred stock classified as interest expense		(2,433	)		(2,434	)		(4,866	)		(4,867	)		(2,433	)		(2,433	)
Income (loss) before income taxes		4,698			(1,479	)		(3,877	)		(10,192	)
Loss before income taxes														(2,982	)		(8,575	)
Income tax expense		2,131			2,300			4,394			4,903			387			2,263
Net income (loss)	$	2,567		$	(3,779	)	$	(8,271	)	$	(15,095	)
Basic and Diluted net income (loss) per common share	$	0.35		$	(0.52	)	$	(1.14	)	$	(2.08	)
Net loss													$	(3,369	)	$	(10,838	)
Basic and Diluted net loss per common share													$	(0.46	)	$	(1.49	)
Weighted average common shares outstanding:
Basic and Diluted		7,267			7,267			7,267			7,267			7,300			7,267
Net income (loss)	$	2,567		$	(3,779	)	$	(8,271	)	$	(15,095	)
Net loss													$	(3,369	)	$	(10,838	)
Other comprehensive income, net of taxes		92			51			102			96			—			10
Total comprehensive income (loss)	$	2,659		$	(3,728	)	$	(8,169	)	$	(14,999	)
Total comprehensive loss													$	(3,369	)	$	(10,828	)

See accompanying notes to the unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficit

Series C convertible preferred stock

Class A common stock

Class B common stock

Additional

Accumulated other

Total

Number of

Number of

Number of

paid-in

comprehensive

Accumulated

stockholders'

shares

Par value

shares

Par value

shares

Par value

capital

loss, net

deficit

deficit

Balance at December 31, 2016

380,000

$
4

4,166,991

$
—

2,340,353

$
—

$
525,999

$
(102
)

$
(640,018
)

$
(114,117
)
Net loss

—

—

—

—

—

—

—

—

(8,271
)

(8,271
)
Stock-based compensation

—

—

—

—

—

—

125

—

—

125

Unrealized gain on derivative instrument

—

—

—

—

—

—

—

102

—

102

Balance at June 30, 2017

380,000

$
4

4,166,991

$
—

2,340,353

$
—

$
526,124

$
—

$
(648,289
)

$
(122,161
)

	Series C convertible preferred stock				Class A common stock				Class B common stock				Additional					Total
	Number of				Number of				Number of				paid-in		Accumulated			stockholders'
	shares		Par value		shares		Par value		shares		Par value		capital		deficit			deficit
Balance at December 31, 2017		380,000	$	4		4,166,991	$	—		2,340,353	$	—	$	526,147	$	(622,065	)	$	(95,914	)
Net loss		—		—		—		—		—		—		—		(3,369	)		(3,369	)
Issuance of Class A common stock		—		—		50,000		—		—		—		—		—			—
Stock-based compensation		—		—		—		—		—		—		22		—			22
Balance at March 31, 2018		380,000	$	4		4,216,991	$	—		2,340,353	$	—	$	526,169	$	(625,434	)	$	(99,261	)

See accompanying notes to the unaudited condensed consolidated financial statements.

	Six-Months Ended						Three-Months Ended
	June 30,						March 31,
	2017			2016			2018			2017
Cash flows from operating activities:
Net loss	$	(8,271	)	$	(15,095	)	$	(3,369	)	$	(10,838	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Dividends on Series B preferred stock classified as interest expense		4,866			4,867			2,433			2,433
(Gain) loss on the disposal of assets		(12,827	)		(3	)
Other operating gains		—			(26	)
Gain on the disposal of assets								—			(1	)
Stock-based compensation		125			463			22			79
Depreciation and amortization		2,243			2,415			1,025			1,132
Net barter loss		94			172
Provision for trade doubtful accounts		377			(126	)
Net barter loss (income)								5			(99	)
(Reversal of) provision for trade doubtful accounts								(61	)		98
Amortization of deferred financing costs		1,138			1,695			—			853
Amortization of original issued discount		629			958			—			538
Deferred income taxes		4,240			4,421			(175	)		2,207
Unearned revenue-barter		(337	)		84
Unearned revenue								78			(457	)
Changes in operating assets and liabilities:
Trade receivables		4,702			3,869			4,497			5,627
Prepaid expenses and other current assets		(1,998	)		(1,332	)		(1,097	)		(498	)
Other assets		(58	)		70			13			(65	)
Accounts payable and accrued expenses		4,240			(1,643	)		777			1,448
Accrued interest		(5,418	)		96			—			8,572
Other liabilities		184			14			41			152
Net cash (used in) provided by operating activities		(6,071	)		899
Net cash provided by operating activities								4,189			11,181
Cash flows from investing activities:
Purchases of property and equipment		(450	)		(1,752	)		(248	)		(276	)
Proceeds from the sale of property and equipment		13,861			—			—			67
Cash payment related to station exchange		—			(1,897	)
Net cash provided by (used in) investing activities		13,411			(3,649	)
Net cash used in investing activities								(248	)		(209	)
Cash flows from financing activities:
Paydown of 12.5% senior secured notes		(10,336	)		—
Payments of other debt		(4,605	)		(153	)		—			(4,616	)
Net cash used in financing activities		(14,941	)		(153	)		—			(4,616	)
Net decrease in cash and cash equivalents		(7,601	)		(2,903	)
Net increase in cash and cash equivalents								3,941			6,356
Cash and cash equivalents at beginning of period		23,835			19,443			16,141			23,835
Cash and cash equivalents at end of period	$	16,234		$	16,540		$	20,082		$	30,191
Supplemental cash flows information:
Interest paid	$	22,971		$	17,347		$	8,141		$	5
Income tax paid	$	28		$	105		$	—		$	14
Noncash investing and financing activities:
Nonmonetary asset exchange	$	—		$	2,794
Unrealized gain on derivative instruments	$	102		$	96		$	—		$	10

See accompanying notes to the unaudited condensed consolidated financial statements.

The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the Company, we, us, our or SBS). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 and for the ~~three- and six-month~~three-month periods ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ 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 8-03 of Regulation S-X. They do not include all information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements as of, and for the fiscal year ended December 31, ~~2016,~~2017, included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017 as filed by the Company on May 23, 2018 (the “Annual Report”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal and recurring nature, necessary for a fair presentation of the results of the interim periods. Additionally, we evaluated subsequent events after the balance sheet date of ~~June 30, 2017~~March 31, 2018 through the financial statements issuance date. The results of operations for the ~~six-months~~three-months ended ~~June 30, 2017~~March 31, 2018 are not necessarily indicative of the results for the entire year ending December 31, ~~2017,~~2018, or for any other future interim or annual periods.

Our consolidated financial statements have been prepared assuming we will continue as a going-concern, and do not include any adjustments that might result if we were unable to do so, and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. However, we have concluded that there is substantial doubt about our ability to continue as a going concern. As of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, we had a working capital deficit due primarily to the classification of our 10¾% Series B Cumulative Exchangeable Redeemable Preferred Stock (the “Series B preferred stock”) as a current liability and the classification of our 12.5% Senior Secured Notes (the “Notes”) as a current liability. The Series B preferred stock became “mandatorily redeemable” and classified as a current liability when we failed to repurchase such stock on October 15, 2013. We discuss the classification of the Series B preferred stock as a current liability in greater detail under the heading “Redemption Date and Subsequent Accounting Treatment of the Preferred Stock” in Note 9 elsewhere in these Notes to the Unaudited Condensed Consolidated Financial Statements. Under Delaware law, our state of incorporation, the Series B preferred stock is deemed equity. Because the holders of the Series B preferred stock are not creditors, they do not have rights of, or remedies available to, creditors. Delaware law does not recognize a right of preferred stockholders to force redemptions or repurchases where the corporation does not have funds legally available. Currently, we do not have sufficient funds legally available to be able to redeem or repurchase the Series B preferred stock and its accumulated unpaid dividends. If we are successful in repaying or refinancing our Notes, and are able to generate legally available funds under Delaware law, we may be required to pay all or a portion of the accumulated preferred dividends and redeem all or a portion of the Series B preferred stock, to extent of the funds legally available. In addition, the Company is currently involved in litigation with some holders of the Series B preferred stock. See Note 6 elsewhere in these Notes to the Unaudited Condensed Consolidated Financial Statements for additional detail regarding the Series B preferred stock litigation. As further discussed below, both of these things, the classification of the Notes and the Series B preferred stock as current liabilities and the Series B preferred stock litigation could adversely affect our ability to continue as a going concern.

As discussed in Note 8, the Notes ~~matured~~became due on April 15, 2017. Cash from operations orand proceeds from the sale of assets ~~was~~and the FCC spectrum auction, which we discuss in greater detail under the heading “Federal Regulation of Radio and Television Broadcasting—Repurposing of Broadcast Spectrum for Other Uses by the FCC” in our Annual Report, were not sufficient to repay the Notes when they became due. We ~~are working~~have worked and continue to work with our advisors regarding a ~~team~~consensual recapitalization or restructuring of ~~financial and legal advisors in evaluating all options available~~our balance sheet, including through the issuance of new debt or equity to ~~us in executing a comprehensive recapitalization plan. These options, include, but are not limited to, selling certain non-core assets (whose net proceeds would be used~~raise the necessary funds to repay the Notes. The Series B preferred stock litigation and the foreign ownership issue we describe in greater detail below and under the heading “Our Continued Recapitalization and Restructuring Efforts—Foreign Ownership Issue” in our Annual Report have complicated our efforts at a ~~portion~~successful refinancing of ~~outstanding Notes), new financings (including debt, equity-linked securities and equity offerings), an exchange offer~~the Notes. The resolution of the recapitalization or restructuring of our balance sheet, the litigation with the purported holders of our ~~Notes (the “Noteholders”), with or without exit consents~~Series B preferred stock and the foreign ownership issue are subject to ~~amend the terms of the indenture under which the Notes were issued (the “Indenture”), use of cash on hand and~~several factors currently beyond our control. Our potential inability to effect a combination of these options. We have been pursuing the sale of certain non-core assets, including certain of our television stations and real estate assets. As further described in Note 11, on June 9, 2017 we sold our Los Angeles real estate assets and used the net proceeds to pay down a portion of the Notes. We expect to continue to use the net proceeds of other significant asset sales to repay a portionconsensual refinancing of the Notes, and ~~thereby deleverage our balance sheet. In connection with our recapitalization plan, we continue conversations with representatives of the Noteholders and the holders of~~successfully resolve the Series B preferred stock ~~regarding these matters. However, we cannot assure you that we~~litigation and the foreign ownership issue will be successful in our recapitalization efforts. We did not repay the Notes at their maturity, as a result of which there was an event of default under the Indenture on April 17, 2017 (April 17, 2017 being the payment date following the Saturday, April 15, 2017 maturity date). On April 17, 2017, we made the interest payment due on the Notes. The Notes willlikely continue to ~~earn interest at the current rate of 12.5% per year after the maturity date but we are not required to pay any default interest under the Indenture. As further described in Note 8, the Company~~have a material adverse effect on May 8, 2017 entered into a forbearance agreement (the “Forbearance Agreement”) with an ad hoc group of more than 75% of the Notes (the “Supporting Holders”). Pursuant to the Forbearance Agreement, the Supporting Holders agreed to forbear from exercising any of their rights and remedies under the Indenture under which the Notes were issued, with respect to certain defaults from the effective date of the Forbearance Agreement until the earliest to occur of (a) the occurrence of any Event of Termination (as defined in the Forbearance Agreement) and (b) May 31, 2017 at 12:01 a.m. New York City time. The Forbearance Agreement expired and has not been extended, however the Company has continued to make monthly interest payments on the Notes on the 15^th of each month and has also continued to pay the monthly legal fees and financial advisor due diligence fees of the Supporting Holders. Nonetheless, one or more Noteholders may seek to exercise various remedies against us, including foreclosing on our assets that constitute collateral under the Indenture.us.

The Company has incurred ~~$3.3 and $4.1~~$0.7 million ~~respectively~~ for the ~~three and six-months~~three-months ended ~~June 30, 2017,~~March 31, 2018, of recapitalization costs, primarily due to professional ~~fees related to the current process of evaluating all options available towards executing a comprehensive recapitalization plan.~~fees. Also included in these amounts are ~~the consent fees paid to the Supporting Holders~~

~~of the Notes who entered into the Forbearance Agreement with the Company, as well as~~ the legal and financial advisory fees incurred by the ~~Supporting Holders.~~ holders of the Notes.

In the event we are unsuccessful in these efforts and one or more Noteholders seek to exercise remedies against us or our assets, we may be required to seek protection under Chapter 11 of the U.S. Bankruptcy Code, among other things, in order to maximize the value of our company for all of our constituents. While we believe that a Chapter 11 filing may create an avenue to successfully execute on our strategy, such a filing may also have several negative consequences to our business, including the costs and negative publicity that surrounds such a filing, reduced advertising revenue due to the uncertainty surrounding the filing, the potential need to sell assets (including the equity of our subsidiaries that own our FCC licenses) under distressed circumstances and the risk that we are unable to execute on a successful plan of ~~reorganization.~~reorganization or restructuring.

Management has evaluated its cash requirements for the next twelve-month period after the date of the filing of this quarterly report on Form 10-Q and determined that it anticipates generating sufficient cash flows, together with cash on hand, to meet its obligations regarding ordinary course operating activities.

Management is responsible for evaluating whether there is substantial doubt about the organization’s ability to continue as a going concern and to provide related ~~footnote disclosures, in accordance with the going concern accounting standard adopted in 2016. Our~~disclosures. Although we expect to maintain cash on hand sufficient to meet our operating obligations, our inability to (i)obtain financing in adequate amounts and on acceptable terms necessary to operate our business, repay our Notes and redeem or refinance our Series B preferred stock; and (ii) obtain a favorable resolution to the Series B preferred stock ~~or finance future acquisitions~~litigation and the foreign ownership issue, negatively impacts our business, financial condition, results of operations and cash flows and raises substantial doubt about our ability to continue as a going concern. The financial statements do not include adjustments, if any, that might arise from the outcome of this uncertainty.

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update), which expresses the views of the SEC staff regarding the application of FASB Topic 740, Income Taxes, in the reporting period that includes December 22, 2017—the date on which the Tax Cuts and Jobs Act (the "Tax Legislation") was signed into law. SAB 118 provides guidance for entities under three scenarios:

Entities are to report the provisional amounts of the tax effects of the Tax Legislation in the first reporting period in which a reasonable estimate can be determined. SAB 118 further provides that the measurement period is complete when an entity’s accounting is complete and in no circumstances should the measurement period extend beyond one year from the enactment date. The Company may be able to complete the accounting for some provisions earlier than others. As a result, the Company may need to apply all three scenarios in determining the accounting for the Tax Legislation based on the information that is available. The ultimate impact of the Act on the Company’s consolidated financial statements and related disclosures for 2017 and beyond may differ from current estimates, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the Tax Legislation that differ from those presently contemplated. For additional information, see Note 14 to the financial statements in our Annual Report.

In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which clarifies certain aspects of certain not-yet-effective guidance on the recognition and measurement of financial assets and financial liabilities. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Entities with fiscal years beginning between December 15, 2017 and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018. Entities may early adopt these amendments for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted Update 2016-01. The Company is currently evaluating the effect the update will have on its financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,to allow a reclassification from accumulated other comprehensive income to retained earnings for certain tax effects resulting from the enactment of the Tax Legislation. The update is effective for annual periods beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted. The update is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the US federal corporate income tax rate in the Tax Legislation is recognized. The Company is currently evaluating the effect of this update and does not expect the new guidance to have a material impact on its financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718),to provide clarity and reduce cost, complexity, and diversity in practice when applying stock compensation guidance to a change to the terms or conditions of a share-based payment award. The update is effective prospectively for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company ~~is currently evaluating~~adopted the ~~effect~~new guidance in the ~~update will have~~first quarter of 2018 with no material impact on its financial statements.

In February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), to clarify the scope of guidance on the derecognition of nonfinancial assets and to provide guidance for partial sales of nonfinancial assets. The update is effective retrospectively or on a modified retrospective basis for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early application permitted in certain circumstances. The Company ~~is currently evaluating~~adopted the new guidance on January 1, 2018, using the modified retrospective transition method. The cumulative effect of initially applying the ~~update will have on its financial statements.~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles — Goodwill and Other (Topic 350)~~, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. ASU 2017-04 is required to be applied prospectively and will be effective for annual or interim impairment test in fiscal years beginning after December 15, 2019, with early adoption permitted. We have evaluated the impact and determined that applying this new ~~standard will not have a material~~guidance had no impact on ~~our financial position, results~~the opening balance of ~~operations and disclosures.~~accumulated deficit as of January 1, 2018.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805).. This new standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This update is effective prospectively for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. ~~Upon adoption, we will evaluate~~The Company adopted the ~~accounting implications for any acquisitions we may enter into.~~new guidance in the first quarter of 2018 with no material impact on its financial statements.

In October 2016, the FASB issued ASU No. 2016-16, – Income Taxes (Topic 740). ~~This new~~The standard ~~improves the accounting for~~requires that the income tax ~~consequences~~impact of intra-entity sales and transfers of ~~assets~~property, other than ~~inventory.~~inventory, be recognized when the transfer occurs. The ~~update is~~standard became effective ~~retrospectively for annual periods beginning after December 15, 2017~~January 1, 2018, and ~~in interim periods in that reporting period, with early adoption permitted.~~requires any deferred taxes not yet recognized on intra-entity transfers to be recorded to retained earnings under a modified retrospective approach. The ~~Company is currently evaluating the effect the update will~~implementation of this standard did not have an impact on ~~its consolidated~~our financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statements of Cash Flows (Topic 230). This new standard’s objective is to clarify how companies present and classify certain cash receipts and cash payments in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statements of Cash Flows (Topic 230) which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ~~This update is~~These updates are effective on a retrospective basis for annual and interim periods beginning after December 15, 2017 with early adoption permitted. ~~We are currently evaluating~~The Company adopted the new guidance in the first quarter of 2018 with no material impact ~~if any, that this new standard will have~~ on ~~our consolidated~~its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This new standard requires organizations that lease assets to recognize on the balance sheet the lease assets and lease liabilities for the rights and obligations created by those leases and

disclose key information about the leasing agreements. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of an interim or annual reporting period and must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. We are currently evaluating the impact that this new standard will have on our financial position and related disclosures and expect the impact on our assets and liabilities will be material due to the addition of right-of-use assets and lease liabilities; however the impact cannot currently be quantified.

In January 2016, the FASB issued ASU No. 2016-01, Accounting for Financial Instruments – Recognition and Measurement. The new guidance changes how entities measure equity investments and present changes in the fair value of financial liabilities. The new guidance requires entities to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value and as such these investments may be measured at cost. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. ~~We are currently evaluating~~The Company adopted the ~~impact, if any; however, we do not expect this update to have a~~new guidance in the first quarter of 2018 with no material impact on ~~our~~its financial ~~position and results of operations.~~statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).This new standard provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under U.S. GAAP. In July 2015, the FASB postponed the effective date of this standard. The standard is now effective for the first interim period within annual reporting periods beginning after December 15, 2017. In May 2016, the FASB issued accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations, licenses, and determining if a company is the principal or agent in a revenue arrangement. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, which is intended to make minor corrections and to improve and clarify the implementation guidance of Topic 606. The ~~Company currently expects~~new standard also requires expanded disclosures relating to ~~adopt~~ the ~~new~~nature, amount, timing, and uncertainty of revenue ~~standard in its first quarter of 2018~~ and ~~continues to evaluate the method of adoption and the impact of the provisions on our financial position and results of operations, if any.~~cash flows arising from contracts with customers. The ~~company has since~~Company implemented an evaluation tool to assist it in clearly determining the risks, materiality and complexities associated with its multiple revenue streams. The Company ~~expects to finalize~~finalized its ~~implementation and assess~~assessment of its impacts ~~in the third quarter 2017. Based~~and determined there was no material effect on ~~the Company’s on-going review,~~our financial position and results of operations nor do we ~~continue to not~~ expect ~~this update~~ to have a material impact on our financial ~~position or results~~statements in future periods. The timing and amount of ~~operations;~~revenue recognized based on the new standard is consistent with the revenue recognition policy under previous guidance, however, ~~our initial assessment is subject~~certain additional financial statement disclosures are now required, including additional disaggregated view of revenue. We have adopted the new standard effective January 1, 2018, using the modified retrospective transition method and comparative information has not been restated and continues to ~~change.~~

~~On December 23, 2004, in connection~~The Company adopted ASC 606 on January 1, 2018 using the modified retrospective transition method as the timing and amount of revenue recognized based on the new standard is consistent with the ~~closing~~revenue recognition policy under previous guidance and there was no material impact to our financial position or results of operations. The adoption of ASC 606 represents a change in accounting principle that more closely aligns revenue recognition with the delivery of the ~~merger agreement, dated October 5, 2004,~~Company's services and provides financial statement readers with ~~CBS Radio Media Corporation (formerly known as Infinity Media Corporation, “CBS Radio”), an indirect wholly-owned subsidiary~~enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of ~~CBS Corporation, Infinity Broadcasting Corporation~~promised services. The amount of ~~San Francisco (“Infinity SF”)~~revenue recognized and ~~SBS Bay Area, LLC, a wholly-owned subsidiary of SBS, pursuant~~reported reflects the consideration to which SBS acquired the FCC license of Infinity SF (the “CBS Radio Merger”), we issued to CBS Radio an aggregate of 380,000 shares of Series C convertible preferred stock, $0.01 par value per share (the “Series C preferred stock”). Each share of Series C preferred stock is convertible at the option of the holder into two fully paid and non-assessable shares of the Class A common stock. The shares of Series C preferred stock issued at the closing of the CBS Radio Merger are convertible into 760,000 shares of Class A common stock, subject to certain adjustments. In connection with the CBS Radio Merger, we also entered into a registration rights agreement with CBS Radio, pursuant to which CBS Radio may instruct us to file up to three registration statements, on a best efforts basis, with the SEC, providing for the registration for resale of the Class A common stock issuable upon conversion of the Series C preferred stock.

In connection with the issuance of the Series C preferred stock, we entered into a Stockholder Agreement, dated October 5, 2004, with CBS Radio and Mr. Alarcón. Pursuant to the terms of the Stockholder Agreement, CBS Radio was given a right of first negotiation with respect to any radio station that we control in the New York and Miami markets after the date of such agreement. The negotiation right is required to stay open for a period of ten (10) business days. In addition, CBS Radio was also given a right to match any offer received by us with respect to any Miami radio station. Such matching right expired one year after the date of the Stockholder Agreement.

holders have the same voting rights and powers as our Class A common stock on an as-converted basis, subject to certain adjustments. The Certificate of Designations for the Series C preferred stock does not contain a voting rights triggering event provision like the one found in the Certificate of Designations for the Series B preferred stock. Each holder of Series C preferred stock (i) has preemptive rights to purchase its pro rata share of any equity securities we may offer, subject to certain conditions, and (ii) may, at their option, convert each share of Series C preferred stock into two (2) shares of Class A common stock, subject to certain adjustments.

The terms of the Certificate of Designations for our Series C preferred stock limits our ability to (i) enter into transactions with affiliates and certain merger transactions and (ii) create or adopt any shareholders rights plan.

~~On August 8, 2016, CBS Radio entered into a Stock Purchase Agreement with~~ the Company ~~AAA Trust and Mr. Alarcón (the “Stock Purchase Agreement”)~~expects to sell and assign its rights related to its 380,000 shares of Series C preferred stock to the AAA Trust for $3.8 million. AAA Trust is a Florida trust, of which Mr. Alarcón is the trustee. Pursuant to the Stock Purchase Agreement, CBS Radio agreed to assign the rights under the registration rights agreement and Stockholder Agreement to AAA Trust, which now holds such registration rights. The parties closed on the Stock Purchase Agreement on August 18, 2016.

The rights of the Class A common stockholders and Class B common stockholders are identical except with respect to their voting rights and conversion provisions. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to ten votes per share. The Class B common stock is convertible to Class A common stock on a share-for-share basis at the option of the holder at any time, or automatically upon a transfer of the Class B common stock to a person or entity which is not a permitted transferee (as described in our Certificate of Incorporation). Holders of each class of common stock arebe entitled to receive ~~dividends~~in exchange for these services and ~~upon liquidation or dissolution, are~~ entitled ~~to receive~~under the contract. Substantially all ~~assets available for distribution to stockholders. Neither the holders~~deferred revenue is recognized within twelve months of the ~~Class A common stock nor~~payment date. To achieve this core principle, the holders of the Class B common stock have preemptive or other subscription rights, and there are no redemption or sinking fund provisions with respect to such shares. Each class of common stock is subordinate to our Series B preferred stock. The Series B preferred stock has a liquidation preference of $1,000 per share and is on parity with the Series C preferred stock with respect to dividend rights and rights upon liquidation, winding up and dissolution of SBS.

~~In July 2006, we adopted an omnibus equity compensation plan (the “Omnibus Plan”) in which grants of Class A common stock could be made to participants in any of~~Company applies the following ~~forms: (i) incentive stock options, (ii) nonqualified stock options, (iii) stock appreciation rights, (iv) stock units, (v) stock awards, (vi) dividend equivalents,~~five steps:

4) Allocate the transaction price to performance obligations in the contract, and ~~(vii) other stock-based awards.~~

The ~~Omnibus Plan authorized up to 350,000 shares of our Class A common stock~~following table summarizes revenue from contracts with customers for ~~issuance, subject to adjustment in certain circumstances. The Omnibus Plan provided that~~ the maximum aggregate number of shares of Class A common stock units, stock awards and other stock-based awards that may be granted, other than dividend equivalents, to any individual during any calendar year was 100,000 shares, subject to adjustments. The Omnibus Plan expired on July 17, 2016 and no further options can be granted under this plan.

Stock options have only been granted to employees or directors. Our stock options have various vesting schedules and are subject to the employees’ continuing service. A summary of the status of our stock options, as June 30, 2017 andthree-months ended March 31, 2018 and 2017 ~~and changes during the quarter ended June 30, 2017, is presented below~~ (in ~~thousands, except per share data and contractual life)~~thousands):

Weighted

Weighted

Average

Average

Aggregate

Remaining

Exercise

Intrinsic

Contractual

Shares

Price

Value

Life (Years)

Outstanding at March 31, 2017

408

$
4.32

Granted

—

—

Exercised

—

—

Forfeited

—

—

Outstanding at June 30, 2017

408

$
4.32

$
1,200

7.7

Exercisable at June 30, 2017

358

$
4.50

$
1,200

7.2

	Three-Months Ended
	March 31,
	2018		2017

Local, national and digital		28,628		27,897
Network		2,130		1,480
Special events		5,120		3,080
Barter		912		1,496
Other		1,661		1,410
Gross revenue		38,451		35,363
Less: Agency commissions and other		4,545		4,013
Net revenue		33,906		31,350

Local and digital revenues generally consist of advertising airtime sold in a station’s local market, our La Musica application or our websites either directly to the advertiser or through an advertiser’s agency. Local revenue includes local spot sales, integrated sales, sponsorship sales and paid-programming (or infomercials). National revenue generally consists of advertising airtime sold to agencies purchasing advertising for multiple markets. National sales are generally facilitated by an outside national representation firm, which serves as an agent in these transactions. Revenues from national advertisers are presented as net of agency commissions as this is the amount that the Company expects to be entitled to receive in exchange for these services and entitled to under the contract.

A contract for local, national and digital advertising exists only at the time commercial substance is present. For each contract, the Company considers the promise to air or display advertisements, each of which is distinct, to be the identified performance obligation. The ~~following table summarizes information about our stock options outstanding~~price as specified on a customer purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs as an advertisement airs or appears.

Network revenue generally consists of advertising airtime sold on AIRE Radio Networks platform by network sales staff.

A contract for network advertising exists only at the time commercial substance is present. For each contract, the Company considers the promise to air advertisements, each of which is distinct, to be the identified performance obligation. The price as specified on a customer purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs as an advertisement airs.

Special events revenue is generated from ticket sales and ~~exercisable~~event sponsorships, as well as profit-sharing arrangements by producing or co-producing live concerts and events promoted by radio and television stations.

The Company enters into Special Events contracts in which a customer may purchase a combination of advertising and services. These contracts include multiple promises that the Company evaluates to determine if the promises are separate performance obligations. Once the Company determines the performance obligations and the transaction price, including estimating the amount of variable consideration, the Company then allocates the transaction price to each performance obligation in the contract based on a relative stand-alone selling price method or using the variable consideration allocation exception if the required criteria are met. The corresponding revenues are recognized as the related performance obligations are satisfied, which may occur over time (i.e. term marketing agreement) or at ~~June 30, 2017 (in thousands, except~~a point in time (i.e. event commencement).

Barter sales agreements are used to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services.

A contract for barter advertising exists only at the time commercial substance is present. For each contract, the Company considers the promise to air or display advertisements, each of which is distinct, to be the identified performance obligation. The price as specified on a counterparty’s purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs as an advertisement airs or displays.

Other revenue consists of syndication revenue, subscriber revenue and other revenue. Syndication revenue is recognized from licensing various MegaTV content and is payable on a usage-based model. Subscriber revenue is payable in a per ~~share data~~subscriber form from cable and ~~contractual life):~~satellite providers. Other revenue consists primarily of renting available tower space or sub-channels.

The Company considers signed license or subscriber agreements to be the contract with a customer for the sale of syndicated or subscriber related content. For each contract, the Company considers making content available to the customer to be the identified performance obligation. The price as specified on a counterparty’s agreement, which is generally stated on a per user basis, is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar

Outstanding

Exercisable

Weighted

Weighted

Average

Weighted

Average

Remaining

Average

Vested

Unvested

Exercise

Contractual

Number

Exercise

Range of Exercise Prices
Options

Options

Price

Life (Years)

Exercisable

Price

$1.03 - 2.99

45

50

$
2.68

8.9

45

$
2.33

$3.00 - 4.99

273

-

3.21

8.1

273

3.21

$5.00 - 9.99

20

-

7.50

2.8

20

7.50

$10.00 - 49.99

20

-

24.03

1.0

20

24.03

358

50

$
4.32

7.7

358

$
4.50

circumstances. Revenue is recognized when control is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs on a month-to-month basis. Other revenues related to renting tower space are recognized in accordance with ASC 840 - Leases.

As part of ~~June 30, 2017,~~its consideration of the existence of contracts, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). Advertising contracts are for one year or less. In determining the transaction price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. In determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.

$0.2 million of local, national and digital revenue was recognized during the three months ended March 31, 2018 that was included in the unearned revenue balances at the beginning of the period. $0.1 million of ~~total unrecognized compensation costs related~~special events revenue was recognized during the three months ended March 31, 2018 that was included in the unearned revenue balances at the beginning of period. $0.1 million of barter revenue was recognized during the three months ended March 31, 2018 that was included in the unearned revenue balances at the beginning of period. Network and other revenue recognized in the same period from unearned revenue balances at the beginning of the period were not significant.

Transaction Price Allocated to ~~nonvested stock-based compensation arrangements granted under all of our plans.~~ the Remaining Performance Obligation

The ~~cost is~~Company has elected to use the optional exemption in ASC 606-10-50-14 with regard to disclosing balances associated with remaining performance obligations. Revenue expected to be recognized ~~over~~in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations, is not material.

Assets Recognized from the Costs to Obtain a ~~weighted average~~Contract with a Customer

ASC 606 requires that the Company capitalize incremental costs of obtaining a contract such as sales commissions. The guidance provides certain practical expedients that limit this requirement. The Company has elected to use the practical expedient in ASC 340-40-25-4 which allows us to recognize the incremental cost of obtaining a contract, such as sales commissions paid to our employees, as an expense when incurred if the amortization period of ~~approximately 1.2 years.~~

~~Our accumulated other comprehensive loss was comprised of accumulated gains and losses on a derivative instrument (interest rate swap)~~the asset that ~~qualifies for cash flow hedge treatment. Our total comprehensive income (loss) consisted of our net income (loss) and a gain on our interest rate swap for~~ the respective periods. The gain on the interest rate swap was shown net of taxes; however, there was no tax effect as a result of a full deferred tax asset valuation allowance related to the interest rate swap. The interest rate swap expired on January 3, 2017.

For the three-months ended June 30, 2017 and 2016, we reclassified from other comprehensive loss to interest expense less than $0.1 million and $0.1 million, respectively. During the three-months ended June 30, 2017 and 2016, weentity otherwise would have recognized ~~in other comprehensive income, net of taxes, an unrealized gain on derivative instrument of approximately $92 thousand and $51 thousand, respectively.~~

For the six-months ended June 30, 2017 and 2016, we reclassified from other comprehensive loss to interest expense less than $0.1 million and $0.1 million, respectively. During the six-months ended June 30, 2017 and 2016, we recognized in other comprehensive income, net of taxes, an unrealized gain on derivative instrument of approximately $102 thousand and $96 thousand, respectively.is one year or less.

Basic net ~~income (loss)~~loss per common share was computed by dividing net ~~income (loss)~~loss applicable to common stockholders by the weighted average number of shares of common stock and convertible preferred stock outstanding for each period presented, using the “if converted” method. Diluted net loss per common share is computed by giving effect to common stock equivalents as if they were outstanding for the entire period.

The following is a reconciliation of the shares used in the computation of basic and diluted net ~~income (loss)~~loss per share for the ~~three- and six-month~~three-month periods ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (in thousands):

	Three-Months Ended					Six-Months Ended				Three-Months Ended
	June 30,					June 30,				March 31,
	2017			2016		2017		2016		2018		2017
Basic weighted average shares outstanding		7,267			7,267		7,267		7,267		7,300		7,267
Effect of dilutive equity instruments		—			—		—		—		—		—
Dilutive weighted average shares outstanding		7,267	��		7,267		7,267		7,267		7,300		7,267
Options to purchase shares of common stock and other stock-based awards outstanding which are not included in the calculation of diluted net income per share because their impact is anti-dilutive		408			399		399		409		418		401

The following summary table presents separate financial data for each of our operating segments (in thousands):

	Three-Months Ended						Six-Months Ended						Three-Months Ended
	June 30,						June 30,						March 31,
	2017			2016			2017			2016			2018			2017
Net revenue:
Radio	$	31,279		$	31,429		$	59,503		$	59,954		$	29,251		$	28,224
Television		2,902			3,831			6,028			6,919			4,655			3,126
Consolidated	$	34,181		$	35,260		$	65,531		$	66,873		$	33,906		$	31,350
Engineering and programming expenses:
Radio	$	5,672		$	6,112		$	11,871		$	12,144		$	5,465		$	6,199
Television		1,146			1,474			3,564			3,604			1,266			2,418
Consolidated	$	6,818		$	7,586		$	15,435		$	15,748		$	6,731		$	8,617
Selling, general and administrative expenses:
Radio	$	14,932		$	11,327		$	28,068		$	24,803		$	12,157		$	13,136
Television		1,631			1,651			2,982			3,630			2,731			1,351
Consolidated	$	16,563		$	12,978		$	31,050		$	28,433		$	14,888		$	14,487
Corporate expenses:	$	2,793		$	2,549		$	5,237		$	5,542		$	2,963		$	2,444
Depreciation and amortization:
Radio	$	460		$	475		$	936		$	963		$	427		$	476
Television		559			584			1,118			1,247			537			559
Corporate		92			106			189			205			61			97
Consolidated	$	1,111		$	1,165		$	2,243		$	2,415		$	1,025		$	1,132
Gain on the disposal of assets, net of disposal costs:
Radio	$	(12,826	)	$	—		$	(12,826	)	$	(3	)	$	—		$	—
Television		—			—			(1	)		—			—			(1	)
Corporate		—			—			—			—			—			—
Consolidated	$	(12,826	)	$	—		$	(12,827	)	$	(3	)	$	—		$	(1	)
Recapitalization costs:
Radio	$	—		$	—		$	—		$	—		$	—		$	—
Television		—			—			—			—			—			—
Corporate		3,263			—			4,089			—			711			826
Consolidated	$	3,263		$	—		$	4,089		$	—		$	711		$	826
Other operating gains:
Other operating income:
Radio	$	—		$	—		$	—		$	—		$	—		$	—
Television		—			—			—			—			—			—
Corporate		—			(26	)		—			(26	)		(1	)		—
Consolidated	$	—		$	(26	)	$	—		$	(26	)	$	(1	)	$	—
Operating income (loss):
Radio	$	23,041		$	13,515		$	31,454		$	22,047		$	11,202		$	8,413
Television		(434	)		122			(1,635	)		(1,562	)		121			(1,201	)
Corporate		(6,148	)		(2,629	)		(9,515	)		(5,721	)		(3,734	)		(3,367	)
Consolidated	$	16,459		$	11,008		$	20,304		$	14,764		$	7,589		$	3,845
Capital expenditures:
Radio	$	111		$	897		$	313		$	1,279		$	225		$	202
Television		44			215			67			309			17			23
Corporate		19			63			70			164			6			51
Consolidated	$	174		$	1,175		$	450		$	1,752		$	248		$	276

We are calculating our effective income tax rate using a year-to-date income tax calculation, due to the full valuation allowance on the Company’s deferred tax assets, ~~other than the net operating loss carryforwards~~with exception of ~~our U.S. Licensing companies and the U.S. AMT~~indefinite lived deferred tax ~~credits.~~assets. In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or the entire deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax ~~assets,~~liabilities, projected future taxable income, and tax planning strategies in making this assessment. Due to the continued pre-tax operating losses reported through ~~Q2 2017,~~the first quarter of 2018, management has not changed its valuation allowance position as of ~~June 30, 2017,~~March 31, 2018, from December 31, ~~2016.~~2017.

Our income tax expense differs from the statutory federal tax rate of ~~35%~~21% and related statutory state tax rates primarily due to the tax amortization on certain indefinite-lived intangible assets that do not have any valuation allowance, offset by the deferred tax asset created from disallowed interest as a result of tax laws changes from the Tax Legislation, and other changes in the valuation allowance.

U.S. Federal jurisdiction and the ~~continued losses that cannot be realized due to~~jurisdictions of Florida, New York, California, Illinois, Texas and Puerto Rico are the ~~full valuation allowance. The gain on the sale of property in 2017 will be absorbed by operating losses for the current year, and as such, there is no incremental~~major tax ~~expense recorded for this transaction.~~

Wejurisdictions where we file ~~federal, state and local~~ income tax ~~returns in the United States and Puerto Rico.~~returns. The tax years that remain subject to assessment of additional liabilities by the ~~United States~~ federal, state and local tax authorities are ~~2013~~2010 through ~~2016.~~2017. The tax years that remain subject to assessment of additional liabilities by ~~state, local, and~~the Puerto Rico tax ~~authorities~~authority are 2012 through ~~2016.~~

From time to time, we continue to be subject to state income tax audits, including an active audit by a State tax authority (the “State”) for the income tax years from December 31, 2010 through 2013. The audit is ongoing; however, the state has issued a “consent to field adjustments”, for which a resulting liability is probable. The liability is related to franchise taxes. The company has accrued $1.0 million for the liability expected to be paid.2017.

Based on our evaluation, we have concluded that there are no ~~significant~~material uncertain tax positions requiring recognition in our consolidated financial statements as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016.~~2017.

We are subject to certain legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated. In our opinion, we do not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on our financial condition or operating results. However, the results of legal proceedings cannot be predicted with certainty. Should we fail to prevail in any of these legal matters or should all of these legal matters be resolved against us in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.

Persons claiming to own 94.16% of our Series B preferred stock filed a complaint against us in the Delaware Court of Chancery, in Cedarview Opportunities Master Fund, L.P., et al. v. Spanish Broadcasting System, Inc. (Del.Ct.Ch. C.A. No. 2017-0785-AGB), on November 2, 2017, which was subsequently amended. The amended complaint (the “Preferred Holder Complaint”) alleges counts for breach of contract, breach of the implied covenant of good faith and fair dealing and specific performance regarding the Certificate of Designations in connection with a forbearance agreement we entered into with certain Noteholders on May 8, 2017 (the “Forbearance Agreement”) and breach of our Third Amended and Restated Certificate of Incorporation (the “Charter”) and for a declaratory judgment regarding t he validity of a provision of the Charter regarding the foreign ownership issue we describe in greater detail under the heading “Our Continued Recapitalization and Restructuring Efforts—Foreign Ownership Issue” in our Annual Report. Specifically, it alleg es that the Forbearance Agreement (which expired on May 31, 2017) and certain payments pursuant thereto were barred by the Certificate of Designations due to the existence of a “Voting Rights Triggering Event” under the Certificate of Designations because, among other things, the forbearance agreement allegedly constituted a “de facto” extension or refinancing of the Notes. The Preferred Holder Complaint alleges that SBS breached the Charter by suspending certain rights of the Series B preferred stockholders, and that Section 10.4 of the Charter is overbroad and thus invalid as a matter of Delaware law. The complaint requests relief including, among other things, an order interpreting and enforcing the Certificate of Designations, preventing us from making any additional payments on the Notes and requiring us to redeem the Series B preferred stock at face value plus accrued dividends (or approximately $168.0 million as of March 31, 2018), as well as unspecified money damages and a declaration that

Section 10.4 of the Charter is invalid. This is the fourth lawsuit filed against us by holders or purported holders of our Series B preferred stock, the first three of which we successfully challenged and won. We believe these claims are without merit, and we intend to defend ourselves vigorously. We have filed a motion to dismiss these claims, for which oral argument was heard on April 12, 2018. However given the uncertainties inherent in litigation, there can be no assurances that we will be successful and win the current litigation.

The ~~company~~Company is periodically subject to state tax audits. ~~Currently,~~During the ~~company is under~~first quarter of 2018, the Company agreed to settle an audit by a State tax authority, which challenged the ~~State, which is challenging the company’s~~Company’s allocation of subsidiary capital and attributable liabilities, for the tax years from December 31, 2010 through 2013. The audit is ongoing; however, the state has issued a “consent to field adjustments”, for which a resulting liability is probable. The liability is related to franchise taxes. The company has accrued $1.0 million forCompany settled the liability for $0.3 million. This settlement also results in $0.2 million of additional taxes owed to another local jurisdiction that is expected to be ~~paid.~~paid during the third quarter of 2018. Tax years 2014 and later remain open and subject to audit.

The ~~company~~Company received an audit assessment (the “Assessment”) wherein it was proposed that the Company underpaid a local tax for the tax periods between June 1, 2005 and May 31, 2015 totaling $1,439,452 in underpaid tax, applicable interest and penalties. The Company disagrees with the assessment and related calculations but is developing a settlement strategy to discuss and pursue with the taxing jurisdiction with the hope of avoiding a lengthy litigation process. While we are uncertain as to whether the jurisdiction will accept this offer, an accrual of $391,000, based upon our current best estimate of probable loss, was charged to operations in the

second quarter of 2016. However, if the settlement offer is not accepted by the jurisdiction, the amount of the ultimate loss to the Company, if any, may equal the entire amount of the Assessment sought by the taxing jurisdiction.

We are a defendant in Aida Ivette Gutiérrez Ortiz et al. v. Municipio Autónomo de Bayamón, et al., a lawsuit involving the death of a man who was shot and killed at a concert co-promoted by us. Plaintiffs allege that we were negligent because we did not provide the necessary security to prevent the entry of firearms in the concert venue or its surrounding areas. Plaintiffs also allege we did not provide the necessary measures to control the venue and allege that we were negligent because we failed to provide the necessary medical assistance to aid the victim. Plaintiffs are seeking an estimated $3.5 million as indemnity. We intend to defend our self vigorously against this claim.

The Pretrial Conference was held on August 14, 2017 and a hearing to mark the evidence was scheduled for October 13th, but due to the passage of Hurricanes Irma and María, said hearing was cancelled until further notice. The trial dates previously scheduled for October 23 through November 2, 2017 were also cancelled until further notice from the Court. On February 16, 2018, the court held a status conference hearing to schedule the trial dates. The trial is set to begin on August 16, 2018 for a two day trial. At this stage, an estimate of loss cannot be made, however, we believe we have good defenses and it is not probable that the outcome of the litigation will result in a material loss or liability to us.

Cash and cash equivalents, receivables, as well as accounts payable and accrued expenses, and other current liabilities, as reflected in the consolidated financial statements, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of our other long-term debt instruments, approximate their carrying amounts as the interest rates approximate our current borrowing rate for similar debt instruments of comparable maturity, or have variable interest rates.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The fair value of the Notes is estimated using market quotes from a major financial institution taking into consideration the most recent activity and are considered Level 2 measurements within the fair value hierarchy. The fair value of the Series B cumulative exchangeable redeemable preferred stock was based upon a weighted average analysis using the Black-Scholes method, an income approach, and the yield method resulting in a Level 3 classification. The Black-Scholes method utilized an estimate of the fair value of the SBS equity, volatility, an estimate of the time to liquidity, and a risk free rate in the determination of the SBS preferred fair value. Key assumptions for the income and yield methods included the expected yield on preferred stock, accrued dividends, the principal amount of the Series B preferred stock, and an estimate of the time to liquidity. A discount for lack of marketability of the ~~Series B~~ preferred stock was also utilized in the analysis. The outcome of the Series B preferred stock litigation may impact the fair value of the Series B preferred stock may be impacted by the Company’s ability to monetize certain non-core assets to generate cash proceeds which we could use to repay, refinance and/or restructure our short term obligations, as well as its ability to be able to successfully recapitalize its balance sheet.going forward.

The fair value of the Series B Preferred Stock may be impacted by the potential monetization of non-core assets used to generate cash proceeds which the Company could use to repay, refinance and/or restructure its short term obligations, as well as its ability to be able to successfully recapitalize its balance sheet.17

The estimated fair values of our financial instruments are as follows (in millions):

		June 30, 2017				December 31, 2016					March 31, 2018				December 31, 2017
	Fair Value	Carrying		Fair		Carrying		Fair		Fair Value	Carrying		Fair		Carrying		Fair
Description	Hierarchy	Amount		Value		Amount		Value		Hierarchy	Amount		Value		Amount		Value
12.5% senior secured notes (note 8)	Level 2	$	264.7		279.9	$	275.0		275.5	Level 2	$	260.3		271.1	$	260.3		269.1
10 ³/4% Series B cumulative exchangeable redeemable preferred stock (note 9)	Level 3		160.7		49.1		155.8		60.5	Level 3		168.0		37.7		165.6		38.1
Promissory note payable	Level 3		—		—		4.6		4.7

On February 7, 2012 we closed our offering of $275 million in aggregate principal amount of our Notes, at an issue price of 97% of the principal amount. The Notes were offered solely by means of a private placement either to qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act, or to certain persons outside the United States pursuant to Regulation S under the Securities Act. We used the net proceeds from the offering, together with some cash on hand, to repay and terminate ~~our then existing~~the senior credit facility term loan, and to pay the transaction costs related to the offering. The Notes matured on April 15, 2017. Because we did not have sufficient cash on hand and did not generate sufficient cash from operations or asset sales, we did not repay the Notes at their maturity, as a result of which there was an event of default under the Indenture on April 17, 2017 (being the payment date following the Saturday, April 15, 2017

maturity date)~~, as a result the Company is in default of the covenant to repay the Notes at their maturity (which constitutes an event of default under the Indenture)~~. ~~See Note 1 elsewhere in these notes to the financial statements for additional detail regarding our recapitalization efforts and our failure to repay the Notes at maturity.~~

In addition, one of our limited liability companies had not become a guarantor when formed in 2013, as required by a covenant under the Indenture and therefore we were in default under the Indenture from the formation of the limited liability company until we subsequently submitted documentation to the Trustee to have the limited liability company become an additional guarantor in April 2017. We were also required to amend the limited liability operating agreement to permit the trustee to more adequately perfect its security interest in the equity of the company. This default has subsequently been cured.

~~On April 17, 2017, the Company timely made the interest payment due on the Notes. The Notes will continue to earn interest at the current rate of 12.5% per year after the maturity date.~~

On May 8, 2017, the Company, and certain of its subsidiaries entered into ~~the~~a Forbearance Agreement with ~~the Supporting Holders of~~certain Noteholders, owning more than 75% of the ~~$275 million~~principal amount of the outstanding Notes. ~~The Forbearance Agreement became effective on May 17, 2017, after the Company complied with the conditions precedent to its effectiveness. Pursuant to the Forbearance Agreement, the Supporting Holders~~These Noteholders agreed to forbear from exercising any of their rights and remedies under the ~~indenture under which the Notes were issued,~~Indenture, with respect to certain defaults from the effective date of the Forbearance Agreement until the earliest to occur of (a) the occurrence of any ~~Event~~event of ~~Termination (as defined in the Forbearance Agreement)~~termination and (b) May 31, ~~2017 at 12:01 a.m. New York City time.~~2017. As part of the Forbearance Agreement, the Company agreed to make monthly ~~(as opposed to semiannual)~~ interest payments of $2,864,583 on the Notes for the 30 day periods ending on May 15, 2017 and June 15, ~~2017.~~2017, rather than on a semi-annual basis as required by the Indenture. The Company also agreed to pay a consent fee to ~~the Supporting Holders~~these Noteholders equal to 0.35% of the principal amount of the Notes held by such parties and ~~also agreed~~ to pay the legal fees and financial advisor due diligence fees of ~~the Supporting Holders.~~these Noteholders. The Forbearance Agreement expired and has not been extended.

As of the date of the filing of ~~this Quarterly Report on Form 10Q,~~these financial statements, the Company had made all of the payments required to be made under the Forbearance Agreement and has continued to make ~~the~~ monthly interest payments on the Notes on the 15^th15th day of each month and continued to pay the monthly ~~fees~~ legal and financial advisor due diligence fees of these Noteholders.

At March 31, 2018, there was $260.3 million in principal amount of Notes outstanding. As a result, there has been and remains an event of default under the Supporting Holders. As previously discussed in Note 1 we continue to work with a team of financial and legal advisors in evaluating all options available to us in executing a comprehensive recapitalization plan and continue conversations with representatives of the Noteholders andIndenture which gives the holders of our Notes the ~~Series B preferred stock regarding these matters.~~

~~As further described in Note 11,~~right to demand repayment of the Notes and, subject to the terms of the Indenture, to foreclose on ~~June 9, 2017 we sold~~ our ~~Los Angeles~~assets that serve as collateral for the Notes. The collateral constitutes substantially all of our assets. We continue to pay interest on the Notes at their current rate of 12.5% per year on a monthly basis. We expect to sell our New York real estate ~~assets~~for $14.0 million in the third quarter of 2018, and ~~used~~we expect to use the net proceeds from the sale of the New York real estate to ~~pay down~~repay a portion of the ~~outstanding indebtedness on~~Notes. See Note 1 elsewhere in these financial statements for additional detail regarding our ~~Notes. On June 9, 2017, net proceeds of $10.3 million were delivered directly~~continued recapitalization and restructuring efforts and our failure to repay the ~~trustee in order to pay down our Notes. These monies were subsequently distributed to the Noteholders, by the trustee, on August 4, 2017.~~

~~A summary of the outstanding balance of our~~ Notes ~~as of March 31, 2017 and June 30, 2017, and changes during the quarter ended June 30, 2017, is presented below (in thousands and net of unamortized discount and deferred financing costs):~~at maturity.

The Notes accrue interest at a rate of 12.5% per year. Since April 17, 2017, interest has been payable ~~from time to time,~~ on demand. We have been paying interest monthly since that date. Additional interest will be payable at a rate of 2.00% per annum (the “Additional Interest”) on (i) the unpaid principal amount of the Notes plus (ii) any amount of Additional Interest payable but unpaid in any prior interest period, to be paid in cash, at our election, on any acceleration of the Notes and any redemption of the Notes; provided that no Additional Interest will be payable if, for the applicable fiscal period, either (a) we record positive consolidated station operating income for our television segment for the most recent twelve-month period ending either June 30 or December ~~31or~~31, or (b) our secured leverage ratio on a consolidated basis is less than 4.75 to 1.00.

Although our secured leverage ratio was greater than 4.75 to 1.00, we recorded positive consolidated station operating income for our television segment for the ~~twelve month~~most recent twelve-month period ending ~~June 30,~~December 31, 2017.

The Notes and the guarantees are secured on a first-priority basis by a security interest in certain of the Company’s and the guarantors’ existing and future tangible and intangible assets (other than Excluded Assets (as defined in the Indenture))., which constitutes substantially all of the Company’s assets. The Notes and the guarantees are structurally subordinated to the obligations of our non-guarantor subsidiaries. The Notes and guarantees are

senior to all of the Company’s and the guarantors’ existing and future unsecured indebtedness to the extent of the value of the collateral.

The Indenture permits us, under specified circumstances, to incur additional debt; however, the occurrence and continuance of the Voting Rights Triggering Event (as defined in ~~note~~Note 9 of the Notes to the Unaudited Condensed Consolidated Financial Statements) currently prevents us from incurring any such additional debt.

The Notes are senior secured obligations of the Company that rank equally with all of our existing and future senior indebtedness and senior to all of our existing and future subordinated indebtedness. Subject to certain exceptions, the Notes are fully and unconditionally guaranteed by each of our existing ~~and future~~ wholly owned domestic subsidiaries (which excludes (i) our existing and future subsidiaries formed in Puerto Rico (the “Puerto Rican Subsidiaries”), (ii) our future subsidiaries formed under the laws of foreign jurisdictions and (iii) our existing and future subsidiaries, whether domestic or foreign, of the Puerto Rican Subsidiaries or foreign subsidiaries) and our other domestic subsidiaries that guarantee certain of our other debt. The Notes and guarantees are structurally subordinated to all existing and future liabilities (including trade payables) of our ~~nonguarantor~~non-guarantor subsidiaries.

The Indenture ~~governing the Notes~~ contains covenants that, among other things, limit our ability and the ability of the guarantors to:

As a result of our failure to pay the Notes at maturity, an event of default under the Indenture has occurred and is continuing.

On October 30, 2003, we partially financed the purchase of a radio station with proceeds from the sale, through a private placement, of 75,000 shares of our 10 3/4% Series A cumulative exchangeable redeemable preferred stock, par value $0.01 per share, with a liquidation preference of $1,000 per share (the “Series A preferred stock”), without a specified maturity date. The gross proceeds from the issuance of the Series A preferred stock amounted to $75.0 million.

On February 18, 2004, we commenced an offer to exchange registered shares of our 10 3/4% Series B cumulative exchangeable redeemable preferred stock, par value $0.01 per share and liquidation preference of $1,000 per share for any and all shares of our outstanding unregistered Series A preferred stock. On April 5, 2004, we completed the exchange offer and exchanged 76,702 shares of our Series B preferred stock for all of our then outstanding shares of Series A preferred stock.

Holders of the Series B preferred stock have customary protective provisions. The Certificate of Designations governing the Series B preferred stock (the “Certificate of Designations”) contains covenants that, among other things, limit our ability to: (i) pay dividends, purchase junior securities and make restricted investments or other restricted payments; (ii) incur indebtedness, including refinancing indebtedness; (iii) merge or consolidate with other companies or transfer all or substantially all of our assets; and (iv) engage in transactions with affiliates. Upon a change of control, we will be

required to make an offer to purchase these shares at a price of 101% of the aggregate liquidation preference of these shares plus accumulated and unpaid dividends to, but excluding the purchase date.

We had the option to redeem all or some of the registered Series B preferred stock for cash on or after October 15, 2009 at 103.583%, October 15, 2010 at 101.792% and October 15, 2011 and thereafter at 100%, plus accumulated and unpaid dividends to the redemption date. On October 15, 2013, each holder of Series B preferred stock had the right to request that we repurchase (subject to the legal availability of funds under Delaware General Corporate Law) all or a portion of such holder’s shares of Series B preferred stock at a purchase price equal to 100% of the liquidation preference of such shares, plus all accumulated and unpaid dividends (as described in more detail below) on those shares to the date of repurchase. Under the terms of our Series B preferred stock, we are required to pay dividends at a rate of 10 3/4% per year of the $1,000 liquidation preference per share of Series B preferred stock. From October 30, 2003 to October 15, 2008, we had the option to pay these dividends in either cash or additional shares of Series B preferred stock. During October 15, 2003 to October 30, 2008, we increased the carrying amount of the Series B preferred stock by approximately $17.3 million for stock dividends, which were accreted using the effective interest method. Since October 15, 2008, we have been required to pay the dividends on our Series B preferred stock in cash.

On October 15, 2013, holders of shares of our Series B preferred stock requested that we repurchase 92,223 shares of Series B preferred stock for an aggregate repurchase price of $126.9 million, which included accumulated and unpaid dividends on these shares as of October 15, 2013. We did not have sufficient funds legally available to repurchase all of the Series B preferred stock for which we received requests and instead used the limited funds legally available to us to repurchase 1,800 shares for a purchase price of approximately $2.5 million, which included accrued and unpaid dividends. Consequently, a ~~“voting rights triggering event”~~“Voting Rights Triggering Event” occurred (the “Voting Rights Triggering Event”).

During the continuation of a Voting Rights Triggering Event, certain of the covenants summarized above become more restrictive by their terms including (i) a prohibition on our ability to incur additional indebtedness, (ii) restrictions on our ability to make restricted payments and (iii) restrictions on our ability to merge or consolidate with other companies or transfer all or substantially all of our assets. In addition, the holders of the Series B preferred stock have the right to elect two members to our Board of Directors. At our Annual Meeting of Stockholders in 2014, the holders of the Series B preferred stock nominated and elected Alan Miller and Gary Stone to serve as the Series B preferred stock directors who ~~have~~ remained on the ~~board since then.~~Board of Directors until their resignation on August 17, 2017. The holders of the Series B Preferred Stock have the right to elect two new directors to the Board of Directors to fill the seats vacated by Messrs. Miller and Stone for their unexpired terms at a special meeting of the holders of the Series B preferred stock. As of the date of these financial statements, the holders of the Series B preferred stock have not elected any new directors to fill the vacated seats. The two vacancies on the Board of Directors will remain unfilled until such time as the holders of the Series B preferred stock appoint two new directors.

The Voting Rights Triggering Event shall continue until (i) all dividends in arrears shall have been paid in full and (ii) all other failures, breaches or defaults giving rise to such Voting Rights Triggering Event are remedied or waived by the holders of at least a majority of the shares of the then outstanding Series B preferred stock. We do not currently have sufficient funds legally available to be able to satisfy the conditions for terminating the Voting Rights Triggering Event. The~~The~~ terms of our Series B preferred stock require us, in the event of a change of control, to offer to repurchase all or a portion of a holder’s shares at an offer price in cash equal to 101% of the liquidation preference of the shares, plus an amount in cash equal to all accumulated and unpaid dividends on those shares up to but excluding the date of repurchase. We do not currently have sufficient funds legally available to be able to satisfy the conditions for terminating the Voting Rights Triggering Event or for repurchasing the shares in the event of a change of control. During the continuation of the Voting Rights Triggering Event, the Indenture governing our Notes prohibits us from paying dividends or from repurchasing the Series B preferred stock.

We are currently in litigation with persons claiming to own 94.16% of our Series B preferred stock as described above in Note 6, Commitments and Contingencies.

In reviewing the Preferred Holder Complaint, we noted that if the allegations set forth in the Preferred Holder Complaint were correct, which we have not conceded, and the collective ownership of the outstanding Series B preferred stock by foreign entities (as defined below) exceeded 63 percent of the outstanding Series B preferred stock as stated in the Preferred Holder Complaint, then foreign entities would own well in excess of 25 percent of our equity in violation of the Communications Act of 1934, as amended (the “Communications Act”) without giving effect to the operative provisions of Article X of our Charter. Section 310(b) of the Communications Act prohibits foreign entities from holding in excess of 25 percent of the equity in the Company absent the affirmative consent of the FCC. In addition, we determined that the current ownership of the Series B preferred stock appeared to violate the foreign ownership restrictions set forth in the Charter. Article X of our Charter contains provisions governing foreign ownership of the capital stock of the Company and compliance with Section 310 of the Communications Act. These provisions of our Charter restrict foreign ownership in us to not more than 25 percent of the aggregate number of our shares of capital stock outstanding in any class or series entitled to vote on any matter. In addition, the last paragraph of Article X of the Charter provides that any transfers of the Company’s equity securities that would either violate (or would result in a violation of) the Communications Act or that required prior approval of the FCC are “ineffective.” As a result, in reviewing the Preferred Holder Complaint, we believed that certain of those transfers, when attempted, appear to have been in contravention of the Charter and the Communications Act, and were therefore void as a legal matter when they were attempted, if this provision is given effect. In addition, to the extent that those transactions required prior FCC approval or, if given effect, would have placed the Company in violation of the foreign ownership restrictions set forth in the Communications Act, those transactions were ineffective and void by operation of the Charter, and are therefore deemed to have never occurred.

Given the information that was disclosed to us in the Preferred Holder Complaint regarding the purported ownership of a majority of the Series B preferred stock by foreign entities, we were required to take immediate remedial action in order to ensure that any violations of the Communications Act and our Charter resulting from that ownership did not adversely affect our FCC broadcast licenses and ability to continue our business operations. Accordingly, on November 28, 2017, consistent with our obligations and authority provided to us under the Communications Act and by Article X of our Charter, we notified holders of our Series B preferred stock that we were suspending all rights, effective immediately, of the holders of the Series B preferred stock, other than their right to transfer their shares to a citizen of the United States.

Additionally, on November 13, 2017, the Company filed a notification with the FCC to apprise the FCC of the possible non-compliance with the Communications Act’s limits on foreign ownership. On December 4, 2017, the Company also filed a petition with the FCC for declaratory ruling with respect to the potential excess foreign ownership. The FCC responded to the petition by sending a letter to the Company detailing the information the FCC would need regarding the identities and nature of the purported foreign ownership of the Series B preferred stock to make a determination regarding the Company’s petition and establishing a deadline for the disclosure of that information. The purported Series B preferred stockholders were therefore required to provide to the Company sufficient information about the extent and nature of their foreign ownership to enable the Company to supplement the petition for declaratory ruling with this additional information. On March 23, 2018, counsel for the purported holders of most of the Series B preferred stock filed a letter with the FCC supplying a significant portion of the information requested. The Company has reviewed this information in order to determine whether it is complete, true and correct, as required by the FCC’s rules, and has requested some additional information from the Series B preferred stockholders. The Company’s petition therefore remains pending before the FCC, and cannot be acted upon until complete ownership information is submitted and has been certified by the Company as true and correct. In addition, on March 26, 2018, we issued a press release and filed a Current Report on Form 8-K with the SEC that disclosed the foreign ownership issue we summarize above, in part, to warn innocent investors of possible attempted, fraudulent transfers of the Series B preferred stock and our request to The Depository Trust Company (“DTC”) to suspend trading in the Series B preferred stock pending the resolution of who validly owns these shares, among other things. Subsequent to that press release, we believe, based on conversations with DTC, that DTC will not impose a global lock and chill on Series B preferred stock held by its participants. We provide additional information regarding the foreign ownership issue under the heading “Our Continued Recapitalization and Restructuring Efforts—Foreign Ownership Issue” in our Annual Report.

As of the date of these financial statements, there remain genuine questions regarding valid ownership, or good title, to the Series B preferred stock by these foreign investors. As a result, we intend to remain vigilant regarding compliance with the Communications Act and our Charter and will continue to evaluate information provided to us by the purported holders of the Series B preferred stock. Because we have not yet received all of the requisite information from the purported holders, we have been unable to effectively determine whether to withdraw the suspension of their rights as owners of such preferred stock or the extent of any additional remedial action by the Company that may be necessary.

Under the terms of our Series B preferred stock, the holders of the outstanding shares of the Series B preferred stock are entitled to receive, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor, dividends on the Series B preferred stock at a rate of 10 ¾% per year, of the $1,000 liquidation preference per share. All dividends are cumulative, whether or not earned or declared, and are payable quarterly in arrears on specified dividend payment dates. While the Voting Rights Triggering Event continues, we cannot pay dividends on the Series B preferred stock without causing a breach of covenants under the Indenture governing our Notes.

As of ~~June 30, 2017,~~March 31, 2018, the aggregate cumulative unpaid dividends on the outstanding shares of the Series B preferred stock was approximately ~~$70.2~~$77.5 million, which is accrued on our condensed consolidated balance sheet as 10 ¾% Series B cumulative exchangeable redeemable preferred stock.

Prior to October 15, 2013, the Series B preferred stock was considered “conditionally redeemable” because the redemption of the shares of Series B preferred stock was contingent on the Series B preferred stockholders requesting that their Series B preferred stock be repurchased on October 15, 2013. On October 15, 2013, almost all of the holders of the Series B preferred stock requested that we repurchase their shares of Series B preferred stock. As a result of their request, we assessed and determined that, under applicable accounting principles, the contingency had occurred, and the Series B preferred stock now met the definition of a

~~“mandatorily~~ “mandatorily redeemable” instrument under Accounting Standards Codification 480 “Distinguishing Liabilities from Equity” (“ASC 480”). Although under Delaware law the Series B preferred stock is deemed equity, under ASC 480, if an instrument changes from being “conditionally redeemable” to “mandatorily redeemable,” then the financial instrument should be reclassified as a liability.

In addition, the Series B preferred stock will be measured at each reporting date as the amount of cash that would be paid pursuant to the contract, had settlement occurred on the reporting date, recognizing the resulting change in that amount from the previous reporting date as interest expense. Therefore, the accruing quarterly dividends of the Series B preferred stock is being recorded as interest expense (i.e. “Dividends on Series B preferred stock classified as interest expense”).

On January 4, 2016, the Company completed an asset exchange with International Broadcasting Corp. under which the Company agreed to exchange certain assets used or useful in the operations of WIOA-FM, WIOC-FM, and WZET-FM in Puerto Rico for certain assets used or useful in the operations of WTCV (DT), WVEO (DT), and WVOZ (TV) in Puerto Rico previously owned and operated by International Broadcasting Corp.

~~The asset exchange is being accounted for as a non-monetary exchange in accordance with ASC-845~~ ~~Nonmonetary Transactions, as the Company did not acquire any significant processes to meet the definition of a business in accordance with ASC 805~~ ~~Business Combinations~~. As the transaction involved significant monetary consideration, the Company recorded the exchange at fair value. The fair value of the assets received in the asset exchange was $2.9 million, as determined by an independent third party valuation. In addition, the Company paid $1.9 million in cash which we attribute to the value of the acquired television spectrum. Subsequently, we filed an application and participated in the FCC’s Broadcast Incentive Auction with our Puerto Rico television stations. As a result of the fair value assessment of the assets exchanged, the difference in exchanged fair values of $1.8 million was deemed attributable to the acquired television spectrum and was recorded on the balance sheet under FCC licenses. The cash proceeds of $4.7 million for the sale of the spectrum were received from the FCC on July 21, 2017. The Company has 90 days to relinquish the spectrum to the FCC, during which time the Company will continue to control and operate the asset. The gain on the sale of the spectrum will be recognized once the asset is relinquished to the FCC. In accordance with the financial gain to be recognized in a subsequent period during 2017, the tax gain will be recognized in the same period during the year and will be partially offset with a valuation allowance release.

During 2016, the Company entered into a listing ~~agreements~~agreement with ~~brokers~~a broker to sell ~~two buildings~~a building and related improvements in New York City, ~~and Los Angeles~~ which ~~are~~is part of our radio segment. The ~~two properties have~~property has been reclassified from ~~land,~~ building and building improvements, as well as furniture and fixtures to assets held for sale as these assets were approved for immediate sale in their present condition, ~~are~~were expected to be sold within one year and management iswas actively working to locate buyers for ~~these buildings~~this building and related ~~improvements . As~~improvements.

Pursuant to an agreement entered into by the Company, as of ~~December 31, 2016,~~September 12, 2017, with 26 W. 56 LLC, the ~~land, buildings and related improvements had~~Company expects to sell its New York facilities with a ~~net book~~carrying value of ~~$1.4 million.~~

~~On June 9, 2017, we closed on~~$0.4 million for $14.0 million, exclusive of closing costs, and is expected to close during the ~~sale~~third quarter of our Los Angeles facilities which had carrying values of $0.9 million of land and $0.1 million of property and equipment. These facilities are where we currently maintain our Los Angeles radio operations. We will continue to maintain our radio operations at the property pursuant to a separate office lease agreement which extends for a period of up to 12 months after the closing date and the Company has the option to unconditionally exit the lease by providing 30 days’ notice to the lessor. In accordance with ASC-840 ~~Leases, the Company has reviewed the sale and lease agreement and concluded that the two agreements qualify for accounting as a normal leaseback. As such, the~~2018. The Company will ~~be able to recognize the gain on the sale~~repay a portion of the ~~Los Angeles facility in~~outstanding Notes with the current reporting period and treat the office lease agreement as a separate operating lease entered into in the ordinary course of business. The purchase price under the agreement was $14.7 million from which the Company recognized a gain of $12.8 million,resulting net ~~of closing costs. Additionally, the sale of the Los Angeles facilities resulted in net~~ proceeds, ~~of $10.3 million to the Company,~~ as defined by the ~~Indenture~~indenture governing our ~~outstanding~~ Notes ~~which is~~(the “Indenture”). The net proceeds are calculated differently than the ~~recognized~~ gain ~~of $12.8 million~~that will be recognized for financial reporting ~~purposes. In~~purposes at the time of closing.

As related to the New York asset sale, and in order to arrive at net proceeds as defined by the Indenture, the Company is permitted to hold back certain amounts related to taxes, relocation expenses and capital expenditures that are expected to become payable in the future. The net proceeds ~~were~~will be used to repay a portion of the outstanding indebtedness on our Notes.

The $1.8 million Puerto Rico television spectrum for which the Company has received the cash proceeds of $4.7 million, described in note 10, is expected to be relinquished in its present condition during the fourth quarter 2017.

A summary of assets held for sale as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 is as follows (in thousands):

		June 30,		December 31,		March 31,		December 31,
Description		2017		2016		2018		2017
Land	$	—	$	850
Property and equipment, net		409		527	$	409	$	409
FCC licenses (Puerto Rico television spectrum)		1,764		—
Assets held for sale	$	2,173	$	1,377	$	409	$	409

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a leading Spanish-language media and entertainment company with radio and television operations, together with live concerts and events, mobile, digital and interactive media platforms, which reach the growing U.S. Hispanic population, including Puerto Rico. We produce and distribute original Spanish-language content, including radio programs, television shows, music and live entertainment through our multi-media platforms. We operate in two reportable segments: radio and television.

We own and operate radio stations located in six of the eight most populous Hispanic markets in the United States: Los Angeles, New York, Puerto Rico, Chicago, Miami and San Francisco. The Los Angeles and New York markets have the largest and second largest Hispanic populations and are also the largest and second largest radio markets in the United States measured by advertising revenue, respectively. We format the programming of each of our radio stations to capture a substantial share of the Hispanic audience in their respective markets. The U.S. Hispanic population is diverse, consisting of numerous identifiable ethnic groups from many different countries of origin, and each ethnic group has its own musical and cultural heritage. Since the music, culture, customs and Spanish dialects vary from one radio market to another, we strive to maintain familiarity with the musical tastes and preferences of each of the various Hispanic ethnic groups. To accommodate and monetize such diversity, we customize our programming to match the local preferences of our target demographic audience in each market we serve. In addition to our owned and operated radio stations, we have our AIRE Radio Networks with over 250 affiliate radio stations serving ~~over 75~~85 of the top 100 U.S. Hispanic markets, including ~~all~~47 of the top 3050 Hispanic markets. AIRE Radio Networks currently covers ~~93%~~94% of the coveted U.S. Hispanic market. Our AIRE Radio Networks reach over ~~17.0~~17.4 million listeners in an average week with our targeted networks. For the ~~six-months~~three-months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ our radio ~~segment generated 91% and 90%, respectively, of our consolidated net~~ revenue ~~which~~ was generated primarily from the sale of local, national, and network ~~advertising.~~advertising, and our radio segment generated 86% and 90% of our consolidated net revenue, respectively.

Our television stations and related affiliates operate under the “MegaTV” brand. We broadcast via our owned and operated television stations in South Florida, Houston and Puerto Rico through programming and/or distribution agreements, including nationally on a subscriber basis, which allow us to serve markets representing over 3.5 million Hispanic households. We have created a unique television format which focuses on entertainment, current events and variety with high-quality content. Our programming is formatted to capture a larger share of the U.S. Hispanic audience by focusing on our core strengths as an “entertainment” company, thus offering a new alternative compared to the traditional Hispanic television channels. MegaTV’s programming is based on a strategy designed to showcase a combination of programs, ranging from televised radio-branded shows to general entertainment programs, such as music, celebrity, debate, interviews and personality based shows. As part of our strategy, we have incorporated certain of our radio on-air personalities into our television programming. In addition, we have included interactive elements in our programming to complement our Internet websites. We produce over 7050 hours of original programming per week. For the ~~six-months~~three-months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ our television revenue was generated primarily from the sale of local and national advertising and paid ~~programming and~~programming. Our television segment generated 9%14% and 10% of our consolidated net revenues, respectively.

As part of our operating business, we also maintain multiple Spanish and bilingual websites, including www.lamusica.com,, Mega.tv and various station websites that provide content related to Latin music, entertainment, news and culture, as well as the LaMusica mobile ~~app.~~application. The LaMusica mobile ~~app~~application is a music and entertainment video and audio ~~app,~~application, that programs an extensive series of short form videos, simultaneously live streams our radio stations’, includes hundreds of curated playlists and has tools that enable users to personalize their mobile radio streaming experience. The new video enhancements to our mobile ~~app~~application significantly enhance the audience’s engagement level and increases the reach of our mobile offering. In addition, we produce live concerts and events in the United States and Puerto Rico. Concerts generate revenue from ticket sales, sponsorship and promotions, raise awareness of our brands in the surrounding communities and provide our advertising partners additional opportunities to reach their target audience.

We have not repaid our outstanding Notes since they became due on April 17, 2017, and we continue to evaluate all options available to refinance the Notes. While we assess how to best achieve a successful refinancing of the Notes, we have continued to pay interest on the Notes, payments that a group of investors purporting to own our Series B preferred stock have challenged through the institution of litigation in the Delaware Court of Chancery as described in Note 6, Commitments and Contingencies, of the Notes to the Unaudited Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. The complaint filed by these investors revealed a purported foreign ownership of our Series B preferred stock, which we are actively addressing, including before the Federal Communications Commission (the “FCC”) in order to protect our broadcast licenses. Our refinancing efforts have been made more difficult and complex by the Series B preferred stock litigation and foreign ownership issue. We provide more information about each of these items under the headings “Our Continued Recapitalization and Restructuring Efforts;” “Special Note Regarding Forward-Looking Statements” and “Risk Factors— Risks Related to Our Indebtedness and Preferred Stock” in our Annual Report.

The following discussion provides a brief description of certain key items that appear in our consolidated financial statements and general business factors that impact these items.

Our net revenue is primarily derived from the sale of advertising airtime to local, national and network advertisers. Net revenue is gross revenue less agency commissions, which are generally 15% of gross revenue.

Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listenership/viewership levels. Each station broadcasts a predetermined number of advertisements per hour with the actual number depending upon the format of a particular station and any programming strategy we are utilizing to attract an audience. The number of advertisements we decide to broadcast hourly is intended to maximize the station’s revenue without negatively impacting its audience listener/viewer levels. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of the day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year.

Our net revenue is also affected by general economic conditions, competition and our ability to improve operations at our market clusters. Seasonal revenue fluctuations are also common in the broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Our net revenue is typically lowest in the first calendar quarter of the year.

In addition to advertising revenue, we also generate revenue from barter sales, special events revenue, ~~interactive revenue, syndication revenue, subscriber revenue~~ and other revenue.

Our operating expenses consist primarily of (1) engineering and programming expenses, (2) selling, general and administrative expenses and (3) corporate expenses.

We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our market clusters. In our pursuit to control our operating expenses, we work closely with our local station management and vendors.

Comparison Analysis of the Operating Results for the Three-Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~

The following summary table presents financial data for each of our operating segments (in thousands):

	Three-Months Ended						Three-Months Ended
	June 30,						March 31,
	2017			2016			2018			2017
Net revenue:
Radio	$	31,279			31,429		$	29,251		$	28,224
Television		2,902			3,831			4,655			3,126
Consolidated	$	34,181			35,260		$	33,906		$	31,350
Engineering and programming expenses:
Radio	$	5,672			6,112		$	5,465		$	6,199
Television		1,146			1,474			1,266			2,418
Consolidated	$	6,818			7,586		$	6,731		$	8,617
Selling, general and administrative expenses:
Radio	$	14,932			11,327		$	12,157		$	13,136
Television		1,631			1,651			2,731			1,351
Consolidated	$	16,563			12,978		$	14,888		$	14,487
Corporate expenses:	$	2,793			2,549		$	2,963		$	2,444
Depreciation and amortization:
Radio	$	460			475		$	427		$	476
Television		559			584			537			559
Corporate		92			106			61			97
Consolidated	$	1,111			1,165		$	1,025		$	1,132
Gain on the disposal of assets, net of disposal costs:
Radio	$	(12,826	)	$	—		$	—		$	—
Television		—			—			—			(1	)
Corporate		—			—			—			—
Consolidated	$	(12,826	)	$	—		$	—		$	(1	)
Recapitalization costs:
Radio	$	—		$	—		$	—		$	—
Television		—			—			—			—
Corporate		3,263			—			711			826
Consolidated	$	3,263		$	—		$	711		$	826
Other operating gains:
Other operating income:
Radio	$	—		$	—		$	—		$	—
Television		—			—			—			—
Corporate		—			(26	)		(1	)		—
Consolidated	$	—		$	(26	)	$	(1	)	$	—
Operating income (loss):
Radio	$	23,041		$	13,515		$	11,202		$	8,413
Television		(434	)		122			121			(1,201	)
Corporate		(6,148	)		(2,629	)		(3,734	)		(3,367	)
Consolidated	$	16,459		$	11,008		$	7,589		$	3,845

The following summary table presents a comparison of our results of operations for the three-months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (in thousands). Various fluctuations in our results are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.

	Three-Months Ended						Three-Months Ended
	June 30,						March 31,
	2017			2016			2018			2017
Net revenue	$	34,181		$	35,260		$	33,906		$	31,350
Engineering and programming expenses		6,818			7,586			6,731			8,617
Selling, general and administrative expenses		16,563			12,978			14,888			14,487
Corporate expenses		2,793			2,549			2,963			2,444
Depreciation and amortization		1,111			1,165			1,025			1,132
Gain on disposal of assets, net of disposal costs		(12,826	)		—			—			(1	)
Recapitalization costs		3,263			—			711			826
Other operating gains		—			(26	)
Other operating income								(1	)		—
Operating income		16,459			11,008			7,589			3,845
Interest expense, net		(9,328	)		(10,053	)		(8,138	)		(9,987	)
Dividends on Series B preferred stock classified as interest expense		(2,433	)		(2,434	)		(2,433	)		(2,433	)
Income tax expense		2,131			2,300			387			2,263
Net income (loss)		2,567			(3,779	)
Net loss								(3,369	)		(10,838	)

The ~~decrease~~increase in our consolidated net revenues of ~~$1.1~~$2.6 million or 3%8% was due to ~~decreases~~increases in net revenue in both of our radio ~~segment~~ and television ~~segments’ net revenues.~~segments. Our radio segment net revenues ~~decreased $0.2~~increased $1.0 million or ~~less than 1%~~4%, due to ~~decreases~~increases in ~~national~~local, network and ~~local~~special events revenue, which were partially offset by ~~increases~~decreases in ~~special events.~~national and barter sales. Our local sales ~~decreased~~increased in our ~~Los Angeles, Chicago,~~ Puerto Rico and ~~New York~~Los Angeles markets, while our national sales decreased in our ~~Los Angeles,~~ New York ~~Puerto Rico~~ and ~~Chicago~~San Francisco markets. Our special events revenue increased primarily in our ~~San Francisco market.~~Puerto Rico and Los Angeles markets, mainly due to an additional event held in Puerto Rico. This additional event was a new event that was originally scheduled to occur in 2017 but was postponed due to the effects of Hurricane Maria. The increase in Los Angeles was primarily due to better event results than in the previous year. Our television segment net revenues ~~decreased~~increased by ~~$0.9~~$1.5 million or ~~24%~~49%, due to the ~~decreases~~increases in ~~local sales.~~special events revenue from the performance of a new event.

The decrease in our consolidated engineering and programming expenses of ~~$0.8~~$1.9 million or ~~10%~~22% was due to the decreases in expenses in both of our radio and television ~~segments’ expenses.~~segments. Our radio segment expenses decreased ~~$0.5~~$0.7 million or 7%12%, mainly due to ~~a decrease~~decreases in ~~transmitter rents, programming compensation~~digital development and ~~benefits, and music license fees.~~content production costs related to the LaMusica application. The television segment expenses decreased by ~~$0.3~~$1.2 million or ~~22%~~48% primarily due to ~~decreases in programming related production costs and~~ the increase of production tax credits in Puerto ~~Rico.~~Rico and reductions in originally produced programming costs.

The increase in our consolidated selling, general and administrative expenses of approximately ~~$3.6~~$0.4 million or ~~28%~~3% was due to ~~an increase~~increases in our television segment’s expenses offset by decreases in our radio segment’s expenses. Our radio segment expenses ~~increased~~decreased approximately ~~$3.6~~$1.0 million or ~~32%~~7%, mainly due to ~~increases~~the impact of a legal settlement and decreases in special events, ~~taxes~~barter, and licenses, barter, legal and Aire network related affiliate compensation expenses partially offset by reductions in severance expenses. Our television segment expenses remained flat and decreased less than $0.1 million or 1%, primarily due decreases in barterbad debt expenses offset by increases in professional fees, ~~associated with the acquisition of the Puerto Rico production tax credits.~~advertising and commissions expenses. Our television segment expenses increased $1.4 million or 102%, primarily due to increases in special event related expenses.

The increase in corporate expenses of ~~$0.2~~$0.5 million or ~~10%~~21% was mostly due to ~~increases in~~an increase related to legal fees, compensation and benefits, and ~~professional fees.~~

~~The increase from the gain on sale of assets of $12.8 million was due to the sale of our Los Angeles facility in June 2017.~~travel related expenses.

The Company incurred ~~$3.3~~$0.7 million of recapitalization costs, a decrease of $0.1 million, primarily due to professional fees related to the current process of evaluating all options available towards executing a comprehensive recapitalization plan, as described in Note 1, Basis of Presentation,

of the Notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Also included in these amounts are the ~~consent fees paid to the Supporting Holders of the Notes who entered into the Forbearance Agreement with the Company, as well as the~~ legal and financial advisory fees incurred by the Supporting Holders.

The increase in operating income of ~~$5.5~~$3.7 million or ~~50%~~97% was primarily due to the ~~gain on the sale of our Los Angeles facility partially offset by the decrease~~increase in net revenues and the ~~increase~~decreases in operating expenses and ~~increase in~~ recapitalization costs.

The decrease in in interest expense of ~~$0.7~~$1.8 million or 7%19% was primarily due to the decrease in amortization of the originally issued discount and deferred financing costs being amortized and recorded as interest expense over the term of the Notes, which expired on April 15, ~~2017.~~2017, as well as, a decreased amount of monthly interest payments based on a lower principal amount due on the 12.5% Senior Secured Notes.

The decrease in income tax expenses of ~~$0.2~~$1.9 million or 7%83% was primarily a result of a reduction of the partial release of valuation allowance against the US PR Licensing NOLs in 2017. The gain on the sale of property in 2017 will be absorbed by operating losses for the current year, and as such, there is no incrementaldeferred tax ~~expense recorded for this transaction.~~

~~The increase in net income was primarily~~liabilities due to the ~~increased operating income and decrease in~~generation of an indefinite lived deferred tax asset related to interest ~~and income tax expense.~~

~~Comparison Analysis~~disallowance as a result of the ~~Operating Results for the Six-Months Ended June 30, 2017~~Tax Cuts and ~~2016~~

~~The following summary table presents financial data for each of our operating segments (in thousands):~~

Six-Months Ended

June 30,

2017

2016

Net revenue:

Radio
$
59,503

59,954

Television

6,028

6,919

Consolidated
$
65,531

66,873

Engineering and programming expenses:

Radio
$
11,871

12,144

Television

3,564

3,604

Consolidated
$
15,435

15,748

Selling, general and administrative expenses:

Radio
$
28,068

24,803

Television

2,982

3,630

Consolidated
$
31,050

28,433

Corporate expenses:
$
5,237

5,542

Depreciation and amortization:

Radio
$
936

963

Television

1,118

1,247

Corporate

189

205

Consolidated
$
2,243

2,415

Gain on the disposal of assets, net of disposal costs:

Radio
$
(12,826
)

(3
)
Television

(1
)

—

Corporate

—

—

Consolidated
$
(12,827
)

(3
)
Recapitalization costs:

Radio
$
—

—

Television

—

—

Corporate

4,089

—

Consolidated
$
4,089

—

Other operating gains:

Radio
$
—

—

Television

—

—

Corporate

—

(26
)
Consolidated
$
—

(26
)
Operating income (loss):

Radio
$
31,454

22,047

Television

(1,635
)

(1,562
)
Corporate

(9,515
)

(5,721
)
Consolidated
$
20,304

14,764

~~The following summary table presents a comparison of our results of operations for the six-months ended June 30, 2017 and 2016 (in thousands)~~Jobs Act (the "Tax Legislation"). ~~Various fluctuations in our results are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.~~

The decrease in our consolidated net revenues of $1.3 million or 2% was due to decreases in both our radio and television segments’ net revenues. Our radio segment net revenues decreased $0.4 million or 1%, due to decreases in national, network, and local revenue, which were partially offset by increases in special events and digital sales. Our local sales decreased in our Los Angeles, Chicago, New York and Puerto Rico markets, while our national sales decreased in our Los Angeles, Chicago, New York and Puerto Rico markets. Our special events revenue increased primarily in our San Francisco and Los Angeles markets. Our television segment net revenues decreased by $0.9 million or 13%, due to a decrease in local sales offset by an increase in national sales.

The decrease in our consolidated engineering and programming expenses of $0.3 million or 2% was due to the increases in both our radio and television segments’ expenses. Our radio segment expenses decreased $0.3 million or 2%, mainly due to a decrease in transmitter rents, taxes and licenses, and programming salaries offset by an increase the acquisition of digital programming costs related to the LaMusica App. The television segment expenses decreased by less than $0.1 million or less than 1% primarily due to decreases in compensation and benefits offset by increases in programming content costs.

The increase in our consolidated selling, general and administrative expenses of approximately $2.6 million or 9% was due to the increases in our radio segments’ expenses offset by decreases in our television segments’ expenses. Our radio segment expenses increased approximately $3.3 million or 13%, mainly due to increases in special event expenses, taxes and licenses, Aire network related affiliate compensation, rating services and the acquisition of digital programming content partially offset by lower compensation and benefits, commissions, and marketing expenses. Our television segment expenses decreased approximately $0.7 million or 18%, primarily due to decreased barter and commission expenses.

~~The decrease in corporate expenses of $0.3 million or 6% was mostly due to decreases in professional fees and stock-based compensation offset by an increase in compensation and benefits.~~

~~The increase from the gain on sale of assets of $12.8 million was due to the sale of our Los Angeles facility in June 2017.~~

The Company incurred $4.1 million of recapitalization costs, primarily due to professional fees related to the current process of evaluating all options available towards executing a comprehensive recapitalization plan, as described in Note 1, Basis of Presentation, of the Notes to the financial statements included elsewhere in this Quarterly Report on Form 10-Q. Also included in these amounts are the consent fees paid to the Supporting Holders of the Notes who entered into the Forbearance Agreement with the Company, as well as the legal and financial advisory fees incurred by the Supporting Holders.

The increase in operating income of $5.5 million or 38% was primarily due to the gain on the sale of our Los Angeles facility partially offset by the decrease in net revenues, the increase in operating expenses and recapitalization costs.

The decrease in in interest expense of $0.8 million or 4% was primarily due to the decrease in amortization of the originally issued discount and deferred financing costs being amortized and recorded as interest expense over the term of the Notes, which expired on April 15, 2017.

The decrease in income tax expenses of $0.5 million or 10% was primarily due to the tax impacts of the Puerto Rico Swap transaction during 2016, which did not reoccur in 2017. The gain on the sale of property in 2017 will be absorbed by operating losses for the current year, and as such, there is no incremental tax expense recorded for this transaction.

The decrease in net loss was primarily due to the increased operating income and ~~decrease~~decreases in interest and income tax expense.

~~On October 15, 2013,~~The most important aspects of our liquidity and capital resources as ~~a result~~ of ~~a failure by us to repurchase all~~March 31, 2018 and, as of the ~~shares~~date of this Quarterly Report on Form 10-Q, are as follows:

We continue to evaluate all options to effect a successful recapitalization or restructuring of our balance sheet, including a refinancing of the Notes. Our refinancing efforts have been made more difficult and complex with the litigation with certain purported holders of our Series B preferred stock ~~that were requested~~and the foreign ownership issue. We provide more information about each of these items under the headings “Our Continued Recapitalization and Restructuring Efforts;” “Special Note Regarding Forward-Looking Statements” and “Risk Factors—Risks Related to ~~be repurchased by the holders thereof, a Voting Rights Triggering Event occurred. Following the occurrence,~~Our Indebtedness and ~~during the continuation, of the Voting Rights Triggering Event, we are subject to more restrictive operating covenants, including a prohibition on~~Preferred Stock” in our ability to incur any additional indebtedness and restrictions on our ability to pay dividends or make distributions, redeem or repurchase securities, make investments, enter into transactions with affiliates or merge or consolidate with (or sell substantially all of our assets to) any other person. The Voting Rights Triggering Event shall continue until (i) all dividends in arrears shall have been paid in full and (ii) all other failures, breaches or defaults giving rise to such Voting Rights Triggering Event are remedied or waived by the holders of at least a majority of the shares of the then outstanding Series B preferred stock. We do not currently have sufficient funds legally available to be able to satisfy the conditions for terminating the Voting Rights Triggering Event.Annual Report.

Our primary ~~sources~~source of liquidity ~~are~~is our current cash and cash ~~equivalents and the cash provided by operations.~~equivalents. We do not currently have a revolving credit facility or other working capital lines of credit. Our cash flows from operations are subject to factors impacting our customers and target audience, such as overall advertising demand, shifts in population, station listenership and viewership, demographics, audience tastes

and fluctuations in preferred advertising media. We do not expect to raise cash by increasing our indebtedness for several reasons, including the need to repay the Notes, the existence of an event of default under the Indenture that arose on April 17, 2017 ~~(being the payment date following the Saturday, April 15, 2017 maturity date)~~ and the existence of the Voting Rights Triggering Event. ~~The Company continues to negotiate with~~In addition, we also face the ~~holders~~risk of the ~~Notes and holders~~potential negative impact of an adverse ruling of the Series B ~~Preferred Stock as to refinancing possibilities and any extension of the Forbearance Agreement, as may become necessary. As~~preferred stock litigation, which is described in more detail in Note ~~1, Basis of Presentation,~~6, Commitments and Contingencies, of the Notes to the ~~financial statements included elsewhere in~~Unaudited Condensed Consolidated Financial Statements of this Quarterly Report on Form ~~10-Q, one or more Noteholders may seek to exercise various remedies against us, including foreclosing on our assets that constitute collateral under the Indenture.~~10-Q.

Our consolidated financial statements have been prepared assuming we will continue as a going-concern and do not include any adjustments that might result if we were unable to do so, and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. However, we have concluded that there is substantial doubt about our ability to continue as a going concern as discussed under “Critical Accounting ~~Policies -~~Policies— Going Concern” in Item 7 of our ~~annual report on Form 10-K for the year ended December~~Annual Report. Furthermore, as of March 31, ~~2016. As of June 30, 2017~~2018 and December 31, ~~2016,~~2017, we had a working capital deficit due primarily to the classification of our Series B preferred stock as a current liability and the classification of our Notes as a current liability. Under Delaware law, our state of incorporation, the Series B preferred stock is deemed equity. Because the holders of the Series B preferred stock are not creditors, they do not have rights of, or remedies available to, creditors. Delaware law does not recognize a right of preferred stockholders to force redemptions or repurchases where the corporation does not have funds legally available. Currently, we do not have sufficient funds legally available to be able to redeem or repurchase the Series B preferred stock and its accumulated unpaid dividends. If we are successful in ~~repaying or~~ refinancing our Notes, and are able to generate legally available funds under Delaware law, we may be required to pay all or a portion of the accumulated preferred dividends and redeem all or a portion of the Series B preferred stock, to extent of the funds legally available.

Our strategy is to primarily utilize cash flows from operations to meet our ordinary course operating obligations. Management continually projects anticipated cash requirements and believes that cash from operating activities, together with cash on hand, should be sufficient to permit us to meet our ordinary course operating obligations over the next twelve-month period. Cash from operating activities will not be sufficient to repay the Notes or to redeem the Series B preferred stock.

Assumptions which underlie management’s beliefs with respect to operating activities include the following:

Historically, we have evaluated strategic media acquisitions and/or dispositions and strived to expand our media content through distribution, programming and affiliation agreements in order to achieve a significant presence with clusters of stations in the top U.S. Hispanic markets. Historically, we have engaged in discussions regarding potential acquisitions and/or dispositions and expansion of our content through media outlets from time to time in the ordinary course of business. As a result of the consequences resulting from the occurrence of the Voting Rights Triggering Event and the need to repay the Notes, we are currently not able to finance acquisitions through the incurrence of additional debt and are subject to additional restrictions which may preclude us from being able to execute this strategy.

~~On April 17, 2017, we timely made the interest payment due on the Notes. The Notes will continue to earn interest at the current rate of 12.5% per year after the maturity date.~~

extended. As of the date of the filing ~~this Quarterly Report on Form 10Q,~~of these financial statements, the Company had made all of the payments required to be made under the Forbearance Agreement and has continued to make ~~the~~ monthly interest payments on the Notes on the 15^th15th day of each month and continued to pay the monthly ~~fees~~ legal and financial advisor due diligence fees of these Noteholders.

At March 31, 2018, there is $260.3 million in principal amount of Notes outstanding. As a result, there has been and remains an event of default under the Supporting Holders. As previously discussed in Note 1 we continue to work with a team of financial and legal advisors in evaluating all options available to us in executing a comprehensive recapitalization plan and continue conversations with representatives of the Noteholders andIndenture which gives the holders of our Notes the ~~Series B preferred stock regarding these matters.~~

~~As further described in Note 11,~~right to demand repayment of the Notes and, subject to the terms of the Indenture, to foreclose on ~~June 9, 2017 we sold~~ our ~~Los Angeles~~assets that serve as collateral for the Notes. The collateral constitutes substantially all of our assets. We continue to pay interest on the Notes at their current rate of 12.5% per year on a monthly basis. We expect to sell our New York real estate ~~assets~~for $14.0 million in the third quarter of 2018, and ~~used~~we expect to use the net proceeds from the sale of the New York real estate to ~~pay down~~repay a portion of the Notes. See Note 1 elsewhere in these financial statements for additional detail regarding our recapitalization efforts and our failure to repay the Notes at maturity.

A summary of the outstanding ~~indebtedness on~~balance of our ~~Notes. On June 9,~~Notes, as of January 1, 2017 and changes through the quarter ended March 31, 2018, is presented below (in thousands and net of unamortized discount and deferred financing costs). Redemptions listed below were made with the net proceeds of ~~$10.3 million were delivered directly to the trustee in order to pay down our Notes. These monies were subsequently distributed to the Noteholders, by the trustee, on August 4, 2017.~~asset sales.

The Indenture ~~governing the Notes~~ contains covenants that, among other things, limit our ability and the ability of the guarantors to:

As a result of our failure to pay the Notes at maturity, an event of default under the Indenture has occurred and is continuing.

On October 28, 2003, our Board of Directors approved the issuance of 280,000 shares of 10 ¾% Series B Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share. Holders of the Series B preferred stock have customary voting rights and provisions. As of March 31, 2018, we had outstanding $90.5 million of Series B preferred stock due to the liquidation preference and accrued dividends of $77.5 million.

The Certificate of Designations entitles the holders of the Series B preferred stock to receive dividends when, and if, declared by the Board of Directors.

Holders of the Series B preferred stock have customary protective provisions. The Certificate of Designations contains covenants that, among other things, limit our ability to: (i) pay dividends, purchase junior securities and make restricted investments other restricted payments; (ii) incur indebtedness, including refinancing indebtedness; (iii) merge or consolidate with other companies or transfer all or substantially all of our assets; and (iv) engage in transactions with affiliates. Upon a change of control, we will be required to make an offer to purchase these shares at a price of 101% of the aggregate liquidation preference of these shares plus accumulated and unpaid dividends to, but excluding the purchase date.

The Certificate of Designations provided holders the right, on October 15, 2013, to require us to repurchase their shares, subject to the legal availability of funds. At the option of the holder, we were required to repurchase the Series B preferred stock at a purchase price equal to 100% of the liquidation preference, or $1,000 per share, plus accrued and unpaid dividends. Certain holders of the Series B preferred stock exercised their repurchase option, but we were unable to fully repurchase the Series B preferred stock for which repurchases were requested, resulting in a continuing Voting Rights Triggering Event. During the continuation of a Voting Rights Triggering Event, certain restrictions are imposed on us, including (i) a prohibition on our ability to incur additional new indebtedness, (ii) restrictions on our ability to make restricted payments and (iii) restrictions on our ability to merge or consolidate with other companies or transfer all or substantially all of our assets. In addition, upon the incurrence and during the pendency of a Voting Rights Triggering Event, the holders of the Series B preferred stock have the right to elect two members to our Board of Directors. A Voting Rights Triggering Event shall continue until (i) all dividends in arrears shall have been paid in full and (ii) all other failures, breaches or defaults giving rise to such Voting Rights Triggering Event are remedied or waived by the holders of at least a majority of the shares of the then outstanding Series B preferred stock.

As discussed in Note 9, elsewhere in this Quarterly Report on Form 10-Q, we report dividends on the Series B preferred stock as interest expense.

For more information regarding the Series B preferred stock, see Note 9, elsewhere in this Quarterly Report on Form 10-Q.

On December 23, 2004, in connection with the closing of the merger agreement, dated October 5, 2004, with CBS Radio (formerly known as Infinity Media Corporation, CBS Radio), a division of CBS Corporation, Infinity Broadcasting Corporation of San Francisco (“Infinity SF”) and SBS Bay Area, LLC, a wholly owned subsidiary of SBS, pursuant to which SBS acquired the FCC license of Infinity SF (the “CBS Radio Merger”), we issued to CBS Radio an aggregate of 380,000 shares of Series C convertible preferred stock, $0.01 par value per share in exchange for the acquisition of all the rights and obligations of Infinity SF, including the FCC license of Infinity SF for radio station 93.3 FM, serving the San Francisco, California market. The shares of Series C preferred stock issued at the closing of the CBS Radio Merger are convertible into 760,000 shares of Class A common stock, subject to certain adjustments. In connection with the CBS Radio Merger, we also entered into a registration rights agreement with CBS Radio, pursuant to which CBS Radio may instruct us to file up to three registration statements, on a best efforts basis, with the SEC, providing for the registration for resale of the Class A common stock issuable upon conversion of the Series C preferred stock.

We are required to pay holders of Series C preferred stock dividends on parity with our Class A common stock and Class B common stock, and each other class or series of our capital stock created after December 23, 2004. The Series C preferred stock holders have the same voting rights and powers as our Class A common stock on an as-converted basis, subject to certain adjustments. The Certificate of Designations for the Series C preferred stock does not contain a voting rights triggering event provision like the one found in the Certificate of Designations for the Series B preferred stock. Each holder of Series C preferred stock (i) has preemptive rights to purchase its pro rata share of any equity securities we may offer, subject to certain conditions, and (ii) may, at their option, convert each share of Series C preferred stock into two (2) shares of Class A common stock, subject to certain adjustments.

On August 8, 2016 CBS Radio entered into a Stock Purchase Agreement with us, AAA Trust and Mr. Alarcón (the “Stock Purchase Agreement”) to sell and assign its rights related to its 380,000 shares of Series C preferred stock to the AAA Trust for $3.8 million. AAA Trust is a Florida trust, of which Mr. Alarcón is the trustee. Mr. Alarcón is also the beneficial owner of all the shares of Series C preferred stock held in the AAA Trust. Pursuant to the Stock Purchase Agreement, CBS Radio agreed to assign the rights under the registration rights agreement and Stockholder Agreement to the AAA Trust, which now holds such registration rights. The parties closed on the Stock Purchase Agreement on August 18, 2016.

For more information regarding the Series C preferred stock, see Note 12 to the financial statements included in our Annual Report.

As of March 31, 2018, we had 4,216,991 shares of Class A common stock outstanding.

As of March 31, 2018, 2,340,353 shares of Class B common stock were outstanding, which have ten votes per share. Raúl Alarcón, our Chief Executive Officer and the Chairman of our Board of Directors, has voting control over all but 350 shares of the Class B common stock.

The following summary table presents a comparison of our capital resources for the ~~six-months~~three-months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ with respect to certain key measures affecting our liquidity (in thousands). The changes set forth in the table are discussed below. This section should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto.

	Six-Months Ended									Three-Months Ended
	June 30,						Change			March 31,						Change
	2017			2016			$			2018			2017			$
Capital expenditures:
Radio	$	313			1,279			(966	)	$	225			202			23
Television		67			309			(242	)		17			23			(6	)
Corporate		70			164			(94	)		6			51			(45	)
Consolidated	$	450		$	1,752			(1,302	)	$	248		$	276			(28	)

Net cash flows (used in) provided by operating activities	$	(6,071	)		899			(6,970	)
Net cash flows provided by (used in) investing activities		13,411			(3,649	)		17,060
Net cash flows provided by operating activities										$	4,189			11,181			(6,992	)
Net cash flows used in investing activities											(248	)		(209	)		(39	)
Net cash flows used in financing activities		(14,941	)		(153	)		(14,788	)		—			(4,616	)		4,616
Net decrease in cash and cash equivalents	$	(7,601	)		(2,903	)
Net increase in cash and cash equivalents										$	3,941			6,356

The decrease in our capital expenditures was primarily due to ~~reduced current~~a greater amount of prior year ~~development cost associated with~~corporate capital expenditures due to a software implementation which occurred during the ~~LaMusica digital application, as compared to the prior year.~~first quarter of 2017.

Changes in our net cash flows ~~from~~provided by operating activities were primarily a result of the ~~company~~Company commencing to make interest payments on a monthly rather than semi-annual basis on the 12.5% Senior Secured Notes.

Changes in our net cash ~~provided by~~used in investing activities were primarily a result of having ~~sold~~received proceeds from the ~~Los Angeles building property~~disposal of a generator and related ~~assets in June 2017.~~electrical equipment during the first quarter of 2017 which were not present during the first quarter of 2018.

Changes in our net cash used in financing activities were a result of ~~providing a partial pay down of the principal related to the Notes, in June 2017, and~~ paying the promissory note related to the SBS Miami Broadcast Center ~~which was due~~ in January 2017.

In January 2016, we filed applications to participate in the FCC’s Broadcast Incentive Auction with respect to our television stations in Miami, Houston, and Puerto Rico to potentially generate cash proceeds. As part of our strategy, we also entered into a channel sharing agreement for one of our television stations in Puerto Rico. Due to below market pricing levels in the Broadcast Incentive Auction that concluded in January 2017 we will relinquish our spectrum for one of our Puerto Rico stations and will retain our other television stations in Miami, Houston and our other two stations in Puerto Rico. The cash proceeds from the Puerto Rico station of $4.7 million were received from the FCC on July 21, 2017.

On April 3, 2018, we received written notice from the OTC advising us that the Annual Report and the OTCQB Certification for the year ended December 31, 2017 (the “OTCQB Certification”) were due on April 2, 2018 but had not yet been provided to OTC. On April 27, 2018, we received a ~~written~~second notice ~~from OTC Markets ("OTC"), advising us that our market capitalization had stayed below $5 million for more than 30 consecutive calendar days (the “Rule”) and that it no longer met~~reiterating the same. Under Section 2.2 of the OTCQB Standards, ~~for Continued Qualification for the OTCQX as per the OTCQX Rules for U.S. Companies. OTC further notified us that~~we received a 45 day cure period, or until May 17, 2018, to file the Annual Report on EDGAR and post the OTCQB Certification through the OTC website. The Company received an extension of ~~180 calendar days~~the 45 day cure period, from the OTC, until May 31, 2018 to ~~regain compliance had begun, during which~~file its Annual Report and until June 30, 2018 to post its OTCQB Certification. If we do not post the ~~minimum criteria must be met for 10 consecutive trading days. The 180-calendar day grace period expires September~~OTCQB Certification by June 30, ~~2017. If our market capitalization has not been at or above $5 million for 10 consecutive trading days by that time,~~2018, our Class A ~~common stock will be moved from OTCQX to OTC Pink, which may result in further reduced liquidity for our Class A common stock.~~

~~On July 20, 2017, we received notification from the OTC informing the Company~~Common Stock that it had regained compliance with the minimum market capitalization standard of $5 million for a minimum of 10 consecutive trading days as set forth by OTCQX Rules for U.S. Companies. Accordingly, the Company has regained compliance with the Rule and will continue to beis currently listed on the ~~OTCQX.~~OTCQB Venture Market will be downgraded to OTC Pink. We currently intend to post the OTCQB Certification as soon as reasonably practicable and, in any case, prior to June 30, 2018, to maintain our listing on the OTCQB Venture Market.

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently issued accounting pronouncements are described in Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if:

Our critical accounting policies are described in Item 7 of our ~~annual report on Form 10-K for the year ended December 31, 2016.~~Annual Report. There have been no material changes to our critical accounting policies during the ~~six-months~~three-months ended ~~June 30, 2017.~~March 31, 2018.

We are a “smaller reporting company” as defined by Regulation S-K and as such, we are not required to provide the information contained in this item pursuant to Regulation S-K.

Evaluation Of Disclosure Controls And Procedures. Our management, including our principal executive and financial officers, have conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and financial officers concluded, as a result of the material weakness in internal control over financial reporting discussed below, that our disclosure controls and procedures were not effective as of the end of the period covered by this report. However, we believe that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

In March 2018, management concluded that a control deficiency in the process of detecting ownership changes related to Section 382 of the Internal Revenue Code, which impacts the calculation of the provision for income taxes and the measurement of our deferred tax assets constituted a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Since such time, management is implementing the following measure to remediate the material weakness related to the process of detecting ownership changes in accordance with Section 382. Management is implementing a quarterly review process that is performed in collaboration with outside legal counsel and third party tax specialists, where changes in ownership that have occurred since the prior period are considered and analyzed to determine if these represent ownership changes in accordance with Section 382. The conclusion as to whether or not an ownership change under Section 382 has occurred is further reviewed and approved by management. If we determine that an ownership change has occurred, we will conduct an analysis in accordance with such section to determine the impact to the calculation of the provision for income taxes and the measurement of our deferred tax assets. Management continues to explore additional measures to detect ownership changes under Section 382.

Based on our assessment, we consider that the material weakness related to the process of detecting ownership changes related to Section 382 has not been fully remediated and is still present as of March 31, 2018 as the remedial measures have not operated effectively for a sufficient period of time for management to conclude, through testing, that the applicable controls have operated effectively for a sufficient period of time.

Changes In Internal Control Over Financial ~~Reporting~~Reporting.~~. There~~ In November 2017, management concluded that a control deficiency with respect to the design of controls related to the classification and presentation of transactions on the Consolidated Statement of Cash Flows constituted a material weakness in internal control over financial reporting and that our disclosure controls and procedures were not and would not be deemed effective until such time that the deficiency was considered remediated.

Management has since implemented the following remedial measures to improve the review process to ensure that all transactions, including non-ordinary transactions are properly classified and presented on the Consolidated Statement of Cash Flows.

The combination of engaging an independent third party to assist and provide additional guidance, assigning additional managerial resources to the review process, and the creation and utilization of a checklist as part of the review have strengthened the Company’s documentation process and resulting in an improved evaluation of the Consolidated Statement of Cash Flows.

Based on our assessment, management concluded that the material weakness related to the classification and presentation of transactions on the Consolidated Statement of Cash Flows has been remediated as of March 31, 2018, as the implemented remedial controls have been operating effectively for a sufficient period of time.

As previously discussed, management revised its policies and procedures with respect to controls over the process of detecting ownership changes related to Sections 382. Except for the material weaknesses we identified and the remedial measures we have implemented, as described above, there has been no change in our internal control over financial reporting during the quarter ended ~~June 30, 2017~~March 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

For a description of our legal proceedings, see Note 6, Commitments and Contingencies, of the Notes to the unaudited condensed consolidated financial statements of this Quarterly Report on Form 10-Q.

34For a description of defaults upon senior securities, see Note 8, 12.5% Senior Secured Notes, of the Notes to the unaudited condensed consolidated financial statements of this Quarterly Report on Form 10-Q.

The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, furnished herewith or incorporated by reference herein:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☒
Emerging growth company	☐


		Page
PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements - Unaudited	5

	Condensed Consolidated Financial Statements—Unaudited	5

	Notes to the Unaudited Condensed Consolidated Financial Statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2223

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3334

ITEM 4.	Controls and Procedures	3334

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	3435

ITEM 3.	Defaults Upon Senior Securities	35

ITEM 6.	Exhibits	3536

SIGNATURES		3637

12.5% senior secured notes, net, as of March 31, 2017	$	274,624
Amortization of discount and deferred financing cost		376
Redemption of Notes		(10,336)
12.5% senior secured notes, net, as of June 30, 2017	$	264,664

12.5% Senior Notes due 2017, net, as of January 1, 2017	$	273,233
Amortization of discount and deferred financing cost		1,767
Redemption of Notes (June 9, 2017)		(10,336)
Redemption of Notes (August 23, 2017)		(4,390)
12.5% Senior Notes due 2017, net, as of March 31, 2018	$	260,274

Exhibit Number		Exhibit Description


10.1*		~~Contract of Purchase and Sale, dated May 15, 2017, among Spanish Broadcasting System, Inc. and Harbor Associates, LLC.~~

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Periodic Financial Report by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Periodic Financial Report by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

							Weighted
			Weighted				Average
			Average		Aggregate		Remaining
			Exercise		Intrinsic		Contractual
	Shares		Price		Value		Life (Years)
Outstanding at March 31, 2017		408	$	4.32
Granted		—		—
Exercised		—		—
Forfeited		—		—
Outstanding at June 30, 2017		408	$	4.32	$	1,200		7.7
Exercisable at June 30, 2017		358	$	4.50	$	1,200		7.2

	Outstanding								Exercisable
							Weighted
					Weighted		Average				Weighted
					Average		Remaining				Average
	Vested		Unvested		Exercise		Contractual		Number		Exercise
Range of Exercise Prices	Options		Options		Price		Life (Years)		Exercisable		Price
$1.03 - 2.99		45		50	$	2.68		8.9		45	$	2.33
$3.00 - 4.99		273		-		3.21		8.1		273		3.21
$5.00 - 9.99		20		-		7.50		2.8		20		7.50
$10.00 - 49.99		20		-		24.03		1.0		20		24.03
		358		50	$	4.32		7.7		358	$	4.50

SPANISH BROADCASTING SYSTEM, INC.

By:	/s/ JOSEPH A. GARCÍA
	JOSEPH A. GARCÍA

	Chief Financial Officer, Chief Administrative Officer, Senior Executive Vice President and Secretary (principal financial and accounting officer and duly authorized officer of the registrant)

~~Exhibit~~ ~~Number~~		~~Exhibit Description~~


10.1*		~~Contract of Purchase and Sale, dated May 15, 2017, among Spanish Broadcasting System, Inc. and Harbor Associates, LLC.~~

31.1*		~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*		~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1**		~~Certification of Periodic Financial Report by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

32.2**		~~Certification of Periodic Financial Report by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

101.INS*		~~XBRL Instance Document~~

101.SCH*		~~XBRL Taxonomy Extension Schema Document~~

101.CAL*		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.DEF*		~~XBRL Taxonomy Extension Definition Linkbase Document~~

101.LAB*		~~XBRL Taxonomy Extension Label Linkbase Document~~

101.PRE*		~~XBRL Taxonomy Extension Presentation Linkbase Document~~